Rachel Reeves' Budget will not introduce any new freeports - such as Teesport (Image: GETTY)
Rachel Reeves will not introduce any new freeports in Wednesday’s Budget, the Government has confirmed - even though Downing Street actually signalled the UK’s intention to create five more tax-free zones on Friday.
Instead, the Labour Party Chancellor will set out only the "next steps" for five existing freeports, which will receive formal approval to establish customs zones within their designated boundaries, officials have admitted.
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Ms Reeves will also press on with plans for a separate "investment zone" in the East Midlands - initially proposed by the previous Conservative Party government last year.
The Government’s apparent willingness to continue the strategy put in place by the previous Tory administration was swiftly seized upon by Tory Mayor for Teeside Ben Houchen, who claimed the local Labour Party would be "furious".
Downing Street’s announcement of "five new freeports" on Friday, made while Prime Minister Sir Keir Starmer was in Samoa at the Commonwealth Heads of Government summit, caused enormous confusion among port executives, Whitehall officials, and local mayors - none of whom had any prior knowledge of the plan.
READ MORE: Rachel Reeves accused of ‘crashing economy’ as she’s ‘worse than Liz Truss’
Sir Keir Starmer, pictured in Samoa (Image: Getty)
One official told the Financial Times: "It just was a total cock-up with the comms." Downing Street has yet to respond to requests for comment on the matter.
Meanwhile, the Conservative Party has branded it a "humiliating u-turn that will once again damage the already shrinking business confidence in this country."
Ms Reeves will nevertheless confirm continued support for the existing freeports scheme, a project championed by former Prime Ministers Boris Johnson and Rishi Sunak as a post-Brexit strategy aimed at attracting fresh investment.
Freeports offer special customs zones whereby imported goods can enter the country tariff-free, with duties payable only on final goods once they reach the UK market. Such sites also benefit from tax relief on hiring new staff and investment in infrastructure and machinery.
Fantastic to see this Government doubling down on the freeport policy I delivered for the Conservative Govt that is delivering for hard working people creating thousands of jobs across Teesside
I’m sure Teesside Labour will be furious… https://t.co/GJn8HyTDHk
— Ben Houchen (@BenHouchen) October 25, 2024
To date, seven freeports have operational customs zones. Ms Reeves is expected to announce that five additional sites, including Liverpool, Humber, and the Inverness and Cromarty Firth Green Freeport in Scotland, are now poised to fully activate their customs operations.
Officials have said that the Humber freeport will become fully operational, unlocking an additional ￡25 million in seed funding.
The Labour government is continuing to support the initiative despite research suggesting that the structure of UK tariffs offers only limited benefits.
So far, just six companies are utilising the customs zones at the eight freeports in England, according to data from HM Revenue & Customs, which has been shared with Whitehall departments.
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Boris Johnson and Rishi Sunak pictured at Teesport when PM and Chancellor respectively (Image: Getty)
Speaking on Friday, Sir Keir said Labour was not approaching the issue from an "ideological view" and was committed to integrating them into the party’s industrial strategy, aimed at supporting high-growth sectors.
He said: "We looked at them, they are working well, I think they could work better, so rather than stand them down we’re going to go with it, we’re going to make some improvements so they could work even better."
The Prime Minister explained that ministers will explore ways to "maximise the potential" of freeports by linking them more closely with the Local Growth Plans that the Government has requested from local councils as part of its broader growth agenda.
Each freeport has a defined area of focus. Humber is set to become a hub for rare earth metals processing, Teesside will lead offshore wind turbine manufacturing, and Plymouth and South Devon are looking into the development of autonomous maritime vehicles.
Ben Houchen greets Sir Keir Starmer earlier this year (Image: Getty)
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To date, freeports have attracted ￡6.4 billion in investment, generating an estimated 7,000 jobs, according to government figures. The government also projects that low-tax investment zones in England will create 90,000 jobs by 2033, with an anticipated ￡10 billion in private investment.
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Powered by
POLL: Should the UK pay reparations for slavery?
751 Comments
I was in the room for Keir Starmer's pre-budget speech and there was one repeated feeling
Comments
Voters will not forgive Keir Starmer for taking them for fools over tax hikes
144 Comments
Keir Starmer faces slavery reparations showdown as Commonwealth demand ￡18trn
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168 Comments
POLL: Should the UK pay reparations for slavery?
751 Comments
I was in the room for Keir Starmer's pre-budget speech and there was one repeated feeling
Comments
Voters will not forgive Keir Starmer for taking them for fools over tax hikes
144 Comments
Keir Starmer faces slavery reparations showdown as Commonwealth demand ￡18trn
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Britain to engage in talks about reparations for slavery without financial compensation
239 Comments
Serving up the same old failed recipe of tax and spend, writes Leo McKinstry
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Labour moves to curb Winter Fuel Payment outrage - vows to 'protect' pensioners in Budget
1054 Comments
Rachel Reeves steals Brexit blueprint to supercharge economy with new investment hubs
462 Comments
Keir Starmer drops biggest hint yet of where Labour will unleash tax hikes in Budget
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Keir Starmer blasted for 'losing the plot' in bonkers slavery reparations row
159 Comments
Keir Starmer 'gave green light' for reparation demand with one controversial move
120 Comments
Keir Starmer loses reparations battle as Commonwealth demands justice over slave trade
431 Comments
Labour accused of dodging questions over tax plans
76 Comments
Left-wing MP branded 'idiotic embarrassment' over demands for tax on 'extreme wealth'
399 Comments
Keir Starmer accused of 'double lie' as Rachel Reeves 'to unleash slew of tax rises'
46 Comments
Labour's Budget will push up taxes for most people, ex-Bank of England chief warns
540 Comments
Keir Starmer faces backlash after claiming pensioners are better off under Labour
1059 Comments
Rachel Reeves to snatch away winter fuel - with only 'two things' protected for pensioners
4 Comments
Rachel Reeves urges to make key pledge to pensioners in Budget after winter fuel cuts
10 Comments
Sir Keir Starmer denies misleading public on Labour's tax policy for working people
168 Comments
POLL: Should the UK pay reparations for slavery?
751 Comments
I was in the room for Keir Starmer's pre-budget speech and there was one repeated feeling
Comments
Voters will not forgive Keir Starmer for taking them for fools over tax hikes
144 Comments
Keir Starmer faces slavery reparations showdown as Commonwealth demand ￡18trn
140 Comments
Britain to engage in talks about reparations for slavery without financial compensation
239 Comments
Serving up the same old failed recipe of tax and spend, writes Leo McKinstry
7 Comments
Labour moves to curb Winter Fuel Payment outrage - vows to 'protect' pensioners in Budget
1054 Comments
However, economic studies on similar initiatives within the UK and abroad suggest they may simply divert investment from other regions, as opposed to creating substantial new inward investment.
When the policy launched in 2021, the Office for Budget Responsibility, the independent fiscal watchdog, expressed doubts about the economic impact of freeports, predicting it would be “difficult to discern even in retrospect.”
Posting on X, Mr Houchen crowed: "Fantastic to see this Government doubling down on the freeport policy I delivered for the Conservative Govt that is delivering for hard working people creating thousands of jobs across Teesside.
"I’m sure Teesside Labour will be furious.”
A UK Government spokeswoman said: "It's really important for businesses who are investing to know that this government remains committed to ensuring the customs benefits remain on offer and are available in the new sites, which have been put forward by industry.
"That's what we announced on Friday in confirming five new custom sites in freeports across the country."