On the 30th November South Hams Council Executive briefly discussed the findings of a key report into the highly complex relationship between SHDC and Plymouth & South Devon (PASD) Freeport.
Analysis of this internal report can be found here. Tensions in the meeting ran high – and the ensuing PR statement from South Hams District Council glossed over the serious risk and concerns that were raised, instead leading with an incorrect headline ‘The Freeport is on Track Following Review’. The Council’s own report in fact found that South Hams have already made a projected loss of over £2 million and is far behind schedule, ‘green’ centrepiece Langage is delayed, and the Task & Finish group’s own report highlights critical Council failings that need to be resolved before the project can in any way be termed ‘on track’.
Today – Monday 4th December 2023- all SHDC Councillors will receive this Open Letter (below), outlining the key questions that should be asked about the Freeport.
On 14th December there will be a Full Council to discuss potentially moving further with the Freeport. There has never been a more important time for Councillors to fully understand what the Freeport means- and to explore this fully, and at their own pace.
We thank all our Councillors for doing a hard job. But sometimes this job is a simple task: to ask important and demanding questions – and to expect full transparency on key information. When it comes to the Plymouth & South Devon Freeport, every Councillor should be given ample time and scope to make an informed decision, not one undermined by lack of information or pre-conditionality of a ‘done deal’.
That is why we at the Totnes Pulse have put together 10 key questions that need to be considered by Councillors. There are many more, but these are particularly important.
Freeports are conducive to secrecy…
There is a body of evidence-based research into Freeports that give an overview of the top tier concerns: the European Parliament’s report Money laundering and tax evasion (“Freeports are conducive to secrecy…”) and Portsmouth University’s report are good starting points. Environmental risks are also clearly evidenced (as presented to the UK Parliament in this report and in the Freeport Bidding Prospectus particularly Section 3.9). The UK’s most infamous Freeport – Teesside- is now subject to a UK Government inquiry after substantial allegations of corruption.
WHAT IS A FREEPORT!?
In essence a Freeport is a vehicle for artificial zones that have special ‘business favourable’ conditions. The UK Government describes them as “special areas within the UK’s borders where different economic regulations apply… delivering investment on specific sites benefitting from tax and customs incentives.”
The concept is based around these principles: use public money to help build and develop infrastructure and land for private companies; enable extra-ordinary tax and business breaks; allow scope for ‘innovative’ changes to regulations with an expectation that this investment is recouped longterm- in this case in 25 years.
The Plymouth and South Devon Freeport stretches 75k north to south and includes Totnes, Dartmouth and all of Dartmoor, but not Torbay or Newton Abbot.
“It was given the green light by the government at the end of 2022 and now work is underway to develop the Freeport to benefit our businesses and local residents. “- source – SHDC website.
Partners in this freeport include South Hams District Council, Plymouth City Council, and Devon County Council, alongside Princess Yachts, the MoD, Carlton Power, Associated British Ports, and the universities of Plymouth and Exeter.
There are three key sites – Langage in the South Hams, where a 10mw hydrogen hub is proposed but delayed; South Yard in Devonport and Sherford near Plymouth.
Money from the local authorities will be used to “pump prime” the acivities inside the freeport, which is headed by CEO Richard May. South Hams has committed £5.5 million.
These are the Totnes Pulse’s 10 key questions that SHDC Councillors should be asking:
One – Demand to see the full legal agreement/ Memorandum of Understanding which shows any costs and damages for leaving the Freeport partnership. If Councillors don’t know what the risks of not proceeding are, they won’t know if that outweighs the risks of going further with the Freeport. Councillors deserve to know what exactly the legal situation is. The Council has claimed it is too expensive and grave for unilateral withdrawal, whilst never being explicit about what is involved – or the actual ‘cost’. But what about partial withdrawal – or modification? There is a reputational risk for the Council staying with the Freeport in exactly the same way as there may be one for leaving. Clearly there is an option to withdraw and modify- the Council has been recommended “That the Executive reviews the delegated powers and authority related to the Freeport and determines if any changes are needed”. There has never been a better time to get out of the Freeport or amend the agreement – especially since, as as indicated on 30th November, the £5 million borrowed by South Hams for the project hasn’t been spent yet. If access to the full legal details are refused, Councillors should ask- what kind of ‘deal’ is SHDC now in, if its own Councillors are barred from full scrutiny?
Two – Demand revised financial projections for Langage. Langage is at a standstill. No one has decided what to do with it yet. If the land is not developed, it will not have occupancy. No occupancy means no business rates. The current projections don’t reflect any of this. How can Langage and Sherford continue to be used as Tax Sites if South Hams was to withdraw from the Freeport? All these questions, options and alternative financial projections which accurately reflect the discrepancy around Langage need to be explored with the legal agreements fully visible for Councillors.
Three – Demand to see the full submitted Freeport bid: This document contains the ‘exceptional reason’ Dartmoor was enclosed in the Freeport boundary (75km) when the maximum permitted boundary was 45km. Attempts to explain this away so far do not make sense: the bidding prospectus (Section 3.1) makes it clear a boundary cannot be simply ‘geographically neat’, and the argument that it fitted neatly with the Joint Local Plan is not adequate either. The prospectus is clear- it had to be an exceptional economic rationale to exceed 45 km. Did the bid also contain any references to ‘regulatory sandboxing’- the ability for Freeports to de-regulate within the Freeport boundary for ‘innovation’ as encouraged in Section 3.9? And if it didn’t, Councillors should make sure they read the small print, where it states ‘sandboxing’ (regulatory exceptions) can be done now – or at any time in the future.
Four – Demand the failings highlighted by the Task & Finish group are FIXED before approving any further Freeport engagement: the report highlights clearly how key policies and protections, checks and obligations are missing or weak: the Gateway policy, Net Zero Advisory Board, Council risk analysis, management plan – it is reasonable to expect that these all need to be put in place and scrutinised before supporting and approving the Freeport agreement any further. Without EVIDENCE that these failings have been addressed, there is no guarantee these things will actually happen, and that will only make a poor deal even poorer.
Five – Demand substantive answers to the following highlighted risks from the Task & Finish Group: The risks listed here were all highlighted in the Council’s own report. They are all reasonable and probable outcomes, especially with a likely change of UK Government. Have Councillors seen evidence of strong mitigation measures? Who will pay for these? Have you seen the projections and costs for each of these very real risks that set your mind at ease? If mitigations are going to be worthwhile, they need to be thorough- and the Council should not rush putting them in place. The Task & Finish report highlighted:
- i. Risk that a new Government changes the way the Freeport operates, or the way that retained business rates can be used.
ii. Risks that costs escalate, or that the projected income stream fails to meet its target so that income does not cover the loan repayments costs. This could be caused by a lack of tenants, delays in the developments or other factors beyond the control of the Council.
iii. Risk that land values decline after an SHDC purchase, Risk that land values decline after an SHDC purchase, leading to a reduced capital receipt.
iv. Risks that the operational or other costs increase.
v. Risk of land contamination or environmental or carbon impact from the works on the sites.
vi. Risk that there are fewer Freeport jobs created than projected, or that the jobs are lower paid, leading to reduced economic or social benefits for residents.
vii. Risk that firms from other parts of the South Hams relocate into the Freeport, displacing jobs and reducing the net benefit for the region. This may be particularly the case for small and medium sized companies.
We [SHDC] as a Council cannot impose on the Freeport company
Six – Question the argument that “South Hams are better off ‘in’ than ‘out’”. If the argument is already being made that we are tied into this deal, imagine how deep we will be in if it continues to go wrong. Being ‘in’ with the Freeport involves commitment of finance, resources and Council capacity, which has already proved hugely distracting from core Council duties. It has been confirmed that, “We as a Council cannot impose on the Freeport company”. Instead the influence that SHDC can bring is to ‘encourage’ and ‘seek’ through being a Founding Member and the Freeport Steering Group. Councillors should study the articles and membership powers carefully for reassurance: it is clear from the Council’s own report that South Hams has little delegatory power. And meanwhile the Freeport company gets a great deal from South Hams- Langage, Sherford and access to Dartmoor. Councillors should also note that they need to be shown the FULL documentation in all aspects of their investigations: the public facing documents are all redacted to the point that they are useless, with Freeport disclaimers looking after all our ‘digestion’:
“In order to make a compelling case for Freeport designation, the business case that was submitted to Government followed a prescribed template that was by necessity very detailed and also contained a range of commercially sensitive information. These summaries provide a more digestible overview of the business case with commercially sensitive information removed. “
Seven – Question why and how it has come about that Councillors are still being asked to make decisions without full access to all the information. The Freeport is a 25 year commitment: this is just the start. Public money needs to be guarded for the maximum public good, in line with the Council’s Nolan principles and obligations for services and residents.
Eight – Be absolutely certain what it is you are being asked to recommend or approve: be certain you know what is being asked of you, and what the implications are. Somehow the Council has arrived at a position which it simultaneously claims is a ‘done deal’ but yet its own internal report states can be modified. A lack of information, lack of transparency and lack of capacity for Councillors to make reasoned consideration should not be allowed to influence the outcome from now on in.
Nine – Demand to be given TIME to analyse, discuss with your colleagues and know the information well. Already many aspects of the Freeport arrangement have deviated substantially from its inception. Some might claim ‘that’s simply what happens’- but not if a project is clearly visioned, openly scrutinised, and monitored with absolute transparency. And no decision on this can be justified by putting people under undue time pressure to ‘approve’ or ‘recommend’ without fully seeing the evidence and understanding the implications involved.
Ten – Ask – how did we get to this point? There is widespread consternation that South Hams seems to have arrived suddenly at a point where – some maintain- there is no turning back, however poor the Freeport ‘deal’ might be. In order to make accountable decisions, Councillors DO need to know the timeline of events with absolute clarity, and how this situation has occurred. And above all, they need access to all documents and legal agreements in their entirety- however historic.
To conclude: the Council’s own report evidences further that the Freeport partnership with SHDC has substantial risks and concerns including:
- No Council risk analysis or management plan
No legal power to enforce transparency and tightening of policies
Is already far behind schedule and in 18 months has turned a projected £2 million net profit into a projected £288,000 net loss
Has a core tenet in which costs are borne by the public sector to enable the private sector to enjoy tax breaks and favourable business conditions
No current power to ensure the delivery of green economy or green jobs
Is based on financial projections that do not reflect the lack of progress and uncertainty with Langage
Multiple and substantive risks beyond its control including probable change of UK Government
Has shown little action on transparency
Encompasses the entirety of South Hams and Dartmoor
Will impact on all our lives for the next 25 years – but how, in reality?
Thank you Councillors: for your diligence and care for the residents and communities you serve and for safeguarding our futures with wise decisions. We hope you can make these decisions in full knowledge- and not be expected to make important decisions on partial information or under time pressure.
Read more of the developing story into South Hams District Council’s partnership with the controversial Plymouth and South Devon Freeport here:
More revelations coming soon- in the Freeport story that refuses to ‘go away’.