Policy paper

Green Freeports clarification Q and A

Updated 28 July 2023

This was published under the 2019 to 2022 Johnson Conservative government

Applies to Scotland

The bidding prospectus for Green Freeports in Scotland set out how ports can apply for Green Freeport status and further details on our proposals for the policy. With the publication of the bidding prospectus, the Scottish and UK governments launched the bidding process to select Green Freeports in Scotland.

In the bidding prospectus we invited stakeholders to submit via email any questions they had about the Green Freeports policy and bidding process. This document aims to cover the key questions and themes that we received. Any potential applicants will be able to contact [email protected] to request clarification on any of the content of the bidding prospectus until 29 April 2022. A summary of answers will be published online no later than 20 May 2022.

Successful locations will subsequently be announced in the summer following a fair, open and transparent selection process.

The bidding period will close on 20 June 2022. We look forward to receiving bids from interested parties via the online portal by 10.00am on Monday 20 June 2022.

Tax

1. The prospectus states that Employer NICS reliefs are available from April 2022. Can you confirm whether this is an error and should read 2023?

A: No, this is not an error. The relief will legally be available from April 2022, and it will last until at least April 2026. As paragraph 3.2.1 of the prospectus makes clear, however, the exact duration of all the tax reliefs will be set out in the Outline Business Case guidance, which will be published once successful bidders have been announced.

2. Please could more detail be provided on the arrangements for the retention of incremental non-domestic rates? It would be helpful to understand the process that local authorities will need to follow to benefit from this measure. As this represents a potentially significant revenue stream for a Green Freeport, with implications for funding arrangements that need to be documented in the bid, we respectfully ask for a response to this question as soon as possible.

A: As set out in the Green Freeports bidding prospectus, the relevant local authorities will be able to retain all of the non-domestic rates growth within that area above an agreed baseline, for a guaranteed period of 25 years. Once the bidding process is concluded, the Scottish Government will establish a baseline of non-domestic rates income within the Green Freeport area using, amongst other information, the valuation data for the existing lands and heritages contained within the delineated tax site. The income that can be retained for reinvestment, meeting borrowing costs or targeted spending will be the growth in net non-domestic rates income above that established baseline (i.e. the increase in non-domestic rates income resulting from an increase in the tax base, less any reliefs). In parallel with this baselining exercise, the Scottish Government will also work with the winning bidders on the detailed process and arrangements for implementing the scheme, within the context of the successful applicants’ broader strategic approach.

Planning

3. The streamlined planning approach section makes no reference to Marine Scotland, yet they are the responsible authority for marine licensing, under which most port developments would be permitted. Is the Scottish Government planning to engage in activities that will streamline marine planning and replicate e.g. masterplan consent areas?

A: The streamlining foreseen specifically by the Planning (Scotland) Act 2019 relates to onshore planning: but there is also a streamlining project under way within Marine Scotland to assess and implement ways to maximise efficiencies within the context of the existing marine licensing regime. This streamlining project will cover the marine elements of port and harbour development.

Customs

4. There appears to be some overlap between questions 1.10, 1.11 and 1.12. Please could you advise if question 1.12 relates to additional Customs Sites within the outer boundary, or only if there are any Customs Sites outside of the outer boundary? If the former, please could you clarify the difference between question 1.12 and 1.10?

A: Thank you for highlighting this potential overlap. To improve clarity, we have decided to reword questions 1.10 and 1.11 in the prospectus and application form, as shown below, and to delete question 1.12:

1.10 Please provide rationale for all proposed customs sites, including:

• What you expect each customs site to be used for?
• What outputs/benefits do you expect each site to generate?
• How do they relate to each other and the wider Green Freeport?

1.11 Does your Green Freeport propose any customs sites outside the Outer Boundary? If yes, please provide a written submission with clear and specific reasoning justifying such additional proposals and how it relates to the wider Green Freeport.

5. Will freeport customs site benefits remain where goods travel between different freeport customs sites (e.g. Scottish Green freeport to English Freeport) under bond?

A: Yes, it will be possible to move goods between different Green Freeport customs sites within the same Green Freeport, and to other Freeports under duty suspension.

See GOV.UK for guidance on declaring goods moved between different customs sites.

6. Under a Freeport storage and processing authorisation, is it permissible to hold machinery, used in the processing authorised, in Customs duty suspension for the period that it is employed to carry out that function?

A: Freeports facilitate the storage and processing of goods under duty suspense. They do not provide duty relief for items or assets used in the business. In order to use imported items in the business, they will need to be declared to free circulation first, with relevant duties paid. This can be done while the goods are in the customs site.

7. What is the definition of “infrastructure” in this context?  (Refers to Question 1.15 – ‘Please set out how you will meet the minimum standard of security and infrastructure required in customs and tax sites before being able to operate as a Green Freeport.)

A: Customs - Infrastructure will be required by HMRC, Border Force and other government agencies to carry out checks in line with existing arrangements at ports. Green Freeport operators will be required to provide this infrastructure. Infrastructure may include, but not be limited to, examination facilities, potential sites to scan goods and vehicles, and a dedicated area to securely store goods in accordance with AEO(S) requirements.

Tax - 3.1.20 The tax sites:

a. should be underdeveloped, with reference to section 3.1.26

b. should be clearly delineated on a map – they should not be engineered to create a single site with the use of long and narrow lines (if there is an economic case for it there can be multiple sites, please see point c)

c. should encompass a single site within the Green Freeport of no greater than 600 hectares, or up to 3 individual sites aiming to be between 20-200 hectares – we will consider submissions that make an economic case for an individual site that falls outside the 20-200 hectares guideline, but the total area of the individual sites within the Green Freeport must not exceed 600 hectares. Those that do exceed 600 hectares will automatically fail the Green Freeport application process at the pass/fail stage

d. can have uneven boundaries, if that helps capture promising areas while cutting out areas that are more developed, so long as those sites are justifiably single and individual

e. do not have to be a single piece of land – for example, a single site could be two pieces of land split by a road. If there is no portion of land connecting the sites – for example, if they are split by a river, or residential property – we would consider these two separate sites unless very clear geographic and economic interconnection can be demonstrated. We are open to one single site containing multiple parcels of land split by a road, protected area or geographic feature (such as a river) so long as the parcels within the land can reasonably be considered one single site because geographic and economic interconnection between the sites can be demonstrated (e.g. travel between them is plausible).

f. do not all have to be owned by one owner – it can include multiple, separately owned parcels of land that all fall under the single delineated site. Applicants must provide evidence that landowners have signed up to the vision for the proposed tax site and will take appropriate steps to ensure development on the site aligns with the Green Freeport’s objectives and those of the wider Green Freeports policy

g. do not need to be fenced – but it should have clearly identifiable boundaries (for enforcement purposes) and be clearly delineated on a map provided as part of the application

h. should ideally be located in areas with:

i. below national average GDP per head currently or over the last 5 years

ii. above average national unemployment rates currently or over the last 5 years

8. In a floating offshore wind manufacturing scenario, foundations would be manufactured on port facilities, or at the quaysides, before being floated into the water for ‘wet’ storage. This activity would take place year-round, with 50 units manufactured per annum. The towers, motors and blades would be added just before the turbines are towed out to the windfarm site, in the summer installation window.  As this storage and processing takes place on the water, this is a slightly unusual scenario. Can you confirm whether the combined Freeport special procedure would allow for the inclusion of these pre-identified wet storage locations as Customs Sites, to allow for the movement of goods between the port and the wet storage areas without attracting tariffs and duties, in order to meet the needs of the offshore wind developers and manufacturers?

A: Further details on this proposal would be required for us to be able to confirm whether it is workable. However, this could be provided after the bidding stage if the bidder was successful and need not prevent them bidding. The bidder should be aware that, if this proposal is deemed unworkable, they would be required to secure the designation of an alternative customs site in order to meet the minimum requirements of a Green Freeport.

Assessment

9. To what extent:

• will the assessment consider how the green freeports deliver to the majority of Scotland’s economy and its population?
• are there measures in place to ensure the designated sites reflect the discreet strengths, characteristics and opportunities of the industrial base and connectivity infrastructure in the east and west of the country?
• will the appraisal process take into account the capacity of bidders to be able to report robustly on economic impact?
• will the appraisal process recognise the competence and maturity of the partnership?
• will the assessment process take into account the extent of risk in either growing existing established sectors as opposed to entering new sectors?
• will the appraisal of the bids seek to ensure that the freeports are complementary rather than competing for the same economic sectors?
• will the appraisal of the bids seek to ensure an equitable geographic distribution of freeport locations throughout Scotland?
• will the assessment process look for uniqueness, complementary investment and Geographical Displacement across the UK?

A: As the prospectus makes clear, all of these matters will be considered against the broader economic policy backdrop. We recognise that different regions will have different existing strengths, institutions, and economic strategies. We want to select successful Green Freeport locations that account for and take full advantage of the diverse potential of the different regions of Scotland.

Among other factors to be assessed, we will consider the proposed governance and partnership working arrangements (see 2.1.3 of the prospectus); an appropriate sectoral focus that reflects local strengths, opportunities and aspirations (see 2.1.5 – 2.1.7 of the prospectus); plans for securing private sector and other investment (see in particular sections 2.1.6, 2.3.5, 2.3.6, 3.1.26, 3.4.1, 3.4.6) and appropriate proposals to address the risk of displacement (see 3.1.28 of the prospectus).

We will expect Green Freeports to be able to report robustly on the impact of their plans both on the local area and more widely, and applications should reflect this (see sections 4.7.2 and 4.7.3).

The consideration of regional spread between the 2 Green Freeport locations is covered in the prospectus – please see section 5.3 and in particular 5.3.2.b.i. and 5.3.2.b.iv. In selecting bids, we will consider the issue of spread, but equally if there are two nationally exceptional proposals located in close proximity we reserve the right to appoint them.

10. In 2.1.6 the prospectus refers to evidencing new private sector investment being rewarded with a higher assessment criteria. To what extent can private sector investment be included where investment has already been publicly announced, committed, or partially spent?

A: The focus is on additionality, and the higher assessment will be strongly linked to additional investment that is attracted by Green Freeport status. However, current plans are a relevant background consideration and form part of the wider context. Applications will be assessed against the criteria set out in section 5 of the prospectus but will be considered in relation to their wider context. Section 1.2 of the prospectus sets out an overview of Green Freeports as a policy approach. Paragraphs 2.1.1 to 2.1.4 of the prospectus sets out some of the relevant wider context in relation to promoting regeneration.

11. What is the definition of “commercial demand for the infrastructure” in this context? (Refers to Question 3.10 - Please provide evidence of the commercial demand for:

• the tax site land
• the customs site(s)
• the infrastructure or other outputs from the requested seed capital)

A: Commercial demand in this context relates to interest in the proposed output that will be found through spending of seed capital acquired. This could be evidenced via letters of interest from investors, reports on the number of site enquiries or analysis of viable comparable sites, for example.

Application process

12. Please could you explain the differences you expect to see in the Implementation Plan (3.2; 3.4-3.7) and the Delivery Plan (3.3)

A: This text has been updated to refer consistently to “Implementation plan” throughout the prospectus.

a. Should the implementation plan cover just the period up to Green Freeport designation or to delivery?

A: The implementation plan should cover the period up to delivery of Green Freeports

b. Does the Delivery Plan relate to the plan for the setup of the Green Freeport or the setup of tax sites or both?

A: The implementation plan should cover both the set-up of the Green Freeport and the set-up of tax and customs sites

13. Please could you confirm that the Fairer Scotland Impact Assessment can be uploaded in the portal at Question 1.3?

A: Yes, there will be an option to upload information for 1.3

14. Please would you advise under which Question you would like to see details of the proposed Green Freeport governance body? (Refers to the Statement 4.3.2. “Applicants are therefore required to set out their proposals for a future Green Freeport governance body to oversee their Green Freeport.”)

A: This should be included in the Implementation Plan.

We have updated the prospectus to note this (see section 5.8 of the prospectus, under 3.3 in the table) and increased the word limit for this question to 1000 words to accommodate this information.

15. Other than the letters of support, requested elsewhere in the bid, please detail what kind of formal agreements or commitments would be required? (Refers to Question 4.2 - Please describe any formal agreements or commitments you have from businesses or other partners to support port and business development. Please upload any supporting documentation to evidence these commitments. Bids that demonstrate genuine and tangible long-term commitments from partners will score more highly)

A: Please note, letters requested in section 1 of the application form are seeking confirmation of support from land owners, local authorities and an understanding regarding the requirements for customs site designation. Question 4.2 is seeking evidence of support from businesses and other stakeholders for port development. We would look to receive evidence the businesses have signed up to a long-term commitment to the development of port location, this should go beyond local authorities.

16. Should second part of this question be answered in the text box or in the landowners’ letters? If text box, what is the word limit? (Refers to Question 1.6 - Evidence (e.g. letters) that landowners have signed up to your vision for the proposed tax site, associated land use and will take appropriate steps to ensure development aligns with the freeport’s objectives and those of wider freeport policy. Explain how and why government can have confidence that the tax site will be delivered in line with your vision.)

A: This question can be answered using evidence, the text box, or both. Applicants can decide to use whatever method they think best sets this out. The word limit for the text box is 250 words.

17. Regarding the years in the template for Q3.9?:

a. The years start in 22/23, and we are concerned that delivery of investments is unlikely to begin in this year given the time taken to complete OBC and FBC processes. Should the schedule begin in 23/24?

A: We do not require or expect delivery of investments to have begun in 22/23, however this is included in case of any early activity. A zero response in this column is acceptable.

b. There is a repetition of years 24/25 in the template, should this read 25/26 and 26+?

A: This has now been amended.

18. For the investment schedule template (template 3.9) what detail is required in columns marked ‘Revenue’ (Columns K, M, O, Q , S, U)? Do these only require revenue cost details for any revenue spending related to the use of green freeport enabled funding i.e. retained business rates?

A. There is an example column, which should act as a guide but we would emphasise that the response should set out the revenue funding required, and where that funding is expected to come from.  This should specifically focus on revenue that is directly related to the Green Freeport intervention – i.e. all of the geography and economic levers offered to applicants as outlined in Section 3 of the prospectus – and that would not happen without the Green Freeport designation.

19. In question 4.1, do the SIC codes form part of the 500 word limit or are they a separate entry?

A: Information on SIC codes will not count towards the word limit on question 4.1.  You will be able to submit additional words in this response and they are not a separate entry.

20. In filling out the spreadsheet for Question 3.9 we’ve noticed that some of the formulae in the template are inconsistent / confusing. Could you please advise on the following? 

Q: In Column G which asks ‘Who is responsible for the borrowing?’ the input cells are the same drop-down list as Column E (i.e., indicating whether it is ‘Private Investment’ or ‘Public Investment’) which we presume is a mistake. As such, we are assuming these should be a free inputs cells (e.g., “ABP”).

A: Yes – please input relevant information.

Q: Column V ‘Funding Source Total’ only appears to sum Columns L to Q (i.e., 2022-23 to 2024-25) rather than the full capital / revenue profile (i.e., Pre 2022 to 2026+, or Columns J to U) which we presume is also a mistake. As such, we are assuming Column V should sum Columns J to U.

A: Yes, this is a mistake. The online proforma has been updated on the website, but you do not have to use this if you have already completed this information. You may choose to amend the formula yourself in the original template if you wish but we will take the full profile into account in the assessment as long as the values are entered in the relevant cells.

General

21. Should there be delays to councils forming following the 05 May election, will the assessors accept letters of support from local authorities signed by emergency delegated powers to council officials?

A: Yes, should this situation occur, letters of support signed by an appropriate Council Officer under delegated powers would be accepted as part of the application process. In the event that this continues to affect any bidder progressing beyond the gateway stage, further discussion would be required to agree an appropriate way forward, noting that a letter of support will be required as soon as possible after the administration forms.