HL Deb 02 February 1984 vol 447 cc785-90

4.56 p.m.

The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Glenarthur)

My Lords, with the leave of the House, I shall now repeat a Statement which is being made in another place by my honourable friend the Minister of State at the Treasury. The Statement is as follows:

"With your permission, Mr. Speaker, I should like to make a Statement.

"Last year in the course of his Budget Statement my right honourable and learned friend announced that, in accordance with the recommendations of a working party chaired by the former honourable Member for Knutsford, the Government had decided to designate a limited number of freeports on an experimental basis.

"Subsequently on 27th July I informed the House of the terms on which freeport applications would be assessed and invited applications to be submitted by 31st October. Forty-five applications were received by that date. On 3rd November I listed the names in a Written Answer and I undertook to announce the successful candidates early in the New Year.

"Since November all 45 applications have been examined, first by officials and then by Ministers. As it was necessary to limit the numbers, it was not possible to satisfy all of the applicants. My right honourable friend and I, together with ministerial colleagues, have made our choice with great care and no little difficulty; and the House will understand that it would not be right—or proper, for reasons of commercial confidentiality—for me to attempt to explain why a particular application was successful and why another failed. Our selection achieves a mix of airports and seaports with a good geographical dispersion. This will enable the freeports concept to be properly tested, and, as we have said, each of the initial freeports will be closely monitored and formally reviewed after five years.

"We have chosen six sites. They are: Belfast (Northern Ireland Airports Limited); Birmingham (West Midlands Freeport Limited); Cardiff (Pearce (Wales) Consortium); Liverpool (Mersey Docks and Harbour Company); Prestwick (Kyle and Carrick District Council and British Airports Authority); and Southampton (Associated British Ports (Holdings) PLC).

"The necessary enabling legislation will be included in the Finance Bill which my right honourable friend will introduce next month. Discussions will begin immediately with the successful applicants with a view to designating and bringing the sites into operation as quickly as possible. In some cases it may be necessary for the plans submitted to be modified to some extent for operational reasons".

My Lords, that concludes the Statement.

Lord Bruce of Donington

My Lords, the House will be grateful to the noble Lord for having repeated the Statement made in another place. The announcement follows the initiative taken by the Chancellor of the Exchequer, and, as one would expect, it primarily involves customs and other tariff matters with which the Treasury is normally concerned. The measure would seem to be essentially fiscal in origin, though obviously it has overtones involving other departments.

I should like to ask the noble Lord to confirm that the designation of a freeport does not involve any particular tariff advantage. I wonder whether such advantages that flow from having a freeport are of a non-tariff nature; that is to say, that there is a certain simplification of the various customs procedures, that there are certain advantages in a concentration of warehouse and other facilities, and that for importers and re-exporters on a large scale there may be certain cash-flow advantages in being able to attract large quantities of goods without having to pay out the duty on them. Those are the non-tariff advantages.

Of course one has no objection to the establishment of freeports of this kind. But I put it to the noble Lord that it might perhaps have been better for the Government themselves had they formulated a coherent policy for the ports of the United Kingdom as a whole and then related the freeport proposals to an organised, planned conception of what should be done with the ports of this country, many of which at this time are operating at under capacity.

Is the noble Lord aware that such attraction of activity as may take place at the freeports designated will probably be at the expense of other places in the country which are already suffering quite severely in terms of having considerable over-capacity? Will the noble Lord agree—and I do not in any way wish to be derisory—that to some extent the term "freeport" itself has a cosmetic quality, in that, no matter how much it may, one hopes, attract people to use the port, it does not really convey the true content of the operation as a whole?

Obviously we on this side of the House are not in a position at the moment to comment on the geographical selection or on the firms whose applications have been successful. We would assume that those matters have gone through the normal process, and we would have no particular wish to question them. But we shall keep a very careful eye on the whole project, and we trust that via parliamentary Questions and Answers and other means we shall soon have more information based on experience as to exactly how the freeports are going to work.

Lord Diamond

My Lords, I should like, for the second day running, I am afraid, to extend a full welcome to Government action—in this case in bringing in these proposals—and at the same time I wish to thank the noble Lord for repeating the Statement. In case my welcoming Government proposals on two days running is embarrassing to the noble Lord, perhaps I should add that it is not only twice in two days, but also twice in 14 years. So that will put the matter in perspective.

I welcome the arrangement because, as I understand it, I see it as an attempt by the Government to provide circumstances in which exports from this country will be encouraged, and I regard that as a proper duty of government. As to the details, it will be for another place to make representations on a constituency basis with regard to individual ports. Nevertheless, I have certain questions which I should be grateful if the Minister would answer, particularly since the legislation in which the proposals will be framed will not normally come to this House for detailed discussion.

In the first place, can the Minister be a little more expansive on the reasons which led the Government to choose six sites only? It seems to me a very small number. One can understand the reason for limiting numbers somewhat, but six seems to me especially small, and, in that connection, would it be possible for the Government to reconsider the situation earlier than the period of five years after which they have said the matter will be reviewed? Surely it ought to be possible after, say, three years for the Government to form a view as to whether the freeports are working out well, and therefore to consider whether some further applicants ought not then to be admitted.

Secondly, I turn to the question of the modification of plans to which the Statement refers, saying, In some cases it may be necessary for the plans submitted to be modified". Having regard to the need for the operation to be successful, will applicants be very fully consulted on the modification of the plans?

Finally, I wish to refer to the experimental basis which has been adopted, and which surely must appeal to our common sense as the right approach. Nevertheless, it will be difficult to have an experimental basis and at the same time avoid inhibiting those applicants who might wish to apply but who would regard five years as too short a period to cover the capital expenditure in which they would be involved. Therefore, in considering these matters, will the Government have regard to what might have to happen if the freeport arrangement were removed at the end of five years, to the embarrassment of those applicants who had incurred considerable expenditure in order to meet what is, after all, something that is in the best interests of the country?

5.8 p.m.

Lord Glenarthur

My Lords, I am grateful to the noble Lords, Lord Bruce and Lord Diamond, for their comments. First, perhaps I may apologise to both noble Lords for a slight error which appeared in references in part of the Statement—though not a part which I read out—to certain columns in Hansard. I think I am right in saying that at the start of the second paragraph there should have been a reference to cols. 451 and 452, and if that confused the noble Lord, Lord Bruce, I am of course sorry.

The noble Lord, Lord Bruce, asked first about tariff benefits. I can tell him that freeports would offer no additional tariff benefits, and I hope that he is reassured by that. The benefits arise from the simplification of procedure and economies of scale associated with it. The EC rules do not allow imported goods to be processed free of duty specifically for the home market, which includes all member states. If diversion of that kind occurred, duty would be charged at the rate applicable to the components rather than to the finished article.

The noble Lord asked about the term "freeport" and wondered whether it represented a true picture of the ports. Of course I understand the point that the noble Lord was making, but I am sure he will appreciate that the term "freeport" perhaps seems appropriate to the reduction of bureaucracy which is certainly associated with the concept.

As to the question of ports as a whole, of course the Government have had to consider the matter of the ports generally in their assessment of those that would be fitted to meet the experiment, which is what this is. Because it is an experiment, it is not always possible to select those which might fit a wider pattern; which is what the noble Lord suggested.

I am grateful to the noble Lord, Lord Diamond, for his welcome—indeed, his second welcome in a week to a piece of good news from the Government. The noble Lord asked a variety of questions which I shall try to answer and he particularly asked why there were not more than six. We recognised, I think rightly, that the fewer the number of sites, the better the chance of a successful experiment quite simply because too many sites would compete with one another. Again, I take the noble Lord back to the point that I made just now to the noble Lord, Lord Bruce—namely, that this is an experiment.

As regards the time for the experiment and whether or not it is right to have a shorter period than five years or a longer one—which I think the noble Lord suggested towards the end of his comments—we think that five years is about right. It might be arguable either way, but five years has been chosen because it will allow time to assess how the freeports are doing in comparison with the forecasts upon which the designation has been based. Freeports are a new development and it would not be appropriate to give an open-ended commitment, irrespective of actual performance, to provide the official resources required to control the zones. The main purpose of the review will be to identify any freeports which clearly have no prospect of viability. Zones which are successful, or potentially so, have nothing to fear.

The noble Lord also asked about consultation as regards any variation of application. I can tell the noble Lord that, yes, we would expect that detailed discussions with the operators may result, to a greater or lesser degree, in any modifications to the initial proposals. I hope that I have answered most of the points that the two noble Lords have raised. If I have failed to answer them, I shall write to the noble Lords.

Lord Diamond

My Lords, perhaps I did not make one question sufficiently clear to the noble Lord and that question concerns the period. It is not simply a question of whether five years is too long or too short. Given that we have a period of five years and that the number of applications granted is six out of a much greater number—I believe that there were about 40—would it not be possible for the Government to make an interim review of the situation prior to the expiry of five years with a view to considering whether further applicants might not then be reconsidered?

Lord Glenarthur

No, my Lords, I do not think that that will be possible, but I am sure that my honourable friend in another place will note the noble Lord's views. Only a small number could be chosen and so inevitably many applicants have had to be disappointed. Some of them were good and some of them were not so good. But we are confident that we have chosen those experimental sites which give a reasonable mix to allow the freeport concept to be properly tested.

Lord Gisborough

My Lords, I welcome the Statement in general, but does my noble friend agree that not one of these freeports is on the east coast, and that in particular not one is on the north-east coast where there is much unemployment? Can my noble friend say whether that is because there were no applications? Does it not counter the Minister's desire to have reasonably distributed freeports throughout the country? Can the opportunity be given in the reasonably near future to have this point about the east coast considered?

Lord Glenarthur

My Lords, I think I made it clear when I repeated the Statement that there are reasons which really preclude my going into why any particular port was not successful in its application. I understand that there were two applications for the north-east. Newcastle Airport and Immingham are the two that would probably be in the area to which my noble friend referred, but I do not think that I can be drawn any further about the reasons why any particular site was or was not chosen. Suffice it to say that my honourable friend when considering all 45 applications took into account a great many factors, and we believe that it was right in the end to choose the six that were in fact chosen.

The Earl of Northesk

My Lords, I should like to ask my noble friend a brief question. One recognises the need for freeports in such places as Liverpool and Belfast, which are areas of high unemployment, but have the Government taken into consideration the fact that permission has been granted—and, therefore, a decision has been taken—to provide a freeport in the Isle of Man? Because of the close proximity of these three places, will there not be, perhaps, undue competition?

Lord Glenarthur

Yes, my Lords, consideration was given to this matter. The Isle of Man freeport is being developed under existing freely available customs duty relief arrangements. There is an agreement between the Isle of Man authorities and the United Kingdom which requires a common approach to customs procedures, and so the designation as such of a freeport will follow the introduction of legislation in the Finance Bill.

Baroness Hornsby-Smith

My Lords, can my noble friend say to what extent he thinks that the six freeports will divert traffic from other ports? Also it seems to me a little strange that, while Birmingham Airport gets this designation, Heathrow—with London as our capital—does not do so.

Lord Glenarthur

My Lords, I can only repeat in answer to my noble friend what I said to my noble friend Lord Gisborough: these factors were taken into consideration. It would be wrong of me—and I expressed this when I repeated the Statement—to go into any detail about why either was chosen, or why one was chosen and another was not.

Lord Hale

My Lords, as regards the Isle of Man, I understand—and I am subject to correction—that it comes under the Isle of Man Customs Bill which has, certainly throughout my membership of either House, been renewed every year merely to bring reciprocal duties into force as between the Isle of Man and the rest of the United Kingdom. However, if we are called upon to consider the Isle of Man would it not be equally meritorious to consider the Lancashire coast in that area, which is a centre of industry and a centre of communications? It may be that it was included in the list that was read out, but I did not identify it or recognise it with ease. However, I certainly would have thought that that was a matter for very real consideration and, indeed, it may have to be taken into account when considering the Isle of Man Customs Bill and the reciprocal arrangements.

Lord Glenarthur

My Lords, I am aware of course of the noble Lord's interest in the north-west. As I have already explained, I cannot really say any more about the reasons why any particular site was chosen. But this is an experiment and if the experiment is successful then perhaps in due time it may be possible to have a freeport in the north-west. However, the Isle of Man is tied, so far as I understand it, to certain customs procedures in the rest of the United Kingdom, and that is why it will not be possible to designate the Isle of Man as such until the United Kingdom has legislated in the Finance Bill. I hope that that clears up the noble Lord's point.