35 years ago, Margaret Thatcher’s government enthusiastically packaged the municipal water companies for sale. Debts were written off. Liabilities sidelined. And a wholly unrealistic regulatory regime drawn up to make these privatised monopolies attractive to investors. Barely 15 years later, it was starting to go wrong. Today, the water companies are a disgrace and a national scandal.
Could the next national scandal be in the making?
One of the most under-reported developments of recent times is the post-Brexit banquet of Freeports and Special Economic Zones promoted by the Conservative’s Rishi Sunak when Chancellor and since turbocharged by the Labour government.
Freeports, in their old guise, are nothing new; but unshackled from EU regulation, the British government has been frantically creating a network of ‘free zones’, currently numbering 12 Freeports, 74 SEZs (Special Economic Zones) and 5 Ai growth zones, each with its own set of tax incentives, planning exemptions and public subsidies.
The way these Freeports and Free Zones are intended to operate is complex and shrouded in opaque doublespeak. These are not the business districts or industrial parks of old. They bear more comparison to offshore financial centres, beyond the reach of everyday rules and regulations.
Among the EU’s reasons for tightly regulating free zones are money laundering, smuggling, and tax evasion. In the UK, the government gives all sorts of vague assurances, but there remain questions as to how illegal activities can be tracked in zones that are granted special and secretive status.
On the one hand, you might view these new zones as a dynamic way of getting GB plc motoring again. On the flip side, it is a scale of corporatisation that is open to exploitation and abuse.
The pitch is that these will be engines of local growth; but their primary ‘pull’ is subsidy and relaxed regulation. The economic activity relocates to capture those advantages. Evidence from previous freeports in the UK and elsewhere in the world is that employment is simply displaced with little net gain for communities.
In effect, the UK is being subdivided into corporate fiefdoms where different rules and different levels of democratic accountability apply. A lot of public money is being handed out to encourage participation. Labour, who opposed much of this in opposition, is now accelerating it at breathtaking speed.
With billions in taxpayer-funded state aid flowing into these zones, benefiting global giants like BlackRock, the stage is set for repeated corporate heists. Also worrying is the embodiment of Investor-State Dispute Settlement (ISDS) in SEZs, which allows corporations to sue the government if state policy impacts their profits.
As if to demonstrate how these laissez-faire arrangements can be massively exploited, in 2017 the Conservative mayor of Tees Valley (now Lord Houchen) and his local mates set about creating a massive regeneration scheme on Teesside, touting it as the flagship post-Brexit Freeport. It became a complex, opaque, quasi-political enrichment scheme that swallowed £560million of public funding and continues to carry massive debts.
Private Eye magazine must be credited for doggedly exposing the scheme. In their words: “It was to be the UK’s largest regeneration scheme in decades, a model for regional devolution, and the flagship post-Brexit Freeport. But the redevelopment of the former steelworks on the south bank of the River Tees became little more than an unlawful, taxpayer-funded scheme to promote the political career of a Tory golden boy and vastly enrich a couple of local businessmen and their families, all hidden in a web of deception.”
Latest news is that the Teesside Freeport is set to fold, crystallising a massive loss of public funds. Who is to say this won’t happen again and again.
Do Labour understand what they are getting into?