Scotland's Economy

Ministerial Statement: The contribution of place-based economic development zones

January 21, 2021 by No Comments | Category Business, Economy, innovation, Uncategorized

Trade Minister Ivan McKee:

Presiding Officer, today, I have published findings from a survey conducted at the end of 2020 on “Scotland’s Economic Performance: The Contribution of Place-Based Economic Development Zones” and I welcome the opportunity to set out some of those findings and next steps to Parliament.

The survey sought the views of businesses, local authorities and other partners on how we might develop future plans to nurture Scotland’s regional and local economies. I would like to thank everyone who responded to the survey.

The survey was conducted for two principal reasons. Firstly, in mapping out the future of the current network of 16 Enterprise Areas across Scotland beyond March 2022, we wanted to obtain views on the efficacy of the Enterprise Area model and how they, and other place-based economic development initiatives, could be improved and how they can support delivery of our fair work first and net zero agendas.

We also wanted to obtain views on the merits or otherwise of UK Government plans for freeports, and how they might work in the Scottish context.

This government is clear that all of our efforts to develop Scotland’s future economy must enable an inclusive and sustainable recovery from the impact of the COVID-19 pandemic, with wellbeing and fair work at its heart.

The hallmarks of that recovery will include the creation of new jobs, good jobs and green jobs, which we adopted as a national mission in our Programme for Government.

Scotland now finds itself, for now, outside of the EU and denied all of the benefits of being within the single market and customs union. The UK government has cited the creation of freeports as something made possible by Brexit. That is, a new ability following our collective, enforced departure from the EU. Their narrative ignores the inconvenient fact that freeports have operated in the UK while in the EU, and still exist across the EU.  In that sense, they are being oversold as a Brexit dividend.

With that as our backdrop, the Scottish Government will leave no stone unturned in seeking to create a technology enabled, net zero, inclusive wellbeing economy that delivers for every place and community in Scotland.

The very helpful returns to our survey have helped to frame our thinking and will be used to inform the Scottish Government’s policy position. The approach I am setting out today is one informed by a range of opinion and knowledge from Scottish stakeholders.

Respondents were supportive in general of development of a tailored Scottish approach to the freeport model, tied to Scottish Government policy priorities around inclusive growth, fair work and the just transition.

Some comments gathered highlighted Scotland’s natural advantages around renewable energy and net zero transition activity, and reinforced the need to create high-value jobs.

Some respondents also reflected on the impact of COVID-19, both in terms of the impact on current activity and timescales for progress in this area but also on the importance of new interventions to help with economic recovery.

We are already taking a range of actions to grow regional and local economies.  We provide incentives and assistance to encourage cluster-building through the Enterprise Area network.

The importance of building on the strengths of places was reinforced in our inward investment plan, ‘Shaping Scotland’s Economy’, which identified opportunities for cluster building based on our strengths in high technology, high productivity and high wage sectors.

And every part of Scotland has a commitment to new investment through the City Region and Growth Deal programme. Many deals are in delivery, with communities beginning to benefit from over £1.9 billion of Scottish Government investment commitment. We have worked with the UK Government and our regional partners to assemble a £5 billion programme over the next 10 to 15 years.

Building on this  partnership working, we have considered whether the UK Government freeport proposition can fit with our model of economic development by helping to drive inclusive and sustainable growth in Scotland.

The reputation of freeports across the world is mixed, with concerns about deregulation and risks of criminality, tax evasion and reductions in workers’ rights raised. That, Presiding Officer, is not a model nor an approach that this Scottish Government will sign up to or allow here in Scotland.

We have considered these risks and the views shared through our survey very carefully, and I can confirm that the Scottish Government, having looked at the available evidence, has developed a proposal which adapts the published UK Government proposition to make them fit for the Scottish context.

We will take the UK’s freeport model and apply Scotland’s values and priorities to it, so that it meets our ambition to deliver a net zero economy and uphold the highest standards of environmental protections and fair work practices.

Presiding Officer, I can announce today that Scotland will turn freeports into sustainable, fair, green ports.

We won’t be engaging with any economic model or mechanism that allows for a ‘race to the bottom’.

Instead, the Scottish green port model will be an exemplar, adopting best practice which helps deliver our net zero and fair work principles, alongside supporting regeneration and innovation ambitions.

Being designated a green port or operating within such a zone will come with benefits and incentives. It is therefore right that it comes with responsibilities too. Responsibilities to uphold high standards, put into practice our fair work principles and work towards a just transition to net-zero.

We are also conscious of the need to avoid economic displacement, both within, and from, Scotland.

Scotland’s model will seek to anchor our newly designated economic development and trading zones. They will be designed to support the development of innovative industries committed to developing new green technologies; fair work opportunities; and embed themselves into the local communities in which they are based.

Presiding officer, I am confident that we can take key elements of the UK model and align those with our Scottish values to make sustainable, fair, green ports work.

The Scottish green port model will include the following key features:

  • The application of clear conditions which ensure these zones contribute to sustainable and inclusive growth.
  • These conditions will centre on specific commitments being made by applicants, and subsequent obligations placed upon successful applicants, linked to a dual commitment to supporting decarbonisation and fair work.
  • These conditions will include payment of the real Living Wage and adoption of the Scottish Business Pledge by the operator of the zone and all new businesses operating within the zone boundary benefitting from any governmental assistance through devolved or reserved tax incentives.
  • Applicants or applicant partnerships and new beneficiary businesses setting up in the zone would also be expected to demonstrate how they are contributing to Scotland’s just transition to net zero emissions and a low carbon economy, for example, meeting certain standards related to reductions in greenhouse gas emissions and waste.

Under this model, applicants would be required to set out a robust and ambitious transition plan to show how they will contribute to making a just transition towards a net zero economy.

As with the UK Government’s model the incentives and support on offer to Scottish green ports would be a mixture of reserved and devolved tax benefits and other support.

Devolved tax benefits, potentially including non-domestic rates and Land and Building Transaction Tax reliefs, will be designed specifically for the Scottish green port model, taking into account the complementary reliefs on offer from the UK Government.

From my discussions with UK Government Ministers, I am confident we can realise our approach for a sustainable, fair, green ports’ proposition and we can create something inspirational setting the standard in accelerating decarbonisation, promoting job creation and fair work, and sending out a signal about Scotland’s commitment to being a dynamic, open and principled trading nation with fair work and the planet’s future at the top of our priority list.

Equally, I am clear that we will not allow any freeport to be created in Scotland that enables or allows potential tax evasion. This is a specific issue I have raised with the Chief Secretary to the Treasury.

It will be essential that the UK Government plays its part by including firm legislation and measures to ensure good tax behaviours. More widely, our governments will want to work together on compliance, governance and management of performance related to the operation of Scottish green ports and the business conducted within their boundaries. I am happy to keep Parliament updated as this work develops.

Having published the responses to our recent survey, our next step is to publish an application prospectus for green ports in Scotland for potential bidders. I  aim to make this available for interested parties this quarter so that we are in a position to establish these zones to dovetail with UK Government plans.

Presiding Officer, place based economic development has significant potential to grow our economy sustainably in communities all across Scotland, not least through our cluster building approach to key sectors.

Work in that regard is underway and being marshalled in particular through regional economic partnerships and Scotland’s inward investment plan.

And our green port proposal also plays a role here.  We will now seek to optimise key aspects of the UK Government’s freeports model, principally around innovation and regeneration.

In particular, we will ensure that Scottish green ports help to drive desirable investment and inclusive growth, focussed on this government’s twin ambitions of creating a net-zero carbon economy and fair work.

For these reasons, this government now intends to move forward with our proposals to secure the development of Scotland’s first designated sustainable, fair, green ports based on the criteria outlined above – and we would welcome this Parliament’s support in that endeavour.

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