Scotland is to miss out on a freeport after SNP ministers walked out on talks with UK officials about a joint agreement to establish new trade hubs.
The UK Government is now set to push ahead with plans to sideline the nationalist administration and invite bids for a single Scottish freeport, which it will establish unilaterally, after negotiations collapsed.
Officials had been discussing a deal that would have seen two ports in Scotland receive the special status, with the scheme a key part of Boris Johnson’s vision for boosting trade in post-Brexit Britain.
Freeports receive significant tax breaks and exemptions from some customs rules, and advocates claim that would create thousands of jobs and boost local economies.
However, the SNP ministers demanded that the hubs were rebranded “greenports” north of the border and that operators must agree to meet certain environmental and employment standards, claiming the internationally renowned freeports brand was “tarnished” by links to smuggling, crime and tax evasion.
The UK Government saw the proposed changes as cosmetic and as part of an SNP attempt to claim credit for the scheme while unfairly presenting Scottish ports as superior to the eight sites that have already been chosen for England, including Teesside, Plymouth and Liverpool.
The failure to reach a deal means that a single Scottish freeport will now be at a disadvantage to counterparts in England, as while most of the tax breaks on offer are controlled by the Treasury, some, such as a reduction in Scotland’s equivalent to stamp duty, would need to be agreed by the SNP.
On Friday, Ivan McKee, the SNP trade minister, blamed the UK Government for the collapse in talks and claimed the Scottish Government would now “take forward plans to further develop our greenport model”.
‘This is a missed opportunity’
A UK Government source said: “We remain 100 per cent committed to freeports which have the potential to boost the Scottish economy and create highly paid jobs.
“We are deeply disappointed that the Scottish Government has chosen not to work with us on the scheme.
“A Scottish freeport will be a huge success but this is a missed opportunity. It is for the Scottish Government to explain why they have chosen not to work with us.”
Dundee, Port of Cromarty Firth and Aberdeen are among the Scottish ports that are desperate to obtain the special status.
UK ministers expect Scottish ports to embrace the opportunity to apply to become Scotland’s only freeport, which they believe will neuter inevitable SNP claims that they are being “imposed” by Tory ministers who are trampling over the devolution settlement.
In a letter to Ivan McKee, the SNP trade minister, sent earlier this month, Alister Jack, the Scottish Secretary, claimed a deal between the governments was close with £120m in tax reliefs on offer over five years.
He confirmed two freeports would have been set up in Scotland under the deal, with the Scottish Government to have had a joint role in deciding winning bids, and “fair work practices” among the factors to be considered.
However, he made clear that he would not give into Mr McKee’s demand to change their name to “greenports” or insist on payment of the real living wage. He also said the SNP must make “a comparable tax offer in devolved policy areas as is in place for the English freeports”.
Mr McKee said he was unwilling to compromise on his conditions around “fair work and net zero”.
He added: “It is difficult to comprehend why UK Ministers would seek to dilute a strong commitment to fair work, including payment of the real living wage, when seeking to implement their freeport policy in Scotland.
“The Scottish Government, therefore, has no option but to take forward plans to further develop our greenport model to meet the specific needs of Scotland’s economy.”
A spokesman for the UK Government said its freeport model already “embraces the highest employment and environmental standards”.