My Lords, I in turn thank the noble Baroness again and the noble Lord, Lord Tunnicliffe, for raising these concerns. In particular, I will address the point she made about displacement slightly later in my remarks.
Amendment 3 would require the Government to conduct a review, six months from the date this Act receives Royal Assent, into the effectiveness of the policy. The Government acknowledge the importance of monitoring reliefs of this nature and evaluating ambitious programmes such as these free ports. It is for that reason that the Government have already committed to reviewing the use and effectiveness of this relief before deciding whether to extend it further. This review will look at the data available through HMRC’s systems.
More broadly, the Department for Levelling Up, Housing & Communities—the department responsible for delivery of free ports, as I mentioned during an earlier debate—is leading the monitoring. It will work closely and collaboratively across government to ensure a robust and rigorous evaluation. Given that the free ports policy is focused on generating long-term benefits to local areas, six months is unlikely to be an appropriate timescale for any review, as free ports will not have fully reached their operating potential within that six months. For example, ports will still be looking to attract additional investment and continuing to develop their sites. In addition, this policy relates to new employees. As I imagine the noble Baroness will understand, the hiring process can take a number of months, which would take us well beyond the six months she suggests.
The department for levelling up has committed to publishing its monitoring and evaluation strategy in spring 2022. This strategy will be in line with key principles and best practices from the Magenta Book, which provides guidance on evaluation within government, and will ensure a robust and rigorous evaluation of the free ports programme.
Furthermore, the Government have taken on board suggestions and feedback from stakeholders and the public as part of the consultation process to ensure that the UK has an ambitious and attractive offer for businesses. Our new free ports offer is far more ambitious than our previous one, including simplified customs processes, targeted tax measures to incentivise private business investment, carefully considered planning reforms and targeted funding for infrastructure. This new, ambitious free ports policy offer is already proving attractive to domestic and international investors looking to start or grow their UK operations.
Throughout the development and delivery of the free ports policy, the Government have taken steps to ensure that the tax, spending and policy levers deployed in free ports are used effectively. That takes us back to the first debate we had this afternoon. For example, to minimise displacement of economic activity, we required bidders to explain how their choice of tax locations would attract new economic activity to the area which would not have been possible without free ports. Subsequently, tax sites were not designated until the Government were confident that this had been successfully demonstrated. This approach has been recognised by the OBR in its Economic and Fiscal Outlook, which says that
“the Treasury has taken steps to try to reduce displacement through the bidding process, requiring bidders to demonstrate how they would generate additionality and minimise displacement from other locations.”
We are already seeing positive evidence of new investment at free ports. For example, DP World announced an investment of £300 million to support the Thames free port.
It is prudent to work within these existing frameworks so that we can get a holistic view of the success of free ports. We believe that conducting the review less than six months from when the relief comes into effect will produce an incomplete dataset and will not give a fair reflection of the policy. With this explanation and these reassurances, I hope that the noble Baroness will withdraw her amendment.