A Deal With The Devolved - Part Two

Craig DalzellBack in March I wrote about the plans the Scottish Government had for the new Green Freeports. Not content with merely supporting and allowing the UK Government to create two vast tax and regulation-free zones in Scotland they had just launched a consultation on the first of two devolved taxes that the Scottish Government intended to apply to Freeport activities. Their plan was to offer “full or partial relief” of Land and Building Transaction Tax to land or buildings purchased for the purposes of Freeport activities (this matches a similar plan by the UK Government to cut Stamp Duty for similar purchases). You can read our response to the consultation here.In short, we oppose this relief. We oppose the Freeports as a fundamental principle and do not think the Scottish Government should be aiding and abetting them using devolved taxes. If tax adjustments are to be applied then we think that the Scottish Government should increase devolved taxes on Freeport activities to compensate for the loss of public revenue that will occur due to UK reserved tax cuts and to prevent those cuts resulting in cuts to Scottish public services and we believe that there should be no “partial” exemption if tax cuts are to happen. The last point has a little subtlety to it. The reason for partial relief is in the case that land or buildings are purchased but are used for both Freeport and non-Freeport activities. One example might be an office that employs people who work on Freeport accounts and, in the same office, people who work for the same company but on their non-Freeport activities. Another might be land purchased to build a car park for employees in the normal office and for employees working in the Freeport office across the road.But the purpose of a Freeport is that it is designed to completely and totally segregate its activities from the “domestic” economy and there should be a hard customs border between the two to prevent either tax dodging (goods being imported to the Freeport then moving into the domestic economy without paying the appropriate taxes) or regulatory breaches (such as chemicals being used in the Freeport Zone that would be illegal in the rest of the country due to environmental laws that the Freeports are able to avoid). If “partial” tax relief is offered for mixed use, then it becomes difficult to enforce those customs borders. The only solution is an all or nothing approach. If the company wants the tax and regulatory benefits of a Freeport, then it has to properly segregate its activities and police its customs border just as you’d expect at, say, the duty-free side of an airport.This week, the analysis report of the consultation was published and while Common Weal has made a substantial impact in the report – just as we did last week with the FOI consultation – I can’t say I’m approaching this one with as much positivity as the previous one.For a start, the response rate for this consultation was appallingly low. Just ten responses were accepted by the Government and included in the report. Of those, one was from us and two were from trade unions (Unite and the STUC).Property consultants, tax accountants and the Freeports themselves make up the rest (though the response from Forth Freeport is curiously absent from the publication website – have they declined to give permission for the public to see their response perhaps? Are they afraid of us seeing what they’ve said?). With some concern, I note that the report mentions that “In keeping with standard practice, responses which did not engage with the questions asked are not included in this analysis”.Indeed, looking at the responses that have been published, it appears that the submissions from Unite and the STUC are entirely blank which suggests that their submissions have been largely erased for “not properly answering the question”. You can, however, read the STUC's response to the consultation thanks to them publishing it on their own website here in which they are, like us, are particularly scathing about the impact these tax cuts will have on workers' rights and on public services.Given that I know of at least a couple of response that went in that haven’t appeared on the final list at all (including from groups such as Global Justice Now and at least a couple of activists I know who put in personal responses) I fear that many voices have been silenced and I think I know the reason why.From the outset, this was an unusual consultation. Most consultations essentially ask the public what they think about the policy. “Do you agree with the Government proposal to do X?” is the usual, if somewhat loaded, format for consultation questions. This one, however, did not directly ask that question at all. It did not ask us if we thought that the Scottish Government should offer tax cuts to Freeports.Instead, it presented proposed legislation and asked “Do you think this legislation will give effect to the proposed tax cut?”In many cases, it would have. The legislation, to my legally untrained eye, looked like it was competent and would do as they said they wanted it to do. But this is a very different question from asking if we thought what they wanted to do was a good idea or not. I suspect people who only offered their opinion on the policy and didn’t answer the question as written have had their response discarded. That, or they read the question and were turned off from even responding at all.This is utterly undemocratic. The public are not there to be the untrained, unpaid legal clerks for the Scottish Government. We are not here to check to see if they are doing their paperwork correctly. We are here to tell them what we think of their policies and for them to work out how to do what we ask them to do.I guess we at Common Weal are lucky that I’m a pedantic old goat when it comes to awkward questions because with the memory-holing of activist returns and the blanking of responses from the trade unions it has left us as just about the sole voice of dissent in this consultation.Many times throughout the report, it notes a near-consensus of views that tax cuts for Freeports are a good idea only to say something like “one respondent suggested [a dissenting view]”. While they never namecheck Common Weal in the body of the report, the quote that follows is invariably from our response.Unusually for a consultation report, the Scottish Government’s response to the replies is included directly within the report itself (rather than as a separate report released weeks or months later). My guess is that this was possible partially because of the dearth of accepted responses and the near consensus of those that were accepted and because of the near-universal nature of the Government’s response.In almost all cases, such as our call for complete economic segregation of Freeports, the dropping of partial tax consideration in favour of an all-or-nothing approach, and on our call for taxes to be increased instead of cut, the Government’s response was the same. “The Scottish Government does not intend to [make changes to its initial proposals]. No amendments have been made to the legislation.” The only amendments to the legislation that have been accepted are minor technical amendments such as adjusting the timescales over which the tax cuts could apply.When I was asked why I thought the Scottish Government were going along with these plans I replied with three possible options. That they’re afraid of bad headlines from the media if they resist these plans; that they’re afraid of capital flight if they don’t match England’s race to the bottom; and that at least some in the Government are True Believers who honestly think that Freeports will grow the economy by more than the tax cuts despite all evidence to the contrary.I also believe that the Scottish Government knows that the public aren’t with them on Freeports. I think they know that during times of increasing hardship, there is no political capital or votes to be won by offering tax cuts to multinational companies while promising the folk who work for them only wage cuts and less safe working conditions. It is simply not acceptable to be as sneaky as they have been with consultations as important as this one. It is not acceptable to discard responses simply because people don’t like the question asked, or to frame the questions to limit the answers you get. The plan to offer tax cuts for Freeports must be paused until the public are given the free, fair and proper chance to tell the government if they want them to go ahead or not. We should also be allowed to see the responses from folk like the Freeports as they will be direct beneficiaries of the tax cuts – that fact and the public interest in their views should and must outweigh their normal right to anonymity in their response.Freeports are a bad policy – I will maintain this until a proponent of them can provide actual evidence to the contrary. This holds true no matter how competent the legislation enabling that policy actually is. The Scottish Government should re-run this consultation and, next time, let us tell you what we actually think rather than just what you want to hear.