Liz Truss's plan for tax-free zones condemned by Labour

<span>Photograph: Frank Augstein/AP</span>
Photograph: Frank Augstein/AP

Liz Truss, the new trade secretary, will promise to create up to 10 new tax-free zones at ports and airports in a move condemned by Labour as setting up tax havens and money-laundering opportunities along Britain’s coasts.

The cabinet minister, a free marketeer whose political hero is former chancellor Nigel Lawson, said the plan for so-called “free ports” could revitalise transport and trade hubs like Margaret Thatcher did for the London Docklands in the 1980s.

Boris Johnson championed free ports when he took office last week, but the Singapore-style tax-free zones are controversial and have been identified by the EU as a money-laundering risk.

Under the plans, ports including Teesport, Milford Haven, Port of Tyne and London Gateway could become standalone economic zones, considered independent for customs purposes, that charge no taxes or tariffs on imports.

Related: What is a free port? All you need to know about the free-trade zones

Free ports are typically used to store high-value items such as valuable artworks, precious stones or antiques in places such as Luxembourg, Singapore, Beijing, Monaco and Delaware. They were heavily criticised by a European parliament report last year for facilitating “illegal activity” such as tax evasion and money laundering.

Those advising Truss on a new free port panel will include Eamonn Butler, the director of the rightwing, libertarian Adam Smith Institute, and Tom Clougherty, the head of tax at the Thatcherite thinktank the Centre for Policy Studies (CPS). Emma Jones, who runs a small business network, and Daniel Korski, a former adviser to David Cameron will also be on the panel.

One CPS report by Rishi Sunak, now chief secretary to the Treasury, claimed that free ports could create 86,000 jobs for the British economy if they were as successful as in the US. But others have warned that investment and jobs can simply end up moving there from other parts of the country with a loss of revenue for the exchequer.

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Speaking on a visit to Teesside, Truss will say: “Freedoms transformed London’s Docklands in the 1980s, and free ports will do the same for towns and cities across the UK. They will onshore enterprise and manufacturing as the gateway to our future prosperity, creating thousands of jobs.

“We will have a truly independent trade policy after we leave the EU on 31 October. I look forward to working with the free ports advisory panel to create the world’s most advanced free port model and launch the new ports as soon as possible.”

The Department for International Trade described free ports as hubs for business and enterprise that “could be free of unnecessary checks and paperwork, and include customs and tax benefits”.

It would mean areas of the UK where businesses did not have to pay the usual taxes or go through normal planning laws. The department pointed to 250 free trade zones in the US where 420,000 people are employed.

However, Barry Gardiner, shadow trade secretary, said it would create a “race to the bottom that will have money launderers and tax dodgers rubbing their hands with glee”.

“Free ports and free enterprise zones risk companies shutting up shop in one part of the country in order to exploit tax breaks elsewhere, and, worst of all, lower employment rights,” he said.

“The British people did not vote for this new administration and they certainly did not vote to see their jobs and livelihoods threatened in favour of gifting further tax breaks to big companies and their bosses.”

Owen Smith, a Labour MP and supporter of the People’s Vote campaign for a second EU referendum, said creating onshore tax havens would be “likely to suck away jobs from businesses that pay their taxes than anything else” and create a boom in self-storage for art thieves.

“If that happens at any scale it is likely to undermine the public finances and ultimately lessen the money available to fund the police, schools and hospitals,” he said.

“Free ports will do nothing to address the multitude of supply crises that no deal will create. Free ports do not make it easier or faster to get vital medicines or food or chemicals into the country. Free ports do not solve the problems of the Northern Ireland border, nor do they stop goods on our supermarket shelves being hit with import taxes.

“Free ports do, though, offer great new opportunities to anyone who wants to avoid customs checks while they store goods. One industry could indeed boom – self-storage for art thieves.”

Harry Theochari, chairman of Maritime UK, representing the shipping and ports industry, gave a cautious response, saying free ports were “one important piece of a larger puzzle” in terms of boosting growth.

“Implementing free ports successfully requires time, collaboration and careful planning, but we are keen to work closely with government to ensure their plans are a success for the long term,” he said.

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