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Land and Buildings Transaction Tax (Green Freeports Relief) (Scotland) Order 2023 [Draft]
The next item on our agenda is evidence on the draft Land and Buildings Transaction Tax (Green Freeports Relief) (Scotland) Order 2023. I welcome to the meeting David Melhuish, director of the Scottish Property Federation; Derek Thomson, Scottish secretary at Unite the union; and Liz Cairns, researcher at Unite the union.
I intend to allow up to an hour for this session. If a witness wants to be brought into the discussion at any point, they should indicate that to the clerks, please, and I can then call them. I will direct my questions for Unite the Union to Derek Thomson, but if he would prefer Liz Cairns to answer them, I would be quite happy with that. We will simply suck it and see, so to speak.
We have your submissions, which I thank you for. We will go straight to questions.
My first question is to David Melhuish. In response to our questions, you talked about the five-year timespan being
“simply too short for the nature of long term investment in the two green freeports”
in Cromarty and Leith. You also said:
“we note that the green freeports will not be fully operational until at least 2024 or perhaps even 2025. We therefore suggest that the qualifying period should be extended to at least 7 years.”
What would be the benefits of that to your industry and, indeed, the wider Scottish economy? How much investment and employment do you realistically expect to come into those two green ports?
Thank you very much for the opportunity to give evidence to the committee.
We think that the green freeports are a very positive initiative. To go directly to the question that you asked about the timespan, the nature of our business tends to involve very long-term investment. To be frank, it can be several years before some investors can do the statutory pre-application planning and so on for major developments. Albeit that there is intended to be a smoother planning process as part and parcel of the freeports, it nonetheless takes some time to get together the capital expenditure and teams, and to get the potential attracted businesses into the location. Our fear has been that, although we think that the schemes are really positive, five years might simply be there and gone before the relief could kick in. Our fear about that—the “So what?” aspect, I suppose—is that it might put off investors who are looking at a potentially lengthy process from coming at all. We simply think that some flexibility on timescales would give them the best chance of maximum success in bringing the jobs and added value to the economy, and the spur to sustainable growth that is envisaged in the plans.
On what is realistic, we are well aware that Forth Ports has suggested something like £6 billion supercharging the economy and more in added value, and I think that the brochure mentioned 50,000 jobs, but these developments take time. That is absolutely feasible, and there have been well worked-through business plans over a period of time, but a bit more time to pull together all of the investment would help both freeports to be the successes that they could be.
Derek, you talk in your submission about some 75,000 jobs. I have to be honest and say that the numbers seem quite fantastical to me. What are your concerns regarding displacement? When previous Governments have introduced enterprise zones, there have been concerns that they have simply moved jobs from one part of the country to another part. Obviously, that is particularly acute in areas that border such zones, including, in this case, green freeports.
Thanks for the opportunity to contribute.
Our estimates are 50,000 jobs at Leith and 25,000 at the Cromarty Firth. That is where we got that figure from.
On displacement, the idea of creating those 75,000 jobs is welcome. Obviously, that is a great step forward in respect of what can be brought into the economy. However, our fear is that business will simply run to the cheaper rates and cheaper areas and will start to move people and work in. There is a lot of deprivation and poverty in some of the areas that surround the two key areas, and a lot of people rely on jobs there. Our fear is that, if we start to move cheaper jobs and labour into the areas, people will be displaced and there will be poorer jobs, communities and areas. In our view, big business will rush to try to claim the tax relief at the expense of some of the workers.
This is not really the committee that deals with this, but we are looking at serious skills and jobs shortages when the just transition comes in, because we are not yet in a position to determine what a green job is. Our fear is that, if we start to move jobs out of different areas into the freeports—or green ports, as we like to call them in Scotland—displacement will take place and that will lead to further poverty if we do not reinvest in proper jobs in different parts of the community.
Although we welcome the idea of the green freeports, real concerns exist about how they might displace current jobs and people. Our fear is that, if we do not get the support to those communities absolutely right through that period, it will leave them devastated.
You have said in your submission that you
“cannot accept an economic situation which allows for private sector employers in Freeport areas to increase profits as a result of government subsidies while vital local public services that our communities and those in greatest need depend upon, are allowed to wither on the vine.”
Where is the evidence that that will happen? The whole point is to create economic growth, which will increase tax revenues, which will allow further revenues overall for the Government to invest in services.
Freeports will create more revenue if the jobs are properly paid and there are proper terms and conditions. One of our reasons for wanting to be here is to discuss the issue of collective bargaining. Our fear is that companies will rush in because they will be given the tax relief that is in this legislation and that that will drive down wages, because that is what big business has done numerous times. If we do not get the balance right and have proper wages in these areas, the tax relief will count for nothing. No tax relief will come in via big business and little more will come in through the jobs that are created, because no proper pay system will exist that generates tax and income.
To us, you are putting the cart before the horse a bit when you say, “We’re going to create all those wonderful jobs, but we don’t have an infrastructure in place yet,” and when you talk about the five to seven years investment programme. In our view, the people who will come into this will be big business, and they will exploit the workers and the system that you are putting in place, so we urge a bit of caution.
The evidence is that, if people are displaced out of current jobs and those jobs are moved into those new areas, poverty will start to increase in the areas to which the jobs are moving, because business will move to the cheapest area that it can get. So, we have a bit of a situation.
Business might move but, with less than 4 per cent unemployment in Scotland, why would workers move to an area if their wages were to go lower? Would they not just get a job somewhere else? Surely, 75,000 people will not move into those zones to get lower wages. It is not really credible that people will move to accept lower wages in an economy where there already are chronic labour and skills shortages, is it?
Sorry—are you saying that people will not move into those jobs?
Well, not from existing jobs. You have talked about displacement. If people are going to be displaced, they will not be displaced on the basis of lower wages and poorer working conditions, will they?
I am pretty sure that big businesses will move their business to one of the green ports if they get the idea to move it. That is the reality.
The national insurance relief applies up to £25,000, and in Cromarty, in particular, where the community is spread over a vast area, the jobs that are offered will be very attractive. We made a freedom of information request—I think that I say that in my submission—asking about the level of loss to the public purse from the relief on national insurance contributions. HMRC, to which we submitted the FOI request, advised us that there is a £2,400 loss for every job. We are potentially talking about 75,000 jobs—25,000 in Cromarty and 50,000 on the Forth—so that is a £180 million loss just for the most recent tax year.
That assumes 100 per cent displacement, however, and I thought that the whole point of the green ports was to create new, additional jobs.
Displacement can happen without an individual having any responsibility over it. If an employer decided that it wanted to move for that reason, it might close its factory, move into the new green port, start new jobs—to benefit from the tax relief, they have to be new jobs—and make people in those communities redundant. The employer would go but the people might stay. Although some people might be willing to go, others might not be or might be unable to do so.
I will put a lot of these questions to the minister when he gives evidence, to find out what he has to say.
David, what kind of jobs and what kind of businesses do you envisage will go to the freeports?
I think that the intention is that the jobs and businesses will be part of the new-style economy—in other words, that they will be in green manufacturing and support for maintenance. I think that it is generally accepted that that is an area where Scotland as a whole hopes to do better. There have been one or two false starts. I would like to think that there will be less displacement than is feared by colleagues.
I am also aware of the commitments that have been made by the people behind the freeports to, for example, the real living wage. I hope that that will alleviate some of the concerns that have been expressed. Although it is not my area of expertise, on national insurance contributions, I think that the Cromarty Firth freeport has proposed reinvesting the equivalent of NICs in reskilling, in order to avoid an imbalance with businesses around the area.
The proponents of the two successful bids have been very aware of the concerns, which have been taken on board by the Government and the local authorities that have been behind the bid brochures in how the schemes have been developed. I think that the emphasis is on encouraging things that might not otherwise have happened. In that sense, it will, on balance, be new jobs that are created, although possibly not in 100 per cent of cases. However, I do not think that there will be 100 per cent displacement. I think that, overwhelmingly, there will be more jobs and more investment in the new technologies and the new manufacturing opportunities.
I do not think for a minute that there will be 100 per cent displacement, but I do not think that there will be zero displacement either; it is bound to be somewhere between the two. That is a concern. Do our guests have any evidence on what level of displacement they think there is likely to be? I will ask the Scottish Government about that specific issue, but are you able to give us best and worst scenarios?
You have raised some important points about the jobs that will be created in the green port areas. Mention has been made of green jobs and green manufacturing.
I come back to the displacement by companies that Liz Cairns has alluded to, whereby the business moves but maybe not the people. There is talk of green jobs and green manufacturing, but, as yet, no one can tell us what a green job is. Will someone using an electric bike for deliveries be classed as having a green job? There is no guarantee when it comes to green jobs and green manufacturing.
Let us take the oil and gas industry, the upstream and downstream elements of which extend from Aberdeen down to Grangemouth. There is a whole list of jobs in that industry that could change to green jobs under a just transition, but that has not been defined yet. Mention has been made of the possibility of green jobs being moved to Leith and the Cromarty Firth, but those jobs could displace jobs in the oil and gas industry if the green manufacturing has to be done in those areas.
The issue of manufacturing needs to be raised, because the Scottish Government is not investing in manufacturing. We want manufacturing to be done in this country. If we are to have new technologies, new green energy and new construction, those things should be built and manufactured in Scotland. Perhaps jobs can be created in those areas.
However, wider thought needs to be given to what the economy will look like. We cannot just say, “We’ll put green jobs in here,” without thinking where the green jobs will go. The oil and gas companies are investing in doing their new green energy work onshore in this country, so building work will be done here. Why is the manufacturing for the offshore wind farms not being done in Scotland? Why can that technology not be built in some of the areas that we are talking about? We keep asking those questions because there is no agenda for how we achieve a just transition. In our view, green ports are part of the just transition agenda. Jobs are being moved to the green port areas. It is claimed that those jobs will be new green jobs. However, if those jobs are new jobs, existing jobs will have to be replaced, because the technologies are not there to get things done.
The issue of a just transition is so much bigger than people think it is; it goes beyond just oil and gas. It is a massive issue that extends across a raft of areas, including the energy networks and local authorities, where jobs will be under threat and new training is needed. Perhaps we need to have another go at thinking about how those areas will be utilised by the Scottish Government and by the economy.
11:15I will mention another area while we are talking about that. The first road into those two places will be construction, because construction will need to grow: the buildings will need to be built and the foundations will need to be put in. However, there is a real danger in construction that we do not want to see. If you do not get the procurement processes and investment right, you will have self-employed and bogus self-employed companies making fortunes out of those areas, and you will have people not paying tax. That is exactly what happens under bogus self-employed companies. The tax gains that you think you will get from that are not reasonable at this point in time. I am being as critical and as fair as I can be—I do not think that it has been well thought through in relation to the bigger picture of the wider Scottish economy.
Anyone who has read the latest issue of Private Eye will have seen the comments about the alleged shenanigans going on in Teesside, where a freeport is being developed. One of the issues about displacement is that, if there was not a freeport in Leith, perhaps there would be displacement to Teesside. Perhaps that was one of the reasons why Leith was considered as a location.
Let me turn back to David Melhuish. You raised concern about forward funding arrangements. Could you elaborate a wee bit on that?
That is closely tied to the point that was made earlier about the long-term nature of investment. The developers tend to be facilitators of capital—they go and attract the investment from around the world, often beyond Scotland—and they compete for that capital. So, yes, if we did not have green freeports, we would be disadvantaged compared to the freeports not just in Teesside but elsewhere in England.
The developers often attract that forward funding. In other words, they passport that investment into the ground, as it were. Nonetheless, in the immediate period, they take on the development risk and make sure that the structure goes up as intended. They will find the tenants and so forth that will come in and be the businesses that, in the long term, will provide the employment and the tax revenues in those locations.
Typically, and much more nowadays, rather than getting old-fashioned lending from a bank, developers will get it from an institutional funder or a range of institutional funders, which could be located anywhere. To get the capital expenditure, the developers need to be able to depend on forward funding for the lifetime of the project.
Our concern in the arrangements that were expressed was whether the relief would go to the developer that is initiating all the up-front capital expenditure and works or to the long-term owner. We put that question to the Government, but it has decided not to amend the regulations, as the committee will be aware, so that remains a concern of ours.
I understand anecdotally that it was not picked up in England either under similar regulations, but nonetheless it remains a concern of ours based on what developers in Scotland say to us.
I will open it up to colleagues around the table, but I have a final question for Derek Thomson and Liz Cairns. You said in response to question 3 that
“Unite would argue that there is a deliberate lack of clarity on whether trade unions will be able to access and organise workers operating within the zones, and to bargain with employers over pay, terms and conditions.”
Who do you think is responsible for that lack of clarity?
One difference between the freeports in England and the green freeports in Scotland is the ability to have an effective voice, which was mentioned specifically in relation to trade union engagement. Signing up to the business pledge was raised within that, but we know that the business pledge has failed. The last time that I looked, 0.4 per cent of registered businesses had signed up to the pledge, which is something like 700 businesses.
The voluntary arrangement for businesses to be fair to workers will not happen at these sites. It does not happen generally, but it is less likely to happen at these sites. If you deregulate and give incentives to organisations, the last thing that they will do is dish out any of that. The employees are unlikely to benefit from any of that.
As I said earlier, we also feel that the £25,000 cap will be used as a comparator to suppress wages generally beyond the region. Businesses might come up with creative ways of paying more than £25,000 that do not go through the normal routes to attract some workers, but we think that the £25,000 cap will suppress wages not only within the green freeport area but externally.
Colleagues will press some of those issues further as we progress through the meeting. I do not want to hog the whole meeting. The first colleague to ask questions will be Ross Greer and he will be followed by John Mason.
I go back to the convener’s original line of questioning about displacement and the request for evidence. The theory behind freeports has been tested in the UK. In the 1980s, freeports were one of Thatcher’s signature economic policies, and studies have been done on displacement as a result of freeports. I think that the study that I am looking at just now is regarded as the major study in this area but I could be wrong about that; I have certainly seen higher figures. Larkin and Wilcox’s 2011 study said that there was 41 per cent displacement—that is, 41 per cent of the jobs in the UK’s freeports of the 1980s were not new jobs but were displaced from elsewhere.
David Melhuish, you acknowledged that there will not be 100 per cent new jobs at the freeports and that there will be some level of displacement. Would 41 per cent displacement be unliveable? Would that be satisfactory, or would it be too high a rate of displacement if we saw that happen again this time round?
We are in a very different economic environment, are we not? The labour market is a lot tighter than it was in the 1980s when there were very deep industrial recessions and so on. I would not anticipate a 41 per cent displacement.
Displacement could happen in many ways. Could people be going to better jobs and a better location? There are other factors that could be argued might be positives. However, given that we are focused on trying to create new jobs here, there would be some disappointment with such a level of displacement.
One of the growing areas of economic inequality in Scotland is between east and west. Given the location of the freeports, a lot of concern has already been expressed, particularly by local authorities in the west of Scotland, which are already dealing with significant challenges of deprivation and depopulation. I take Inverclyde and Argyle and Bute as examples. They are concerned that, as a result of the expected economic displacement resulting from the freeports, there will be further depopulation and less investment in the economy in the west of Scotland, which has already seen far lower growth and income, for example, than the east coast.
Would it be of concern to the Scottish Property Federation if we saw further displacement from west to east aggravating those existing inequalities?
The SPF is a Scotland-wide organisation, so we are there to encourage investment across the country. Look, I am aware of this. I am also aware that Cromarty and Edinburgh got picked for the green freeports and Glasgow and Aberdeen got the innovation zones, and that Dundee was not happy at all because it is on the east coast and did not get either. We are aware of those considerations, but I would like to think that, because we are boosting new jobs, we are looking to boost the economy overall.
In the west, the area around Glasgow has a hugely diversified economy and it is already attracting a lot of investment from our industry. Other forms of investment, particularly based on the strength of its universities, will come to the Glasgow area.
Yes, it is something to keep an eye on—
Surely those other forms of investment will, inevitably, be drawn to the east and the north now. I accept that you are saying that there are strengths to greater Glasgow’s economy—of course there are—but the depopulation and relative growth in income and earnings show that there has been a clear shift from the west to the east. Do the freeports not just exacerbate that to the disadvantage of your members in the west?
You are talking about a long-term trend, but there are other initiatives that will balance things out. Glasgow is still the greatest population centre in the country. There are, as we speak, around 2 million people in the area. As I have said, with some of the other initiatives at play, including the boost for manufacturing, advanced manufacturing innovation districts—or AMIDs—and so on as well as the growth that the city is trying to push and turn around in the city centre itself, I think that, in the long term, there will be opportunities in the west and the east.
However, they might well be different opportunities, because what will go into the freeports will be very business specific, will it not? It is therefore difficult to draw broad generalisations, and the trend that you have talked about has been apparent to factors for some time now. The only answer that I can give at this stage is that I do not necessarily think that this move will necessarily exacerbate things; it is all crystal-ball gazing, to a degree, but I think that other initiatives and investments in areas to the west—and further up to the north and north-east—will help to balance things out.
I get why you say that, but given the evidence that we have from the last time that the UK tried freeports, the massive displacement that happened then and, indeed, the gap that we already have between the east and the west, it is reasonable to see this as a risk that, at the very least, needs to be mitigated.
I am interested in the part of your written submission where you talk up the fact that investments in the freeport zones
“will meet strict environmental and social ... criteria”,
which will mean not just economic benefits but wider social and environmental benefits. However, going back to what Liz Cairns touched on a moment or so ago, I understand that, although the tax incentives are very clear and have been laid out in the statutory instrument, a lot of the environmental and social criteria ultimately depend on voluntary agreements. Is there not a significant risk that organisations that invest might fulfil those environmental and social criteria for the first few years and then not do so over the long term? After all, there is no way of guaranteeing they will do so, because there is no clear enforcement mechanism in the instrument to ensure that the criteria are met in the long term.
It is my understanding that the proposals were accepted on the basis that those commitments would be maintained—indeed, that is what is behind that bit of our written submission—but the governance arrangements that are in place for both proposals relate not just to the private sector. There is public and private involvement, so I think that accountability is being built in from the outset.
I am sorry—I do not know the details of the 1980s arrangements, so I do not know if that was the case then, but I would argue that this feels different, both economically and governance-wise. That would be our reply to that question at this stage.
I have a final question for Derek Thomson and Liz Cairns. Going back to a question that the convener asked, I note that your submission mentions
“a deliberate lack of clarity”
particularly on union access to workers in the freeport zones. I think that the word “deliberate” is really charged, so can you say a little bit more about why you think this is deliberate rather than just an oversight or something that neither Government is prioritising? Do you think that there is a deliberate attempt to leave the fair work stuff pretty vague while pressing ahead with the tax breaks, and, if so, what makes you think that?
History makes us think that, when we are talking about such levels of investment. For us, sustainability needs to be built in; if there are going to be new jobs, protection has to be built in for workers, and that should be laid out from the very start. Any bidding process or procurement policy should build in protection for workers, and we are not seeing that in any way, shape or form.
With all due respect to everybody here, and to David Melhuish, I have to say that history tells us that when this kind of new business or investment starts, the worker is generally the one who gets left behind the most. In particular, when tax relief is given to people coming into these big zones, our experience is that the person who pays the most is predominantly the worker, because they have no health and safety rights. That is why we are asking for some of these things, including the fair work stuff, to be built in.
I can give you an example. When one of our deputy regional secretaries met the City of Edinburgh Council to discuss the freeport issue, they got very little from it about anything. There was no consultation; we had to ask probing questions. We are having to ask for information—it is just not forthcoming.
That is one of our bigger issues with the initiative. We are generally supportive of the jobs involved, but how are we supposed to support such an initiative without workers’ protection and rights or health and safety being built in or without built-in procurement policies that will allow us to ensure that it is properly funded, that people get proper wages and that it is not done on the cheap? We want something more concrete in any bids or proposals for it.
Liz, do you want to add to that?
11:30
Yes. In the absence of any devolved employment law, the only thing that we can ask the committee to hear relates to procurement. The sort of money that we are talking about on procurement is a way for the Scottish Government to lay down the rules.
We should have been at the table. We feel that we have been put behind the curve. We are not being listened to when we get opportunities. That is why we have come to the committee.
You can tell that we are not tax experts. The earlier conversation with Professor Roy about fiscal situations was over my head. However, we have been given an opportunity to put forward our position with regard to the lack of consultation with trade unions generally and the lack of engagement with trade unions on the issue. We are not at the table.
It is unfortunate that the Scottish Trades Union Congress cannot be at today’s meeting as well. It would be able to reiterate a lot of what we are saying not just from the perspective of our union but from the perspective of other unions and affiliates of the STUC that have concerns.
Employment law has not been devolved. Procurement is an opportunity. Public money is going into the freeports and green ports and we should have a bigger say. If effective voice means something and if fair work means something to the Scottish Government, it has to bring us on board and listen to what we have to say.
Our members are concerned, and we are here to represent them. They are more than 140,000 workers and they want their voices to be heard. They need to know that their concerns about the matter are heard. Those can be put into a paper, but we need to be at the table. Evaluation and monitoring are important. We need to look at when the decisions are made and who made them. Who made the decision not to include trade unions rather than to include them, which we want to happen?
You have given us plenty to ask the minister when he comes to speak to the instrument.
We have covered quite a lot of ground already. On the timeframe, five years seems quite short, Mr Melhuish. Even seven years seems quite short. Clyde Gateway, which is in my constituency, is looking at a 10-year timescale for filling up a development.
What are the risks on the timescale? Is it that nobody will be interested to start with because it is too short, or is there a danger that people walk away after the five years?
The up-front danger is the one that you identified: that, as alluded to earlier, people might look at the initiative and think, “Well, if we’ve only got a few years to get everything in place, it might simply be too short.” We have members with single buildings that can take eight or nine years to develop because of the complications that are involved.
The timescale is short. We discussed the proposal for seven years with our members. We realise that the timescale could not be open ended because, at some stage, the Government will want the new economic transactions to start delivering the full revenues that are anticipated in time. However, the fear is that it is too short a timescale for a major investment to fully deliver on its potential. That is our concern.
Would seven years make a difference?
We think that it would. I accept that longer would probably be more beneficial given the fact that, as I explained, individual projects can take eight or nine years. We tried to strike a balance at seven years. People felt that it would add a little bit more time for investors to make progress but that, at the same time, the Government might not regard it as too open-ended.
I will ask you my other question then come back to the Unite folk. I think that the Scottish Fiscal Commission has said that the impact will be less than £5 million in lost LBTT. Therefore, it is not commenting further because that is a relatively small amount compared with the whole Scottish tax take. That £5 million of lost LBTT is fairly definite, whereas any money coming in is fairly uncertain. Does it concern you that, if we go ahead with the scheme, public services will have to face a cut to match that?
No. I recognise the Scottish Fiscal Commission’s expertise on the matter, but this is about making things happen that are currently not happening. That is probably where we are coming from. In the longer term, even when the buildings are built, they will change over, new tenants will come in and tax will be paid at that point. New buildings will be replaced and created on sites once there is critical mass and success of investment, which might be beyond the seven years that we are asking for. There will be more LBTT in the long run, because the intention is to get new investment into places where that is not currently happening.
I have the same two questions for Mr Thomson. Are you concerned about the timescales, or is that not a factor for you?
For us at this stage, it is probably the longer the timescale, the better—getting things right is where we want to be. I alluded to the Scottish Government needing to consider the issue in more detail. I know that you will question the minister on that later, but the implications of what we are discussing here worry us even more in relation to new jobs, because nobody can tell us what those new jobs will look like. We will have to have a serious think about how—I am sure that we will be back in front of a committee at some point on just transition—the effects of the movement of work under just transition will impact new jobs. We want to get much more involved in the talks on the issue, but that longer period is not a concern for us.
You mentioned cuts to public services and tax revenue coming down. That will be a massive concern, as we have spoken about, in relation to displacement. There is an on-going issue with the amount of tax that is coming in due to the stagnation of wages, and that must be recognised in relation to where the money for investment is coming from.
On public services, we obviously represent public sector workers, and our fear is that more money will be taken out of that sector and pushed into different areas; that is a concern. I take it back to the same issue, which is that, if we create good new jobs, they have to be well-paid jobs. Well-paid jobs bring more taxation into the country and generate wealth in local economies, but we cannot do that at the expense of the areas that will experience displacement. As Ross Greer says, we will have real concerns in some of those areas.
I will focus on the application process. I hear evidence so far of a globally acknowledged problem around special economic zones, special export zones and their impact on workers’ terms and conditions and their rights in those areas. I turn to Unite first. How important is it to have a transparent process of application and evaluation for such schemes?
That is critical for us to reassure our members and ourselves, and for the Scottish Government to reassure itself, that things are happening. We want to see a clear process in relation to how the tendering started, and who has invested, their investment history, their portfolio across the rest of the economy and their history in terms of jobs, pay and conditions for their workers. It is like asking for due diligence to be done on investors to make sure that, when they come in and invest in the Scottish economy, they are not only investing in the Scottish economy but in the Scottish people and its workforce. That is really important for us.
On evaluation, there are two things to say. There is an evaluation of how the economy is progressing in relation to LBTT, which we are talking about here. However, for us, the evaluation should be whether such schemes bring what is required into the economy. That is one of the critical questions that we need to ask ourselves.
If we are talking about green ports and investment in new green jobs and new technology, we need a fair analysis of what those jobs will be. I made a joke earlier about green jobs and somebody flying about on an electric scooter delivering food for Deliveroo, but, at this time, we do not know what a green job looks like. There is no definition of what those jobs will be that enables us to make a comparison.
We do not want new jobs thrown into freeports and green zones just for the sake of those being new jobs; a new job must be valuable and it has to contribute to the economy. We hope that they are proper new green jobs, that they contribute to the just transition and that they address the country’s future economic and environmental needs.
In essence, this is about spending public money; that is what we are involved in here. Do you have confidence in the evaluation process for those bids?
Not really, no. Not enough has been done on being transparent about how the bids have been delivered and who is involved in the bids. We at Unite are doing our own mapping to find out who is already in those areas and look at what existing companies might be attracted to such schemes.
More work could have been done to make the process much more transparent. Trade unions and the STUC could have been involved in order to alleviate any concerns that we might have. Instead, we have to come to you to express our concerns, because we do not feel as if we have been involved in the process.
The essence of the Scottish Property Federation’s submission is a concern about whether the plans can be delivered, and you mention the timeframe. How robust does the evaluation of applications have to be in order to make sure that we can deliver them? Do we need a robust process to evaluate the plans that are put forward?
I agree that the process needs to be robust. Part of the reason why we raised concerns about the timescale for when reliefs will kick in was to do with the partnerships that were being put together as part of the bidding process, although they are already strong. They have been appointing chief executives, managing directors and others to drive forward the plans. I would trust the people on the ground; there are strong partnerships between local authorities and the investors and businesses involved in those areas, and the Scottish and UK Governments have been involved as well.
There is quite a strong organisational process, which should lead to robust scrutiny and accountability, but you are talking about giving reliefs, and we have talked about the issues there. I expect that this committee and others will keep a close focus on progress.
Would it be acceptable to your organisation to have a process that had no published criteria or advertised application route, and for those decisions to be taken behind closed doors?
In relation to appointing the successful bids or as we go forward?
To appoint the successful bids.
The issue with appointing successful bidders is that it was always going to be a decision made by the UK and Scottish Governments. It is inevitable that there would be sensitivities around that.
Anecdotally, having talked to some of the officials behind the UK Government’s freeports prospectuses back in the day, I know that they were very impressed with the prospectus that was put together by the Scottish Government, and they thought that it had picked up on some lessons. I think that it had picked up on some of the lessons from history that we have talked about. That process was good.
There was a process and a prospectus there, but would it be acceptable to spend public money in the absence of a process and a prospectus?
No. It is about giving a fair chance to bidders around the country, so that prospectus was helpful.
That is a point well made. I put the same question to Unite. Would it be acceptable to spend public money without an application process?
No. The process would have to be fair and transparent.
Mr Thomson, you have been excoriating in your criticisms of the situation as we face it. In section 4 of your submission, you say:
“We find this attempt to lure businesses to these sites on the back of taxpayer funded tax breaks abhorrent”.
That is pretty strong language. Do you actually believe in the concept of the green port, or do you think that the aims and objectives could be achieved by another means?
11:45
We are not opposed to freeports and green ports at this stage, but it all depends on what comes out of discussions such as the one that we are having today. As you have rightly said, these discussions are being had in different areas the length and breadth of the UK, and we are dealing with the Scottish side of it.
Obviously, we welcome the investment in up to 75,000 jobs and what that will bring in terms of new skills, what it means for taxation issues and so on. It will be critical in building local economies. However, the idea that we should just bring them in and give them tax relief without their giving anything back is something that we just cannot agree with.
That brings us to the issue of proper pay, proper terms and conditions, proper health and safety legislation and a proper procurement process that is open, fair and transparent and which does not just throw money at something. I am sure that youse have been at many committee meetings where you have heard the horror stories about public procurement and where the funding has gone; you need look only at some of the stuff that goes on in the health service under the health and social care partnerships, where it can cost £150 to change a light bulb in different areas. We do not want to see those things happening again, so we want to ensure that the trade union—the effective voice that Liz Cairns referred to—is there from the beginning.
However, I fear that this could end up with our just handing over money and tax relief to big business. When we start moving businesses into these areas, they become almost deregulated or unregulated in a way that, for us, potentially opens up a can of worms. Going forward, we want assurances that there is proper health and safety regulation in those areas and that the procurement, the construction work and so on are open and honest from the very start and follow proper employment law.
Liz Cairns referred to employment law in Scotland, and I hope that our union is pushing very hard to try to make all this happen. I hope that that will give us more protections, but what we find abhorrent is giving money over and getting nothing back.
Thank you.
I call Jamie Halcro Johnston.
Good morning. I should say that I supported the Cromarty Firth bid; that is not a declaration of interest or anything, but I think that it important to say that. Ross Greer talked about the east-west divide, but there is also the north-south divide, and undoubtedly there is an important need to invest in remote and rural areas, particularly across the Highlands and Islands.
My first question is for Derek Thomson and Liz Cairns. You have talked about not being engaged in the process and have said that you are not sure what green jobs are—I do not think that you are the only ones to find themselves in that position—but what engagement have you looked to have or have you been having with the two successful bids from Port of Cromarty Firth, Global Energy Group and Port of Inverness as well as, obviously, the consortium led by Forth Ports?
Most recently, we met the City of Edinburgh Council. We are trying to engage on those areas, but as I have said, what happened in Edinburgh was null and void.
I think that there is a lack of understanding out there about the engagement—the negotiation and stuff—that has to happen. That is why we keep reiterating that we want to be in at the beginning so that we can discuss workers’ issues as these things come in. We might not be at the stage of boots on the ground, but it is important to set a standard.
Liz, did you want to come in?
I was just gonnae say that we have a number of members at Forth Ports; in fact, we have a very organised workforce that is pushing these issues. However, it is pushing at a different level from where the decisions are being made about the bids coming in et cetera. It might be happening at a low level, but we are having discussions with our members in Forth Ports; it is just not happening at the point where the decisions are being made about who will make the investment, whose bids will be accepted and so on.
We want to be in from the beginning, and we want to make our voice heard when people talk about which companies are coming in. We have had situations, particularly in construction, in which a number of very large organisations have been involved in blacklisting. Are they gonnae be in there getting public money again after they have had to pay money back to workers who had been blacklisted? We need to be more mindful of that.
We have some of the answers that require to be heard, but we are not being asked. That is frustrating for us.
I recognise what you say about wanting to be there from the beginning of the process and be part of that decision making. This is a devil’s advocate question, really, but do you not see value in that engagement even now, with the two winning bids—the two consortiums—at least around getting that information to them and ensuring that they are aware of it all?
Absolutely.
Have you tried to do so?
No, not in my capacity; however, if there were opportunities to do so, we would take them up. We are trying to do our own mapping, because we cannot get the information that we need to know. If our conveners at those sites cannot get that information, where can we go? That might be something that we can take up—
I understand the point that you are making and the arguments that you have made previously, but it does not sound at this stage that you have asked either, so that might be an area in which to start.
It does sound as though we are coming here to say that we are not being listened to while we have actually made no attempt to try to get heard, but we are not being heard at the level at which we need to be heard. We are contacting people and saying to them, “We need to be heard. Can we get a meeting?” and those sorts of things, but we need to pursue that because time is moving on. Bids are being accepted and funding is being given to organisations already.
It would be interesting, from our point of view, to be updated on how that engagement goes.
We will pursue that.
I was pleased that the Cromarty Firth bid was successful, but one of the issues that we all recognise is that a huge amount of other investment is needed, in infrastructure for example. Transport infrastructure in the Highlands is not particularly good, and housing will be needed if those jobs are created and people move to those areas. David Melhuish, how important do you feel that that could be?
Very important is the short answer. Clearly, the Highland Council is closely involved in the bid and has a track record of success in taking forward a lot of initiatives, which should give us some encouragement in the process. However, I agree entirely that it will be important to build the infrastructure that people will need to make those areas a success.
Obviously, a lot of work still needs to be done, given that the bids have only recently been successful, but do you think that, at the moment, the UK Government, the Scottish Government and local government are working together enough on delivering the peripheral infrastructure? I say “peripheral”, but perhaps it is also key.
Highland Council is already progressing long-term development plans, and there is a related city region deal process as well. For us, it is very noticeable that the Department for Levelling Up, Housing and Communities, for example, is much more on the ground and active around the country than it perhaps was a few years ago.
Thank you very much. That concludes questions from the committee. Are our witnesses happy to make any further points to the committee on something that has not been covered? If you feel that we have not asked anything that you would like to mention, now is your chance.
I would like to reiterate a couple of points that we skipped over. First, we would be hoping for direct employment—no zero-hour contracts in those areas that have work. It is really important to ensure that the community and local areas are developed—you talked about the housing of people who will need to move—and to ask, if jobs are displaced, how that affects the local community.
Secondly, one of the key things for us is to ensure that the products, the concrete, the steel, and whatever is used in what is done in the freeports is all manufactured in Scotland. Money in those areas needs to be used for things that are built in Scotland. It needs to become a proper economy and not about selling things off, which is what is happening with the wind turbines—we are importing everything from another country when we could be building them here.
On some of those issues, I get a feeling that we are running before we are walking. A massive change is coming under the just transition; there will be an environmental impact and an impact on productivity and manufacturing, and things will need to get done.
With freeports, in our view, there is an opportunity to get something right from the beginning—to get the right legislation; ensure that the manufacturing is done in this country and that the jobs are kept here; and ensure that everything is done reasonably and above board, gives a proper boost to the economy and is not just about shoehorning things in because we want to try to create a bit of a boost in the economy. For Unite, there is a longer-term thought process when it comes to this, and we hope that you consider the wider economy issues that will come alongside freeports. The just transition agenda will have a massive impact on freeports and the biggest impact on our economy in any generation, and I hope that those points have been taken on board.
Thank you very much for your time.
I want to mention skills training and apprenticeships in those communities. It is important to put in place proper facilities in order to create jobs for the next generation. We have talked about not having the green jobs, but what are the green jobs? There were green jobs in Machrihanish and they have gone, which was devastating for that community. We cannot have jobs that were there and are now lost.
We need to ensure that there is a future for our young people, and that skills training and robust apprenticeships—where real training on renewables is given—are put into the green ports so that they will not be unsuccessful in five years, which would mean that people would move. We have seen in other areas in Scotland that organisations come into a place, extract every part of public funding that they can get and then leave—we cannot have that happen. We need to leave a legacy and ensure that freeports, if they do anything, offer a future. Real opportunities exist, especially in areas such as the Cromarty Firth and the Highlands and Islands, to get sustainable jobs for young people, which will stop a movement out of those communities to the central belt, for example. It is about ensuring that a proper skills training and apprenticeship agenda exists within green ports.
Going back to the displacement question, although we firmly believe in additionality, new businesses and, in the long term, new revenues and so on coming from green freeports, not all displacement is necessarily bad. If freeports help to retain some of the 50,000-odd fossil fuel-related jobs in the north-east that are facing decline or loss, I would like to think that that element of retention—even if it is displacement—would be seen positively, because we would be retaining those jobs in Scotland instead of losing them elsewhere.
Thank you very much for those final points, which are much appreciated, and for taking the time to give evidence to the committee. We will continue to take evidence on the draft order next week when we will hear from the Minister for Community Wealth and Public Finance and take a decision on whether we ought to approve the order.
That concludes the public part of today’s meeting. The next item on our agenda is consideration of our work programme.
11:58 Meeting continued in private until 12:05.