Green Ports Delivering Freeports for Scotland: Applicant Prospectus (DRAFT)

Section 2. Economic levers and design of interventions

This section details the specific design of a green port. First, it sets out the geographic parameters for the size, shape and location of a green port. It then details the specific economic levers offered to applicants as they would apply in Scotland, which the Scottish and UK Governments will make available to successful applicants. The green port model will be based on the model the UK Government have used for Freeports in England.

2.1. Green port geography

2.1.1. The green port model is geographically flexible. To ensure all economic geographies within Scotland have the opportunity to apply the green port model in a manner which best fits their local area, we have deliberately not taken a "one size fits all approach".

2.1.2. This section sets out design principles and limits on green port geography to demonstrate what a green port "is" and help applicants apply that flexible green port model to their specific space and geography.

2.1.3. The proposed model allows for multiple sites to be designated within the overall green port. This allows applicants to best reflect existing economic geographies; to maximise collaboration between ports, businesses, wider stakeholders and relevant economic assets by allowing them to benefit and contribute to the green port. However, limits must ultimately apply to generate agglomeration benefits and control costs. These limits, and flexibilities around them in exceptional cases, are set out below.

Overview of the green port model

2.1.4. The above shows a hypothetical green port focused around a sea port. It is demarcated with an Outer Boundary containing:

a. A primary customs site around the sea port – site a) which, in this case, is not within the tax site, so businesses inside benefit from the customs measures, but not tax measures.

b. Additional "underdeveloped" land separate from the primary customs site – sites b) and c) where businesses in both sites will benefit from the tax measures.

c. An additional customs subzone - site c) which is also part of a tax site so businesses inside benefit from both the customs measures and the tax measures.

d. A nearby factory site – site d) which is an additional customs subzone but is not covered by the tax site, so businesses inside site d) benefit from customs measures but do not benefit from tax measures – as per site a).

e. A distant factory – site e) which is outside the Outer Boundary, so cannot be a customs subzone or part of a tax site without a special economic case for inclusion.

Outer Boundary

2.1.5. Applicants must define an Outer Boundary in their applications. The green port measures – the tax site or sites, the customs sites, and the planning, regeneration spending and innovation measures outlined in subsequent sections – must all be applied within this Outer Boundary. The Scottish and UK Government intends for the green port model to help a place which has a clear economic geography, and the Outer Boundary ensures that while multiple sites can exist, those sites all exist to help that clearly defined place within the Boundary.

2.1.6. Applicants will need to submit a map with the Outer Boundary marked on it to delineate the geography of the green port.

2.1.7. The limit for the Outer Boundary is set at 45km. The primary customs site, tax site, and any additional customs subzones must all be contained by the Boundary. However, the Scottish and UK Governments will consider applications for exceptional additional customs subzones and tax sites outside the Outer Boundary, where this can be supported by a clear economic rationale (see below).

2.1.8. This means that, unless a very strong case is made, the furthest permitted distance between any two sites within the same green port is 45km and the largest area a green port Outer Boundary can cover is a circle of diameter 45km, as demonstrated by the hypothetical multi-port green port in Figure 2.1.2. Applicants will need to provide clear economic rationale for why the green port Outer Boundary is defined as it is. Applications judged to be designed simply to maximise the area contained within the Outer Boundary without clear economic rationale will fail the application process at the pass/fail stage.

The Port

2.1.9. Applicants must include at least one port of any mode (sea, air, rail) within their green port Outer Boundary. The port does not have to be a tax site or a customs site – for example, a thriving hub for international trade and employment might be established nearby, boosting throughput through that port. Applications without a port within their Outer Boundary will fail the applicant process at the pass/fail stage.

2.1.10. Ports of all modes: The model has been designed to apply effectively to areas with seaports, airports and rail ports. Every mode of port is welcome to make an application or form part of an application coalition.

2.1.11. Multiple Ports: The Scottish and UK Governments welcome green port applications that include multiple ports, including multiple ports of different modes.

a. If there are two or more ports located within the Outer Boundary distance that are interested in being part of a green port, and their economic activity affects one another and the region, they may be able to make a strong case for collaboration in support of the wider economic geography. However, proximate ports of different scale or with different economic focus are also free to be part of separate applications, if they have a strong individual case for a distinct economic green port cluster.

b. As noted, the Scottish and UK Governments will consider additional customs sites and tax sites outside of the Outer Boundary if a compelling case can be made for their relevance to the area within the Boundary – this may help applicants who wish to include a port outside the Outer Boundary because of strong economic rationale meriting its inclusion in one green port.

2.1.12. Regional Distribution: The Scottish and UK Governments expect to select a single green port per Regional Economic Partnership (REP) area.

a. Where there are multiple applications from the same REP area, government reserves the right to select one application from that REP area, if doing so is necessary to maximise the benefits of green port policy; or both, if both applications are nationally outstanding in comparison to other applications and have a suitably strong individual case for a distinct economic green port cluster which does not inhibit the effectiveness of the other's proposals or the government's wider ambition to spread green port across the regions.

b. Applications that include ports that are split across multiple REP areas will be considered to originate from the REP in which the tax site is located. If there are multiple tax sites, the application will be considered to originate from the REP where a plurality of customs and tax sites are located.

2.2. Subsidy control

2.2.1. The green port offer set out in this prospectus will be subject to international subsidy control obligations and our domestic regime.

2.3. Trade and investment support

2.3.1. The Scottish Government's and agencies' trade and investment support offer is guided by our export growth and inward and capital investment plans, Scotland: A Trading Nation and Shaping Scotland's Economy. Applicants should outline what specific trade and investment support measures they believe would benefit a green port in their area. The Scottish Government and agencies will work with successful applicants and the Department for International Trade to ensure a workable business support programme is clearly articulated to businesses considering locating within a green port.

2.4. Tax (devolved)

Land and Buildings Transaction Tax (LBTT) Relief

2.4.3. The Scottish Government proposes to offer a specific LBTT relief on relevant land transactions within qualifying tax sites in Scotland where that property is to be used for qualifying commercial activity.

2.4.4. Legislation to provide for this will require to be laid in the next Scottish Parliament and subsequently approved before any relief can be made available. As such, the timing for this cannot be confirmed at present.

2.4.5. Further details on the Scottish Government's proposals will be provided in due course, but for planning purposes the expectation is that any relief would be available until 2026 (date to be confirmed). Where relief is available, clawback provisions will apply in the event that land, or property, is not used for a qualifying purpose within a control period which will be set out in the legislation. This is expected to be three years, or earlier if the land or property is sold. As with standard practice, the relief would be claimed through the initial LBTT return.

2.4.6. Applicants should note that as LBTT policy is devolved, the details of relief may differ from the SDLT relief, based on the specifics of the Scottish approach.

Non-Domestic Rates Relief

2.4.7. The Scottish Government intends to offer up to 100% relief from non-domestic rates on certain properties within green port tax sites including new properties and existing premises used for specific purposes, from 1 April 2022. Based on the UK Government's model in England, this relief would apply for up to five years from the point at which the beneficiary first receives relief; and the point at which a beneficiary first receives relief must be by 30 September 2026. This relief will be mandatory, i.e. eligible applicants will receive the award if they qualify; and will be fully funded by the Scottish Government.

2.4.8. Eligible firms will be able to apply to the relevant local authority to access this relief.

2.5. Planning

2.5.1. Scotland's ongoing programme of planning reform is refocusing planning on improving the quality of our places. As a part of this, the new system will provide greater certainty and flexibility for investors, to help enable good quality development in the right locations that benefits communities.

2.5.2. We are undertaking a review of National Planning Policy in Scotland with a view to publishing National Planning Framework 4 in 2022. This will be Scotland's long-term development strategy. The direction of travel is set out in the National Planning Framework 4 Position Statement and we would expect applications to reflect our planning priority aspirations and key outcomes including a wellbeing economy, resilient communities, quality of place and net-zero emissions. Depending on timing, we would look to support successful applications for green ports in the emerging National Planning Framework 4, including by considering whether they would benefit from national development status. We also consider that proposals should work with, rather than against, the spatial strategy and policies of any relevant local development plans.

Permitted development rights

2.5.3. Permitted development rights (PDR) refer to those types of development for which planning permission is granted by national legislation, meaning they can be carried out without needing to submit a planning application. Port operators already have broad PDR under Part 13 of Schedule 1 to the Town and Country Planning (General Permitted Development) (Scotland) Order 1992. These rights permit a range of development on operational port land and would be applicable to any such land within a designated green port.

2.5.4. The Scottish Government is currently carrying out a substantial review of permitted development rights. Through this phased programme, we will be taking forward new and extended PDR in Scotland for a range of development types. Although our work plan does not currently cover port development, we will consider whether port operators' existing PDR remain fit-for-purpose and whether amending them would help to support the Scottish and UK Government's objectives for green ports. Following its February 2020 consultation, the UK Government has confirmed that it will amend the PDR that apply to port operators in England so that they are more closely aligned with those of airport operators. We would welcome applicants' views on this measure and, in particular, what the practical effect of making an equivalent change in Scotland would be, however this will not be part of the formal application process. Any proposals for new PDR would be subject to public consultation.

Place-based planning approaches

2.5.5. A number of place-based tools could be used to support the delivery of appropriate development in green port areas by providing greater planning certainty and enabling streamlined decision-taking. These include Enterprise Areas, Simplified Planning Zones and processing agreements, and new mechanisms like Masterplan Consent Areas^[4]. Such tools may enable planning authorities to take a more strategic approach to green port development. We therefore encourage authorities and prospective applicants to consider their use. Applicants should provide evidence of early discussions they have had with planning authorities on this.

Applicant requirements

2.5.6. Applicants will need to demonstrate relevant stakeholder support for their proposals to ensure successful delivery. At a minimum, government would expect the relevant local authorities to:

a. Be part of the application coalition.

b. Have discussed the fit with development plans and policies as part of compiling the application.

c. Offer statements of support for implementing place-based planning approaches, as referred to above.

2.5.7. Such cooperation will be vital for ensuring development plans are able to progress smoothly through the planning system. The government expects applications to demonstrate local authority support for commercial property development within tax and customs zones, to support their growth.

2.5.8. We welcome applications which present innovative development proposals, including those that are forward leaning on using available land to bring forward infrastructure and support businesses that further the Scottish Government's net zero ambitions.

2.5.9. In addition to the minimum requirements, successful applications should:

a. Include qualitative proposals explaining how a place-based approach may be used to support green port objectives.

b. Provide map-based evidence of where 'vacant and derelict land' (see para 2.1.26), including the tax sites, may be redeveloped for the purposes of green port development, with the appropriate support of the relevant local authority.

c. Show how the planning system and any relevant requirements for environmental assessment will help to ensure approach to mitigating any adverse impacts. Applications can also usefully indicate whether any early engagement with key agencies has been undertaken as part of this.

d. Take into account and reference the relevant development plan context for the area and describe how the proposal will help to deliver on any relevant spatial objectives.

e. Explain the steps taken (or planned) to engage with local communities to consider how proposals will maintain and enhance where possible the quality of the locality within which the proposal is located.

2.6. Regeneration and infrastructure

2.6.1. The amount of seed capital funding to be committed to green ports in Scotland will be confirmed in due course.

2.6.2. Applicants should outline proposals for how to spend seed funding within their Outer Boundary in order to address the three pillars of the Infrastructure Investment Plan and how to contribute to the Scottish and UK Government objectives for green ports.

2.6.3. In order to deliver Scottish Government commitments around 20 Minute Neighbourhoods, Town Centre Action, Community-led Regeneration and Community Wealth Building, any national infrastructure investments near/around/within a place need to be seen as integral partners in their locality.

2.6.4. The Scottish and UK Government expects proposals to be focused primarily on land assembly, site remediation, and internal small-scale transport infrastructure to connect sites within the green port to each other, the immediate surroundings or other economic assets within the Outer Boundary. These should embed transport strategies, sustainable transport and investment hierarchies. Proposals for spending seed capital on skills, digital and/or other infrastructure will only be considered in exceptional circumstances. Seed capital may not be spent on security infrastructure for customs sites.

2.6.5. Applicants should summarise the costs of delivering their proposal, as well as the source of funding (e.g. green port seed capital), and application partner responsible for that cost in their response. As far as possible this should be broken down by financial year. As well as the preferred option, proposals should include a scaled down "minimum viable proposal" to show how the proposal would respond to lower commercial demand or a smaller allocation of seed capital. Key delivery milestones should also be reflected in applicant responses as part of their implementation plan.

2.6.6. To ensure resources in the local economy are used effectively, green port proposals should build on and add to existing partnerships and plans for the port, and complement pre-existing strategies such as Regional Economic Strategies, Skills Development Scotland strategic plans, spatial strategies and national, regional and local transport plans.

2.6.7. Proposals should detail funding secured from other sources, community support, and any critical interdependencies.

2.7. Innovation

2.7.1. Green port applicants are key to realising our ambitions to establish green ports as innovation zones. To effectively build on successful local innovation strategies and the generous wider innovation support offered by the Scottish and UK Governments to innovators, green port applicants should set out their innovation ambitions – focused on our green port innovation objectives and outcomes. The Scottish and UK Government can then calibrate the levers set out in the Consultation Response and this Application Prospectus to turn ambition into reality.

2.7.2. The quality of proposals will form one of the assessment criteria for applications. Government is particularly interested in private sector-led innovation within green ports, and innovation ambitions that contribute to the decarbonisation agenda or net zero.

2.7.3. Additional detail on UK Government innovation support will be announced in the spring.

2.8. Wider government funding

2.8.1. Applicants should outline how their green port proposals could be complemented by successful funding from existing or additional upcoming funding rounds from across government. The green port proposal should be viable without these additional sources of unsecured funding, though government may choose to align allocations across funds where objectives and timing allows.