Business and Trade Committee
Oral evidence: The performance of investment zones and freeports in England, HC 272
Wednesday 10 January 2024
Ordered by the House of Commons to be published on 10 January 2024.
Business and Trade Committee members present: Liam Byrne (Chair); Douglas Chapman; Ian Lavery; Anthony Mangnall; Charlotte Nichols; Mark Pawsey.
Levelling Up, Housing and Communities Committee member present: Mr Clive Betts.
Questions 178 - 261
Witnesses
I: Dominic Johnson, Lord Johnson of Lainston, Minister of State (Minister for Investment and Minister for Regulatory Reform), Department for Business and Trade; Rt Hon Michael Gove MP, Minister for Intergovernmental Relations and Secretary of State for Levelling Up, Housing and Communities.
Witnesses: Lord Johnson of Lainston and Michael Gove.
Q178 Chair: Welcome to this morning’s session of the Business and Trade Committee. We are delighted to be joined by the Secretary of State, Michael Gove, and by the Minister, Lord Johnson. Thank you so much for joining us to help with our inquiry into freeports and investment zones.
Secretary of State, do you want to set the scene for us and tell us why, in your view, freeports and investment zones are such a good idea?
Michael Gove: Freeports and investment zones are both essential elements and essential tools in the toolkit of levelling up, and there are many similarities between how they operate. They are parts of a regional industrial strategy that seeks to take account of two big and related factors.
As the levelling-up White Paper makes clear, productivity is at a globally admirable level in London, the south-east, and the golden triangle. But in significant parts of the UK, outside the capitals—Edinburgh, Cardiff, and so on—productivity and investment are lower than they should be. There is a fundamental economic inequality that requires to be addressed; one that Governments across generations have acknowledged.
We know that the economic rationale behind particular parts of the country has changed over time. As an example, South Yorkshire’s economic success was built on steel and coal; it was one of our manufacturing heartlands. Again, global economic forces and other changes have meant that there has to be a new future for South Yorkshire, as there has to be for the north-east and Liverpool. We want to make sure we can create the right circumstances for a renewed generation of private sector investment in those areas. We believe there is a role for both central and local government, and for higher education institutions, particularly with investment zones, to play in making sure we can have economic growth in those areas.
The impact of clusters is well known, well rehearsed, and well advertised. In crude terms, the aim and the intention are having that agglomeration effect, having a reason for different actors to come together in an area where you have a workforce willing to rise to the challenge, local leadership that wants to play its part, and an engaged private sector looking to invest; bringing those things together and creating the alchemy, which can encourage growth.
I would not claim any great novelty for the idea; as witnesses to this Committee have pointed out, this is very much in line with the thinking for which Michael Heseltine was responsible in the 1980s and early 1990s. It also reflects work done under the coalition by David Cameron and George Osborne.
Q179 Chair: There was a very good analysis in the 1944 White Paper on employment about why some regions will be bedevilled by what it called sunset industries, and there would therefore always be a need for Government to be able to surge in investment. Do you think freeports and investment zones are the most important way we can surge in public investment into regions where there is a problem with regional inequality, or are other instruments in your toolkit more important?
Michael Gove: Other instruments in the government toolkit are just as important—in some cases, arguably more important. Investment zones are overwhelmingly located in core cities where there are now mayoral combined authorities. One of the elements in encouraging growth in areas where it has been lower is providing a platform for stronger civic leadership and providing the tools for Mayors in those areas to make a difference themselves. For example, Andy Burnham, Andy Street or Ben Houchen can make decisions about transport infrastructure, and they can also bring together other partners to help.
Central Government can also do more, for example through the wiser allocation of research and development spending. The levelling-up White Paper signalled the importance of making sure research and development spending—both that for which the state is responsible and that which we can encourage the private sector to allocate—is spread in a more geographically enlightened way, which the Department for Business and Trade and now DSIT are responsible for.
Thinking about the work done by the Office for Investment, other decisions will be made on transport infrastructure and other decisions made by the Department for Business and Trade.
An active Government can engage with investors—particularly overseas—to help them see the attraction of parts of the United Kingdom they may not necessarily have first thought of when they were looking for investable propositions.
Q180 Chair: There is quite a thoughtful analysis in the levelling-up White Paper where you list five different problems that have bedevilled regional growth plans in the past. Do you think investment zones and levelling-up zones deal with those problems of policy longevity, delivery co-ordination, local empowerment, evidence and transparency? Do you think that levelling-up zones and investment zones are in danger of making some of those problems worse, or do they solve some of those problems?
Michael Gove: I do not think that they make them worse, but it is important to go back to the hackneyed but helpful analogy of tools in the toolkit. Freeports and investment zones are the sons and daughters of previous interventions like enterprise zones. There is evidence of enterprise zones having worked, but also evidence of variable outcomes. They are relatively new in terms of their creation, implementation, and funding under this Government. I believe they are already showing evidence of success, but I would not say they are the complete answer to any of the challenges we face.
Q181 Chair: Lord Johnson, given the enormous prize that closing the productivity gap yields us as a country, do you think we are investing enough into ideas like investment zones or freeports?
Lord Johnson of Lainston: You can always invest more in anything. Since they are more established, freeports particularly have been enormously powerful in acting as a hook for me to go out and sell the opportunities internationally.
If you look back over the last 100 years or so, as Michael rightly said, the concentration of high-quality local and civic leadership has also been a very different feature. We now have metro Mayors, with whom I work very closely and who can articulate a vision, which again is part of marketing and international sales. There are also very attractive tax offerings, which help reduce the risk for the initial investment.
Investment zones are still being developed, so it is worth monitoring that very closely, but I see them as a way to replicate the golden triangle, which we know works well; a mixture of intellectual capital, industrial capacity, funding, Government support and infrastructure. Why not try to replicate that around the country where you have specific clusters and expertise?
I raise freeports and investment zones in nearly every meeting I have with international investors, and they are very excited about what the UK has to offer because it is about innovation, advanced manufacturing, and the future. To some extent, we are re-leveraging off our sunset industries to create our sunrise industries, and it has been very successful; the proof of the pudding is in the fact that we announced a whole range of very powerful investments in the freeports towards the end of November.
The SeAH Wind monopile factory is a classic example of a company that took a great deal of engagement on behalf of myself personally and the Government in general. That fits in with the Ørsted investment announced a few weeks ago, which is the biggest investment ever in our offshore wind capability; that will also have huge knock-on effects on the supply and components element, which then builds local industries and is the sort of productivity you want to see growing.
Q182 Chair: The Chancellor has set out five priority sectors in things like the advanced manufacturing plan. How do you resolve this age-old conundrum within Government of how the sectoral policy interacts with the spatial policy? When you have that support going into sectors, how does the rubber hit the road?
Michael Gove: In the conversations we had with each of the investment zones, and the separate conversations we had with freeports—particularly in Scotland, with green freeports—we were interested to see what each of the local leadership teams wanted to put at the heart of their investment zone or freeport. Reflecting on one of the points Dominic made, you can sometimes have an initial movement towards investment in energy, green jobs and renewables in particular, because people can see that that is a significant growth sector.
We can quite understand the children’s football rush towards that ball. We also want to have an iterative conversation with you about other areas; for example, one of the challenges was that creative industries have quite rightly been highlighted by the Chancellor and the Prime Minister as one of those five sectors. It was not immediately obvious which investment zones or which local leaders might wish to say, “Do you know what? Rather than the obviously shinier and more tangible prize of advanced manufacturing and renewables, we want to move away from that and let someone else concentrate their energy on it, while we think about the creative sector.”
The conversations we have had with Ben Houchen and with Tees Valley have been helpful; the fact they have both an investment zone and a freeport has meant they have been able to put their money on both red and black, as it were. As Dominic pointed out, the freeport has played a significant part in attracting green industrial jobs, and now Tees Valley is looking at its investment zone being concentrated on creative industries, as well.
Q183 Chair: It sounds like the join is something of a negotiation.
Michael Gove: Yes.
Q184 Mark Pawsey: Lord Johnson, you referred to freeports acting as a hook and then having hooked an enterprise into the site with the multiplier effect. Are you satisfied that the tools are adequate to attract the right kind of people and to make a significant difference?
Lord Johnson of Lainston: Several things are to our advantage. The first is the focus each freeport and investment zone will have, which allows for a very useful specificity of targeting. The second thing is that the most important thing we have done recently is extend the benefits from five to 10 years. That was extremely valuable, because it takes a year or so to get the whole process set up, then a company takes a year or so to—
Q185 Mark Pawsey: Why did we ever focus on five years? That strikes me as the most obvious change to have made. Why did we persevere for so long with a five-year programme?
Lord Johnson of Lainston: I am sure Michael will have a comment on this. Five years is the right time for the benefits to last. The issue was it would probably have been helpful to have built in some pre-time to get established. It is not the longevity; it is not the Government’s job to subsidise, it is our job to try to reduce risk and to create the environment where businesses will make their commitments as they have.
Q186 Mark Pawsey: But businesses like certainty, do they not?
Lord Johnson of Lainston: Yes, which is what we have given them.
Q187 Mark Pawsey: They spend some time evaluating the decision to go in, and, by then, they are two or three years into the process. There is not a lot of time to benefit from the advantages the investment zone or freeport would have.
Lord Johnson of Lainston: Which is why I think we did exactly the right thing.
Q188 Mark Pawsey: But my question is why it took so long to make the change.
Lord Johnson of Lainston: I will have to ask my colleague.
Michael Gove: I do not think it took a long time, because both policies have only really been launched in the last couple of years, and we are still in the process of finalising the deals with investment zones. There was initial caution from the Treasury; in crude terms, the Treasury will always think, “Hmm, a tax incentive and an advantage here is income forgone in the short term,” so it will be reluctant necessarily to make that long-term commitment.
As the Committee has heard, in the Heseltine incarnation of enterprise zones, the support was there for 10 years, and the Chancellor is the person who deserves the credit for saying, “Let’s double down.” Jeremy as Chancellor was determined to ensure we made a level of commitment broadly equivalent to that of Michael Heseltine. Some would say, “Why not keep it in perpetuity?” The argument is that, provided you get the right investment, the initial honey to draw the investment should not need to be there for long, because it becomes self-sustaining over time.
Q189 Mark Pawsey: We all support five to 10 years. What about the other measures? What else is crucial in attracting the right businesses there to deliver the effect we are looking for?
Michael Gove: There are different analyses of which tax benefits are most powerful. Business rates relief and national insurance holidays are probably two of the most powerful tools. We want to evaluate and see what the specific attractions are because the decisions that businesses take now may be different from those taken 10 years ago or even in the 1980s and ’90s. There has been some debate with freeports over whether the customs advantages are sufficiently strong in incentive; we will see. It is no skin off anyone’s nose to have an approach that allows people to import materials and to finish products in those environments.
A lot will also depend on other actors and other players. With investment zones, a lot will depend on the involvement of the higher education sector and the quality of local leadership. When Oliver Coppard appeared before the Committee, he made the point that the Advanced Manufacturing Research Centre just outside Sheffield and the quality of the universities in South Yorkshire will be a critical part of it.
Q190 Mark Pawsey: You have just used the expression, “We will see.” Do we not have a pretty good handle on what the outcome of the measures will be? Otherwise, we would not be introducing those particular measures. What are the criteria for setting them? Why can we not be more confident that they will deliver, instead of needing to wait and see?
Lord Johnson of Lainston: A useful hook has been non-monetary, which is regulatory collaboration. The freeports have regulatory forums where key regulators are obliged to come together and be more proactive when it comes to regulating new industries. Unmanned submersibles in Plymouth—a company called MSubs—have been a very good example of where we have been reactive in a rapid way to businesses who want regulatory collaboration. Those sorts of things are very important. We are not necessarily going to know what the future of those developments is going to be, and so we want to monitor that and continually provide support where we can, particularly in non-monetary senses.
Michael Gove: In terms of results so far, since freeports were established they have attracted £2.9 billion-worth of investment and 6,000 jobs have been created. Some people might say, “Well, some of that investment might have come anyway; some of those jobs might have been created anyway.” It is impossible to accurately define to what extent it is what economists would call a deadweight loss, or to what extent it is a new benefit. However, there are clear significant new benefits.
In terms of monitoring public policy, even though you can be very confident an intervention will work and will attract investment, you have to keep a weather eye on how it develops but also look at those that have been more successful. Within the stable of freeports, within the family of investment zones, which ones have been most energetic and successful in attracting investment?
Q191 Mark Pawsey: You referred to what Heseltine did; the Chairman referred to legislation in the 1940s. Why do we seem to be constantly doing this?
Michael Gove: There are deep problems in the UK economy that run over decades, even before the 1940s, to the 1920s and ’30s.
Q192 Mark Pawsey: Are we saying the measures we introduced at that time have not been successful?
Michael Gove: No; they have contributed to success in different ways. One of the arguments in the levelling-up White Paper is, on the one hand, that there have been some regional industrial policies about the Government’s direction of investment; Ravenscraig, Linwood, and so on. When chilled economic winds blow, you find those industries fade or fall.
The other view is that you should simply deregulate and hope the world will notice and attract investment. Experience tells you that is not enough. You need an overall environment that is attractive to inward investment—the lowest corporation tax in the G7, and so on—and you need the sorts of policies that will make sure that parts of the country that have latent potential and skilled workforces and institutions can play a big part. The soil must be irrigated so the private sector invests there.
That is the right approach. At different points, we have seen cities that were in decline and are now emphatically not. Manchester is an example of a city that would have been thought of as in secular decline over the last 10 years and beyond but is now clearly a formidable economic powerhouse.
Q193 Mark Pawsey: We need these kinds of powers permanently, because economic situations are changing. At any one time, one region may be suffering more than another, so we are always going to have these kinds of measures.
Michael Gove: Potentially; there are test cases. Without wanting to speculate too much, we have an issue in Port Talbot at the moment with the future of steel production, and the Secretary of State for Business and Trade has been hyperactive in making sure we can maintain steel production there and move towards green steel production.
Many years hence, some industries that are generating jobs at the moment will be in eclipse, and it will require interventions. Future Business Secretaries will probably have to be as quick off the mark as our current Business Secretary in thinking about tailored interventions, and I am sure some interventions will be tax or planning incentives.
Q194 Anthony Mangnall: Secretary of State, have you seen a positive result from the doubling of the tax reliefs from five to 10 years thus far? It may be too early to say.
Michael Gove: There is enthusiasm on the ground, for understandable reasons. We are in the process of emphasising to local actors how important it is to work with us to attract even more investment from outside. I cannot point to a huge and visible surge in investment, but I hope that will come; it seems logical that it should.
Q195 Anthony Mangnall: Where has the investment of £2.9 billion come from? How much is public, how much is private and how much is foreign direct investment?
Michael Gove: That £2.9 billion is all additional private sector investment, and the freeport that has been most successful so far in securing private sector investment has been in Teesside. I think it is Humber after that, but I can write back to the Committee—
Anthony Mangnall: Your officials are nodding behind you, so I think you are on the money here.
Lord Johnson of Lainston: FDI is about 1.3% to 1.4%, and the rest comes domestically and a mixture. A lot of these companies are international but locally based, like Scottish Power and so on.
Q196 Anthony Mangnall: That is helpful. I declare my interest on this, Chair: are there no core cities in the south-west for you to look at for investment zones? Are Bristol or Exeter not appropriate for being a—
Michael Gove: The short answer is yes. The quality of the universities in Exeter, Bristol, and Plymouth are such that we should be giving more thought to the south-west.
Q197 Anthony Mangnall: I am sure they will be listening and will be delighted with that response.
Secretary of State, you are a free marketeer. You believe in the Government not being too prescriptive; I hope and believe you would take that approach. Is there a danger that we are being too prescriptive in the areas identified in investment zones? Are we not allowing market forces to come up with the industries we would like to see created? You made a point about the Government’s direction of investment, whether businesses fade or fall.
Michael Gove: I completely agree. Experience would lead us to believe that there is a limited but powerful role for the Government in working with the private sector to help to secure investment in areas that the private sector might not otherwise initially think of. It would be completely wrong for the Government to seek to specify that a particular employer should or must operate in a particular area beyond the length of time that makes economic sense.
We fund higher education institutions, and we have a relationship with local government. People thinking about investment and deciding between the United Kingdom and France will want to talk to someone in Government, and often someone in local government, to decide whether it should be Lyon or Liverpool. There is a role to play, and there is no purely laissez-faire administration. Countries like Singapore and South Korea, which are successful in industrial terms or economic terms, recognise that they can attract investment over all these horizontal factors by having a broadly low-tax regime and focused, effective, light regulation in critical areas, but then sometimes you need that place-specific work to get the investment required.
I must defer to Dominic, but we are working to secure investment in the teeth of competition from France, Germany, Italy, Portugal, and others. The strengths of every part of the United Kingdom have sometimes been underplayed in the past. Investment zones and freeports enable us to say, “You might first have thought of Reading or Bracknell; now there are reasons to think of Exeter or Liverpool as well.”
Lord Johnson of Lainston: I completely agree with that. To answer your first point about the extension of the tax period, I would like to emphasise that it is not simply for tax breaks that businesses are locating themselves in investment zones and freeports; they just help to reduce the risk. The Government have made a very clear signal that these are very totemic and relevant policy foci.
Around the world, freeports tend to be, effectively, glorified bonded warehouse principles. We have taken that and developed it, and we want these areas to be centres for excellence in advanced manufacturing. That is slightly different and gives us a significant advantage.
I am afraid I have not read the 1944 report.
Chair: It bears re-reading.
Lord Johnson of Lainston: I will read it straight after this meeting, if the Committee will indulge me. But we did not have the sense of civic leadership then in the conglomerated way that we have now. When I look at the value of the M10 metro Mayors, whom I engage with regularly, in terms of their leadership, how they can market their areas, and the flexibility and responsiveness they can give to my investor base, that is one of the most important elements of the whole package.
Q198 Anthony Mangnall: On the point of clusters, we had an inquiry at the end of 2023 in which some witnesses made the point that even setting up a cluster takes a considerable amount of time. How confident are you, not only that what we have in place will be able to create the seed capital and the tax incentivisation to attract businesses and organisations, but that you can get these clusters up and running in the short term rather than having to be back here in 20 years? Given your staying power, Secretary of State, you probably will be here in 20 years.
Michael Gove: Thank you. When you are Secretary of State, Anthony, you will be able to see the process having matured.
Anthony Mangnall: That is very, very far off.
Michael Gove: The investment zones in particular are augmenting what is already there; we are not taking a tabula rasa and trying to persuade people to take a risk on that. For example, there will already be leadership in materials science in Manchester, experience in advanced manufacturing in South Yorkshire, and leadership in life sciences in the north-east. There are already fertile parts of the soil for private sector investment; it is about irrigating it better overall.
Q199 Charlotte Nichols: Lord Johnson, four out of five announced investment zones have chosen to focus on advanced manufacturing, and freeports also target that as a sector. How significant is the risk that investment zones and freeports will end up competing for the same investment?
Lord Johnson of Lainston: That is a very fair question. In terms of marketing both offerings, how we differentiate the two is very relevant. I would suggest that the freeports certainly have a preponderance towards advanced manufacturing in renewables. A good example is the SeAH Wind monopile plant; a Siemens blade plant is located south of there. That gives us a natural focus.
The conversations I have had with the investment zones have tended to focus far more around intellectual capital that can be developed in terms of advanced manufacturing; battery technology, and so on. So there is a natural division in that sense, and advanced manufacturing covers an enormous spectrum, as do renewables. I do not think that is an issue, but it is certainly worth making sure the offerings are slightly different.
Q200 Charlotte Nichols: On a similar note, because the freeports and investment zones offer such similar incentives, do you think there is a potential confusion for investors about which place they might want to be sited?
Lord Johnson of Lainston: That has not been the case in my experience. As I say, the renewables advanced manufacturers I have been talking to are very clear that they want to be in the freeports. Logistically, if you are making a wind turbine, you want it to be on the coast so you can float it out to the fields, whereas there are other investors who are looking particularly at life sciences in Liverpool, for example, or other advanced manufacturing in the midlands who want to be near the universities.
The offers may sound overlapping, and the simplicity of offering is quite helpful. I like the fact that the tax breaks are very similar, although the pots of capital are slightly different. It makes it easier, and then we can sit down with the investor and they can say what their industry is and where they want to focus.
Michael Gove: I completely agree with Dominic. Often, in other countries, you get logistics hubs and other relatively quick-to-establish investments. All investment adds value, but manufacturing adds more. The fact that we are seeing a desire for so many of the investment zones to make advanced manufacturing at the heart of their offer is a good and worthwhile thing, and we want to make sure there is a spread.
As the Committee will have noted, under the Secretary of State for Business and Trade, the UK has overtaken France in terms of manufacturing output, and part of the story of manufacturing has been an assumption about decline in the UK. I would not want to say that there is a renaissance, but there has been resilience and new investment in manufacturing under the Secretary of State.
Investors are savvy; they will know certain that clusters of excellence are already in existence. If you are interested in investment in life sciences, Newcastle and Liverpool are areas you will already be looking at, much in the same way that if you were in the aerospace sector and thinking about investing in France, Toulouse would be the place you looked to. People are already aware of where there are strengths. The key point, for people looking at investing in life sciences in Switzerland, France or the UK, is that we want them to think of the UK and think about Liverpool and Newcastle as pre-eminent places for investment.
Q201 Charlotte Nichols: To go back to your point about logistics, my constituency is a little strip between the very powerful Liverpool city region and Manchester city region. The Parkside development within the Liverpool city region has prompted some local concern that it will further entrench issues around low growth if it ends up not attracting the kind of investment it seeks in advanced manufacturing. In those circumstances, where there will be the types of logistics jobs you have mentioned, that will be displacing and cannibalising jobs that exist within our town in between those two city regions, which would be the opposite of levelling up. What reassurance would you give constituents in places like mine that these investment zones and freeports will attract the type of offering they are seeking but there will not be a negative consequence for surrounding areas, in terms of displacement of existing jobs in those sorts of sectors?
Michael Gove: What is good for Liverpool and what is good for Manchester is also good for Warrington. There has been a very important ongoing debate about the economic future of towns over the last 10 years in which people like Lisa Nandy have said some very thoughtful things, and our Government have been very much engaged, including in the most recent announcement of the long-term plan. But towns only succeed when the cities within the broader economic area in which they are located succeed.
There may be an investment decision where someone is thinking about Warrington and decides on Liverpool, but, provided that Liverpool and Manchester are growing, Warrington becomes an attractive place to live and work for people benefiting from the economic growth in the broader region as well. The long-term plan for towns and some other interventions we have are designed to ensure we are in a position to help Warrington’s civic leadership if there are specific factors that Warrington needs to help it to grow. I know that Warrington and Cheshire have been discussing whether there might be an option for greater devolution; that is something we would welcome.
Q202 Anthony Mangnall: It is expected that freeports will create somewhere in the region of 210,000 jobs. How many have been created thus far, and when do you expect 210,000 jobs to be created?
Michael Gove: Six thousand is our best estimate, and it will be a rising trajectory; I would not want to put a firm projection to this Committee on when we would reach 210,000, but I will come back.
Q203 Anthony Mangnall: Do you expect that rate to increase quite dramatically?
Michael Gove: Yes.
Lord Johnson of Lainston: Yes, it will. Travelling around the world, it is interesting how many interested parties have heard of levelling up. I go to Malaysia or Singapore and they talk to me about our own Government’s policy, led by Michael Gove and very much supported by my Secretary of State; that is quite important. The branding around what we are trying to do is very relevant because they see a Government that is responsive to investors’ needs. It is not just the tax breaks and the physical locations; people want to see civic leadership and responsiveness when they are investing in the UK, and they get that with these projects.
There is also a lot of interest from international investors in areas of the UK outside the south-east. If I had been doing this job 20 years ago, I think most of my conversations would have been about investing in property from sovereign wealth funds in London, for example, or the south-east; I have very few conversations about that. They are all very excited about the opportunities in cities like Manchester, Newcastle, Birmingham, and so on. Layering the freeport and investment zone programme on top is truly transformational for these areas.
Q204 Chair: Is it that there a timeframe for the 214,000 jobs target but you just do not have it with you, or is there not a timeframe?
Michael Gove: I will come back. I do not want to pluck another figure out of the air. I will come back and say what we think the likely trajectory of growth will be.
Lord Johnson of Lainston: We are driving this as hard and as fast as we can.
Q205 Mark Pawsey: I want to pick up another point on the tools in the toolkit. One of the advantages of investing in a freeport and investment zone was that there was 100% tax relief on plant and machinery. In the last Budget, the Chancellor gave that to everybody. Has that not detracted from the attractions of investing in a freeport or investment zone?
Michael Gove: Yes, relative to the rest of the UK, but the fact it has been extended from freeports and investment zones to the whole of the UK makes the UK even more attractive for investment in comparison to France, Germany, and so on.
Q206 Mark Pawsey: But the relative advantage of the investment zone is diminished by that decision.
Michael Gove: That is true.
Q207 Mark Pawsey: How does that square with the broader principle of a golden thread running through central Government decision-making in supporting levelling up?
Michael Gove: It is an example of the success of freeports and investment zones already, and the desire to ensure the UK as a whole is attractive to investors everywhere. Yes, there is a marginally less attractive offer in freeports and investment zones, but they are still proving to be powerful and successful. We will do more reviewing if we need to—but as I say, yes, you are correct.
Q208 Mark Pawsey: Might other advantages exist within the investment zones and freeports that could effectively be rolled out across the country?
Michael Gove: The Committee might well want to make that recommendation, or not.
Q209 Anthony Mangnall: We had an interesting previous session on this in the Committee. When it comes to free trade and attracting investment, the UK Trade Policy Observatory assessed the scope for tariff inversion in the UK and found that it was “almost non-existent. The notable exceptions were for products in the manufacture of dairy, starch and animal feeds sectors.” How worried are you by comments like that from bodies like that?
Michael Gove: Not particularly. I know the Committee has heard that the single sector of the economy that would benefit most from freeports is dog food.
Q210 Chair: Is that analysis correct?
Michael Gove: The academic explaining that position was discussing the difference between tariffs on components and finished products. My limited knowledge of economics leads me to believe that very rarely is an investment made on the question of tariffs alone, given how broadly low UK tariffs are. As Dominic pointed out, through bonded warehouses and other facilitations, if that was all you wanted to do, there were already ways you might make an investment decision on that basis.
So the customs benefits of freeports are just one of a number. To go back to the earlier analogy, we irrigate the soil, but what people want to plant there and what they decide is the most fruitful set of nutrients is a matter for them. The evidence so far is that people do not turn their noses up at the fact that this is an additional benefit. In five years, we will be able to judge to what extent it was a nice-to-have or to what extent it was critical in helping to persuade people to invest.
Q211 Anthony Mangnall: As you say, the customs benefit is one element you might benefit from. Lord Johnson, what is your Department doing in terms of helping businesses to export and trying to attract foreign direct investment? For instance, where does UK Export Finance play a role in these areas?
Lord Johnson of Lainston: These are broader points, which I am happy to cover. To go back to the freeports, in the Budget which levelled up expensing, a flexible fund was also introduced for freeports and investment zones, which is enormously helpful, and the extension of the timeline of the tax break. If you were to do a calculus, the relative advantages have been increased for freeports by £150 million, and I am delighted to have the expensing extended across the rest of the country. I do not think that it disadvantages freeports in any way.
On the question on logistics, I went to the Mars DHL pet food distribution plant in Thames Gateway and was very impressed to see so much Whiskas. But it is not the only benefit; it is quite important not to try to over-analyse.
In terms of job creation, I want to go back to the Ørsted/SeAH Wind case. I do not want to speak on their behalf, but the fact the monopile factory had been committed to helped drive their decision to invest in the UK, because then they had the production on site. For SeAH Wind, they could not get the contract in advance, because that is just not how the flow works, so the freeport offering enabled them to reduce their risk and to put their monopile factory there. It is going to be the biggest monopile factory in Europe, possibly even in the world, in terms of the size of the monopiles they are going to develop. That then enabled knock-on effects in terms of other investment in other areas.
I would not like to just count the jobs in each individual freeport; obviously we want to create as many as possible, but we really want to have regional generation and gross value added for every region, and this is exactly the sort of example of where you will see that, so I just wanted to emphasise that.
In terms of the work we do for freeports and investment zones, we have a team of six or seven people full-time in the Department who just focus on this, and they liaise specifically with the investment zones and the freeports. My role is not just going out and selling; we have people in the Department for Business and Trade who are helping to develop the offering. If I were to look at ways in which we could invest more time, effort and thought, it would be in helping particularly the investment zones, which are more nebulous and a bit more complex, to develop saleable propositions that international investors can then access. We do a lot of work on that, and that is done with the OFI; we have a head of product who focuses specifically on that.
There are many dozens, if not hundreds, of officials in post around the world whose job it is to showcase the opportunities in freeports, and, ultimately, in investment zones, as well. There is a big team under me promoting this very important programme.
Q212 Anthony Mangnall: I can absolutely understand your point in saying, “This is what the Department is doing; this is what our embassies are doing.” But if I am a business based in your investment zone or your freeport, what can I realistically expect to hear from DBT in terms of, “This is how we are going to help you export”? What are the tools there? You talked about the offering. Can you give just a little more flavour?
Lord Johnson of Lainston: I have covered the investment side. In terms of exports, we have a large number of advisers based particularly around the areas where we have freeports and investment zones. If you were looking for assistance in exporting, ultimately you have that resource to depend upon. They then contact our community in post, which then assists you in developing local partnerships. The real value-add for export assistance from the DBT is in finding distribution for companies in the UK rather than just negotiating export wins, which of course happen at a larger level in order to be more scalable.
The final point I would add is that we want more businesses to export, and if we can increase the percentage of companies that have a desire to export, that will have an immediate impact on the economy. That is as much a concept of practical support, which we do a great deal of—and promotion through our free trade agreements, by the way, which should not be underestimated in terms of changing that cultural direction and enriching our companies—but also selling the benefits of exporting, reducing any concerns about the difficulties and trying to remove those barriers.
Mr Betts: Secretary of State, good morning. Indeed, happy new year to you as well.
Michael Gove: Happy new year.
Q213 Mr Betts: On the Levelling Up, Housing and Communities Committee, which I chair, we have been hearing from local government recently about the challenges it is facing—not just the individual failings of some authorities, but collectively their concerns about the long-term impact of austerity and the particular challenge of statutory requirements on social care and homelessness. One thing that has been happening is the hollowing out of many other aspects of local government resources that have been taken away from economic activity, for example. Do you think local government generally has the capacity to deliver the freeport and investment zone policies that you are implementing?
Michael Gove: So far, all the evidence says yes. I have been struck by how enthusiastic local government leaders across all political parties have been. Maybe it is because of the geographical location of the investment zones and the freeports that we are working with some of the very best people in local government, though obviously there are good people at every level. So far I have not sensed any lack of capacity or ambition.
Q214 Mr Betts: A freeport told this Committee at a previous session that it thought local government did not have that capacity and was not going to concentrate on economic growth, given the many other challenges that it is currently facing.
Michael Gove: Again—this reflects one of the points Dominic made—the investment zones are overwhelmingly in mayoral combined authorities. Many of the freeports—not all, of course—are as well. Within those, every one of the current metro Mayors sees it as central to their mission to be the champion of economic growth in their area, and they use the resources and the platform of that mayoral role to champion economic development. There will, I am sure, be some upper and lower-tier local authorities that are facing difficult financial challenges at the moment, but in those areas where we have been working, we have found that there is a real acceptance and understanding that thinking hard about economic development is critical to getting, for example, the tax base to grow and to relieve some burdens that would otherwise be placed on the shoulders of council tax payers.
Q215 Mr Betts: Is it your view that local government, and devolution to local government, is absolutely essential to deliver these policies? Do you have to have an elected Mayor to make them work?
Michael Gove: You do not absolutely have to. I think it does help. For example, I visited the Inverness and Cromarty Firth Green freeport. I was incredibly impressed by the work that was going on there. It crosses different local authorities in Scotland—Highland and Moray—but it is also the case that private sector figures, like Roy MacGregor, have worked very effectively. To be fair, the Scottish Government, particularly Kate Forbes, appreciated the importance of that investment. There is no equivalent to the mayoral model in Scotland, but the local authorities there have definitely risen to the challenge.
Q216 Mr Betts: In terms of what the Government are doing overall, one thing the LUHC Committee looked at recently was the funding for devolution. We were very critical of the fact that the Government have all these pots of money with bidding arrangements for them—which local government has been critical of, and you have accepted we need to try to move away from—but no sense of joining the totality up in terms of an overall strategy. Are the freeports and particularly the investment zones going to be joined up with all these other policies, or are we still going to see separate silos?
Michael Gove: They are, to a significant extent. Again, one of the things we have done with the trailblazer deals in the west midlands and Greater Manchester is move towards a system of a single pot of funding. That is what we want to do with all the mayoral combined authorities in due course. In an ideal world—there will always be exceptions—we would see more and stronger mayoral combined authorities leading the work in partnership with central Government to make investment zones and freeports work. But by definition there will be investment zones and freeports outside England, where there will be a different approach towards local government, because the devolved administrations will make that judgment. Also, for example, in the Solent there is certainly no appetite for a mayoral combined authority at the moment because of the particular nature of local government there.
Q217 Mr Betts: I noticed the term “in due course”. Is there a timescale attached to that phrase?
Michael Gove: I very much believe that it is always later than you think and that you should always crack on, but after we win the next general election, I hope this will be something that we will see come to rapid maturity in the first couple of years of the next Conservative Administration.
Q218 Mr Betts: Even assuming that, Secretary of State, the next couple of years of the next Administration is three years away. Why do we have to wait that long if this policy is absolutely right?
Michael Gove: No, we are cracking on now. We are talking to the existing mayoral combined authorities about replicating the trailblazer deals that we have with the west midlands and Greater Manchester.
Q219 Mr Betts: I have one other point to follow up. One thing we were again very critical of was that while levelling up is an overall Government policy, we felt it was very much a DLUHC policy with other Departments not really joining up. If you are going to make this work, it is not about particular requirements or inventions of policy or pots of money; it is about the totality of Government expenditure being geared towards levelling up. That does not happen. There is no evidence that Government Departments are sitting down and saying, “How can our general mainstream budgets be used to help levelling up and the investment zone policy?”
Michael Gove: I think that challenge is spot on. There are two things. First, are other Government Departments enthusiastic about it? Absolutely, and I would cite DBT as being the Department that is most energetic in making sure that levelling up works, because—and I will come to public investment in a moment—levelling up will only succeed if we get private sector investment in areas with lower productivity that have in the past been under-invested in. The public sector has a role to play in that, but that is why DBT is so vital and why I am so grateful for the leadership that the Ministers there have shown.
On public sector investment, you are right, and we have been publishing data on everything from R&D to Arts Council spending in the past, laying bare where public sector investment has gone. We have changed that, and we will be seeing more in the course of the next couple of months on how the inner wiring of Government can be improved in order to ensure that spend is more effectively and equitably directed for levelling-up reasons.
Q220 Mr Betts: So in two months’ time you will be able to show us how the Department for Transport and how the skills budgets of the Government are being redirected to support these policies.
Michael Gove: Yes.
Mr Betts: Okay, we will look forward to that.
Q221 Douglas Chapman: I want to talk about accountability in terms of freeports. On the back of what Mr Betts was talking about, as someone north of the border looking south I find that the whole complex landscape with the funding is counterproductive to what you are trying to achieve.
I have been looking at some quotes from the Institute for Government, which has claimed that levelling up is ineffective in its promise to “Create new jobs, drive economic growth, help restore people’s pride in the places where they live, and spread opportunity more equally.” The criticism there is that it would include too little funding and too complex systems to allow local authorities to navigate their way through.
I know that one council applied for levelling-up funding and spent a huge resource trying to win a bid. Maybe one or two fairly large councils received something, but some areas were very disappointed that they did not win anything. Is it time to reform that and have a much more strategic approach to all these pots of money that sit around your Department and others, make it a bit more joined up and give people a feeling that there is a strategic approach behind all this?
Michael Gove: I would not overstate it, but there is a fairness in the point you make. With both investment zones and freeports, we have worked with the Scottish and Welsh Governments. For example, the investment zone in the north-east of Scotland was, in effect, co-designed with the Scottish Government. The decision over freeports in Forth and Inverness and Cromarty was taken with the Scottish Government. If the Scottish Government had started the process, they might have ended it in a slightly different place, not in terms of location but in terms of design of the policy, but we did co-design it. Earlier, I mentioned Kate Forbes, who was Finance Minister, and she, as you know, takes a very pragmatic and pro-growth approach.
Q222 Douglas Chapman: The main point, though, is that there are just too many targets, as it were, and not enough actual activity to look as if it is all joined up.
Michael Gove: I think the earlier criticism was fairer. We now have a very coherent set of interventions across Scotland to complement local government and the Scottish Government. Now, I know that there are some great places like Dunfermline that we should think—
Q223 Douglas Chapman: I was really talking about the complexity south of the border.
Michael Gove: No, but I also think—and it is very much a point that Clive and his Committee have made—that we do need to simplify, and while it is a good thing to have some elements of funding allocated competitively, too much has been allocated in this way. That is fair.
Q224 Chair: Can you just remind us how many different Government programmes are competitively run from Departments that are basically routing money to local places?
Michael Gove: In my own Department?
Chair: No, across His Majesty’s Government.
Michael Gove: I only know that in my own Department it is more than 100.
Q225 Chair: Across the whole of Government, it is about 140, and about £85 billion goes through those programmes.
Michael Gove: Yes.
Chair: That is ridiculous.
Michael Gove: That is why, as I mentioned earlier, we are moving towards a single-pot approach, and why Andy Burnham and Andy Street made the case—and we enthusiastically agreed with them—that they could act as trailblazers for this approach. We are in violent agreement. To repeat a point that I have made elsewhere: some competitive allocation is a good thing.
Chair: Not 140 different competitions.
Michael Gove: No.
Chair: Sorry, I interrupted.
Q226 Douglas Chapman: That is okay. I think you have answered the point well. You mentioned irrigating the soil earlier, but it seems to me that you are using a teacup instead of a power hose, and that is one of the big problems. Local authorities are feeling money sucked out their budgets all the time, and it is being replaced by very little in return that they have actually got to bid for. Maybe that is a comment for another day.
On the accountability of freeports, how would you describe the governance and scrutiny arrangements for freeports as they currently exist? In your view as Minister, is it sufficient to allow public confidence to grow in the freeports, because there is a lot of criticism over deals being done behind closed doors and so on?
Michael Gove: I am pretty confident that the governance arrangements for freeports themselves are effective and transparent. Scrutinising them and having conversations with most of those involved has reinforced that. I know that there has been criticism, predating the establishment of the freeport, of some economic activity in Tees Valley. That is why, at the request of the Mayor of Tees Valley, we set up an independent investigation. There were some very serious allegations made amounting to criminality and so on. We want that inquiry to conclude as quickly as possible, as do members of this Committee. If there are lessons to be learned, we will be very open about what they might be.
Q227 Douglas Chapman: In terms of that scrutiny, though, I believe there are only two freeports that have actually published their memorandums of understanding, and only two that appear to have published their full business case. Out of the 14 freeports that currently exist, is that good enough for you? How do you win the confidence of local communities to say, “This is all about you: it is about your jobs, it is about your future,” when all this is being done and nothing is in the public domain for them to scrutinise?
Michael Gove: A fair amount has been in the public domain. Again, I mention the Inverness and Cromarty example, where the responsible people—the leader of Highland Council, Roy MacGregor and others—are embedded and accountable within the community, and there has been strong community support for it. My judgment is that people want to see results, so if public money is being wasted or misdirected, they will be angry about that. But what they really want to see are new jobs, new investment coming into that area, and a vote of confidence in that area economically.
I know the point has been made by the Committee—and it is a fair one—that there are a number of overlapping interventions, and it is sometimes difficult to work out at every stage where the clearest line of accountability is, but one thing we are seeking to do is always to make it clear where the strongest point of accountability might be, whether that is through a Mayor or another body.
Q228 Douglas Chapman: My understanding is that some freeports were allowed to choose whether or not to publish information regarding their full business case. From the point of view of a Government Minister, as somebody who values that level of accountability, why were you not pressing the button on that and saying, “You really need to publish this so that everything is in the public domain and so we have clarity”?
Michael Gove: I think it is the case that it is required to be in the public domain. I cannot remember with one or two bidders for freeport status that did not succeed that there was a question mark over whether those business cases should be published. I know there was disappointment in Aberdeen that they were not allocated freeport status. The Department subsequently went through the business case with them and explained why it was that Inverness and Cromarty and Forth had performed better against the objective criteria that we and the Scottish Government had set out, but I do not believe it is the case that there is any freeport that has, as it were, wilfully withheld its business—
Q229 Chair: Can we clarify that by way of follow-up?
Michael Gove: Absolutely. Again, I would not want to mislead the Committee. It is my understanding that they absolutely must. If for any reason any of them has been reticent or dilatory, obviously we will chase that up.
Q230 Douglas Chapman: Just one final quick point as well. We have heard from previous evidence sessions that FOIs are very difficult to apply to freeport areas. As Minister, is that something you could you do something about as well?
Michael Gove: Yes, absolutely. Again, there should not be a problem in local government responding to FOIs, as a general rule. I will definitely look into it. If there are specific examples of individual freeports or individual mayoral combined authorities that have been slow, do let me know, and we will chase it up.
Chair: Thank you.
Ian Lavery: It is good to see you this morning, Secretary of State. I hope you are feeling a lot better than perhaps you look.
Michael Gove: Thank you.
Ian Lavery: And I mean that most sincerely.
Michael Gove: I know you do—thank you.
Q231 Ian Lavery: Can I focus on the Tees Valley freeport, which has caused so much controversy since the beginning of the development? It appears to be the only one to have done so. It appears to be a bit of a secretive, murky, dodgy, backroom deal, with cronyism of the highest order and people making fortunes at the expense of the taxpayer. I think that needs to be proved wrong.
In your response to Mr Chapman, you mentioned that the review was ongoing. We have to get to the bottom of this, Secretary of State, because the reality is that the people in the country are fed up with the Mone issue, the Post Office issue, cronyism and people making fortunes on the back of the taxpayer. It is really important that we get to the bottom of this.
You may have not seen it, but I am sure you have heard about the point of order raised by Alex Cunningham about the annual accounts produced yesterday by Teesworks. It tripled its profits to £54 million, but 90% of the shares in Teesworks have been handed by the Mayor to two businessmen, and 10% of the shares remain with the organisation—the taxpayer, as it were. That means that before the creation of jobs, of the £54 million of profits being made, two businessmen have made £48.6 million and the taxpayer gets £5.4 million. Does that not set alarm bells ringing in your Department, Secretary of State?
Michael Gove: First, thank you very much. I normally feel a lot better than I look, but it is particularly so at the moment. It is very kind of you to ask.
The points that you raise, and which Alex raised, I know have been matters of concern, absolutely. To be fair, they are also matters of concern to the Mayor, Ben Houchen, himself. That is why Ben was very keen that there be a proper and rigorous inquiry to get to the root of things, because some allegations that have been made go beyond some things that you have said, Ian. There have been allegations of potential criminality as well, so we wanted to make sure there was a proper inquiry. Angie Ridgwell, who is the chief executive of Lancashire County Council, has been doing that. It has taken slightly longer than any of us would have wanted. That is because she and her team have been thorough. I hope the inquiry will conclude its work shortly; I know this is what Ministers always say, and it can be irritating, but I cannot pre-empt it.
There is a lot I would like to say, because I am a big fan of Ben’s and what he has achieved, but I do not want to pre-empt what the inquiry will conclude. I want to say that you and Alex are asking questions that others have asked, and that is perfectly legitimate, and it is important that Angie and her team respond appropriately to your questions.
Q232 Ian Lavery: Secretary of State, you said that you want the report concluded as early as possible. You said on the record it would be finished by summer 2023, then November, then December. Now it has been pushed to spring 2024. There is a big feeling with regard to this being kicked into the long grass because of the mayoral elections in Teesside in May. You have to give a commitment to this Committee that this definitely is not the case, because that is what people are generally thinking.
Michael Gove: I understand. It is an independent inquiry, but the team know that we would like them to report as quickly and as comprehensively as possible. Of course, no one wants it published more than Ben Houchen himself, because he wants the mayoral election to be about what he has achieved, his record, his plans for the future, and for all these issues to be out there, tackled, so that people are able to make a judgment on the basis of the facts.
Q233 Ian Lavery: Can you give a commitment to the general public that this independent inquiry—I understand it is independent—will be concluded way before the mayoral elections?
Michael Gove: I am doing everything I can to make sure that it is.
Q234 Ian Lavery: Is there a reason for this delay, bearing in mind that you said you believed initially it would be the summer of last year?
Michael Gove: I always wanted it to be as quick as possible, but it is also important that it is comprehensive. The worst thing would be if we had a quick response that ended up with people saying, ”What about this? What about that?” I do not think there was ever any risk of that with someone like Angie Ridgwell, but it needs to be comprehensive, so that the points that you and others have raised are properly seen to be addressed.
Q235 Ian Lavery: Secretary of State, have you or your officials seen the report or parts of the report yet?
Michael Gove: I have not, but officials of course have been working to make sure that all the information that Angie Ridgwell and her team require has been shared with them. I do not know what the conclusions of the report are.
Q236 Ian Lavery: There has been no attempt by your officials to dilute the report or the initial recommendations, for example?
Michael Gove: I cannot believe that any of our officials would ever do that.
Q237 Ian Lavery: Is there much in terms of communications between your officials and Angie Ridgwell regarding what they have already seen? There is a big fear and an understanding, by the way—I might as well say it—that there has been some interference from your officials with regards to the initial findings of this review. I will accept what you say on that, but it might be very helpful if the communications between your officials and Angie Ridgwell could be sent to this Committee, for example, just for clarification.
Michael Gove: I totally understand. I have no reason at all to doubt her integrity or that of my team or officials. I know that this Committee, and indeed Clive’s Committee, will take a close interest in the report when it is published. If on publication there are further questions that you, Ian, or anyone else wants to ask, I will make sure that we address them. When you have an independent inquiry like this, it is normally the case that you will have some people from the Department who are there to act as a secretariat, to get the material together, to help answer questions and so on, but we want total transparency on this.
Ian Lavery: I want this to succeed. I want jobs in all the freeports.
Michael Gove: Absolutely.
Q238 Ian Lavery: I am not terribly sure whether I am 100% supportive of the notion of freeports, but that is all part of the inquiry and investigations. Unfortunately, Andy McDonald, who is the MP involved, is not able to be here this morning because he has had a knee replacement and cannot walk. He probably feels a lot worse than perhaps you feel yourself. But we want this to succeed, and we want to draw a line under this, so please try to get this sorted as soon as practicably possible.
Michael Gove: Yes. I have had my disagreements with Andy, but do send him my best wishes as well. I appreciate how determined he is to get to the truth.
Q239 Chair: Thank you. Let us have the map. Let me crystallise a couple of things. Where is the report right now? Has a draft report been submitted by Angie to your Department?
Michael Gove: Not to me, no.
Q240 Chair: Has it been submitted to your Department?
Michael Gove: Not that I am aware of, no.
Q241 Chair: Have any of your officials been involved in making suggestions to Angie about drafting?
Michael Gove: I am sure it is the case that there have been discussions, but again, I do not know the nature of them.
Q242 Chair: Are you able to commit to the Committee to publish the report before purdah?
Michael Gove: I think we have to, and I am sure Angie would appreciate the importance of doing so. Again, I am sure the Committee can appreciate my—what’s the word?—not impatience, but desire, for all sorts of reasons, to have it out there and to have you and everyone else read it, but what I cannot do is force the hand of an independent investigator. I am sure the team fully appreciate that with a democratic event coming up, it would be wrong not to have it out.
Q243 Chair: There may be a draft of the report in the Department.
Michael Gove: I am sure it is the case that there will be a working draft, yes.
Q244 Chair: Can we see the draft?
Michael Gove: I do not think that would be right, because, by definition, it could only be published once Angie and her team have satisfied themselves that they have seen and stress-tested all the material.
Q245 Chair: At this stage, you are saying to the Committee that it is your ambition to publish this before purdah, and you are not aware of your officials suggesting redrafts to Angie.
Michael Gove: I am absolutely determined that it should be published at the earliest possible opportunity, and I am not aware of anything that would amount to interference with the report. It may well be the case that officials have provided additional information upon request. As we know—there are members of this Committee who have been Ministers—it might well be the case that an initial proposition is put, then more information comes to light, and then something is qualified, and it may be qualified in a way that is more or less critical.
Q246 Chair: Why did not you ask the NAO to look into this?
Michael Gove: Originally, it was Ben’s idea that the NAO should do so, but the judgment we came to was that it was not really appropriate for the NAO. It was not the NAO’s function to undertake this work, and it would be appropriate to have someone conducting the work who was an unimpeachably independent figure from the world of local government. I am sure people will be able to judge the report on its merits on publication.
Q247 Chair: You will know as well as I do that section 6(3)(d) of the National Audit Act 1983 gives you as a Minister the power to direct the NAO to investigate individual cases, so why did not you exercise that power in relation to this case?
Michael Gove: Because I thought that it might lead to consistent and persistent requests for the NAO to review the activity of local government in many other areas, and because we have set up, through Oflog, a new body that is designed explicitly to look at the performance of local government. Also, we wanted to make sure we had something that was authoritative, independent and expeditious. Obviously it has not been as rapid in its publication as we might want.
Q248 Chair: Has it been expeditious, in your view? You gave it a deadline of reporting by the summer of 2023, and you still cannot commit to a precise date for publishing it.
Michael Gove: No, and again, you will appreciate the balance between—
Chair: It is not expeditious though, is it?
Michael Gove: On the one hand, I would not want to criticise someone who is conducting this. My experience of inquiries is that they rarely report to the timescale, whatever the Government.
Q249 Chair: You are inviting us to believe that the delays are with Angie and her team.
Michael Gove: No, I am not blaming anyone. I have not seen the report. I do not know what—
Chair: Your officials have.
Michael Gove: There will be people in the Department who will have seen at least part of it, but I have deliberately said that I want to see the report out as early as possible. I also want it to answer all the questions that have been raised, and I want it to be comprehensive.
Q250 Chair: Many of those questions are now begged by the publication of the first year of the Teesworks accounts. Have you read them?
Michale Gove: I have not.
Q251 Chair: Are you familiar with what they say?
Michael Gove: Broadly familiar, yes.
Q252 Chair: As you will know, as regards the piece of land, which is on the maps here, 110 acres has been bought by a company, which is 90%-owned by friends and close associates of Lord Houchen, at £1 an acre. It is 110 acres. There was then a leasing deal and there were some rights over scrap metal on the site. Together, that means that the company, which is 90% owned by these associates, has a turnover of £143 million, and about £50 million in profit in one year has largely now gone out to these private shareholders. In your view, at first blush, does that sound like best value was secured for taxpayers?
Michael Gove: I cannot answer that question, as you know, because while this inquiry is going on, I must not pre-empt or end-run its conclusions. Separately, as I mentioned to Ian, I am a huge champion of what Ben Houchen has done. Were I in any role other than this, I would be more than happy to mount not just a defence but a vigorous and energetic one of the approach that he has taken throughout. But serious issues have been raised. Both Ian and you have articulated them. We take them seriously, and that is why we want the report to do its work properly and then conclude. I know it is frustrating. It is so for me, as it must be for the Committee, but what you were inviting me to do—and it is a perfectly legitimate question, of course—
Chair: It is a simple question—
Michael Gove: Is to look at the headline on a press report from a trial—
Q253 Chair: It is not a press report; it is a set of company accounts. It says that in one year, a company that has bought 110 acres for £1 an acre is now turning over £143 million and shovelling £50 million out to private shareholders in profits. My question to you is: are you confident that we have secured best value for taxpayers? Let me put the question another way: do you have full confidence in the governance of Teesworks Ltd today?
Michael Gove: Again, you are asking me a question about this particular issue, which an investigation is currently looking at in detail—perhaps excessive detail from this Committee’s point of view. It is legitimate to ask, but it would be wrong for me to pre-empt it.
Q254 Chair: Okay. Let me ask you whether you have full confidence in Lord Houchen’s conduct in relation to this matter.
Michael Gove: I do, yes. I have the highest regard for him, but what I do not want to do is pre-empt the conclusions of the investigation by anything that I say. Can I speak on a personal level?
Chair: You can. You are even protected by parliamentary privilege here.
Michael Gove: I can say that I have the highest regard for Ben in all my observations and dealings with him. I think he is a first-rate public servant who has been responsible for the economic transformation of the Tees Valley, and he is a great and visionary leader in local government.
Q255 Chair: When there are such heightened concerns about, for example, the PPE contracts, and when we have a deal like this, which appears to be routeing £50 million in profit on a very strange deal that has released 110 acres for £1 an acre, you must accept there are real concerns about whether taxpayer interests have been safeguarded. My question to you is: do you have full confidence in whether the arrangements have secured best value for taxpayers?
Michael Gove: I will say two things. The reason why the inquiry has been set up is to establish that. You mention PPE, again perfectly legitimately. Because I know something about the disjuncture between the reporting of what happened with PPE and the reality, I also know that many of the judgments people have made, on the basis of what they have read and what has been reported, are utterly at variance with the truth.
Chair: To be fair, I am merely quoting from the company accounts.
Michael Gove: Indeed.
Chair: They have only been published for one year, and they were published two or three days ago.
Michael Gove: Chair, it is helpful that you have made that analogy, but my experience is that there have been some people who have quoted unambiguous facts relating to the procurement of PPE, but those facts quoted in isolation have given a wholly erroneous picture of the procurement decisions that were made and the context in which they were made.
Q256 Chair: But there remain questions in your mind about whether the taxpayer’s interest has been best safeguarded.
Michael Gove: Again, by definition, an inquiry is set up to satisfy other people’s questions, and I have to avoid—
Q257 Chair: But you must be curious.
Michael Gove: I am endlessly curious, but you are trying, brilliantly, to get me to pre-empt or to end-run the conclusions of an independent inquiry, and I will not.
Q258 Chair: Here is a case where company accounts have been produced that show some pretty strange behaviour. On the face of it, they do not appear to say that the taxpayer interest has been safeguarded. You have chosen not to invite the NAO to come in and have a look at this in detail. That raises questions about whether freeport governance as a policy is in a good place.
Michael Gove: The key thing is that the issues raised all relate to activity before the establishment of the freeport.
Q259 Chair: That is not quite true, because some money that has gone through the freeport—about £21.5 million—has gone into the land remediation on the site, and that was actually produced to us in the evidence that they submitted to us.
Michael Gove: Yes. The South Tees Development Corporation was set up before the freeport was established. One of the things I would say is that there was—
Q260 Chair: You are not inviting us to believe that there are no advantages associated with the freeport that have flattered the value of the land in question?
Michael Gove: I am saying two things. The first is that there was a previous and unrelated allegation about crustacean deaths related to the freeport and Ben. On the basis of all the evidence, my belief is this was a politically motivated attack on Ben for a variety of reasons. There was no evidence at all that those crustacean deaths had anything to do with the economic activity of the freeport.
Chair: I do not think we need to be diverted by crustacean deaths. The question here is about best value for the taxpayer.
Michael Gove: I think it is critical here because—and it is not an allegation or a criticism that I would lay at this Committee’s door, or yours or Ian’s, because there are legitimate questions—it is the case that, because of Ben’s success, he has attracted political opposition that has leapt on phenomena and reporting in order to try to besmirch his name. One of the reasons why Ben himself wanted an inquiry is that he is confident that some of the lurid allegations that have been made against him are not justified by the facts.
Q261 Chair: As we stand today, is the Teesside freeport still a flagship case study for your freeport policy?
Michael Gove: Yes.
Chair: Secretary of State and Lord Johnson, that has been a really illuminating session. Thank you so much for coming before us to help us with our inquiry. We look forward to presenting it to you in due course.