Taxation (Post-transition Period) (Ways and Means)
Tuesday 8th December 2020
(3 years, 11 months ago)
Commons ChamberRead Full debate Taxation (Post-transition Period) Act 2020 Read Hansard Text Read Debate Ministerial Extracts
17:22 - The House divided: - Ayes: 264 / Noes: 360 - Question accordingly negatived.
Mr Deputy Speaker (Mr Nigel Evans)
I inform the House that I have selected the amendment in the name of the Leader of the Opposition to the first motion.
The Financial Secretary to the Treasury (Jesse Norman)
I beg to move,
That provision (including provision imposing and regulating new duties of customs) may be made in connection with goods in Northern Ireland and their movement into and out of Northern Ireland (whether the movement begins or ends in Great Britain or elsewhere).
It is a delight to see you in the Chair, Mr Deputy Speaker.
In less than a month’s time, the UK will reach the end of the transition period and resume its place as a fully sovereign trading nation. As colleagues across the House will be aware, our negotiations with our counterparts in the EU continue. The Government remain cautiously optimistic about the conclusion of those talks. However, there is no doubt that we have a responsibility to the people of the United Kingdom to be ready for every outcome. The measures contained in the Taxation (Post-transition Period) Bill, which will be introduced and published following this debate, will play an important part in those preparations. The Bill will help to give confidence and certainty to the owners of businesses small and large throughout the United Kingdom after the end of the transition period.
Sir William Cash (Stone) (Con)
Will my right hon. Friend explain exactly how this matter we are dealing with now will be affected by the statement made by the Chancellor of the Duchy of Lancaster about an hour ago, which also deals with the question of goods to be considered not at risk, and with questions relating to customs and tariffs, and the decision that appears to have been taken that the Government have agreed in the Joint Committee with Mr Šefčovič on a number of matters of which at the moment we only have an outline? I know the Chancellor will make a statement tomorrow, but perhaps my right hon. Friend could assist us in this matter, because it quite clearly has relevance to what he is saying now.
Jesse Norman
I am very grateful to my hon. Friend for raising the question, and I will touch on it in my remarks in my opening speech, but I should say to him that I am not better sighted on the breaking news than he is. He will have ample opportunity to address this matter tomorrow with the Chancellor of the Duchy of Lancaster when he comes to the House. As my hon. Friend will be aware, this matter was a product of a joint negotiation with the Commission, and the UK Government do not control the timing of that, and therefore the Chancellor will come at the earliest opportunity to the House to discuss the matter with colleagues from all political parties.
Today’s debate is on the important but technical ways and means motions that we need to pass before the Bill is debated tomorrow. If I may, I will talk a little about the Bill’s key elements in greater depth in order to foreshadow what we are going to see over the next day or so. The Bill will take forward important changes to our tax system to support the smooth continuation of business across the UK. In particular, it will ensure that we meet our commitments to the people and businesses of Northern Ireland in relation to the implementation of the Northern Ireland protocol. It will help to uphold our pledge to protect the UK’s internal market by ensuring that Northern Ireland goods have unfettered access to Great Britain. To that end, the Bill will set out a new framework for the UK’s customs, VAT and excise systems following the end of the transition period, so that there are clear rules in place for goods movements.
If I may, I will start with the areas of the Bill that relate to customs. The motion before us relates to legislation that will be required for customs duties and processes to support the practical implementation of the Northern Ireland protocol. I want to underline to right hon. and hon. Members that the legislation follows directly from the commitments made in the Government’s Command Paper on the implementation of the protocol, which was published in May of this year. The House will recall that the Northern Ireland protocol guaranteed no checks or controls at the Northern Ireland-Ireland land border and maintained the UK as a single customs territory.
The legislation will achieve its aims through a series of targeted changes to the Taxation (Cross-border Trade) Act 2018, focusing on five specific areas. First, the changes will ensure that EU goods imported to Northern Ireland from the European Union—for example, goods moved across the Ireland-Northern Ireland border—are not subject to customs duties or processes.
Secondly, the changes will introduce a framework for charges on goods arriving in Northern Ireland, both from Great Britain and from the rest of the world, that are considered at risk of moving into the EU, subject to conditions agreed under article 5 of the Northern Ireland protocol.
Thirdly, these alterations to the TCTA will establish the framework for the UK Government to offer waiver and reimbursements for tariffs that are still incurred when that is needed.
Fourthly, the customs aspect of the legislation will ensure that the UK’s customs regime applies to goods moved from Northern Ireland to Great Britain if they do not qualify for unfettered access. Anti-avoidance rules will prevent goods from being re-routed through Northern Ireland in order to enter Great Britain without undergoing UK import processes.
Finally, the rules will ensure that customs enforcements, penalty, review and appeal provisions in relation to duty can continue to work alongside EU legislation in Northern Ireland and can apply where required in relation to movements of goods between Northern Ireland and Great Britain.
I will, if I may, respond to my hon. Friend the Member for Stone (Sir William Cash), who raised the point earlier. He was right to point to the EU-UK joint statement that has just been made. This sets out the agreement in principle regarding the implementation of the Northern Ireland protocol. The Government are therefore not introducing the so-called notwithstanding provisions to the taxation Bill. In the light of that, the Opposition’s proposed amendment to the first motion is unnecessary.
This Bill will also allow us to amend and modify certain provisions in relation to VAT and excise, including mechanisms to ensure that, in so far as is possible, VAT will be accounted for in exactly the same way as it is today. In addition, the Bill will make provision for amending current legislation for excise duty to be charged when excise goods, such as alcohol, tobacco and certain fuels, are removed to Northern Ireland from Great Britain.
Sir William Cash
As my right hon. Friend knows extremely well, all these matters relating to the Northern Ireland protocol and the withdrawal agreement have direct relevance to the question of sovereignty. A statement was made by the Paymaster General yesterday relating to the question of negotiations, but the matters that have just been raised by the Chancellor of the Duchy of Lancaster in his statement to the press and to the public, but not to this House so far, have not been dealt with properly, because that statement has not yet been made to the House of Commons, although it has been published in general.
The point that I wish to make is simple and I would be grateful if my right hon. Friend addressed it. In withdrawing the “notwithstanding” provisions—clauses 45, 46 and 47 of the internal market Bill—which have a direct relevance to the question of sovereignty, does he have any comment to make and could he please help the House to understand, if these provisions are being withdrawn from the internal market Bill and will not be introduced in the taxation Bill, for which he does have responsibility, what are the implications for sovereignty with respect to what has been announced? I understand that the Chancellor of the Duchy of Lancaster will make further comment tomorrow.
Jesse Norman
I thank my hon. Friend for having another go at this issue. Let me address the questions that he raises. I do not accept the point that he tries to make about whether this is, in some sense, an inappropriate procedure. As I have indicated, this is a product of a joint negotiation. The UK did not control the timing. It is as agreed with the other party to the debate and the discussion.
The Chancellor of the Duchy of Lancaster will be coming to this House at the earliest opportunity once he returns from Brussels, in order to make a statement to discuss this and to receive scrutiny from my hon. Friend and from other Members of the House. That seems to me entirely appropriate. I cannot, of course, comment on matters relating to the United Kingdom Internal Market Bill, but what I will say is that, in withdrawing these “notwithstanding” provisions, we do not regard that UK sovereignty is being in any way impeded or undermined—on the contrary. Therefore, I think his concern can be and should be allayed, but I leave it to the Chancellor of the Duchy of Lancaster to address those points tomorrow.
Alan Brown (Kilmarnock and Loudoun) (SNP)
The Business, Energy and Industrial Strategy Committee heard evidence this morning that the IT systems and processing procedures to allow the Northern Ireland protocol to be implemented on 1 January are not in place. Will the Minister update the House on what the Government are doing to rectify that situation to meet the technical provisions that he is bringing forward?
Jesse Norman
I think the hon. Gentleman knows that the work that we are doing in terms of legislation very much has as its counterpart a great effort to put in place all the procedures that may be required. Significant work has been done. He will be aware that there is a trader support service that works directly with people who will be importing into Northern Ireland to make it as close to a one-stop-shop arrangement as possible. What we are discussing today is the framework for the law under which those movements will operate.
John Redwood (Wokingham) (Con)
The Minister has not yet reassured me about the sovereignty issue. Is it not the case that when any good in commercial quantity comes into the UK across any border—Northern Ireland or one of our marine borders—there are usually VAT and excise adjustments to be made and those take place by computer, not actually at the port of entry? Why do we need special arrangements here?
Jesse Norman
My right hon. Friend will be aware that under the terms of the Northern Ireland protocol, we have agreed arrangements for Northern Ireland with the European Union. The goal of the legislation is to make sure that, as far as possible, it is a completely seamless and straightforward process for those who are trading and that it is unfettered in regards to trade from Northern Ireland into Great Britain. That seems to me to be a very important technical fact.
Sammy Wilson (East Antrim) (DUP)
On the VAT issue, which comes to the sovereignty issue once again, under article 8 of the Northern Ireland protocol, Northern Ireland traders will be subject to not just UK VAT rules, but EU VAT rules. Do the provisions that the Minister is now putting forward exempt Northern Ireland traders from being subject to dual VAT rules, given the costs that that would present and the huge administrative issues which would arise from it?
Jesse Norman
We do not expect the vast majority of any trade into Northern Ireland to be subject to any dual VAT arrangements. The whole purpose of these rules is to put in place the simplest and most straightforward arrangements that can be put in place and that replicate in so far as possible the current experience that people will have when they trade with the EU.
Jesse Norman
I will give way once more, and then I will make some progress.
Sammy Wilson
The Minister has said that he would not expect that Northern Ireland traders will be subject to VAT rules of another jurisdiction, but article 8 of the protocol makes it clear that they will be subject to a dual VAT regime. Do these provisions remove that requirement from all traders in Northern Ireland, or are we giving away some of our sovereignty by accepting that some parts of the United Kingdom and some sectors in that part of the United Kingdom will be subject to VAT rules from another jurisdiction?
Jesse Norman
I am afraid that inadvertently the right hon. Gentleman has misrepresented my position, or misdescribed my position. I am saying that we are following the Northern Ireland protocol and, therefore, following any provisions that he refers to, but what we are doing is putting in place mechanisms that make them as easy and as facilitated as possible, so that the experience of someone trading in Northern Ireland should be as close as possible to that which they would have today.
The Bill will allow us to amend or modify certain provisions in relation to VAT and excise, including mechanisms to ensure that, in so far as possible, VAT will be accounted for in the same way as it is today, as I have said. In addition, it will make provision for amending current legislation for excise duty. Most of these changes are necessary to ensure that there is comprehensive VAT and excise legislation in place in relation to Northern Ireland at the end of the transition period.
In addition to those steps, there is also a small number of other taxation measures that need to be in place before the end of the transition period. They include provision for an increase in the rate of duty on aviation gasoline, which will apply across the UK. Otherwise known as avgas, the fuel is a form of leaded petrol predominantly used in private aviation.
Alan Brown
I notice the Minister said private aviation. Is the Treasury going to look at hydrocarbon fuel duty overall? Kerosene is zero duty rated, which is ridiculous, when motorists pay duty. We need a system in which the duty is applied to kerosene used by airlines, but given the fragile state of the flight industry, we should perhaps do that in a cost-neutral way to it and the Treasury, by incentivising the use of sustainable fuels. Is that something that the Treasury would look at?
Jesse Norman
I admire the hon. Gentleman’s ingenuity in bringing this matter into a debate that has no direct relevance to that issue at all. I, like him, would like to see as green and sustainable a world as we can arrange. This is a measure that does not relate to kerosene; it relates to avgas, and it has to do with the need to harmonise—or rather, to manage—the relationship between Northern Ireland and the UK, and that is what we are seeking to do. The requirement for an increase is set out in the Northern Ireland protocol—again, it relates only to Northern Ireland—but we are expanding it to the whole of the UK to ensure consistency, to avoid burdens on business, and to reduce compliance risks for Her Majesty’s Revenue and Customs. It is extremely small in its magnitude.
The Bill will also make provision for the introduction of a new system for collecting VAT on goods entering the UK. This includes moving the VAT collection on certain imported goods away from the border, and removing the VAT relief on low-value consignments. Together, these provisions will help to level the playing field for UK businesses, and they will protect the UK high street from VAT-free imports. The Bill will also take forward measures to ensure that the Government retain their ability to prevent insurance-premium tax avoidance after the end of the transition period. This will provide Her Majesty’s Revenue and Customs with access to the same tools to prevent insurance- premium tax evasion—sorry, I should have said “evasion” rather than “avoidance” earlier—regardless of whether or not an insurer is based in an EU member state.
Finally, the Bill will make provision for new powers that will enable HMRC to raise tax charges under the controlled foreign companies legislation for the period from 2013 to 2018. This technical provision will deal effectively and efficiently with the legacy state aid decision relating to the period before the UK left the European Union.
Patrick Grady (Glasgow North) (SNP)
I wonder why, if the Bill is so technical and dry, and does not have much relevance to the statements that the Chancellor of the Duchy of Lancaster is making outside the House, we cannot see a copy. Why do we have to listen to the Minister tell us all about it, but none of his hon. Friends or my colleagues on this side of the House can prepare properly to respond?
Jesse Norman
I thank the hon. Gentleman. What I am actually doing is giving him a preview of a Bill that will be published in the normal way, after the resolutions debate has concluded. This is a debate on the resolutions required to lay the Bill, and we will do so as soon as the debate has concluded and the measures have been voted on. At that point, he will have a chance to see the Bill and its details.
Sir William Cash
In view of the statement that has been made by the Chancellor of the Duchy of Lancaster—a press statement has been put out; we do not have enough notice of that at the moment—will my right hon. Friend explain whether the Bill, which we will receive in a few moments, or whenever the ways and means resolution has been completed, will contain those notwithstanding provisions? On the basis, as I understand it, that it will not, as the Minister responsible for the Bill which is being brought in, I think, would he not know that the notwithstanding provisions had been removed? Presumably, they are not contained in the Bill—or are they?
Jesse Norman
I salute my hon. Friend’s astonishing indefatigability, but I am afraid his memory plays him false. I have already said that the notwithstanding provisions will not feature in this Bill. I said that earlier in my speech, but I am sorry that that was not as clear as it should have been, because that is the state of affairs.
This Bill will help the UK to cement its position as an independent trading nation at the end of the transition period. It will give businesses throughout the UK certainty about the arrangements that will apply from 1 January next year, and it will play a part in safeguarding the unity and integrity of this country, both in the months ahead and long into the future. I therefore commend these resolutions to the House.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
I beg to move amendment (a), at end add
“; but any such provision must not place the United Kingdom in breach of its obligations under the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community which entered into force on 1 February 2020, and specifically its obligations under the Protocol on Ireland/Northern Ireland of that Agreement.”
It is 1,629 days since the UK voted to leave the European Union. In that time, our country has managed two general elections, and we are now on to our third Conservative Prime Minister. It is just 23 days until the United Kingdom’s transition period following its exit from the European Union comes to an end, yet this afternoon, we still have little clarity on the Bill that the Government tell us they will present tomorrow to set the legal framework for future taxation in Northern Ireland, for value added tax, for aviation fuel duty, for insurance-premium tax and for state aid rules.
With less than four weeks to go, the single sheet of A4 in front of us is almost all the detail that the Government have shared with Parliament about their new tax plans for next month. The only other information we have is that, just over two hours ago, the Government confirmed that they would withdraw clauses 44, 45 and 47 of the United Kingdom Internal Market Bill and that the provisions of the Taxation (Post-transition Period) Bill would reflect the same approach. The Minister recently tabled a written ministerial statement to that effect, although he offered little more this afternoon by way of further clarity.
The clock has been ticking ever more loudly. People in this country might reasonably have assumed that by this late date, it would already be clear what the Government’s plans for Britain’s future were. They might have assumed that by this late date, there would be a clear agreement on our future relationship with the European Union.
Kevin Hollinrake (Thirsk and Malton) (Con)
The hon. Member makes an interesting point about the late stage of these negotiations. Who is she blaming for that—the United Kingdom Government or the European Union negotiators?
Bridget Phillipson
Time is ticking. We want to get a deal. We are frustrated that at this point, we still do not have a clear understanding about our future relationship. If the hon. Member shares those concerns, I suggest that he raises them with his own Prime Minister.
People in this country—especially those who live near our 300-mile border with the European Union, or those who live in or near our port towns and port cities —could be forgiven for expecting that trading relationships and rules on the movement of goods would long since have been finalised. Such reasonable assumptions would not have been partisan. After all, we have the Prime Minister’s own word for it: to leave with no deal would be a “failure of statecraft”.
One thousand six hundred and twenty-nine days is a very long time in which Ministers have chosen not to address the issues that leaving the European Union raises. It is 1,421 days since the Government announced that we would be leaving the single market. It is 1,350 days since the Government notified the EU of the United Kingdom’s decision to trigger article 50. It is 1,240 days since the Brexit talks began and 886 days since the Chequers plan was announced to the current Prime Minister by the previous Prime Minister. It is a little over 500 days since the Prime Minister took office. It is 320 days since the European Union (Withdrawal Agreement) Act 2020 became law. They have had ample time.
John Redwood
Up to this point, Labour has always backed the EU position and not the UK position. Will the hon. Lady now use the Opposition’s voice to say that we should not give away our fish and our independent lawmaking?
Bridget Phillipson
That is, frankly, a ludicrous statement for the right hon. Gentleman to make.
With epic irresponsibility, successive Conservative Governments have wasted this time. Still businesses are not clear how they will be trading next month. Still people living along our land border with Ireland are unsure what daily life will bring in four weeks’ time. That epic irresponsibility comes in two forms. First, there is the immediate irresponsibility—the irresponsibility to businesses and working people; to everyone who needs to be able to plan their future and their finances; to everyone who wants the simple security, stability and certainty that a responsible Government should provide; to everyone who believed the Chancellor of the Exchequer when he said on the “Today” programme a year ago tomorrow,
“We won’t need to plan for no deal because we will have a deal”;
and to everyone who believed the former International Trade Secretary when he told us that a trade deal with the EU would be
“one of the easiest in human history.”
That irresponsibility has meant months and years of uncertainty and insecurity for so many families and so many firms. Make no mistake: the Conservative party has now lost forever any claim to be the party of business. That irresponsibility means that people in Fermanagh, Galloway, Anglesey, Kent and all around our key ports today still face the risk of their roads being clogged with queues of lorries for months on end. That irresponsibility—a failure to engage with the problems of our country, to look ahead and to plan, to lead and to rise to the level of events—is sadly of a piece with the Government’s wider failures in recent months.
The country has suffered terribly from the pandemic: the worst economic hit in the G7; the worst level of excess deaths in Europe; a Government who are again and again caught on the hop, scrambling to catch up with the consequences of their own incompetence; a Government who never use the time they have to get ahead of the problems that they know are coming. It is all too familiar. It is the story of everything that this Government touch.
If the Government had got ahead of the issues that our country faces, we would have had a Budget, not a statement, in the summer. Instead of multiple episodes of the winter economy plan, we would have had a Finance Bill with proper time for debate, and proper time for businesses to plan on that basis. But just as the Government were behind the curve on covid, so they are behind the curve on Brexit. And here we are, with tax decisions for next month being bundled together into a last-minute Bill, which they have not yet even published—inaction, incompetence, and scrambling to fix the mess that they have created themselves, again and again, month after month.
Jesse Norman
I am awfully grateful to the hon. Lady for giving way. Could she possibly name any EU treaty that has not been concluded by the EU at the last minute?
Bridget Phillipson
I look forward to seeing in detail what the Government intend to bring forward on our future trading relationship, as that will determine so much around what our businesses will need for years into the future. I believe that our country is a great place to do business. I want all our businesses to succeed into the future. That is why it is so important that we see a good deal for our country, and that the Government use the time they still have available to them well. They have not done so yet. I look forward to hearing more from the Minister later about exactly what the Government intend to set out in this legislation, because he has not really offered a great deal so far this afternoon.
The Government’s irresponsibility has not been limited to inaction and incompetence in the face of a ticking clock. There is also the greater irresponsibility that we have seen in recent months—an irresponsibility of which I fear the consequences may last for generations—and that is the irresponsibility with which this Government have made it clear that they are prepared to break international law. The world will not forget that just weeks ago the Government introduced legislation to tear up an international agreement that was signed less than a year ago. We welcome the fact that they now propose to withdraw those measures, but we fear that the damage has been done. The Government threatened to break the law to get their own way. What message does that send to Britain’s friends and allies with whom we have signed that agreement, with whom we have other agreements and with whom we hope to conclude future agreements?
Anthony Browne (South Cambridgeshire) (Con)
You talked about the notwithstanding clauses as irresponsible and said that the damage may have been done, but would you like to join me in welcoming the Government reaching an agreement in the Joint Committee, as was announced just a couple of hours ago, on the issues that those clauses were intended to address?
Madam Deputy Speaker (Dame Rosie Winterton)
Order. Just a gentle reminder not to use the word “you” to the shadow Minister, because “you” means me.
Bridget Phillipson
In fact, I had just indicated that very point. Everyone on the Opposition Benches is delighted that the Government have in recent days managed to conclude a trade deal with North Macedonia, but what message does it send to our friends in the USA, who have made their position on this point very clear, that the Government no longer regard it as at all times non-negotiable that they will uphold the rule of law? It is because of our concerns on that point that we have tabled the selected amendment to the first resolution. We wish to append the text of the first resolution, at the end, with a clear limitation that provisions under that resolution may not place this country in breach of its obligations under law. The amendment would insert new text at the end of the current text of the first resolution to ensure that
“any such provision must not place the United Kingdom in breach of its obligations under the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community…and specifically its obligations under the Protocol on Ireland/Northern Ireland of that Agreement.”
Obviously, in the last two hours the Government have announced that they have reached an agreement in principle with the European Union on that protocol and will therefore resile from their expressed intention to enact legislation that would have breached those agreements. Of course, Opposition Members welcome that news, even as we find it astonishing that it should ever have been delivered and shambolic that it arrives so late. We would not, until this autumn, have ever imagined it necessary to make it clear in a resolution of the House that the Government, in exercising their powers, must obey international agreements into which they freely entered. Yet, as a result of the deep irresponsibility of the Government, that is precisely where we find ourselves today. We will not oppose the substantive resolutions, and we shall wait to see what further reassurances the Minister can provide before deciding whether to press our amendment to a vote.
We recognise that there needs to be a lawful basis for the collection of VAT, customs duties, aviation fuel duty and insurance premium tax, even while we do not yet know what the Government propose to table by way of a Bill. Let me repeat that: we do not yet know what the Government propose to table by way of a Bill—less than 24 hours before its Second Reading and Committee of the Whole House. Less than a month before we leave the European Union, we simply do not know with any certainty what measures the Government intend to set out. This extraordinary state of affairs undermines the ability of Members to give such important legislation the scrutiny it rightly deserves, not to mention the ability of businesses to plan. Is the Minister really telling us that it was not possible before today to set out the Government’s proposals on aviation fuel duty or insurance premium tax? Of course it was. These clauses were held back—they still are—so that the Government could, until a few hours ago, continue to brandish the threat of breaking international law as part of their negotiating tactics with the European Union, believing they have an ace up their sleeves, when in fact the whole world sees the Government as a pack of jokers.
Although we will not oppose these resolutions, we cannot and will not vote for any measures that the Government introduce that would breach agreements into which this country has entered with her friends and allies, because the consequences of such unlawful acts have been made clear to us. The Speaker of the United States House of Representatives said:
“The U.K. must respect the Northern Ireland Protocol as signed with the EU to ensure the free flow of goods across the border. If the U.K. violates that international treaty and Brexit undermines the Good Friday accord, there will be absolutely no chance of a U.S.-U.K. trade agreement passing the Congress.”
Sammy Wilson
I note the hon. Lady’s concern for Northern Ireland, the Good Friday agreement and the people of Northern Ireland, but does she not recognise that if the protocol goes through in its present form, the EU has made it clear that it will require measures to be implemented that have already led to supermarkets saying that they will no longer operate in Northern Ireland—that they will withdraw from Northern Ireland? The goods that would be supplied from here to Northern Ireland will no longer be supplied. I am only talking about one limited area. How can she defend that protocol, which would so adversely affect people in Northern Ireland?
Bridget Phillipson
I am grateful to the right hon. Gentleman. I understand the point he raises, but I am afraid I do not share his assessment of the situation. I say to him sincerely that I think it is important that we have certainty around this area. The Government’s approach on this has been misguided and has caused real damage. However, while understanding his concerns, I am afraid I do not recognise his assessment of the situation.
We hope the commitments announced earlier today by Ministers will be further repeated in this place, and that the assurances regarding the withdrawal of the offending clauses of the United Kingdom Internal Market Bill will be honoured. Ensuring that the UK’s forthcoming tax legislation does not breach our international treaty commitments, and in so doing put the Good Friday agreement at risk, is the sole purpose of our amendment. I do not doubt that there will be those on the Government Benches who regard such an amendment as weakening their hand, even as they too welcome the Government’s recent announcement. To them, seeking to legislate to break international law may have seemed a way of showing that they mean business. The delusion would be comic were the consequences not so grave. A negotiation in which one party makes it clear that it cannot be trusted—not inadvertently, but by what passes for strategy—is not one on which strong future relationships will be built, nor one that will commend us to other nations as a reliable partner for trade or security. What the Government have tossed away this autumn in the search for a fleeting advantage is a reputation that will take our country many years to regain.
Ways and Means resolutions enable the House to give effect to the taxation decisions of the Government for the year ahead. Some of those taxes and duties will fall more heavily on some of us than others. But for the Government’s extraordinary irresponsibility, which today’s events illustrate so powerfully, I fear the price will be paid by all of us, not just next month or next year but for many years to come.
Sir William Cash (Stone) (Con)
I have already made a number of comments to the Minister in charge of this motion, also in respect of the Bill that we have not yet seen. It seems quite extraordinary, if I may say so, that we are being asked to give such blanket agreement to the Ways and Means resolution, which is the manner in which the money is raised to deal with the questions that arise in respect of the Bill, when we have not actually seen a copy of the Bill itself and therefore do not know what the provisions refer to.
I see, for example, that the motion includes reference to amending section 9A of the Value Added Tax Act 1994, part 3 of the Value Added Tax (Place of Supply of Goods) Order 2004, schedule 4B to that Act, which relates to call-off stock arrangements, section 18A of that Act, which affects fiscal warehousing, and paragraph 114(2) of schedule 8 to the Taxation (Cross-border Trade) Act 2018. It also includes proposals relating to the rate of fuel duty on aviation gasoline, amending section 6(1A)(aa) of the Hydrocarbon Oil Duties Act 1979. It also deals with value added tax questions relating to such matters, and makes provision regarding value added tax in cases involving
“supplies of goods by persons established outside the United Kingdom that are facilitated by online marketplaces”,
or
“the importation into the United Kingdom of goods of a low value.”
There are also provisions relating to the insurance premium tax in respect of the liability of the insured, amending section 65 of the Finance Act 1994, and matters relating to the recovery of unlawful state aid in respect of controlled foreign companies, in particular dealing with the Commission decision of 2019 relating to state aid
“concerning the CFC Group Financing Exemption.”
That gives some indication of the breadth, and also the depth, of these matters. It is very difficult, to put it bluntly, to dissect, comment on and make what I would describe as a full analysis of a provision that we have not yet seen, and as I had not actually seen these—nor did I know that they were going to be included until I got notice of them just now—I am not in a position to be able to do more than to say that I regard the whole question of these provisions as something that will obviously have to be dealt with when we actually see the Bill. What we have not seen, we cannot really comment on. It is really almost Alice in Wonderland, isn’t it? The fact remains that there are important issues of principle in relation to all this, and the notes that I have received raise some interesting questions. I do not know whether those notes have been made generally available.
John Redwood
Will my hon. Friend comment on the sovereignty issue, which is at the heart of all this? I was not satisfied by the Minister’s reply, when my hon. Friend was asking very good questions. Does he share my worry that we have not solved the sovereignty issue over Northern Ireland in this provision, and that we are making it worse?
Sir William Cash
My right hon. Friend might have anticipated that I would raise this very question with the Minister, as I did when he was in mid-flow at the beginning of these proceedings. That was the question I asked, and my right hon. Friend has now referred to it. I am extremely supportive of the Government in relation to Brexit and to the statements that have repeatedly been made not only by the Prime Minister but by other members of the Cabinet, including the Paymaster General in the statement that she made yesterday, in which the word “sovereignty” was completely reaffirmed and stated over and over again, and I take the Government at their word. But of course issues of the kind that we are dealing with do get somewhat obscured sometimes by provisions of legislation, particularly when we have not seen the legislation but are asked to comment on it. That makes life quite difficult in being able to identify with precision exactly what effect this would have on the sovereignty of the United Kingdom, save only to say that yesterday the House of Commons, by a majority of something like 90, passed provisions in the United Kingdom Internal Market Bill, and one would therefore have expected the Bill that is under consideration now—which must have been prepared yesterday when we were debating the other one, because otherwise it could not have been printed—to have contained similar provisions.
I am left in a bit of quandary until we can see that this Bill does not contain the notwithstanding provisions that were put in yesterday, which the House decided on, in principle, in the interests of sovereignty. I know a bit about that. I was also responsible for section 38 of the European Union (Withdrawal Agreement) Act 2020, which was passed by a majority of 120 with notwithstanding provisions in it at the beginning of the year. So for practical purposes, the principle of whether notwithstanding provisions are needed has already been established.
I repeat that I am very supportive of the Government and very supportive of the Prime Minister, and I make that absolutely crystal clear, but that makes it absolutely essential for us to have a very clear understanding about the reasons for withdrawing the provisions that were passed in respect of this Bill and were passed in respect of the other Bill yesterday, on the same principles of sovereignty as would need to be put forward under section 38 of the EU (Withdrawal Agreement) Act, which, by the way, is still in statute and can still be used —and will be, I hope, as we move forward.
The Government are withdrawing these provisions of the Bill, which is presumably done for some reason that I cannot quite get but is to do with managing to assuage some of the hostility in the House of the Lords and the hostility that has led the European Union and the Commission to threaten legal proceedings unless we withdraw them. No doubt all this is being done in an attempt to arrive at some sensible or other kind of conclusion and settlement.
Sir William Cash
But I reserve judgment on that until I have heard what my right hon. Friend says.
John Redwood
Is it not up to Parliament to withdraw the provisions that we were asked to support, and did support, yesterday? Was there not a long debate in which my hon. Friend made a contribution, while I was arguing the case elsewhere? Were we wasting our time? It seems to me that Parliament needs to be asked again if Ministers have changed their minds.
Sir William Cash
Indeed.
It is extremely important to point out that these notwithstanding provisions are directly related to the issue of sovereignty, but also related to the substance of our leaving the European Union. Not until we see a copy of the Bill will we be able to make the judgment about the extent to which they would impair or affect that sovereignty. We will have to wait until tomorrow to see exactly what the Chancellor of the Duchy of Lancaster presents to the House. We have an outline, but no more than that. The question of sovereignty will no doubt be much discussed tomorrow during his statement.
I heard the Opposition spokesman declaiming, in line with the amendment that they have tabled, that this is all about breaches of international law. I have to say to the hon. Lady that in the context of the continuous provisions on a whole range of matters, including Finance Bills that the Labour party was responsible for bringing in when it was in government, there are stacks—hosts—of treaty overrides. As I said in my contribution yesterday, such overrides have been passed as Labour party proposals when it was in government, by the coalition in 2010 and the years following that when the Liberal Democrats were involved, and also in some Conservative measures that have been passed that are overrides of international law. I pointed out yesterday that it has been done in the past for very good reasons of national interest, including economic national interests, as they clearly have been in the past. Some of them were hugely important constitutional issues—for example, affecting the independence of India and Pakistan—and there were other provisions that I will not go into in detail now, but I have put them all out there on the record.
The extraordinary thing is putting down this amendment based on so-called breach of international law, when actually the Labour party itself has done exactly the same in consistency with—not inconsistent with, but in consistency with—international law. Article 46 makes this abundantly clear. I was very glad that my hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill) conceded that point on the Floor of the House yesterday when he said, at last, that he was going to support the Government on this question. Lord Judge, a very distinguished judge in the House of Lords—the ex-Lord Chief Justice—who has been leading the argument on the question of international law, has said, in effect, that in principle he knew there was a moment at which there were circumstances whereby a given Government would be entitled to take such steps as were necessary in order to protect the national interest.
Nothing could be more important than protecting our sovereignty. That is what this whole Brexit is about. It is about being able to ensure our having left the European Union lawfully by having passed all the Acts of Parliament—and the House of Lords having passed all those Acts of Parliament as well—and in addition to that, having had a referendum on the votes of the people of this country, which itself was based on the authorisation by Parliament that the referendum should be allowed to take place. That was passed in the House of Lords and the House of Commons—in the House of Commons, incidentally, by six to one—and it was followed, as I have said, by a series of other enactments.
The European Union (Notification of Withdrawal) Act 2017 was passed by 499 to 120, including by the Labour party, so there should not be any question about that, and I do not believe that the Labour party has anything to gain by trying to argue that somehow or other we have unlawfully left the European Union, which is what it seems to be implying in its amendment. Then we move on to the European Union (Withdrawal Agreement) Act 2020, which, as I pointed out in an intervention, was passed by 120 in this House on Second Reading. It contained the notwithstanding provisions, in section 38, that I had proposed to the Government on 17 October last year. For all these reasons, we have not only lawfully left, but lawfully left on the basis of our sovereignty, which has been endorsed not only by the referendum and by the voters of this country, but by their representatives in this House as the House of Commons. They are elected, unlike the House of Lords, and in the House of Commons they have endorsed these provisions by massive majorities. So what on earth would be the purpose of removing provisions that ensure that our sovereignty can be maintained?
I can almost hear somebody on the Government Benches perhaps thinking to themselves, “Well, they’re not needed because, actually, the situation has now been firmly dealt with in the Joint Committee”. Of that we know nothing, more or less, because I have asked the Chancellor of the Duchy of Lancaster three times to appear in front of our European Scrutiny Committee, and thus far he has not come on these matters. He knows that, and I have had some very diligent, shall we say, correspondence with him on his not attending, although he did allow the Paymaster General to come and she did appear before us a few weeks ago.
The point I am making is that this is a critical time in our history. This is the moment when we regain our sovereignty. It is not just a philosophical statement or a constitutional theory; it is actually about the practicality of how this country is governed. It is as simple as that. We are governed by a constitutional arrangement under which, through parliamentary government, the Members of Parliament who are who are elected by the voters pass laws that are imposed upon the people by the consent of those representatives. It is as simple as that.
John Redwood
Will my hon. Friend confirm that when his admirable clause 38 was tried on the previous Prime Minister, she rejected it on the grounds that it would mean that Parliament could unilaterally override the withdrawal agreement if it wished, and she did not want that?
Sir William Cash
Absolutely, which was precisely why I brought it forward. It solved a lot of problems.
I must say that the reasons for the notwithstanding provisions in the United Kingdom Internal Market Bill were based on the same principle of sovereignty, and the same applies to the taxation Bill, in which it was understood that the notwithstanding provisions would be included. I have not seen the Bill yet—I wait to see it with interest—but I am assuming that the adjustment will not appear. Therefore, I reserve my position with respect to the question of the notwithstanding arrangements, because I need to be satisfied that there is no impugnment of our sovereignty by virtue of the removal of those provisions in this Bill. It is as simple as that. I could say much more, but I do not think it will be strictly speaking necessary for me to do so, because I have dealt with all the matters of principle that arise.
I am not quite sure how authoritative the material I have been supplied with is, only because it was given to me by somebody associated with the Government and I am not at all sure whether it is in the Library of the House of Commons; all I can say that it is quite extensive and that it deals with a lot of matters that the Minister has already dealt with and that no doubt will be further examined when we get to see the Bill itself. However, I notice that it does include such matters as the fact that, whatever the outcome of the FTA and joint committee negotiations,
“we have an obligation to the people of Northern Ireland to make sure that they continue to have unfettered access to the UK under all circumstances, to ensure that there are no tariffs on goods remaining within the UK customs territory and to ensure that there is no legal confusion about the fact that, while Northern Ireland will remain subject to EU state aid rules for the duration of the protocol, Great Britain will not be subject to EU rules in this area. That is the Government’s overriding priority.”
I have heard that said before, in one form or another, but I think we need to note that that is what this Bill does. There are other provisions relating to Northern Ireland customs and Northern Ireland VAT and excise on goods, and a provision that says:
“VAT will be accounted for the same way as it is today, with Northern Ireland remaining part of the UK’s VAT and excise system”—
we will check that when we see the Bill.
“HMRC will continue to be responsible for the operation and collection of the revenues, which will not be passed on to the EU”—
a-ha!—
“while Parliament will remain responsible for setting VAT and excise rates across the UK.”
I am not going to be entirely negative about all this; I never am. I rely with confidence on what the Government have said with respect to sovereignty and with respect to tax.
These are important questions. I have confidence in the Prime Minister. I have confidence in the fact that we have had a general election and that the manifesto made the whole of the Brexit question quite clear to the people who voted, giving us a majority of around 80 and, in my own case, as much as 63% of the vote in my constituency, for which I am deeply grateful to my constituents. All I can say is that we will be watching all these matters with great diligence and with a constructive approach, because we hope and trust that, when we have been through the full proceedings on this Bill and, indeed, finalised the United Kingdom Internal Market Bill, that confidence will be entirely justified and there will be no impairment of our sovereignty as the United Kingdom, which is what this is all about.
I will conclude simply by saying this. Not since 1688 have we been faced with a situation of such historic importance, other than when we went into the European Union under the false pretences of a White Paper that turned out, unfortunately, to be misleading the British people. There have been two world wars where people have tried to take over this country by force of arms—in particular Germany—and I simply say this: this is the most important moment in our history in the last 250 years, whereby we have regained the sovereignty that was embedded in the arrangements after 1688-89.
By gradual evolution, we developed parliamentary government and representative government. We are described as the mother of Parliaments, as John Bright put it. This is our sovereignty, and we have absolute, total determination—as I understand it, so does the Prime Minister—to maintain that. It is about democracy; it is about freedom. It is what Churchill was proud of; it is what Margaret Thatcher was proud of; it is what we are proud of. I simply make this final point: we will maintain our sovereignty at any price.
Alison Thewliss (Glasgow Central) (SNP)
It is a pleasure, I guess, to follow the hon. Member for Stone (Sir William Cash). He was talking about 1688; I think we travelled there in real time, but I thank him very much for the comments that he made.
This time last year, we were all in the throes of a slightly surreal Christmas general election, pounding the streets and chapping the doors in the freezing cold, listening carefully to the concerns of our constituents. My constituents were deeply concerned about the state the UK was in, and they remain concerned today.
It is difficult to believe that we are a full year on since the Conservative party won a majority in this place with promises of a Brexit deal that was “oven ready”. I say it is difficult to believe because we are now just a couple of weeks from the end of the transition period and there still is not anything of substance in the oven. I am not even convinced, actually, that the Government have an oven. The only thing the Prime Minister has driven a bulldozer through lately is his own reputation, treating these negotiations as a game and continuing to pursue a no-deal Brexit in the middle of a global pandemic as households and businesses in this country struggle with the second wave of covid-19.
Anthony Browne
I wonder whether the hon. Member would like to join me in making it clear to the British public that the phrase “oven ready” was used about the withdrawal agreement, which we did indeed vote into law one week after the general election, not about the trade deal. The Prime Minister never described the trade deal as “oven ready”. Would the hon. Member like to join me in making it clear to the British public that that is the case?
Alison Thewliss
It is very difficult to understand anything that the Prime Minister says because he swivels around on just about everything that he has ever said. He had two positions on whether we should leave the EU, so who knows whether he has an oven-ready deal, an oven or even a microwave? Who can really tell? It is quite difficult to establish that. Perhaps, Madam Deputy Speaker, we could have a TV mounted in the Chamber somewhere showing BBC live news so that we can keep track of what is happening in the negotiations, as the new Brexit countdown calculator they have in the corner ticks away.
It is no secret that these negotiations have been difficult and that the UK Government have not helped themselves as we have gone through them. The UK’s leaving the EU, because of the attitude that the UK has taken, was always going to be the messiest of messy divorces, but the Government have done absolutely no favours in the way they have approached things.
The hon. Member for Stone talked for 21 minutes, I think, about things that he could not see in terms of the Bill that is supposed to be being brought forward tomorrow. The Minister said from the Dispatch Box that he was no better sighted on where things are at with the negotiations than the hon. Member for Stone, who also regards this whole situation as extraordinary. The Minister says that this is going to be debated in the normal way, but there is nothing normal about this situation here today. We go to the Public Bill Office and ask it for advice on what is in the Bill and it does not know; we ask the Library what is in the Bill and it does not know. None of this is their fault; it is the Government’s fault that we do not know what is in this Bill. It is an absolute farce.
These six resolutions and this phantom Bill are a prime example of the procedural chaos that has dominated the Government’s handling of Brexit. Before the taxation Bill has even been published, the Chancellor of the Duchy of Lancaster says he
“will keep under review the content”
relating to the Northern Ireland protocol. Yesterday, a statement from 10 Downing Street stated:
“Good progress continues to be made regarding the decision as to which goods are ‘at risk’ of entering the EU market. Talks continue this afternoon. In the light of those discussions, the government will keep under review the content of the forthcoming Taxation Bill.”
At 1.16 this afternoon, we had a tweet from Maroš Šefčovič, one of the negotiators, but we still do not know the implications of today’s announcement and it is very difficult to see exactly what is going to happen. The joint statement talks about determining the criteria for goods to be considered not “at risk” of entering the EU, but we do not know what that means. It mentions an agreement in principle, but the Government have not been very principled in the way they have approached anything. How the EU can trust them I do not know.
Kevin Hollinrake
Every business person would ideally like to have seen the deal done and dusted some months before, but on the basis that the European Union made a commitment to an ambitious free trade agreement, are there no words of criticism that the hon. Lady is willing to use regarding its part in these negotiations that are taking so long?
Alison Thewliss
I think the EU has been more than patient for some time, to try to get some kind of agreement and something sorted out. The UK Government have held two general elections in that time, and we have had several different Prime Ministers. The Government have been an absolute shambles from start to end, and that is where we are today.
Alan Brown
Despite the valiant efforts of the hon. Member for Thirsk and Malton (Kevin Hollinrake), is it not the case that if the EU was not so patient, we would already have suffered a no-deal crash out months ago, perhaps even a year ago?
Alison Thewliss
The EU has done everything it can because it knows it is everybody’s interest to have a deal.
Alison Thewliss
I will make some progress and bring the right hon. Gentleman in later on. It is interesting that Tony Connelly from RTE said that the EU nations are watching closely to ensure that the relevant clauses are effectively withdrawn from the Bill. If I were them, I would be looking very dubiously at the UK Government on that issue, because we do not know what is going to happen.
It is quite surreal to prepare for a Bill that we have not yet seen, and from which clauses that do not yet exist could still be removed or added, after being rubber-stamped by the House. The six ways and means resolutions on one side of A4 paper represent a significant volume of very detailed VAT resolutions. Resolution 6 alone refers to a Commission decision that runs to some 39 pages on the treatment of CFC group financing exemptions to state aid, and there is still no detail on specifically how the Government wish to amend the substantial pieces of taxation legislation.
We would have advance notice of a Finance Bill, for example. We would have Second Reading, Committee, and Report over an extended period. That time would allow evidence and engagement with stakeholders, but that is not so with these resolutions. To take an example, the Finance Bill earlier this year contained a solid five and a half pages on the detail of call-off stock arrangements. We debated them in the Bill Committee at great length, and it was tremendously exciting.
Alison Thewliss
If the right hon. Gentleman can tell me something about call-off stock arrangements and what the Government are proposing, I will let him in.
John Redwood
I would like to know why the hon. Lady supports the EU position on everything. On the question of fish, does she support the general EU smash-and-grab raid for most of the fish, or does she prefer the French version, which is to take practically the whole lot?
Alison Thewliss
I would prefer it if the Government would listen to the concerns of west coast fisheries in Scotland that do not want their fish to die and rot in lorries at Dover because the Government have not sorted out the trading customs.
Members of the House are expected to scrutinise the new tax regime in a fast-tracked timetable with no time for debate or consultation with businesses. There are a host of details in the VAT resolutions. I went through them this morning. I copied them and pasted them, and took them from the VAT regulations that currently exist. That runs to some 20 pages of detail on those VAT resolutions. [Interruption.] I can see the hon. Member for Thirsk and Malton waiting for me to read through those 20 pages, but I am not going to do that. I will send him a copy if he would like to read it over later. We will certainly be further forward than we are with the Government concluding anything.
There is a lot of detail in the resolutions and we need to know what exactly is going to happen with them. There are issues on penalties relating to VAT in the Taxation (Cross-border Trade) Act 2018. There are issues to do with the importing of goods as well, and how that is going to work. The guidance on the resolution
“Value added tax (online sales by overseas persons and low value importations)
That provision may be made for the purposes of value added tax in cases involving—
(a) supplies of goods by persons established outside the United Kingdom that are facilitated by online marketplaces, or
(b) the importation into the United Kingdom of goods of a low value.”
runs to 11 pages on the UK Government’s website. There are 11 pages of detail, but we do not know what the Government are proposing to change here. We do not know what the Government are proposing to do here and that is very unfortunate. The issue really does follow on from that: we do not know what the Government are going to do and we do not have adequate time to scrutinise all the papers and see what is in them. We do not know whether the Government’s drafting will actually work, when it has been done in such haste.
Patrick Grady
My hon. Friend is providing a ray of sunshine in between the dark clouds of the Maastricht rebels who are featuring so heavily on today’s call list. Is it not the case that it is not just us and the Opposition who do not know what is going on? Clearly, the Government do not know what is going on either. The Bill has not been published because there is a massive copy-and-paste job going on somewhere in Her Majesty’s Treasury right now, so that they can have it ready. That is probably why we are going to be speaking until 7 pm—they will need that length of time to get the thing finalised, printed and in the Vote Office.
Alison Thewliss
My hon. Friend is absolutely right. Perhaps I should send the Minister my copy-and-paste job from earlier and that would help him out.
But this really matters. The right hon. Member for East Antrim (Sammy Wilson) talked earlier about people, supermarkets, food arriving and places, and what the impact will be. The Road Haulage Association’s director, Martin Reid, has warned:
“Regardless of whether there is a deal or not, there will still be customs requirements and it’s the customs requirements that will cause the delays. Those delays could run on for at least the first quarter”
of next year. The post-transition situation will be chaotic and that will be devastating for business, particularly the way the Government are going about it. Further to that, speaking to The Press and Journal, Mr Reid said the fact that issues still remain to be resolved is shocking:
“The hauliers’ handbook that they produced contains links that take you nowhere, so we’re nowhere near the level of information that is required basically. For goods moving to Ireland, we are still not 100% sure what it’s going to look like; as for moving through the short straits, we still have a great deal of concern as to the government’s capability either to have the right people in place.”
Nothing the Minister has said this afternoon—or indeed, the scuttling that is going on, on the Government Front Bench just now—gives us any reassurance as to what is going to happen.
Business bodies in Northern Ireland’s legislative committees have expressed concern about potential compliance costs for the future operation of VAT and excise, and nobody knows what it is going to look like. Businesses and farmers in Northern Ireland have been clear that they are not ready for a no-deal scenario. They have said it will place them under unbearable and unnecessary strain. The UK Government are providing no technical detail and very little guidance to those businesses. As my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown) pointed out so well earlier on, the IT system to support all of that just is not there. We heard similar evidence to the Treasury Committee. Businesses have begged the UK Government to reach an agreement, but the UK Government have indulged in bad faith negotiating at every turn.
Sir William Cash
On the question of bad faith, I do not know whether the hon. Lady heard what I said yesterday, but I will say this: there has never been a more egregious example of bad faith than the manner in which the EU sought to bounce the Government in the middle, and indeed at the end, of the negotiations. It is quite outrageous and in itself warrants the use of article 46, which is there to terminate the agreement if the Government cannot get what they need to preserve our sovereignty.
Alison Thewliss
I do not really agree with the point the hon. Gentleman makes. That probably will not surprise him. The difficulty with all of this is that the UK has never really known what it wanted.
Alison Thewliss
The hon. Gentleman says sovereignty. I am not sure he really understands that either.
The UK Government have not known what they wanted from this situation from the start. I commend the Brexiteers on the Conservative Benches. They have taken this as far as it can go and they have got what they wanted. Perhaps they knew what they wanted, but the Government have not had a clue. That has been clear all the way through and that is part of the reason we are in the difficulties we are in.
The resolutions in front of us do not represent clever negotiating tactics by the UK Government. On the Opposition Benches, on the Government Benches and in Brussels, everyone can see quite plainly the Government’s recklessness in this scenario. At every stage of this laborious and unnecessary process, they have sought to undermine trust in proceedings. Any remaining shreds of goodwill that the UK Government have internationally are in absolute tatters. The UK Government are at the wind-up at a time when we no longer have time to waste. An EU diplomat quoted in the Financial Times this morning said that the moves of the UK Government amounted to the UK
“trying to use rogue behaviour as leverage”.
Presumably the UK Government have caved today in taking the clauses out of the Bill, but we have to ask why they were there in the first place. How does it help us to say that we will break international law? It is a pretty basic principle that the Government have breached. Presumably, if the negotiations take a further slide backwards, the clauses can be put back in again. With apologies to Mark Durkan, because it is the kind of thing he would have said, it is hokey-cokey legislation.
It is perhaps not a surprise to those of us in Scotland that the Prime Minister and this Tory Government would sell a devolved nation down the river in order to appease those on the more extreme fringes of their party—
Jesse Norman
Did the hon. Lady say that the Government had sold someone down the river?
Alison Thewliss
Devolution. If the Minister was paying attention, I said devolution has been sold down the river—
Alison Thewliss
But devolution has been fundamentally undermined—perhaps the right hon. Gentleman will like that phrasing better. Devolution has been fundamentally undermined by the actions of the Government in the internal market Bill yesterday, ripping up the very principles by which devolution was established 20 years ago. Scotland did not vote for any of this—not in the EU referendum, not in either of the snap general elections this Government have called, and not in the European elections—not once, but we are being dragged off the cliff edge anyway.
Even before the pandemic, modelling suggested that a no deal would decrease Scotland’s GDP by 6.1%, considerably more than even the 2008 crash. The Office for Budget Responsibility estimates that a no deal Brexit on 1 January would inflict a cost on the UK economy of about £40 billion, and increase unemployment by 300,000 next year. All this while the UK economy is already among the worst performing in the OECD due to the UK Government’s shambolic handling of covid.
Jim Harra, the head of HMRC, confirmed at the Treasury Committee yesterday that doing the paperwork alone for this will cost business an eye-watering £7.5 billion a year. That is £7.5 billion that businesses will not have to spend on improving their businesses, increasing staff wages or investing in productivity. There will be 265 million customs forms after Brexit, compared with 54 million now. What a complete and utter waste of everyone’s time and money, and nobody put that on the side of a bus.
Not content with inflicting damage on our economy, these resolutions and the behaviour of the UK Government throughout this process permanently damage and erode trust in the devolution settlement. We are seeing a shameless power grab of state aid powers that should have been devolved, quite rightly, to the Scottish Parliament.
There is still time to pull back from the no deal cliff edge. The choice is entirely the Prime Minister’s to make. It is as clear as day that Westminster is acting against Scotland’s interests. It is little wonder to any of us on these Benches that the majority of Scots now support independence. One of those people who supported Scottish independence relentlessly was Craig Munro, who passed away just recently, and our thoughts are with his sister Gail and his son Sam. They will be devastated that he will not be here to see independence when it comes, because it is there to be won for all of us. More and more people are seeing the urgent need for independence to protect Scotland’s place in Europe and all the powers that we have come to enjoy through devolution. Scotland will complete that journey. The UK Government’s behaviour through all of this is only hastening that journey’s end.
John Redwood (Wokingham) (Con)
I declare my business interests in the register.
I came to this debate expecting to hear the Minister set out a vision of post-Brexit Britain, how the taxation system will be transformed and how VAT will be changed to encourage our businesses and give our consumers a better time. Instead, we have six resolutions that are mainly about trying to make sure that the Government can get even more VAT out of people after we have left than before. The Government could have done that at any time. Where is the vision that we will have a much better tax system after Brexit?
We are taking back control of VAT, which was almost entirely under EU control. The Government say, for example, they wish to be a green Government, but these measures will not even take VAT off a whole series of green products, which should not have VAT on them if the Government are trying to encourage people to insulate their homes, change their boiler controls or put in more fuel-efficient ways of heating their homes. The Minister has failed this very simple test.
We have six resolutions about a piece of legislation which we are not allowed to see until after the debate. It is a piece of legislation that will be very complex, because it is mainly about the techniques of raising revenue and making sure that no revenue escapes. However, the Brexit voters out there—the majority in the country—have had to vote three times now for Brexit to make it clear to the House of Commons that they want even this House of Commons to be in charge, even though there are still too many MPs on the Opposition Benches who hate the idea of this country legislating for and governing itself and think that every law that comes from Europe is wise and necessary and every law that is made here is somehow inappropriate.
We want our Ministers to say, “No, we are the people’s representatives. We had the majority in the election and we are going to transform our country’s economy, recover the economy from covid-19 and level up the country.” That requires bold and visionary leadership and it certainly requires pretty fundamental tax changes. VAT rates on some things are too high. VAT should not be imposed on some things at all. We need to remodel that tax. We need to look again at our corporate taxes, where a series of judgments by the European Court of Justice prevented this country levying all the corporate taxes that it wished to raise.
Patrick Grady
I probably should not rise to the bait, but does the right hon. Gentleman honestly think that the way the Government are treating the House tonight is an expression of parliamentary sovereignty? Is this what he really campaigned for over all these years, so that the Government could fast-track major financial legislation, bounce it through the House of Commons, not give us the information we are looking for and not subject it to proper debate? Is that what he campaigned for for all these years?
John Redwood
The answer is that I campaigned for this Parliament to take control and use it in the interests of the people, which is why I am making the speech that I am making. Why does the hon. Gentleman not listen to it instead of planning an intervention for a speech I am not making? I am urging the Government to take back control and use it in the way that the public would like to see them use it.
I must take up the point of sovereignty. My hon. Friend the Member for Stone (Sir William Cash) is quite right to go back to that. The simple truth about Brexit is that Brexit voters knew exactly what we were voting for. We understood the slogan “Take back control”, and we think control—the right of self-government, the right to trust people in these Houses of Parliament to make decisions for us or the right to throw them out if they are useless—is fundamental to our freedoms and living in a democracy. You do not bargain those away in some kind of dispute about tariffs. You do not argue about those in the context of making compromises.
This is the fundamental truth of Brexit. Like practically every other country in the world that is not a member of the EU, we just want to be free to make those decisions and laws that we can make and have representative institutions—a great Parliament—in order to do that. We clearly need to train some of the parliamentarians in the idea that we can make better laws here than people can make for us abroad and that we can modify European laws that we currently have so that they work in our interests better.
Alison Thewliss
Does making better laws not start with letting MPs see a Bill before it exists?
John Redwood
I do not disagree with the hon. Lady. I have said that I want to debate a real Bill. I am giving ideas to the Minister because I do not think what he has in mind for this Bill is going to quite suit me. I want to pep it up. I want to make it more exciting so that we can go out to the public and say, “This is the party that is going to level up. This is the party that knows how to recover an economy that has been damaged by covid”, and that requires lower taxes and different taxes and requires that we use the powers that only the House of Commons has. The House of Lords has very limited abilities to intervene, and on this occasion I am very pleased about that, because it nearly always wants to take the European answer, and the European answer is the high unemployment answer, the high taxation answer and the very complicated taxation answer.
VAT is an extremely complicated tax. We had to adopt its complications and we are now trying to add to those complications to try to avoid items slipping through. We are trying in these proposals to deal with small transactions that sometimes escape the net. They try to find ways of making online organisations, for example, responsible for levying tax between two people trading with each other.
Alan Brown
The right hon. Gentleman referred to the levelling-up agenda. On rough figures, we have had 50 years of the EU, 20 years of devolution and over 300 years of the Union. Why are devolution and the EU to blame for the requirement to level up when, quite clearly, the Union is at the heart of the problem?
John Redwood
I do not agree, and nor did Scottish voters when they were asked this question. We do have a great democratic country and I was a great enthusiast for the people of Scotland deciding whether they liked our Union or not. They said, yes, they liked our Union. Then the people of the United Kingdom were asked whether they liked the European Union and they said they did not. So I found myself in the happy position of agreeing in two big referendums with the winning side. It is such a pity that the Scottish National party lost both and has never understood the democratic principle that it then has to accept the verdict. I was on the losing side in a former referendum; like my whole party, I was against the principle of Scottish devolution, and we got that wrong. We lost that referendum and from the day after that we did not fight it, delay it or dilute it. We said, “Yes, devolution is the wish of the Scottish people.” We got on and implemented it.
Sir William Cash
I do not know whether my right hon. Friend can recall this, but when that Bill was introduced by the late Donald Dewar in 1997 I put forward a proposal that the devolution settlement should be decided by a referendum of the entire UK. Perhaps it is some encouragement for him to know that despite a three-line Whip half the Conservative Back Benchers went through the Lobby behind me on that question of having a referendum for the whole UK on this devolution issue, about which he is being so extremely articulate.
John Redwood
We are probably straying a little away from the resolutions before us, Madam Deputy Speaker, so I will not try your patience any more. I have made my two main points, but just to summarise: we need more vision from the Government to use our power to tax in our own way, because our current tax system is ill fitting and not yet geared to promoting that recovery we want —we need greater simplicity, lower taxes and a lower incidence of taxes to get that recovery going; and we need reassurances from the Government that sovereignty is not something one can bargain away or compromise over, but is fundamental. We either have a free trade agreement between an independent UK and the EU, which is our preferred model, or we have no deal. It is as simple as that. The choice is theirs.
Anthony Browne (South Cambridgeshire) (Con)
It is a great honour to speak after my right hon. Friend the Member for Wokingham (John Redwood) and hear his impassioned plea for a vision about life in Britain after Brexit. Let me say one thing on that. In my one year here in Parliament, I have spent a lot of time working on different bits of legislation about what life will be like after Brexit. For example, the Environment Bill sets out a whole new framework, one far more ambitious than the EU’s, to preserve the environment, and the Agriculture Bill removes the totally discredited common agricultural policy, which I would like to see any Opposition Members support, and replaces it with a new regime in the UK that is fit for purpose.
I am the proud product of the EU and its internal market; I am half Norwegian, part Irish, part French, with extended family in Italy and Denmark. I have also been engaged in European politics for about 20 years. I was Europe correspondent for The Times, living in Brussels for three years. I was in charge of all the EU funding in London during the Prime Minister’s first term as Mayor of London. As chief executive of the British Bankers’ Association, I led all the negotiations for Britain’s biggest export industry in the European Commission, Council and Parliament, with meetings up to and including Jean-Claude Juncker. So I have had a ringside seat at many European negotiations, and we all know that they are part showmanship, part brinkmanship. Everything is always left to the last minute, and for a very good reason—this picks up on the point made by the shadow Minister, the hon. Member for Houghton and Sunderland South (Bridget Phillipson)—which is that we are negotiating with 27 different countries and they all have differing interests. A lot of them have a vested interest in trying to leave everything to the very last moment. I have sat through many Council meetings and summits where things went to not just to one minute to midnight, but several hours past it.
Alan Brown
Earlier, the hon. Gentleman tried to do the whole “oven-ready deal was to do with the withdrawal agreement”, which we know is a fudge. If this is so complicated, as he highlights just now, with 27 other countries involved, what does he say about the former International Trade Secretary, the right hon. Member for North Somerset (Dr Fox), who said that a free trade agreement with the EU would be the “easiest in human history”? How does the hon. Gentleman conflate or twist that?
Anthony Browne
I never thought that it would be a really easy negotiation. It was clearly going to be complicated, and the Government have been negotiating in good faith.
Another thing I have noticed from EU negotiations is that there are many different negotiations happening in parallel, and virtually no one knows what is going on. In fact, no one really knows what is going on apart from the people in the negotiating room, and often the people in the negotiating room do not know what is going on, because there is some ambush being plotted somewhere else that then slips into the negotiations. We have to trust our negotiating team. They are the only ones with the insight and knowledge of what is going on to be able to make judgments about when an issue should be pushed, when to play hard ball and when to turn up the charm.
That brings me back to the “notwithstanding” clauses. I strongly welcome the Chancellor of the Duchy of Lancaster announcing this agreement on all the Joint Committee issues with the European Commission. That protects the Good Friday agreement and the Northern Ireland protocol, and it will protect peace in Northern Ireland.
Those “notwithstanding” clauses were needed only in case the Joint Committee did not reach agreement. It has reached agreement, and therefore those clauses are not needed. The hon. Member for Houghton and Sunderland South said that the damage is done, but it is not. Often in negotiations, we need to play hard ball to get an agreement. It is entirely plausible that if we had not had those clauses, this agreement would not have been reached. We have that agreement, and the whole House should welcome it.
But it’s not all over till it’s over. We do not have the trade deal yet. There are still negotiations going on. I hope that we do get a trade deal, as I think the whole House does; very few people do not want that. It is very much in both sides’ interests that we get an agreement. It is in President Macron’s interest as well. I would not like to see him have to tell his entire fishing industry that it is about to lose 100% of its access to British fishing waters. Until we have a trade deal, the Government have to negotiate for all the different scenarios of having or not having a trade deal. We do not have to legislate for the Joint Committee not reaching an agreement, because it has done so. Therefore, we do not need those “notwithstanding” clauses in the Bill.
The Government have an absolute duty to ensure the integrity of the UK and its internal market and to do everything they can to ensure as much continuity as possible for businesses affected by this. The Government have an absolute obligation to the people of Northern Ireland—I speak as someone with a lot of family in Northern Ireland—to ensure that they have unfettered access to the UK in all circumstances. There must be no tariffs on goods from Northern Ireland to GB or GB to Northern Ireland, so long as those goods are consumed in the UK.
I welcome the agreement on the Northern Ireland border, which is be welcomed, but there is still the possibility of a no-deal scenario, and there might therefore be tariffs. It would be a dereliction of the Government’s duty if they did not legislate to have a tariff regime in Northern Ireland, which is what the Bill does.
The Government have a duty to ensure as much continuity as possible for businesses. The Bill ensures continuity of administration for VAT and excise duty in Northern Ireland, so that businesses in Northern Ireland know that they will still be part of the VAT and excise duty regime in the UK.
Alan Brown
The details of the Bill have not been made clear, so I am not sure how it provides the certainty that the hon. Member is talking about.
Anthony Browne
We have been given enough information so far to know the general principles of the Bill, but we are discussing a Ways and Means motion. The Bill will be published after this, in time for Second Reading.
There are two provisions on tax evasion in the Bill that are very welcome. The first is on ensuring that VAT is paid on goods bought online from overseas. We all know the scenario, and I am sure we have all done it: we order goods online from overseas and they are delivered through the post. The VAT payment is not made in the UK—it is often made overseas—or often not made at all. That mattered less when we were part of the EU, because we had an agreement with the EU under which VAT was charged. Following Brexit, it is even more important that we have a system where there is proper, robust payment of VAT. This is really important for high streets in Britain. The high streets in my constituency have really suffered from the coronavirus closures and lockdowns and from people moving to e-commerce. More than ever, we need a level playing field between the high streets and e-commerce, so I fully support that provision.
The second tax evasion provision is on the insurance premium tax. Again, this was less of an issue when we were in the EU. It is about whether somebody who buys insurance from other countries pays the insurance premium tax that insurance companies in the UK are required to pay. We had an assistance agreement with the EU to ensure that EU insurance companies paid that insurance premium tax. At the end of the transition period, that comes to an end, and this provision fills that gap, so I very much welcome it. This Bill is absolutely necessary. It would be a dereliction of the Government’s duty to ensure the integrity of the UK if we did not pass it, and I fully commend it.
Sammy Wilson (East Antrim) (DUP)
I note that the hon. Member for South Cambridgeshire (Anthony Browne) talked of being part French, part Norwegian and part Irish—he had other bits as well that I did not quite pick up. Can I assure him that I am 100% British and want to remain 100% British? I have taken the stance I have against the withdrawal agreement, and the approach that people have taken to it, because it diminishes my Britishness.
I am not quite clear what is in the legislation that the Minister is introducing today, and I am even less clear now, because, according to the statement issued by the Chancellor of the Duchy of Lancaster at lunch time, whatever is in the Bill today, some of it will not be in it tomorrow. As far as I am concerned, the parts that are important seek to manage the parts of the withdrawal agreement that are damaging to the Northern Ireland economy and to the internal market of the United Kingdom, which are underpinned by the Act of Union. Those are the important parts for me. It seems that they might well be removed from the Bill before it even gets to the Floor, or certainly they will not be exercised.
Why do I believe that protections are needed? The withdrawal agreement intervenes and undermines many parts of the Northern Ireland economy. It also damages the Northern Ireland economy’s relationship with the biggest market for Northern Ireland businesses, which is the market in Great Britain. It interrupts the supply of goods from the main source of the supplies that we receive in Northern Ireland, right down to basic foodstuffs, the equipment required by manufacturers and the parts required by producers in Northern Ireland who then export their goods across the world. The withdrawal agreement seriously undermines that and the interpretation of the withdrawal agreement by the EU even goes beyond what the agreement said and what the Government expected from the agreement.
Let me give just one example: goods at risk. According to article 5 of the protocol, exemptions could be made, determined on the basis of
“the final destination and use of the good; the nature and the value of the good; the nature of the movement; and the incentive for undeclared onward-movement into the Union, in particular incentives resulting from duties payable pursuant to paragraph 1.”
Yet despite the fact that some goods clearly do not present a risk under any of those criteria, the EU was insisting up until this week—I do not know what has happened at the Joint Committee; we will hear from the Minister tomorrow—that even supermarket goods brought from GB to Northern Ireland for shops that did not even have outlets in the Republic would be regarded as goods at risk. Goods that had been freely consumed across the EU for the last 40 years, made in GB, from which nobody died of poisoning or had their health affected, were no longer acceptable.
Kevin Hollinrake
The right hon. Gentleman is making some very good points. He is clearly saying that the European Union is being difficult in these negotiations. Is he therefore surprised that there was not one word of criticism for the EU’s role in the negotiations from the SNP or the official Opposition?
Sammy Wilson
No, I am not, and the reason for that is that from the day that the people of the United Kingdom voted to leave the EU, the cheerleaders for the EU have been those sitting on the Opposition Benches—apart from the Members from my own party. At every stage, it has almost been as if the EU had its representatives sitting in this Parliament. The Labour party in particular suffered from that, because many of its patriotic supporters asked, “What kind of representation are we getting, where these people are seeking to undermine our country, rather than uphold our sovereignty and the result of the free vote that the people of the United Kingdom undertook in the referendum?”
John Redwood
Did the right hon. Gentleman note that when I intervened on Labour and SNP Members to invite them to support just something in the current UK negotiating position, they could not bring themselves to support a single thing that this country wants from the negotiations?
Sammy Wilson
Again, that does not surprise me, because most Members on the Opposition Benches wish, first, that the referendum had never happened; secondly, that the result had not been as it was; and thirdly, that they could find some Machiavellian way to undermine it, as they have been doing for the last number of years. It is unfortunate that we are in the position that we are partly because the EU knows that there are people in this Parliament who will undermine the Government’s negotiating position. That, of course, makes it more difficult for the Government to negotiate. I do not give that as a justification for some of the things that the Government have agreed to in the withdrawal agreement, whether they relate to Northern Ireland or to the impact on the rest of the United Kingdom; to me, the withdrawal agreement is poison that will infect any future trade arrangements that we might get with the EU.
The point that I am making is that protections are needed because the EU has taken the withdrawal agreement. Even where the agreement does give some latitude to allow the internal market of the United Kingdom not to be disrupted and the economy of Northern Ireland not to be undermined, the EU has refused to give that interpretation. In fact, it has done the exact opposite and looked for the most draconian interpretation of the agreement. Only last Friday, the EU insisted that anyone travelling from GB to Northern Ireland would have to have their personal baggage searched to ensure that they were not taking any contraband into Northern Ireland, despite the fact that article 5 of the Northern Ireland protocol states that the “nature and value” of the goods should be considered.
I hope that the hon. Member for Houghton and Sunderland South (Bridget Phillipson) can understand that when she and the Labour party table amendments such as the one she moved today, saying that the withdrawal agreement must be guarded and protected at all costs, she is in effect saying, “We put the value of this piece of paper above the interests of the people of Northern Ireland.” This is putting that piece of paper above the interests of the people of Northern Ireland to have the range of goods that they want and at the best prices, and above the interests of businesses that export from Northern Ireland to GB. In effect, that is what her amendment says.
I am even more amazed that any representative from Northern Ireland dares to put their name to that amendment. I wonder what the consumers and businesses in their constituency think about somebody who values protection of the EU, and an agreement that the EU has with the UK, above the interests of their constituents.
Ian Paisley (North Antrim) (DUP)
Does my right hon. Friend accept that the Republic of Ireland’s interests with regards to Northern Ireland are many times predatory in terms of our businesses? They wish to stifle the competition that exists on the island and to stifle the thrifty economy of Northern Ireland. They have done so in many ways and the withdrawal agreement gives them further opportunity to do that.
Sammy Wilson
Yes, the worrying thing is that, with the withdrawal agreement in place, Northern Ireland is subject to laws made in Europe—laws into which the Irish Republic will have an input; laws into which, because we have left, the UK will have no input; laws into which Ministers in the Northern Ireland Assembly will have no input. We are at the mercy of those who wish to engage in this predatory behaviour and use EU legislation to damage Northern Ireland.
That is why the protections are needed. The protections that I would like to see in the Bill—unfortunately, it appears the Government are prepared to withdraw the protections before they have even introduced the Bill—would apply where the EU insists that goods that come into Northern Ireland have tariffs and would have tariffs imposed on them if they were going into the EU. That barrier should not be in place. Northern Irish consumers and businesses which bring in goods that will clearly be sold and consumed in Northern Ireland should not have to pay those taxes. I heard what the Minister said. It appears that, even with the Bill, he is not ruling that out. If I noted him correctly, he said that there would be a waiver where tariffs are incurred that should not have been incurred. He is almost admitting that, in the Bill that he has introduced, there will be provision to repay those tariffs. However, producers in Northern Ireland will find themselves in a situation where they have to pay EU tariffs, prove that the goods on which they paid the tariffs did not go into the EU, and then get the money back.
That presents a number of problems. First, the trade itself is not free. Secondly, the business that has to pay the tax has a cash-flow issue. Thirdly, there are additional administrative costs involved in proving that some of the goods on which it paid tax did not leave Northern Ireland. If there is anything that will put a chill on trade between GB and Northern Ireland, it is that. I am concerned—perhaps the Minister in his response will be able to give me some comfort—that the Bill, even though it will carry some protections, still does not give that absolute protection for businesses in Northern Ireland because of the terms of the protocol. I could provide many other examples of the EU’s draconian interpretation of the Bill. Someone who takes their pets from GB to Northern Ireland would be affected, or someone going on holiday there. Someone taking their pet from Northern Ireland to a dog show in Scotland will now have to have a pet passport, a rabies vaccination, and all the documentation surrounding that—probably about £400 a trip, yet we are part of the United Kingdom.
That is why protections are needed. I implore the Minister—I know what has been said in the statement today—not to remove the notwithstanding clauses in the Bill until it is sure that the issues that are likely to arise have been dealt with properly, because we have not even seen the detail of the particular things that have been agreed.
In conclusion, it is a pity that we do not have the detail of this Bill today. It is a pity that we do not have the assurances. I note what the Minister said about the VAT regime, which is that Northern Ireland businesses will remain under the UK VAT regime. That is true, but what he failed to say was that, as a result of the Bill, they will not also remain under the EU VAT regime. Article 8 of the Northern Ireland protocol makes it clear that we will and that has all kinds of implications. We have to have two different VAT systems. We have to have different means of VAT recording. Will we be subject to the EU conditions when it comes to VAT exemptions, or the various tiers of VAT rates? Will the EU exemptions for small businesses apply to Northern Ireland—the €85,000 or whatever it is—so that small businesses find themselves caught in a net that they would not have found themselves caught in had we been truly under the UK VAT system? It is not enough to say that we will remain under the UK VAT system. The important thing is: will we be exempt from article 8 of the protocol as a result of the measures in the Bill?
Those are the kind of issues that people in Northern Ireland are looking for. Traders in Northern Ireland—people who sell used cars, for example—will now be subject to EU rules. It used to be that they incurred only the marginal VAT rate, on the profit made on the car. Now the VAT rate will apply to the whole price of the car, putting up the price of second-hand cars for people in Northern Ireland. They will be paying above what they would pay if they lived in the rest of the United Kingdom.
Perhaps in his summing up, the Minister can let us know whether the Government are addressing any of those issues, because those are the issues that concern my constituents and those are the issues that stem from this protocol. That is why this protocol is poisonous to the internal market of the United Kingdom.
Andrew Jones (Harrogate and Knaresborough) (Con)
It is always a pleasure to follow my right hon. Friend the Member for East Antrim (Sammy Wilson). He is one of the most effective and passionate communicators in this Chamber and, if nothing else today, he has reminded the Labour party that there are two sides in a negotiation.
We have had a very wide-ranging debate so far, some of it even on the ways and means resolutions. Should these actually come to a vote later this evening—we have had some apocalyptic language used, but apocalyptic language does not always follow through into actually voting—I will be supporting them, because we must make sure that preparations are in place for the end of the transition period. This Bill is a part of that, which is why these resolutions should pass. This Bill is also a part of ensuring that we are legally prepared for the different outcomes that could flow from the negotiations, this work in progress. We do not know what it will say, but I just want to put it on the record again that I hope we will have a deal along the free trade lines already agreed.
The Bill is also about ensuring that we have smooth continuity of business. Of the six measures, three deal with Northern Ireland and the protocol. There are colleagues in this House more focused on the detail of Northern Ireland policy than me. I just want to say that I view Northern Ireland as a really important part of the United Kingdom. I want to see the continuity of trade operate smoothly and effectively across all four parts of our United Kingdom, and I am pleased that the Government have made the obligation to the people of Northern Ireland about continued unfettered access to the UK under all circumstances.
I will not add anything further to the contributions on Northern Ireland. Those measures have been talked about in this debate already and very articulately. There are three other measures, which are reforms to the wider tax system. The most significant is the new model treatment for VAT on goods arriving into the UK from overseas. Basically, the collection of VAT will move from the existing arrangements on to the overseas seller or the online marketplace where the sale transaction occurred, making the collection of VAT easier and ensuring a more level playing field, especially for the UK high street. Businesses on every high street in the country have been having a rough time for many years, and one reason for that is the rise of internet shopping. Many businesses have a physical and digital offer—both bricks and clicks—making themselves available to customers through whichever purchase route they choose. These businesses pay VAT and will be unfairly undercut if overseas businesses are allowed to make VAT-free sales. This measure will tackle non-compliance. I understand that similar measures are in place in other parts of the world and, indeed, that the EU is introducing something similar.
The fifth measure is about tackling tax evasion in the insurance sector so that HMRC can prevent tax evasion whether an insurer is based in the UK or not—basically it is the power to issue a liability notice irrespective of location. That is part of the creation of a level playing field for UK businesses, just as the previous measure was. The last measure is very technical in nature, dealing with taxation implications from legacy state aid decisions. All I can say is that as I am glad that my right hon. Friend the Minister is on the case. This measure was perhaps designed for specialists.
Overall, the continuity of seamless trade across the UK is critical for us all. The United Kingdom Internal Market Bill has that at its core. That principle is maintained in this Bill, alongside the measures for a level playing field, which is why I shall support it.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
This debate has been far more entertaining than I imagined it would be at the start. We have seen some real squirming on the Government Benches, particularly from the Minister and some unsettled Members who have steadfastly supported Brexit for quite some time. One of the best pieces of gymnastics I have heard today has been from the Government Bench: it has to be the rejection of the idea of the Prime Minister’s oven-ready deal. It reminded me of William Hughes Mearns, who said—well, he didn’t; I am reimagining—“Yesterday upon the table, they had a deal that wasn’t there. It wasn’t there again today. Oh, how they wish that deal would go away.”
The Minister said at the start of the debate that he was not even briefed on his own Government’s announcement; he did not know the news coming through that affected what we are debating.
Jesse Norman
As you will be aware, Madam Deputy Speaker, I said no such thing. In fact, I responded and outlined the relevance of the statement to the speech and the debate. What I said was that I had no privileged access, since I am not myself a member of the committee that discussed this item, but that the Minister concerned would be coming to the Chamber to discuss it tomorrow.
Drew Hendry
Hansard will confirm whether or not he said he was not sighted on the Government’s announcement this afternoon. Even if we take him at his word, he comes here woefully ill prepared to tell us what might be in the Bill; he can tell us some things that will not be in there because of that announcement this afternoon, but he cannot tell us what will be in there. We are none the wiser as to what might be in the detail, which my hon. Friend the Member for Glasgow Central (Alison Thewliss) so forensically went through earlier. He could have given a lot more detail on the issues that will be affected. We just do not know what is going to come forward. It is not clear. It is good to know that the lawbreaking clauses that might have been contained in the United Kingdom Internal Market Bill will no longer be contained in this Bill. Of course, they should never have been in this Bill or the internal market Bill. While we welcome their going, that situation should never have occurred in the first place.
The Minister talked about giving confidence and certainty and meeting the commitments to the people of Northern Ireland, but there are still serious issues for the supply chain. It is a dry term, “the supply chain”, but it has direct effects on people’s lives. It means goods, food and essentials being available to people’s families and, of course, to sustain businesses. My hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown) talked earlier about the evidence given to his Committee about systems that were simply not in place. The Minister cannot claim that access will be unfettered in those circumstances, because even with a low deal, there is a clear probability of critical shortages and delays. People’s lives will be affected, in some cases severely, amid what is, let us not forget, a global pandemic.
The Northern Ireland Retail Consortium has naturally welcomed the news today, but it points out that there are still major problems ahead, as is the case in Scotland. It has published new research from its Brexit working group showing that the majority of businesses could not and will not be prepared in time. They include food producers such as those in the Northern Ireland meat industry.
We have also heard from the Road Haulage Association. It has to be said—a former Transport Minister, the hon. Member for Harrogate and Knaresborough (Andrew Jones), is sitting across from me just now—that the association has been raising concerns about this, year after year. It has known what is coming in logistical challenges. Even with a deal there will be delays, and delays mean shortages, so spare a thought for the Road Haulage Association. It should have been central to the Government’s planning. Its members are the experts on logistics; they are the people who know on a day-to-day basis what needs to be done, yet they have been ignored by this Government pretty much all the way through, save for some platitudes and some “There, there, things will be okay” comments. Those people should have been at the heart of these preparations.
It is rare for me to agree with anything that the hon. Member for Stone (Sir William Cash) has to say, but I have to agree with him that what we are being asked to debate today is impossibly vague. As far as I can see, the Ways and Means resolution in its present form, even after the Government’s announcement today, still contradicts the withdrawal agreement. So unless the Minister can clarify that that is not the case, we will have to assume that it is still the case at hand. Northern Ireland, like Scotland, never voted for this Brexit shambles, yet families and businesses there will both feel the effect.
The Minister said earlier that it was inappropriate to say that the Tories had sold devolution down the river. Well, apart from being tellingly sensitive, he has obviously also not been sighted on the United Kingdom Internal Market Bill clauses that still remain. People in Scotland are not daft. They see what this Government are doing. They see what is going on, and that is why, soon, they will choose to take their own place in their own future with an independent nation.
Shaun Bailey (West Bromwich West) (Con)
It is a pleasure to speak in this debate today. I have been listening to the debate from the start with some interest, and there have certainly been some vigorous contributions. I must say that I was presented with some hope by my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) when he spoke to the actual motions. I was nearly aghast, because for me this debate has felt a bit like groundhog day, to be honest.
Twelve months ago, like all of us in this House, I was out there pounding the streets in my constituency, 70% of which had voted to leave the European Union. There had been a Labour MP there for some 90 years. I was there as grown men were breaking down and crying on their doorsteps because everything they believed in had been completely betrayed and abandoned. They had been told that they did not understand what they had voted for, that they had no comprehension of the impact of what they had done, and that as a result, they did not really deserve to have their voices heard. That is why I am here today; it is because of how they felt.
I will now get to the core of the motions. Hon. and right hon. Members have talked in much depth, and I want to talk about the VAT implications, particularly for my retailers, and about motion 4 on the Order Paper. My hon. Friend the Member for Harrogate and Knaresborough made a very detailed interrogation of these regulations, and he was right. This is about ensuring that our high streets, our domestic retailers, can have a balanced playing field as we move forward.
These regulations are needed either way, because we have to accept the fact that we have left the EU and that on 1 January we will have a new relationship, whatever that looks like. My constituents, leave or remain, want a deal. They want to ensure that this is done. There is no denial about that. We want to get this done in the right way. We want that consistency; we want to ensure that traders can carry on. I represent an area that has a significant manufacturing and advanced engineering base. We want to be sure that our manufacturers and engineers can still have access to those markets, that it can be done in the right way and that they know where they are and where they stand.
I completely stand with the Government in their commitment to ensuring that we get there, but, as right hon. and hon. Members have said, it is a historical fact, which we know from previous negotiations such as these, that they go to the eleventh hour, and political bluster and back and forth often characterises them. I am absolutely behind the Government in their attempts to ensure that we get that deal, because my manufacturers and my businesses need it.
Coming back to the point on VAT, which has been raised consistently throughout this debate, we have seen the impact of the covid-19 pandemic, and let us just for a moment remember what we are talking about with these motions. We are talking about real people. We are talking about their livelihoods. We are talking about how they provide for their families.
It might seem quite abstract when we talk about ways and means resolutions and what they mean, because at their heart is the technical and administrative way in which revenue is raised. They are very technical motions, and I do not think they are going to garner a wide audience at five minutes past 5 in the afternoon—although we never know; some of the speeches today have certainly garnered some interest. However, at the core, this is about those individuals we are here to represent, about those families, and about ensuring that businesses, particularly on our high streets—as right hon. and hon. Members who have spoken to these motions have stated—are able to carry on. As we come through this period into next year, it will be vital to ensure that we can have communities that thrive again and that we get beyond this.
The fact is that life is going to move on. We are going to have to go into 2021 and carry on with our lives. We will have to move forward, whatever our nation looks like; I appreciate there are divergent views across the House on how that will look in one way or another, but we must ensure that we can function, that our constituents can carry on with their lives and that business can carry on, and that is what these motions are about. At their heart is the practicality of ensuring that we can raise revenue, that we can follow through those taxes and that our VAT system works.
To pick up a point that my right hon. Friend the Member for Wokingham (John Redwood) made, we have real potential now, with our VAT freedoms coming back to us, to do some really innovative things. A prime example would be zero VAT on sanitary products; that has been a huge campaign, and I pay tribute to the people involved in it. That is something that we can ensure carries on. Equally, on digital books and services, we can ensure that, in areas such as mine with some of the highest levels of child deprivation, we close the digital gap and ensure that educational opportunities are there.
People might think that these things are minutiae and that they are abstract compared with everyday life, but they are not. They are at its core. We do not hear about them and we do not talk about them often, but they are there and they have an impact on every single one of our communities, from Princes End in my constituency to Aberdeen, Broadland, Harrogate—even Doncaster, Madam Deputy Speaker. They have an impact on everyone.
We talk about the importance of these resolutions and why we must get them through, and that is about ensuring that ultimately, as we move forward, we can operate a tax system that is efficient and that can carry on and that, as we look forward to 2021, as life goes on beyond these debates that have plagued us now for four and a half years and as we finally respect the decision that was taken by 70% of my constituents in 2016, we can do so in an efficient way that works for everyone. I will be supporting these resolutions today, and I commend my right hon. Friend the Minister for bringing them forward.
Kevin Hollinrake (Thirsk and Malton) (Con)
I add my comments to those of my hon. Friend the Member for West Bromwich West (Shaun Bailey), with his optimistic tone. I, too, am optimistic about the future; despite the fact that I have never looked at Brexit through rose-tinted spectacles, I have never argued that this country cannot succeed economically outside the European Union. I welcome some of the measures in this proposed Bill, particularly on creating a fairer and more level playing field for our small and medium-sized enterprises—I draw the House’s attention to my entry in the Register of Members’ Financial Interests.
Before talking about that, however, I would like to talk about the national interest. I think it was Churchill who said that in our parliamentary duties we should put country first, constituency second and party third, yet all I have heard from the Opposition and the SNP today is putting their party interests first.
Alison Thewliss
What the hon. Gentleman is missing is that we have a different definition of nation, and our interpretation of Scotland’s national interest is quite different from the UK’s national interest that he sees.
Kevin Hollinrake
I have heard quite a lot the argument that Scotland did not vote to leave the European Union, but that is not how the votes were added up. This was a national, United Kingdom vote. Those were the terms of the referendum, which were voted for in this House. That is how the entire nation voted, and we are leaving the European Union. Some of us will be less happy about that than others, but nevertheless, that is what we are instructed to do and what we should do.
For the Opposition, the hon. Member for Houghton and Sunderland South (Bridget Phillipson) said time and again that the Government were irresponsible in these negotiations. Can I just remind her that there are two sides to this negotiation? There are two sides, and I would ask which side she is on, because she is not representing the national interests in the way she is discussing these matters and blaming the Government for being in this position at this stage. Of course—and I am in business today—every business in this land would have liked the situation to be done and dusted last June, as we had hoped. However, there are two sides to this negotiation, and it has to be said that the European Union has been difficult in these negotiations.
If the hon. Lady does not believe my words about that, she should listen to one of the most reliable commentators on her Benches, the right hon. Member for Leeds Central (Hilary Benn), in his speech on 14 September. He was talking about the United Kingdom Internal Market Bill, and he said that
“I have to say that I have some sympathy with the Government’s argument: exit summary declarations should not be required for goods moving from Northern Ireland to GB. When Wrightbus sells one of its wonderful buses to a transport operator in the UK, why is the form needed and what is the EU going to do with the form?”
On goods at risk, he said that
“surely it is possible to reach a pragmatic solution, because a lorry load of goods destined for a supermarket in Belfast can hardly be described as being at risk of entering the European Union.”—[Official Report, 14 September 2020; Vol. 680, c. 64.]
Yet those are some of the matters that the European Union was negotiating on or on which it was trying to negotiate hardball.
I ask again: who does the hon. Lady think, and who does the hon. Member for Glasgow Central (Alison Thewliss) for the SNP think, is being difficult in this negotiation? Is it purely the United Kingdom? Of course it is not. Why are there no words of criticism for the European Union’s position and for leaving it this late before agreeing what should be a simple trade deal to arrange and negotiate? It has negotiated similar trade deals with many other countries around the world, and we start from a similar position with our regulations and customs duties.
Kevin Hollinrake
From an identical position. This should have been an easy trade negotiation, but of course it is not, for the reasons that we know. Of course, there is politics behind this negotiation, and the politics in this place should be united on one side, in the UK’s national interests, but they are not. Too often, Opposition Members have represented the European Union’s negotiating position in these negotiations.
Stephen Flynn (Aberdeen South) (SNP)
Of course, it was the United Kingdom Government who were threatening to break international law. Does he have any similar examples from the European Union, or is it simply a one-way street as far as he is concerned?
Kevin Hollinrake
The hon. Member makes a fair point, but I would point him back to the political declaration, which sat alongside the withdrawal agreement, within which there were clear commitments from the European Union to agree an ambitious free trade agreement. He must accept, as commentators on that side of the fence—on the Opposition Benches—have also said, that it is clear the European Union has been difficult in these negotiations, and more difficult than perhaps many had anticipated. It is clearly in the European Union’s interests and their constituents’ interests to agree a free trade deal without this kind of last-minute drama.
Shaun Bailey
On that point, I am sure my hon. Friend will, like me, have seen in the press German car manufacturers begging the German Government and saying, “We’ve got to get this done. The European Union has got to get it done.” Equally, French fishermen have been doing the same with President Macron. Surely our European cousins and partners get this—that it is a bilateral thing that the European Union needs to do—but why do the Opposition seem not to get that? Perhaps he could enlighten me.
Kevin Hollinrake
Of course, the European Union is negotiating in its interests and is obviously trying to protect its interests in that negotiation, but one thing the European Union has done much better than we have on this side of the channel is negotiate with one voice. In this place, we have not—we absolutely have not—and that has undermined the UK’s negotiating position. If the Opposition think that the European Union does not hear what this place says, that is clearly a naive position. If the Opposition think that the European Union does not hear what this place says, that is clearly a naive position. I would argue, at this very late stage, that we work together, cross-party, to try to bring about a situation where we can get the free trade agreement that we all know is possible and can be delivered within the timescale we have left.
Alison Thewliss
The hon. Gentleman is making an interesting point about working cross-party. We entered into this in the spirit of cross-party working. The Scottish Government put forward constructive proposals on cross-party working that the UK Government rejected. For a long time during this process, it has been his own party that has been undermining his Government’s negotiating position. Does he not accept that that has been part of the problem?
Kevin Hollinrake
No, I do not. The UK Government have to take a number of matters into consideration. They have a collective position. Clearly, we cannot always get exactly what we want in terms of negotiation. My point is that we could have done better in these negotiations and there could have been less drama around them. The fact that these negotiations are concluding so close to the deadline for businesses has been brought about partly because of the divided nature of this Parliament. The hon. Lady and the Opposition should take responsibility for that position.
My point about a fair and level playing field is about the fact that many of our small businesses in the UK compete with online platforms—online marketplaces, as they are called—such as Amazon and eBay. How can it be right that for so long many of those small businesses have been competing at a 20% disadvantage? Many retailers selling into the UK are not paying VAT on those sales. I am pleased that the Government have acted on this and closed the loophole. They have closed a number of loopholes in recent years through measures such as the digital services tax and the diverted profits tax. This creates the fairer and more level playing field for the rest that I very much welcome. There is one more loophole that we could close, not in this legislation, but in the Financial Services Bill, which is going through Parliament at the same time.
Country-by-country reporting would also have a profound effect in closing loopholes that some companies are using to divert profits out of this country.
Jerome Mayhew (Broadland) (Con)
The Government are making an important point in this Bill in starting to look at online retailers facilitating the sale and that is making a difference, particularly with international trade. Does my hon. Friend agree that this should be expanded beyond just VAT into things like the extent of producer responsibility and other aspects of international trade?
Kevin Hollinrake
Yes, I do. We all know that the best way of driving down prices and driving service for our consumers—our citizens—is through a free, competitive marketplace. Our job, wherever we can, is to let that marketplace do its work. Our job is also to make sure that it sits on a fair and level playing field. My hon. Friend, in talking about regulation for some of the retailers—some of the UK businesses but not businesses abroad—makes a very sound point that the Government should consider.
Going back to country-by-country reporting, let me give an example. Google’s turnover in the UK is about £10 billion. We can work that out by extrapolating certain figures from a couple of years ago. Internationally, it declared a 22% profit margin, which means a £2.2 billion profit in the UK. Based on corporation tax at 19%, it should pay £420 million in tax on that. Last year it actually paid £67 million in tax. That cannot be a fair and level playing field for other UK retailers or other UK companies that compete against Google, particularly in terms of advertising space—many of our regional papers, for example. I would like the Government to bring forward legislation, in some vehicle or other, to tackle that issue.
I am very pleased that this loophole is being closed and I very much commend the principles and the outline of the legislation that we will see tomorrow.
Bridget Phillipson
It is extraordinary that we have not yet had sight of the Bill and that all we have is a single sheet of A4, just 23 days until the end of the transition period. The Minister did not offer much this afternoon other than to merely say he regarded Opposition amendment (a) as unnecessary. I regret that our trust in the Government’s promises and assurances has run rather thin this autumn. In the absence of the publication of formal texts, I have not been persuaded by the Minister’s arguments this afternoon.
Jesse Norman
This has been a very wide-ranging and interesting debate, and we have heard some diverse voices. I was particularly interested, as I am sure the House was, to see the knights of Maastricht swinging a leg as they get into the saddle once more and go into battle—always an interesting sight. I thank the hon. Member for Houghton and Sunderland South (Bridget Phillipson) and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for reminding us that this is a complex and difficult process. It is not straightforward to negotiate with another party at the same time as seeking to make legislation, and we recognise that.
I want to quickly pick up on a couple of the points that arose in the debate. I rather differ from my hon. Friend the Member for Stone (Sir William Cash) in thinking of this as the most important constitutional moment since 1688. I might respectfully offer the Act of Union 1707 or even the Act of Union 1801 as possible alternatives.
Imagination in tax is of great interest to the Treasury, but that must come after the transition period has ended and we have regained this full measure of sovereignty. That is the moment to think about these issues in the wide way that my right hon. Friend the Member for Wokingham (John Redwood) described. This is a technical matter of putting into place the requirements for us to leave in as orderly a way as possible.
The right hon. Member for East Antrim (Sammy Wilson), on classically robust form, rightly highlighted the lack of balance in this debate relating to the European Union, and I thank him for that. I remind the hon. Members for Glasgow Central (Alison Thewliss) and for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) that the rules as they stand were that all goods going into Northern Ireland were to be considered at risk. The “notwithstanding” clauses were designed to protect us against that transparently absurd outcome, which would have had the effect that a bag of salad brought in for sale in a Northern Ireland supermarket was considered an at-risk good and was therefore treated on that basis. That cannot be right. In advancing the “notwithstanding” clauses, the Government were seeking a perfectly sensible and proper readjustment to the situation. I am delighted that those clauses have been withdrawn, and with that good message, I commend these motions to the House.
Question put, That the amendment be made.
Madam Deputy Speaker (Dame Eleanor Laing)
As the House has just agreed, amendments and new clauses to be moved in Committee of the Whole of House may now be tabled. Hon. Members should table through the Public Bill Office inbox, which is pbohoc@parliament.uk. They should not attempt to hand in amendments and new clauses to the Table in the Chamber due to the current situation of the pandemic.
Taxation (Post-transition Period) Bill
Wednesday 9th December 2020
(3 years, 11 months ago)
Commons ChamberRead Full debate Taxation (Post-transition Period) Act 2020 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the Whole House Amendments as at 9 December 2020 - (9 Dec 2020)
The Financial Secretary to the Treasury (Jesse Norman)
I beg to move, That the Bill be now read a Second time.
It is a delight to speak under your chairmanship, Madam Deputy Speaker.
In three weeks’ time, the transition period will end and this country will take its place as a fully sovereign trading nation once more. It is a very important moment in our nation’s history, one that will undoubtedly provide us with great opportunity in the years ahead, but the Government are acutely aware that at this time they also have a great responsibility to provide certainty to people and businesses and to preserve this nation’s unity, and the fundamental purpose of this Bill is to achieve those goals. It seeks to ensure that businesses in every part of the UK can continue to trade smoothly after the end of the transition period, but its particular focus is on businesses based in Northern Ireland or those that work with Northern Ireland companies.
The Government have always been clear that we must deliver on our pledge to provide unfettered access for Northern Ireland’s businesses to the rest of the UK internal market, and we have been equally unstinting in our determination to uphold our commitments to the people of Northern Ireland under the Northern Ireland protocol and to protect the progress made under the Belfast Good Friday agreement. This Bill will help us support those commitments by providing legal certainty for the customs, VAT and excise systems in Northern Ireland after the end of the transition period.
If I may, I will start with the customs elements of the Bill. The House will know that the UK is a single customs territory, with article 4 of the Northern Ireland protocol giving a clear legal commitment to this. However, the protocol also requires a new and unique set of arrangements to be put in place for goods moving from Great Britain to Northern Ireland. Under these arrangements, the only circumstance in which there should be charges on goods moving between Great Britain and Northern Ireland is if those goods are destined for the EU single market or there is a clear and substantial risk that they may be.
John Redwood (Wokingham) (Con)
I am grateful to the Minister for giving way in this Second Reading debate before we get to Committee. Will he confirm that under the proposals in this last legislation the European Court of Justice will be the ultimate arbiter of excise and VAT arrangements within Northern Ireland, and that the European Union will be placing staff in our country to supervise this?
Jesse Norman
VAT in Northern Ireland will be subject to the EU principal VAT directive, and for that purpose the ECJ will be the judicial body. I cannot comment as to whether or not there will be anything more than staff, except to say that excise processes in Northern Ireland will be carried out by Her Majesty’s Revenue and Customs.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The Minister was asked by his right hon. Friend the Member for Wokingham (John Redwood) whether the ECJ would be the ultimate arbiter, and the Minister replied that it would be the judicial authority. Is that the same thing?
Jesse Norman
Yes, I was simply paraphrasing the point that my right hon. Friend made.
Under the terms of the protocol, we need to treat goods at risk of such onward movement into the EU differently from those groups that are not at risk. On the specific details of what will be defined as at risk or not at risk, the House will be aware of the EU-UK joint agreement made this week setting out that an agreement has been reached in principle regarding the implementation of the Northern Ireland protocol. In accordance with that statement, the draft texts will now be subject to further consideration in both the EU and the UK. Once that is complete, a joint committee will be convened to adopt them formally. Further details will be set out in due course, and before the end of the year.
Sir William Cash (Stone) (Con)
In reply to my right hon. Friend the Member for Wokingham (John Redwood) and the right hon. Member for Orkney and Shetland (Mr Carmichael), the question of jurisdiction was raised, and perhaps it is best to use the right expression, rather than paraphrasing. The fact remains that EU officials will be there for the purposes of enforcing the jurisdiction of the European legal arrangements, which will be enforced subject to the European Court. In those circumstances, will the Minister now accept that actually there is an infringement of sovereignty in that respect? As the “notwithstanding” clauses are being taken out, there is therefore a further complication, and if I may say so respectfully, that is slightly in contradiction of his allegation that we would now take over as a sovereign, fully independent power.
Jesse Norman
I thank my hon. Friend for the question. He is right that it is expected that there will be EU officials. The checks will be levied and done by HMRC inspectors, and the system that we are putting in place gives effect to the Northern Ireland protocol, which, as he will recognise, already recognises the balance that is being struck in Northern Ireland between its status under the Union customs code and its status within the UK customs system.
If I may proceed, the Bill will allow the Government to put in place decisions made by the Joint Committee on goods that are not at risk of entering the EU, ensuring that they do not have to pay the EU tariff. However, if I may underline the point, this Bill does not itself seek to specify the classes or categories of goods or movements that are at risk or not at risk. Instead, that will be set out by regulations that the Bill permits us to make once legal texts have been formally adopted. The “at risk” or “not at risk” definitions will also determine whether the UK or EU tariff applies when goods arrive in Northern Ireland from rest-of-the-world countries, again in line with the Northern Ireland protocol.
In relation to the so-called “notwithstanding” clauses, as part of yesterday’s EU-UK joint statement, the Government have agreed not to introduce these provisions into this Bill, and we have also committed to remove the three “notwithstanding” clauses from the United Kingdom Internal Market Bill.
Jesse Norman
I suspect we are going to go around this many times, but I am happy to give way again.
Sir William Cash
Could I simply say to my right hon. Friend that this does raise a question? I am not going to go into it in an intervention on him, but I will in my speech. I believe that those provisions may well be needed, because we do not know the outcome of the negotiations yet. I will leave it at that for the moment. We do not know, but we have been told that the clauses are going to come out. The question of whether they should have been put in is a separate question, which I dealt with yesterday.
Jesse Norman
I am not quite sure where that was heading, but we have the Bill in front of us and the Government have made it clear that the so-called “notwithstanding” clauses will not be introduced.
The legislation follows from commitments made in the Government’s Command Paper on the implementation of the protocol, which was published in May. The Bill will ensure that EU goods moving into Northern Ireland remain free from customs duties or processes. Although we recognise and are addressing the challenges relating to the movement of goods from Great Britain to Northern Ireland, we should not lose sight of the benefits to Northern Ireland of having continuing access to the EU market.
In addition, this legislation will ensure that the UK customs regime applies to goods moved from Northern Ireland to Great Britain if they do not qualify for unfettered access. The Bill will also introduce anti-avoidance rules to prevent goods from being rerouted through Northern Ireland to avoid UK customs duties or associated obligations, and its measures will ensure that customs enforcement and penalties, along with review and appeal processes, are in place in relation to duty and that they continue to work alongside EU legislation in Northern Ireland and can be applied, where required, to movements of goods between Northern Ireland and Great Britain.
Stephen Farry (North Down) (Alliance)
I welcome the thrust of the Bill. We have heard a lot about the anti-avoidance approach in recent months, but we have never seen any detail as to how it will work. This is a critical issue, particularly for the agrifood sector, to make sure that inferior product is not coming into Northern Ireland and taking advantage of the protocol, and there is the risk of organised crime in Ireland as well. When will we see detail on exactly how it will look?
Jesse Norman
As the hon. Gentleman will know, goods that are, as it were, normally circulating in Northern Ireland will be open to go into Great Britain from the beginning. There will be some goods that, over time, will be designated as non-qualifying goods for these purposes, and HMRC has well established practices for identifying, discussing and targeting those, as may be necessary, and will be applying them to prevent avoidance and to keep the market honest.
As I have said, the Bill will ensure that the UK customs regime applies to goods moving from Northern Ireland to Great Britain if they do not qualify for unfettered access. These anti-avoidance rules will prevent goods from being rerouted through Northern Ireland to avoid UK customs duties or associated obligations, and its measures will ensure that customs enforcement and penalties, along with review and appeal processes, continue to work alongside EU legislation in Northern Ireland and can be applied, where required, to movements of goods between Northern Ireland and Great Britain.
The Bill also amends and modifies certain provisions in relation to VAT and excise for Northern Ireland.
Mr Toby Perkins (Chesterfield) (Lab)
In many of these debates over the past four years, the Government have referred to “frictionless trade” between the mainland and Northern Ireland. The Government now say that they want VAT accounting treatment for goods moving between Great Britain and Northern Ireland to remain “as close as possible” to the current approach. Will the Minister confirm whether we have now accepted that frictionless trade is not possible? Can he tell us a little more about what “as close as possible” actually means for businesses in Northern Ireland that are looking forward to 1 January with some trepidation?
Jesse Norman
I thank the hon. Gentleman for his question and, yes, the legal basis on which VAT is charged will change. I will spare him the details of the difference between import VAT and acquisition VAT, but it will change. The experience of those who pay VAT will be very similar, if not identical, to the system we have in place at the moment. HMRC and the Government have identified flexibilities, which allow that to be put in place. Of course, there will continue to be the normal processes of enforcement that one would expect to see from HMRC in order to make sure that VAT is properly paid in the usual way.
John Redwood
These are urgent and important issues. We heard earlier from the Chancellor of the Duchy of Lancaster that there are various delays to the full implementation of trade arrangements into and out of Northern Ireland as a result of his negotiations. Will they be incorporated into this legislation, and do they provide a brake on the immediate introduction of these complex double-taxation arrangements?
Jesse Norman
I have no doubt that the Chancellor of the Duchy of Lancaster will be updating the House over time as the different provisions he has negotiated come into force but, from our point of view, the position remains as stated, that is to say that VAT will become chargeable by a slightly different legal means, but in substantially the same way in Northern Ireland as it is at the moment. The mechanisms we have put in place are designed to ensure that, as far as possible, VAT will be accounted for in the same way as it is today.
Existing rules in relation to movements of goods between Northern Ireland in the EU, including the rules relating to acquisitions and distance selling, will continue to apply. Goods entering Great Britain from Northern Ireland will be subject to VAT as though they were imports under the relevant UK legislation. Similarly, goods entering Northern Ireland from Great Britain will also be subject to VAT as though they were imports and relevant EU or UK legislation will apply, but let me add that the Government are adopting an approach that minimises any changes for goods moving between Northern Ireland and Great Britain.
Stephen Flynn (Aberdeen South) (SNP)
On a point of order, Mr Deputy Speaker, can you clarify whether Members in the Chamber should be socially distancing by staying on the seats that have ticks on them?
Mr Deputy Speaker (Mr Nigel Evans)
Yes, that is what the ticks are there for. I hope that all Members will abide by them so that we can have safe social distancing. Thank you very much.
Jesse Norman
In addition, the Bill amends current legislation for excise duty to be charged when certain goods, such as alcohol and tobacco, are moved from Great Britain to Northern Ireland. The changes are necessary to ensure that there is a fully functioning VAT and excise regime in place in relation to Northern Ireland at the end of the transition period.
In line with the protocol, Northern Ireland will maintain alignment with existing EU excise rules. That means a change to excise duty is required when goods are moved to Northern Ireland from Great Britain, but the Government are adopting an approach using flexibilities and EU rules that minimises changes for excise goods moving between Great Britain and Northern Ireland.
A small number of other taxation measures also need to be in place before the end of the transition period. The Bill introduces a new system for collecting VAT on cross-border goods. That includes moving VAT collection on certain imported goods away from the border and involving operators of online marketplaces in the collection of VAT at the point of sale.
In addition, measures in the Bill will remove the VAT relief on imported low-value items so that VAT will be due on all consignments, irrespective of their value. The relief has been the subject of long-standing abuse and removing it will build on Government efforts to level the playing field for UK businesses still further by protecting high streets from VAT-free imports. Together, the changes will improve the effectiveness of VAT collection on imported goods, tackle non-compliance and protect the flow of goods at the border.
Kevin Hollinrake (Thirsk and Malton) (Con)
I very much support the measures that the Minister is talking about. Why is the measure just for low-value goods? There will be other goods where a similar loophole applies, such as watches or jewellery that have a value above £135. Is this not an opportunity to close that loophole as well?
Jesse Norman
I thank my hon. Friend for his question, and I will take that under review. We have put in place a set of measures designed to tidy up the position that particularly arises in relation to the Northern Ireland protocol, as he will be aware, and the end of the transition period, and that has meant a change to low-value consignment relief and the changes I have described. I am grateful to him for his contribution and suggestion.
The Bill also includes provision for an increase in the rate of duty on aviation gasoline, which will apply across the UK. Otherwise known as avgas, the fuel is a form of leaded petrol predominantly used in leisure flying. The change made by clause 6 of the Bill will increase the avgas rate by half of a penny to 38.2p a litre from 1 January next year. By way of explanation, the Northern Ireland protocol requires that Northern Ireland continues to comply with the EU’s energy taxation directive following the end of the transition period. It sets a minimum level of duty in euros on unleaded petrol used for propulsion. After some careful consideration, the Government have chosen to apply the change to the whole of the UK to ensure consistency between Great Britain and Northern Ireland, avoid burdens on business and reduce compliance risks for HMRC.
The Bill also includes a clause to ensure HMRC has access to the same or similar tools to prevent insurance premium tax evasion as it does at present, regardless of whether an insurer is based in an EU member state. Overseas insurers are liable to pay insurance premium tax when they supply general insurance for UK-located risks. Occasionally, overseas insurers do not pay the insurance premium tax they owe, so it is important that HMRC has access to tools that deter and tackle that form of evasion. Up to now, it has been using EU provisions to prevent evasion by insurers based in EU member states.
Separately, HMRC can issue liability notices in cases involving insurers based in any country outside the EU with which the UK does not have a mutual assistance agreement. Given that the EU provisions expire at the end of the transition period, this clause will enable HMRC to issue liability notices in evasion cases involving insurers based in any country with which the UK does not have a mutual assistance agreement, including EU member states.
Finally, the Bill introduces new powers that will enable HMRC to raise tax charges under the controlled foreign companies legislation for the period from 1 January 2013 to 31 December 2018. This is a technical provision that will deal efficiently with the legacy state aid decision relating to the period before the UK left the European Union.
This Bill will give people and businesses throughout the UK certainty about the arrangements that will apply from 1 January next year. It will play a part in further safeguarding the unity and integrity of this country, both in the months ahead and long into the future. I commend the Bill to the House.
Mr Deputy Speaker (Mr Nigel Evans)
Before I call Anneliese Dodds, let me say that the wind-ups will begin at 5 o’clock at the latest, and that 13 Members wish to speak and are all here. We therefore know that there will definitely be 13 Members speaking, so colleagues should really be thinking about speeches lasting for six minutes. Even if I do not put the clock on, it would be really useful if everybody shows at least some discipline on that, so that everybody can get a fair crack of the whip.
Anneliese Dodds (Oxford East) (Lab/Co-op)
It is a year to the day since the Chancellor boasted that there was no need to plan for no deal because
“we will have a deal.”
Yet today, as we debate this Bill, we stand on the brink of a no-deal Brexit that would destroy jobs and livelihoods right across the United Kingdom. We have only 22 days to go until the end of the transition period, with still no deal in sight.
When we debated yesterday the Ways and Means resolutions associated with this Bill, a number of Government Members claimed that agreements between nations are often only finalised at the last minute—that there is nothing out of the ordinary about this Government’s approach. That is because for run-of-the-mill agreements there is a fall-back option, a status quo. But failing to reach a deal now does not mean a return to the status quo—that we stay as we are. It means extensive economic damage to the tune of an additional 2% loss of GDP, on top of the 4% loss of GDP that the Office for Budget Responsibility has calculated would be the impact of a very thin deal: the type of thin-as-gruel deal that the Conservatives look set to deliver.
Mr Perkins
My hon. Friend is absolutely right, but even the statistics that she refers to regarding the overall impact on the economy mask the absolutely catastrophic impact that no deal would have on individual businesses and individual industries. I had the pleasure of visiting the Toyota factory in Derby. No deal means that the entire purpose of that factory being based in Derby is under serious threat. Alongside those statistics about the overall impact, it is really important that we recognise that the situation is much worse than that for individual businesses and industries.
Anneliese Dodds
My hon. Friend is absolutely right. There is potentially a very, very severe impact from no deal, but, as I will go on to explain, there is already a concrete and very acute impact on our economy. I am particularly concerned about the situation for many businesses based in Northern Ireland.
This damage will be long lasting, likely to outlive even the impact of the current covid crisis. Our country cannot afford this. We have already experienced the steepest economic downturn in the G7 due to the covid crisis, and are predicted by the OECD to experience the slowest recovery in the G7. Just the prospect of a potential no-deal outcome is already leading to chaos in the midst of a pandemic. Stockpiling by companies, caused by the threat of no deal, is exacerbating supply blockages at our ports.
Kevin Hollinrake
The economic damage that the hon. Member is talking about should a deal not be agreed would also be inflicted on the European Union, particularly certain parts of the European Union, such as the Republic of Ireland. She criticised the UK Government for the way that they have negotiated. Does she have no words of criticism for the EU negotiators in this two-way negotiation?
Anneliese Dodds
Of course we need application and a determination to conclude a deal on both sides; that surely is obvious. But the fact remains, as I will go on to describe, that it was the UK Government that, rather than tabling this Bill many weeks ago, which they could have done, decided to effectively retain provisions that threaten to break international law. That is on the Government’s head, and it is something that the Government must surely be responsible for.
The irresponsible approach that we have seen recently speaks to a wider pattern over the last 12 months of recklessness with public finances, broken promises to the British people and short-term thinking that is doing long-term damage to our country. The Prime Minister promised the British people that he would get Brexit done. He said he had an “oven-ready” agreement. Whatever he has got cooking ahead of his dinner with von der Leyen tonight, my message to him is to get on and deliver what was promised.
Sir William Cash
I would just like to point out to the hon. Lady that Labour Governments, not to mention Conservative Governments or the coalition Government after 2010—there is a host of examples by a number of Governments—have passed treaty overrides, on exactly the same principles relating to Finance Bills, in the past. If she wants to construe that as breaking international law, she can, but the reality is that it is consistent with article 46 of the Vienna convention.
Anneliese Dodds
I am pleased that the hon. Gentleman mentions that situation, because it has been referred to by those who favoured the Government’s approach previously. However, I gently state to him that if he is referring in particular to provisions against tax avoidance—the example of a general anti-avoidance rule—then, sadly, I believe he is mistaken. In that case, that commitment and the ability to apply such rules was actually a fundamental principle agreed to by this country as part of a multilateral agreement that it concluded with the OECD, so I fear that that example is not as telling as he may wish it to be.
With just three weeks to go until the end of the transition period, the Government published late yesterday afternoon the 116-page Bill that we are discussing now, setting out detailed new rules for tax and customs duties. Members of this House have been given less than 24 hours to scrutinise a major piece of post-Brexit legislation that will impact businesses and individuals across the country, especially in Northern Ireland. Many of the clauses in the Bill, particularly those covering customs and excise duties, require the Treasury to make regulations that will set out the actual detail of its proposals at a later date, so even with the publication of the Bill, businesses and individuals still do not have the information they need to prepare for the end of the transition period.
Earlier today, the Chancellor of the Duchy of Lancaster said there would be “further clarity” forthcoming on these matters, but again without saying when. In fact, the Minister talked a few moments ago about those details coming in due course. His letter to Members spoke about the fact that there would be information on this later; “in the coming days” was the formulation at that time. How can he really expect businesses to plan on that basis—on the never-never up to 1 January?
This last-minute approach was not necessary. It is no use pointing to the complexity of the ongoing negotiations. We know that this Bill could have been published a long time ago because the Government have been floating a Finance Bill for months, so why yet another last- minute scramble? My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) set it out very clearly: because the Conservatives had a not-so-cunning plan to use this Bill as negotiations reached a critical point by threatening to override the withdrawal agreement. At a time when we are seeking to negotiate new trading relationships across the international community, and when the Government are trying to project an image of global Britain to the world, this tactic certainly sent a clear message, albeit not the message the Government intended.
It is welcome that the Government finally saw sense yesterday, although we have already seen damage being done. Both in relation to the provisions in the Bill and more generally, the time is running out to ready our country for the challenges ahead. The Public Accounts Committee was clear last week that:
“Government is not doing enough to ensure businesses and citizens will be ready for the end of the transition period”.
It expressed concern at reports from industry bodies that the Government had not provided the key information needed for businesses to prepare. Indeed, the Committee indicated that more than a third of small and medium-sized enterprises still believed that the transition period would be extended.
The Cabinet Office has admitted that it is well behind in recruiting the customs agents desperately needed for 1 January, despite more than £80 million having been spent so far. Yet again, earlier today, the Chancellor of the Duchy of Lancaster refused to specify exactly how many additional customs agents had been recruited. Overall, £4.4 billion has been spent by the Government on preparations for Brexit and the end of the transition period, yet we are still not ready.
Jesse Norman
I am terribly grateful to the hon. Lady for giving way. She has criticised the Government for spending £80 million in support of traders and a facilitated approach to the border. Could she tell us whether she thinks that number is too large or too small?
Anneliese Dodds
With enormous respect to the Minister, the problem with his Government’s approach is the fact that they do not indicate what they have got with that spending. As I said, £4.4 billion has been spent on preparedness for Brexit and for the end of the transition period, and the £80 million that he refers to, but there is no indication from the Government of how many additional customs officers we have received as a result of that spending. I hoped that he was intervening on me to provide an indication of the additional workforce that has been recruited. It is a matter of regret that he was unable to do so.
Alison Thewliss (Glasgow Central) (SNP)
The hon. Lady is quite rightly querying how money has been spent. I do not know whether she has had letters from the Government asking MPs, as small businesses, to get ready for Brexit. I got two of them, including one that referred to me as an MSP, so perhaps the Government are not spending their money particularly wisely or accurately.
Anneliese Dodds
I am grateful to the hon. Member for that very relevant point. I am sure that it is not only Opposition Members but Government Members who have had many businesses contacting them, often in despair, about the communications and advertisements asking them to get ready when there is so little indication of what they have to get ready for.
Yesterday morning, the Business, Energy and Industrial Strategy Committee heard from the Food and Drink Federation, which said that the guidance being published now was already too late. Some 43% of its members who supply Northern Ireland have said that they will not do so in the first three months of next year. That is desperately worrying. TheCityUK said that in the worst-case scenario, 40% of the UK’s EU-related financial activity could be lost. Every day between now and the end of the year counts to get a deal, and failing that, to plan for the no-deal outcome that the Prime Minister himself conceded would represent a failure of statecraft.
With that in mind, Labour supports this Bill passing. Labour is a responsible Opposition, and we are determined to see the minimum disruption possible, but we cannot support such continued lack of clarity on critical issues. When businesses need clarity as a matter of urgency, it is not good enough to state that further guidance will be forthcoming. At the very least, they need a timetable for the provision of that greater certainty. They need to know what rules of origin will apply from 1 January. The continued lack of clarity could create unprecedented new costs. They need to know when appropriate tariff codes will be published. They need to know whether the Government will be providing easements, and they need to know these things in concrete terms, not through the winks and nudges that have substituted for clarity so far.
Businesses need to know whether there will be a pause in penalties arising out of this legislation and, if so, what would be done to counterbalance that and prevent wilful avoidance. They need to know whether the measures in the Bill countermand the existing guidance provided to Northern Irish businesses, some of which was updated just on 7 December. They need to know, as revealed in The Irish Times, whether and when the information on the trusted trader scheme for Northern Irish business—details of which have allegedly been coming out of internal communications —is going to be fully published, so that businesses can follow that scheme.
I want to end my contribution by asking the Minister to place himself in the shoes of a small manufacturing company. We have many excellent such companies across the United Kingdom—in Northern Ireland and in Great Britain. Companies will already have faced enormous challenges during this period because of covid. Potentially, they have staff off because they have to self-isolate. Potentially, there is continuing uncertainty about the future of furlough because of this Government’s unwillingness to provide that certainty. Potentially, they were counting on the job retention bonus, but they are not going to receive it. They are now trying to plan which members of staff they will need to have in the company at work to get ready for 1 January. The stress and strain are immense.
The Minister and his Government must do all they can to overcome those uncertainties and help businesses to plan. That is the least they can do for businesses and the people who work for them, who have had such a hard year.
Sir William Cash (Stone) (Con)
I simply would like to put on record it on Second Reading the fact that, as I made clear in a point of order earlier, consideration on Report will take place next week and a lot will happen between now and then. The UKIM Bill at the moment has the “notwithstanding” provisions in it; they have not yet been taken out. We do not yet know what will transpire this evening or at any point between now and the Report stage of this Bill next week. Therefore, I have given instructions for the tabling of amendments to reinsert the “notwithstanding” provisions for the purposes of this Bill, which would have appeared but for the fact that the decision had already been made yesterday, before a statement was made to the House of Commons. That was dealt with today in principle, although not the question of what actually is going to be done. Therefore, for practical purposes, all I need say on Second Reading is that there are relevant provisions within the scope of this Bill, in clause 9, which is entitled “Recovery of unlawful state aid”.
Earlier this afternoon, I chaired, as I always do on Wednesdays, the European Scrutiny Committee. We have a 10 or 15-page paper on this question. The report, which will be signed off today and then published, covers reform of state aid rules and potential implications for the UK and includes a full description of what the state aid rules would mean; what the evaluation is at the moment by the European Commission; what it intends to do with respect to state aid in relation to enforcement proceedings; matters of sovereignty regarding the United Kingdom; the timetable for amendments to the EU state aid rule book; and the continued relevance of EU state aid law to the UK.
I am reading out some headline points, which also include infringement proceedings for state aid granted before 31 December; state aid law under the protocol on Ireland and Northern Ireland; state aid commitments—this is of course highly relevant to what the Minister said at the beginning, and I strongly advise him to read the report carefully—and state aid commitments in the EU-UK trade agreement, which the Prime Minister is going to be discussing today, and we do not know the outcome of that; the impact of EU subsidy controls on the competitors to UK businesses; and article 10 of the protocol on Ireland and Northern Ireland, which my right hon. Friend the Member for Wokingham (John Redwood) referred to. Indeed, I did too this afternoon, when my right hon. Friend the Chancellor of the Duchy of Lancaster made his statement and I pointed out that not only do I agree 100% with what the Prime Minister said at Prime Minister’s questions on all those relevant matters, wishing him well for this evening, but that what the Chancellor of the Duchy of Lancaster announced yesterday, in principle, and then reaffirmed today must not be allowed to undermine the unfettered sovereignty of the United Kingdom Parliament. That sovereignty is based on the referendum, the votes, the Acts of Parliament that everybody in this House on the Government Benches and the House of Lords agreed to, and, for that matter, section 38 of the European Union (Withdrawal Agreement) Act 2020, which was passed by a majority of 120 in this House—not a word of dissent from the House of Lords and not a word of dissent from any Member of this House.
In conclusion, I intend to table these amendments to examine the question when we get to the Report stage next week.
Sir William Cash
It is always a pleasure to give way to the right hon. Gentleman, with whom I have been jousting on these questions for the best part of 20 years.
Mr Carmichael
I hate to think it is the best part, but certainly it has been almost 20 years. The hon. Gentleman gives an interesting list of topics that his Committee has considered. The actual, practical application of these matters will be very different if the ratio decidendi in the Factortame case continues to have application in Northern Ireland post 31 December. Is that a matter he has considered, and what impact does he think it has on these things?
Sir William Cash
As somebody who has taken a great interest in Irish matters since I came into this House, I can only say the answer to that is yes. However, I also know that there is an enormous amount of malicious rubbish talked about the implications for the hard border. We are not going to impose a hard border. If anybody does, it will be the EU. If the EU gets its way on these matters, believe me, we are going to end up with difficulties that will have been created by the EU, not by us. I remember Martin Selmayr saying that the price the United Kingdom would have to pay would be the loss of Northern Ireland. I mean, it is as bad as that. I therefore say that I do take a great interest in it, because I want the Union to survive and to prosper. I believe it can, but it will not be able to if we end up with provisions that undermine the sovereignty of the United Kingdom Parliament.
On the specific question of state aid, that is a matter within the scope of the Bill. I therefore expect our amendment to be able to be called. Precisely what I do about it at that time will depend on the outcome of the negotiations, but I am not going to buy a pig in a poke and accept the idea that it is all over and done with because somebody who happens to be a Government Minister made a statement yesterday from Brussels and then came to the House to put forward his case today. We have not seen the details, so I want to reserve my position until I know exactly what the outcome of the negotiations is. I would warrant that the 70% of the British people would agree with me.
Alison Thewliss (Glasgow Central) (SNP)
The way this Bill has been brought to the House today, less than 24 hours since it was published yesterday, really shows the disrespect the Government have for Parliament and for all of us here today. It is unacceptable that the UK Government are coming so late in the day with these proposals and are blatantly using them as a form of leverage in their negotiations.
The proposals before us today will impact on the daily lives of residents in Northern Ireland and of businesses more widely. I have concerns, not least from what the hon. Member for Stone (Sir William Cash) has just said, that the clauses being taken out could easily be put back in again—if not by him, then by the Government themselves. We have no certainty over that because of the way they have conducted these negotiations.
As MPs, we do not have adequate time to scrutinise what is in front of us this afternoon. Businesses and stakeholders have also been excluded from the process and they are, of course, those who will feel the impact the most. It is typical of the slapdash, chaotic way the UK Government do things, but I would like very much to put on record my dismay and regret at this shambles. I would also like to say that, while I have huge sympathy for those who have worked on the drafting on the Bill, it would not be the first Bill that has come back with errors and drafting issues because it has been prepared in haste. We have also seen that with some of the financial services statutory instruments that have gone through. I am very concerned that this has been done so hastily that we will not find out what the errors are until the UK Government come back to fix them later.
The Northern Ireland provisions have huge complexity and give significant powers to the Treasury to define in regulations the goods that are “at risk” of being moved into the EU. The Minister confirmed yesterday that we do not know exactly what those at-risk goods are, which causes huge uncertainty for those moving goods in and out of Northern Ireland. As the hon. Member for Oxford East (Anneliese Dodds) said, that has a chilling effect on businesses that want to transact their business as normal, but just do not know what it is that they are being expected to prepare for.
The letter that we received earlier from the Financial Secretary to the Treasury confirms that changes to the regulations will be made under the negative procedure, so this House will have no ability to further scrutinise them. The same is true of Stormont and it is crucial that we hear Stormont’s views on these regulations and the effect of them.
“Take back control,” this Government said. Well, it seems that most of the control is either going to the Treasury or to officers in HMRC. All these regulations are being put forward in such a way as to remove scrutiny and to remove control. Throughout the letter that we received earlier from the Financial Secretary to the Treasury, references were made to the use of the negative procedure and, curiously, to powers that there are no plans for the Government to use. It may not be the plan now to use them, but even the best laid plans gang aft agley, as happens so often and so wildly with this Government. How will the scrutiny work should the Government decide to make these changes? Lots of powers are being hived off, as we can well see. The amendment tabled in my name and the names of my colleagues attempts to redress some of the democratic deficit in the way that the Government are conducting themselves.
The affirmative procedure, as with many procedures in this place, is not perfect by any means, but at the very least this would make the UK Government come to this House to explain the reasons for their actions and to be scrutinised on their thinking, rather than just making changes that will make a real difference to the lives and livelihoods of people across these islands and more widely. Changes should not just go through on the nod.
The withdrawal agreement has the consent mechanism for Stormont, which will kick in only at the end of 2024. The UK Government must explain how their engagement will operate on all the mechanisms between then and now. This matter is horribly complicated and my sympathies are with all those who have to operate under these very difficult circumstances. So much of the uncertainty is also swathed in huge amounts of red tape. The red tape that the Brexiteers claimed they were going to remove will now be wrapped around Northern Ireland.
I received very little by way of reassurance from the Chancellor of the Duchy of Lancaster in his statement and his responses to Members earlier today. Too much is uncertain, and a lot of it is mince. The derogation in chilled meat, sausages, mince and unfrozen prepared meals is one such aspect. [Laughter.] Keep up, keep up! RTÉ’s Tony Connelly notes that when the as-yet-to-be-determined derogation period expires, supermarkets in Northern Ireland will need to source products locally or from the Republic of Ireland. That may well be good for those producers and good luck to them, but a clear competitive disadvantage is being placed on food exporters in Scotland, Wales and England and that cannot be justified by the Government.
The trusted trader scheme itself is subject to review three and a half years after the Northern Ireland protocol begins, but what mechanisms exist to hold it to account in the meantime to ensure that it is effective and that it does not have a distorting effect, which we suspect that it may do? What is in place now to ensure that there is not a further panic in a couple of months’ time due to a lack of qualified staff to carry out checks for export health certificates? Given the propensity of this Government to hand in their homework late if the dog has not already eaten it, what concrete assurances can they give?
I turn now to enforcement. The Prime Minister could not answer the question earlier from the Leader of the Opposition on the existence, or otherwise, of 50,000 customs agents, and the Minister today could not answer the same question from the hon. Member for Oxford East. I want to know a bit more about these customs agents. Where are they? How many of them are there? Will they be prioritised for the big ports in the UK, or will the Government run the risk of leaving the door open to smuggling and tax-dodging via the short straits? As the hon. Member for North Down (Stephen Farry) mentioned earlier, there is a risk of criminality as well as just of error.
What assessment have the Government made of the competitiveness of our export businesses with reference to schedule 3 of the Bill? If customs charges now apply, surely it will make it more difficult for people to export as well as to import? This is a general concern that has been raised by my hon. Friend the Member for Aberdeen North (Kirsty Blackman) on multiple occasions. It presents an extra hassle for small businesses as well as an extra unanticipated expense for consumers. I give the House a small example. I ordered a necklace some time ago from the United States and when it arrived a huge customs charge was slapped on it. Had I known about it before I had ordered it, I might not have ordered it, given the scale of the charge. Consumers do not know what they will end up with if they order something online. When we see something online, we see what the price of it is and what the postage is, but we do not see that customs charge, which is really not transparent. The earrings that I am wearing today are from a small business based in Slovenia, which was able to send them with no additional charges because we were a member of the European Union. Some 70% of Irish online purchases come from the UK. I want to know from the Minister what the impact of the changes will be on our own businesses that wish to export to the Irish Republic.
Andrew Griffith (Arundel and South Downs) (Con)
The hon. Lady makes an almost persuasive case about the difficulty of fragmenting a customs union that has been in place for only 40 years or so. How much more difficult would it be to fragment the United Kingdom, a customs union that has been in place for centuries?
Alison Thewliss
The hon. Gentleman makes a good attempt there, but the issue is really the UK Government and their incompetence in dealing with all these issues, which could well have been anticipated, as well as in taking us out of the large trading bloc on our doorstep from which we have benefited for 40 years and from which our businesses have been able to export their goods. We in Scotland have been able to export our food and drink very easily, very simply and without any barriers. These are barriers that the UK Government wish to put in place—and if they wish to put them in place with an independent Scotland, that is their choice, not ours.
Alison Thewliss
I have almost finished, so I want to make a little progress, but I will try to bring the hon. Lady in later.
I am curious about what assessment the Government have made of the chilling effect of these changes. It is also very interesting that the customs duties will benefit the Irish Exchequer and be to the detriment of our people who wish to export. I note that paragraph 12 of schedule 1 will amend the Isle of Man Act 1979, and that part 6 of new schedule 9ZB to the Value Added Tax Act 1994, which is inserted by schedule 2, also relates to the Isle of Man, so I would be grateful if the Government told us what communication they have had with the Manx authorities on the proposals. Obviously those proposals have come out overnight, so I do not know what discussions have been had, but it would be very interesting to find out.
Scotland has not been offered the deal that Northern Ireland has been offered. The Financial Secretary to the Treasury spoke about the benefits of the EU single market that people in Northern Ireland will enjoy. Lucky them. Scotland is the only part of this supposed Union of equals not to get any of what we asked for, and we will see our own industries disadvantaged. To add insult to our very evident injury, Baroness Davidson and the then Scottish Secretary, the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell), threatened to resign if Northern Ireland was given different treatment. Just a couple of years ago, they said:
“Having fought just four years ago to keep our country together, the integrity of our United Kingdom remains the single most important issue for us in these negotiations.
Any deal that delivers a differentiated settlement for Northern Ireland beyond the differences that already exist on an all Ireland basis (eg agriculture), or can be brought under the provisions of the Belfast Agreement, would undermine the integrity of our UK internal market and this United Kingdom…We could not support any deal that…leads to Northern Ireland having a different relationship with the EU than the rest of the UK, beyond what currently exists.”
Well, that is exactly what we have. It is exactly what the Bill is and what it does, yet those two Members are still about. The Scottish Conservatives really do have more faces than the town clock.
To move on to the Chancellor of the Duchy of Lancaster, he has an absolute brass neck to describe the situation in Northern Ireland as the “best of both worlds”. He said on ITV that Northern Ireland would have
“access to the European single market, because there is no infrastructure on the island of Ireland, and at the same time unfettered access to the rest of the UK market.”
“The best of both worlds”—in Scotland, we have heard that before. The Better Together campaign told us that the only risk of losing our place in the EU was if Scotland voted for independence. Where are we now?
The United Kingdom Internal Market Bill farce undermines yet further the integrity of this crumbling Union, and today’s Bill takes another sledgehammer to the support structures that this Government believe are stronger than they are. The people of Scotland—those who voted no as well as those who voted yes, and those who were unable to vote six years ago—have been watching what has been going on. They do not want a UK Government who drag Scotland out of the EU—they voted very clearly, by 62%, to remain—they do not want a UK Government who threaten to break international law and spoil our standing in the world, and they do not want a UK Government to force Scotland into an insular and poorer future. People want their chance to have their say. The 15 polls in a row that now back independence show clearly to me and everybody else that the people of Scotland believe that things have changed. As Winnie Ewing said:
“Stop the world, Scotland wants to get on.”
Mr Deputy Speaker (Mr Nigel Evans)
Members should be aiming to speak for not much longer than four minutes, if we are to get everybody in. I call Sir John Redwood.
John Redwood (Wokingham) (Con)
I have declared my business interests in the Register of Members’ Financial Interests.
The origins of this legislation lie in the negotiations under the previous Prime Minister that introduced the whole idea of a Northern Ireland protocol. I regretted those negotiations very much. I opposed them at the time and did not vote for the deals that my right hon. Friend the Member for Maidenhead (Mrs May) came forward with, because I thought they were designed by the EU as a lever to try to delay, dilute or damage Brexit.
When the current Government asked me to support their version of the withdrawal agreement, I still had considerable reservations about the Northern Ireland protocol. I put those to Ministers, who reassured me and said, “This is only an outline operation in the withdrawal agreement as currently drafted. None of the detail has been done. We will negotiate very strongly. We will get rid of the offensive features that you don’t like.” They said that they shared some of my concerns and that they would come back with something much better. I am always trusting of colleagues, so I said that that was very good to know but that I did not have the same confidence in the EU.
I thought it was unlikely that the EU would want to facilitate that in the way that I and the Government would like. so with some friends, I backed my hon. Friend the Member for Stone (Sir William Cash) in saying that the way through this was to put clause 38 into the European Union (Withdrawal Agreement) Bill. Under that clause, were the EU to act in bad faith and not come up with a workable solution for Northern Ireland and the other problems, we would have asserted UK sovereignty in our version of the treaty, and so in good law we could use clause 38 to legislate in Britain for what we intend to do, overriding the agreement.
It was quite clear from the drafting of that Bill that we wanted that override, and I would not have dreamt of voting for the thing without the override. The Government were saying that they did not think we would need to use it, but we could use if we had to, which is why I was pleased to support them earlier this week in a very modest override. It is entirely legal; it is the assertion of British sovereignty. We need to keep that in reserve, because without seeing all the detail from the Chancellor of the Duchy of Lancaster, I am not satisfied yet that we have a working operation for the Northern Ireland border and the matters that we are discussing today—more precisely, who controls the taxation.
What I do not like about these proposals is that it is extremely difficult for individuals and businesses to have to respond to two legal jurisdictions on tax in the same place, yet we seem to have both an EU VAT system and a UK VAT system. I hope that the UK VAT system will deviate rather more from the EU one and be friendlier, lower and apply to different things, but the more that that happens, the more difficult it will be if we are trying to enforce two different VAT systems in one part of the United Kingdom.
I am also concerned about the enforcement mechanisms. We are led to believe that it will be handled by HMRC, but we are also told that the ultimate authority on the EU part of VAT and excise will be the European Court, and therefore there are likely to be inspectors and invigilators—electronic or in person—interfering in the process within what should be sovereign United Kingdom territory. I hope the Government will think again and push back again.
We need more of the detail that the Chancellor of the Duchy of Lancaster has so far withheld from the House. It may be that he does not yet know it all or that his agreement is high level, in principle, but there are details that we need to know—indeed, details that it would be better to know before we legislate today. For example, the Chancellor of the Duchy of Lancaster says that delay periods for adjustment will be necessary for supermarkets and some meat products and so forth. Does that not require some kind of recognition in this legislation? Does it not mean that these jurisdictions do not kick in during the period of grace that we are told will be available?
We need to have more detail from the Government on what exactly happens at the border. I have always explained to the House and others who are not very interested that VAT and excise take place electronically across the borders at the moment, so we are talking largely about an electronic border. We need to know how this electronic border will be programmed to deal with the competing jurisdictions and competing incidences of taxation, and how the product codes and shipment codes will correctly identify the products by category that will be suborned by the EU jurisdiction as well as, properly, by the UK jurisdiction, which ideally would be handling the whole thing.
We do not have nearly enough time to discuss the fundamentally big issues of principle that the Bill brings before us and we have had precious little time to go into the detail. It is all very sad that this rush job is being done like this, but I hope before the Government finish the debate today they will have done a better job of explaining to someone like me why we need to have this dual jurisdiction; how the EU control is going to be limited; how it is going to operate; how, in the early days, the “transitional arrangements”, which we are told about, are going to apply; and why they are not reflected in the current text of this rather unfortunate piece of legislation.
Mr Toby Perkins (Chesterfield) (Lab)
It is a great pleasure to follow the right hon. Member for Wokingham (John Redwood). Unusually, I found myself agreeing with much of what he said about the time we have to debate this Bill. The points made by my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) in the previous debate were absolutely on the mark.
As someone who voted in the referendum to remain but who represents a seat that voted leave, I have to say that when I hear speeches such as the right hon. Gentleman’s, and many others that we are going to hear, I fear that much of what I have long feared about the whole Brexit process is coming to pass, which is that Brexit will be an orphan child and when we have left the EU and come to our final arrangement, it will be impossible to find anyone, perhaps with the exception of the Prime Minister, who says, “This is the Brexit I was campaigning for.”
Brexit operated in so many different people’s minds as a different entity. Even now, with a Brexit-backing Prime Minister, an overwhelming Tory majority, any Tories who showed a whiff of regard for our future relationship with Europe banished from the party and all rebellion quashed, the fundamental contradictions of Brexit remain unresolved. I have no way of knowing whether there will be a deal, but I can be certain that when that deal is signed many who argued earnestly that we should leave the EU will claim, “This was not the Brexit I was campaigning for.”
Let me turn to the measures in the Bill. I confess that during the referendum our campaign to back remain in Chesterfield hardly touched on the position of Northern Ireland. We did speak a bit about the Union in the context of Scotland, but Northern Ireland was barely mentioned, yet much of the Bill relates to the provisions relating to Northern Ireland that have become central to the issues that remain. The Labour party is, as I am, resolutely behind the Union and entirely committed to the Belfast agreement, and we recognise the many contradictions that persist.
I have to say to colleagues from the Democratic Unionist party and others that they should not think that these Northern Ireland issues concern very many of my constituents in Chesterfield. I know from many conversations that took place during the general elections on doorsteps in Chesterfield in 2019, when I was trying to raise the issues associated with Northern Ireland, that if the cost of getting a Brexit deal that enables our country to trade freely and regain control of immigration happened to be a united Ireland, many of my Brexit-voting constituents would accept that in a heartbeat. The people of Northern Ireland, whom, we should remember, in totality voted to remain, have been badly let down by many of the people they elected to represent them, either by those who sold their support to prop up the disastrous May Government and were then shocked to be sold down the river by the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), or by those who, through their absence from this place, allowed the Brexit view to be heard as the dominant opinion of Northern Ireland.
The businesses of Northern Ireland are now starting to understand what that failure means for them. Right now it means that just weeks away from a change that will impact them more than any other on these islands, the promise that they will be able to enjoy frictionless trade has been exposed as wrong. It is irresponsible that when the Government themselves acknowledge that the administrative impacts on businesses affected by these changes will be significant, those businesses have so little time to plan, and no serious economic or fiscal impact assessments are contained within.
The last-minute nature of the Bill once again exposes the fact that the businesses of Great Britain, and particularly Northern Ireland, are left vulnerable by this incompetent Government’s pursuit of a promise that they cannot keep and should never have made. Although I wish the Prime Minister well tonight, the whole country needs him to remove the spectre of no deal from the nightmares we face as we look towards 2021. Once again, the Government are leaving businesses in the dark, jobs at risk and industries on the brink.
Mr Deputy Speaker (Mr Nigel Evans)
The next two speeches will be timed at four minutes, and then everyone else will have three minutes.
Katherine Fletcher (South Ribble) (Con)
I am going to break with tradition in this debate and actually talk about the Bill. A Bill that is described, in large sections, as primarily technical, administrative and procedural will not always excite the juices in Parliament, among the public or in the press but, although dry in sections, this Bill contains important measures, and I rise to support them.
Let me ground my comments in the experience of many people in the UK today. As someone who ran her own business prior to the election, I know that it is often the technical, administrative and procedural that can really shift the dial—for example, on the number of sales an individual can make or on market price points for a certain type of product—never mind the administrative and procedural processes that take too much valuable time from often hard-pressed smaller traders. Clarity is essential, welcome and timely. Once passed, the Bill will ensure that whatever happens in the ongoing trade negotiations with the EU, in an important subset of regulations there is clarity and fairness for businesses in the UK.
Measures in the Bill will change and improve our tax system and have been brought forward in separate legislation in advance of the proposed Finance Bill. They will ensure that the UK is prepared, whatever the outcome of the Prime Minister’s trip to Brussels later today. We are, and will continue to be, a proud sovereign trading nation. We are ensuring, and will continue to ensure, a smooth transition and continuity for trading businesses.
What do I mean? Let me be specific and turn to schedule 3, on amendments to the Value Added Tax Act 1994—essential bedtime reading for all, I am certain. In my previous business, I sold volumes of lower-value goods in online marketplaces and online channels to customers in the UK, the EU and many other locations overseas. For too long prior to the election I saw lower-value goods advertised by overseas sellers—my competitors— that were imported from abroad and undercut UK manufacturers and suppliers.
Currently, overseas sellers can avoid VAT, not charging it at the point of sale and not handing the revenue back to our Exchequer. That means that our country is losing twice: our fabulous businesses are losing sales to cheaper products from overseas sellers who do not have to charge VAT, which is unacceptable, while our Exchequer is also losing the revenue that such measures raise, which I remind the House funds the provision of the public services, such as the NHS and schools, that we rightly value so highly on the Government Benches. The Bill will remove that overseas-seller anomaly.
Specifically, the measures will mean that low-value consignment relief—LVCR—is removed from all non-UK sellers. All imported goods worth under £135, including under those worth under £15, will be subject to VAT at UK rates. Although currently legal, the existing situation amounts to tax avoidance by overseas sellers and has created distortions in UK marketplaces. It is this Conservative Government who are clamping down on it. To level the playing field, online marketplaces must now account for their VAT. This Government support our fabulous businessmen and women who trade from shops or—like me—online and will continue to do so.
Earlier, the hon. Member for Glasgow Central (Alison Thewliss) mentioned extra exporting barriers. As someone who has sat and put the labels on to goods going to EU, Ireland and international destinations, I know that for lower-value goods, any individual consignment worth under £270 gets a CN23 sticker with all the declarations on it, and then off it pops and there are no additional barriers between the EU and the US. No change that we will make today will put in place extra paperwork: what was done for the EU was always what happened anyway—it automatically comes off the printer. I am sure there are great British jewellers who can sell us wonderful earrings—
Andrew Jones (Harrogate and Knaresborough) (Con)
Yesterday in the debate on the Ways and Means resolutions, I said that I would be supporting the Bill because our country needs it. It needs it for the core purposes of the Bill, which are the smooth continuity of business after the transition period, being ready, and creating a more level playing field for UK businesses.
I recognise that leaving the EU is a field full of tough issues, but the most problematic element is the nature of our land border with it. Seeking to deliver Brexit while protecting the Good Friday agreement was the major stumbling block in our endless debates and struggles last year, so I am pleased to see progress made on that issue. We had a statement on it earlier; I will not go over trodden ground.
There are businesses in Harrogate and Knaresborough that do significant trade selling to and buying from Northern Ireland. The Bill will be welcome news for them. More people in Harrogate and Knaresborough are affected by internet shopping, either buying from or selling via online platforms. Even if people do not buy online, they are affected by the struggles on the high street. It is a tough time for retailers and, of course, high streets provide countless thousands of jobs. They are economic hubs. Our high streets and town centres also have a social function beyond an economic one. They provide a community focal point.
Before coming here, I worked in retail and for brands that sell through retail. When I talk to retailers, they say that they just want a level playing field. They are talking widely when they use that phrase, but they are talking about taxation, particularly business rates and VAT. The Bill helps to create more of a level playing field with a new model for the treatment of VAT on goods arriving in the UK from overseas. The collection moves to the overseas seller or the online marketplace where that transaction occurs. As a result, it will be easier to collect VAT and harder to avoid it. The last thing that a business having a tough time needs is for competitors to have a 20% price advantage. High street businesses and online players based here pay VAT, so if overseas businesses are allowed to make VAT-free sales, they are unfairly undercut.
I do not think the measure is controversial; it is entirely reasonable. Indeed, as I mentioned yesterday, there are moves across the world in this policy direction. I commented on the other measures in the Bill yesterday, so I will not detain the House with repetition.
The past year has obviously been one of the toughest on record in peacetime. The economic impact will be felt for many years. We also have the consequences of Brexit. The need for the continuity of business operation is profound. Our whole United Kingdom must focus on growth as we seek to protect livelihoods as we have sought to protect lives. The Bill is part of the measures being taken to secure our business future, and that is why I will support it.
Miriam Cates (Penistone and Stocksbridge) (Con)
The existence and contents of the Bill encapsulate the opportunities and complexities that we, the United Kingdom of Great Britain and Northern Ireland, face as we reach the end of the transition period. As we regain control of our money, borders and laws, we have the opportunity to innovate and, in relation to taxation, to remould our regulations around the values and requirements of our modern UK economy.
For example, the Bill introduces some administrative and procedural VAT changes that not only are legally necessary, but allow us to tackle non-compliance and to support our high streets to compete with online sales. That is important in the current economic climate where, for nearly nine months, our high streets have faced unprecedented restrictions and sales have plummeted, while online retailers have traded unhindered and made record profits. I therefore support the measures in the Bill that stipulate that VAT is due from online sales by companies that import goods into the UK. That will ensure a more level playing field for our bricks-and-mortar retailers.
Another opportunity presented by our departure from the EU and the end of the transition period is our potential ability to crack down on tax evasion. The Bill also makes technical provisions on that issue. As well as realising the administrative opportunities that we can embrace as we leave the EU, the Bill reflects some of the complexities that have inevitably arisen as we, an historic Union of four distinct nations, seek to disentangle ourselves from 40 years of economic and increasingly political union with our European neighbours.
During the referendum campaign in 2016, I was not actively involved in politics and I was not a member of a political party, but I agonised over my vote. I was torn between the moral conviction that our UK Parliament should be sovereign and the practical acknowledgement that any divorce after 40 years of union will be complicated and messy—of course, both are true. Following 17 million votes to leave the EU, it is right and democratic to leave, but is also a complex and challenging process that has tested our determination and resolve for three and a half years. That is why the Bill must also make provision for all the circumstances that we may face following the outcome of ongoing trade negotiations. We cannot gloss over or underestimate these complexities or pretend that they should not exist. The history of the relationship between each of our four nations is unique, and it is based on cultural and relational settlements as much as law and statute. Whatever the outcome of the trade negotiations, we must ensure that we have a VAT and customs framework in place to allow trade across the UK to continue as seamlessly as possible. That is what this Bill will achieve, and it is why I support it as a sensible, responsible and necessary piece of legislation.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Somehow or other, I always thought that taking back control would look rather different for this place than this: to have just 24 hours to consider 112 pages of highly technical and detailed taxation legislation is an affront and insult to this House, and an abuse of the process by which we are supposed to govern ourselves. Those on the Treasury Bench who have brought forward this legislation in this way should hang their heads in shame. But, as the hon. Member for Oxford East (Anneliese Dodds) indicated in her contribution, it is, unfortunately, necessary. It is remarkable that amongst these 112 pages there are so many enabling provisions; so we know that in fact the detail is still to come and there will require to be secondary legislation to implement the detail of what our businesses will actually need.
The kindest comment I can make about the Bill at this stage, given the time available to me, is that it is just a foretaste of things to come. Essentially, most of what we have here pertains to the relationship with Northern Ireland, and even at this stage the Government are still tying themselves in knots because they promised three things of which they could only ever at best deliver two. They said we could come out of the customs union or we would have no border north and south or have no border east or west. In fact, if we were going to come out of the customs union, eventually we had to have a border north or south, or east or west; we could not have all three. I listened to the right hon. Member for Wokingham (John Redwood) talking about electronic borders, but the clue is in the title: it is a border. Once sovereignty trumps economics, that inevitably leads to having borders—something that should be heard in all parts of this House.
I was struck by the hon. Member for Glasgow Central (Alison Thewliss) quoting Robert Burns, saying:
“The best laid schemes o’ Mice an’ Men
Gang aft agley,”
I was disappointed and a little surprised that she did not then deliver the next line of that stanza:
“The best laid schemes o’ Mice an’ Men
Gang aft agley,
An’ lea’e us nought but grief an’ pain,
For promis’d joy!”
If ever I heard the perfect way of describing Brexit, that has got to be it:
“An’ lea’e us nought but grief an’ pain,
For promis’d joy!”
The House will remember, of course, that Robert Burns was an exciseman, so he would know quite a lot about customs and the matters in this Bill; Lord alone knows what he would make of it if he were alive today.
Jerome Mayhew (Broadland) (Con)
This time yesterday we, frankly, would all have celebrated seeing what is in this Bill; today, I want to celebrate what is not in it. It is great that we do not have to consider the inclusion of additional measures to take account of the failure of the Joint Committee to come to an agreement on the proper interpretation of the Northern Irish protocol; I am delighted to learn that we have now come to the pragmatic and proportionate way found by the Joint Committee for the interpretation and enforcement of its provisions. Just a few days ago the European Union asserted that all goods travelling from GB to Northern Ireland were to be considered as being “at risk” of onward transport to the EU, a patently absurd and obstructionist position, so I heartily welcome this last-minute change of heart.
TD Simon Coveney, the Fine Gael Minister for Foreign Affairs, has said that
“Practical cooperation and flexibility has been agreed to make it as manageable as possible for people and businesses.”
Amen to that, and may the same spirit suffuse the continuing negotiations elsewhere in Europe.
Clauses 2, 3 and 4 put in place the practical requirements to allow for the charging of customs duties and VAT away from the geographical border with the Republic of Ireland while continuing to protect the ability of Northern Irish products to travel without restrictions to the rest of the United Kingdom. This respects the Government’s commitment that goods from Northern Ireland will continue to have unfettered access to the rest of the United Kingdom.
Clause 7 proposes that VAT collection for goods sold in the UK by overseas sellers will move away from the border either directly to the overseas seller or, importantly, where the sale has been facilitated by an online marketplace, to that marketplace. This is a very important step that marks, I hope, the beginning of a much wider reassessment of the role of online marketplaces and the responsibility that they should properly have for the goods of international origin that they sell. All goods sold on our high streets pay the appropriate level of VAT, yet high street shops are being unfairly undercut by online international competitors that have avoided VAT. This clause allows the first step to be taken in recognising that the online marketplace has come of age, and with that coming of age it needs to accept the responsibilities of its powerful market-making position.
I hope that the link between the facilitation of sale and wider responsibilities will be a theme that the Government expand on in the coming months. As I mentioned in the debate yesterday, the same argument can be applied to areas of environmental legislation, such as the extended producer responsibility, as well as the collection of electronic waste for recycling.
I welcome Her Majesty’s Government’s approach. It is no longer credible for the hugely powerful and commercially dominant online marketplaces to wash their hands of what actually passes through their platforms.
Stephen Flynn (Aberdeen South) (SNP)
It is a pleasure to follow the hon. Member for Broadland (Jerome Mayhew), particularly given the fact that he highlighted that just yesterday, we were all wondering what was going to be in this Bill.
What a complete and utter boorach the last 24 hours have been. The right hon. Member for Orkney and Shetland (Mr Carmichael) rightly highlighted the shambolic scenes that we have all seen. I heard yesterday from those on the Government Benches that the reason for this is that we are currently in a fast-paced environment. This has been going on for four and a half years, with three Prime Ministers and two general elections. How many resignations? How many U-turns? And the Government leave it until three weeks before the end of the transition before they bring forward something, and they do so with less than 24 hours’ notice of what it will actually entail. What a complete and utter embarrassment. Government Members are the ones who tell us that this is the place where power should lie, yet they are the ones who treat it with more contempt than anyone else. If I was not so disappointed, I would laugh at their sheer hypocrisy.
To turn to the Bill—I am very mindful of time—the hon. Member for South Ribble (Katherine Fletcher) was right to highlight one of the good elements of the Bill, in relation to online VAT. We should all support that, particularly at this moment in time, given the challenges that we are all seeing on our high street. We need to see a level playing field, and if we can bring that level playing field about, we should be willing to do it. I hope, however, that the Government will continue to go further and revisit the issue of the digital services tax, where they have the powers to make further inroads into levelling that playing field.
You will be unsurprised to learn, Mr Deputy Speaker, with just 60 seconds to go, that my agreement with the Government ends there, for four simple reasons that I will cover quickly. The first one is this: England voted to leave and England will leave. Wales voted to leave and Wales will leave. Northern Ireland voted to remain and Northern Ireland is going to get the best of both worlds; it is going to get access to the EU market while simultaneously remaining in the United Kingdom. And what of Scotland? What do we get? Scotland was told that we should stay in the United Kingdom in order to lead the United Kingdom—lead, don’t leave. We wanted the same access as Northern Ireland. We put forward numerous proposals, yet time after time, this UK Government completely ignored our views and desires in that respect. That all adds up, and it adds up in the minds of the very people this UK Government are going to have to rely upon the next time we go to the polls on our independence.
Kevin Hollinrake (Thirsk and Malton) (Con)
At least I and the hon. Member for Aberdeen South (Stephen Flynn) agree on a level playing field for business, and I want to concentrate my comments on that area. There is no question, for the best deal for consumers on prices and service, but that we need a fair and level playing field for businesses. That makes the market more competitive, which drives down prices and drives up service. It is absolutely where this Government should focus, and I am pleased to see that they are doing so in this legislation.
I am a big fan of VAT’s part in the collection of taxation. It is much more difficult to avoid than other taxes and much easier to collect. It is not a regressive tax, and I think we should try to focus on indirect taxes as we reform taxes in the future and simplify the tax system. As this closes a loophole, there is actually another area where we lose such a fair and level playing field, and that is the threshold for VAT registration. Some businesses are slightly below that and gain an advantage over others that are slightly above it. That is perhaps a conversation we should have another day.
On part 1 of schedule 3 to the Bill, I very much welcome the changed emphasis on online marketplaces in the collection of VAT duty. I understand from reports that when the changes were made in 2016, we collected about £500 million, although I am not sure what period that accounted for. I would be interested to hear from the Exchequer Secretary how much she thinks these changes will actually bring in for the Exchequer. I am pleased to see that we are closing another loophole in this way, after things like the digital services tax and the diverted profits tax. I do not think any Government in history have done more to clamp down on tax avoidance than this Government, quite rightly.
I would like to ask a couple of questions about these provisions. As I asked in my intervention, why is the figure £135? I realise this is to do with the changes in Northern Ireland to do with our leaving the European Union and the provisions in EU law for this, but why is it £135? Many products sold on the internet are also sold by UK domestic sellers who have to charge VAT, but above £135 overseas sellers may not have to, so this is another loophole that needs closing. I am not sure why, for example, someone could buy a watch from abroad that might be £500 or £1,000 and the same loophole would apply.
Similarly, this applies only to goods, not services. Many services are now sold online from abroad, such as legal services, accountancy services, IT developer services—for example, people can recruit developers from abroad through platforms such as Elance—and UK providers would have to charge VAT, but overseas providers potentially would not, so I wonder whether we can look at that. However, in the round, I am very supportive of these changes. I welcome them, and I certainly will be voting for them, if it comes to that, later today.
Stephen Farry (North Down) (Alliance)
I am pleased to be a Northern Ireland voice in this very important debate. Obviously, this is a different type of speech from the one I was envisaging making earlier this week, and I do welcome that progress—not least that we are, I hope, moving beyond part 5 of the United Kingdom Internal Market Bill and the potential notwithstanding clause in this legislation, although of course we do remain vigilant in that regard.
I would welcome confirmation from the Minister, not least given that we have had very little time to scrutinise the detail, that the current version of this Bill is entirely consistent with the Northern Ireland protocol. It is worth recalling why we have to do that and why there is such a protocol. It arises from the decision of the UK not to have a fresh customs union with the EU post Brexit. That prompts the question of where the line is going to be drawn on the map between the UK’s customs union and the EU. The protocol essentially sees a situation whereby Northern Ireland remains part of the single market for goods, but remains part of the UK’s customs territory. Crucially, however, the EU customs code is to be applied down the Irish sea; hence the nature of this Bill.
Just to correct something that was said earlier, the withdrawal agreement and the protocol, which were signed up to by this Prime Minister, had the starting point that all goods moving into Northern Ireland were potentially at risk. That was what was said in the protocol, and I do welcome the progress that has been made in trying to find a way through this and that that is not going to be the case in practice.
Some people may say that it was only the EU that was threatening a border in Ireland. Of course, the EU does have the right to protect the integrity of its single market and customs union, but I think we are being too complacent about the UK’s own obligations in that regard. If, in the event of no deal, the back gate was left open, so to speak, there would be a requirement under WTO rules for the UK to adopt the exact same posture that it has on the island of Ireland with the rest of the world. I am not sure that is a line that it would want to go down, particularly given the whole range of threats that are out there.
There are a range of issues still to be addressed regarding the wider context of the Bill—in particular, the achievement of a zero-tariff, zero-quota deal. Even with that, rules of origin will still be an issue. But if there is no free trade agreement, we are back to the issue of goods at risk. Although we have the prospect of the authorised economic operator model—we await more details of that—it is not going to cover everyone. For example, it is not going to cover small retailers and it may not cover the online issue. There is also the question of what happens if that measure is not renewed in a few years’ time, as well as the issue around necessary resources.
Looking the other way, I have already raised in my intervention on the Minister the issue of qualifying goods and how we can tackle avoidance.
Mr Deputy Speaker (Mr Nigel Evans)
I call Shaun Bailey; please resume your seat no later than 5 pm.
Shaun Bailey (West Bromwich West) (Con)
It is a pleasure to contribute to this debate. It has certainly been a wide-ranging and interesting one, on both sides of the House.
Trade is among the most efficient ways to ensure that peace can be maintained between the communities in Northern Ireland as a whole, and to maintain the prosperity of Northern Ireland and the rest of the United Kingdom. I believe that this Bill secures that. In creating the legal framework for customs, VAT and excise charges, the Bill will make a real and positive impact on trade in both Northern Ireland and the rest of the United Kingdom, including in my communities in Wednesbury, Oldbury and Tipton. It will have a sizeable effect, given that 10% of England’s exports are to other parts of the United Kingdom, and particularly to Northern Ireland, with Northern Ireland external purchases from Great Britain coming in at around £14 billion. In specifying that customs charges will apply to certain goods only if they are at risk of moving into the EU, the Bill provides greater certainty and will ensure that our businesses can have the brighter future that they are looking for. Equally, the Bill will ensure that businesses across the United Kingdom can benefit from a continual flow of goods between the United Kingdom and Northern Ireland, and that Northern Ireland exports and imports do not have to suffer from barriers to trade.
It is quite right that our red line in this Bill has been the ability to set our own customs laws and excise duties. We are going to see the benefit of that in January, with the streamlining of some 6,000 tariff lines and the removal of tariffs on some £30 billion of imports entering supply chains, particularly within manufacturing, which is a key industry for areas like mine in the Black Country. We are going to do that while ensuring that there is no hard border on the island of Ireland, that we maintain the peace that has been built there over generations, and that we maintain the integrity of the communities within Northern Ireland.
Let me turn to the technicalities of the Bill. My hon. Friends the Members for South Ribble (Katherine Fletcher) and for Harrogate and Knaresborough (Andrew Jones) touched on the tax element, particularly VAT. As we have heard, schedule 3 finally ensures that our high street retailers can have the level playing field that they desperately need. As I touched on in my contribution yesterday, this has been a horrendous year for our high street retailers, with all the uncertainty and difficulties that they have come through, so ensuring that they are on a level playing field with online retailers and are able to obtain those benefits—and, equally, ensuring that the tax revenue that we have lost out on so far can be put into our vital public services, which have stepped up to protect us and our constituents during this time—is absolutely crucial. I welcome that part of the Bill.
I am extremely conscious of time, so I will round off my comments. Ministers have been given quite a degree of discretion under the words in the Bill, both in some of the definitions, and in some of the abilities that they will have. My right hon. Friend the Member for Wokingham (John Redwood) touched yesterday on the point that Ministers have to realise the potential of what they can do through this Bill. I implore my hon. Friends on the Treasury Bench to realise the potential in some of the abilities and powers that they have in this Bill, and to ensure that they get this right as we move forward—because we will move forward into 2021, and we have to ensure that, as we implement these measures, we do the best by all traders and all businesses operating within our United Kingdom.
Mr Pat McFadden (Wolverhampton South East) (Lab)
I thank everybody who has contributed to this short debate. To pick out a few, the hon. Member for Stone (Sir William Cash) told us that he was reserving his judgment on some of these measures, particularly the Government’s decision not to proceed with the “notwithstanding” clauses. The hon. Member for Glasgow Central (Alison Thewliss) talked about hidden customs charges and described parts of the Government’s approach as “absolute mince”. The right hon. Member for Wokingham (John Redwood) spoke about the dual taxation regime, which we will return to in the Committee stage shortly to follow. My hon. Friend the Member for Chesterfield (Mr Perkins) spoke about the phenomenon of people saying that it is never a proper Brexit, no matter what kind of Brexit it is. The hon. Member for North Down (Stephen Farry) gave us a very welcome Northern Ireland voice on these issues.
What this Bill does, first and foremost, is to put in place a framework for the monitoring, taxation and movement of goods that was not there in the past. However much the Government try to duck that issue—to pretend that everything is going to carry on as normal—the new regime is there for everybody to see in the clauses of the Bill and the regulations to follow. Business to and from Northern Ireland will be conducted on a more monitored, differently taxed and significantly more bureaucratic basis than before. There is simply no escaping that and no hiding from it, and it would be better if the Government acknowledged this as what they have agreed. My first question to the Minister is: do the Government really expect to implement everything in this Bill and to secure compliance from businesses both in Northern Ireland and in the rest of the UK on all these measures by 1 January? Is that the Government’s realistic goal?
The Bill, of course, could have been very different. It could have contained clauses setting aside parts of the Northern Ireland protocol. The Government did look ready to double down on the course of action that they had embarked on in the UK Internal Market Bill, but thanks to yesterday’s statement by the Chancellor of the Duchy of Lancaster and his counterpart, Mr Šefčovič, the Government have announced that they will not proceed with such clauses. We can now look forward to the Government moving amendments in the other place to delete that which they insisted was necessary in this House on Monday evening. It is one thing to play ping-pong with the House of Lords, but quite another to play ping-pong with yourself. Once again, the Government’s MPs who valiantly defended the line on Monday now have a very different line to advance before Thursday. This is not the first time this has happened, and I should guess it will not be the last. If I was a Government Back Bencher, I would be becoming a little bit more wary of following the line from No. 10 on a number of issues.
In all the twists and turns that got us here, Ministers might think that they have acted tough, but threatening to legislate to set aside parts of an international agreement that the Government signed only a year ago has only done damage to the country’s reputation. The Government have not communicated toughness; all they have communicated is that they cannot be trusted. As we embark on a process of trying to negotiate new free trade deals around the world, what a signal to send and what a starting point: do a deal with the Government who threatened to ditch parts of the last one that we signed. That was not clever negotiating tactics and it was not toughness—it was reckless, and, I am afraid, it was revealing about the character of the Government.
The Bill sets out the new customs regime for so-called at-risk goods moving to and from Northern Ireland and the rest of the UK. Although it empowers Ministers to levy the necessary duties, there is still much that, as clause 1 says, will have to be clarified in new regulations from the Treasury. We only have 22 days to go. When will we see these new regulations? When will businesses in Northern Ireland, or those anywhere else in the country that send goods to Northern Ireland, know exactly what the new regime will be? Does the Minister really think that this is a proper way to do this, more than four years after the referendum and just three weeks before the end of the transition period?
Similar phrasing is used in clause 2 in relation to goods moving from Northern Ireland to the rest of the UK, and the same point applies: when will businesses know what is happening? On the VAT regime in clause 3, will the Minister set out how the EU’s VAT regime, as it applies to Northern Ireland, will interplay with the UK’s VAT regime—the question raised by the right hon. Member for Wokingham (John Redwood)? Similarly, on excise duties, how will the measures in clause 4, which apply to everything from spirits and beer to tobacco products, differ from current arrangements? Are the insurance premium tax changes thought necessary in the event of no mutual assistance provisions between the UK and the EU? If they are, are such provisions likely to be part of any deal which, if agreed, would then mean that the clause was not needed?
These measures are likely to pass the House quite quickly tonight, but the real action at the moment is of course not here, but elsewhere. As we debate this Bill, we still do not know whether there will be a free trade agreement reached. After four years, the public, companies and their staff do not know what they will be facing in January, and the root of that decision remains what it has always been: this choice between sovereignty and market access.
The story of the past four years has been the Government moving more and more towards the sovereignty side of that choice. They may say that is the remorseless logic of Brexit, but no one should doubt the significance, because what it means is that, for the first time in history, we have a Government and a process where questions of investment, of people’s prosperity and of their living standards have been progressively relegated to a more and more distant second place. We will see the results of that choice over the coming months. Perhaps after tonight’s dinner in Brussels, we might even be a bit clearer about the results in the days to come, but in the end what has been described as a negotiation is, in fact, a choice. The Government have made their choice, and we will see the effect in the months to come.
The Exchequer Secretary to the Treasury (Kemi Badenoch)
It is a privilege to close this debate on behalf of the Government, and I thank Members from all parts of the House for their thoughtful and varied contributions.
At the end of this month, the transition period will end. As my right hon. Friend the Financial Secretary pointed out at the beginning of today’s debate, we have a great responsibility to be ready for this event. The measures contained in the Taxation (Post-transition Period) Bill will play an important part in the preparations.
Let me take this opportunity to thank Opposition Members for their constructive and collegiate approach throughout the passage of this Bill, despite their evident reservations, and in that same spirit I will address some of the points raised in today’s debate.
The Bill is an essential part of our preparations for the end of the transition period. It takes forward important changes to our tax system to support the smooth continuation of business across the UK. It contains six measures. Three relate to the implementation of the Northern Ireland protocol and three implement wider changes to the tax system, which are needed before 1 January. Most importantly, it will ensure that we meet our commitments to Northern Ireland, including on unfettered access and those commitments as set out in the Northern Ireland protocol. Taken together, the measures form an important part of our preparations as we resume our place as a fully sovereign trading nation.
Now that we have further clarity on the outcome of the Joint Committee negotiations, it is vital that the provisions are in place before the end of the transition period to provide that certainty. The Bill’s passage is necessarily rapid, but it will allow for these important changes to be implemented on time. The right hon. Member for Wolverhampton South East (Mr McFadden) asked if we believed it can be done, and my answer is yes, of course. The UK Government will take forward a pragmatic approach that draws upon available flexibilities to implement the protocol without causing undue disruption to lives and livelihoods.
The Government are committed to supporting business. At the centre of the package is the free-to-use trader support service, which will support business when moving goods into Northern Ireland, educating traders on what the protocol means for them and completing customs safety and security declarations on their behalf. That is working. Since the launch of the registration portal in September, more than 18,000 businesses have signed up for support from the trader support service.
Turning to Members’ comments, the hon. Member for North Down (Stephen Farry) requested confirmation that the UK meets its obligations. The powers in the Bill allow us to implement the Northern Ireland protocol in a way that is consistent with our obligations, and I appreciate his broader supportive statements. My hon. Friends the Members for South Ribble (Katherine Fletcher) and for Harrogate and Knaresborough (Andrew Jones), among others, rightly referred to our closing of the VAT loophole in clause 7 and schedule 3. Low-value consignment relief is subject to widespread abuse and contributes to trade distortion. It disadvantages UK high street businesses that are required to charge VAT where overseas businesses are not, either for legitimate reasons or through abuse, and removing the relief will bring overseas sellers on to an equal footing with UK businesses.
My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) asked why the clause applied just to low-value goods and whether there was an opportunity for it to apply to high-value goods as well. The reason is that the £135 threshold aligns with the threshold for customs duty liability. Imports of goods greater than £135 in value are subject to enhanced customs requirements, which would negate the benefit of moving VAT away from the border. Therefore, imports of goods greater than that amount will remain subject to the current model for goods arriving from non-EU countries, where VAT is collected at the point of importation.
My hon. Friend also asked what revenue we expected from this change. The Office for Budget Responsibility has forecast that these changes will raise over £300 million a year over the next five years, and £1.6 billion over the scorecard period. Approximately two thirds of that will come from improving collection and tackling non-compliance through the new VAT treatment of cross-border goods, and the final third of the revenue will come from the removal of low-value consignment relief, which will end widespread abuse of this relief.
My right hon. Friend the Member for Wokingham (John Redwood) asked whether the ECJ would be the ultimate arbiter for VAT and excise. The ECJ will continue to have a role where EU directives apply in Northern Ireland—for example, where there are disputes on how the EU rules should be interpreted. However, the rules will continue to be policed by HMRC, which will continue to be the tax authority for the whole of the UK. He also mentioned Northern Ireland being subject to two regulatory systems. Northern Ireland is and will remain part of the UK and its VAT system. It is correct that the Northern Ireland protocol means that NI will continue to align with the EU VAT rules in respect of goods, but not services. That is to ensure that trade is not disrupted on the island of Ireland, and to allow us to meet our commitments under the Belfast/Good Friday agreement. But, as I said, HMRC will continue to be the tax authority for the whole of the UK. Businesses will continue to have a single UK VAT number, issued by HMRC, and they will submit only one UK VAT return to account for VAT on all supplies of goods and services.
My hon. Friend the Member for Stone (Sir William Cash) asked about the current negotiations. Just to remind him and reiterate to the House, the UK Government set out on 17 September that Parliament would be asked to support the use of provisions such as clause 45 of the United Kingdom Internal Market Bill and any similar subsequent provisions in a Finance Bill. These clauses were introduced as reasonable steps to create a safety net, so that the Government would always be able to deliver on their commitments to the people of Northern Ireland in the event that a negotiated outcome could not be reached in the Joint Committee. However, as we all now know, following intensive and constructive work over the past weeks by the UK and EU, we now have an agreement in principle on all issues in relation to the protocol on Ireland and Northern Ireland. As we have mutually agreed solutions, the UK can now withdraw clauses 44, 45 and 47 of the UKIM Bill and not introduce any similar provisions in this taxation Bill.
Mr McFadden
On that point about the “notwithstanding” clauses, can the Minister guarantee, given that neither the United Kingdom Internal Market Bill nor this Bill has finished its passage in the House, that the Government will not reintroduce them at any further stage?
Kemi Badenoch
As I have just said, I am not in a position to be talking about what is happening in the future. We have been negotiating in good faith and we have an agreement in principle. I do not believe that those clauses will be coming back, but as the right hon. Gentleman knows very well, the negotiations are still ongoing and we need to wait and see what the outcomes of those negotiations are. It would be quite wrong for me or him to pre-empt anything else that will be taking place, and we must not bind the hands of our negotiators. It is absolutely right that we all speak with one voice in this House.
The hon. Member for Glasgow Central (Alison Thewliss) mentioned GB and NI parcels and asked how consumers would know whether there was a customs charge. The movement of parcels into Northern Ireland is another important part of how the protocol will work in practice for people in Northern Ireland. That is why the UK Government will take forward a pragmatic approach, just as we have elsewhere, that draws on available flexibilities to implement the protocol without causing undue disruption. In terms of schedule 3, she gave the example of the earrings from Slovenia that she had ordered. It is worth stressing that schedule 3 deals with imports to the UK and not exports. It will ensure that UK customers see the amount of VAT that needs to be paid at the point of sale on goods below £135. For goods between Northern Ireland and GB, VAT is already charged on supplies sold by a GB business to an NI customer. When the Northern Ireland protocol comes into effect, Northern Ireland businesses or consumers purchasing goods from VAT-registered businesses will see no significant difference in costs from a VAT perspective.
Let me conclude by saying that tonight, this House has the opportunity to give businesses in Northern Ireland and throughout the rest of the UK certainty about the arrangements that will apply from 1 January next year, to strengthen the precious bonds of union that tie this country together, and to prepare this country for an even brighter future as an independent sovereign trading nation. For all those reasons, I urge all Members to support the Bill.
Question put and agreed to.
Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).
Mr Deputy Speaker (Mr Nigel Evans)
I will now suspend the sitting for a brief period in order for both Dispatch Boxes to be sanitised.
Taxation (Post-transition Period) Bill
Wednesday 9th December 2020
(3 years, 11 months ago)
Commons ChamberRead Full debate Taxation (Post-transition Period) Act 2020 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the Whole House Amendments as at 9 December 2020 - (9 Dec 2020)
17:41 - The Committee divided: - Ayes: 257 / Noes: 350 - Question accordingly negatived.
The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)
Before I ask the Clerk to read the title of the Bill, I should explain that in these exceptional circumstances, although the Chair of the Committee would normally sit in the Clerk’s chair during Committee, I will remain in the Speaker’s Chair in order to comply with social distancing requirements, although I will be carrying out the role not of Deputy Speaker but of Chairman of the Committee. Chairs of the Committee should be addressed as such, rather than as Deputy Speakers.
I must also modify the call list slightly in the light of the selection and grouping of amendments by the Chairman of Ways and Means. I will call the right hon. Member for Wolverhampton South East (Mr McFadden) to open the debate by moving amendment 2; we will then follow the rest of the call list as published, starting with the hon. Member for Stone (Sir William Cash). I will call the Minister at the end to respond to the debate.
Clause 1
Duty on goods removed to Northern Ireland
Mr Pat McFadden (Wolverhampton South East) (Lab)
I beg to move amendment 2, page 2, line 43, at end insert—
“(4A) The Treasury must publish guidance setting out its proposed approach to the reliefs, repayments and remissions referred to in subsection (3)(b) within four working days of this section coming into force.”
The First Deputy Chairman
With this it will be convenient to discuss the following:
Clause stand part.
Amendment 3, in clause 2, page 4, line 24, at end insert—
“(5) The Treasury must publish guidance setting out its proposed approach to the reliefs, repayments and remissions referred to in subsection (4)(a) within four working days of this section coming into force.”
Clause 2 stand part.
Clauses 3 to 4 stand part.
Amendment 1, in clause 5, page 7, line 44, leave out subsection (3).
This amendment is connected with NC1, which would make all substantive regulations under the Bill subject to the affirmative procedure.
Clause 5 stand part.
Clauses 6 to 12 stand part.
New clause 1—Regulations—
“Notwithstanding any other enactment, a statutory instrument containing regulations made under this Act, other than regulations made under section 11, may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.”
This new clause would make regulations made under the Bill (other than the commencement regulations in clause 11) subject to House of Commons affirmative procedure.
New clause 2—Treasury use of powers—
“(1) The Treasury must, within four working days of the day on which this Act is passed, publish a report setting out the timeframe within which it will use the powers to make regulations conferred by—
(a) section 40A(2) of TCTA 2018;
(b) section 40B(1) and (2) of TCTA 2018;
(c) section 30A(4) of TCTA 2018;
(d) section 30B(1) and (3) of TCTA 2018;
(e) section 30C(5) of TCTA 2018, and
(f) section 5(2) of this Act.
(2) The Treasury must publish an annual report setting out how it has made use of the powers referred to in subsection (1).
(3) Each report under subsection (2) must include an assessment of—
(a) what considerations the Treasury made when deciding to use its powers, and
(b) the impact of the regulations on individuals and businesses throughout the UK, and specifically in Northern Ireland.”
That schedule 1 be the First schedule to the Bill.
That schedule 2 be the Second schedule to the Bill.
That schedule 3 be the Third schedule to the Bill.
That schedule 4 be the Fourth schedule to the Bill.
Mr McFadden
As well as speaking to amendment 2, I will speak to amendment 3, which makes the same points, and say a word about new clause 2. All three have been tabled in the name of the Leader of the Opposition and those of my right hon. and hon. Friends.
Clause 1 sets out the new customs regime that will apply to goods moving between Great Britain and Northern Ireland—specifically those that are deemed to be at risk of entering the EU single market. The Northern Ireland protocol that the Government have signed up to requires such a regime as a result of their decision to leave the single market and the customs union. It will mean a system of paying customs duties for those who move such goods.
As yet, none of us knows whether a deal will be agreed, although we know that an important dinner is taking place in Brussels tonight. However, we welcome the announcement of a trusted trader scheme today, although it comes very late in the day. That scheme will remove some of the possible tariffs on goods that move from Great Britain to Northern Ireland in the event of a no-deal Brexit, but for other goods we are clear that we do not want to see additional costs for businesses and communities in Northern Ireland.
The House should note that Northern Ireland consumers have, on average, about half the discretionary income of consumers in the rest of the United Kingdom; the long and the short of it is that they simply cannot afford such additional trade tariffs on goods. There therefore needs to be a system for at-risk goods that do not leave Northern Ireland, in line with the agreement that Northern Ireland remains part of the UK’s customs territory and that customs duties should not apply to goods that travel between Great Britain and Northern Ireland if Northern Ireland is their end destination.
The protocol and the arrangements agreed yesterday by the Chancellor of the Duchy of Lancaster and his counterpart create new requirements for businesses to be set out in regulations. Clause 1 is specific about that, for example in new section 40B of the Taxation (Cross-border Trade) Act 2018, which states that the Treasury
“may by regulations provide”
for which goods the new duties will apply to, and make
“provision about reliefs, repayment and remission…checks, controls or administrative processes”
and other matters.
My broad point is that that is obviously a description of new arrangements that are not in place right now; that is why they are being introduced in the Bill. As I said on Second Reading, it would be better for the Government to acknowledge that this is a new regime with new requirements, instead of the pretence that everything will carry on exactly as it is.
As I also said on Second Reading, we only have three weeks to go. Businesses in Northern Ireland and those that do a lot of trade with Northern Ireland will be asking, “What does this mean for me? What processes do I have to go through? What do I have to pay? If the goods remain in Northern Ireland, will I be entitled to a rebate if I have paid? How will I claim that rebate? How will this system work?” Those are all legitimate questions about the new regime being introduced by the Bill and the regulations enabled by it. Amendment 2 asks the Treasury to reach conclusions and to publish answers on these matters in the coming days. Frankly, it is already too late to expect businesses to absorb more than 100 pages of legislation within a few weeks. But even if it is too late, we cannot afford more delay, which is why our amendment calls for the publication of guidance on this within a few days of the Bill coming into force.
I should stress that nothing in this amendment alters the regime that the Government are trying to bring in. Everything in the amendment is fully in line with the Northern Ireland protocol and with the commitments that the Government have made as part of that. We want to provide clarity for businesses as soon as possible, rather than leaving open-ended the time for these regulations to be published.
In response to my question at the end of the Second Reading debate, the Exchequer Secretary to the Treasury said with confidence that she was sure this could all be done by 1 January. I hope she is right and that any scepticism that all these arrangements will be completed in the three weeks between now and 1 January is unfounded. Let us hope that she is right. The amendment asks for the Government to outline precisely how these duties and tariffs, if they are necessary, will be rebated. Businesses will be asking that question and, quite reasonably, they will want an answer.
Will businesses be required to pay up front and then be reimbursed by HMRC, as envisaged in the Northern Ireland protocol? Is that what the Government have in mind? If so, the Minister should know that there are fears that such a rebate system could be hugely complex. Indeed, some fear that it is not fully built, but we are told that it will all be ready for 1 January. These are vital questions. As it stands, the Bill does not fully answer them, nor does it set out a timeframe in which they will be answered, which is why we have tabled amendments 2 and 3 to the Bill.
Finally, new clause 2 is an attempt to give both Parliament and the public some timetable—some road map—for the blizzard of regulations that are enabled by the Bill and to secure a report on their impact in the future. As I said, this is a new regime. The Bill legislates for something that we have not had to do before in the United Kingdom, and we should at least have the courtesy of reporting on how it is operating in the future. New clause 2 asks for both a timetable of the regulations and a report on how the new regime has operated. These are completely reasonable amendments. I hope that, in a spirit of generosity, the Government will find it within themselves to accept them, and I look forward to hearing the Financial Secretary to the Treasury wind up the debate.
The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)
Sir William Cash is not here, so we go to Alison Thewliss.
Alison Thewliss (Glasgow Central) (SNP)
I am very sorry to hear that the hon. Member for Stone (Sir William Cash) is not here, because I am sure that there is so much more that he could have added to this debate that he has not already said.
The First Deputy Chairman
He may have withdrawn but I have not been told, so that may explain it.
Alison Thewliss
That is absolutely fine. I wish to speak to the amendments in my name and the names of my hon. Friends.
As I outlined on Second Reading, I have real concerns about the scrutiny aspects of the Bill. It is a thick and substantial Bill that gives substantial powers to the UK Government to move things through this House under the negative procedure, which gives very little opportunity for us or anybody else to scrutinise their proposals. We wish to see the proposals come under the affirmative procedure wherever possible, to allow extra scrutiny of the Government.
As I said, I am very concerned about the letter that the Minister sent to Members. It talks about a huge range of duties that the Government are creating but that, at this moment, they do not intend to use. I question why they are creating such duties if they do not intend to use them. At some stage perhaps they will use them, so we need a mechanism to scrutinise them. It is unfortunate, but perhaps not surprising, that the Government see taking back control as bringing it back from bureaucrats in Brussels to give it to bureaucrats in Whitehall, bypassing this place altogether. It should have been an opportunity for this place to get more powers to scrutinise such duties, but no; it all goes to Her Majesty’s Revenue and Customs or to the Treasury, and very little comes here or indeed to the Committees of this House. There should have been an opportunity to look at the new taxation structures that we are bringing in here and that we have responsibility for in this House, but the Committees of this House will not get the opportunity to scrutinise these measures either. I know that some have suggested that an additional Committee would allow that scrutiny to be made.
I very much support what the right hon. Member for Wolverhampton South East (Mr McFadden) said and the questions he asked. We are dealing with complex supply chains when we talk about the movement of food, chemicals and manufactured goods. In my constituency and in the constituencies of some of my colleagues, for example, we have manufacturers of leather, who move raw hides from Ireland to the west of Scotland. They need to know how they will be able to move these goods through different territories, as they really should not be left hanging about for any length of time; they need to be moved quickly to where they are processed. We do not know whether they would fall under what the Government have termed “at risk goods”. It is not surprising that businesses are tearing their hair out with this shambles of a Government, because they do not know whether they will be able to continue with their business come the turn of the year.
There is also the cost and the red tape, whether it is the 265 million customs forms that will need to be filled out compared with the 54 million now, or whether it is the issue of rebates and the processing of fees and money. This is the end of the transition period, but we do not know what we are transitioning to. We certainly know what we had and what we will not have any more: free and unfettered access to a huge market in Europe. We do know that we are losing that, but we do not yet know what the Government’s plans are.
Despite the Government’s attempts to reassure us, concerns remain. Aodhán Connolly of the Northern Ireland Retail Consortium, while acknowledging the progress that has been made, said of the delays:
“We are just 22 days out and retailers are still unsure about the exact processes needed to move food to Northern Ireland. Therefore, the Government needs to assure them how this will be done without additional bureaucracy.”
There are real concerns about the cost and the choice of food that people of Northern Ireland will have if we do not get this right.
The point that I made earlier about customs charges and duties was reflected in an item on RTÉ at about 2.30 this afternoon. It said that customers in Ireland will be faced with VAT and customs duty from 1 January if buying goods from the UK worth over €22. That is significantly lower than the levels that were spoken about earlier. It was said that the Irish Revenue has no way of knowing whether consumers will continue to buy from the UK when additional charges apply. I ask the Minister to consider this and to do some studies on whether these additional charges will have an impact on people in this country who make good-quality goods and export them to Ireland. A total of 70% goes to Ireland, and we need to have some certainty from the Government about the long-term impact.
The scrutiny mechanisms that we suggest give us ample opportunity to do that at every stage of this process, not just today while we are considering this Bill, and then putting it in a box and leaving it, but on an ongoing basis. This Government definitely need to be held to account.
The First Deputy Chairman of Ways and Means (Dame Rosie Winterton): I believe that the Members who were numbers five to 11 on the call list spoke in the earlier debate and have withdrawn from this one, which means that we go straight to Andrew Griffith.
Andrew Griffith (Arundel and South Downs) (Con)
It is a pleasure to speak under your chairmanship, Dame Rosie.
I welcome this set of pragmatic measures. The Bill is a building block on the way to regaining our national self-determination in this very important area. I will oppose the amendment, although not on the principle— greater scrutiny and giving business greater certainty are things that I hope that those on both sides of the House can support. However, we should recognise that we are in a fast-moving environment. The Treasury team have been working incredibly intensively in the context of the pandemic and I think it is unfair to impose on them a specific timeframe when I know they will—perhaps the Minister will address this point—use their very best endeavours to give the very greatest amount of certainty as quickly as possible.
I follow the hon. Member for Glasgow Central (Alison Thewliss), who I have to say takes something of an 18th-century approach to customs, borders, forms and tariffs. The reality is that, as my right hon. Friend the Member for Wokingham (John Redwood) said earlier, we are in an age of online forms and digital electronic surveillance. Any good that passes across any internal or external border is tracked through a multiplicity of different technologies. I made the observation to the hon. Lady that of course when one introduces any customs border—this is one reason why Government Members are so keen to keep our United Kingdom together—there is an added level of complexity, but we should not overstate the complexity or understate the ability of business to innovate and deal with that.
Alison Thewliss
I thank the hon. Gentleman for allowing an intervention. Is he aware that we were told in the Treasury Committee that the UK could have adopted the French customs system, which was up and running before ours? Ours is not ready, as the Business, Energy and Industrial Strategy Committee heard yesterday. Technological solutions exist, but they do not exist in the UK, and we do not have them up and running to get this moving by the turn of the year.
Andrew Griffith
I beg to differ with the hon. Lady. There will be different systems for different territories, but on the business side of things there is already sophisticated tracking of stock, sales and data, which can be used to feed into accounting systems.
What I really want to do is to celebrate—I hope that those on both sides of the House can do that—the absolute game-changer that is contained within clause 7 to crack down on the leakage of the important tax revenues that fund our valued public services, and, most importantly, to create a level playing field for the nation’s small and online retailers. That has needed to be addressed for far too long. I welcome the Minister to his place and what clause 7 will do for the enterprising small businesses of our nation.
The Financial Secretary to the Treasury (Jesse Norman)
Dame Rosie, what a delight it is to see you in the Chair, metaphorically if not actually.
It is a measure of the wide gulf between the House’s professed intentions and its actual activities that we are about to wind up within a very few minutes, and nothing like to time, the scrutiny of the Bill in Committee. I thank those who have spoken. Let me do service on my part by keeping my remarks brief, although I will say that nothing could have surprised me more than that my hon. Friend the Member for Stone (Sir William Cash) will not be taking the opportunity to make a trivial two-hour speech.
The right hon. Member for Wolverhampton South East (Mr McFadden) said that somehow the Government were pretending there was no change. Of course, he then went on to say that nothing has changed. We are not pretending anything. We acknowledge that there is change and that is specifically why we have used the language we have of making the changes as easy and as frictionless as possible for all parties concerned.
The right hon. Gentleman raises concerns and questions about Northern Ireland. I remind him that the Trader Support Service, which was launched on 28 September, has 18,000 subscribers already. He asks us to publish guidance. I can tell him that guidance has been published already, on 26 October.
The hon. Member for Glasgow Central (Alison Thewliss) saw Brexit—rather helpfully—as an opportunity to return powers to Parliament. How right she was. That is why I am a supporter of the United Kingdom of Great Britain and Northern Ireland, and of the Parliament that stands at its centre. My hon. Friend the Member for Arundel and South Downs (Andrew Griffith) rightly said that it should be for the Bill to make matters as easy as possible. I agree with that. He pointed to the absolute game-changer in clause 7. I agree with that too.
The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)
I believe the right hon. Member for Wolverhampton South East may wish to withdraw his amendment.
Mr McFadden
I point out to the Minister that he said guidance was published in October; he cannot be referring to the guidance referred to in clauses 1 and 2, which talks about the regulations under the Bill. However, on the basis of the whole debate, we will not press the amendment to a vote tonight, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 ordered to stand part of the Bill.
Clauses 2 to 4 ordered to stand part of the Bill.
Amendment proposed: 1, in clause 5, page 7, line 44, leave out subsection (3).—(Alison Thewliss.)
This amendment is connected with NC1, which would make all substantive regulations under the Bill subject to the affirmative procedure.
Question put, That the amendment be made.
Taxation (Post-transition Period) Bill
Tuesday 15th December 2020
(3 years, 11 months ago)
Lords ChamberRead Full debate Taxation (Post-transition Period) Act 2020 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 15 December 2020 (large print) (PDF) - (15 Dec 2020)
Taxation (Post-transition Period) Bill
Wednesday 16th December 2020
(3 years, 11 months ago)
Lords ChamberRead Full debate Taxation (Post-transition Period) Act 2020 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 15 December 2020 (large print) (PDF) - (15 Dec 2020)
The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con) [V]
My Lords, the Bill was introduced in the other place on 8 December.
At the end of this year, the United Kingdom will leave the European Union’s legal jurisdiction and this country will recover its economic and political sovereignty. The measures in the Bill play an important part in those preparations. It sets out a new framework for the UK’s customs, VAT and excise systems following the end of the transition period, so that there are clear rules in place for goods moving in and out of Northern Ireland. It upholds our pledge to protect the UK’s internal market by ensuring that Northern Ireland goods have unfettered access to Great Britain.
I first turn to measures relating to the Northern Ireland protocol. This Government are committed to providing unfettered access for Northern Ireland businesses to the UK’s internal market. That means no tariffs or customs formalities for Northern Ireland goods arriving in Great Britain. Northern Ireland is and remains part of the UK’s customs territory. For goods deemed to be “at risk” of moving into the EU, the Bill introduces a framework for charges on goods arriving in Northern Ireland, both from Great Britain and from the rest of the world. The Bill will allow us to put in place decisions made by the joint committee on goods “not at risk” of entering the EU, ensuring that they do not have to pay the EU tariff. It also imposes a charge to UK customs duty on goods that enter Great Britain from Northern Ireland and are not qualifying Northern Ireland goods. The Bill also includes anti-avoidance rules on the use of unfettered access to ensure that it is not legitimate for goods to be routed to Great Britain via Northern Ireland in order to avoid the UK’s customs border.
For VAT, the Bill includes mechanisms to ensure that, in so far as is possible, VAT will be accounted for in the same way that it is today in Northern Ireland. Noble Lords will be aware that Northern Ireland is and will remain part of the UK and its VAT system. However, it will continue to align with the EU VAT rules in respect of goods but not services. This is to ensure that trade is not disrupted on the island of Ireland and allows us to meet our commitments under the Belfast/Good Friday agreement. HMRC will continue to be the tax authority for the whole of the UK. While the ECJ will continue to have a limited role where EU directives apply in Northern Ireland, the rules will continue to be policed by HMRC. Businesses will continue to have only one UK VAT registration number and to complete one VAT return each period for all supplies. In implementing the Northern Ireland protocol, the Government have sought to minimise changes to how the rules will operate in practice, as far as possible.
The Bill amends current legislation for excise duty to be charged when excise goods such as alcohol and tobacco are removed to Northern Ireland from Great Britain. This does not necessarily entail additional costs for Northern Ireland businesses and consumers. A credit of the duty already paid on the goods in Great Britain will be set against the duty arising in Northern Ireland, meaning that in almost all cases there will be no further duty to pay. In many cases, businesses move goods in duty suspension, meaning that there is no duty to pay in any case until the goods are released for consumption.
Some further taxation measures in the Bill need to be implemented before the end of the transition period. The Bill introduces a new system for collecting VAT on cross-border goods. This includes moving VAT collection on certain imported goods away from the border and involving operators of online marketplaces at the point of sale. UK consumers will now be able to see a VAT-inclusive price at the point of purchase, making pricing more transparent. In addition, measures in the Bill will remove the VAT relief on imported low-value items, meaning that VAT will be due on all consignments, irrespective of their value. This relief has been subject to long-standing abuse and removing it will build on government efforts to further level the playing field for UK businesses by protecting our high streets from VAT-free imports.
The Bill also includes provision for an increase in the rate of duty on aviation gasoline, which will apply across the UK. Otherwise known as avgas, the fuel is a form of leaded petrol, predominantly used in leisure flying. The Northern Ireland protocol requires that Northern Ireland continues to comply with the EU’s energy taxation directive following the end of the transition period. This directive sets a minimum level of duty in euros on leaded petrol used for propulsion. The Government have chosen to apply the change to the whole of the UK to ensure consistency between Great Britain and Northern Ireland. This avoids burdens on business and reduces compliance risks for HMRC. The change made by the Bill will increase the avgas rate by 0.5p to 38.2p per litre from 1 January next year.
To prevent insurance premium tax evasion, the Bill also includes a clause to ensure that HMRC has access to the same anti-evasion tools, regardless of whether an insurer is based in an EU member state. Overseas insurers are liable to pay insurance premium tax where they supply general insurance for UK-located risks. Occasionally, overseas insurers do not pay the insurance premium tax that they owe, so it is important that HMRC has access to tools to deter and tackle IPT evasion. The changes made by Clause 8 remove references to “member states” in current legislation, and allow notices to be issued in the case of a non-compliant insurer based in a member state, without mutual assistance arrangements in place. We do not expect that HMRC will issue liability notices frequently but the ability to issue notices acts as an important deterrent.
Finally, the Bill introduces new powers that will enable HMRC to raise tax charges under the controlled foreign companies legislation for the period from 2013 to 2018. In order to recover state aid in line with a European Commission decision, the changes will enable additional CFC tax charges to be raised for the years 2013 to 2018. The Government are pushing for the decision to be annulled. In the event that it is, Schedule 4 requires the Treasury to make such regulations as are necessary to restore all affected taxpayers to their original position.
The Bill gives businesses throughout the UK certainty about the arrangements that will apply from 1 January next year. It plays a part in safeguarding the unity and integrity of this country and will help to protect our high-street retailers. I beg to move.
Lord Hain (Lab)
My Lords, I thank the Minister and of course welcome the Bill. However, it reflects a chaotic last-minute scramble by the Government to retreat from their outrageous proposal to break international law in relation to the Northern Ireland protocol of the European Union withdrawal agreement, which was agreed by the Prime Minister and EU leaders in October last year. Among other things, the protocol requires that the UK introduce a framework for customs, VAT and excise after the end of the transition period on 31 December. The Bill before us now reflects the decisions of the joint UK/EU committee set up under that agreement on goods entering Northern Ireland “not at risk” of entering the EU, thereby ensuring they do not have to pay the EU tariff, as the noble Lord explained.
Crucially, the Government are therefore not introducing the so-called “notwithstanding” provisions into the Bill, which, along with those measures also now withdrawn from the UK internal market Bill, would have reneged on that withdrawal agreement.
I therefore welcome the statement made on 8 December by the co-chairs of the EU-UK committee. It is good news for businesses trading across the Irish Sea, as it is estimated that 98% of goods going from Great Britain to Northern Ireland will now be able to do so free from tariffs, irrespective of whether there is a UK-EU trade deal.
However, there remains concern about the imminence of the end of the transition period and the potential for disruption, especially to agri-food products; I would be grateful if the Minister could say something about that in his response. The reported three-month grace period for businesses may at least limit, to some extent, the disruption on 1 January. However, as pointed out by the Institute for Government, the joint committee will need to continue to work on ensuring that the arrangements under the protocol are acceptable to the people, and businesses, of Northern Ireland, who have been plagued by months of stressful and disruptive uncertainty. That is the Government’s fault.
No doubt this latest change of direction by the Government demonstrates a recognition of the realpolitik of the outcome of the American election. The Brexiteers’ confidence that a trade deal with the US would be an easy win has already been proven misplaced. President- elect Joe Biden made a very clear statement on 24 November that, if the UK wishes to discuss a trade deal with the US, the Irish border must remain open. In answer to a question from journalists about what he would say to Brexit negotiators, he stated:
“We do not want a guarded border”.
Biden also made his position clear in a New York Times interview at the beginning of December, stating:
“I am not going to enter any new trade agreement with anybody until we have made major investments here at home and in our workers and in education.”
In any case, such a deal with the US would have been more political than economically significant. Leaked government forecasts suggest that a trade deal with the US could benefit the UK’s economic output by about 0.2% in the long term—a miserly amount compared with almost half of our trade currently done with the EU, which is at risk unless there is a decent deal.
The advent of the new Administration in the US therefore serves only to underline the fallacies of the magical thinking of hard-line Brexiteers. In debates on this Bill in the other place, they have complained that, under the agreement reached between Michael Gove and Maroš Šefčovič—a vice-president of the European Commission—the EU will be allowed to have its officials permanently based in Northern Ireland to oversee checks on goods crossing the Irish Sea. They protest that this is an infringement of sovereignty, which, of course, they have always mistakenly confused with power. Perhaps we should close all foreign embassies on our soil, in case they also fail this ridiculous sovereignty test.
Is it simply too tempting for us to imagine that there is perhaps a glimmer of light that the Government have finally found the courage to face down the tyranny of their own rabid nationalist Back-Benchers? As the noble Baroness, Lady Cavendish, observed the other day in an article she wrote for the Financial Times, in 2016, in the weeks following the referendum result, it became obvious to those in No. 10, like her, that
“there would be a trade-off between sovereignty and market access.”
Yet, she observes, four years later,
“the UK is still trying to wish away the trade-offs, with no coherent vision for future prosperity.”
On the contrary, she says, Britain is
“engorged with Covid-led state intervention”
with
“few radical policies to help enterprise”.
The Government’s strategy for mitigating the disastrous economic devastation caused by Covid-19, which has reduced the capacity of the UK economy to withstand further shocks, is apparently one of compounding it with a possible disgraceful no deal or, at best, a scrawnily thin-deal Brexit. In July, the London School of Economics published a study showing that the business sectors that have escaped the worst fallout from Covid-19—such as manufacturing and services—are more likely to suffer from the effects of Brexit. Furthermore, the damaging economic impact of no deal is shown to be two to three times as great as that of Covid over the medium to long term. We now learn that Ministers have dreamed up Operation Kingfisher to support
“businesses that may be temporarily affected by changes of circumstances that are related to Brexit”.
Where is the economic strategy to generate the necessary revenues to fund all this state aid and the subsequent desperately needed recovery?
My noble friend Lord Adonis reports that a senior German politician confided in him that Chancellor Merkel thought it best, last week,
“not to speak to Johnson … ‘for fear of damaging British-German relations. It’s like how she managed Trump, by not speaking to him’.”
Last week, both Merkel and Macron refused to take the Prime Minister’s calls—perhaps the ultimate Brexit humiliation for any British Prime Minister for now.
The well-informed commentator Alex Andreou reported on Twitter the Brussels view of Boris Johnson’s behaviour:
“This has led people to split into two camps: There is one school of thought, that Johnson really is utterly clueless. His behaviour at the UVDL dinner last night (a car crash, apparently), has fed that impression. This makes people not want to do business with this government … The second school of thought, is that Johnson negotiated in bad faith throughout. That his aim was always No Deal and he simply strung 27 countries along, at the expense of a huge amount of work, effort and expense. This makes them not want to do business with this government … Note that the conclusion is precisely the same under either theory. That whether idiot or fraudster, Johnson is best kept at arms length. Polling in most EU27 shows that being tough with the UK yields a big favourability boost. So, I’m afraid, nobody is riding to our rescue”—
if we do not rescue ourselves, that is. Let us hope that it is not too late for the Government, having looked over the precipice, to step back from the brink of no deal on the wider relationship.
Given the poor state of relations that now exists between the EU and this Government, a thin deal is the most we can possibly hope for. However, as was spelled out by the Centre for European Reform think tank in August, this would at least avoid tariffs and provide the basis for building a deeper relationship in the future.
The agreement reached in the joint committee on the Northern Ireland protocol surely demonstrates the value of constructive compromise, collaboration and partnership in solving the many daunting issues currently facing our country over Brexit. Can this Government conceivably have the humility to admit that, in a shrinking post-Covid global economy, Britain can never prosper alone?
With more positive smoke signals about the negotiations as we debate this Bill, if the UK and the EU succeed in striking a deal, Boris Johnson will inevitably have a high-noon confrontation with the zealots who elected him Conservative leader, but the country will breathe a sigh of relief. I am afraid that, all along, that has been the problem in this sorry Brexit saga: putting dogma and factional fundamentalism ahead of the national interest.
Baroness Kramer (LD)
My Lords, it is astonishing when the most important comment to make about a Bill is that the British Government have changed their mind and do not intend to use it to break international law and subvert agreements in existing treaties. I really do not understand what sort of hubris led the Government to attempt to take such a position in this Bill and the internal market Bill, but they have done real damage to Britain’s international reputation.
As for the Bill itself, it is troubling that, once again, the Government seek to diminish Parliament’s role by doing so much through negative SIs. The Northern Ireland protocol deals with a complex situation with many sensitive political ramifications—the supply chains alone are far from straightforward. A no-deal result to the UK-EU trade negotiations would make matters seriously worse. In those circumstances, Parliament should be fully engaged. Cutting Parliament out is not the way the Government should have moved within the Bill.
Much of the cross-border trade between Ireland and Northern Ireland involves small businesses. The Government’s answer to new problems for small businesses, which will be legion, seems to be trusted trader status. I sit on the EU Goods Sub-Committee. Small businesses have told us that the trusted trader scheme is simply not fit for purpose. It is complicated, expensive and disproportionate. It must be reformed, but so far the Government seem deeply resistant and certainly seem not to have addressed such issues in their trade negotiations. Therefore, no change is reflected in this Bill. It is an instrument that most will simply not be able to use.
The Bill also allows for new trade rules to be introduced gradually for supermarket supplies and medicines, and that makes sense. But it would have made more sense if it had been extended far more widely. I and my colleagues have called for a six-month adjustment period for all goods and small businesses that form our trade with the EU. Frankly, in the time of Covid intensifying—I suspect that when the Bill was conceived there was an expectation that it would be meandering away at this point—it is even more imperative to apply a much broader breathing space. I hope the Government will rethink that in these last few days.
Lastly, I will touch on VAT. HMRC has said that, in so far as possible, VAT will be accounted for by businesses and individuals as it is today as goods cross the Northern Ireland border. I attended a virtual webinar held just a few days ago on VAT, including the Northern Ireland border issues. I will admit that I could not follow large chunks of it, but it was easy to draw two conclusions. The first is that this is a real Bermuda triangle, with intense complexity embedded in it. Any business will be taking a real risk if it does not get expert advice to be able to cope, and that will be really challenging, especially for smaller and medium-sized businesses. The other conclusion one came to, which was a happy thought for those involved in the webinar, was that VAT experts had been given job security for life with the complexities that will arise.
We in this House have no say in the future of this Bill, but it is one that touches on serious issues that will shape the future of Northern Ireland and of our union. Despite that limitation, I hope that we will continue to follow these issues. We need to continue to hold the Government to account.
Baroness Altmann (Con)
My Lords, I thank my noble friend for his explanation of the Bill and I certainly welcome it. I congratulate the Government on attempting to reinforce the powers to tackle tax evasion and on seeking to minimise the changes involved. I also welcome, as expressed so clearly by the noble Lord, Lord Hain, and the noble Baroness, Lady Kramer, the decision to pull back from the brink of breaking international law.
As noble Lords will know, I have long been concerned about the position of Northern Ireland. It is important that Northern Ireland goods have unfettered access to Great Britain. These frameworks for the changes have now been agreed with the EU-UK Joint Committee, as set out in the Northern Ireland protocol. That is good news, but safeguarding the unity and integrity of the internal market is important. However, can my noble friend say when we will get further details on how this will be implemented? Clearly, the view of the Joint Committee, as established by the Northern Ireland protocol, has now been accepted and I am delighted that the withdrawal agreement and the Northern Ireland protocol will be upheld.
Avoiding no deal is absolutely essential, as is repairing relationships with our European neighbours. May I ask my noble friend what the agreement in principle on the Northern Ireland protocol framework for future customs and tax arrangements means? When will the Joint Committee set out details and when will regulations be introduced, so that businesses will know what they need to do? We know that the agreement is that Northern Ireland exports to Great Britain will pay EU tariffs only if goods are at risk of moving into the EU. How will this be assessed and checked? How will the money be collected and how will it be policed? We are about to leave in a number of days’ time, and we do not seem to know the answers. As the noble Baroness, Lady Kramer, pointed out, the trusted trader scheme cannot be relied on. I also urge my noble friend to consider, if necessary—and perhaps we can see now that it is necessary—delaying further any temporary exemptions from initiation here.
I also congratulate the Government on ensuring that online marketplaces must charge VAT and on removing the low-value exemptions to help British businesses and reduce tax avoidance. I welcome, too, the measures to prevent evasion of insurance premium tax, with Clause 8 allowing HMRC to issue liability notices. This should help to ensure that EU insurers do not continue, as in some cases they have, to try to avoid the insurance premium tax.
I finish on an issue that has proved extremely contentious: the abolition of tax-free shopping for overseas visitors. Thousands of people come here to shop and this risks driving wealthy international shoppers elsewhere for their purchases and other expenditure, which would generate tax revenue in the UK through visits to hotels, restaurants and places of entertainment. I believe that France and Italy are already advertising for the business of these wealthy overseas tourists and shoppers. The Government’s estimates have been shown, even by the OBR, to be flawed. The suggestion is that this could save £500 million. However, the OBR suggested that this £500 million estimate in the spending review is significantly overstated and the figure may be £195 million at best, but this is highly uncertain because it does not assume particular behavioural change by those customers who would clearly be likely to go elsewhere. Indeed, the Centre for Economics and Business Research estimated that this change in VAT, opposed by the tourism, culture, hospitality and retail sectors, as well as by airports such as Heathrow, could lead to 138,000 job losses and a potential loss of revenue to the Treasury of £3.5 billion, rather than a net saving.
Hanbury has estimated that this will not just hit London and the south-east. In terms of the Government’s levelling-up agenda, it would appear that Manchester, Liverpool, Leeds and Edinburgh risk losing their current benefits of more than £200 million of tax-free sales last year. The removal of this VAT incentive is something for which I have struggled to find any support in any quarter. I therefore ask my noble friend to take back to his department the extreme concerns on this issue.
Overall, however, I welcome the Bill, hope we will be able to avoid any kind of no-deal outcome and look forward to a successful 2021.
Lord Bruce of Bennachie (LD) [V]
My Lords, the Bill is welcome for the practical measures it contains, but more for the notwithstanding clauses that have been omitted and were previously threatened. In a way, it is another tortuous step along the way to deliver the easy Brexit that the Government, or their Brexit-controlling cabal, promised. I well remember the Prime Minister during the election, in a draughty-looking warehouse in or near Birmingham, promise that there would be no new paperwork or charges between Great Britain and Northern Ireland. In fact, the “oven-ready deal” proved anything but. The only oven-ready thing about it is that it was stuffed.
Having agreed the deal that Theresa May negotiated, we then got the United Kingdom Internal Market Bill, with its law-breaking clauses now dropped. Why? It was because the EU-UK joint committee met and agreed a way forward. This was always the way it should have been resolved, without the threat of breaking international law or resorting to the latest ploy of gunboat diplomacy. I just wonder how hard the Government are working to alienate everybody that we need to have on side for trade, co-operation, security and all the other things that a respecting nation needs.
Arch-Brexiteers in the Commons tried to reinstate this approach yesterday. It appears that they are still deluded in the belief that sovereignty is an absolute. It can be only if the country puts itself in solitary confinement—an uncomfortable place for a trading nation with a historically massive balance of payments deficit. Facing reality, the Government have now agreed, as they always had to, that at-risk goods will be properly monitored, that Northern Ireland will conform to EU rules on, as a case of detail, aviation fuel duty, and that the rest of the UK will follow suit for “consistency”. Is this a taste of things to come? I suspect it is. Similarly, there is agreement on aspects of VAT, but can the Minister explain the implications for online sales under £15 in Northern Ireland? Do Northern Ireland residents have to pay VAT on online purchases when GB residents do not?
Can we now hope for the dawn of pragmatic common sense and an acceptance of reality? The Prime Minister advocated cakeism, and it appears that Michael Gove believes that it is being delivered, but for Northern Ireland. He seems to be supported by the Foreign Secretary. We have been told that Northern Ireland is in a wonderful position, effectively being in the UK and the single market. This is an enviable position that the majority of businesses in Great Britain wish to be part of, but they cannot be.
The rest of us—the 99.8% of the economy that does not depend on catching fish—want to know where the dust will settle. Even in fishing, the catchers and processors have conflicting interests. If we want to continue trading profitably with the EU, which takes nearly 50% of our exports, we have to accept that there will be EU rules and we will need to accept those rules if we want to secure access. That has always been the case for third countries. We will no longer have a say in shaping those rules but, as the EU states have pooled their sovereignty to make the rules, we can reject them only at a price. We have the right to choose, but there is a price to pay.
Ironically, we are choosing to trade under WTO rules. We have far less influence over these than when we were members of the EU. Indeed, the WTO is a pretty dysfunctional organisation in dealing with disputes among its members. The Government are urging businesses to prepare to end transition in 15 days’ time. Ministers claim that they are trying to provide certainty, but the opposite is the case: how can people prepare for the unknown against a background of promises that it would all be quick and easy? This Bill is necessary, but more legislation is required. We still do not know under which terms, if any, we will leave the EU, and businesses are expected to adapt to unknown rules and regulations, which the Government cannot explain, which are complicated and for which they will probably have to pay for expert advice.
I was astonished, the day after the Prime Minister claimed that there would be no new rules, regulations or paperwork, to go on to the government website and see that its advice was to contact HMRC to get a registration, to take advice on customs requirements and to consider whether you need to employ customs staff or a customs agent. The contradiction was there for all to see on the very day that the Prime Minister made his absurd claim, which everybody knew was unsustainable.
The Bill is necessary. Thankfully, it is limited compared to what it would have been, but it is symptomatic of the bungling incompetence that characterises the Government in delivering an ideological ambition that is deeply damaging to the interests of this country and has left the world looking on in astonishment at how the UK took leave of its senses.
Lord Sharpe of Epsom (Con) (Maiden Speech)
My Lords, it is an honour and privilege to make my maiden speech in this important debate. I had rather hoped to be able to give my speech during the CHIS Bill’s passage through your Lordships’ House, as this is a subject on which I have some specialist knowledge, but my carefully laid plans were undone by contact with a gentleman who had tested positive for the dreaded virus so, in spite of a negative test, I was condemned to two weeks’ self-isolation. This was not much fun, although it left me with a refreshed appreciation for my family, who have to put up with me all the time. I found two weeks of my own company a most severe test. I am pleased to report that the gentleman in question has made a full recovery.
I arrived at your Lordships’ House at an odd time. I have watched, listened and attempted to learn, but the conditions are far from ideal for a new boy. Arriving during Covid is like trying to assemble a complex jigsaw puzzle, but without the picture on the box. At the outset, therefore, I give thanks to a number of people who have helped me paint the necessary picture. Noble Lords on all sides of the House have extended to me a very warm welcome. The doorkeepers and staff of the House carry out their responsibilities with such good cheer. I have to say how skilled the doorkeepers are at seeing through my cunning facial disguise every day. My noble friend Lady Seccombe has generously shared her many years of experience of your Lordships’ House, and last, but by no means least, I thank my two supporters at my introduction in October—my noble friends Lord Taylor of Holbeach and Lady Pidding.
I was particularly honoured that my two noble friends introduced me, as they are also predecessors of mine as chairmen of the National Conservative Convention, by which route I arrived at your Lordships’ House. For those of you who do not know, the national convention’s antecedents date back to 1867—to Disraeli’s time and that of the Second Reform Act. The National Union, as it then was, formed with the explicit intent of reaching out directly to the newly enfranchised voters created by that Act. Over the past 153 years, and no doubt to the regret of some of your Lordships opposite, it has been remarkably successful.
Joking aside, there is an important point to be made here, and more so in these troubling times, and that is that the foundations of our civil society and democracy require the active participation of many selfless volunteers from all walks of life and parts of our United Kingdom, and from every political persuasion. I am sure that your Lordships agree that, without them, many of the things that we take far too easily for granted would not happen and, whether we agree politically or not, we would be the poorer for that. So it has been a privilege and a pleasure to represent those from my side of the argument. I thank them and commit to continuing to represent them and all those who volunteer in your Lordships’ House.
My other life, the remunerated part, involved a lengthy career working in the stock markets of the world, which took me from Hong Kong to Tokyo, New York and back to London. I look forward to returning to the subject of financial markets and regulation in the new year, but I also look forward to contributing to the inevitable debates in this House on Hong Kong. I lived there for a decade and started life as an inspector in the Royal Hong Kong Police. That was a long time ago, and much has changed—not, I fear, for the better—but I have a great affinity for Hong Kong and its people and, having served in some of the more remote places in the New Territories, considerable experience of the pace and rhythms of life outside the glittering towers of Central and Kowloon. I owe these people a lot, this country owes them a lot, and I look forward to making the case that we must continue to demonstrate that.
In pursuing this career that has spanned much of the world, I have been lucky enough to gain a cultural understanding of a number of places, and that has shaped my views on our world and our place within it. As a consequence—and this is very relevant to the debate today—I am an optimist, bullish about our great nation’s future. It is perhaps a little hard to see the wood for the trees right now, but we should not forget the words of the second US President, John Adams:
“Every problem is an opportunity in disguise.”
We have the opportunity to demonstrate leadership in many different areas, and I hope to make the case that large parts of the world will respond favourably if we make the most of those opportunities. Having observed the proceedings in your Lordships’ House over the past month and, indeed, past half hour, I have reluctantly concluded that this may not be the majority attitude here, but I think that this Bill highlights the positive difference that your Lordships can and, I have no doubt, will continue to make.
We need this Bill: it ensures that we are legally prepared to leave the EU. It sets out a framework to prepare for all outcomes of the free trade agreement negotiations with the EU, and of the Joint Committee discussions on the implementation of the Northern Ireland protocol. It ensures the smooth continuation of business following the end of the transition period. The Government have made it very clear that they are committed to providing unfettered access for Northern Irish business to the rest of the UK’s single market, protecting progress made under the Belfast/Good Friday agreement. It is clear to me that this Bill will form a vital part of our preparations as we prepare to become a fully sovereign trading nation, and I have no hesitation in supporting it.
I thank noble Lords for indulging me with this speech and I look forward to taking my responsibilities seriously and contributing to the debate here on those subjects that I have outlined, and perhaps others where I have experience, perspective and knowledge.
Baroness Pidding (Con)
My Lords, it gives me immense pleasure to follow the excellent maiden speech of my noble friend Lord Sharpe of Epsom. Our friendship goes back some 15 years, when we worked side by side as volunteers in the Conservative Party. As my noble friend mentioned, both my noble friend Lord Taylor of Holbeach and I have had the privilege of being chairman of the National Conservative Convention, the position that my noble friend Lord Sharpe currently holds. And what a superb chairman he is, leading from the front, motivating, encouraging and cajoling, but never asking fellow volunteers to do something that he would not do himself.
There are few parts of this country that my noble friend Lord Sharpe and I have not campaigned in together, and I am certain that his passion for democracy and volunteering will continue for years to come. I know, as I have witnessed first-hand, how much my noble friend likes nothing more than a good debate on the doorstep. Now that he is here in your Lordships’ House, he has found a new forum for debate. This outlet will probably be a great relief to his family.
Talking of family, it would be remiss of me not to mention my noble friend’s wife Fiona, son Charlie and daughter Kate, who, over the years, have given their unstinting support to his voluntary work and, on occasion, have got involved too. As is so often the case in working for any voluntary organisation, it has meant his absences on many an evening or weekend.
As noble Lords will have heard from his speech, in my noble friend we have a great addition to our House. We have heard only a snapshot of the experience that he will bring. Not only does my noble friend have a notable background in the world of finance and the unique experience of being an inspector in the Royal Hong Kong Police, but there is so much more. He is well travelled and is even a published historian. In the coming months, when we are able to move beyond this dreaded virus, more noble Lords will, like me, find my noble friend to be the most genial company, and I know that he will prove to be a real asset to these red Benches.
Turning to the business before us today, the Taxation (Post-transition Period) Bill is a crucial step on the road that the United Kingdom must take us as we prepare for the end of the transition period at the end of this year. I know, and hear today, that there are noble Lords who see this as a cause for melancholy, whereas others, like myself and my noble friend Lord Sharpe are optimistic for the opportunities that Brexit will bring to the whole of the United Kingdom, Northern Ireland included.
Throughout the negotiations, Northern Ireland has been the focus of much debate. This has caused anxiety from many in the United Kingdom who hold the union dear. However, the most affected are the British citizens who live in Northern Ireland or those whose livelihoods rely on trade and the movement of goods between Northern Ireland and the rest of the United Kingdom’s internal market. This has inadvertently harmed businesses, which are rightly concerned about the legal and practical state of regulations and tiresome taxes governing their trade with the European Union and the rest of the United Kingdom. Reassuring words of politicians have had little impact in soothing this concern. This Bill, however, represents action, ensuring that Northern Ireland will not be left behind or forgotten. It provides legal certainty for the customs, VAT and excise systems in Northern Ireland after the end of the transition period. This legislation will also help deliver the commitment made by this Government to deliver unfettered access for Northern Ireland businesses to the rest of the UK internal market and protect progress made under the Belfast agreement.
As the United Kingdom leaves the European Union, we must do our best to provide the assurances and support needed for businesses to prosper across the country. This is particularly true of SMEs, which are the backbone of the United Kingdom’s economy and which millions of citizens rely on for work. I am glad to see that this Bill has this at its core.
The Bill is no silver bullet but, along with other Bills currently making their way through Parliament, it will create a clear pathway for the whole of the United Kingdom to pass through this transition period, weather any possible storms and emerge stronger and ready for the opportunities awaiting us. Like my noble friend Lord Sharpe of Epsom, I give this Bill my full support.
The Deputy Speaker (Lord Faulkner of Worcester) (Lab)
The noble Baroness, Lady Jones of Moulsecoomb has withdrawn, so I call the noble Baroness, Lady Ritchie of Downpatrick.
Baroness Ritchie of Downpatrick (Non-Afl) [V]
My Lords, it is a pleasure to follow the noble Baroness, Lady Pidding, and to welcome the noble Lord, Lord Sharpe of Epsom, who has just made his maiden speech. I look forward to working with him as he stated that he looked forward to working with all noble Lords around the House.
I thank the Minister for his explanation of the Bill, whose purpose is to implement various aspects of the Northern Ireland protocol relating to customs duties, VAT and excise. While welcoming the provisions of the Bill, I note that it would have been a different position if there had not been a resolution on the operation and implementation of the Northern Ireland protocol in the UK/EU Joint Committee negotiations last week. The protocol will not contain provisions to disapply provisions within the protocol; that agreement has been achieved in the Joint Committee on export declarations for goods moving from Northern Ireland to GB and the application of state aid under the protocol. Notwithstanding that, I have some questions for the Minister.
First, can the Minister provide assurances that this Bill is consistent with the Northern Ireland protocol in all aspects? It is important to remember why the Northern Ireland protocol is in place—it is to prevent a hard border on the island of Ireland between Northern Ireland and the Republic of Ireland. It is also meant to act in accordance with the principles of the Belfast/Good Friday agreement to build on the peace with political, economic and social stability and to continue to foster reconciliation on the island. It is vital, therefore, as it contains those necessary ingredients to enable that to happen.
I hope that there is a zero tariff trade deal and that that is achieved as quickly as quickly as possible. I implore both the UK and EU to arrive at a deal; I did not want to leave the EU but realise the need for a proper and adequate trade deal so that business can be conducted which will not undermine or hinder trade opportunities and provide goods to customers at affordable prices. Lest we be in any doubt, no deal will not be beneficial for the UK, Northern Ireland or the Republic of Ireland or in fact the wider European Union. I note that the Government, through the debate on the United Kingdom Internal Market Bill, have followed on from the agreement in the Northern Ireland protocol to ensure that qualifying Northern Ireland goods have unfettered access to the UK internal market. This is welcome because it provides assurances to businesses and consumers alike.
The protocol applies the EU’s regulations on traded goods, customs and VAT on goods to movements into and out of Northern Ireland. As I have already said, this is to ensure that there is no hard border across the island, to protect the integrity of the EU single market and the customs union, and to respect Northern Ireland’s position within the UK’s customs territory and the UK internal market.
The protocol sets out in depth the parts of the EU’s acquis on goods that are to be given effect to and provides that the protocol will have the characteristics of EU law in terms of precedence and direct effect. This ensures that the legal rules on traded goods, VAT on goods, and customs processes not only are the same in Northern Ireland as the Republic of Ireland but will be enforced in similar ways. Of course, the decision on the continued application of the protocol arrangements on traded goods in Northern Ireland will be for the Northern Ireland Assembly to take on a cross-community basis every four years. I have a query about that, because that is not the true application of that particular facility in the agreement itself.
This legislation, which is to be given its Second Reading today, will give effect to the necessary implementing arrangements on VAT and customs. I understand that associated delegated legislation will need to be put in place quite quickly. Therefore, could the Minister indicate the schedule, framework and content for that delegated legislation?
This legislation also has several consequences, and I have certain questions in that respect. Since it prescribes through provision for taxation and VAT measures, how will the Bill and the Government deal with anti-avoidance? How will that work in the agri-food sector in particular? On the one hand, the Trade and Agriculture Commission, which is to be put on a permanent basis for at least three years through the Trade Bill, will underpin food standards. How will the Government ensure that inferior food products do not come into Northern Ireland to take advantage of the protocol?
How will the legislation prevent organised crime? What work will be carried out with the Police Service of Northern Ireland, other police constabularies, the Gardaí in the Republic of Ireland, and Interpol to underpin those standards and prevent avoidance measures? What will be the role of the National Crime Agency? With HMRC, what are the established practices for identifying and targeting those involved in avoidance measures to ensure that it does not happen?
When will the infrastructure at the ports of Derry, Larne, Belfast and Warrenpoint be in a state of readiness and operation? Where will the officials be based? Where will the EU officials operate from? Will they work alongside officials from HMRC? Has the recruitment of customs agents taken place? When will they take up post at the ports?
Will the Minister ensure that more details are set out on how duties and tariffs might be rebated through regulations under the Bill? For the avoidance of doubt, could he confirm that fish landings at Northern Ireland ports will no longer be subject to tariffs under the Northern Ireland protocol?
I realise that there were several questions there that the Minister might be able to answer today. If he is not able to do so, I would appreciate answers in writing and a copy being placed in the Library of your Lordships’ House.
While welcome, this taxation Bill comes at the end of a long process that many of us felt deeply unhappy about. I hope that there will be full implementation of the Northern Ireland protocol and that the people of Northern Ireland and the island of Ireland, where I live and have worked for many years, will be able to benefit and that there will be an end to this long, very sorry saga.
Baroness Suttie (LD) [V]
It is always a pleasure to follow the noble Baroness, Lady Ritchie of Downpatrick. I agree with so much that she said. I also congratulate the noble Lord, Lord Sharpe of Epsom, on his extremely thoughtful maiden speech.
I suppose one thing we can say with a degree of certainty about the Bill is that it could have been worse. In that sense, it is to be welcomed. If the Government had not changed their position on Part 5 of the UK Internal Market Bill last week, we could have faced an extremely unwelcome piece of legislation. As it is, we find ourselves with just two weeks to go before the end of the transition period, debating a long and complex Bill without clarity on either the context or much of the content.
On the context to this Bill, we still do not know whether there will be a deal. We should recall that no deal would have a particularly brutal effect on the Northern Ireland economy. With only two weeks to go until the end of the transition period, we know that parliamentary scrutiny of the content of any deal that is now agreed will be very limited, and so much of the content of the Bill before us today will be delegated to future regulations. It does not give us a feeling of confidence that there will be much transparency in this process.
As others have remarked, it is an irony that so much of the Brexit debate was about taking back control and moving away from a system of imposed regulations that we were unable to amend. Yet, at the 11th hour, it is at least welcome that attempts are being made to make the Northern Ireland protocol work in practice. However, there remain a great many unanswered questions.
The Minister will know that, last week, the Northern Ireland trade groups warned that, in spite of the £200 million trader support service, businesses would not be ready to deal with the new border processes, computer systems and bureaucracy in time for 1 January. Can the Minister say what additional measures will be put in place to protect Northern Ireland households from significant price rises and potential shortages or delays to the many highly complex supply lines? As other noble Lords have said, the Minister will also know that there is particular concern in the agri-food sector in Northern Ireland about products of a lower standard coming into Northern Ireland and taking advantage of the protocol. Can the Minister say when we will see detail on exactly how measures to avoid this will work in practice?
It also remains unclear how non-qualifying goods will be determined and how they will be distinguished as they move from Northern Ireland to Great Britain. Can the Minister say what the operating model will be for this process? What mechanisms will be put in place to distinguish between Northern Ireland goods and goods from the rest of the EU, including the Republic of Ireland? The Minister will know that there is particular concern in the food and drink sector that cheaper or non-authentic versions of quality products may be able to reach the UK market in this way.
There is now so little time left to resolve so many problems before 31 December. We are ultimately in this situation because, from the outset, the Government promised a series of incompatible things—a trilemma, as my friend Stephen Farry MP has called it. The Government consistently said that the whole of the UK must leave the customs union and the single market, that special status for Northern Ireland was ruled out, and, correctly, that there should remain no border on the island of Ireland. It was the Government who insisted on these red lines, but it is now the people and businesses of Northern Ireland who risk paying the price.
Baroness McIntosh of Pickering (Con) [V]
My Lords, I give a very warm welcome to my noble friend Lord Sharpe of Epsom and congratulate him on his first-class maiden speech. How lucky we are to benefit from his broad experience in so many different fields. He is very welcome indeed. I also congratulate my noble friend the Minister on bringing forward the Bill, albeit at this late stage, but without the “notwithstanding” clauses.
I want to press my noble friend the Minister on certain issues that are not on, or not immediately apparent and clear on, the face of the Bill. As he will be aware, we on the EU Environment Sub-Committee were very fortunate this morning to take evidence from those concerned with the agri-food sector and goods moving into Northern Ireland from continental Europe from 1 January. Is he minded to acquiesce to their request for a period of grace for a minimum of two months, but ideally of between two and six months, which others referred to as a period of adjustment, given the months of uncertainty and continuing lack of clarity, even with the publication and debate of the Bill today? Can the Government clarify the status of the UK global tariff regime? It was published in May, but we heard from a witness today that there is still a lack of customs data, trade statistics and tariff availability for imports.
Also, as others have mentioned, the trusted trader scheme will play a vital role, particularly in Northern Ireland, in preparing the flow of goods and unfettered access to which the Government are committed, which I applaud. With a budget of £2 million to fund the scheme, can my noble friend confirm that all 800 staff have been hired and trained and are ready to give the advice that will be required? Customs clearance will be required for all goods entering Northern Ireland from England, Scotland and Wales. What is the state of preparedness within HMRC regarding the additional 220,000 forms? Have all the necessary customs agents been appointed and trained, and are they in place and ready to go?
Regarding the abolition of tax-free shopping for overseas visitors, what is the up-to-date assessment of the loss of this trade for major stores not just in London but across the United Kingdom—in Birmingham, Manchester, Cardiff, Belfast and Edinburgh? What will the damage be? Does my noble friend share my concern that this will be removed from the UK market and that all the trade from which we have benefited over so many years will go to Paris, Amsterdam and Frankfurt, our near neighbours?
I end with specific requests flowing from the Bill. The first, as I set out at the beginning, is for a period of grace of between two and six months, to ensure that those asking to abide by the rules, which are not yet clear, will have the time to make the rules familiar with them, so that they can apply them from perhaps 1 April or 1 June. Also, can my noble friend confirm the status of the UK global tariff regime for imports? On the question of equivalence on phytosanitary measures, can he look at whether it should be veterinary surgeons alone who issue these environmental health certificates that will be required, or whether others might be more suitable, given the current shortage of vets, to enable these certificates to be issued in time?
Finally, can my noble friend give us a programme of when the implementing instruments will be in place so that we have a position at least to familiarise ourselves with them? I welcome the Bill and wish it a fair passage through Parliament.
The Deputy Speaker (Lord Faulkner of Worcester) (Lab)
My Lords, the noble Lord, Lord Desai, and the noble Baroness, Lady Wheatcroft, have withdrawn, so I call the noble Baroness, Lady Bennett of Manor Castle.
Baroness Bennett of Manor Castle (GP)
My Lords, I was going to say that it was a great pleasure to follow the noble Baroness, Lady Wheatcroft; as former newspaper editors we could both have reflected on how there was once a silly season where we were not dealing with such serious issues this close to Christmas—but I have said it anyway. I also welcome the noble Lord, Lord Sharpe of Epsom, to this House. I declare my position as co-chair of the All-Party Group on Hong Kong. There may be many things on which we do not agree, but I hope that we can agree on ensuring the rights of those Hong Kongers who wish to come to the UK, and on standing up for Britain’s position as a signatory to the joint declaration on Hong Kong.
I wish to start my reflection on the Bill with a couple of numbers. There are 112 pages, 29 pages of Explanatory Notes, and, depending on how you count it, four or five working days until Christmas. I feel I am repeating myself but it must be said, reflecting the words of the noble Baroness, Lady Kramer, who is not currently in her place: after a horrendous year, small-business people might have been thinking of winding down and finally getting a bit of a break, but they will have to plough through all that paperwork and seek expert advice at this point in the year. I usually try not to repeat what others have said in your Lordships’ House, but I must join many others in celebrating the Government’s U-turn on the “notwithstanding” provisions of this Bill. That a UK Government could be planning to break an agreement that they signed only 12 months ago will long resonate on the world stage. Every time we hear from the Government Benches, as we do so often about amendments to Bills, “This does not have to be on the face of the Bill” and “You can trust us, we’ve said this is our policy”, we can reflect on where we are today.
We must also reflect on the Brexit ultras having to face up to reality. The “easiest negotiations in history” is a phrase that we must remember being said. Drawing a couple of parallels, I reflect on Erasmus Wilson, the Oxford professor who said in 1878:
“When the Paris exhibition closes, electric light will close with it and no more will be heard of it”,
and the president of the Michigan savings bank saying to Henry Ford:
“The horse is here to stay but the automobile is only a novelty, a fad”.
We are in that territory, for this legislation lays bare the emptiness of “taking back control”. Your Lordships’ House is passing this Bill in one day, while the other place passes the new Trade (Disclosure of Information) Bill which, as of last night, no one had even had the opportunity to read. We will do our best to scrutinise so many things, but as we have been seeing, particularly in the Grand Committee, statutory instruments are being looked at that modify previously passed Brexit statutory instruments. I fear we will see the same cycle again early in the New Year.
I join the noble Baroness, Lady Altmann, in welcoming the modest measures in this Bill against tax dodging. I hope that this is the sign of much more to come from the Government Benches. It tackles a very small part of the issue; there are very large factors to be tackled here. I am happy to see the increase in aviation and gasoline tax, but it is nowhere near enough, particularly after the disastrous ruling in the Supreme Court today on Heathrow expansion. Flying is the most carbon-intensive form of travel, but it is undertaxed and inadequately dealt with in the Paris agreement.
In reflecting on that, I also note that today sees the tragic but terribly important coroner’s conclusion that air pollution was a cause of Ella Kissi-Debrah’s death at the age of nine. It is the first time that such a finding has been made in the UK. I ask the House to take a moment to pay tribute to her mother, Rosamund, for her long fight to get this medical reality recognised.
I shall finish with a question for the Minister. I do not know whether, at this late hour, he can ride to the rescue of Boris Johnson in offering an explanation of how the people of the UK will benefit from Brexit: those people who, right now, are making a weary trudge to the food bank to get food for Christmas; the self-employed who have been left for so many months without any money at all through the gaping holes in the Government’s Covid rescue packages; and the weary teachers struggling to provide education and security for their pupils amid the chaos. How will they gain from Brexit, whether it is no deal or the scantily patched-together thin deal that is now our best hope? We know that the surfers of disaster capitalism, the hedge fund traders and the purveyors of fancy financial instruments will benefit from the chaos—they always do. A few people will profit and the rest of us will pay.
Lord Bhatia (Non-Afl) [V]
My Lords, this Bill will implement customs, VAT and excise obligations arising under the Northern Ireland protocol. The terms of the withdrawal agreement and the Ireland/Northern Ireland protocol create a unique status for Northern Ireland. It remains part of the UK’s customs territory but will continue to apply the EU’s customs code, VAT rules and single market rules for goods after the transition period, which ends on 31 December 2020. The Government are legislating in the United Kingdom Internal Market Bill to ensure that qualifying Northern Ireland goods have unfettered access to the UK internal market.
Article 8 of the protocol deals with EU VAT and excise provisions relating to goods that will continue to apply in Northern Ireland. However, HMRC will continue to be responsible for the operation and collection of the revenues that will not be passed on to the EU as VAT exemptions and reduced rates applying to Northern Ireland.
Clause 3 of the Bill amends the Value Added Tax Act 1994 to implement the obligation under the protocol. HMRC and the Treasury have explained that these provisions will ensure that the movement of goods between Great Britain and the Isle of Man and Northern Ireland will be treated as imports and exports. However, co-ordinating mechanisms will ensure that, as far as possible, VAT will be accounted for by businesses and individuals as it is today.
The Government have said that they will follow the UKIM Bill to make it clear that no tariffs will be payable on goods moving from Great Britain to Northern Ireland unless those goods are re-destined for the EU market or there is a genuine and substantial risk of them ending up there. The Government should not forget that the UK has signed an international agreement on Northern Ireland, which is part of the UK. Any breach of this agreement would damage the UK’s reputation internationally. It would also lead to the break-up of the United Kingdom.
Lord Fox (LD)
My Lords, over the course of this parliamentary term, we have seen the introduction of many things. Although the Government have not invented content-free legislation, they have certainly furthered that process through the liberal use of secondary legislation following primary legislation which is unable or unwilling to set things out in exact detail, and we are faced with that again today.
On a slightly more frivolous note, this Bill introduces, or highlights, the way in which a word like “notwithstanding” can suddenly be vested with some sense of terror, like a shark arriving on a beach. We are glad that the “notwithstanding” clauses were not, in the Government’s view, necessary in this Bill, so there is a little piece of brightness there.
The sunny optimism of the noble Lord, Lord Sharpe of Epsom, was very welcome. We welcome him to this House and look forward to his wisdom, and perhaps his anecdotage—I am sure that there is plenty lurking there somewhere. I would call into question his maxim that every problem is an opportunity in disguise. As a former chief executive of the Liberal Democrats, I am quite able to give evidence of why that is not true.
I thank the Minister for his very clear explanation of the nature of the Bill. When I looked at it, I set out with the notion that it is the plumbing, which it is. It is easy to dismiss the plumbing, but then you think about what the world was like before we had plumbing and what it is like when we do not have plumbing and you realise that it is important. That is why the Bill is important and why we welcome it. Given the nature of our role in this House, I will seek clarification on some of the issues rather than make what could be called a traditional Second Reading speech.
The Bill sets out a new framework for customs, VAT and excise duty for goods moving in and out of Northern Ireland. The Minister was very clear, and said twice in two different ways, that Northern Ireland is, and remains, part of the UK customs territory, but on the second occasion he followed it with a big “however”. That “however” is that EU rules for goods but not services will apply in Northern Ireland. Therefore, it remains part of the UK customs territory but it also remains part of the EU customs territory, and there is a dichotomy in that process. That adds complication such that a £200 million scheme is required to help people with it. Like others, I ask the Government to update us on whether that scheme is ready to run.
The complexity lends itself to the six-month adjustment period that my noble friend Lady Kramer introduced. For the benefit of the noble Baroness, Lady Bennett, and others, I should explain that my noble friend is a member of the Economic Affairs Select Committee, and there is a protocol that allows those who have important Select Committee meetings not to sit through the extent of the debate.
The big question set out by the noble Baroness, Lady Altmann, my noble friend Lady Suttie and others concerned non-qualifying goods. We understand that there will be such goods but we do not know what they are and what the criteria are for creating them. We are not sure of the process for communicating what they are and we have no idea about the timing. This is not an abstract debate; it is about real people, with products, trying to understand what they need to do. Like them, I see adverts on my television every night telling me to get ready. Can the Minister tell us what they are getting ready for? What goods will be non-qualifying, and when will people know? That is really important and, again, it begs the question about delaying implementation so that people really can get ready, because that is what they want to do.
The Minister mentioned the role of duty suspension. It is an interesting role and one that I had not talked to the Minister about before. It would be interesting to know whether any of the rules around duty suspension are changing and whether the Government considered changing some of them, perhaps to add or remove friction from the system.
The Minister also talked about the removal of VAT relief on low-value items, and that is a welcome area. I would be interested to know whether the Minister can tell us what the expected increase in tax take is for that, and indeed what extra enforcement will be required to get that tax through the door. It strikes me that there could be an awful lot of different transactions that, in the end, add up to not much take. But I accept the Minister’s point that levelling up the playing field for our high streets across the country is really important. This is a very small measure but I would not overestimate its effect. A lot of things are happening to our city-centre and town-centre shops, and this is just one small element of them. My noble friend Lady Suttie and the noble Baroness, Lady Ritchie, talked about measures to manages shortages and potential price rises, and perhaps the Minister could set out what those would be.
My noble friend Lady Kramer and the noble Baroness, Lady Altmann, raised the issue of the trusted trader scheme. A lot of hope has been vested in this scheme but, without shooting too cheap a shot, our evidence of tracing schemes thus far has been relatively disappointing, to say the least. How can we be sure that this system will stand up to expectations? The accepted wisdom of many is that it is a small scheme that will not facilitate the sort of trade we are looking for.
Finally, a number of your Lordships raised the issue of removing tax-free shopping for foreign visitors. Here, without debating the issue, one needs to know what the facts are. Can the Government publish the cost-benefit analysis that I am sure they must have carried out before publishing such an important change in the rules? Can they explain how the difference in tax raised, which would have had to extend to EU visitors, is weighed against the economic effects on tourism and trade from foreign visitors? That number is very important and when we see it, I am sure we will be better able to understand why the Government have made this decision. Without those numbers, one might imagine that they just put a damp finger in the air and tried to work out which way the wind was blowing.
This is important plumbing, but it is inexplicable why we have had to wait this long so that businesses can get ready. I understand that we had to get through the internal market Bill, but that ran very late. Businesses need to be ready and for that, they need to know what they have to do. The Bill is essentially content free. The real detail comes with the regulation and the secondary legislation. When will we see that? When will businesses know what they have to do so that they can continue to trade? It is up to us and the Government to make sure that they know what they have to do.
Lord Tunnicliffe (Lab) [V]
My Lords, I am grateful to the Minister for introducing this Bill and to all noble Lords who have taken part in this debate. Before I turn to my broader contribution, I welcome the noble Lord, Lord Sharpe of Epsom, to your Lordships’ House and congratulate him on his maiden speech. He gave an interesting insight into his career, and I share with him the belief that a varied career in different areas adds a roundness. I also congratulate him on his refreshing optimism. I say that because, as far as I can tell, apart from that expressed by the noble Baroness, Lady Pidding, his was the only optimism in the House today. Concern over the Bill varied from “chaotic” in my noble friend Lord Hain’s case to more careful concerns, but even those whose concerns were least had issues with the lack of detail.
The noble Baroness, Lady Kramer, was the first to bring up the issue of international reputation, and I thought the comment of the noble Lord, Lord Bruce, that we were alienating everybody was very insightful. The final step in alienation was the announcement of our gunboat proposals. Surely, somehow, we have to learn that if we are to live with our neighbours, it makes quite a lot of sense to be polite when we talk to them. There was also an almost universal welcome for what is not in the Bill, particularly the “notwithstanding” clauses.
When reviewing proceedings from the other place, I was struck by how few of the speakers focused on the detail and how many saw it as an opportunity to air other concerns and grievances, particularly in relation to the Court of Justice of the European Union. Our debate has been just as wide-ranging, which is perhaps inevitable given the recent twists and turns in the trade negotiations.
The Bill has been presented as an essential piece of the jigsaw to ensure readiness for the end of the transition period—an event that will take place just over two weeks from now. As the shadow Chancellor made clear, we support the timely passage of the Bill, as it is important to minimise any disruption. This does not mean, however, that we endorse the Government’s approach to the negotiations on our future relationship with the EU. Given the importance of this legislation, it is disappointing that it was published so late in the transition period and received such little consideration in the Commons. It seems it was held back specifically to give the Government the option of breaching an international agreement, which reflects just how poorly this entire process has been managed.
Thankfully, a deal was done on implementation of the Northern Ireland protocol, but not before the Government had ordered their MPs to put controversial clauses back into the United Kingdom Internal Market Bill. As my colleague, Pat McFadden, said in the other place:
“It is one thing to play ping-pong with the House of Lords, but quite another to play ping-pong with yourself.”—[Official Report, Commons, 9/12/20; col. 925.]
The decision finally to drop the offending provisions from both Bills is a relief on many levels, particularly for those among us who care about the UK’s standing in the world. Far from providing the certainty that businesses and consumers need, this is yet another framework Bill that leaves much of the detail for later. We will have to wait for the Treasury to bring forward the full details of customs and excise duties, for example. Colleagues of mine in the Commons fought valiantly to get precise dates from Ministers but none were forthcoming. Can the Minister offer anything new on timings and sequences for the forthcoming regulations? If they will not be in force on 1 January, does that mean that some duties will be applied retrospectively? What forbearance might companies expect, given these extremely tight timelines?
Another area where we have had little detail is that of customs agents and intermediaries. Several weeks ago I asked the noble Lord about progress towards recruiting 50,000 new customs staff, a commitment which is frequently mentioned by Ministers when they discuss Brexit preparedness. The Minister helpfully clarified that these are industry recruits rather than civil servants, and, like colleagues across government, he was unable to provide figures. Indeed, he referred to the oft-cited 50,000 figure as
“a bit of a finger in the air, to be honest”.—[Official Report, 19/11/20; col. 1602.]
Now that a little more time has passed, is he able to confirm today which way the wind is blowing on that matter?
In the Commons, the Exchequer Secretary pointed to the free-to-use Trader Support Service as evidence of the Government’s support for business. Some 18,000 firms were said to have signed up for this tool. Can the Minister confirm what proportion of businesses which regularly move goods to Northern Ireland this represents?
As a result of the recent Joint Committee outcome, we now have a trusted trader scheme, providing a grace period for supermarkets. While this represents a significant step forward, again, it has come incredibly late in the day. The Northern Ireland Retail Consortium has long expressed concern about business readiness for these changes, while the Food and Drink Federation has voiced what many are thinking: that the process has been a shambles. Even with this agreement, the absence of an overarching trade deal would increase costs for businesses and communities in Northern Ireland. Returning to my point about the early clauses of the Bill, we cannot be sure what these costs will be until the Treasury publishes further information. Can the Minister confirm that, when fleshing out the detail, the department will remain mindful of Northern Ireland’s economic position vis-à-vis the rest of the UK?
We had all, parliamentarians and the public, hoped to have clarity on trade agreements long before now. Indeed, we expected to be dealing with the implementation legislation this afternoon. I had certainly not anticipated the possibility of taking my turkey out of the oven while the Government are still cooking their so-called oven-ready deal. Even at this late stage, and with festive good cheer in mind, let us hope the Prime Minister will finally deliver on his pledge to the British people, enabling us to focus on other issues as we move into 2021.
Lord Agnew of Oulton (Con) [V]
My Lords, thank you for your thoughtful contributions to this debate. I shall try to address the issues raised but first, I shall briefly review the achievements of this Bill.
At its heart, the legislation seeks to ensure that businesses across the United Kingdom can continue to trade unhindered after the end of the transition period. The Government are determined to uphold the commitments to the people of Northern Ireland under the Northern Ireland protocol and to protect the progress made under the Belfast/Good Friday agreement. The Bill will help support these commitments by providing legal certainty for the customs, VAT and excise systems in Northern Ireland after the end of the transition period. It enables us to put in place decisions made by the Joint Committee on goods not at risk of entering the EU.
I start with the noble Lord, Lord Hain, who asked about the “notwithstanding” provisions. The UK Government set out on 17 September that Parliament would be asked to support the use of provisions in Clauses 44, 45 and 47 of the United Kingdom Internal Market Bill and any similar subsequent provisions in a Finance Bill only in circumstances where the fundamental purposes of the Northern Ireland protocol would be undermined. These clauses were introduced as reasonable steps to create a safety net so that the Government would always be able to deliver on their commitments to the people of Northern Ireland in the event that a negotiated outcome could not be reached in the Joint Committee. However, following intensive and very constructive work over the past few weeks by the UK and the EU, we now have an agreement in principle on all the issues in relation to the protocol on Ireland and Northern Ireland. As we have mutually agreed solutions, the Government have not included these elements in the Bill.
The noble Lord, Lord Hain, and others asked about agri-products. The Government have outlined in their Command Paper that there are no plans for any new bespoke customs infrastructure in Northern Ireland or at ports in GB to implement the protocol. We have always acknowledged that there would need to be some additional controls on agri-food movements between GB and Northern Ireland to reflect the island of Ireland’s existing status as a single epidemiological unit, but we have also been clear that these new processes could never be allowed to put food supplies to Northern Ireland at risk. That is why the deal we have reached with the EU and the support we have put in place do what is necessary to protect and preserve GB-NI agri-food trade from 1 January.
The noble Lord, Lord Hain, also asked about a US trade deal. It was always going to be a complex thing to implement, which is probably why the EU has not achieved it yet, but we will of course continue to pursue it with vigour.
The noble Baroness, Lady Kramer, asked about the complexity of the Northern Ireland VAT rules. In implementing the Northern Ireland protocol, the Government have sought to minimise changes to how the rules will operate in practice as far as possible. There will be very few practical changes for the vast majority of traders in Northern Ireland, and this is clear from the HMRC guidance on VAT under the protocol which was first published on 26 October. Businesses will continue to use their current VAT number, HMRC will continue to administer the VAT system for the whole of the UK, and businesses will continue to complete their single VAT return and account for VAT in the same way as they do today, including where they sell goods between GB and NI.
On authorised traders, the Government have consistently underlined the importance of specific solutions for authorised traders, such as supermarkets, which have stable supply chains, comprehensive oversight of warehousing and distribution operations and move prepackaged products for retail sale solely into Northern Ireland. In particular, it is essential to take account of the time it will take for those operations to adapt to the SPS requirements of the protocol, including the required certifications and authorisations. This has been a priority throughout discussions with the EU, and the arrangements that have been agreed provide a sensible, phased solution. This means that authorised traders, such as supermarkets and their trusted suppliers, will benefit from a grace period through to 1 April 2021 from official certification for products of animal origin, composite products, food and feed of nonanimal origin and plants and plant products. The UK Government and the Northern Ireland Department of Agriculture, Environment and Rural Affairs will engage in a rapid exercise to ensure those traders are identified prior to 31 December, so they can benefit from the grace period. The Government will not discriminate against small suppliers or between companies in implementing these practical measures.
My noble friend Lady Altmann asked about tax-free VAT for visitors—indeed, a number of other noble Lords asked the same question. The Government have been clear that they recognise the contribution that the VAT retail export scheme, or VAT RES, has made to international tourism and retail in the UK. However, there was not a choice to maintain VAT RES as it is today. The choice was between extending the scheme to EU residents or removing it completely, as WTO rules specify that goods bound for different destinations must be treated in the same way. Fewer than one in 10 non-EU visitors to the UK use VAT RES, and it is not a policy for discussion in this debate. The rules on VAT RES are not contained in the Bill.
The noble Lord, Lord Bruce, asked about small-value online sales in Northern Ireland. The Northern Ireland protocol means that Northern Ireland will continue to align with the EU VAT rules in respect of goods but not services. However, Northern Ireland is and will remain part of the UK’s VAT system. Changes to accounting for VAT on goods supplied to Northern Ireland are in most cases identical to the changes for supplies in Great Britain. Businesses selling goods to a GB or NI customer will see little if any difference in accounting for their VAT. Low-value consignment relief, the important VAT relief for goods valued at £15 or less, will be removed in both GB and Northern Ireland.
The noble Baroness, Lady Ritchie, asked for assurance that there is consistency between the Bill and the Northern Ireland protocol. The powers in the Bill allow us to implement the Northern Ireland protocol in a way that is consistent with our obligations. She also asked about fish landings. There will be no new SPS requirements for UK-flagged vessels with their port of registration in Northern Ireland when landing fishery products into Northern Ireland or into EU ports. This will be the case regardless of the location from which such products are caught.
On enforcement and anti-avoidance between NI and GB, HMRC will enforce these provisions through risk-based checks and random spot checks. HMRC will also conduct behind-the-border intelligence-led investigations, focusing in particular on high-risk traders and high-risk commodities. It will have the power to prosecute anyone who tries falsely to claim unfettered access for their goods. Wrongly claiming goods status is a form of tax evasion which HMRC will treat as seriously as any other.
The noble Baroness also asked about the EU presence in Northern Ireland. We have reached an agreement with the EU on practical working arrangements which will enable EU officials to exercise their rights under Article 12 of the protocol. These arrangements recognise our position that there should be no permanent EU mini-embassy in Northern Ireland, nor any concept or perception of joint controls. All processes required under the protocol would be carried out by UK authorities. We will ensure that these principles are fully upheld as the arrangements are put into practice from the end of the transition period.
The noble Baroness asks about the certainty that HMRC will have systems ready for 1 January. HMRC has committed to having systems in place to deliver the protocol and facilitate the flow of trade between Great Britain and Northern Ireland. That will include ensuring that electronic declarations for both fiscal and regulatory purposes can be received and processed, while high-risk internal delivery is on track to deliver a functioning model by the end of the transition period.
The software system for the Customs Declaration Service is live and can accept all import and export declaration types. Its minimal viable product has been successfully delivered, all critical core functionality is embedded and it is fully compliant with the union customs code legislation. The CDS has been scaled to be able to process Northern Irish protocol declarations, including GB traders, to move across. The vast majority of additional delivery for the Northern Ireland protocol for CDS is in a live-testing environment. Feedback from our delivery partners has been positive on functionality, although they continue to flag that end-user readiness for the end of December remains extremely challenging. That is why the Government have established the trader support service. It is worth adding as a little further reassurance that the CDS system has been in existence for some time; it is not in any way a brand new system. The changes that are being added are to deal with the dual tariff system under the Northern Irish protocol.
The noble Baroness, Lady Suttie, asked about non-qualifying goods. The Government are delivering unfettered access in two phases. In the short term, our priority is continuity for trade groups. Therefore, the current definition for Northern Ireland qualifying goods is expansive and includes any goods in free circulation in Northern Ireland. In the long term, our priority is to focus the benefits of unfettered access on Northern Irish businesses. Therefore, we will lay a new definition of Northern Ireland qualifying goods that includes only goods moved by businesses established in Northern Ireland. In the long term, additional protections will be in place for Northern Irish agricultural goods.
In the agri-sector, the rules ensure that our Northern Ireland qualifying goods can have unfettered access into GB; all other goods will have to undergo standard UK import processes, regardless of what route they take. The Secretary of State for Agriculture, Food and Rural Affairs is working with the Northern Ireland Executive to design additional protections for Northern Ireland’s farmers and other agricultural businesses. These will be designed with the consent of the sector and involvement of the Northern Ireland Executive.
The noble Baroness, Lady McIntosh, asked about the issue of temporary equivalence on phytosanitary measures. There will be no equivalence of SPS standards after the transition period between the EU and the UK, including for GB goods entering Northern Ireland. All agri-food goods will require an export health certificate, which must be verified by a veterinary practitioner before goods arrive at the border control post for full SPS border checks.
The noble Baroness was also concerned about the abolition of free VAT. I think that I have addressed it, but I can add some additional information. We consulted on the change and specifically asked for evidence on the impacts of withdrawing the scheme. This evidence was assessed alongside the fiscal and economic impacts and balanced against the policy objectives in the area. HMRC has also published a tax information impact note. The OBR, the fiscal watchdog that reports to Parliament, has now published its independent and up-to-date assessment for fiscal effects, which confirms the Government’s conclusion that withdrawal of VAT relief will raise a significant amount of revenue for the Exchequer, with a limited behavioural response and negligible impact on visitor numbers.
The noble Baroness, Lady McIntosh, also asked about the UK global tariff. The Government have today taken the necessary steps to bring into legal effect the UK global tariff, having just earlier this afternoon laid the relevant statutory instrument before Parliament as part of a wider legislative package. The UK global tariff will replace the EU’s common external tariff as the UK’s most favoured nation tariff from 1 January 2021. It is simpler to use, greener and cuts red tape and other unnecessary barriers to trade. It is also tailored to the needs of the UK economy, backing British business to compete on the world stage.
The noble Lord, Lord Fox, also asked about the removal of VAT relief. Just to build on my earlier comments, the OBR has forecast that these changes will raise over £300 million a year over the next five years—that is £1.6 billion over the scorecard period. Approximately two-thirds will come from improving collection and tackling non-compliance through the new VAT treatment of cross-border goods. The final third of the revenue comes from the removal of low-value consignment relief, which will end widespread abuse of this relief.
The noble Lord also asked about the rules on duty suspension. We have kept the rules in relation to the movement of excise goods and duty suspension between GB and NI as close as they are now, to reduce the burden on excise businesses and maintain the important controls that we have in place to prevent excise fraud.
A number of noble Lords asked about the role of the trader support service, or TSS, in Northern Ireland. I can provide some level of reassurance that we now have nearly 20,000 traders registered with it; that splits almost half and half between NI-based and GB-based businesses. We always calculated that there would be around 12,000 NI businesses that would need these services, so we are now at a very high proportion of those. They are receiving weekly bulletins from the TSS on readiness. The TSS call centre is rapidly standing up: it commits to have around 700 people—one noble Lord thought it was 800, but it will not be quite as many as that—and all offers have been made, and the numbers are arriving on a weekly basis. The current number working this week is something in the order of 250, with more arriving rapidly; I shall ask officials to correct me if I am wrong on that number. They will also be able to assist with advice on the complexities arising from the joint committee agreements that we have recently made, but we are encouraged by the progress being made.
The noble Lord, Lord Tunnicliffe, asked a number of questions. On the timings and sequencing of forthcoming regulations, the EU-UK joint statement made last week sets out that an agreement has been reached in principle regarding the implementation of the Northern Ireland protocol. As part of that statement, this agreement is in principle, and the resulting draft texts will be subject to respective internal procedures in the EU and the UK. Once this is complete, a joint committee will be convened formally to adopt them. Further details, including regulations, will be set out in due course, before the end of the transition period.
The excise statutory instruments covering Northern Ireland will be laid in Parliament as soon as possible following Royal Assent. Those statutory instruments will come into force from 11 pm on 31 December and apply from that point onwards. Any new excise change that arises as a result of the excise clauses in this Bill will apply from that point onwards.
The noble Lord asked about forbearance. On customs, we recognise that mistakes happen, even when a business has taken care to meet its obligations, particularly in a new environment. HMRC will be taking a supportive approach and will not charge a penalty if a business has taken reasonable care to get its tax right. Where honest mistakes happen, HMRC will be stepping in to help customers put things right, but taking tougher action on deliberate, fraudulent behaviour. Financial penalties will generally be reserved for those who are able to comply but deliberately choose not to. HMRC will also take a supportive approach on excise. We will not charge a penalty if a business has taken reasonable care to get its excise tax right. Again, where honest mistakes happen, HMRC will step in to help customers put it right, while taking tougher action on deliberate fraud.
The noble Lord, Lord Tunnicliffe, asked about progress on the recruitment of customs agents. Building on my earlier comments, when thinking about readiness it is helpful to think about the capacity to make declarations, instead of the actual number of staff involved. A number of customs intermediaries have invested in improving their computer systems over the past year. We have made financial assistance of some £80 million available to them; we are still allocating grants at the moment. The sector is varied and made up of a number of business models, including specific customs brokers, freight forwarders and fast-parcel operators, all of which will require different numbers of staff to complete declarations and provide their services.
I am conscious of time. The noble Lord, Lord Tunnicliffe, asked about the proportion of businesses regularly moving goods between Northern Ireland and GB. He correctly pointed out that over 18,000 firms have registered. The TSS outreach is ongoing; the call centre I referred to a few moments ago is outbound in conversation with traders daily. He also asked about fleshing out the detail of the Joint Committee. The agreement we have reached in principle means that we can establish arrangements which protect internal UK trade from tariffs, regardless of whether we have a wider free trade agreement or not. Further details on implementation will be set out in due course.
I finish by welcoming my noble friend Lord Sharpe to the House and thank him and the noble Baroness, Lady Pidding, for their picture of optimism. I know that is a minority view in this House, but I share it; I believe that we have huge opportunities to take. The noble Baroness, Lady Bennett, asked for concrete examples: one is the reform of rules on procurement, on which we published the formal consultation yesterday. This allows us to completely replumb—to use the terminology of the noble Lord, Lord Fox—the way this country carries out public sector procurement, which is worth some £290 billion a year. It will enable us to ensure that SMEs and areas not normally given preference in the UK can have a much fairer crack of the whip.
I have sought to answer noble Lords’ questions to the best of my ability. As is regularly the case, many of the expert interventions illustrate the significant value of the ongoing scrutiny of this House. If I have missed a point of substance in my closing remarks, noble Lords should contact me and I will respond in the normal way.
Royal Assent
Thursday 17th December 2020
(3 years, 11 months ago)
Lords ChamberRead Full debate Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 15 December 2020 (large print) (PDF) - (15 Dec 2020)
Lord Ashton of Hyde (Con)
My Lords, in moving that the House do now adjourn, I would like to wish all Members and staff who have remained to this late hour a very happy Christmas. I beg to move.