Duties of Customs

Jonathan Edwards Excerpts

Ways and Means resolution: House of Commons
Monday 20th November 2017 Commons Chamber

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

It is a pleasure to follow the right hon. Member for Broxtowe (Anna Soubry), who spoke with her trademark passion in this debate on one of the most important issues to arise from the Brexit referendum vote. I admire the ingenuity of the hon. Member for Edinburgh South (Ian Murray) in tabling the amendments that have been selected. If he presses them to a Division, my colleagues and I will support him.

The British Government are intent on pursuing a Brexit strategy that does not put the economy first. In her Lancaster House speech at the beginning of the year, the Prime Minister stated clearly that the British Government intend to leave both the single market and the customs union. Like many Members who have spoken today, I could not understand for a second why the British Government decided at that stage to close off both those options, which was why I could not bring myself to vote subsequently for the triggering of article 50. No outline was given of what the British Government were going to put in place to replace two key cornerstones of our economic policy framework that have existed over the past 40 years.

[Tom Brake]

Has the hon. Gentleman, like me, spent the debate waiting for a Conservative Member to give a ringing endorsement of our leaving the single market and customs union? That has not happened, has it?

[Jonathan Edwards]

That is a valid point. When we begin to consider the customs Bill and the Trade Bill, answers will have to be forthcoming, because the House and people throughout the UK are becoming increasingly restless. We need answers from the Government about what they propose to put in place instead of those frameworks, rather than the empty platitudes we have heard since the referendum result.

The customs union is of course the largest and most lucrative trading bloc in the world. It gives us unhindered access to nearly half a billion of the wealthiest consumers in the world. It also acts as a protective measure against cheaper and lower-standard goods, thereby safeguarding our domestic producers, especially food producers, who are a vital part of the Welsh economy. Of course, the UK Government have not negotiated a trade deal since the UK joined the customs union because doing so has been a European competence. There is little expertise in the British civil service to deal with the task at hand.

In the previous Parliament, I visited Washington DC with a parliamentary delegation to scrutinise the Transatlantic Trade and Investment Partnership deal between the EU and the US. When, over a pint one evening, I asked a British Government official there how many people were on his team, he said, “Well, it’s just me.” That indicates the difficulty of getting the British civil service ready to deal with the challenges we will face with respect to our trade policy. Recent press reports about the staff and expertise required in the Department for International Trade do not give me much grounds for confidence. A huge amount of work needs to be done to get the British state ready for the shark-infested waters of modern international trade negotiations, because they are hugely complex.

I do not profess to be an international trade expert in any shape or form, but it seems clear to me that large trading blocs have far more power in negotiations than smaller ones. As I said earlier, the EU customs union is the world’s most powerful trading bloc, and it obviously helps to promote and protect our interests and those of its producers during negotiations. As we move forward, there are big questions as to whether the UK will, as an insular trading bloc, be able to perform the same tasks to the same ability.

During the aforementioned visit to Washington, we had several difficult meetings with representatives from US sectors, who all bemoaned EU intransigence. Nevertheless, the reality was that they had no option but to accept it, because the EU customs union was such a large trading bloc. I remember vividly one meeting with people from the food sector who were impressing on us the need to open up EU markets to the chlorinated chicken and hormone beef that they have in the US, as well as, of course, genetically modified products, but they knew that there was no way they would get that past EU negotiators. I wonder whether UK negotiators will be able to withstand such pressure when they start trade negotiations with the US—I doubt it very much.

[Tom Brake]

The hon. Gentleman may be interested to know that a couple of weeks ago I tabled a parliamentary question to ask how many people in the Department for International Trade had successfully completed a trade negotiation. The answer I got was the newly appointed Crawford Falconer, so there is apparently one person in the Department who has completed a trade negotiation.

[Jonathan Edwards]

That is grounds for huge concern, because these trade negotiators will be up against expert teams that have been carrying out such negotiations for many years, and this is not just about the EU deal. If it is the British Government’s intention, as one of their first options, to take on the United States in trade negotiations, I would advise them to take the advice of the experts who told the Exiting the European Union Committee in the previous Parliament that the UK should perhaps look to smaller countries for their initial trade negotiations, rather than something as powerful as the US trade lobby.

The EU customs union’s numerous existing international trade deals have already have been mentioned. Those deals cover more than 50 countries, and several other trade negotiations are ongoing. A third of all EU members’ trade outside the EU is with those countries. When the Department for International Trade was set up and the Secretary of State for International Trade answered oral questions for the first time, the first question I asked him was what would happen to all the trade deals that we already enjoy around the world. His view was that they were going to be renegotiated, seamlessly, but I fear that that showed extreme naivety on his part. Why would those countries agree to the same terms and conditions with a far smaller trading bloc, which is what the UK will be, as they agreed with the EU customs union? Surely they will want to renegotiate so that they look after and promote their own interests, rather than just accept what is on the table.

The British Government’s intended policy of leaving the single market and customs union is already having a huge impact on Welsh people’s standard of living. The Centre for Economic Performance has calculated that Brexit has already cost the average worker in Wales £448 annually, with its effect on wages and the higher cost of living disproportionately affecting people in Wales—and that is before we actually leave the EU.

With 90% of Welsh food exports destined for the EU customs union, a reckless Brexit could be disastrous for the communities I serve in rural Carmarthenshire. In a recent meeting with sheep farmers, I was amazed to find out that 50% of their produce was sold domestically, with 50% sold in Europe. Domestic markets will not be able to fill those gaps if we lose unfettered access to European markets.

It is also worth concentrating on some of the tariffs associated with food products. The average tariff on dairy products is 38%. For meat products, we are talking in the region of 58% to 70%. That would clearly make our food products destined for the EU completely uncompetitive. Farmers are preparing for 2019-20 at the moment, so they need answers now. They cannot wait for a protracted trade negotiation.

I also want to concentrate on the impact of leaving the customs union on the border between the British state and the Republic of Ireland. Much has already been said on this matter tonight and it has also had considerable media coverage, not least because the border on the island of Ireland is one of the three sticking points that need to be resolved before we reach first base in our negotiations with the European Union. Despite the fact that both sides have focused on this matter since the beginning of the negotiations, we are no nearer a solution. Indeed, press reports over the weekend seemed to indicate that things are getting even more difficult.

The British Government have miscalculated the resolve of the European Union. The EU’s overriding priority in these negotiations is maintaining the integrity of the single market and the customs union. Therefore, in choosing to leave those frameworks, the UK will become a third country—in other words, a competitor. In those circumstances, we will not get a “have your cake and eat it” solution. As the right hon. Member for Broxtowe said, the British Government are living in fantasy land. There will be no such thing as a special partnership. If we are not part of the single market or the customs union, the best thing that we can hope for is a free trade agreement similar to that of Canada. A welcome development in recent months is the fact that both Labour and the Government have agreed that a transition is a good idea, but the key question is what happens at the end of the two years.

[Anna Soubry]

Does the hon. Gentleman agree that the reality is that we will not get a great deal because the EU does not want to give us a great deal? If it gives us a great deal, it would have to give one to a whole load of other people who might decide to leave the European Union. Although I am not saying that it wants to punish us—I do not think that it does—it does have a responsibility to keep the European Union together.

[Jonathan Edwards]

The right hon. Lady captures my sentiments exactly. By deciding to leave the single market or the customs union, we effectively become a competitor —a third country. On that basis, the overriding priority of the European Union is to protect its interests. A lot of the problems that are arising in our negotiations, as we heard from the hon. Member for Glenrothes (Peter Grant), could be dealt with if we said that we wanted to stay in the single market and the customs union.

The transition period is a welcome development, although I am slightly unclear about whether the British Government and indeed the Labour party are arguing for being in “the” customs union or being in “a” customs union with the European Union, because they are diametrically opposed. Even if we did decide to stay within the single market and the customs union for the transition period, the key question arises of what happens at the end of that two-year period. If we are to have a free trade agreement such as that with Canada, it will take far longer than two years to negotiate.

With reference to the border on the island of Ireland, Michel Barnier, the chief negotiator on behalf of the European Union, has said that the EU will not tolerate the UK using this soft border between the six counties and the Republic as a way of avoiding the trade consequences of leaving the customs union. That is the crux of the problem. Even if the British Government’s position stands, there will be two types of borders between the Irish Republic and the British state. There will be a soft border on the island of Ireland and a hard border on the maritime divide between Ireland and Wales. Inevitably, that will have a huge impact on Welsh ports.

We heard earlier about the huge tailbacks that we can expect at Dover and some of the Channel Island ports. Welsh ports will face exactly the same situation, and the infrastructure is not there to deal with such challenges. That might lead to business being diverted away from the traditional Wales-Ireland trade routes to trade routes between Belfast and Scotland and England. Therefore, instead of businesses flowing between Dublin, Dun Laoghaire, Rosslare and Cork to Holyhead, Fishguard and Pembroke, they will be flowing between Belfast and other parts of the UK. We must remember that the Welsh ports sustain thousands of jobs. This is all an unintended consequence of the British Government’s muddled policy.

I want to finish with a point about the impact of leaving the customs union on the UK’s constitutional arrangements. International trade is a reserved matter. However, trade policy could have massive ramifications on the ability of the Welsh, Scottish and Northern Irish Governments to deliver on devolved competences. For instance, if the British Government were to allow food products of a lower standard to enter the UK, it would obviously have an impact on Welsh agricultural policy, not least our ability to export to our main European market in the customs union. If the British Government, for whatever reason, open up public services to further private interference, which has been the concern of many experts in this field, it would fundamentally undermine the ability of the devolved Governments to deliver competences within their public services for which they have responsibility. There is probably a whole range of other problems that I have not even considered yet.

In recognition of those potential problems ahead, the trade White Paper does talk about reconstituting the Board of International Trade with representatives from all four constituent parts. However, that does not go anywhere near far enough. In my view, trade policy would have to become an area of shared competence between the British and the devolved Governments. Within the EU customs union, EU trade deals need the endorsement of all member states and even some other governments, as we saw with the issue of Wallonia during the comprehensive economic and trade agreement discussions. It would be absolutely incredible to me if trade policy was the sole preserve of Westminster, with the interests of Wales, Scotland and Northern Ireland neglected, and our devolved and democratic Governments and Parliaments not allowed to have a say on that. In my view, Brexit will make a new UK constitutional settlement inevitable. Inter-governmental networks within the British state will need to be formalised and strengthened. If we fail to do that, every trade deal could be a constitutional crisis.

Paradise Papers

Jonathan Edwards Excerpts

Monday 6th November 2017 Commons Chamber

[Mel Stride]

My hon. Friend is absolutely right. That is just another example of the 35 additional measures the Government are taking between now and the end of this Parliament to ensure we clamp down on tax avoidance, evasion and non-compliance.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

After nearly a decade of austerity, and with living standards facing their biggest squeeze in nearly a century, the public will, quite rightly, be outraged by the most recent revelations. The Treasury cannot run with both the foxes and the hounds on this, so will it back either the ordinary working people or the super-rich? Which will it be?

[Mel Stride]

The hon. Member talks about our having to live within our means, and it is, of course, right that we do that. He talks about the amount of money we need to bring in. What has been most unhelpful is that the previous Labour Government were so ineffective at bringing in tax, the tax gap became so high they cost our country over £40 billion. If they had had the same average level of tax gap in their last seven years in office as we have had in our seven years, we would be about £45 billion better off.

Finance Bill

Jonathan Edwards Excerpts

Committee: 1st sitting: House of Commons
Wednesday 11th October 2017 Commons Chamber

[Mel Stride]

As with my contributions earlier this afternoon, I will set out why the Government have included this measure in the Bill, before turning to new clause 2.

Clause 25 and schedule 7 make amendments to the Northern Ireland corporation tax regime. The Government are committed to supporting growth across all parts of the UK. Creating a stronger Northern Ireland economy will benefit the entire United Kingdom.

Northern Ireland faces a unique set of circumstances and challenges. That was why, in 2015, this House legislated to devolve corporation tax rate-setting powers to the Northern Ireland Assembly, subject to commencement regulations. The introduction of the regime received nearly unanimous support from Northern Ireland’s political leaders and business community. The rate-setting powers given to the Northern Ireland Assembly are another tool to help to rebalance the Northern Ireland economy by revitalising private enterprise and attracting new investment.

This clause and schedule amend the regime to allow all small companies with trading activity in Northern Ireland the opportunity to benefit from future changes in the Northern Ireland corporation tax rate. They also make changes to ensure that the regime is robust against abuse and ready for commencement once a restored Northern Ireland Executive demonstrate that their finances are on a sustainable footing.

It may help the House if I set out how the devolved rate regime has been designed to focus on incentivising genuine investment in Northern Ireland. The regime was set out in the Corporation Tax (Northern Ireland) Act 2015.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The Minister is making a powerful case as to why the devolution of corporation tax is a good thing for the Northern Ireland economy, but should the same case not apply to Wales and Scotland, because it creates an imbalance if one devolved Government have a set of fiscal powers that the other devolved Governments do not have?

[Mel Stride]

I thank the hon. Gentleman for his intervention, but there is, of course, one key distinction between Wales and Northern Ireland, and that is that Northern Ireland has a land border with the Republic of Ireland, which has a corporation tax rate of just 12.5%. It is particularly important in that context that we make these provisions.

[Jonathan Edwards]

The Minister makes a fair point about the land border, but large parts of Wales, including my part of Wales—the west of Wales—have a sea border with the Republic of Ireland.

[Mel Stride]

I do not think it is within the scope of this particular clause to start getting too much into the devolutionary settlement for Wales.

The regime was set out in the 2015 Act, which, subject to commencement regulations, will devolve corporation tax rate-setting powers to the Northern Ireland Assembly. The Government have committed to working with an incoming Northern Ireland Executive on options for commencement, including on timing and adjustments to the Northern Ireland Executive block grant to reflect tax revenues forgone by the UK Government.

There are two key features to the regime’s design. First, the devolved rate will apply only to a company’s trading profits; investment activities, which are highly mobile, are not in scope. Secondly, the Act requires large companies with a substantial trading presence in Northern Ireland to calculate their Northern Ireland profits separately from the rest of their profits. That calculation must follow internationally accepted principles for attributing cross-border profits. Broadly, that means that companies with profits generated in different tax jurisdictions must calculate their branch profits as though each branch were an independent entity. These profit attribution rules are important to make sure the regime works as intended.

An SME with 75% or more of employment time and costs in Northern Ireland would have all its trading profit taxed at the Northern Ireland corporation tax rate. An SME below the 75% threshold would have all its trading profits, including those generated in Northern Ireland, taxed at the UK corporation tax rate.

--- Later in debate ---

[Jonathan Edwards]

I am sure that the hon. Gentleman agrees that one of the biggest economic challenges that we face is the huge and gross geographical wealth inequality within the British state. Is the Labour position that fiscal devolution has no part to play in the strategy for dealing with geographical wealth inequalities?

[Jonathan Reynolds]

The hon. Gentleman is not correct in that assessment. I certainly agree with him that regional disparity in the UK is one of the principal economic challenges that we face, but I do not agree that the solution is a race to the bottom in corporation tax rates between different parts of the UK. That would be neither effective nor the right way forward, and it would almost certainly fail to address the problems that he raises.

I put it to the House that new clause 2 is a sensible, pragmatic and effective proposal to deliver objectives that are widely shared by Members from all parts of the House: a prosperous Northern Ireland, an effective partnership across the nations of this country and a competitive UK with strong public finances supporting quality public services.

Finance Bill

Jonathan Edwards Excerpts

Tuesday 12th September 2017 Commons Chamber

[Mel Stride]

My hon. and learned Friend is entirely right. As I have said, we are the party of bringing down corporation tax and small business tax, and we continue to bring those taxes down. The Labour party’s current policy is to raise corporation tax to 26%, which is going to do very little to encourage entrepreneurship in this country; it will in fact do the reverse. It must also be borne in mind that, on personal tax, it is Labour’s policy to start dragging more people into the higher tax rate, whereas it is this Government’s policy, through increasing the personal allowance, to take people out of tax and lower the tax burden entirely.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Last week the Institute for Public Policy Research published an influential report on some of the major economic challenges facing the British state, not least chronic geographical wealth inequalities. What measures are there in this Bill to meet those challenges?

[Mel Stride]

The Government’s record on income equality is extremely strong. The hon. Gentleman may be aware that we have the lowest level of income inequality in this country for 30 years, as measured by the Gini coefficient. We are assisting the lower paid through the national living wage and national minimum wage and HMRC’s vigorous actions in making sure that that is complied with by businesses, and, as I have already stated, through the personal allowance changes we have made, which have taken many out of tax—3 million individuals, heading towards 4 million as we go up towards £12,500 as the new allowance.

[Jonathan Edwards]

I was asking about geographical inequalities.

[Mel Stride]

We are a party and Government who recognise that all parts of our economy are equally important in sharing the proceeds of growth. That is why we are investing through our national productivity fund—through the work we are doing on skills, the investment we are making in infrastructure and the northern powerhouse, and through all these approaches—to make sure that prosperity, living standards and household income are improved throughout the length and breadth of our country.

Economy and Jobs

Jonathan Edwards Excerpts

Thursday 29th June 2017 Commons Chamber

[Mr Hammond]

Let me do the maths. Hmm, it would be £1.5 trillion that they raise. Perhaps one of my hon. Friends will check down the back of the Treasury Bench in case the previous Chancellor hid that away down there. As usual, the right hon. Gentleman is talking absolute nonsense.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Will the Chancellor give way?

[Mr Hammond]

I want to make a little progress, but I will give way in a moment.

I have set out our record, but the British people did not get where they are today by admiring their achievements. We have work to do: we have to negotiate our future relationship with the EU; we have to enhance our global competitiveness through raising our productivity; we have to rise to the challenge of sustaining our public services in the face of demographic pressure; we have to address the needs of our population for affordable routes into home ownership; and we have to show the courage and vision to grasp the opportunities ahead. We will meet those challenges head on, as we have always done, with a plan that builds on the strengths of our economy, not one that denigrates them.

Let me say something about our public services and their funding. We all value our public services and the people who provide them to us. Health and social care, education, roads, local authority services, police, fire and rescue, defence and the many, many other services we enjoy all form part of the vital fabric of our society and contribute to the vibrancy of our communities. The challenge of funding those public services is accentuated by the changing age profile of the population, which necessitates a proper debate about how to make the funding of public services sustainable not just next year, but over the decades of demographic change to come. We have to be clear about the choices and what they mean because there are no free lunches or money trees in the real world, and all decisions have consequences.

There are three ways for the Government to increase spending on public services: higher taxes, higher borrowing or higher growth. Higher taxes have a cost in terms of business investment, economic growth and take-home pay. Conservatives are instinctively in favour of keeping taxes as low as possible so that business can continue to create high-quality jobs and hard-working people can keep more of the money that they earn. That is why we reject Labour’s manifesto plan, which would, according to the IFS, take taxation to its highest ever peacetime level. The right hon. Member for Hayes and Harlington is not listening, but—[Interruption.] Pay attention. If he wants to make the case for higher taxation to fund public services, will he at least make this a grown-up debate? Will he at least ask voters whether they want to pay higher taxes to fund public services, not whether they would like someone else to pay higher taxes? As Ed Balls reminds us, in the real world, it is ordinary people who pay.

When we already have an eye-watering amount of debt, higher borrowing makes our economy vulnerable to future shocks. With £1.7 trillion of national debt outstanding and an annual interest bill of £50 billion, even at the current low rates, we should be reducing debt, not increasing it. However, borrowing means something else, too. It means that we are asking the next generations—our children and our grandchildren—to consume less in their lifetimes to pay for our consumption today. That is simply not fair; it is the opposite of sustainable.

[Mr Hammond]

As I have already said, if it were ever to look like the shadow Chancellor was anywhere near having his hand on the lever of power, I suspect that his programme, given what we know about his values and principles around the management of the economy, would lead to a pretty sharp rise in interest rates.

We must continue the job of getting our public finances back in order, over a sensible period of time, so that we are living within our means. The shadow Chancellor referred to the decision in my first autumn statement to push back the date on which we will reach fiscal balance. I made that decision to protect our economy during a period of uncertainty due to our exit negotiations from the European Union, therefore giving ourselves a little more headroom to respond should the economy need support. I would have thought that the right hon. Gentleman welcomed that measure.

The only fair and sustainable way to fund better public services, higher real wages, and increased living standards—[Interruption.] I say to the Opposition Front-Bench team that that is absolutely not the way to do it. The only fair and sustainable approach is to increase economic growth through higher productivity. Our plan will support our public services and living standards.

[Jonathan Edwards]

Based on the rosy picture that the Chancellor has been endeavouring to portray this afternoon, will he explain why Britain has the worst-performing economy in the G7 under his watch?

[Mr Hammond]

The hon. Gentleman is wrong. Last year, the British economy was the second-fastest growing in the G7 after Germany. In the year before that, our economy was the second-fasting growing after the United States.

--- Later in debate ---

[Kirsty Blackman]

I agree with my colleague that this is too little, too late. In the time that a British worker makes £1, a German worker makes £1.35, and not enough has been done. I understand that the industrial strategy is being consulted on, but it has not received very favourable responses compared with previous things that have been done in relation to industrial strategy. I hope to see major changes in the industrial strategy as it goes forward, so that it becomes more fit for purpose.

At this election, the Conservatives failed to bolster their majority and have had to sign a grubby deal with the DUP in order to get a majority. It was so grubby that it did not meet the tests that the Secretary of State for Scotland set out for it. It is back-door funding for Northern Ireland, and it was so grubby that the Prime Minister refused to even sign it.

The Conservatives like to portray themselves as being good with the economy and trusted with it. It is therefore distinctly irony that, after they have had seven years in government, if we ask people in the street, they will tell us that they are feeling the pain of a decade of wage stagnation; they are feeling the effects of rising inflation—rising faster than the Chancellor predicted in his spring Budget; and they are looking at how they can make ends meet in their household budgets. That is the reality for people, but the Conservatives fail repeatedly to understand this. They stand there and talk about the just about managings, the long-term economic plan and how great the economy is, but people are not feeling those things—that is not the real-life, lived experience of people in the UK.

[Jonathan Edwards]

The Tories also like to portray themselves as the party of the Union, but does the Barnett-bypass deal for the DUP not fundamentally undermine United Kingdom pooling and sharing resources?

[Kirsty Blackman]

I absolutely agree; if Northern Ireland is getting £1 billion or £1.5 billion or however much it will be tomorrow, the other nations of the UK should get similar. Our manifesto contained a commitment for extra money for the NHS in England, because we believe that the English NHS should have more money, and that would generate Barnett consequentials for the NHS—or for spend—in Northern Ireland, Wales and Scotland. That is the way we think this should have been done.

On the Conservatives’ economic record, Members should not just take my word for it. They should take the word of the Institute for Fiscal Studies, which described this situation as “dreadful”, projected that child poverty would rise to 30% by 2021-22, and laid the blame squarely on the impact of tax and benefit reforms; they should take the word of the Resolution Foundation, which reported that the Tory Government’s tax and social security policies will drive the

“biggest increase in inequality since Thatcher'”;

they should take the word of the Bank of England, which reported that consumer credit has risen at annual rates above 10%; they should take the word of StepChange Debt Charity, which reported that 22 million people in the UK are not confident that they are saving enough to cope with unexpected bills or a drop in income; and they should take the word of Money Advice Scotland, which, in a damning statement, reported:

“More and more people within the money advice sector already attest to the growing prevalence of debts that are directly related to living costs. People who are borrowing not out of recklessness, but because their level of income cannot sustain a socially acceptable standard of living”.

That is what the Tories are presiding over.