Trade Bill

Lord Kerr of Kinlochard Excerpts

Committee: 4th sitting (Hansard): House of Lords
Monday 4th February 2019 Lords Chamber

[Lord Bates]

I will be glad to do so. In a lot of such agreements, especially for the major manufacturers, the bulk of the value of the trade or the deal is the service package and the support provided thereafter. I will be very happy to write to my noble friend ahead of Report.

[Lord Kerr of Kinlochard (CB)]

In the early part of his speech, the Minister read out an impressive list of points that had been achieved or secured before he moved on to his brilliant ex tempore dealing with the questions raised in debate. I confess that I did not recognise those points. I cannot remember seeing them in the withdrawal agreement. Was he perhaps referring to the relevant part of the political declaration, in which case surely those points have not been secured or achieved and what has been agreed is that all these things may be discussed over the next three, four or five years as the long-term relationship is considered?

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[Lord Kerr of Kinlochard]

My Lords, I support Amendment 77 for the reason that the noble Lord, Lord Lansley, has just given, and I strongly support Amendment 80, for the reason that my noble friend Lord Hannay gave.

Amendment 78, however, is very strange. I support it, but we are in Alice in Wonderland territory here. It is an entirely academic interest, because it seems to me implausible that Mr Barclay and Mr Paterson, and their high-powered alternative arrangements group, would come back to this alternative arrangement—the Chequers proposal—given that they ambushed the Government to take it out by their amendment to the taxation Bill.

It was always rather a fanciful idea anyway. In its brief life, it had several forms. First, it was proposed as a reciprocal arrangement. The foreigners would have to clog up Rotterdam, Antwerp, Hamburg and Bremen collecting our tariffs and operating our quotas, segregating our goods from goods going to the EU, which would be charged EU tariffs and subject to EU quotas. Once segregated, in some magic way, our goods would then proceed to the United Kingdom, having paid UK tariffs at their first European port of entry. That was never going to happen.

The second form, once noises from Brussels had been heard, was that we would do it for EU goods but the EU would not be required to do it for our imports at its ports. It was that, I think, which provoked the ire of the ERG: why should we collect foreign tax? But there was no possibility of the EU at any stage agreeing that we should collect its tariffs at our ports.

There are several degrees of lunacy here, and we have this very strange prohibition on the statute book. I think that the statute book should not contain nonsenses, and so I support the amendment. However, it does not matter. The EU would never agree this proposal in any of its incarnations. Mr Paterson, Mr Barclay and these other trade experts are not going to come up with it as an idea in the alternative arrangements committee, because they were dead against it. Therefore, although I support the amendment, I do not think one need spend a lot of time on it.

[Lord Bates]

My Lords, I rise more in hope than expectation of being able to persuade your Lordships. I pick up the sense from the Committee that this is probably something that your Lordships will want to return to in more depth on Report. Perhaps the best service I can offer at this stage is to put on record the Government’s position, respond to some of the precise points and then await further developments as they may unfold between now and Report.

Amendments 77, 78, 79 and 80 relate to changes passed in the other place during the passage of the Taxation (Cross-border Trade) Act 2018. This Act is important legislation as the UK leaves the EU. It enables the Government to create a stand-alone customs regime by ensuring that the UK can charge customs duty on goods, set and vary the rates of custom duty, and suspend or relieve duty in certain circumstances.

I turn now to the substance of the original amendments to the Act, which these amendments seek to remove. Amendment 77 relates to Section 31(5), which requires further parliamentary scrutiny in the event that the power under Section 31(4) is used to implement a customs union with the EU. The Government support the principle of further parliamentary scrutiny in this case. My noble friend Lord Lansley suggested that this was perhaps reflective of the politics of the movement. As a distinguished former Leader of the House in another place, he will be very familiar with how that side of things works. However, as this House is aware, the Government have made it clear that they are not seeking to be in a customs union with the EU as part of our future economic partnership—I say that without wishing to reopen the many debates we have had on “a” and “the”.

It is important to reflect why the Government have taken this view and to consider what leaving the EU means. It means the ability to strike out on our own to forge new trade deals. In order to do this, one important element is to have the ability to set our own tariffs. Being in a customs union would deny the UK this ability and fundamentally undermine our capacity to negotiate new trade deals with old friends and new partners.

The noble Lord kindly outlined, as he saw it, the way in which Amendment 78 arrived, referencing first the Bill and then the amendment. The Government have been clear in their White Paper that the arrangement they are seeking will ensure that both the UK and the EU get their fair share of the revenues from the rest of world trade. Section 54 of the Taxation (Cross-border Trade) Act is in line with the proposals that the Government set out with a view to achieving just that.

Turning to Amendment 79, Section 55 of the Taxation (Cross-border Trade) Act 2018 requires a single UK customs territory. This is a statement of government policy and ensures that the Government will not act incompatibly with the commitments made in the joint report of December 2017, where they committed to protect the constitutional integrity of the UK.

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[Lord Bates]

It is a challenge when someone with the noble Lord’s intellect begins a sentence by apologising for not being a politician and then asks for clarity at the present time. We are discussing this legislation, but we all know that we are in one of the most fast-moving, dynamic episodes of negotiation that this country has ever entered into. We are gradually working our way through. The White Paper was published at a moment when we were seeking to flesh out exactly what the Government’s position was in response to the Commission saying, “We don’t know what the UK’s position is; we don’t know what they want”. Therefore, the White Paper was introduced at that point. Then there was the clamour for clarity for business—what it would do in the event of no deal—so the technical notices were issued. Then, we got to the position where we reached an outline agreement with the European Commission in December, against many people’s expectations, along with heads of terms for what a future economic partnership might be. That was then presented to the other place and roundly rejected. Therefore, we have now begun another process, so I readily accept that if one wants to score points by stopping the clock at various stages along the process and pointing to certain inconsistencies in it, the Government are pretty easy fare for that.

[Lord Kerr of Kinlochard]

The Minister is making a very gallant effort and I applaud it. I enjoyed many of the things he said, particularly when he referred to a no-Brexit deal. I thought that was a very encouraging concept. I really cannot let him get away with where he is now, in this fast-moving situation he describes. Put yourself in the place of the EU 27: what are they supposed to think when the Prime Minister scuttles her own fleet? She orders her party to vote down the backstop in the treaty. The backstop is 21 articles, 10 annexes and 172 pages. The Prime Minister’s officials have negotiated that line by line, month by month and it is there because we asked for it. Then she decides that the best thing to do with it is to replace it with alternative arrangements, which are now being devised by Mr Owen Paterson and Mr Stephen Barclay. The Minister tells us that this is a fast-moving situation and it is quite hard to keep up with it, but there is nothing happening in Brussels but sheer astonishment at the failure of our system.

[Lord Bates]

That is the noble Lord’s position on this: the reality is that the Prime Minister is seeking an agreement that can command a majority in the other place and that requires compromise. That is what the agreement represents. The House made its view on the withdrawal agreement clear; she is now seeing whether that can be addressed with the Commission. Personally, I wish her well and every possible success, as opposed to my own mis-speaking. Lest it be on the record, I am sure that Sigmund Freud would have observed that perhaps I had momentarily let slip an inner feeling, which, of course, has nothing to do with the position of Her Majesty’s Government, which I consistently seek to put forward from this Dispatch Box and proudly support.

The noble Lord, Lord Purvis, asked about support for government amendments that preclude the facilitated customs arrangements. We would argue that there is nothing about the amendments made to the Taxation (Cross-border Trade) Act in the other place that is inconsistent with the draft political declaration that will inform the future relationship. On the point made by the noble Lords, Lord Hannay and Lord Stevenson, about insufficient focus on VAT implications, the Government have been clear that we are aware of the potential impact on businesses of any move away from the concept of acquisition VAT, but we have also set out that in any scenario we are seeking to avoid any adverse effects. Amendment 80 does not affect that in our view.