Climate Agenda

Lord Lucas Excerpts

Thursday 24th October 2024 Lords Chamber

[Lord Lucas (Con)]

My Lords, I am very grateful to my noble friend Lord Lilley for giving us the opportunity of this debate and it was a great privilege to listen to the maiden speech of my noble friend Lady May of Maidenhead. I note that she had the prescience, having started her life at sea level in Eastbourne, where I live, to move up to the hills of Maidenhead, thereby ensuring that, whatever happens with global warming, she will be okay.

One advantage of this place is that we listen to people we disagree with and very often we learn from them. I listened to the noble Lord, Lord Moynihan of Chelsea, and I disagreed with much of what he said, although I did agree with him on the precautionary principle. The precautionary principle and, indeed, actuaries have made a huge mess of our pensions system, resulting in a stock market with annual outflows rather than inflows, greatly weakening our economy. I very much hope this Government will do something about that. When I was the Lords spokesman for the Ministry of Agriculture and BSE hit, the first reaction of the precautionary principle people was, “We must kill every cow in the country”. Fortunately, we took wider considerations into account—so one does learn from people one finds oneself in opposition to.

We are dealing with a science-based question. Science at its best is a retailer of truthful, beautiful, digestible stories, based on clear metrics, evidence for what works, a real interest in getting at the gaps in the evidence and constant evaluation. I think we are in much that position when it comes to climate change. There is a huge amount of work going in to trying to understand how our climate works. It is a very public body of work. I personally would like to see more red-teaming. I bristle when I hear about scientific consensus. Science is not about consensus; it is about disagreement and challenge. By and large, we have done a pretty good job on that. Where I think we have failed is on net zero. We have not produced the stories, the understanding—what my noble friend Lord Randall called “taking the public with us”. When even the national grid does not know what is expected of it in five years’ time, we are not being open about what lies in front of us—we are not taking people with us.

If we are going to make the best possible and best co-ordinated decisions, we need to really understand where we think we are going to get our power from and what its characteristics, price and availability will be. We are not dealing with little bits here; we are dealing with a whole system and economy and we need to understand how all the bits will work together. And this is not a story which will remain static. We are a long way away from 2050. How we think we are going to get there will change every year, but we need to be telling that story openly and I really hope that that is something the Government will set their mind to.

To pick on three smaller, more particular issues, one of the characteristics of net zero is that carbon will become really valuable. We will not have access to the fossil sources that we have relied on. If we are to run a chemical industry, produce jet fuel, or whatever it is we do, we need to find carbon where it is concentrated. We really ought to make an audit of where those carbon sources are, because a lot of what we now regard as waste will actually be a really valuable resource in 25 years’ time. We ought to build the systems to make access to that resource possible.

Secondly, nuclear clearly has some very good characteristics when it comes to powering those parts of the economy that need guaranteed, continuous power—a data centre is the obvious example, which is why Google has gone in that direction. I really hope that the Government, as they are with housing, will take a pair of shears to the regulations, which grew up over decades of excessive anxiety about the safety of nuclear, and look at giving us sites, chasing multiple technologies for modular nuclear reactors, and dealing with idiocies such as the prohibition on burning the nuclear waste at Sellafield. Why do we have to keep it when some varieties of modern nuclear reactor will use it as fuel?

Thirdly, let us look generally at where the technological pinch points are. What are we finding difficult that ought to be possible because it is allowed by the basic laws of science, but we cannot quite get there? Battery technology is an obvious example, but there are many others. We should make sure we put money into research, because if we can get an early lead there, it will turn into big industries.

Product Regulation and Metrology Bill [HL]

Lord Lucas Excerpts

2nd reading
Tuesday 8th October 2024 Lords Chamber

[Lord Lucas (Con)]

My Lords, I have a great deal of sympathy with the points made from the Front Bench by my noble friend Lord Sandhurst. I do not like a Henry VIII Bill in this form. I was glad that we killed the Schools Bill in the last Parliament. I very much hope that we, on this side of the House, will be able to collaborate to make sure that either we are shown the draft regulations before we get to Committee or that we send the Bill to the other place with a suitably large number of amendments, so that if, when the regulations finally emerge, we find that they pong, we can ping them back.

This Bill sets out to protect consumers from dubious and dangerous goods. I join with the noble Lord, Lord Foster of Bath, in welcoming the Bill from that point of view. In Committee, I want to explore how it could be extended to make sure that VAT is paid on those goods. That is both to pick up the £1 billion or £2 billion a year that we are failing to collect at the moment, and because that kind of attention and positive cash flow would really help reinforce the consumer safety purposes of this Bill.

In what follows, I will rely extensively on Richard Allen’s 20 years of battling to get HMRC to collect the VAT due on imports into this country—a battle that has yet to crowned with full success, though there have been some useful victories. Online retail is just mail order. It is the same business as Pryce Pryce-Jones invented in 1861 and the regulations for dealing with it really date in concept from that era. They have not been updated to address current practices. This has led to a series of past and current abuses.

The abuse of de minimis import tax exemptions is now a global concern. Companies like Shein and Temu have legitimately exploited these outdated exemptions and flooded Asia, Europe and America with low-value goods, assisted by generous Chinese export tax rebates and subsidised international postage rates, overseen by a secretive Universal Postal Union treaty. It appears to me that the business models of those two companies and others are entirely based on the tax that does not get paid. I suspect that, if we collected tax properly, those companies would not exist.

In April 2017, the National Audit Office published its report Investigation into Overseas Sellers Failing to Charge VAT on Online Sales. This highlighted abuse by Chinese retailers who ship goods into UK warehouses with misdeclared import values and then sell them on Amazon and eBay, while not accounting for VAT on the sales. HMRC’s response was ineffective. As can easily be seen by placing test purchases, those ignoring the UK’s obligation to register for VAT can sell goods to UK customers at a distance and send them to the UK in the certain knowledge that, if they are below £135 in declared—not necessarily actual—value, no VAT assessment will be made at the border and the goods will be delivered to the UK customer promptly. That effectively means that these goods can be sold VAT free, which hugely undercuts any legitimate UK business trying to compete. All the business that could be being done in the UK, with the VAT and employment taxes that would result, shifts to these large overseas enterprises.

Large shipments of goods have been sent to the UK individually packaged as consignments of less than £135 in value. Under the new bulk import reduced dataset systems, entire container loads of goods can be declared on a spreadsheet. Undervaluation is hard to detect, and bulk shipments of low-value consignments will not attract VAT or duty if each package is addressed to an individual in the UK and valued at less than £135. Large consignments of goods are thus split into hundreds of smaller consignments and addressed to fake individuals or one of the many hundreds of thousands of mysterious Chinese companies that have been set up at Companies House. Once the goods have cleared customs, these bulk consignments are broken down and the goods are sent to warehouses, from where they are sold on eBay, Amazon or elsewhere. Once the goods are in a distribution warehouse, it is virtually impossible for the customs authorities to determine who is the beneficial owner.

I will outline some simple solutions to these problems. First, make online marketplaces collect VAT on all sales, whether the sellers are established in the UK or not. In the case of those using online marketplaces, as opposed to selling direct, this would greatly simplify collection for the seller and tax authorities and remove the need to determine where the seller is established. As the noble Lord, Lord Foster of Bath, correctly pointed out, in any event, under the Bill, we need to look at how business is conducted in online marketplaces to make sure that the products reaching our consumers are safe. It is not much extra to make sure that the tax has been paid in the correct way. As I said, this would generate a large flow of income that would put a broad smile on the Treasury’s face and make it happy to finance the enforcement effort that, as others have said, will be needed to make the Bill succeed.

Secondly, make any non-resident seller who applies for a UK company or VAT number appoint a VAT representative in the UK who is responsible for paying import tax debts should the seller abscond. Clause 2(2)(k) addresses exactly that for product quality questions: it asks for a UK representative who we can go after if something is wrong with the product, so that it gets put right. In Committee, I will certainly look to make sure that this representative is a person of substance who, faced with substantial fines for exploding batteries— I am glad to see that the noble Baroness, Lady Brinton, is seated on a wheelchair with what looks like lead acid ones—can pay the substantial damages involved. These representatives need to be real people.

Thirdly, make customs brokers responsible for the correct value declaration of goods that they import for their clients, for the safety of those goods and for the payment of any VAT and duty. These two things run together: if you are in the business of importing goods, you will, under the Bill, have to take responsibility for their safety. We can run the VAT in alongside that.

Fourthly, legislate so that all imported goods held in UK warehouses are clearly marked with the name of the beneficial owner. We are asking for products to be properly marked in the Bill. Who is the beneficial owner? Who is the representative whom we can go after if the products are defective or if the VAT has not been paid? We need that sort of information to be clearly specified.

Fifthly, abolish the subsidy enjoyed by Chinese sellers, enabled by the Universal Postal Union treaty. I suspect that will be outside the scope of the Bill, however much I may smile at the Public Bill Office.

Lastly, increase the cost of unrealistically cheap imports, whether through increased duty, enforced partnership with a UK company, the extension of duty to more classes of goods or the application of fixed fees for clearance. Other countries faced with the same challenges have adopted measures like these. VAT has recently been imposed on all low-value imports by South Africa, and a similar measure is being considered in America. In India, Shein has been forced into partnership with an Indian company, ensuring that value is added, to the benefit of the Indian economy.

If we do this for the sake of tax, we will make it easier to ensure safety too. To come back to what the noble Lord, Lord Foster of Bath, said, we will have a way of affording enforcement. In any event, part of the Bill should be an ability to charge for the certification work we do on product safety. This should not happen entirely at the cost of us and our Government; we ought to be able to put a charge on the products. Again, that would ride nicely alongside VAT.