Customs and Borders

Mel Stride Excerpts

Thursday 26th April 2018 Commons Chamber

[The Financial Secretary to the Treasury (Mel Stride)]

I congratulate the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) on securing today’s extremely important debate. I thank all Members for their passionate, heartfelt and informed contributions. I do not intend to go through all the contributions, given their volume and the fact I would like to make sure I leave time for any Member who wishes to intervene on me to ask any questions or to make any points. If I have time, I will leave a minute for the right hon. Lady at the end.

A number of important points have been made in this debate. First and foremost is the matter of Northern Ireland and its Irish border. Some Members have suggested that, in fact, we are prepared to jettison the Good Friday agreement, to undermine it in some way or not to stand up for it, which is certainly not the case. We remain entirely committed to the Good Friday agreement, as we do to having no hard border between the Irish Republic and Northern Ireland and, indeed, no effective customs border down the Irish sea.

[Lady Hermon]

Will the Minister give way?

[Mel Stride]

I give way to my hon. Friend.

[Lady Hermon]

Thank you. It is nice that the Minister regards me as an hon. Friend.

I gently say to the Minister that it would be very helpful in a sensitive situation if the Prime Minister would stop repeating the mantra that no deal is better than a bad deal, because it directly contradicts her pledge, sincerely meant, to uphold the principles of the Good Friday agreement, which I believe she does and intends to do. However, there is a contradiction there, and I am sure the Minister agrees that we do not want to see any risk of a hard border with Ireland. That would lead to violence along the border.

[Mel Stride]

The position of the Prime Minister and the Government is that we are confident of a deal. In that context, this issue of no deal is not particularly pertinent.

Other important points have been raised. I think everybody recognises the importance of having as frictionless a border as possible. Of course, it is recognised that we would achieve that if we stayed within the customs union or a customs union, which is de facto the same thing, but that is not the same as suggesting that there are not alternative arrangements—I will discuss those alternative arrangements in a moment—that would achieve as good as the same thing as a frictionless border.

Many Members today have raised the importance of being free as a nation to go out and negotiate our own free trade arrangements, which of course means that we need to leave the customs union.

[Kirsty Blackman]

Does the Financial Secretary believe the trade agreements we negotiate could possibly be better than the trade agreements we currently have and would continue to have as a member of the EU?

[Mel Stride]

As the hon. Lady knows, we are currently working on transferring the EU’s agreements with third-world countries. Of course, in future we will be free to strike our own FTAs with other countries, which we are currently prohibited from doing.

It is good to hear the hon. Member for Bootle (Peter Dowd) agree with Margaret Thatcher at long last. She stood for free markets, free trade and fiscal responsibility, and I look forward to hearing more of that from him in the years to come.

I have just been informed that I must leave two minutes for the right hon. Member for Normanton, Pontefract and Castleford, which I will endeavour to do—[Interruption]— although she is generously saying that one minute will be enough.

The hon. Member for Bootle suggested that the Government’s position is confused, although I am not sure whether he was thinking of his own position when he said that. The reality is that the Labour party has a classic fudge on the customs union. It wants to tell everybody that we can somehow be in the customs union while not being a rule taker—that we can somehow negotiate to be in the room when FTAs between the EU and other countries are negotiated. The Labour party accuses us of seeking to cherry-pick, but by its own logic, it is quite clear that this is just not a realistic possibility.

The hon. Gentleman specifically mentioned clause 31 of the Taxation (Cross-border Trade) Bill, which will indeed permit the UK to enter into a customs union with another customs union or territory. That is something we will almost certainly wish to do with our Crown dependencies. The clause will therefore not be relevant to the European Union after our departure. The Government are therefore clear that when we leave the European Union we will leave its customs union. That is a matter of fact. The Government have also been clear that forming a new customs union with the EU is not compatible with a meaningful independent trade policy, so we will not be doing that. Outside the EU and a customs union, the UK will be able to sign its own trade deals with our partners around the world.

[Mr Vaizey]

Now that the Minister has been un-shelled—he is doing very well—could he name one trade deal and tell us when it will be signed?

[Mel Stride]

An ingenious question; I would expect no less. As my right hon. Friend will know, we are not able to enter into and sign such deals until we have left the EU and, indeed, we are beyond the implementation period. Of course we are working actively on these deals, but saying that does not mean that we will no longer need a deep and special partnership with our nearest trading partner. The EU is still and will remain a significant marketplace for us. Our markets are deeply interconnected, and that will remain the case for the future. That is why the Prime Minister set out the Government’s intention to negotiate the broadest and deepest possible economic partnership covering more sectors and co-operating more fully than any free trade agreement anywhere in the world and recognising the point of deep convergence from which both sides begin.

In leaving the EU customs union, we will be guided by what delivers the greatest economic advantage to the UK, framed by three strategic objectives. The first is continued UK-EU trade that is as frictionless as possible. The second is avoiding a hard border on the island of Ireland. The third is establishing an independent international trade policy.

The Government have already set out two options for our future customs arrangements with the EU that most closely meet these objectives. One is a new customs partnership. In this model, the UK would mirror the EU’s requirements at our border for imports from the rest of the world with a final destination in the EU. This would mean applying the same tariffs and rules of origin as the EU for those goods. By following this approach, we would know that all goods entering the EU via the UK pay the right EU duties, removing the need for customs processes at the UK-EU border.

The other option is a highly streamlined customs arrangement. This approach would involve the introduction of formal customs processes between the UK and the EU, driven by technology, to streamline and enable this model. However, the UK would look to implement a range of measures—both negotiated and unilateral—to minimise friction, together with specific provisions for Northern Ireland. The precise form of any new customs arrangements will of course be subject to negotiation, and we are pursuing both approaches vigorously with our European friends. I look forward to further progress in these talks.

For the reasons I have given, the Government cannot support the motion before us today. As we prepare to leave the European Union, a significant opportunity awaits us—the opportunity to promote our national interest above all else and the opportunity to shape our future trading policy—because when the people of this country voted to leave the European Union, they voted for democratic self-government and to take control of our future trading arrangements. Moving forward, we will seek to maximise our trade, across all countries and markets as we prepare for the challenges and the exciting opportunities ahead, confident as an independent trading nation and proud of our long history as a global champion of free trade.

Oral Answers to Questions

Mel Stride Excerpts

Tuesday 17th April 2018 Commons Chamber

[Mr Laurence Robertson (Tewkesbury) (Con)]

2. If he will reduce taxes on small businesses.

[The Financial Secretary to the Treasury (Mel Stride)]

I thank my hon. Friend for his question. The Government are bearing down tirelessly on the tax burden on businesses of all sizes, reducing corporation tax from 28% for large companies in 2010 to 19% today, and for small businesses from 21% to 19%. We will go still further, reducing the burden to 17% by 2020. For unincorporated businesses, we are, of course, increasing the personal allowance, in the previous Budget, to £11,850. That will increase further to £12,500 in 2020—further relief to many small businesses.

[Mr Robertson]

I thank the Minister for that encouraging answer. Businesses are, of course, unpaid tax collectors for the Exchequer and the Federation of Small Businesses recently estimated that businesses spend, on average, three working weeks a year on tax compliance. Is there anything further that the Minister can do to reduce that kind of expensive burden on businesses?

[Mel Stride]

I thank my hon. Friend for raising the FSB’s report. I have not only read it, but met the FSB to discuss the report in detail. I highlight to the House two of its important recommendations: one is around better guidance on taxation, and I have tasked officials on that mission within HMRC; and the second is Making Tax Digital, which we are rolling out for VAT-registered companies in 2019. The report states that this

“presents an opportunity to simplify and speed up tax compliance.”

[Ruth George (High Peak) (Lab)]

Is the Minister not concerned that the Office for Budget Responsibility report into welfare trends from January this year estimates that £1.5 billion of support for small businesses will be taken from them through the minimum income floor in universal credit? The Select Committee on Work and Pensions heard that 70% of small businesses currently last for 18 months, but that that will reduce to 20% for those on universal credit. Small businesses will be strangled at birth.

[Mel Stride]

The hon. Lady neglects to mention the fact that small business confidence in the UK is now in positive territory for the first time in many years. We have gone to great lengths within the tax system, as I have just explained, to reduce the burden on small businesses. We rolled out £9 billion of business rates relief in the 2016 Budget and a further £2.3 billion of relief in the autumn Budget last year. We will continue to be on the side of small businesses.

[Derek Thomas (St Ives) (Con)]

A significant number of businesses in west Cornwall and the constituency of St Ives, which I represent, are facing extreme hardship because of business rate increases in 2017 and 2018. This is becoming a burden that is too great for them to bear. What immediate help can the Minister make available to these hard-working business owners?

[Mel Stride]

As I have just identified, the Government have done a huge amount to reduce the burden of business rates. We recognise the important fact that these taxes need to be paid, irrespective of whether businesses are profitable or otherwise. That is why we have gone to such lengths, providing £9 billion of relief in 2016, including transitional relief for those facing the largest potential increases in business rates, and a further £2.3 billion by way of bringing forward by two years the change in the indexation of business rates from retail prices index to consumer prices index, saving businesses £2.3 billion over the next few years.

[Rachael Maskell (York Central) (Lab/Co-op)]

Business rates are really hitting businesses in York, particularly in the retail sector. This is having a huge impact on our city. On 8 March 2017, the Chancellor promised this House a complete review of business rates, yet we have only seen sticking plasters from the Government. When will that review begin?

[Mel Stride]

The business rates review is being undertaken by the Ministry of Housing, Communities and Local Government.

[Andrea Jenkyns (Morley and Outwood) (Con)]

3. What fiscal steps his Department is taking to increase productivity.

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[Mr Alister Jack (Dumfries and Galloway) (Con)]

9. What assessment he has made of the effect of the recent reduction in corporation tax on employment and wages.

[The Financial Secretary to the Treasury (Mel Stride)]

There can be no doubt that this Government’s record on reducing corporation tax from 28% in 2010 to 19% now, and further on down to 17% in 2020, has driven growth, kept prices down, pushed wages up and, indeed, led to more employment. Since 2010, we have seen more than 3 million more people in employment, and, as the Chief Secretary to the Treasury has just outlined, the lowest unemployment since 1975.

[Mr Jack]

Successful businesses create jobs and pay taxes. What steps are the Government taking to back businesses that play by the rules?

[Mel Stride]

My hon. Friend uses the expression “play by the rules”. I should make it very clear to the House that those that do not play by the rules will be clamped down on by Her Majesty’s Revenue and Customs. We have brought in £175 billion in respect of clamping down on avoidance, evasion and non-compliance since 2010. We have, as my right hon. Friend the Chancellor has outlined, the lowest tax gap in our history, at 6%. Those who play by the rules will benefit from our pro-business policies: bringing taxes down, providing relief on business rates, and other measures such as the employment allowance, worth £3,000 for the first employee as a relief on national insurance contributions.

[Alison McGovern (Wirral South) (Lab)]

When it comes to employment and wages, and the impact that corporation tax cuts have had, we have heard a lot of crowing from Ministers this morning, but we all know that our economy is wildly different, depending on where people live. Has the Minister asked for a distributional analysis of the impacts that he has just been talking about?

[Mel Stride]

We have debated at great length the issue of distributional analysis, in this Chamber and around the Finance Bill and other measures. The hon. Lady will know that all tax measures are subject to TINs and to various assessments. We are also bound by the Equality Act 2010 when we take decisions in respect of taxation. As a Minister, I can assure her that I take my duties in that respect extremely seriously.

[Colin Clark (Gordon) (Con)]

Businesses in my constituency welcome the cut in corporation tax, but does not my right hon. Friend share my concern that businesses in Gordon are being damaged by punitive business rates and the highest income tax rates in the United Kingdom?

[Mel Stride]

My hon. Friend raises an important issue, which is probably best listened to very carefully by some of those on the Opposition Benches. I can only speak for the UK Government here in this House, and we will continue to be on the side of businesses, small and large, to ensure that their tax burden is as low as possible.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Lines ag and bg of the spring 2017 Budget predicted that the cuts in corporation tax would cost the Treasury over £24 billion by 2022. If the Treasury had had that money to invest in infrastructure and construction, how many well paid construction jobs could the money have created?

[Mel Stride]

Let me make two simple points. First, corporation tax cuts are clearly to the benefit of businesses who employ people, create wealth and generate the taxes we need to fund our vital public services. Secondly, we have cut corporation tax from 28% to 19% since 2010, and the corporate tax take has risen by 50%.

[Mr Speaker]

A moment ago the Financial Secretary was banging on about TIMS. I was not informed about this matter, but the Clerk has consulted his scholarly cranium and he tells me that it stands for Treasury information management systems.

[Mel Stride]

Tax impact notes, Mr Speaker.

[Mr Speaker]

Oh, TINs! Well, I am sure everybody attending to our proceedings was perfectly well aware of what the right hon. Gentleman had in mind. I am sure I was in a minority of one in not knowing. And what are those pigs I see flying in front of my very eyes?

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[Dr Paul Williams (Stockton South) (Lab)]

11. What progress has been made on implementing the Building our Future programme.

[The Financial Secretary to the Treasury (Mel Stride)]

Progress has been excellent on the Building our Future programme. We have now secured locations for 12 of the 13 regional hubs and negotiations are continuing on the final site.

[Dr Williams]

The HMRC office in Stockton South is closing. Hundreds of staff are being offered jobs in Newcastle, which involves a three-hour minimum round trip that people say they cannot make, because their family lives are built around a job that they are proud of. Will the Minister please meet me given what we now know about the impact that the closure will have on Teesside and its people?

[Mel Stride]

The hon. Gentleman will know that all staff who may be affected will have face-to-face consultations with HMRC staff a year before any changes occur. Some 90% on average of those across the programme will be in a position of having left employment or retired, or finding it perfectly acceptable to move, in this case to Newcastle. I would be delighted to meet the hon. Gentleman to discuss the issue.

[John Howell (Henley) (Con)]

12. What discussions he has had with Cabinet colleagues on ensuring that people have high-tech skills to increase productivity.

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[Nigel Huddleston (Mid Worcestershire) (Con)]

T2. Does the Chancellor agree that consideration should be given to making expenditure such as gym membership tax deductible in recognition of its health benefits and, ultimately, cost-saving benefits for the NHS?

[The Financial Secretary to the Treasury (Mel Stride)]

Perhaps I am in need of the gym, Mr Speaker.

I shall take that as an early Budget representation, and my hon. Friend should be aware that we already have various tax-free reliefs in respect of health in the workplace—check-ups, eye tests, the cycle to work scheme, on-site workplace gym membership and welfare counselling. Of course, our soft drinks industry levy has led a number of companies to improve the quality of their products healthwise.

[John McDonnell (Hayes and Harlington) (Lab)]

In advance of today’s debate on Syria, I welcome financial measures to sanction the Syrian regime. According to past Government figures, £151 million of assets belonging to leading figures in the Assad regime in Syria have been frozen by authorities here. Since then, 261 Syrian individuals have been listed as financial sanctions targets in the UK. Can the Chancellor tell the House what the Treasury’s best and latest estimate is of the total value of assets held in the UK by individuals connected with the Syrian regime?

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[Alex Chalk (Cheltenham) (Con)]

T5. What assessment have the Government made of the prospects for real wages in our country?

[Mel Stride]

As my hon. Friend will know, this morning we were given the good news that we are now back in positive real-wage territory. He will also know from the projections of the Office for Budget Responsibility at the time of the last Budget that we anticipate an increase in real wages throughout the projection period.

[Paul Blomfield (Sheffield Central) (Lab)]

T6. The number of people with unmanageable payday loan debt has more than halved since the Financial Conduct Authority introduced a total cost cap more than three years ago following pressure from Members on both sides of the House. New analysis by Citizens Advice suggests that extending the cap to doorstep-loan and rent-to-own markets would have the same impact on problem debt in those sectors, and could save consumers up to £154 million a year. Will the Chancellor consider taking such action?

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[Liz Twist (Blaydon) (Lab)]

T9. Many NHS trusts have set up subsidiary companies to take advantage of a VAT loophole to save money, often at the cost of the lowest-paid staff. Does the Chancellor have any plans to close this tax loophole and place the NHS on the same VAT footing as local government?

[Mel Stride]

I thank the hon. Lady for her question. Perhaps this is something that I could take up with her offline so that I fully comprehend the exact point she is raising.

[Alex Burghart (Brentwood and Ongar) (Con)]

Last year, more businesses were created in the UK than in any other developed economy. Does that not show that the Government’s policy towards businesses is working, and what will the Treasury do to build on that success?

Social Mobility and the Economy

Mel Stride Excerpts

Wednesday 28th March 2018 Westminster Hall

[The Financial Secretary to the Treasury (Mel Stride)]

It is a pleasure to serve under your chairmanship again, Mr Davies.

May I say how grateful we all are that my right hon. Friend the Member for Putney (Justine Greening) secured this debate? She has done so on the back of an outstanding record in government, including at the highest level. She brings to our debates a burning strength within her as to the importance of social mobility.

During this debate a number of Members have referred to their backgrounds, which have informed in many ways the views they have reached on social mobility and their desire to do something about it. My parents left school at the ages of 15 and 14 because of economic hardship, and the thought of them ever having become a doctor or a scientist, or even having gone to university, is about as fanciful as any one of us stepping on the surface of the moon. It would have been entirely and utterly impossible. My great break in life was when I got a free place at the grammar school, and I took that opportunity and never looked back. I therefore share with many of those present the burning drive to do something about the issues that we have discussed.

We can all agree that far. The question is, how do we approach these issues? As has been evident in the debate, many different strands are involved. The hon. Member for West Ham (Lyn Brown) mentioned housing, for example, which is one component. There are of course many other components, but I will focus on a couple of key areas, if I may, because they relate to the worthy and outstanding initiative launched today by my right hon. Friend the Member for Putney: educational skills, and the economy and business.

We should not overlook the progress we have made, in particular on education and skills, some of it on my right hon. Friend’s watch. We now have 1.9 million more children in good and outstanding schools than we had in 2010, and a record number of young people in education and training. We have more disabled and disadvantaged young people going to university than at any time in our history. We have driven up standards right across the piece. There is no point in getting people into education and training unless we give them good education and training that will be useful to get them work in future. We are achieving that: the EBacc is driving up standards and we have opened up access, particularly in the case of our great universities.

We recognise that we need to do more, so we recently invested £72 million in the 12 opportunity areas across the country, with £50 million allocated to early language and literature skills and £250 million to technical education. We have delivered £406 million for education and skills within the industrial strategy, particularly focusing on maths, digital skills and technology. My right hon. Friend mentioned apprenticeships and T-levels; there have been 3 million new apprenticeship starts since 2010 and 1.2 million since 2005.

My hon. Friend the Member for Ochil and South Perthshire (Luke Graham) mentioned the importance of not writing people off early in their career and the idea of lifelong learning. We are launching our national retraining scheme to ensure that we have upskilling at the centre of our offer. He mentioned the economy, and there is no doubt that providing a strong economy and employment is the best way to get people moving up in society and, in particular, avoiding poverty.

[Peter Kyle]

There are a lot of things I would like to comment on, but the Minister mentions the economy; is it not true that we live in a world where if someone is born into a family that has assets, they are almost certain to succeed in life, but if they are talent-rich but asset-poor they are not? What will the Minister do to restructure the economy so that those born into families who do not own property and do not have savings have a much better chance of success?

--- Later in debate ---

[Mel Stride]

On the specific issue of wealth, the hon. Gentleman will find that income inequality is at its lowest level for about 30 years. If he looks at the tax system, which includes property and assets, as he will know, the top 1% of earners in this country pay 28% of income tax. He will know that the national living wage is being increased by 4.4% as of this month with the start of a new tax year, and he will know that the very lowest-paid in our country have had a real-terms pay increase of 7% since 2015. I hope Members will recognise that the Government are on the side of the poorest in our society and are actively engaged in dealing with those issues.

[David Linden]

Will the Minister put on the record once again that the national living wage does not extend to under-25s?

[Mel Stride]

The hon. Gentleman and I have been in several debates where he has raised exactly that point time after time, and I am grateful to him for raising it again. There is an element of affordability to that; there is also the fact that there is a minimum wage, which we are increasing through time, for those who are under 25. We have been able to provide the above-inflation increase to the national living wage because our stewardship of the economy has allowed us to. The problem with some of the prescriptions that we hear is that they are big on spending and borrowing money and increasing taxation, and I am afraid that is just not a recipe for being able to make the kind of progress on the national living wage that this Government have been making.

I will move on to the overall economic progress that we have made as a Government. We have a near record level of employment in our country; we have more women in work than at any time in our history; and we have virtually the lowest level of unemployment for 45 years—youth unemployment is down by 40% since 2010. We have had five years of continuous growth, and the deficit and the debt are both falling.

[Sarah Champion]

I recognise the things that the Minister mentions, and of course they are to be welcomed, but we are talking about young people’s aspiration not just to get a part-time job in the corner shop but to become an MP, a judge or a surgeon. Surely that is what we are lacking, and that is why I hope he supports the pledge of the right hon. Member for Putney.

[Mel Stride]

I do not disagree with the hon. Lady, but my point is that unless there is a successful economy, with jobs, growth and all the things that this Government are delivering, it becomes more and more difficult to provide social mobility. This Government are providing all the things that I have outlined, and that is driving social mobility.

The way that the economy is managed has an important impact on poverty, which, as we know, is one of the greatest evils that hold people back. Since 2010 we have a million fewer people in absolute low income—a record low. The hon. Member for Mitcham and Morden (Siobhain McDonagh) raised the issue of child poverty; we have 300,000 fewer children in absolute low income. There are 200,000 fewer pensioners in absolute income poverty and 500,000 fewer adults of working age in absolute low income since 2010. In fact, of the 28 EU member states, our country has the fifth lowest level of persistent poverty. That is not the same as saying that where we are is acceptable or that we do not have to do more, but we should recognise that progress is being made.

Doing more is right at the heart of what my right hon. Friend the Member for Putney suggests. The Government warmly welcome her initiative; she rightly said that a lack of social mobility leads to talent going to waste. I totally endorse that. She referred to the important link between productivity and social mobility, a point that my hon. Friend the Member for Chichester (Gillian Keegan) also raised. It is a simple fact that living standards can increase dramatically if we get productivity right. In fact, if we had the same level of productivity in our country as there is in Germany, our economy would be 30% larger than it is. I am wholeheartedly with her on that.

My right hon. Friend the Member for Putney also raised the issue of Brexit and talked about the freedoms that will come with it as a moment for change. That was an apposite and far-sighted point to make. She urged companies to engage in her social mobility pledge, focusing on partnerships with schools and work experience. My right hon. Friend the Member for Bexleyheath and Crayford (David Evennett) spoke passionately about his work experience when he was a younger man—or should I say an even younger man—than he is today.

On companies’ recruitment practices, my right hon. Friend the Member for Putney raised the issue of name-blind applications and the work that Clifford Chance has done, as well as the contextual recruitment carried out by Deloitte, Linklaters and others, which takes into account applicants’ backgrounds as well as the contents of their curriculum vitae. If I may paraphrase her, it is a case of employers being blind to everything but someone’s suitability to do the job. We can all unite around that. She also raised the important matter of degree apprenticeships and made an interesting point about how the apprenticeship levy is used and whether it could be directed in ways that may be more helpful to the issues that we are debating.

My right hon. Friend raised the important point of how we measure social mobility and human capital. Personally, I think that is an area that would be worthy of greater attention. I do not believe that the Office for National Statistics or any other such bodies produce such statistics, and it may well be worth us looking at that more closely. She raised the importance of working with others, such as companies in our constituencies and organisations such as the CBI, the FSB and the others that she has already brought on board, for which I give her huge credit.

It may be impossible to discuss such a deep and important issue as social mobility without being partisan, and almost inevitably there have been elements of partisanship in the debate. But my right hon. Friend should be congratulated on at least uniting us in spirit on an issue that we are all determined to confront. She left us with a powerful legacy from her time as Secretary of State for Education. I have a feeling that there is far more to come from her; that she is far from finished in her drive for a fairer and better world, with social mobility beating alive, loud and whole at its heart, and I thank her for bringing forward this debate.

Double Taxation Convention: UK and Cyprus

Mel Stride Excerpts

Wednesday 28th March 2018 Written Statements

[The Financial Secretary to the Treasury (Mel Stride)]

A Double Taxation Convention with Cyprus was signed on 22 March 2018. The text of the Convention is available on HM Revenue and Customs’ pages of the gov.uk website and will be deposited in the Libraries of both Houses. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.

[HCWS605]

Digital Taxation

Mel Stride Excerpts

Tuesday 27th March 2018 Westminster Hall

[Chris Philp]

I am sorry that that more attractive alternative did not present itself. However, it is of course an enormous pleasure to serve under your chairmanship, Dame Cheryl. I add my congratulations to my hon. Friend the Member for Harborough (Neil O'Brien) on securing the debate.

I am not sure I want to confess this in public, but I will: when this document, “Corporate tax and the digital economy: position paper update”, arrived in my inbox this month, I quivered with excitement because the topic is so important. I am delighted to see the Government, and particularly the Financial Secretary to the Treasury, my right hon. Friend the Member for Central Devon (Mel Stride), who I gather has been upgraded to be the Paymaster General as well—

[The Financial Secretary to the Treasury (Mel Stride)]

Both.

[Chris Philp]

He is a man of many talents. I was delighted to see him taking the initiative in this important area.

It is worth saying that significant progress has been made in the past eight years, as some colleagues have mentioned. The country’s tax gap is at just 6%, down from 8% in 2010, and is the lowest among OECD countries, which is a very good thing. The amount of corporation tax that we have collected has gone up from about £35 billion to about £55 billion in the past eight years, despite the fact that, as my hon. Friend the Member for North East Hampshire (Mr Jayawardena) mentioned, the rate at which it is levied has gone down. That is all extremely welcome, and the Government are to be warmly commended for that progress.

It is, however, also true—I think this view commands widespread support—that a number of typically large multinational companies, often providing digital services, such as Google and Facebook, have succeeded in organising their affairs, fully in conformity with current international tax laws, such that they manage to argue that the substance of their economic activity takes place in very low-tax jurisdictions. Those jurisdictions are often in the Caribbean, and I suspect that they are not selected for their clement climate. That situation strikes me as fundamentally unfair and unreasonable. The Government have, of course, already taken a lead in the matter, via the base erosion and profit shifting initiative, including such things as limiting the deductibility of interest expense to 30% of earnings before interest, taxes, depreciation and amortisation. The UK Government led on that, and are to be strongly congratulated on it. However, there is scope to go significantly further.

It just does not seem right or fair that a company such as Google, with revenues in relation to UK customers in the order of £4 billion, pays virtually no tax by successfully arguing that the substance of its economic activity lies elsewhere. That is why I was so excited by the position paper update, published a few weeks ago. The approach laid out in the excellent position paper, which by the way I fully support, is a multilateral one of trying on an international basis to redefine economic activity to account for the value created by users. It is exactly the right thing to do, and I hope we are successful in that. However, I suspect that as with any multilateral enterprise, it will take time to get agreement with many other countries, particularly when some of the companies concerned will use their influence to try to slow things down and stymie progress. While it is certainly right to take a multilateral approach to changing the way we define economic activity, it is important to have a plan B that could be implemented much more quickly.

The position paper deals with that admirably. It discusses a tax on sales and, as hon. Members have said, the European Union is looking at that. I fully support that approach. A threshold of the kind that we have talked about, to exclude small and even medium-sized companies, is the right thing. The number that I heard mentioned—3% of sales—seems reasonable. A point that I want to make more for the 27 European countries than for us is that care should be taken to ensure that the EU does not use it as a pretext for retaining the tax receipts and developing a European Union treasury function for the first time. That will not, I think, concern us, but it might concern the other 27 members.

I advocate that if the European Union does not move quickly enough and implement the sales tax in a timely fashion—and by “timely” I mean that I hope it would happen in the next 12 to 24 months—the UK should take unilateral action. My hon. Friend the Member for North East Hampshire made a cautionary point about not making the UK uncompetitive, but of course the tax would be based not on where the company was domiciled but on where its sales occurred and where its users were. It would not be a disincentive to locating in the United Kingdom, either for permanent establishment or locus of incorporation. A sales tax or, indeed, a user tax would not violate the principle of competitiveness to which my hon. Friend rightly referred. We are generally speaking the second largest market for the companies in question, behind the United States of America. We are significantly larger than Germany because our economy tends to be rather more intensively digital. I do not think that, if we took unilateral action, Google or Facebook would suddenly refuse to do business in the United Kingdom. If they did, they would be pulling out of their second largest global market.

I suspect that unilateral action on a sales tax while we are a member of the European Union—and, I suspect, during the transition period up to December 2020—would probably be classed as VAT, or sufficiently similar to VAT to fall foul of European regulations. If we have to consider unilateral action, which I advocate and support, prior to our exit from the EU or the end of the transition period, something other than a sales tax would have to be considered. Something we might consider that would not fall foul of EU regulation on sales taxes and VAT would be a tax based on users. We might set a user-based tax of a certain pound amount per active user, for example. That would, again, apply only to the very largest companies with, perhaps, a UK turnover in excess of £100 million. That would make sure that they made a reasonable contribution before we managed to come up with a multilateral solution at global level or a sales tax at European level. It would, I think, be a good move. It would not undermine our competitiveness and it would mean that those companies were seen to make a fair contribution.

The proceeds of such a tax could usefully be applied in the area of business rates. Several colleagues have mentioned that, and I am sure that small businesses in all our constituencies have raised the issue of business rates with us. Of course, digital companies such as Google and Facebook—and even Amazon, because it operates from large warehouses in remote locations that do not have a high rateable value—pay little in business rates. They also pay little in corporation tax, although of course they pay their full share of payroll taxes. It is inherently rather unfair: local high street businesses pay their full share of business rates and corporation taxes. So some of the money raised by the digital tax, whatever form it might take, could be applied to offer business rate relief, particularly to smaller businesses—perhaps those with less than £28,000 a year of rateable value.

I should be interested to hear the Financial Secretary’s response to the one or two ideas that I have set out. Really, however, I want to express my strong and enthusiastic support for the course that he has laid out. It is a great pleasure to come here and support it.

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[The Financial Secretary to the Treasury (Mel Stride)]

It is a pleasure to serve under your chairmanship, Dame Cheryl. It was a pleasure to hear the opening speech, because it was insightful, clear and well-structured and set out. Given that this is a highly technical subject, that was quite an achievement. It was also extremely thoughtful. It has been remarked by a number of hon. Members that there are quite a few of us on this side of the House. That is because we care deeply about issues such as tax. Traditionally, we like to see taxes as low as possible, as my hon. Friend the Member for Saffron Walden (Mrs Badenoch) rightly pointed out, but we also recognise that tax is important, because it provides the finances for vital public services—our national health service, our social care, our armed forces, our police, our teachers and so on. We also recognise, as several hon. Members have pointed out, that it is important in terms of fairness and of having a level playing field—particularly, in that context, for those hard-working small businesses that occupy our high streets, which have to pay their business rates, a tax which cannot be avoided whether a business is profitable or unprofitable. On this side of the House, we recognise the paramount importance of getting to grips with the issues we have been discussing today.

Hon. Members have, understandably, raised the issues of avoidance, evasion and non-compliance. Conservative Members have dealt at length on the great success we have had in that respect. We have raised or protected £175 billion since 2010. We have one of the lowest tax gaps in the world—the difference between what we could collect and actually do collect—at 6%. HMRC is doing a great job, by and large, in ensuring that those who are due to pay tax do indeed pay it.

It is important to point out, as several hon. Members have, that what we are discussing today is predominantly not about avoidance and evasion. That is an important distinction. Whatever we may feel about tech companies or internet-based businesses—and they do not always acquit themselves admirably—the accusation is not in any way that they are avoiding taxation, but simply that the current international tax regime does not effectively accommodate the way they generate value within the United Kingdom.

If this is not about avoidance, what exactly is it all about? It is about the way the current international tax regime assesses taxation and where corporation tax should fall due based on where the economic activity occurs. As my hon. Friend the Member for Harborough (Neil O’Brien) rightly pointed out, typically we would be looking at the factories, the employment of people, where the intellectual property lies and where the decisions around risk and investment in the business are taken. We know that for certain types of digital platform—typically, the search engines, the online marketplaces and the social media providers—a lot of the value is generated via the interaction between the end user and the platform itself. Therein rests the actual value. The question we then have to ask is how do we effectively address that situation and ensure that where businesses generate huge sums of profit within the United Kingdom, a fair share of corporation tax falls due to them.

We have already brought in a measure, announced in the autumn Budget, to tax the royalties that flow to intellectual property held in zero and low-tax jurisdictions. This is very much a front-foot approach to those digital-based businesses that are shifting profits out of the United Kingdom in tax terms. We are consulting on that and legislation will come forward in due course. We expect it to raise around £800 million by 2023. That is a significant sum. It is the kind of amount that could potentially be useful to ease the pressure on our high streets, as many have called for this afternoon.

The position paper last year and the March paper we just introduced by way of consultation were mentioned. In those papers, we have suggested that our preferred route is a globally negotiated deal with our partners in not just the European Union but the wider OECD. That is to ensure that any agreement works effectively, and that we avoid the problems associated with unilateral action, such as situations of double taxation between ourselves and countries that we trade with around the globe. However, in that paper we do set out an interim position.

I should make clear the Government’s intention that if we do not move forward at sufficient pace to put the appropriate measures in place, we will seriously consider an interim position—a unilateral move, which my hon. Friend the Member for Croydon South (Chris Philp) was keen to see. Under those circumstances, we would potentially look at a tax based on revenue, recognising that we do not want to capture market entrants or early-stage companies that may have some level of revenues and therefore fall to this type of tax, but which could be unprofitable at that stage of their development. This is where the whole issue of de minimis and thresholds comes in, which hon. Members have spoken about this afternoon.

In that context, it might be worth briefly referring to the proposals put forward by the European Union in its recent paper. As my hon. Friend the Member for Harborough pointed out, it has suggested that a 3% tax on revenues would be appropriate, raising about €5 billion, but that there should be a de minimis on the basis of those companies’ worldwide turnover and the level of taxable revenues that would fall due within the European Union. It also makes the point that it is important, within EU domestic tax legislation and the treaties between member states, that we have a definition of the concept of significant economic presence, which captures this idea of creating value in the way that I described. It also recognised the importance of going further and factoring in those definitions within the bilateral or multilateral trade agreements and tax treaties that we have with the rest of the world—with non-EU member states. That is to capture the fact that it is often companies outside of the EU that are transacting in this manner—many of those businesses are in the United States.

I will conclude by saying that we are very serious about this matter. I have a great deal of time and some affection for the shadow Minister, the hon. Member for Bootle (Peter Dowd), despite the red book that beats in his breast pocket as I address him. In response to him I have to say that it is this party, the Conservative party in government, that is doing something about this issue. It is not the Labour party that ever got on top of avoidance, evasion and non-compliance—just look at the 6% compared with the 8%-plus under Labour. We are the party that is bearing down on these issues.

My hon. Friend the Member for Harborough, who will wrap up the debate in a moment, has my personal assurance that we will continue to take this matter extremely seriously. We will press ahead with vigour on the basis that, ultimately, it is only fair to do so.

Draft Finance Act 2003, Part 3 (Amendment) Order 2018

Mel Stride Excerpts

Monday 26th March 2018 General Committees

[The Financial Secretary to the Treasury (Mel Stride)]

I beg to move,

That the Committee has considered the draft Finance Act 2003, Part 3 (Amendment) Order 2018.

May I say what a pleasure it is to serve under your capable chairmanship, Mr Davies? The order provides for a technical amendment to part 3 of the Finance Act 2003, which makes provision for civil financial penalties where there has been a failure to comply with a duty, obligation, requirement or condition in specified tax legislation.

One such piece of tax legislation is the Community customs code: the body of European legislation that lays down the rules and procedures applicable to goods brought into or taken out of the customs territory. In May 2016, it was replaced by the Union customs code, more commonly known as the UCC. As a result, the Finance Act 2003 is out of date and its references to “Community customs code” need to be changed to “Union customs code”.

The order ensures that UK domestic law cross-refers to the most recent version of EU legislation with which it was intended to operate. It does not seek to alter materially the scope of the power to impose penalties; the underlying substantial legislation will remain the same.

The order is particularly important because it continues to preserve the capability of our customs officers to issue a civil financial penalty when there has been a breach of a duty obligation, requirement or condition of the Union customs code, which is an important part of HM Revenue and Customs’ overall compliance strategy. I therefore commend the order to the Committee.

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[Mel Stride]

I thank the shadow Minister, as always, for her participation on these occasions. I had thought that this might be a very short Committee, given that this is a highly technical change. As always, however, the hon. Lady raised important points, which I will go through.

First, the hon. Lady raised the TIIN and its accessibility—whether the URL was correct. I will have to get back to her on that, but I will certainly look into it because I recognise the importance of those assessments to her. I point out that there is no change in the scope or the penalties involved in this particular case or, indeed, in the manner of operation of this particular regime. However, it is right that that information should be properly accessible.

The hon. Lady asked why it had taken so long—since 2016, in fact—to bring in this measure. The answer is that until recently the legal advice, such as it was, was that there was not actually a requirement to make this change as the cross-reference was fairly obvious. However, more recent advice has suggested that we should make the change.

The hon. Lady asked about the number of penalties issued under this regime. Between March 2015 and 2016 a total of 466 penalties were issued, with a total value of £577,712; since the UCC was introduced, in 2016-17, 345 penalties have been issued.

The hon. Lady asked about the capacity of HMRC to handle the penalties and this particular regime. I point her to the fact that HMRC, as she knows, has an outstanding record on avoidance, evasion and non-compliance: £175 billion has been brought in or protected since 2010, and we have one of the lowest tax gaps, at 6%, in the world. I am confident that it is well resourced for this. She asked specifically about the number of HMRC staff who will be available. As she mentioned, there will be up to 5,000 additional staff, given the Brexit changes and the customs changes that are to follow. That is not a figure that the Treasury has brought forward; it is a figure that the head of HMRC has come forward with. We and my right hon. Friend the Chancellor of the Exchequer have made it clear that we will ensure that sufficient funding and resources are available for HMRC to carry out the important work that it will have, going forward. That is why last year about £45 million was made available to HMRC for Brexit-related matters and, in the recent spring statement, the Chancellor made it clear that a further £260 million will be made available for the next year.

The hon. Lady referred to the number of cases being handled by customs officers in the United States and Canada. Of course, those are different regimes, with different elements to them, but perhaps it is just indicative of the efficiency of HMRC and customs that they cover such a large amount of work with an efficient number of personnel. On that note, I hope that we can agree the order.

Question put and agreed to.

Draft Scottish Rates of Income Tax (Consequential Amendments) Order 2018

Mel Stride Excerpts

Monday 26th March 2018 General Committees

[The Financial Secretary to the Treasury (Mel Stride)]

I beg to move,

That the Committee has considered the draft Scottish Rates of Income Tax (Consequential Amendments) Order 2018.

May I say what a pleasure it is to serve under your chairmanship, Sir David? The order updates legislation to reflect structural income tax changes announced by the Scottish Government and includes a number of consequential amendments to tax reliefs, which remain reserved. The changes will ensure certainty and consistency for taxpayers across the United Kingdom, no matter where they are based.

The Government have transferred extensive income tax powers to the Scottish Government, ensuring that they are more accountable to Scottish taxpayers. Since April 2017, the Scottish Government have been able to vary the income tax rates and thresholds, except for the personal allowance for non-savings, non-dividends income.

[Ian Murray (Edinburgh South) (Lab)]

I thank the Financial Secretary for giving way so early in his contribution. Does he agree this statutory instrument means that the vow made during the independence referendum to devolve as much as possible under agreement to the Scottish Parliament has been approved?

[Mel Stride]

I would say that it is entirely in line with the vows we made at that time, and indeed the Scottish Government have exercised their right under the Scotland Act 2016 to vary Scottish tax rates—both the thresholds and the marginal rates. The Scottish Government used those powers at their recent budget to make a number of changes, including the introduction of a new starter rate of 19%.

[Stephen Kerr (Stirling) (Con)]

I am grateful to the Government for stepping in to sort out the mess that the Scottish National party Government have created in Scotland. Are not the facts that the SNP did not consult anyone in the Treasury at Westminster about the changes it was about to make and the impact they would have on marriage allowance and on pensions?

[Mel Stride]

I thank my hon. Friend for that intervention. In the spirit of moving forward positively, I shall leave it for his remarks to be placed on the record as he has seen fit.

As I was saying, the changes included the introduction of a new starter rate of 19%, an intermediate rate of 21%, and increases in the higher rate to 41% and in the top rate to 46%. The Scotland Act passed the powers to make consequential amendments to primary legislation via a statutory instrument, where required to respond to changes made by the Scottish Government.

The order makes changes to reflect the new income tax rates so that certain tax reliefs continue to work as intended when the changes take effect in April. It will ensure that those in the new Scottish starter and intermediate rate bands continue to receive marriage allowance at the current rate of 20%. It will also ensure that Scottish taxpayers continue to get the right amount of relief on charitable donations and claim the right amount of pensions tax relief under the relief at source mechanism, and that those who have deferred their state pension continue to pay tax at their marginal rate on a lump sum.

The order also makes minor changes to the Income Tax Act 2007, the Taxes Management Act 1970, the Income Tax (Trading and Other Income) Act 2005, the Finance (No. 2) Act 2005, the Finance Act 2016 and the Scottish Rate of Income Tax (Consequential Amendments) Order 2015, to reflect the new taxes.

The changes will ensure that the tax system remains fair and consistent and that there are no complex tax relief rules depending on where in the United Kingdom a taxpayer is resident. They will ensure that those reliefs and wider tax legislation continue to work as intended and demonstrate our continuing commitment to making the Scotland Act and devolution work. I commend the order to the Committee.

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[Kirsty Blackman (Aberdeen North) (SNP)]

I appreciate that the UK Government are introducing enabling legislation to ensure that the Scottish rate of income tax can apply and that Scotland will therefore be the fairest tax part of the United Kingdom.

[Mel Stride]

I hope that the Committee will agree to the order.

Question put and agreed to.

Leaving the EU: UK Ports (Customs)

Mel Stride Excerpts

Monday 19th March 2018 Commons Chamber

[Hilary Benn (Leeds Central) (Lab)]

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on customs clearance arrangements at UK ports after the UK leaves the European Union.

[The Financial Secretary to the Treasury (Mel Stride)]

The Government have been clear that in leaving the European Union the UK will also leave its customs union, allowing us to establish and enhance our trading relationships with old allies and new friends around the world. The Government have also set out that in leaving the EU customs union, we will be guided by what delivers the greatest economic advantage to the United Kingdom and by three strategic objectives: continued UK-EU trade that is as frictionless as possible; avoiding a hard border on the island of Ireland; and establishing an independent international trade policy.

As we implement the decision of the British people to leave the EU at the end of March 2019, we want a deep and special partnership with the European Union. The Government set out in our future partnership paper last summer two options for our future customs arrangements—two options that most closely meet these objectives. One is a highly streamlined customs arrangement. That approach comprises a number of measures to help to minimise barriers to trade, from negotiating the continuation of some existing trade facilitations to the introduction of new technology-based solutions. The other is a new customs partnership, which is an unprecedented and innovative approach under which the UK would mirror the EU’s requirements for imports from the rest of the world that are destined for the EU, removing a need for a formal customs border between the UK and the EU. Those models were detailed again in the Government’s White Paper last October, and by the Prime Minister in her Mansion House speech and subsequent statement to the House. We look forward to discussing both those options with our European partners and with businesses in both the UK and the EU as negotiations progress.

[Hilary Benn]

I am grateful to the Minister for that reply, but when was the Transport Secretary proposing to tell the House—or indeed him—about the new policy of not checking goods at Dover after we leave the EU, as opposed to telling the BBC last Thursday:

“We don’t check lorries now—we’re not going to be checking lorries in Dover in the future ”?

Given that the Government are committed to leaving the customs union, but that all free trade agreements involve some checks at borders, how exactly can this be squared with no checks at all? Which border crossings will be covered by the no-checks policy? Will they just be ro-ro ports, for example? Are the Government confident that World Trade Organisation rules allow for not applying certain customs checks at some ports but not others? Which checks do the Government intend to forgo? Have the Government had any discussions with the French, Belgian or Dutch authorities about whether they intend to apply a reciprocal approach at Calais or other channel ports? Will there be no checks on goods that have arrived in Dover from outside the EU? What risk assessment has been undertaken and will Ministers publish it?

When is Parliament going to see the information and analysis that has apparently been shared with businesses— it is reported that they have been required to sign confidentiality agreements—about possible new customs arrangements? Lastly, when are Ministers finally going to realise that if they actually want frictionless trade with the EU and to keep an open border between Northern Ireland and the Republic of Ireland, the best way to achieve that is to remain in a customs union?

[Mel Stride]

I thank the right hon. Gentleman for asking a variety of questions about what the Secretary of State for Transport said last Thursday. In addition to the remarks that the right hon. Gentleman mentioned, the Secretary of State also said that

“we will not in any circumstances create a hard border in Dover that requires us to stop every lorry in the port of Dover”.

That is absolutely right. The right hon. Gentleman will know that the discussions that we have had with other authorities in the EU27 are formal discussions, because the negotiations that we have been having with the EU have not been possible. However, some informal discussions have taken place.

The right hon. Gentleman raises the issue of confidentiality agreements for those with whom Her Majesty’s Revenue and Customs is in discussions. As I am sure he will know, this is an entirely normal state of affairs for such discussions. Incidentally, this works both ways, in that while there is confidentiality on the part of those private sector organisations, that is also binding on the Government, as anything of a commercially sensitive nature will not be divulged by the Government either.

The right hon. Gentleman raised the issue of Northern Ireland, on which we have made our position extremely clear: there will be no return to the hard border of the past. As we have made it clear to the EU27, we will not accept a situation in which we have a customs border down the Irish sea. We will respect the Belfast agreement, and we are engaged in further discussions with the Irish Government to come to a sensible arrangement that is in the mutual interests of ourselves, of Ireland and of the wider European Union.

[Sir William Cash (Stone) (Con)]

Last week, my European Scrutiny Committee met Mr Michel Barnier in Brussels. Tonight, my Committee will issue a report on Brexit in the context of the UK ports and customs issue, and the jurisdiction that goes with it. Will the Minister confirm, in the context of the Secretary of State for Exiting the European Union’s statement with Mr Barnier today on the draft withdrawal agreement, that the British Government will stand firm on the question of not allowing the European Court of Justice exclusive or sole jurisdiction, given that articles 122 and 123 of that draft withdrawal agreement make significant concessions to the European Court?

[Mel Stride]

We have made it clear that once we have exited the implementation period, the European Court of Justice will have no further remit. We will take back our laws, to be determined by our courts at every level, including the Supreme Court.

[Peter Dowd (Bootle) (Lab)]

I reaffirm what my right hon. Friend the Member for Leeds Central (Hilary Benn) said earlier. On Thursday night, the Secretary of State for Transport promised a Dover studio audience that there would be no customs checks on goods vehicles passing through UK ports following our exit from the European Union. The Minister dodged every question that my right hon. Friend asked, but I will give him another opportunity to answer some of them.

It stands in complete contradiction to the Government’s wider position that, unlike Labour, they will not seek to form a customs union with EU member states after the transition period. Will the Minister confirm that it is now Government policy to discard protections on goods travelling into the country through a customs union while also refusing to check goods vehicles as a requirement to entry? Will he explain how tariffs will be applied and enforced without goods vehicles being checked by customs officials? Surely that would be in breach of World Trade Organisation rules—unless he knows something different. Can he give a single example of a nation that does not rely on either a customs union agreement or customs enforcement at its border? What are the Government’s plans to manage our trade relationships, to protect our own producers and to uphold environmental protections without either a customs agreement or border enforcement?

We all thought that the Government’s “cake and eat it” Brexit strategy was wildly misguided, but they now seem to have put us into a worse position that even fails to meet the low bar set by the Brexit Secretary when he committed to avoiding a “Mad Max-style”, “dystopian” Brexit. The Minister must set out clearly which of the options the Government are going to choose. Is it a customs union, as proposed by Labour, or goods checks at the borders? Or is it neither, as his Cabinet colleague has promised? For the sake of business confidence and planning, and of economic stability and continuity, will the Minister please ask the Chancellor to do us a favour and get to grips with the Government’s hokey-cokey Brexit policy, and tell the Transport Secretary—in the Defence Secretary’s words—to “go away” and “shut up”?

[Mel Stride]

Well, we waited a long time to get to the end of that, and I am not sure whether we are any wiser as a consequence.

As the hon. Gentleman will know, we are leaving the customs union, and I set out in my opening remarks the two models that we are intent upon progressing with our European partners. I also stressed that we will arrive at a solution that is as frictionless as possible. I have been down to Dover to meet the organisation that runs the port, and also the Border Force personnel who are engaged with it, and I am fully familiar with the importance of a frictionless border. Of course, the other important news that we have had today is that we have concluded, subject to the European Council meeting this week, an implementation period for the arrangements, which will not only give us additional valuable time to provide certainty to businesses, but ensure that we have all the arrangements in place for a successful customs system going forward.

[John Redwood (Wokingham) (Con)]

Will the Minister confirm that we currently have friction-free and successful trade with the rest of the world under WTO terms and its facilitation of a trade agreement? If there is no free trade agreement with the EU after March 2019, we can have exactly the same friction-free trade with them, with Germany trading as China and America do today.

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[Mel Stride]

My right hon. Friend is correct. We will be in a perfectly good position to ensure that we have near frictionless trade on day one, using the kind of facilitations that we are already using when it comes to the policing of our borders with the rest of the world, and indeed that exist between other countries such as Canada and the United States.

[Peter Grant (Glenrothes) (SNP)]

We waited a long time to get to the end of that, and I not sure that we are any further forward as a result. The Minister finally understands what the rest of the world has been thinking after they have read every statement, listened to every speech and played through every attempt at clarification that we have had from the Government since the day of the referendum. My bingo card is not quite complete, but we got “deep and special”, “unprecedented” and “innovative”. We got “frictionless” twice, and we also got “streamlined”. However, I do not think that I heard “taking back control”, which is where I missed out on the jackpot, possibly because it is difficult to talk about “taking back control of our borders” when the Minister is trying to justify why we are not going to have any customs controls and therefore no border controls of any kind.

I remind the Minister that the port of Dover reckons that 99% of its traffic goes to and from the European Union, and it takes the massive great lorries an average of two minutes to get through. The other 1% goes to the rest of the world, and it takes an average of 20 minutes for those lorries to get through. There is no degree of customs check that can prevent Dover—in fact, most of Kent—from becoming a car park. We have not even started to talk about the impact on the Welsh ports. Where will the border be for traffic going from Wales to Northern Ireland via the Republic of Ireland? All the possible locations for a border have already been ruled out.

Has the Minister read the Northern Ireland Affairs Committee report that was published at the end of last week? Has he read the report of the Exiting the European Union Committee that was published on Sunday morning? Has he read the Business, Energy and Industrial Strategy Committee’s report that was published this morning? All of them say that the Government’s obsession with leaving the customs union will simply not work. I draw his attention to a conclusion of the Exiting the European Union Committee’s report of December 2017:

“It is difficult to imagine any possible deal, consistent with WTO and other international treaties, that would be more damaging to the UK’s interests than leaving the EU with no deal whatsoever in place.”

Does the Minister agree with that? Does he understand that we are now barely six months away from when we effectively need a deal in place? When are the Government going to get rid of the clichés and soundbites, and start giving us genuine solutions to the problems that they, and they alone, have caused?

--- Later in debate ---

[Mel Stride]

You are indeed a generous fellow, Mr Speaker. The nub of this issue is the misconception that having customs control at the border is the same thing as stopping every vehicle or jamming up Dover. There are approaches available—we set out them out at length in our White Paper last year, and we have been negotiating on them and will continue to put them forward to the EU—that use technology and the pre-lodging of customs declarations, and that may use inventory systems at ports or number plate recognition technology. All these approaches are perfectly capable of allowing traffic to move briskly through the ports, as indeed is the case today.

[Sir Edward Leigh (Gainsborough) (Con)]

Surely the implication of this question is that after we leave the customs union, it would somehow—bizarrely—be in the interest of those on either side of this equation to want to impose friction on trade. Surely the EU would not want to do this, given its massive trade surplus. So are we not tilting at windmills here—or is this not, as the French would say, a mere canard?

[Mel Stride]

My hon. Friend makes an extremely important point. As we know, there is a trade deficit in goods between ourselves and the EU, so it is clearly in the EU’s interests—and, particularly in the case of Dover and Calais, in France’s interests—to make sure that trade continues to flow smoothly.

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

The Minister referred to automated number plate recognition. Will he confirm that he has been discussing with the port of Dover extensive cameras, which could be part of his proposed technological solution? Will he also confirm that the Government rule out having such cameras at the Northern Ireland border, because they have ruled out any physical infrastructure at that border?

[Mel Stride]

The right hon. Lady is right to say that the Government have clearly ruled out any infrastructure at the Northern Ireland border. In the discussions on Dover—not necessarily with myself directly, but through officials—all those options, including the number plate recognition to which she refers, have indeed been talked about.

[Anna Soubry (Broxtowe) (Con)]

As my right hon. Friend knows, if there were two countries that were ever going to have a completely frictionless border, they would be Norway and Sweden, because they are both in the single market, but, as we know, there is a hard border there. In any event, will he be so good as to go to his officials at the conclusion of his appearance in the House to ask them to make sure that the costs of the system the Government hope to achieve with our neighbours in the EU are fully calculated?

[Mel Stride]

I thank my right hon. Friend for her question, but of course we do not yet know, as we negotiate these arrangements with the EU27, exactly what form of arrangements will be in place. Of course we will be assessing those carefully.

[Mr Chris Leslie (Nottingham East) (Lab/Co-op)]

May I press the Minister a little more on his two alternatives to the customs union? He has posited the idea that one is a technological solution, but he has already acknowledged that it is not viable, because of the border with Northern Ireland, so this all rests on a customs partnership arrangement. Will he confirm not only that that would that require the UK to assess two separate tariff arrangements internally—one for us and one for the EU—but that we would be looking to the EU to assess both its own and the UK’s tariff arrangements simultaneously? Does that happen anywhere else in the world?

[Mel Stride]

We have made it clear all along that the new customs partnership is an extremely innovative approach and would be a first, because this is a unique situation in which we and our European partners have a strong trading relationship and a near complete alignment of rules and regulations pertaining to our trading arrangements. The hon. Gentleman suggests that there is no alternative to the new customs partnership in relation to the border between Northern Ireland and Ireland, but that is not the Government’s position. We are confident that by using facilitations and various arrangements—[Interruption.] If he focuses for a moment on the kind of activity that is happening across the border between Northern Ireland and Ireland, such as fuel laundering, he will see that it has proven perfectly reasonable for the Police Service of Northern Ireland to intercept those engaged in such activities, well away from the border and very effectively, by using targeted approaches, as we might be able to do going forward.

[Charlie Elphicke (Dover) (Ind)]

I urge the Minister to reject the representations from the analogue Opposition parties, which seem to have a dystopian vision of analogue borders at which every single load is stopped. As the constituency representative for the port of Dover, I urge him to embrace digital borders, at which we have frictionless trade, risk-based stopping of trade and inspections where necessary, and the postponement of workplace checks and audits. In that way, the Labour party’s dystopian desire for Dover and Kent to be turned into a car park can be avoided, but only with investment. I urge the Minister to make the appropriate investment in systems to make that vision a reality as soon as possible.

[Mel Stride]

I thank my hon. Friend for his comments and also take this opportunity to thank him for the sound advice and guidance that he, as the Member who represents Dover, has given to me. As he says, we can of course use technology to ease traffic flows. We will also invest as required to make sure that our borders function effectively. The Chancellor made it clear in the autumn Budget in November that £3 billion would be made available as necessary, across Departments, for that purpose.

[Tom Brake (Carshalton and Wallington) (LD)]

I note that the Minister has disowned the Secretary of State for Transport’s policy brainwave, because the Government are saying that vehicles will be stopped at Dover, but not all of them. Given that 10,000 trucks pass through Dover every day, how long will the tailback be if, say, one out of every 10 additional trucks needs to be checked and each check takes five minutes? Where will the lorry parks be built that will be needed to accommodate that?

--- Later in debate ---

[Mel Stride]

There will be no requirement for anything like the level of stoppages at Dover that the right hon. Gentleman suggests. We will use technology to facilitate the movement of trucks and goods through the port of Dover. If there is an intelligence-led requirement to stop any vehicles, that can be done outside the port of Dover. We will make sure that traffic through the port keeps flowing.

[Sir Desmond Swayne (New Forest West) (Con)]

If we adopt unilateral free trade, we will not be the source of any friction, will we?

[Mel Stride]

I thank my right hon. Friend for his succinct question. Of course, that very much depends on where we end up in respect of our free trade agreements with the European Union and with other countries.

[Mike Gapes (Ilford South) (Lab/Co-op)]

Will the Minister confirm that the arrangements that will be agreed with the European Union will apply in exactly the same terms to the British overseas territories and specifically to Gibraltar, and that there will be no problems about that with Spain?

[Mel Stride]

I refer the hon. Gentleman to the comments of the Secretary of State for Exiting the European Union this morning. I believe he has confirmed that Gibraltar will be part of the agreements that we are expecting the European Council to agree to very shortly, and that they will also extend to our Crown dependencies and overseas territories as appropriate.

[James Cleverly (Braintree) (Con)]

Will my right hon. Friend take as inspiration the workings of DP World, the deep-water port in the south of Essex where thousands of lorries-worth of containers flow into the country from outside the customs union swiftly, slickly and smoothly? Will he look upon that as a potential solution for the Dover border?

[Mel Stride]

I thank my hon. Friend for that point. I have no doubt that that is just one more example of where facilitations and technology can ensure that goods move efficiently across a customs frontier.

[Stephen Timms (East Ham) (Lab)]

Does the Minister recognise that if there is no trade deal with the European Union, it will be a breach of World Trade Organisation rules to apply checks and tariffs to non-EU goods but not to EU goods?

[Mel Stride]

The right hon. Gentleman is absolutely right that under WTO terms we would have to treat the various countries equally, but we are confident that there will be a deal. Indeed, we made huge progress on the phase 1 issues in December and have heard just today that we are looking clearly at an agreement on the implementation period. We will be going forward for further agreement with the European Union on a deal for this country and the EU.

[Mr Marcus Fysh (Yeovil) (Con)]

Does my right hon. Friend agree that provisions related to a transition as per the mooted withdrawal agreement would not be effective until such an agreement were ratified and adopted, and that those stages will not be complete until next year? In that context, can he assure the House that upgraded capacity for inspections and declarations will be implemented behind the border now, so that trade can continue to flow whatever the outcome of negotiations with the EU by 29 March next year, and that this work will not be stood down?

[Mel Stride]

As I have already said, we will make sure that those elements of infrastructure—the places where goods can be checked on an intelligence-led basis and the technology that is required to keep our customs borders moving—will be in place by the appropriate time.

[David Hanson (Delyn) (Lab)]

If a Dublin-based company imports goods from mainland Europe in the European Union, puts them on a lorry, drives them through the frictionless border to Belfast, puts them on a ferry from Belfast to Liverpool, near my constituency, at what point do checks, and indeed facilitations, take place?

[Mel Stride]

As the right hon. Gentleman will know, these matters are subject to negotiation at the present time, but what we will make absolutely certain of is that there is no hard border between Northern Ireland and the Republic of Ireland, that there is no customs border effectively within the Irish sea, that the Belfast agreement is respected, and that we have a relatively frictionless movement of goods across the Northern Ireland-Irish border.

[Mr Jonathan Djanogly (Huntingdon) (Con)]

People are talking about the customs union, a customs union, a customs partnership and, as the Prime Minister put it, a hopeful customs arrangement, but will my right hon. Friend accept that as far as businesses are concerned they do not really care what it is called as long as they do not have 10-mile queues at the border, they are not paying EU tariffs and they are not being clogged up with more bureaucracy and red tape?

[Mel Stride]

My hon. Friend is absolutely right. What matters to business is that we keep the borders moving, and I have explained in my responses to many questions this afternoon exactly how we will approach that.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

Jaguar Land Rover is postponing investment in a new generation of electric vehicles until it is satisfied that there will be frictionless trade with the EU. Given that the Government have ruled out a customs union with the EU, what arrangements will the Government make that will both be achievable with the EU and satisfy Jaguar Land Rover so that it invests in much-needed electric vehicles?

[Mel Stride]

The Government are well aware of the particular needs of the motor manufacturing sector, with just-in-time delivery and the fact that some components move across what will potentially become a customs border in the future. Those needs are a priority for us during the negotiations. I have no doubt that the implementation period that has been announced today will be one of the things that will drive the economy forward even faster. The hon. Gentleman will know from the spring statement that the Office for Budget Responsibility has already upped the estimates of growth for next year, and hopefully the implementation period will make a further positive contribution to that.

[Ben Lake (Ceredigion) (PC)]

Wales is ideally based as a land bridge for many Irish exporters. Indeed, more than 70% of Irish road freight comes into the UK through Welsh ports. If a border is placed in the Irish sea, Welsh ports could face severe delays and disruptions. Will the Minister outline what assessment the Government have made of the potential impact on Welsh ports, and of whether trade will be diverted or displaced elsewhere?

[Mel Stride]

The good news for the hon. Gentleman is that there will be no circumstance under which this Government, or a British Prime Minister, will negotiate a deal in which we have an effective customs border between Northern Ireland and other parts of the United Kingdom.

[Stephen Kinnock (Aberavon) (Lab)]

Currently, goods that require checks go into a lorry park just off the M20, which apparently has 82 parking spaces, but, never fear, there will be a new lorry park just off the M20. However, it seems that the plans to build it are completely snarled up in a judicial review. Will the Minister please give an update on how the lorry park will save the day, and by when it will be built?

[Mel Stride]

We will ensure that sufficient facilities are available for checks. As is the case at the moment, many of those checks will occur at business premises and storage facilities, including Stop 24, for example.

[Diana Johnson (Kingston upon Hull North) (Lab)]

As an MP for a city that has a port and that voted to leave the EU, taking back control of our borders was one of the most common reasons that I heard for people voting to leave. Will the comments attributed to the Transport Secretary about having no hard border at Dover apply to Hull as well?

[Mel Stride]

The Transport Secretary said that not every vehicle will be stopped, and that is absolutely right. In fact, we will use intelligence-led, technologically driven interceptions where appropriate, as is currently the case for our dealings with countries outside the European Union.

[Albert Owen (Ynys Môn) (Lab)]

When will Ministers realise that the mantra of “frictionless border, frictionless border, frictionless border” is not standing up to scrutiny? Is he aware that Irish companies are already making contingency plans to go directly to mainland Europe, thereby bypassing Welsh, Scottish and English ports? Does he understand the effect that that will have on those port communities, but also on Her Majesty’s Treasury?

[Mel Stride]

We are committed to, and confident that we will achieve, a frictionless border between Northern Ireland and the Republic of Ireland that will facilitate trade in the future.

[Ian Murray (Edinburgh South) (Lab)]

Will ports on mainland Europe reciprocate by having no customs checks for UK goods?

[Mel Stride]

It will depend on exactly what transpires in the negotiations, as the hon. Gentleman knows.

[Melanie Onn (Great Grimsby) (Lab)]

Today’s news on the customs arrangements during the transition phase will come as a very welcome update to business in the logistics of ro-ro port operations, and particularly to the time-sensitive fish trade and processing industry. Continuation of these sensible arrangements is essential for the long-term future of Great Grimsby’s processing sector and 5,000 jobs. Will the Minister tell the British public that their Grimsby fishfingers will be safe in their hands after we leave the EU?

[Mel Stride]

Everybody’s fishfingers will be safe in the hands of this Government.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

I was a big fan of Peter Pan when I was growing up. I thought that the idea of a magical Neverland was wonderful, but of course as we grow older we realise that it does not exist—[Hon. Members: “What?”] I am sorry to disappoint hon. Members. The Minister, however, seems to think that he can wish a happy thought and fly out of the window. I am going to ask him a very practical question. Have he and the Home Office undertaken plans to train and recruit additional customs officers for the Welsh ports that have been mentioned? I have asked a number of questions and have not been able to get a straight answer from the Home Office. Are additional staff being recruited? If so, how many?

[Mel Stride]

We have made it very clear that sufficient staff will be made available. The head of Her Majesty’s Revenue and Customs has made it clear that there will be a requirement of between 3,000 and 5,000 additional staff. The Chancellor made it clear at the Budget that £260 million would be made available for HMRC in the coming year, and those resources are for people as well as technology. The right and appropriate number of people will be available.

[Wes Streeting (Ilford North) (Lab)]

The clock is counting down, yet the agreement reached today is clear that the thorny issue of the future of the borders surrounding Northern Ireland is being kicked into the not-so-long grass. I want to pick up two things with the Minister, based on his answers this afternoon. First, we are hearing lots about technology. Does it even exist? If so, what is it and how quickly can it be implemented? Secondly, he talks about the facilitation of the border between Northern Ireland and the Republic of Ireland. Will he say a bit more about what this facilitation is? It is not very clear, and the clock is ticking?

[Mel Stride]

An example of the technology would be the customs declaration service system that HMRC is developing as a replacement for the customs handling of import and export freight system. It is currently in testing, will go live come August and will be used in its entirety come January next year—well over a year before the end of the implementation period.

[Wera Hobhouse (Bath) (LD)]

What exactly, in simple terms, is the difference between a customs partnership and a customs union?

[Mel Stride]

In a customs union, as I am sure the hon. Lady will know, a country would be bound by the external tariffs set by that customs union. A relationship with a customs union takes the form that I have described, which would be a frictionless interaction of our exports and imports with that customs union.

[Catherine West (Hornsey and Wood Green) (Lab)]

What special assessment has been made of the risk of medications perishing due to long delays at ports?

[Mel Stride]

With regard to Euratom’s remit over the kinds of isotopes that the hon. Lady is referring to, nothing in our relationship with Euratom, or our lack of involvement with it going forward, will affect the ability of those isotopes to move between mainland Europe and the United Kingdom.

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

The difference between a customs partnership and a customs union strikes me as a distinction without a difference. However, if there is a difference, and the Government are eschewing a policy of maintaining any form of customs union after Brexit, why did the Minister’s officials place a clause in the Taxation (Cross-border Trade) Bill leaving it open to the Government to create a customs union after Brexit?

[Mel Stride]

One of the reasons for that relates to our Crown dependencies and overseas territories, where we may need to make arrangements to make sure that the whole deal functions effectively.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The Transport Secretary has said:

“Trucks will move through the border without stopping…in the way it happens between Canada and the US.”

In a simple 20-second Google search, I found a handy border crossing guide for commercial truck drivers travelling between Canada and the US. It confirms that they need to submit paperwork to customs at least two hours before they arrive, which may expedite the process by up to 30 minutes. It also confirms that all trucks will have a primary inspection that may or may not be the only stop. Shall I send the Minister this document? Does he agree that the Transport Secretary is no longer fit for his job?

[Mel Stride]

I have made it very clear that facilitation such as the pre-lodging of customs declarations before vehicles even arrive at a particular border is an approach that, combined with other technological approaches, can ensure that vehicles move very swiftly and frictionlessly through borders, as evidenced by a number of examples around the world of where exactly that is happening.

European Affairs

Mel Stride Excerpts

Thursday 15th March 2018 Commons Chamber

[The Financial Secretary to the Treasury (Mel Stride)]

I am delighted to open the second day of this very important debate. At the outset I want to set out the status of our negotiations and reiterate this Government’s vision for a future economic partnership with the EU. I will in particular focus on the important issue of financial services within any future trade agreement, and remind the House that we have been very clear that the decision to leave the EU does not mean some loveless divorce or division. There is indeed no need for this, given that the economies of the UK and the EU are inextricably connected, and given our long and shared history of common values and shared challenges, and I have no doubt that any future economic partnership must recognise and reflect these facts.

We stand at the threshold of a new beginning with our European partners, and a renewal of our commitment to ensure the continued prosperity and stability of both the UK and the EU. Before I turn to our future economic partnership with Europe, it is important to set out just how far we have come, and what awaits us as we progress our discussions.

The agreement in December was a significant step forward. The joint report issued by the UK and the EU set out progress on three areas: a fair deal on citizens’ rights that enables families who have built their lives together in the EU and the UK to stay together; a financial settlement that honours the commitments we undertook as members of the EU, as we said we would; and an agreement in relation to Northern Ireland. We are confident that this collaborative spirit, which led to the December agreement, will endure as we take our approach forward into the next phase, including at the European Council next week.

[Mr Chris Leslie (Nottingham East) (Lab/Co-op)]

On this concept of a collaborative, open spirit, trying to find solutions and securing frictionless trade, the Minister will have seen today’s Sky News report that the Government are insisting on non-disclosure agreements with a variety of industry groups, transport bodies, hauliers and others in trying to find their way through. Why are the Government insisting on gagging business organisations in that way?

[Mel Stride]

It is standard practice for the Government to use non-disclosure agreements, and delivering a seamless post-Brexit border is a top priority for us. Non-disclosure agreements with key delivery partners for the border are crucial to the open exchange of information and opinion on options and scenarios, and they ensure that all planning negotiations and decisions are based on what is achievable and most appropriate for the UK to ensure a safe and secure border.

In respect of our future trading relationship, draft EU negotiating guidelines have been circulated to the EU for comment, and we expect final guidelines to be formally adopted next week at the March European Council. We trust that these will provide the flexibility to allow the EU to think creatively about our future relationship, and, looking ahead, we are confident that we will conclude a deal on the entire withdrawal agreement by the European Council in October. This confidence is not just grounded in our mutual interest of striking a deal, but also because we enter these negotiations from a point of striking similarity: our rules, regulations, and commitment to free trade and high standards are the same. So, as we build this new relationship, we are doing so from a common starting point.

The next milestone in the negotiations will be an agreement of an implementation period. We saw the implementation period prioritised in the Chancellor’s Mansion House speech and the Prime Minister’s Florence speech, alongside a frictionless customs arrangement and a comprehensive agreement on trade in goods and services. The implementation period is the essential first step to ensure that we can all experience an orderly exit from the EU, plan accordingly, and enjoy certainty during the transition.

[John Redwood (Wokingham) (Con)]

How can we possibly agree an implementation period when at the moment we do not have anything to implement?

[Mel Stride]

While being ingenious in his use of language, my right hon. Friend will I am sure agree with me that the purpose of the implementation period is to make sure we have a period of certainty for business, so that when we end up with our final withdrawal agreement we only have one set of changes to make from where we are now to where we will be at that point. That is the purpose of the implementation period.

[Anna Soubry (Broxtowe) (Con)]

I do not want to alarm you, Mr Deputy Speaker, but I completely agree with my right hon. Friend the Member for Wokingham (John Redwood), which may be a first in this sort of debate—[Interruption.] He is in a state of high shock. In all seriousness, this is an implementation period—the clue is in the name—but many of us fear that by October we will have achieved nothing more than a woolly set of heads of agreement and that there will be little to implement. How does the Minister see things panning out in reality?

[Mel Stride]

Whether it is a transition period, an implementation period or whatever period one seeks to term it, the important thing is to understand what the period is about, and we have always been clear about that. It is a period in which we will remain closely involved—similar to how we are at the moment—so that when we move into the post-transition or implementation period we have undergone just one set of changes and that we have certainty in the interim for British businesses, which is exactly what they have been telling us they would like.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

I repeat these words:

“I propose that we aim for a trade agreement covering all sectors and with zero tariffs on goods. Like other free trade agreements, it should address services.”

Those are the words used by President Tusk in introducing the guidelines, which seem to accept the principle that there should be a comprehensive free trade agreement between the United Kingdom and the EU.

--- Later in debate ---

[Mel Stride]

My hon. Friend makes an important point and, as I will say later in my speech, there is every reason to move towards a comprehensive free trade agreement covering not just goods, but services.

[Vicky Ford (Chelmsford) (Con)]

Given that nearly half of our trade is with the EU and that 40% of that trade is in services, does the Minister agree that the level of services coverage in, for example, CETA is not deep enough or broad enough to recognise adequately the mutual trade between the UK and the EU in services?

[Mel Stride]

My hon. Friend raises an important point. We will be seeking a unique deal for our country that recognises the prime importance of financial services both to our country and to the European Union and of the provision of competitive finance to the EU’s businesses and consumers. She mentioned CETA, and the relevant point there is that the negotiations, which were led by Michel Barnier, recognised the importance of attempting to include areas such as financial services, which is exactly what we will seek in the negotiations that will now follow.

We have the reassurance that the UK and the EU both issued a published text on the approach to the implementation period that reflects the significant common ground between us. The text would codify an implementation period that preserves the current status quo for business and consumers, is time-limited but also provides a sufficient window for the EU and UK to put new processes and systems in place, and ensures continuity in the application of international agreements. As a third country, the UK will have the ability to use the period to negotiate and sign new trade deals, while reflecting the fact that we cannot bring these agreements into legal effect until after the end of the period. We will also introduce a new registration scheme for EU citizens arriving post-Brexit but during the implementation period, when EU citizens should be able to continue to visit, live and work in the UK as they do now.

[Peter Grant (Glenrothes) (SNP)]

The Minister has referred to the potential opportunities to negotiate new trade deals after we leave the European Union, and one of his colleagues has been keen to big up the prospect of the riches to be had from that. Can the Minister name any country in the world that has indicated it would be more likely to give a beneficial trade deal to the United Kingdom on our own than it would be to negotiate a deal with the world’s biggest single internal market?

[Mel Stride]

What I can tell the hon. Gentleman is that a large number of trade missions have been led by the Department for International Trade and its Secretary of State. We have had extremely encouraging discussions with a large number of important potential future trading partners with whom we may be seeking free trade agreements. As I have said, we will be able to negotiate deals within the implementation period, although they will not come into effect until we are beyond that point.

[Rachel Maclean (Redditch) (Con)]

Is the Minister aware of the article on the front page of The Times today, which says that Brussels has now agreed that Britain can sign free trade deals without the approval of the European Union? Will he update the House on the status of the situation? What does it mean for our free trade policy?

[Mel Stride]

I believe that my hon. Friend is right. I certainly read that article this morning, and if what it says is the case, that would be good and sensible news, because it would be entirely logical that we should be in a position to go out and negotiate free trade agreements during any implementation period, although we respect the fact that the deals would not be switched on until we were beyond that point.

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

As a part of the customs union, we have trade deals with 50-odd countries across the world, and I understand that they are worth some £140-odd billion per annum in UK trade exports. Will the priority during the implementation period be to renegotiate and sign deals with all those countries with which we currently have a trade deal? We know that some of them want to renegotiate the terms and want greater access to UK markets as a result. How many of those deals are we going to be able to renegotiate and sign before we actually leave the European Union?

[Mel Stride]

I reassure the hon. Gentleman that it is an absolute priority for the Government to ensure the consistency and continuity of the existing arrangements as they pertain between the European Union and other countries. I see no reason why we should not benefit from those arrangements, just as those countries will indeed benefit from arrangements with us as we go forward.

We have proposed practical solutions to help deliver a smooth departure from the EU. One such solution is the introduction of a joint committee to resolve issues or disputes that may arise during the implementation period. That approach is a common feature of international trade agreements. The joint committee would, for example, allow the UK to raise concerns regarding new laws that might be harmful to our national interest. We will also continue to discuss our involvement in relevant bodies as a third country during the period to ensure that EU rules and regulations continue to operate coherently.

It is in the interests of both the UK and EU to agree the precise terms of the implementation period as quickly as possible. We are close to delivering that, and we expect it to be formalised at the European Council meeting next week. The implementation period is key to forging the best possible future relationship, giving businesses and Government the time and certainty to plan for Brexit, and preparing the UK for its status as an independent trading nation. It will be a bridge from where we are now to where we want to be in the future—on exit, on day one, and beyond.

Looking further forward, it is crucial that talks progress so that we can agree the terms of our future relationship with the EU. We are now moving at pace to set the parameters of an economic partnership. As a Treasury Minister, I am particularly focused on how our economies will interact and grow together. As the Prime Minister said in her speech on 2 March, the UK is seeking the broadest and deepest possible agreement that covers more sectors and co-operates more fully than any other free trade agreement. A key component of any future agreement should be the inclusion of services, particularly financial services.

[Jonathan Edwards]

The Minister is being extremely generous in taking interventions. Taking him back to the implementation period and the negotiation of trade deals, will the priority be renegotiating the trade deals that we already have with all these third countries via the customs union or negotiating new trade deals with countries such as the United States and China?

[Mel Stride]

The hon. Gentleman will understand that both are an extremely high priority. We will be pursuing both avenues vigorously.

As my right hon. Friend the Chancellor made clear in his Canary Wharf speech last week, financial services is a sector that calls for close cross-border collaboration. The Chancellor also reiterated that it is simply not credible to suggest that a future deal could not include financial services. It is in the interests of both parties to ensure that the EU can continue to access and enjoy the significant benefits afforded by our financial services hub, because it is a regionally and globally significant asset, serving our continent and beyond, and near-impossible to replicate.

The UK can claim excellence in many areas, but in trade in financial services we are truly the global leader. We manage €1.5 trillion of assets on behalf of EU clients, and 60% of all EU capital markets activity is conducted here in the United Kingdom. Around two thirds of debt and equity capital raised by EU corporates is facilitated by banks right here in the UK. The huge economies of scale have led to London’s dominant position in EU financial services. As the Chancellor made very clear last week, we should be under no illusions about the significant costs if this highly efficient shared market is fragmented—costs that will ultimately fall to consumers and companies right across Europe.

[Robert Neill (Bromley and Chislehurst) (Con)]

My right hon. Friend is making a very important point. As the Chancellor set out, those costs are many billions of pounds. One example is the proposed relocation of clearing houses, with an effective cost of some £25 billion a year. Does my right hon. Friend agree in addition that it is critical to have continuity for the legal instruments that underpin financial services, and that continuity of access for legal services must therefore be inextricably linked?

[Mel Stride]

My hon. Friend raises an important point about the significance of financial services, not just to us but to our European partners. On his specific point about regulatory continuity, we are considering the detail of that at the moment. We will certainly look at the prospect of returning to the matter on Report of the relevant Bill.

The UK stands ready to engage on a future trade agreement—one that includes financial services. Our overarching vision is for an economic partnership—including a future trade agreement—that delivers the maximum possible benefits for both our economies in all sectors, respects the integrity of each other’s institutions and seeks to strengthen, not weaken, the prosperity of Europe as a whole. Despite that, some still question the possibility of reaching such an agreement or insist that a trade deal cannot include financial services. The Chancellor addressed those sceptics in his speech last week, when he said that

“every trade deal the EU has ever done has been unique”.

The existing models do not represent the best way forward; nor do they provide a useful precedent to form the basis of any future agreement. Joining the EEA would not give the UK enough control, and a CETA-style deal would present too low a level of market access. The EU and the UK come to the negotiating table from the unique position of having the same rules and regulations on day one, not to mention our deeply interconnected economies. Unlike when other countries negotiate free trade agreements, this is not about aligning two totally different systems. Any new trading agreement should reflect the starting point of deep and historic convergence. We understand that, over time, there will be points of inevitable divergence, so we recognise that any future agreement should set out a clear approach to that aspect.

Our country seeks the deepest and broadest agreement possible—a bold economic partnership that is of greater scope and ambition than any comparable arrangement in history. The ambition of our vision reflects the scale of our mutual interest, our shared history and all that we can achieve together as good friends and trusted neighbours. Leaving the European Union represents an opportunity to chart a prosperous future. Along with my colleagues in Government, I have the greatest faith in our country and in our ability to work with others to achieve a deal that provides and endures for us all.

HMRC Staff: Dudley

Mel Stride Excerpts

Wednesday 7th March 2018 Commons Chamber

[The Financial Secretary to the Treasury (Mel Stride)]

I congratulate the hon. Member for Dudley North (Ian Austin) on securing this important debate. I know that these are matters of particular concern to him, as they are to the hon. Member for Preston (Sir Mark Hendrick) and my hon. Friend the Member for Dudley South (Mike Wood), who have also made contributions this evening. HMRC’s location strategy was the subject of a Backbench Business debate held in November last year, and I am grateful to have the opportunity to return to this important matter.

As the hon. Member for Dudley North pointed out, in November 2015 HMRC announced its location strategy as a crucial element of its work to create a modern, world-class tax authority—a key part of our long-term economic plan for national prosperity. Since 2010 we have made substantial investments, enabling HMRC to do more to tackle evasion, drive down avoidance and improve compliance.

HMRC is transforming into a leaner, more highly skilled operation, offering modern digital services. It is moving away from outdated systems of manual processing to become more flexible and technologically driven—changing the way it works and using today’s technology and IT to improve the services it delivers for its customers. These investments in technology mean that HMRC can tackle fraud, evasion and avoidance more effectively and that customer services have improved, with far lower wait times on helplines and new ways to get support, such as webchats.

Changes to HMRC’s office estate are an important part of this transformation process, moving it from a large, widely dispersed estate of offices across the UK, varying in size, to a considered network of significant, modern regional hubs. In November 2015, HMRC announced that over the following 10 years it would bring its employees together in 13 regional offices, all in locations where it already has a significant presence, as it does in Birmingham. The co-location of teams across HMRC will lead to increased collaboration and flexibility, allowing it to provide more effective and efficient services to the taxpayer, and it has put support in place to help its workforce through the changes.

In Birmingham, the regional centre will be situated in the heart of the city at 3 Arena Central. It will be home to 3,600 civil servants, with 2,650 HMRC staff moving in from 13 offices around the west midlands region to undertake a wide range of key tax professional and operational delivery roles.

The first of HMRC’s regional centres opened in Croydon in July 2017 and construction is under way at the Birmingham site, along with further sites in Bristol, Cardiff, Belfast and Leeds. All those offices will be modern, environmentally friendly and located in the heart of the community. Most of them will be shared with other Government Departments, and all have been sized for the future needs of HMRC and the taxpayer.

In addition to the 13 regional centres, HMRC will keep seven transitional sites open across the UK for several years, where it will help retain key skills during the transition period, as well as five specialist sites for work that cannot be done elsewhere. For example, HMRC will retain Telford as a site for some of its specialist digital teams. By phasing the moves into its regional centres over a number of years and keeping sites open during the transition, HMRC will ensure that disruption to its business operations is minimised. The Birmingham regional centre will open in late 2020.

The overall programme to move to regional centres will deliver savings to the taxpayer of around £300 million up to 2025 and then annual cash savings of £74 million in 2025-26, rising to more than £90 million by 2028. It will also avoid costs of £75 million a year from 2021, when the current private finance initiative contact with Mapeley comes to an end.

It is important to stress that this is not just about cost savings and bricks and mortar. HMRC’s new office structure will allow people to develop more fulfilling careers. There will be a far wider variety of jobs and different career paths to senior roles, as a wider range of work will be based on single sites. These modern buildings will unquestionably deliver a better working environment and experience for HMRC’s workforce. Crucially, their city centre locations will also increase HMRC’s attractiveness as an employer, enabling it to recruit and retain the next generation of skilled professionals. That is particularly important given that a substantial proportion of its long-serving workforce are approaching retirement age.

HMRC is clear that it wants to do all it can to keep its people’s skills, knowledge and experience, and it has a policy of minimising any redundancies. The vast majority of HMRC employees are within reasonable daily travel of a regional centre, specialist site or transitional site, and that is deliberate: decisions on where to locate the regional centres were based on modelling of where existing staff are based. HMRC estimates that 90% of its workforce will be able to move to one of its regional centres or complete their career in their current office. For those currently based at the Waterfront offices, the travel time from Dudley to Birmingham city centre is between 35 and 55 minutes by car or train.

That said, HMRC recognises that individual employees have distinct personal circumstances, and not everyone will feel able to move to a regional centre, even where they might be reasonably close by. So it has put structured support in place—this is a point that the hon. Member for Dudley North asked about—to help those who can move and those who cannot. One year ahead of any move, everyone affected has the opportunity to discuss their personal circumstances with their manager and talk through any particular needs to be taken into account when decisions are made or any help they need to make the move—for instance, help with additional travel costs for up to the first five years. It is a tried and tested process, with more than 10,000 such conversations held in HMRC over the last two years. There is also a range of support for those unable to make the move to a regional centre. HMRC runs a programme of training, workshops, webinars and coaching, which includes advice on CV writing and identifying transferrable skills. Since starting in the autumn, it has been offered to around 800 employees, and HMRC will continue to provide such support.

Let me turn to some specific questions that the hon. Member for Dudley North posed. An equality assessment was conducted prior to the location’s announcement in 2015, with a high-level summary published to staff at that time. HMRC continues to review those, and the issues in the west midlands are of course considered with the active input of representatives from the Brierley Hill office and the local Public and Commercial Services Union.

The hon. Gentleman also asked me an important question about the date to which staff not being transferred on the universal credit/DWP basis might expect to stay in place. Currently, HMRC expects there to be ongoing tax credits work in Brierley Hill until March 2021. At that point, the tax credits caseload is expected to have fully moved across to universal credit, so the tax credits work currently undertaken in Merry Hill will come to an end. However, HMRC intends gradually to redeploy the skilled and experienced staff there to other work as the tax credits caseload decreases. HMRC will work with those staff to ensure that there is every opportunity to make a successful move into reallocated employment.

The hon. Gentleman asked whether I would be happy to meet him and some of the staff with whom he has been liaising. I would be more than happy to do that. Perhaps doing so in Westminster would be most appropriate, as the hon. Member for Preston and my hon. Friend the Member for Dudley South might wish to join him for those discussions—I would certainly be open to that.

Finally, the hon. Member for Dudley North asked about the support provided for those who might not, in the event, be able to make the move from Merry Hill to the new centre in the centre of Birmingham. As I have said, all staff will have a one-to-one discussion with their manager around a year in advance of any office move that affects them, to discuss their personal circumstances, establish whether they are within reasonable daily travel of the new office and discuss what support might be needed to enable them to move. For those who can move, there will be financial support towards the additional cost of their journey time for up to five years. HMRC is supporting those who cannot move by seeking redeployment opportunities for them in other Departments.

Question put and agreed to.