David Davis
Main Page: David Davis (Conservative - Goole and Pocklington)Department Debates - View all David Davis's debates with the HM Treasury
Monday 16th July 2018
(6 years, 5 months ago)
Commons ChamberRead Full debate Taxation (Cross-border Trade) Act 2018 View all Taxation (Cross-border Trade) Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 16 July 2018 - (16 Jul 2018)
Madam Deputy Speaker (Dame Eleanor Laing)
Order. It will be obvious to the House that a great many people want to speak. We have three hours of debate left, but we cannot continue with speeches of the length that we have had so far, although there is nothing wrong with what any hon. Members have done. We will therefore start with a time limit of 12 minutes.
Mr David Davis (Haltemprice and Howden) (Con)
For the convenience of members of the Gallery, I should start by saying that this is not a resignation statement—that was last week. This week is a return to my normal business, as an ordinary Back Bencher carrying out the scrutiny of business. I thought that it would be rather mundane until I walked into what appears to be this rhetorical firefight that we have had so far in the debate.
Before I come back to that, the Taxation (Cross-border Trade) Bill and its partner, the Trade Bill coming tomorrow, are vital pieces of legislation. In the newspapers at the weekend, I read that some people were so cross with the White Paper that they were proposing to vote against this. Well, I do not think that they can be much more cross than I am with the White Paper, but I urge them not to vote against it. These are vital pieces of legislation and they are necessary, whether we have the Government’s White Paper policy, my old White Paper policy, the FTA that some have talked about or indeed even the World Trade Organisation outcome. In every single case, we need these Bills and therefore I will be supporting them.
I want to speak directly to the new clause proposed by my right hon. Friend the Member for Broxtowe (Anna Soubry). I will do so without impugning anybody’s motives or questioning whether somebody is acting in the national interest or not and I will not be firing off any gibes. I am not quite sure who she was referring to when she talked about having an excessive attachment to public office, but I do not think it was me. The simple truth is that this is a vitally important argument. It is central to the whole question of the economic aspect of Brexit—Brexit is not just economic; it is democratic as well, but it is central to that—and I will put to one side in my arguments the fact that being out of the customs union was in the Conservative party’s manifesto and therefore, in theory at least, one we are committed to.
The arguments go right to the heart of the principal issues. The proponents of the new clauses have a clear belief in the national economic interest, but they clearly believe that being outside the customs union will lead to a precipitate loss of trade and that the loss of the ability to make trade deals matters less than that potential loss of trade. That is the core of the argument. It is pretty straightforward in that respect.
Let us look at some facts. Back in 1999, the United Kingdom—we are talking about the customs union, so this is about goods—was exporting 60% of its goods to the European Union and 40% to the rest of the world. Since then, that has gone down by approximately 1% per annum, so it is now about 45% to the European Union and the rest to the rest of the world. Pretty much by the end of this decade, it is likely to be 60:40 in favour of the rest of the world, so because it takes away the right to our own commercial policy, the prospect of staying inside the customs union favours the shrinking minority of our trade over the expanding, fast-growing majority of that trade. That is the very simple, fundamental, initial point that we should take on board. It also presumes that being outside the customs union will significantly damage trade because there will be friction at the border.
Mr Kenneth Clarke
One of the most remarkable features of the last 20 years has been the globalised economy and the very rapid growth and emergence of major new markets, so inevitably the balance of our trade was going to grow with them and decline with the European Union. We want to remain as attractive to investors from the new economies as to the old. It does us no advantage in our dealings with China, Brazil and India to damage the value of our access to the European market. Outside events have altered this balance; it is not a failing of our EU arrangements.
Mr Davis
My right hon. and learned Friend was being uncharacteristically inattentive, because that is exactly what I said: because of the growth in world trade, that is what is going on. He is exactly right that we should take a great interest in the fast growth in world trade because we are best placed, probably of most countries in the world, to take the most advantage of that. Also within his comment was the presumption, which I was about to address, that friction in our trade with the European Union—low friction, but friction—will cause enormous damage.
John Redwood
Will my right hon. Friend confirm that many successful manufacturing businesses in Britain today have these just-in-time supply chains bringing in large quantities of raw material and component from outside the EU through a system of authorised economic operators, electronic manifests and the settlement of any bills not at the port? There are not people sitting in boxes in the port taking the money.
Mr Davis
My right hon. Friend is exactly right. It is an issue that I will return to in a second, but before I do I want to make a point about friction. The presumption in all this is that we have a magical, frictionless system at the moment. Actually, we will have seen on our television screens that that is not true. This entire House will have watched Operation Stack in progress over various years. Operation Stack is what we do when one of the ports gets locked up for one reason or another—a strike in France or whatever. It has been operated 74 times in 20 years. In 2015, it took up 31 days of friction, and our businesses—the just-in-time businesses and the perishable goods businesses—all coped with it, so let us not frighten ourselves in doing this negotiation. Nobody wants it and nobody likes it, but they cope with it. My hon. Friend the Member for Dover (Charlie Elphicke) pointed out that with World Trade Organisation facilitation, we will actually minimise the friction on trade through these ports, as was reinforced by my right hon. Friend the Member for Wokingham (John Redwood).
Secondly, while people understandably focus on some of the pressure points—most particularly Dover, which we heard about a second ago—they forget that there is strong competition between the ports on the North sea and the ports on the channel. Zeebrugge, Antwerp and Rotterdam all want to increase their throughput at the cost of the Calais-Dover crossing. They are already preparing for increases in throughput in their own areas when we are outside the EU and preparing for the increase in work—because there will be some increase in work—but again, as my right hon. Friend said, it will not happen at the border. It will happen before they get there or after they pass through it, so our so-called dependency on French ports will turn out to be illusory.
Thirdly, in support of the arguments that any friction at the border is unacceptable we hear lots of talk about supply chains. We had it from my right hon. Friend the Member for Broxtowe who proposed this new clause. The simple truth is that this ignores the fact, as my hon. Friend the Member for Harwich and North Essex (Sir Bernard Jenkin) pointed out, that lots of international supply chain operations operate across borders where there are customs, tariff and currency arrangements. I happen to know one of them very well, because I operated a business across just such a border myself—between Canada and the USA. [Hon. Members: “Thirty years ago.”] I went back last year.
Mr Davis
No, I will not give way.
I went back last year to look at it again, and yes it was 15-year-old technology. It could be better now; it could be faster. What happens in Detroit, the centre of the American motor industry? In Ontario, across a very difficult and constrained border, tougher than Dover, there is an entire industry supplying parts, components and engines for that motor car industry. It operates across a border that has tariffs on it, too.
Kevin Hollinrake (Thirsk and Malton) (Con)
Will my right hon. Friend give way?
Mr Davis
No, if my right hon. Friend will forgive me.
The issues that remain at the border will depend on the customs policy we decide on, which very clearly will alter how that border operates. It will include rules of origin, as has already been pointed out; tariff-paid status, if we are in the future customs arrangement, which is more difficult than rules of origin; and regulatory compliance. None requires action at the border. All can be dealt with by electronic pre-notification or pre or post-audit at either origin or destination.
Without doubt, the most difficult issue in the negotiations as they relate to borders has been Northern Ireland. There is no way, however, that a UK Government are ever going to install a hard border in Northern Ireland—that is as plain as a pikestaff. No UK Government would risk the peace process, which has been going on for decades. Neither would the Irish Government. I cannot imagine in a century that an Irish Government would do that either. What many people forget, however, are that there is already a border there—there is a currency border, a VAT border, an excise border, and there are other tax borders. They are operated north and south of the border by the UK and the Irish tax and customs collection organisations, operating together using intelligence- led intervention.
Much is made of the 300 border crossings. One of the outstanding issues with being outside the customs union is, as somebody said, the issue of rules of origin, but in Northern Ireland, while there may be 300 border crossings, there are only six ports. Rest-of-world imports can actually be surveilled and controlled very straightforwardly. This issue, which has become much more difficult since it was politicised—it was actually working quite well in the negotiations before it was politicised—is eminently soluble, by technical means and co-operation between the two states.
Joanna Cherry (Edinburgh South West) (SNP)
If what the right hon. Gentleman says about the border is so, why was he part of a Government that agreed to the backstop last December?
Mr Davis
They did not agree to the backstop; they agreed to the joint report that talked about full alignment. [Interruption.] Does the hon. and learned Lady want to listen to the answer? She will remember me standing at the Dispatch Box saying that we interpreted full alignment as outcome alignment and relating directly to the issues in the north-south strands—principally, agriculture, transport, and environment as it applies to the single electricity market. Those are the primary strands, and they are eminently soluble, by arrangements that already exist in Northern Ireland—for example, the carve-out on environmental legislation. It is a very straightforward issue, but it has been blown up into something else by the other side of the negotiations.
The risk and costs of having a customs border are less than is being claimed, and what we would give up to join a customs union is much more than is imagined. The EU is a slow and not very effective negotiator of free trade agreements. We keep hearing about its size and negotiating power, but the fact that it represents 28 different countries means it comes up with sub-optimal outcomes all the time, and actually we are the country that does least well out of the EU’s free trade agreements. They almost never involve services, for example, which are our primary trade. The EU is a slow and not very effective negotiator of trade deals.
Yvette Cooper
That is really flipped logic. The hon. Gentleman is effectively saying, “They do not have to do the checks because they can all just pay the tariffs.” Why on earth are we going through this whole process in the first place if all we are going to get is a tiny reduction in tariffs that no one will take advantage of in order to get any benefits?
Mr David Davis
The logic is actually very simple. Empirical evidence shows that in international trade, companies seek to claim their rebates and do what is necessary to avoid tariffs when a tariff is lower than 3%, not when it is above. What that tells us is that the cost of rules of origin administration is less than 3%. Companies are rational operators. The numbers that the right hon. Lady cited from a supposed Government study were wrong.
Yvette Cooper
I would caution the right hon. Gentleman against dismissing the rules of origin checks. There is a huge worry about the burden that they will impose on small businesses in particular. There is a big difference between large and small businesses in this regard. It might be worth large businesses claiming the money back because they can set up systems to do so, but for small businesses the process can be devastating. I am thinking particularly of the huge number of small businesses that have not yet traded outside the EU and for which rules of origin will be a new burden.
Why on earth would we want to add these additional burdens and checks on businesses that have not faced them before? I find myself in a very strange position. I, as a Labour MP, am arguing far more strongly and passionately against these additional burdens on businesses than those on the hard right of the Conservative party, who ought to be arguing against such burdens.
Ian Murray (Edinburgh South) (Lab)
It is a great privilege to follow the right hon. Member for Witham (Priti Patel). We sit on the Select Committee on Foreign Affairs together and agree on much of its work. However, I am afraid that we agree on nothing when it comes to Brexit, and we have those battles in the Committee.
It is unfortunate that we have been left here this evening with a set of four amendments from the group of Conservative rebels who want to take us off a cliff edge. That is what the amendments are designed to do. We have unconfirmed reports that the Government may accept the amendments. I do not know whether the Financial Secretary to the Treasury will nod to indicate that he will accept them, but if he does, I hope he has a match or a lighter in his pocket, because he would do just as well to set the Chequers agreement alight, given the consequences.
On top of all that, the former Secretary of State for Exiting the European Union, the right hon. Member for Haltemprice and Howden (Mr Davis), must now regret leaving the Government, given that after threatening to resign five times, he finally went through with it by resigning following the Chequers agreement, which is just about to be ripped up by his own Front-Bench team and replaced with a much more hard-line position that will take us off the cliff with a hard Brexit. If he had only stayed on a few more days, he may have been able to see through the proposals that he started.
Ian Murray
I am happy to give way to the right hon. Gentleman, given that I mentioned him.
Ian Murray
I am delighted to hear that he would have resigned regardless, but he must surely have some regret. Perhaps we should be glad that he resigned, given that he stood up in this Chamber, as a former Secretary of State, and tried to persuade the House that Operation Stack and having trucks and lorries queued up at our ports was positive for the country. I have never known a former Secretary of State to look at something like Operation Stack, which would be a tragedy for our economy had it continued for much longer, and turn it into a positive. If that is the kind of argument he is offering to this House and to the country, we should ensure that we vote down most of these amendments.
I find it extraordinary that after going through this process—these debates give me déjà vu—we are still hearing arguments about the customs union and the single market. The Government managed to botch together what is now called the Chequers agreement and now, a week away from this Parliament adjourning for the summer recess, they have completely torn it apart by again pandering, as the right hon. and learned Member for Rushcliffe (Mr Clarke) said, to 30 or 40 people on the hard right of the Conservative party. Those people would be being much more honest if they just stood up and said that they want the cliff-edge hard Brexit, rather than tabling amendments that drive a coach and horses through the agreement that the Government managed to reach.