Leaving the EU: Customs Arrangements

Helen Goodman Excerpts

Tuesday 10th July 2018 Westminster Hall

[Helen Goodman (Bishop Auckland) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate the hon. Member for Wimbledon (Stephen Hammond) on securing the debate. We serve together on the Treasury Committee and he has presented a typically thorough and well-grounded case for our having frictionless trade and preferably for being in a customs union. I will make a few remarks based on the experience of businesses in my constituency and then ask the Minister a couple of questions.

My constituency in County Durham has a lot of manufacturing and some agriculture, and people in both those areas are interested in the customs arrangements. We do not have significant service sector exporting. I have people who work in the Nissan factory in Sunderland and in small engineering firms that supply the factory. I have a GlaxoSmithKline pharmaceutical plant, which employs 1,000 people, and PPG, a supplier of coolants and sealants to Airbus, which employs 200 people. What north-east manufacturers are concerned about is frictionless trade and regulatory alignment. Those are their top two priorities.

The north-east chamber of commerce has done a great deal of work with the Department for Exiting the European Union and I am sorry to say that up until now it has been disappointed with the Department’s response. The chamber sent people to train departmental officials, and as the process of the last two years has gone on those officials have become so demoralised that more of them have left the Department than have used the knowledge the chamber gave them. A fortnight ago, the chamber’s chief executive, James Ramsbottom, said that political chaos was reducing business confidence.

We all hope that the Chequers agreement is a step forward—I think it is—but we would like to see a few more steps taken in the north-east. The Government’s assessment has shown that the region would be the part of the country worst hit by a hard Brexit, with a 16% fall in output and unemployment shooting up to a quarter of a million. That would be more people unemployed in our region as a result of a no-deal Brexit than we had in the depths of the recession in the 1980s, when the steel industry and coal mining were being closed left, right and centre.

The hon. Member for Wimbledon pointed out very well the reality. This is what my constituents say to me about the significance of the gravity model: it is expensive to move components around the world. People cannot start importing from Thailand at the same cost as they import from the Netherlands. I urge the Minister to go back to his colleagues with the message that we have to get away from this unicorn Brexit.

As well as wanting frictionless trade, people want no disruption to current systems. I will use examples from each of the firms I mentioned in asking the Minister to explain how a system using one bureaucratic set of rules for imported goods and another exported goods will work. I simply do not understand how that distinction will be made.

Nissan gets components in as part of its integrated supply chain and makes cars. It sells some cars in the UK, some into the European Union and some into third countries in eastern Europe beyond the EU. When it gets the components, how will it know which will go into which cars to be sold in which places? I just cannot grasp that.

We have the same situation with GlaxoSmithKline pharmaceuticals. The company makes drugs with inputs from Ireland—it is a big multinational with plants all over the world—and sells them across the channel in France. How will it know which packets are being used in England and which in France? Or is it the Government’s idea to just sort of pro rata the sales? How would that work if, for example, there was a flu epidemic in France and not in England? Prediction would not be possible—the figures would have to be worked out post hoc and then people would have to claim money back. I simply do not understand how that would work.

Let me give the third example, of PPG. The company makes a component that goes into an Airbus product but has no control over what Airbus does with its outputs. It does not know whether Airbus is selling into Britain or France or Germany, so how will that work? Ministers are doing their best but they need to do better, and I very much hope that this afternoon the Minister will enlighten us a little more about how precisely this will work.

--- Later in debate ---

[Mel Stride]

I point the hon. Lady to her question about the White Paper. There will be more detail to come on just those kinds of questions, and of course much of this will remain to be negotiated. Our estimate is that the vast majority—well in excess of 90%—of goods coming in could be charged directly at the border as an EU good, or would be non-tariff anyway under both EU and UK arrangements, or face the UK tariff accordingly. A very small proportion might fall into the category to which she refers.

[Helen Goodman]

That was the crux of my questions. Listening to the Minister, I realise I perhaps did not formulate it quite as accurately as I should have. The question is not how much comes for one purpose and how much comes for another purpose. The question is how the person importing knows what the purpose will be, and where the final user will be. That is the tricky question. I can see the Minister frowning, so he knows it is tricky as well.

[Mel Stride]

When goods come in and the end-use cannot be determined, we foresee a situation where we might have to charge the higher tariff, with a rebate mechanism in place once the end-user can demonstrate that those goods have indeed been consumed, or found their end-use, in the United Kingdom. As I say, some of those matters will be addressed in the White Paper that will be with us this week.

Hon. Members have rightly mentioned supply chains and the importance of goods and components going in and out of the EU27. The points raised by the hon. Lady in the context of Nissan will be accommodated substantially by the model we are putting forward. My hon. Friend the Member for Wimbledon mentioned VAT systems. We have made it clear that we are looking in the negotiations to ensure that we have the best of the arrangements that are there at the moment, in terms of systems and making our VAT interactions as smooth as possible, albeit we will look to control rates of VAT. In the recent Budget the Chancellor commented on the abolition of acquisition VAT and the move towards import VAT. We recognise that there are certain cash-flow impositions on the part of business that we will want to take into account.

A number of hon. Members rightly mentioned ports, and I think a couple specifically suggested that a two-minute delay could lead to a 17-mile tailback at Dover. We are, of course, extremely cognisant of that risk, but once again, it applies if we need border and customs arrangements in place at the port of Dover, Holyhead and the other ports that have been mentioned. Under this model, that would clearly not be the case.

My hon. Friend the Member for Wimbledon also made a point about free trade deals and how the approach of the facilitated customs arrangement would facilitate them. Most importantly, as distinct from being in “the” customs union, or in a customs union with the customs union, we would not operate a common external tariff, so we would be free to set our own tariffs. The fact that we have a common rulebook between ourselves for goods and agricultural products means that the issue of regulatory barriers, which might otherwise be in place for us in doing FTAs and bringing goods into the UK that might then go on to the European Union, would also be substantially resolved.