Taxation (Post-transition Period) (Ways and Means)

Jesse Norman Excerpts

Ways and Means resolution & Ways and Means resolution: House of Commons
Tuesday 8th December 2020 Commons Chamber

[The Financial Secretary to the Treasury (Jesse Norman)]

I beg to move,

That provision (including provision imposing and regulating new duties of customs) may be made in connection with goods in Northern Ireland and their movement into and out of Northern Ireland (whether the movement begins or ends in Great Britain or elsewhere).

It is a delight to see you in the Chair, Mr Deputy Speaker.

In less than a month’s time, the UK will reach the end of the transition period and resume its place as a fully sovereign trading nation. As colleagues across the House will be aware, our negotiations with our counterparts in the EU continue. The Government remain cautiously optimistic about the conclusion of those talks. However, there is no doubt that we have a responsibility to the people of the United Kingdom to be ready for every outcome. The measures contained in the Taxation (Post-transition Period) Bill, which will be introduced and published following this debate, will play an important part in those preparations. The Bill will help to give confidence and certainty to the owners of businesses small and large throughout the United Kingdom after the end of the transition period.

[Sir William Cash (Stone) (Con)]

Will my right hon. Friend explain exactly how this matter we are dealing with now will be affected by the statement made by the Chancellor of the Duchy of Lancaster about an hour ago, which also deals with the question of goods to be considered not at risk, and with questions relating to customs and tariffs, and the decision that appears to have been taken that the Government have agreed in the Joint Committee with Mr Šefčovič on a number of matters of which at the moment we only have an outline? I know the Chancellor will make a statement tomorrow, but perhaps my right hon. Friend could assist us in this matter, because it quite clearly has relevance to what he is saying now.

[Jesse Norman]

I am very grateful to my hon. Friend for raising the question, and I will touch on it in my remarks in my opening speech, but I should say to him that I am not better sighted on the breaking news than he is. He will have ample opportunity to address this matter tomorrow with the Chancellor of the Duchy of Lancaster when he comes to the House. As my hon. Friend will be aware, this matter was a product of a joint negotiation with the Commission, and the UK Government do not control the timing of that, and therefore the Chancellor will come at the earliest opportunity to the House to discuss the matter with colleagues from all political parties.

Today’s debate is on the important but technical ways and means motions that we need to pass before the Bill is debated tomorrow. If I may, I will talk a little about the Bill’s key elements in greater depth in order to foreshadow what we are going to see over the next day or so. The Bill will take forward important changes to our tax system to support the smooth continuation of business across the UK. In particular, it will ensure that we meet our commitments to the people and businesses of Northern Ireland in relation to the implementation of the Northern Ireland protocol. It will help to uphold our pledge to protect the UK’s internal market by ensuring that Northern Ireland goods have unfettered access to Great Britain. To that end, the Bill will set out a new framework for the UK’s customs, VAT and excise systems following the end of the transition period, so that there are clear rules in place for goods movements.

If I may, I will start with the areas of the Bill that relate to customs. The motion before us relates to legislation that will be required for customs duties and processes to support the practical implementation of the Northern Ireland protocol. I want to underline to right hon. and hon. Members that the legislation follows directly from the commitments made in the Government’s Command Paper on the implementation of the protocol, which was published in May of this year. The House will recall that the Northern Ireland protocol guaranteed no checks or controls at the Northern Ireland-Ireland land border and maintained the UK as a single customs territory.

The legislation will achieve its aims through a series of targeted changes to the Taxation (Cross-border Trade) Act 2018, focusing on five specific areas. First, the changes will ensure that EU goods imported to Northern Ireland from the European Union—for example, goods moved across the Ireland-Northern Ireland border—are not subject to customs duties or processes.

Secondly, the changes will introduce a framework for charges on goods arriving in Northern Ireland, both from Great Britain and from the rest of the world, that are considered at risk of moving into the EU, subject to conditions agreed under article 5 of the Northern Ireland protocol.

Thirdly, these alterations to the TCTA will establish the framework for the UK Government to offer waiver and reimbursements for tariffs that are still incurred when that is needed.

Fourthly, the customs aspect of the legislation will ensure that the UK’s customs regime applies to goods moved from Northern Ireland to Great Britain if they do not qualify for unfettered access. Anti-avoidance rules will prevent goods from being re-routed through Northern Ireland in order to enter Great Britain without undergoing UK import processes.

Finally, the rules will ensure that customs enforcements, penalty, review and appeal provisions in relation to duty can continue to work alongside EU legislation in Northern Ireland and can apply where required in relation to movements of goods between Northern Ireland and Great Britain.

I will, if I may, respond to my hon. Friend the Member for Stone (Sir William Cash), who raised the point earlier. He was right to point to the EU-UK joint statement that has just been made. This sets out the agreement in principle regarding the implementation of the Northern Ireland protocol. The Government are therefore not introducing the so-called notwithstanding provisions to the taxation Bill. In the light of that, the Opposition’s proposed amendment to the first motion is unnecessary.

This Bill will also allow us to amend and modify certain provisions in relation to VAT and excise, including mechanisms to ensure that, in so far as is possible, VAT will be accounted for in exactly the same way as it is today. In addition, the Bill will make provision for amending current legislation for excise duty to be charged when excise goods, such as alcohol, tobacco and certain fuels, are removed to Northern Ireland from Great Britain.

[Sir William Cash]

As my right hon. Friend knows extremely well, all these matters relating to the Northern Ireland protocol and the withdrawal agreement have direct relevance to the question of sovereignty. A statement was made by the Paymaster General yesterday relating to the question of negotiations, but the matters that have just been raised by the Chancellor of the Duchy of Lancaster in his statement to the press and to the public, but not to this House so far, have not been dealt with properly, because that statement has not yet been made to the House of Commons, although it has been published in general.

The point that I wish to make is simple and I would be grateful if my right hon. Friend addressed it. In withdrawing the “notwithstanding” provisions—clauses 45, 46 and 47 of the internal market Bill—which have a direct relevance to the question of sovereignty, does he have any comment to make and could he please help the House to understand, if these provisions are being withdrawn from the internal market Bill and will not be introduced in the taxation Bill, for which he does have responsibility, what are the implications for sovereignty with respect to what has been announced? I understand that the Chancellor of the Duchy of Lancaster will make further comment tomorrow.

[Jesse Norman]

I thank my hon. Friend for having another go at this issue. Let me address the questions that he raises. I do not accept the point that he tries to make about whether this is, in some sense, an inappropriate procedure. As I have indicated, this is a product of a joint negotiation. The UK did not control the timing. It is as agreed with the other party to the debate and the discussion.

The Chancellor of the Duchy of Lancaster will be coming to this House at the earliest opportunity once he returns from Brussels, in order to make a statement to discuss this and to receive scrutiny from my hon. Friend and from other Members of the House. That seems to me entirely appropriate. I cannot, of course, comment on matters relating to the United Kingdom Internal Market Bill, but what I will say is that, in withdrawing these “notwithstanding” provisions, we do not regard that UK sovereignty is being in any way impeded or undermined—on the contrary. Therefore, I think his concern can be and should be allayed, but I leave it to the Chancellor of the Duchy of Lancaster to address those points tomorrow.

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

The Business, Energy and Industrial Strategy Committee heard evidence this morning that the IT systems and processing procedures to allow the Northern Ireland protocol to be implemented on 1 January are not in place. Will the Minister update the House on what the Government are doing to rectify that situation to meet the technical provisions that he is bringing forward?

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[Jesse Norman]

I think the hon. Gentleman knows that the work that we are doing in terms of legislation very much has as its counterpart a great effort to put in place all the procedures that may be required. Significant work has been done. He will be aware that there is a trader support service that works directly with people who will be importing into Northern Ireland to make it as close to a one-stop-shop arrangement as possible. What we are discussing today is the framework for the law under which those movements will operate.

[John Redwood (Wokingham) (Con)]

The Minister has not yet reassured me about the sovereignty issue. Is it not the case that when any good in commercial quantity comes into the UK across any border—Northern Ireland or one of our marine borders—there are usually VAT and excise adjustments to be made and those take place by computer, not actually at the port of entry? Why do we need special arrangements here?

[Jesse Norman]

My right hon. Friend will be aware that under the terms of the Northern Ireland protocol, we have agreed arrangements for Northern Ireland with the European Union. The goal of the legislation is to make sure that, as far as possible, it is a completely seamless and straightforward process for those who are trading and that it is unfettered in regards to trade from Northern Ireland into Great Britain. That seems to me to be a very important technical fact.

[Sammy Wilson (East Antrim) (DUP)]

On the VAT issue, which comes to the sovereignty issue once again, under article 8 of the Northern Ireland protocol, Northern Ireland traders will be subject to not just UK VAT rules, but EU VAT rules. Do the provisions that the Minister is now putting forward exempt Northern Ireland traders from being subject to dual VAT rules, given the costs that that would present and the huge administrative issues which would arise from it?

[Jesse Norman]

We do not expect the vast majority of any trade into Northern Ireland to be subject to any dual VAT arrangements. The whole purpose of these rules is to put in place the simplest and most straightforward arrangements that can be put in place and that replicate in so far as possible the current experience that people will have when they trade with the EU.

[Sammy Wilson]

Will the Minister give way?

[Jesse Norman]

I will give way once more, and then I will make some progress.

[Sammy Wilson]

The Minister has said that he would not expect that Northern Ireland traders will be subject to VAT rules of another jurisdiction, but article 8 of the protocol makes it clear that they will be subject to a dual VAT regime. Do these provisions remove that requirement from all traders in Northern Ireland, or are we giving away some of our sovereignty by accepting that some parts of the United Kingdom and some sectors in that part of the United Kingdom will be subject to VAT rules from another jurisdiction?

[Jesse Norman]

I am afraid that inadvertently the right hon. Gentleman has misrepresented my position, or misdescribed my position. I am saying that we are following the Northern Ireland protocol and, therefore, following any provisions that he refers to, but what we are doing is putting in place mechanisms that make them as easy and as facilitated as possible, so that the experience of someone trading in Northern Ireland should be as close as possible to that which they would have today.

The Bill will allow us to amend or modify certain provisions in relation to VAT and excise, including mechanisms to ensure that, in so far as possible, VAT will be accounted for in the same way as it is today, as I have said. In addition, it will make provision for amending current legislation for excise duty. Most of these changes are necessary to ensure that there is comprehensive VAT and excise legislation in place in relation to Northern Ireland at the end of the transition period.

In addition to those steps, there is also a small number of other taxation measures that need to be in place before the end of the transition period. They include provision for an increase in the rate of duty on aviation gasoline, which will apply across the UK. Otherwise known as avgas, the fuel is a form of leaded petrol predominantly used in private aviation.

[Alan Brown]

I notice the Minister said private aviation. Is the Treasury going to look at hydrocarbon fuel duty overall? Kerosene is zero duty rated, which is ridiculous, when motorists pay duty. We need a system in which the duty is applied to kerosene used by airlines, but given the fragile state of the flight industry, we should perhaps do that in a cost-neutral way to it and the Treasury, by incentivising the use of sustainable fuels. Is that something that the Treasury would look at?

[Jesse Norman]

I admire the hon. Gentleman’s ingenuity in bringing this matter into a debate that has no direct relevance to that issue at all. I, like him, would like to see as green and sustainable a world as we can arrange. This is a measure that does not relate to kerosene; it relates to avgas, and it has to do with the need to harmonise—or rather, to manage—the relationship between Northern Ireland and the UK, and that is what we are seeking to do. The requirement for an increase is set out in the Northern Ireland protocol—again, it relates only to Northern Ireland—but we are expanding it to the whole of the UK to ensure consistency, to avoid burdens on business, and to reduce compliance risks for Her Majesty’s Revenue and Customs. It is extremely small in its magnitude.

The Bill will also make provision for the introduction of a new system for collecting VAT on goods entering the UK. This includes moving the VAT collection on certain imported goods away from the border, and removing the VAT relief on low-value consignments. Together, these provisions will help to level the playing field for UK businesses, and they will protect the UK high street from VAT-free imports. The Bill will also take forward measures to ensure that the Government retain their ability to prevent insurance-premium tax avoidance after the end of the transition period. This will provide Her Majesty’s Revenue and Customs with access to the same tools to prevent insurance- premium tax evasion—sorry, I should have said “evasion” rather than “avoidance” earlier—regardless of whether or not an insurer is based in an EU member state.

Finally, the Bill will make provision for new powers that will enable HMRC to raise tax charges under the controlled foreign companies legislation for the period from 2013 to 2018. This technical provision will deal effectively and efficiently with the legacy state aid decision relating to the period before the UK left the European Union.

[Patrick Grady (Glasgow North) (SNP)]

I wonder why, if the Bill is so technical and dry, and does not have much relevance to the statements that the Chancellor of the Duchy of Lancaster is making outside the House, we cannot see a copy. Why do we have to listen to the Minister tell us all about it, but none of his hon. Friends or my colleagues on this side of the House can prepare properly to respond?

[Jesse Norman]

I thank the hon. Gentleman. What I am actually doing is giving him a preview of a Bill that will be published in the normal way, after the resolutions debate has concluded. This is a debate on the resolutions required to lay the Bill, and we will do so as soon as the debate has concluded and the measures have been voted on. At that point, he will have a chance to see the Bill and its details.

[Sir William Cash]

In view of the statement that has been made by the Chancellor of the Duchy of Lancaster—a press statement has been put out; we do not have enough notice of that at the moment—will my right hon. Friend explain whether the Bill, which we will receive in a few moments, or whenever the ways and means resolution has been completed, will contain those notwithstanding provisions? On the basis, as I understand it, that it will not, as the Minister responsible for the Bill which is being brought in, I think, would he not know that the notwithstanding provisions had been removed? Presumably, they are not contained in the Bill—or are they?

[Jesse Norman]

I salute my hon. Friend’s astonishing indefatigability, but I am afraid his memory plays him false. I have already said that the notwithstanding provisions will not feature in this Bill. I said that earlier in my speech, but I am sorry that that was not as clear as it should have been, because that is the state of affairs.

This Bill will help the UK to cement its position as an independent trading nation at the end of the transition period. It will give businesses throughout the UK certainty about the arrangements that will apply from 1 January next year, and it will play a part in safeguarding the unity and integrity of this country, both in the months ahead and long into the future. I therefore commend these resolutions to the House.

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[Bridget Phillipson]

That is, frankly, a ludicrous statement for the right hon. Gentleman to make.

With epic irresponsibility, successive Conservative Governments have wasted this time. Still businesses are not clear how they will be trading next month. Still people living along our land border with Ireland are unsure what daily life will bring in four weeks’ time. That epic irresponsibility comes in two forms. First, there is the immediate irresponsibility—the irresponsibility to businesses and working people; to everyone who needs to be able to plan their future and their finances; to everyone who wants the simple security, stability and certainty that a responsible Government should provide; to everyone who believed the Chancellor of the Exchequer when he said on the “Today” programme a year ago tomorrow,

“We won’t need to plan for no deal because we will have a deal”;

and to everyone who believed the former International Trade Secretary when he told us that a trade deal with the EU would be

“one of the easiest in human history.”

That irresponsibility has meant months and years of uncertainty and insecurity for so many families and so many firms. Make no mistake: the Conservative party has now lost forever any claim to be the party of business. That irresponsibility means that people in Fermanagh, Galloway, Anglesey, Kent and all around our key ports today still face the risk of their roads being clogged with queues of lorries for months on end. That irresponsibility—a failure to engage with the problems of our country, to look ahead and to plan, to lead and to rise to the level of events—is sadly of a piece with the Government’s wider failures in recent months.

The country has suffered terribly from the pandemic: the worst economic hit in the G7; the worst level of excess deaths in Europe; a Government who are again and again caught on the hop, scrambling to catch up with the consequences of their own incompetence; a Government who never use the time they have to get ahead of the problems that they know are coming. It is all too familiar. It is the story of everything that this Government touch.

If the Government had got ahead of the issues that our country faces, we would have had a Budget, not a statement, in the summer. Instead of multiple episodes of the winter economy plan, we would have had a Finance Bill with proper time for debate, and proper time for businesses to plan on that basis. But just as the Government were behind the curve on covid, so they are behind the curve on Brexit. And here we are, with tax decisions for next month being bundled together into a last-minute Bill, which they have not yet even published—inaction, incompetence, and scrambling to fix the mess that they have created themselves, again and again, month after month.

[Jesse Norman]

I am awfully grateful to the hon. Lady for giving way. Could she possibly name any EU treaty that has not been concluded by the EU at the last minute?

[Bridget Phillipson]

I look forward to seeing in detail what the Government intend to bring forward on our future trading relationship, as that will determine so much around what our businesses will need for years into the future. I believe that our country is a great place to do business. I want all our businesses to succeed into the future. That is why it is so important that we see a good deal for our country, and that the Government use the time they still have available to them well. They have not done so yet. I look forward to hearing more from the Minister later about exactly what the Government intend to set out in this legislation, because he has not really offered a great deal so far this afternoon.

The Government’s irresponsibility has not been limited to inaction and incompetence in the face of a ticking clock. There is also the greater irresponsibility that we have seen in recent months—an irresponsibility of which I fear the consequences may last for generations—and that is the irresponsibility with which this Government have made it clear that they are prepared to break international law. The world will not forget that just weeks ago the Government introduced legislation to tear up an international agreement that was signed less than a year ago. We welcome the fact that they now propose to withdraw those measures, but we fear that the damage has been done. The Government threatened to break the law to get their own way. What message does that send to Britain’s friends and allies with whom we have signed that agreement, with whom we have other agreements and with whom we hope to conclude future agreements?

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[Alison Thewliss]

The hon. Gentleman says sovereignty. I am not sure he really understands that either.

The UK Government have not known what they wanted from this situation from the start. I commend the Brexiteers on the Conservative Benches. They have taken this as far as it can go and they have got what they wanted. Perhaps they knew what they wanted, but the Government have not had a clue. That has been clear all the way through and that is part of the reason we are in the difficulties we are in.

The resolutions in front of us do not represent clever negotiating tactics by the UK Government. On the Opposition Benches, on the Government Benches and in Brussels, everyone can see quite plainly the Government’s recklessness in this scenario. At every stage of this laborious and unnecessary process, they have sought to undermine trust in proceedings. Any remaining shreds of goodwill that the UK Government have internationally are in absolute tatters. The UK Government are at the wind-up at a time when we no longer have time to waste. An EU diplomat quoted in the Financial Times this morning said that the moves of the UK Government amounted to the UK

“trying to use rogue behaviour as leverage”.

Presumably the UK Government have caved today in taking the clauses out of the Bill, but we have to ask why they were there in the first place. How does it help us to say that we will break international law? It is a pretty basic principle that the Government have breached. Presumably, if the negotiations take a further slide backwards, the clauses can be put back in again. With apologies to Mark Durkan, because it is the kind of thing he would have said, it is hokey-cokey legislation.

It is perhaps not a surprise to those of us in Scotland that the Prime Minister and this Tory Government would sell a devolved nation down the river in order to appease those on the more extreme fringes of their party—

[Jesse Norman]

Did the hon. Lady say that the Government had sold someone down the river?

[Alison Thewliss]

Devolution. If the Minister was paying attention, I said devolution has been sold down the river—

[Jesse Norman]

That is a most inappropriate term to use, if I may say so.

[Alison Thewliss]

But devolution has been fundamentally undermined—perhaps the right hon. Gentleman will like that phrasing better. Devolution has been fundamentally undermined by the actions of the Government in the internal market Bill yesterday, ripping up the very principles by which devolution was established 20 years ago. Scotland did not vote for any of this—not in the EU referendum, not in either of the snap general elections this Government have called, and not in the European elections—not once, but we are being dragged off the cliff edge anyway.

Even before the pandemic, modelling suggested that a no deal would decrease Scotland’s GDP by 6.1%, considerably more than even the 2008 crash. The Office for Budget Responsibility estimates that a no deal Brexit on 1 January would inflict a cost on the UK economy of about £40 billion, and increase unemployment by 300,000 next year. All this while the UK economy is already among the worst performing in the OECD due to the UK Government’s shambolic handling of covid.

Jim Harra, the head of HMRC, confirmed at the Treasury Committee yesterday that doing the paperwork alone for this will cost business an eye-watering £7.5 billion a year. That is £7.5 billion that businesses will not have to spend on improving their businesses, increasing staff wages or investing in productivity. There will be 265 million customs forms after Brexit, compared with 54 million now. What a complete and utter waste of everyone’s time and money, and nobody put that on the side of a bus.

Not content with inflicting damage on our economy, these resolutions and the behaviour of the UK Government throughout this process permanently damage and erode trust in the devolution settlement. We are seeing a shameless power grab of state aid powers that should have been devolved, quite rightly, to the Scottish Parliament.

There is still time to pull back from the no deal cliff edge. The choice is entirely the Prime Minister’s to make. It is as clear as day that Westminster is acting against Scotland’s interests. It is little wonder to any of us on these Benches that the majority of Scots now support independence. One of those people who supported Scottish independence relentlessly was Craig Munro, who passed away just recently, and our thoughts are with his sister Gail and his son Sam. They will be devastated that he will not be here to see independence when it comes, because it is there to be won for all of us. More and more people are seeing the urgent need for independence to protect Scotland’s place in Europe and all the powers that we have come to enjoy through devolution. Scotland will complete that journey. The UK Government’s behaviour through all of this is only hastening that journey’s end.

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[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

This debate has been far more entertaining than I imagined it would be at the start. We have seen some real squirming on the Government Benches, particularly from the Minister and some unsettled Members who have steadfastly supported Brexit for quite some time. One of the best pieces of gymnastics I have heard today has been from the Government Bench: it has to be the rejection of the idea of the Prime Minister’s oven-ready deal. It reminded me of William Hughes Mearns, who said—well, he didn’t; I am reimagining—“Yesterday upon the table, they had a deal that wasn’t there. It wasn’t there again today. Oh, how they wish that deal would go away.”

The Minister said at the start of the debate that he was not even briefed on his own Government’s announcement; he did not know the news coming through that affected what we are debating.

[Jesse Norman]

As you will be aware, Madam Deputy Speaker, I said no such thing. In fact, I responded and outlined the relevance of the statement to the speech and the debate. What I said was that I had no privileged access, since I am not myself a member of the committee that discussed this item, but that the Minister concerned would be coming to the Chamber to discuss it tomorrow.

[Drew Hendry]

Hansard will confirm whether or not he said he was not sighted on the Government’s announcement this afternoon. Even if we take him at his word, he comes here woefully ill prepared to tell us what might be in the Bill; he can tell us some things that will not be in there because of that announcement this afternoon, but he cannot tell us what will be in there. We are none the wiser as to what might be in the detail, which my hon. Friend the Member for Glasgow Central (Alison Thewliss) so forensically went through earlier. He could have given a lot more detail on the issues that will be affected. We just do not know what is going to come forward. It is not clear. It is good to know that the lawbreaking clauses that might have been contained in the United Kingdom Internal Market Bill will no longer be contained in this Bill. Of course, they should never have been in this Bill or the internal market Bill. While we welcome their going, that situation should never have occurred in the first place.

The Minister talked about giving confidence and certainty and meeting the commitments to the people of Northern Ireland, but there are still serious issues for the supply chain. It is a dry term, “the supply chain”, but it has direct effects on people’s lives. It means goods, food and essentials being available to people’s families and, of course, to sustain businesses. My hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown) talked earlier about the evidence given to his Committee about systems that were simply not in place. The Minister cannot claim that access will be unfettered in those circumstances, because even with a low deal, there is a clear probability of critical shortages and delays. People’s lives will be affected, in some cases severely, amid what is, let us not forget, a global pandemic.

The Northern Ireland Retail Consortium has naturally welcomed the news today, but it points out that there are still major problems ahead, as is the case in Scotland. It has published new research from its Brexit working group showing that the majority of businesses could not and will not be prepared in time. They include food producers such as those in the Northern Ireland meat industry.

We have also heard from the Road Haulage Association. It has to be said—a former Transport Minister, the hon. Member for Harrogate and Knaresborough (Andrew Jones), is sitting across from me just now—that the association has been raising concerns about this, year after year. It has known what is coming in logistical challenges. Even with a deal there will be delays, and delays mean shortages, so spare a thought for the Road Haulage Association. It should have been central to the Government’s planning. Its members are the experts on logistics; they are the people who know on a day-to-day basis what needs to be done, yet they have been ignored by this Government pretty much all the way through, save for some platitudes and some “There, there, things will be okay” comments. Those people should have been at the heart of these preparations.

It is rare for me to agree with anything that the hon. Member for Stone (Sir William Cash) has to say, but I have to agree with him that what we are being asked to debate today is impossibly vague. As far as I can see, the Ways and Means resolution in its present form, even after the Government’s announcement today, still contradicts the withdrawal agreement. So unless the Minister can clarify that that is not the case, we will have to assume that it is still the case at hand. Northern Ireland, like Scotland, never voted for this Brexit shambles, yet families and businesses there will both feel the effect.

The Minister said earlier that it was inappropriate to say that the Tories had sold devolution down the river. Well, apart from being tellingly sensitive, he has obviously also not been sighted on the United Kingdom Internal Market Bill clauses that still remain. People in Scotland are not daft. They see what this Government are doing. They see what is going on, and that is why, soon, they will choose to take their own place in their own future with an independent nation.

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[Jesse Norman]

This has been a very wide-ranging and interesting debate, and we have heard some diverse voices. I was particularly interested, as I am sure the House was, to see the knights of Maastricht swinging a leg as they get into the saddle once more and go into battle—always an interesting sight. I thank the hon. Member for Houghton and Sunderland South (Bridget Phillipson) and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for reminding us that this is a complex and difficult process. It is not straightforward to negotiate with another party at the same time as seeking to make legislation, and we recognise that.

I want to quickly pick up on a couple of the points that arose in the debate. I rather differ from my hon. Friend the Member for Stone (Sir William Cash) in thinking of this as the most important constitutional moment since 1688. I might respectfully offer the Act of Union 1707 or even the Act of Union 1801 as possible alternatives.

Imagination in tax is of great interest to the Treasury, but that must come after the transition period has ended and we have regained this full measure of sovereignty. That is the moment to think about these issues in the wide way that my right hon. Friend the Member for Wokingham (John Redwood) described. This is a technical matter of putting into place the requirements for us to leave in as orderly a way as possible.

The right hon. Member for East Antrim (Sammy Wilson), on classically robust form, rightly highlighted the lack of balance in this debate relating to the European Union, and I thank him for that. I remind the hon. Members for Glasgow Central (Alison Thewliss) and for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) that the rules as they stand were that all goods going into Northern Ireland were to be considered at risk. The “notwithstanding” clauses were designed to protect us against that transparently absurd outcome, which would have had the effect that a bag of salad brought in for sale in a Northern Ireland supermarket was considered an at-risk good and was therefore treated on that basis. That cannot be right. In advancing the “notwithstanding” clauses, the Government were seeking a perfectly sensible and proper readjustment to the situation. I am delighted that those clauses have been withdrawn, and with that good message, I commend these motions to the House.

Question put, That the amendment be made.

Taxation (Post-transition Period) Bill

Jesse Norman Excerpts

2nd reading & 2nd reading: House of Commons
Wednesday 9th December 2020 Commons Chamber

[The Financial Secretary to the Treasury (Jesse Norman)]

I beg to move, That the Bill be now read a Second time.

It is a delight to speak under your chairmanship, Madam Deputy Speaker.

In three weeks’ time, the transition period will end and this country will take its place as a fully sovereign trading nation once more. It is a very important moment in our nation’s history, one that will undoubtedly provide us with great opportunity in the years ahead, but the Government are acutely aware that at this time they also have a great responsibility to provide certainty to people and businesses and to preserve this nation’s unity, and the fundamental purpose of this Bill is to achieve those goals. It seeks to ensure that businesses in every part of the UK can continue to trade smoothly after the end of the transition period, but its particular focus is on businesses based in Northern Ireland or those that work with Northern Ireland companies.

The Government have always been clear that we must deliver on our pledge to provide unfettered access for Northern Ireland’s businesses to the rest of the UK internal market, and we have been equally unstinting in our determination to uphold our commitments to the people of Northern Ireland under the Northern Ireland protocol and to protect the progress made under the Belfast Good Friday agreement. This Bill will help us support those commitments by providing legal certainty for the customs, VAT and excise systems in Northern Ireland after the end of the transition period.

If I may, I will start with the customs elements of the Bill. The House will know that the UK is a single customs territory, with article 4 of the Northern Ireland protocol giving a clear legal commitment to this. However, the protocol also requires a new and unique set of arrangements to be put in place for goods moving from Great Britain to Northern Ireland. Under these arrangements, the only circumstance in which there should be charges on goods moving between Great Britain and Northern Ireland is if those goods are destined for the EU single market or there is a clear and substantial risk that they may be.

[John Redwood (Wokingham) (Con)]

I am grateful to the Minister for giving way in this Second Reading debate before we get to Committee. Will he confirm that under the proposals in this last legislation the European Court of Justice will be the ultimate arbiter of excise and VAT arrangements within Northern Ireland, and that the European Union will be placing staff in our country to supervise this?

[Jesse Norman]

VAT in Northern Ireland will be subject to the EU principal VAT directive, and for that purpose the ECJ will be the judicial body. I cannot comment as to whether or not there will be anything more than staff, except to say that excise processes in Northern Ireland will be carried out by Her Majesty’s Revenue and Customs.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

The Minister was asked by his right hon. Friend the Member for Wokingham (John Redwood) whether the ECJ would be the ultimate arbiter, and the Minister replied that it would be the judicial authority. Is that the same thing?

[Jesse Norman]

Yes, I was simply paraphrasing the point that my right hon. Friend made.

Under the terms of the protocol, we need to treat goods at risk of such onward movement into the EU differently from those groups that are not at risk. On the specific details of what will be defined as at risk or not at risk, the House will be aware of the EU-UK joint agreement made this week setting out that an agreement has been reached in principle regarding the implementation of the Northern Ireland protocol. In accordance with that statement, the draft texts will now be subject to further consideration in both the EU and the UK. Once that is complete, a joint committee will be convened to adopt them formally. Further details will be set out in due course, and before the end of the year.

[Sir William Cash (Stone) (Con)]

In reply to my right hon. Friend the Member for Wokingham (John Redwood) and the right hon. Member for Orkney and Shetland (Mr Carmichael), the question of jurisdiction was raised, and perhaps it is best to use the right expression, rather than paraphrasing. The fact remains that EU officials will be there for the purposes of enforcing the jurisdiction of the European legal arrangements, which will be enforced subject to the European Court. In those circumstances, will the Minister now accept that actually there is an infringement of sovereignty in that respect? As the “notwithstanding” clauses are being taken out, there is therefore a further complication, and if I may say so respectfully, that is slightly in contradiction of his allegation that we would now take over as a sovereign, fully independent power.

[Jesse Norman]

I thank my hon. Friend for the question. He is right that it is expected that there will be EU officials. The checks will be levied and done by HMRC inspectors, and the system that we are putting in place gives effect to the Northern Ireland protocol, which, as he will recognise, already recognises the balance that is being struck in Northern Ireland between its status under the Union customs code and its status within the UK customs system.

If I may proceed, the Bill will allow the Government to put in place decisions made by the Joint Committee on goods that are not at risk of entering the EU, ensuring that they do not have to pay the EU tariff. However, if I may underline the point, this Bill does not itself seek to specify the classes or categories of goods or movements that are at risk or not at risk. Instead, that will be set out by regulations that the Bill permits us to make once legal texts have been formally adopted. The “at risk” or “not at risk” definitions will also determine whether the UK or EU tariff applies when goods arrive in Northern Ireland from rest-of-the-world countries, again in line with the Northern Ireland protocol.

In relation to the so-called “notwithstanding” clauses, as part of yesterday’s EU-UK joint statement, the Government have agreed not to introduce these provisions into this Bill, and we have also committed to remove the three “notwithstanding” clauses from the United Kingdom Internal Market Bill.

[Sir William Cash]

Will my right hon. Friend give way?

[Jesse Norman]

I suspect we are going to go around this many times, but I am happy to give way again.

[Sir William Cash]

Could I simply say to my right hon. Friend that this does raise a question? I am not going to go into it in an intervention on him, but I will in my speech. I believe that those provisions may well be needed, because we do not know the outcome of the negotiations yet. I will leave it at that for the moment. We do not know, but we have been told that the clauses are going to come out. The question of whether they should have been put in is a separate question, which I dealt with yesterday.

[Jesse Norman]

I am not quite sure where that was heading, but we have the Bill in front of us and the Government have made it clear that the so-called “notwithstanding” clauses will not be introduced.

The legislation follows from commitments made in the Government’s Command Paper on the implementation of the protocol, which was published in May. The Bill will ensure that EU goods moving into Northern Ireland remain free from customs duties or processes. Although we recognise and are addressing the challenges relating to the movement of goods from Great Britain to Northern Ireland, we should not lose sight of the benefits to Northern Ireland of having continuing access to the EU market.

In addition, this legislation will ensure that the UK customs regime applies to goods moved from Northern Ireland to Great Britain if they do not qualify for unfettered access. The Bill will also introduce anti-avoidance rules to prevent goods from being rerouted through Northern Ireland to avoid UK customs duties or associated obligations, and its measures will ensure that customs enforcement and penalties, along with review and appeal processes, are in place in relation to duty and that they continue to work alongside EU legislation in Northern Ireland and can be applied, where required, to movements of goods between Northern Ireland and Great Britain.

[Stephen Farry (North Down) (Alliance)]

I welcome the thrust of the Bill. We have heard a lot about the anti-avoidance approach in recent months, but we have never seen any detail as to how it will work. This is a critical issue, particularly for the agrifood sector, to make sure that inferior product is not coming into Northern Ireland and taking advantage of the protocol, and there is the risk of organised crime in Ireland as well. When will we see detail on exactly how it will look?

[Jesse Norman]

As the hon. Gentleman will know, goods that are, as it were, normally circulating in Northern Ireland will be open to go into Great Britain from the beginning. There will be some goods that, over time, will be designated as non-qualifying goods for these purposes, and HMRC has well established practices for identifying, discussing and targeting those, as may be necessary, and will be applying them to prevent avoidance and to keep the market honest.

As I have said, the Bill will ensure that the UK customs regime applies to goods moving from Northern Ireland to Great Britain if they do not qualify for unfettered access. These anti-avoidance rules will prevent goods from being rerouted through Northern Ireland to avoid UK customs duties or associated obligations, and its measures will ensure that customs enforcement and penalties, along with review and appeal processes, continue to work alongside EU legislation in Northern Ireland and can be applied, where required, to movements of goods between Northern Ireland and Great Britain.

The Bill also amends and modifies certain provisions in relation to VAT and excise for Northern Ireland.

[Mr Toby Perkins (Chesterfield) (Lab)]

In many of these debates over the past four years, the Government have referred to “frictionless trade” between the mainland and Northern Ireland. The Government now say that they want VAT accounting treatment for goods moving between Great Britain and Northern Ireland to remain “as close as possible” to the current approach. Will the Minister confirm whether we have now accepted that frictionless trade is not possible? Can he tell us a little more about what “as close as possible” actually means for businesses in Northern Ireland that are looking forward to 1 January with some trepidation?

[Jesse Norman]

I thank the hon. Gentleman for his question and, yes, the legal basis on which VAT is charged will change. I will spare him the details of the difference between import VAT and acquisition VAT, but it will change. The experience of those who pay VAT will be very similar, if not identical, to the system we have in place at the moment. HMRC and the Government have identified flexibilities, which allow that to be put in place. Of course, there will continue to be the normal processes of enforcement that one would expect to see from HMRC in order to make sure that VAT is properly paid in the usual way.

[John Redwood]

These are urgent and important issues. We heard earlier from the Chancellor of the Duchy of Lancaster that there are various delays to the full implementation of trade arrangements into and out of Northern Ireland as a result of his negotiations. Will they be incorporated into this legislation, and do they provide a brake on the immediate introduction of these complex double-taxation arrangements?

[Jesse Norman]

I have no doubt that the Chancellor of the Duchy of Lancaster will be updating the House over time as the different provisions he has negotiated come into force but, from our point of view, the position remains as stated, that is to say that VAT will become chargeable by a slightly different legal means, but in substantially the same way in Northern Ireland as it is at the moment. The mechanisms we have put in place are designed to ensure that, as far as possible, VAT will be accounted for in the same way as it is today.

Existing rules in relation to movements of goods between Northern Ireland in the EU, including the rules relating to acquisitions and distance selling, will continue to apply. Goods entering Great Britain from Northern Ireland will be subject to VAT as though they were imports under the relevant UK legislation. Similarly, goods entering Northern Ireland from Great Britain will also be subject to VAT as though they were imports and relevant EU or UK legislation will apply, but let me add that the Government are adopting an approach that minimises any changes for goods moving between Northern Ireland and Great Britain.

[Stephen Flynn (Aberdeen South) (SNP)]

On a point of order, Mr Deputy Speaker, can you clarify whether Members in the Chamber should be socially distancing by staying on the seats that have ticks on them?

[Mr Deputy Speaker (Mr Nigel Evans)]

Yes, that is what the ticks are there for. I hope that all Members will abide by them so that we can have safe social distancing. Thank you very much.

[Jesse Norman]

In addition, the Bill amends current legislation for excise duty to be charged when certain goods, such as alcohol and tobacco, are moved from Great Britain to Northern Ireland. The changes are necessary to ensure that there is a fully functioning VAT and excise regime in place in relation to Northern Ireland at the end of the transition period.

In line with the protocol, Northern Ireland will maintain alignment with existing EU excise rules. That means a change to excise duty is required when goods are moved to Northern Ireland from Great Britain, but the Government are adopting an approach using flexibilities and EU rules that minimises changes for excise goods moving between Great Britain and Northern Ireland.

A small number of other taxation measures also need to be in place before the end of the transition period. The Bill introduces a new system for collecting VAT on cross-border goods. That includes moving VAT collection on certain imported goods away from the border and involving operators of online marketplaces in the collection of VAT at the point of sale.

In addition, measures in the Bill will remove the VAT relief on imported low-value items so that VAT will be due on all consignments, irrespective of their value. The relief has been the subject of long-standing abuse and removing it will build on Government efforts to level the playing field for UK businesses still further by protecting high streets from VAT-free imports. Together, the changes will improve the effectiveness of VAT collection on imported goods, tackle non-compliance and protect the flow of goods at the border.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I very much support the measures that the Minister is talking about. Why is the measure just for low-value goods? There will be other goods where a similar loophole applies, such as watches or jewellery that have a value above £135. Is this not an opportunity to close that loophole as well?

[Jesse Norman]

I thank my hon. Friend for his question, and I will take that under review. We have put in place a set of measures designed to tidy up the position that particularly arises in relation to the Northern Ireland protocol, as he will be aware, and the end of the transition period, and that has meant a change to low-value consignment relief and the changes I have described. I am grateful to him for his contribution and suggestion.

The Bill also includes provision for an increase in the rate of duty on aviation gasoline, which will apply across the UK. Otherwise known as avgas, the fuel is a form of leaded petrol predominantly used in leisure flying. The change made by clause 6 of the Bill will increase the avgas rate by half of a penny to 38.2p a litre from 1 January next year. By way of explanation, the Northern Ireland protocol requires that Northern Ireland continues to comply with the EU’s energy taxation directive following the end of the transition period. It sets a minimum level of duty in euros on unleaded petrol used for propulsion. After some careful consideration, the Government have chosen to apply the change to the whole of the UK to ensure consistency between Great Britain and Northern Ireland, avoid burdens on business and reduce compliance risks for HMRC.

The Bill also includes a clause to ensure HMRC has access to the same or similar tools to prevent insurance premium tax evasion as it does at present, regardless of whether an insurer is based in an EU member state. Overseas insurers are liable to pay insurance premium tax when they supply general insurance for UK-located risks. Occasionally, overseas insurers do not pay the insurance premium tax they owe, so it is important that HMRC has access to tools that deter and tackle that form of evasion. Up to now, it has been using EU provisions to prevent evasion by insurers based in EU member states.

Separately, HMRC can issue liability notices in cases involving insurers based in any country outside the EU with which the UK does not have a mutual assistance agreement. Given that the EU provisions expire at the end of the transition period, this clause will enable HMRC to issue liability notices in evasion cases involving insurers based in any country with which the UK does not have a mutual assistance agreement, including EU member states.

Finally, the Bill introduces new powers that will enable HMRC to raise tax charges under the controlled foreign companies legislation for the period from 1 January 2013 to 31 December 2018. This is a technical provision that will deal efficiently with the legacy state aid decision relating to the period before the UK left the European Union.

This Bill will give people and businesses throughout the UK certainty about the arrangements that will apply from 1 January next year. It will play a part in further safeguarding the unity and integrity of this country, both in the months ahead and long into the future. I commend the Bill to the House.

[Mr Deputy Speaker (Mr Nigel Evans)]

Before I call Anneliese Dodds, let me say that the wind-ups will begin at 5 o’clock at the latest, and that 13 Members wish to speak and are all here. We therefore know that there will definitely be 13 Members speaking, so colleagues should really be thinking about speeches lasting for six minutes. Even if I do not put the clock on, it would be really useful if everybody shows at least some discipline on that, so that everybody can get a fair crack of the whip.

--- Later in debate ---

[Anneliese Dodds]

I am pleased that the hon. Gentleman mentions that situation, because it has been referred to by those who favoured the Government’s approach previously. However, I gently state to him that if he is referring in particular to provisions against tax avoidance—the example of a general anti-avoidance rule—then, sadly, I believe he is mistaken. In that case, that commitment and the ability to apply such rules was actually a fundamental principle agreed to by this country as part of a multilateral agreement that it concluded with the OECD, so I fear that that example is not as telling as he may wish it to be.

With just three weeks to go until the end of the transition period, the Government published late yesterday afternoon the 116-page Bill that we are discussing now, setting out detailed new rules for tax and customs duties. Members of this House have been given less than 24 hours to scrutinise a major piece of post-Brexit legislation that will impact businesses and individuals across the country, especially in Northern Ireland. Many of the clauses in the Bill, particularly those covering customs and excise duties, require the Treasury to make regulations that will set out the actual detail of its proposals at a later date, so even with the publication of the Bill, businesses and individuals still do not have the information they need to prepare for the end of the transition period.

Earlier today, the Chancellor of the Duchy of Lancaster said there would be “further clarity” forthcoming on these matters, but again without saying when. In fact, the Minister talked a few moments ago about those details coming in due course. His letter to Members spoke about the fact that there would be information on this later; “in the coming days” was the formulation at that time. How can he really expect businesses to plan on that basis—on the never-never up to 1 January?

This last-minute approach was not necessary. It is no use pointing to the complexity of the ongoing negotiations. We know that this Bill could have been published a long time ago because the Government have been floating a Finance Bill for months, so why yet another last- minute scramble? My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) set it out very clearly: because the Conservatives had a not-so-cunning plan to use this Bill as negotiations reached a critical point by threatening to override the withdrawal agreement. At a time when we are seeking to negotiate new trading relationships across the international community, and when the Government are trying to project an image of global Britain to the world, this tactic certainly sent a clear message, albeit not the message the Government intended.

It is welcome that the Government finally saw sense yesterday, although we have already seen damage being done. Both in relation to the provisions in the Bill and more generally, the time is running out to ready our country for the challenges ahead. The Public Accounts Committee was clear last week that:

“Government is not doing enough to ensure businesses and citizens will be ready for the end of the transition period”.

It expressed concern at reports from industry bodies that the Government had not provided the key information needed for businesses to prepare. Indeed, the Committee indicated that more than a third of small and medium-sized enterprises still believed that the transition period would be extended.

The Cabinet Office has admitted that it is well behind in recruiting the customs agents desperately needed for 1 January, despite more than £80 million having been spent so far. Yet again, earlier today, the Chancellor of the Duchy of Lancaster refused to specify exactly how many additional customs agents had been recruited. Overall, £4.4 billion has been spent by the Government on preparations for Brexit and the end of the transition period, yet we are still not ready.

[Jesse Norman]

I am terribly grateful to the hon. Lady for giving way. She has criticised the Government for spending £80 million in support of traders and a facilitated approach to the border. Could she tell us whether she thinks that number is too large or too small?

[Anneliese Dodds]

With enormous respect to the Minister, the problem with his Government’s approach is the fact that they do not indicate what they have got with that spending. As I said, £4.4 billion has been spent on preparedness for Brexit and for the end of the transition period, and the £80 million that he refers to, but there is no indication from the Government of how many additional customs officers we have received as a result of that spending. I hoped that he was intervening on me to provide an indication of the additional workforce that has been recruited. It is a matter of regret that he was unable to do so.

Taxation (Post-transition Period) Bill

Jesse Norman Excerpts

Committee stage & Committee: 1st sitting & Committee: 1st sitting: House of Commons
Wednesday 9th December 2020 Commons Chamber

[Andrew Griffith]

I beg to differ with the hon. Lady. There will be different systems for different territories, but on the business side of things there is already sophisticated tracking of stock, sales and data, which can be used to feed into accounting systems.

What I really want to do is to celebrate—I hope that those on both sides of the House can do that—the absolute game-changer that is contained within clause 7 to crack down on the leakage of the important tax revenues that fund our valued public services, and, most importantly, to create a level playing field for the nation’s small and online retailers. That has needed to be addressed for far too long. I welcome the Minister to his place and what clause 7 will do for the enterprising small businesses of our nation.

[The Financial Secretary to the Treasury (Jesse Norman)]

Dame Rosie, what a delight it is to see you in the Chair, metaphorically if not actually.

It is a measure of the wide gulf between the House’s professed intentions and its actual activities that we are about to wind up within a very few minutes, and nothing like to time, the scrutiny of the Bill in Committee. I thank those who have spoken. Let me do service on my part by keeping my remarks brief, although I will say that nothing could have surprised me more than that my hon. Friend the Member for Stone (Sir William Cash) will not be taking the opportunity to make a trivial two-hour speech.

The right hon. Member for Wolverhampton South East (Mr McFadden) said that somehow the Government were pretending there was no change. Of course, he then went on to say that nothing has changed. We are not pretending anything. We acknowledge that there is change and that is specifically why we have used the language we have of making the changes as easy and as frictionless as possible for all parties concerned.

The right hon. Gentleman raises concerns and questions about Northern Ireland. I remind him that the Trader Support Service, which was launched on 28 September, has 18,000 subscribers already. He asks us to publish guidance. I can tell him that guidance has been published already, on 26 October.

The hon. Member for Glasgow Central (Alison Thewliss) saw Brexit—rather helpfully—as an opportunity to return powers to Parliament. How right she was. That is why I am a supporter of the United Kingdom of Great Britain and Northern Ireland, and of the Parliament that stands at its centre. My hon. Friend the Member for Arundel and South Downs (Andrew Griffith) rightly said that it should be for the Bill to make matters as easy as possible. I agree with that. He pointed to the absolute game-changer in clause 7. I agree with that too.

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

I believe the right hon. Member for Wolverhampton South East may wish to withdraw his amendment.