Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019

Jesse Norman Excerpts

Monday 7th October 2019 General Committees

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

I beg to move,

That the Committee has considered the Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019 (S.I. 2019, No. 1219).

It is a pleasure to serve under your chairmanship, Mr Hanson. I welcome Members to the Committee. The Government’s aim is to leave the European Union on 31 October 2019 with a deal that works for citizens and businesses. Until that final deadline, we will make every effort to reach an agreement with the EU, but we also have a duty to prepare and plan for all scenarios, and to prepare comprehensively for Brexit. Today we are considering a statutory instrument that is part of the Government’s package for preparing for the possibility of the UK leaving the EU without a deal.

I hope the Committee will allow me to set out the context of this provision, which the Government wish to introduce to manage the safety and security risk of goods entering and leaving the UK. The measures maintain many aspects of the current safety and security regime. They will facilitate the flow of trade, while working to ensure the continued safety and security of our borders.

In 2005, the World Customs Organisation adopted the SAFE framework of standards as a deterrent to international terrorism, to secure revenue collections, and to promote trade facilitation. As a result, safety and security declarations became required when goods moved across borders. Previously, as part of the EU, the UK required safety and security declarations only for goods leaving or entering the EU. If the UK leaves the EU without a deal, UK importers and exporters will be required to complete safety and security declarations for goods moving to and from the EU, as well as to and from the rest of the world, as happens at present.

The statutory instrument has four key purposes. First, Her Majesty’s Revenue and Customs has listened to industry concerns about the readiness of businesses to comply with UK-EU safety and security requirements on trade from day one, so the instrument gives businesses more time to prepare to start to submit declarations to HMRC for movements to and from the EU. The instrument introduces a 12-month transitional period until 1 November 2020, during which there will be no requirement for entry summary declarations for goods imported from territories where the UK does not currently require the declarations. That means that entry summary declarations will not be required for imports from the EU.

Entry summary declarations will continue to be required for goods imported from the rest of the world. The UK will therefore continue to receive the same safety and security import declarations in a no-deal scenario as it does today. The transitional period introduced by the instrument applies to declarations that the UK does not currently receive. As a result, there is no increased security risk to the UK from this approach.

Secondly, the instrument gives HMRC a discretionary power until 1 November 2020 to allow businesses to submit safety and security declarations for certain exports after the goods have left the UK. That is a contingency power, subject to HMRC’s discretion, and the specifics will be set out in a public notice. The power will be used, if required, in combination with a similar power granted in a previous statutory instrument to extend the period in which the export customs declaration has to be provided. Together, that will be used to allow more time, if needed, to provide the combined export customs declaration and export safety and security declaration. If needed, HMRC will use these powers to facilitate the movement of goods and assist with the continued free flow of trade.

Thirdly, the instrument removes until 1 May 2020 the requirement for exit summary declarations for empty containers, empty pallets and empty vehicles moving from the UK to the EU. They are also not required for any spare parts, accessories and equipment for pallets, containers and means of transport. Those declarations are not required at present, so the Government are giving businesses a longer time to prepare.

Finally, the instrument also clarifies that a combined export and safety and security declaration can be accepted when exporting goods, so that exporters are not required to submit separate exit summary declarations.

The instrument does not apply to movements of goods between Northern Ireland and Ireland. A previous statutory instrument set out that in a no-deal scenario there would be no safety and security declarations between Northern Ireland and Ireland. The Government are committed to supporting the all-Ireland economy by avoiding checks and infrastructure at the border between Northern Ireland and Ireland. Under no circumstances will we put in place infrastructure, checks or controls at or near the border between Northern Ireland and Ireland.

In conclusion, this instrument strikes what we believe is the right balance between giving traders time to prepare for new arrangements with the EU and maintaining the safety and security of the UK, and I commend the regulations to the House.

--- Later in debate ---

[Jesse Norman]

I thank colleagues for the peppering of questions about this piece of legislation. Let me start, if I may, with the hon. Member for Bootle, who was very dismissive of business’s preparedness. He did not recognise the Herculean efforts made to assist businesses with that. If there had not been the delays to Brexit, business would take the current work of the Government more seriously. The Government are attempting to make people understand the reality of the departure from the EU on the 31st of this month.

The hon. Gentleman criticised the Government for making powers via secondary legislation. If the Labour party wished to eschew secondary legislation—if it ever came to power, God forbid—that would be an interesting declaration, and we would look forward to hearing it. Secondary legislation has been a very important part of our system of government for many a long year. It is particularly helpful in areas where regulations can be used to give effect to primary legislation, as in this case.

The hon. Gentleman raised a whole series of questions, which I will go through before turning to others’ questions. He asked why 1 November 2020; as I mentioned, hauliers and carriers have consistently told us that they require 12 months to prepare to submit safety and security declarations. They are increasingly asked to fill these things in directly themselves; they have asked for that extra time, and we are seeking to accommodate them. He asked why there should be a six-month waiver on applying security declarations for empty pallets on exit. The matter is relatively straightforward: if the pallets themselves, or the empty vehicles themselves, are not being exported, there are no goods being carried by them for which safety and security declarations would be required.

The hon. Member for Bootle and the hon. Member for Aberdeen North asked about guidance. There are two forms of guidance. As regards the SI, the guidance the hon. Gentleman seeks is in the explanatory memorandum. As regards the policy roll-out, HMRC has already set out that it will provide guidance and support to assist businesses when the time comes for them to submit declarations.

[Kirsty Blackman]

Will the Minister clarify whether HMRC has published that guidance already?

[Jesse Norman]

HMRC has published some guidance already, and plans to publish more in time for the moment when declarations may come into force.

The hon. Member for Bootle asked whether these powers have the effect of undermining scrutiny. He should be aware that of course Border Force will continue to run checks on goods in the way it does at the moment, and these declarations are independent of customs declarations that might be made.

[Peter Dowd]

I wanted clarity about the declarations because one has to be prepared in advance of the potential for a declaration. Rather than having the guidance only when one gets to the declaration, would it not be much more appropriate to have that guidance laid out clearly and unambiguously much earlier, in advance of the need to make the declaration?

[Jesse Norman]

I think the hon. Gentleman is making my point for me. The instrument introduces a 12-month transitional period until 1 November 2020, during which there is no requirement for entry summary declarations for goods imported from territories where the UK does not currently require them. That is precisely in order to allow people to adopt guidance as necessary.

[Stephen Timms]

I am grateful to the Minister for explaining that the UK authority is not going to require these declarations, but what about the EU side? Will the EU still require them? He makes the point that businesses need 12 months to prepare. Are they going to be ready to meet the EU’s requirements, which obviously are not covered by the SI?

[Jesse Norman]

That is true. The right hon. Gentleman raises the question he asked in his speech, so let me take that point out of order. The EU has indicated that it will still require declarations, and of course declarations are required already on goods imported from outside the EU. That structure is not changed as regards imports; as regards exports, exporters will need to adjust.

[Stephen Timms]

I am grateful to the Minister for that answer, but if the information and declarations are still required by the EU side, what is the benefit in not requiring them on the UK side?

[Jesse Norman]

The benefit is that we require, for imports, declarations of safety and security that are reasonably full and cover a whole variety of different elements, and we will need to assure ourselves in due course, if and when we introduce declarations following a no-deal scenario, that that data is being provided. Of course, not to have to provide that, and to give oneself the opportunity to put in arrangements that allow it, is a considerable benefit.

[Stephen Timms]

I think the Minister is telling us that businesses need 12 months to prepare for providing these declarations, but he is also telling us that, from day one of a no-deal Brexit, the EU is going to require those declarations from our businesses. How are they expected to cope with that?

[Jesse Norman]

It has always been built into the situation that we cannot control what EU countries may insist or demand. There have been plenty of other areas in which the EU has sought to give reliefs or allow easements for the first period. It has chosen not to do so in this case, but that does not bear on the question of what we require as a matter of import security declarations from our own hauliers and others. That is what the statutory instrument seeks to address.

The hon. Member for Aberdeen North asked about the timing and the process by which the statutory instrument was laid before Parliament. As she will be aware, it was laid on 4 September, which was in plenty of time before 31 October. It should be understood that it was thought at that point that Parliament was going to be prorogued, and that there would have been time to assess the instrument after that, but the timing reflects the reality.

The hon. Member for Aberdeen North asked how the SI relates to the earlier SI introduced by my right hon. Friend the Member for Central Devon. Being in front of him is like being a young priest being pushed up for ordination with the Pope sitting behind him in St Peter’s. It is a great privilege and honour to have him behind me. He will know better than anyone that the SI replaces the earlier one and will come into effect from day one if we have a no-deal scenario.

The hon. Member for Aberdeen North raises an important question about whether too much power has been given to HMRC. She will know that, more widely, I have asked HMRC, alongside Her Majesty’s Treasury, to conduct a serious investigation into the balance of its powers, and to make recommendations on how those can be adjusted. In this case, the power is relatively limited. To remind the Committee, it is a discretionary power, lasting for a year, that allows businesses to submit safety and security declarations for certain exports after the goods have left the UK. It is subject to HMRC’s discretion, but it is required to be exercised according to a public notice.

The broad point is that this is designed to be an intervention that allows HMRC discretion to give additional easements. HMRC does not believe that it needs to do that at the moment; it wishes to have the power to make those easements, conceivably for a 12-month period. In order to do that, it will have to consult Ministers and publish a public notice. It would be a matter of intense public interest if there was any suggestion that those easements picked out a particular subsection in a discriminatory or unfair way, so there are implicit constraints, both of time and of public pressure, on how those powers can be exercised.

[Kirsty Blackman]

I suppose my concern was not just about this SI, but about the fact that I have sat on so many Delegated Legislation Committees, and Committees scrutinising primary legislation as well, that have given additional discretionary powers to HMRC that it can exercise just by means of a public notice, potentially in consultation with Ministers. It seems that HMRC now has a huge amount of these powers that it did not have two or three years ago. I am concerned that it now has too much power, or that nobody is doing an assessment of the powers. I am pleased about the overview. It would be incredibly useful if the Minister could assure me that it will look at all the new discretionary powers that HMRC has gathered.

[Jesse Norman]

That is a very interesting suggestion. The work that is being done at the moment has to do with the way HMRC exercises powers in relation to UK taxpayers, particularly individual taxpayers. Once Brexit has taken place, it would be a very interesting idea to consider whether there should be a further piece of work to assess whether there has been a ratchet in some way that has granted HMRC powers that it ultimately should not have. If the hon. Lady is happy with this, I will take that away and reflect on it, because it is an interesting suggestion. I am grateful to her for it.

I was asked how much declarations and the full panoply of the costs associated with Brexit will affect businesses. The Committee will be aware that this has previously been estimated at £6.5 billion, a fact that has been in the public domain for some time. The impact assessment that has just been published has pushed the figure up to £7.5 billion. Although that is a significant increase of £1 billion, it appears to be related mainly to an increase in business activity and trade over the period measured, and also to a slight tweak to the methodology, rather than to any large rise in underlying costs.

The hon. Member for Aberdeen North raised the issue of the UCC. She will be aware that the Union customs code requires safety and security declarations. We are seeking to waive them and have clarified that we will continue the process of combining export and safety and security declarations. It has been deemed straightforward to incorporate aspects of this directly into our law, rather than to go via the UCC, but I am thankful for the question.

Question put and agreed to.

Resolved,

That the Committee has considered the Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019 (S.I. 2019, No. 1219).