Taxation (Cross-border Trade) Bill (Second sitting)

Jonathan Reynolds Excerpts

Tuesday 23rd January 2018 Public Bill Committees

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Q Thank you, Mrs Main, for chairing the session. I share concerns that there is very little in the Bill on the issue of distorted economies. It would be helpful if you could indicate what provisions you think might be necessary to remedy that current deficiency.

Rosa Crawford: A step forward would be to use as a baseline the new rules that the EU has adopted, whereby non-market economies are not regarded as reliable in having a price indication for the goods that they export. Rather, an analogue country of a similar level of development would be used to judge whether an unfair pricing practice was used. We hope that that will allow the EU to take stronger measures against countries—not just China, but Vietnam and other countries that are using undue levels of Government influence to set prices at a low level.

In the current UK legislation, we do not see any approach like that. Indeed, we know that the UK Government have been holding back EU attempts to take stronger measures against China and other non-market economies. I think we can be forgiven for not quite believing it when we are told that in the secondary legislation we will have adequate measures to deal with non-market economies. We do not have an indication that the Government are likely to introduce secondary legislation on that.

Ben Richards: A key new development within the European Union is that, when they are assessing an analogue country, where there is more than one, they can now also take social and environmental factors into account. That is obviously absolutely crucial, because if a country is abusing labour rights or environmental regulations, that is also trade distortion, and should be taken into account in our trade remedies regime.

Kathleen Walker Shaw: There are two more points that are vital in terms of dealing with the distortions in the UK within the Bill framework, the first of which is the timing of it. To expedite these procedures at a time when they can actually help the companies while they remain competitive and able to see off the challenge was a problem that we had in the steel crisis, as some of you will be aware. Even the EU timetables at that time were dragging on too long and exacerbating some of the problems that we had across the steel industry, so the speed with which we can move the procedures is vital. The placing of the economic interest test in there makes me doubt that we will be able to do that.

Again, setting the tariffs at a level at which they will have the effect of adding the effective protection that we need was something that we struggled with agreement on at European level. The European Commission was going to set the levels on certain types of steel much higher than the UK Government. In the end, it became a political process rather than an economic process of what was required to protect and maintain the competitiveness of British industries and other European industries in that case.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Q During the steel crisis, I sat in this very room as a member of the Business, Innovation and Skills Committee taking quite a lot of evidence from some of you as well. It is clear that if this bit on trade remedies is got wrong, the consequences will be severe.

My worry on the public and economic tests is that, even in something like the steel crisis, there were people arguing for the benefits of very cheap steel coming into UK for construction and so forth. If those tests are not drafted correctly, frankly, we do not have any trade remedies at all. If we are going to have them in the Bill, how can we draft them to ensure that they are robust and fair? Who should be involved in the Trade Remedies Authority to ensure that that is the case?

Ben Richards: We need an opportunity to have that debate, which we will not have at all with the Bill as it is currently drafted. It will simply be written into secondary legislation—we will not have that ability. We have four or five minutes left to have a discussion about how it should be drawn up. It would take us another couple of hours. That is what we want, as a trade union movement: an involvement in these discussions and debates.

We have huge concerns about the way in which the appointments are being made to the Trade Remedies Authority. In effect, in the way that the Bill is currently written, we are not seeing one economic interest test but three. To give you a one-sentence answer about how it should be is very difficult: we want to engage in that debate. We want to have a role in that process in the future to ensure that our members are confident that those decisions are being taken with their interests in mind.

Kathleen Walker Shaw: On the Trade Remedies Authority, its structure is very important. We would like to see it set up in line with the Health and Safety Commission, where we have three employers, three trade unions and three other interests. I am a bit concerned that we are limiting that to nine, because I have a strong concern that devolved Administrations need to be involved in that process as well.

I would also like to see the Bill developed to give a role for parliamentary scrutiny—for the TRA to be liaising with structures within wider parliamentary scrutiny—on the European economic area IT, and on the decisions of the TRA, and to remove the power of the Secretary of State to veto a decision of the collective scrutiny of Parliament and the TRA on remedies. In that way, we might be some way to getting to the bottom of a justified and effective remedy.

[Peter Dowd]

Q Everybody in the Committee shares concerns about democratic oversight, industry protection, consumer protection, worker protection, the whole question of resources for HMRC, and sunset clauses or the lack of them. Taken together, it is of concern—not just at an individual level. In relation to your role in all this, I do not get the sense that you have had any substantive or significant consultation with the Government as a legitimate group of organisations. Is that a fair assessment of the situation?

Kathleen Walker Shaw: You are picking at a wound there. I was the poor person that drafted our response to the trade White Paper. I spent a lot of evenings doing that and I was more than a little concerned when I submitted that paper—less than eight hours later, the Bills were published. For people who take policy and their engagement with Government and Parliament very seriously, it was difficult not to feel the contempt with which that response that I spent hours sweating over to place before Parliament was received.

Consultation over the trade and customs Bills is vital because the Government have to get this right. There is no margin for getting this wrong. The future of Brexit hangs on these two bills: trade and the taxation cross-border. That is what our success or failure post-Brexit will hang on. I am very nervous about it, but I am more nervous about the fact that the Government are pretending that they are consulting us and they are not. We are very serious people and we want to be taken seriously. We want to help you to get the trade Bill and the cross-border trade Bill right, but we can do that only if we are a serious part of the process.

We have been engaging, but we have not been listened to. It is not enough for the Government to say, “We have consulted”, because if you miss off, “But we haven’t listened to a word you’ve said”, the quality and the integrity of that consultation is brought into severe question. It will not stop us from being delighted at being invited to come and have these conversations with you—we are not making this up, particularly Alan, who works for HMRC.

Alan Runswick: On delivery, my union wrote to Jon Thompson, the chief executive of HMRC, immediately after the referendum result to say that it was a game changer, that he needed to pause the office closure programme, stop making people redundant and evaluate this new situation. We have not even mentioned, and we will not get to, the issue of import VAT for business and for delivery. As well as customs duties, there will be a big increase in import VAT transactions. They will need to be processed, and staff will need to run a compliance regime under the new situation, to counter evasion and avoidance.

We also feel that we have not been properly consulted. We have been trying to engage the Department in serious talks about delivery, how staff can be recruited and trained and how we can retain the existing skills. We most definitely feel that we have not had those serious discussions about how HMRC can be made fit for purpose in the new Brexit position.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for International Trade (Graham Stuart)]

Q I was going to follow on in pretty much the same area. Despite that desperate effort to lead you, you were quite clear that there was no fundamental shift, that we need frame- work legislation, that this is an appropriate vehicle for such framework legislation and that, despite the shortcomings as you see it in the scrutiny of delegated legislation within this House, there is nothing untoward about the way that the Bill is set up or uses secondary legislation.

Joel Blackwell: It is important that Members take note of the delegated powers Committee’s concerns on particular issues that it has highlighted. I do think that there is an issue with the use of the made affirmative procedure for cases that do not seem to me to be urgent; that procedure is used for reasons of urgency and should be confined to that. I have never been entirely clear or comfortable with the use of the first instance affirmative procedure. If it has been viewed that a provision should be subject to the affirmative procedure for the first time, it should be subject to the affirmative procedure all the time. The two Henry VIII powers are subject to the negative procedure as well. So there are issues with the Bill.

In terms of saying that the Bill is fine, yes, you have to use framework legislation for issues like this. What concerns the Hansard Society is when framework Bills are laid before Parliament and contain no detail whatsoever on the powers that they wish to confer on Ministers. The lack of an opportunity for the Government to provide draft regulations alongside scrutiny of this Bill, for example, will be a matter of concern, and is something we raised about the Welfare Reform Act 2012. So there are issues with framework Bills.

If there is a huge lack of detail on what the Government intend to do with delegated powers, what usually happens is that you get situations that we would like to avoid where you have clause 7 of the European Union (Withdrawal) Bill that is so wide that there are issues regarding the balance of power between Parliament and the Executive.

[Jonathan Reynolds]

Q Are there any specific areas of the Bill that currently put significant powers in the hands of the Secretary of State but that make you think we should consider the arguments for an enhanced degree of parliamentary oversight?

Joel Blackwell: That is a question I have been posing to myself for the last few days. Honestly, no. We have to be careful, knowing that the procedures for the scrutiny of delegated legislation in the Commons are inadequate, that we do not just fall back on using a strengthened, enhanced or super-affirmative procedure for everything when the affirmative procedure would be appropriate. We need to play the ball rather than the man, to use a football analogy. You have to look at the powers that are brought in front of you and decide there and then whether the scrutiny period is appropriate.

The problem with this Bill, and with other supply Bills, is that the vehicle to highlight inappropriateness in the degree of scrutiny and the appropriateness of delegated powers is the House of Lords Delegated Powers and Regulatory Reform Committee, and there is no counterpart in the House of Commons. The Bill just highlights the lack of that counterpart. But no, looking at the powers, I do not think that the strengthened scrutiny procedure would be useful in this case.

[Mr Wragg]

Q What are the constitutional similarities between this Bill and the European Union (Withdrawal) Bill?

Joel Blackwell: Having said that I do not think the strengthened scrutiny procedure would be appropriate for any of the powers, they are wide powers. If we look at clause 51 in particular, the wording is very similar to that used for clause 7, so I think there are similarities. What has been highlighted is that people would like, potentially, to use a Committee to look at all Brexit statutory instruments and at the moment that will not happen. You could insert a change into the Standing Orders that would allow you to do that, which is something to consider.