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

Jonathan Reynolds Excerpts

Committee Debate: 3rd sitting: House of Commons
Thursday 25th January 2018 Public Bill Committees

Division 1

Ayes: 9

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Labour: 7
Scottish National Party: 2

Noes: 10

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Conservative: 9

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

I beg to move amendment 1, in clause 8, page 6, line 1, at end insert—

“(aa) the interests of manufacturers in the United Kingdom,”

This amendment requires the Treasury to have regard to the interests of manufacturers in considering the rate of import duty.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 78, in clause 8, page 6, line 6, at end insert “and

(e) the impacts on sustainable development.”

This amendment requires the Treasury to have regard to the impacts on sustainable development in considering the rate of import duty.

Amendment 106, in clause 8, page 6, line 6, at end insert “and—

(e) the public interest.”

This amendment requires the Treasury to have regard to the public interest in considering the rate of customs tariff in its standard form.

[Jonathan Reynolds]

This amendment requires the Treasury to have regard to the interests of manufacturers in considering the rate of import duty. UK manufacturing makes a vital contribution to the British economy each year. According to House of Commons Library research published in 2017, it accounted for 8% of jobs in the UK, which is 2.7 million; £177 billion of economic output, which is 10% of the UK’s total; and 57% of UK imports, to the value of £243 billion. On a personal note, I remain one of the vice-chairs of the all-party parliamentary group on manufacturing. In my constituency, those figures are roughly double the national average.

Manufacturing industry is significantly exposed to Brexit in a number of ways, the first of which is the export relationship. The UK exported goods worth £134 billion to the EU in 2015. In other ways, manufacturing industry is more reliant on imports, as many goods are imported to be used in the manufacturing supply chain. It is well known that the UK has a negative balance of trade at present; in 2016, that deficit was £98.7 billion.

Secondly, keeping the supply chain flowing freely is essential and time-critical. For example, while giving evidence to the International Trade Committee in February 2017, Nissan said that its Sunderland plant—a place very close to my heart because that is where I grew up—holds only half a day’s stock and uses 5 million parts a day, 60% of which are imported. As such, Nissan has said that any disruption to its supply chains would be “a disaster”.

Thirdly, supply chain imports are also heavily exposed to movements in the price of sterling, which has become considerably more volatile since the referendum result, with the pound losing 15% of its value against the euro between June and October 2016. Sterling’s weakness against the euro continues, with the pound still 14% below its pre-referendum levels.

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[Nic Dakin]

My hon. Friend is setting out the case for the measures he is arguing for very strongly. He may or may not agree, but it seems to me that it is important that, when considering what to do, the actions he is talking about need to be taken.

[Jonathan Reynolds]

I agree. Every member of the Committee will recognise my hon. Friend’s constituency interest and expertise in this area. I felt that the evidence that UK Steel gave us earlier in the week was particularly helpful in being prescriptive as to where it believes the Bill falls short. As an industry, it is especially susceptible to gaps in trade remedy legislation given the historic damage that dumping has done to the sector.

[Nic Dakin]

The opportunity of leaving the European Union ought to be to speed up these processes, and to give greater confidence to the industry rather than less confidence.

[Jonathan Reynolds]

That is absolutely the case. Gareth Stace from UK Steel told us last Tuesday:

“The Government can promise anything they like, but more than a third of all tariffs in place affect the steel sector and it hits us hard, therefore, if this system, when it comes out, is not appropriate for what it is trying to do.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 68-69, Q105.]

That will clearly result in huge problems for the sector.

UK Steel’s main reservation with the Bill is the lack of detail, as my hon. Friend has said, which is present on a number of fronts where it believes the industry needs more certainty. Secondary legislation is being relied upon to provide a huge amount of the practical information we need. One of UK Steel’s specific concerns is around investigations relating to the dumping of foreign subsidies that can cause injury to UK industry. As related by Dr Cohen in her testimony, to which I referred earlier, there is no information on how dumping margins are to be calculated.

UK Steel goes further and sets out a list of other considerations that should be taken into account, including how to assess whether a UK industry has been injured; how to determine if such injury has been caused by the dumped or subsidised imports; what principles may be used in defining the products covered by an investigation; how subsidies can be defined; what evidence an industry needs to produce to trigger an investigation; how to conduct an investigation, including any time limits; and how to require guarantees to cover possible future duties when provisional measures are required. It is a long list and I could go on, but in the interests of the Committee’s time I will not. However, it serves to illustrate the point that there are a number of multi-layered and complex considerations to take into account.

I also want to underline that this is not a matter of protectionism. As Gareth Stace also made clear in Tuesday’s evidence session:

“The steel sector thrives on free, liberalised trade. A third of all steel produced in the world is traded across borders.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 67, Q104.]

At present there are zero tariffs between developed nations for steel trade. It was his belief that, without trade remedies, there will be an increase in protectionism, as they are essential to allowing free trade to take place. I thoroughly endorse that message.

The upshot of such deputations is that manufacturers are not asking for special measures from the outset, but pointing out that we are on the cusp of a complex world post-Brexit and they need more detail. It has been the Government’s choice not to include such detail in the Bill and it is too late to make that change now. It is clear, however, that the lack of certainty that results has not been optimal for our manufacturing sector and has inhibited its ability to make plans and prepare for the future.

As UK Steel has highlighted, the legislation lays out the bare minimum needed, delegating all detail to secondary legislation. It is true that we are on a tight timeline for negotiations, but there is a wealth of global legislation that could have been drawn upon to help inform the Bill, such as the US Tariff Act of 1930, the Canadian Special Import Measures Act, the EU Regulations 2016/1036—

[The Chair]

Order. The Member is straying slightly outside the remit of the amendment and needs to bring it back.

[Jonathan Reynolds]

Well, Ms Buck, I am just pointing out that it was possible to put in detail. If that is not in the Bill, we have to have amendments that allow for the detail to be included.

[The Chair]

Pointing out needs to be done within the scope of the amendment.

[Jonathan Reynolds]

The Opposition are asking for the Government to offer reassurance to manufacturers by enshrining consultation into subsequent procedures. Clearly there are a great many things to consider, which may be made clear only by close consultation with the industries themselves. We are concerned that there is potential for an abuse of power by subjugating the process to secondary legislation, which is subject to considerably less parliamentary scrutiny. For the final time, I refer to UK Steel’s words:

“UK industry needs to be able to ascertain what its rights in domestic courts will be to challenge the decisions of the Trade Remedies Authority and the Secretary of State”—

[The Chair]

Order. I repeat that talking about the secondary legislation matter is not within the scope of the amendment. Please come back to the scope of the amendment.

[Jonathan Reynolds]

Okay. I will take your advice on that, Ms Buck.

Over the course of the Committee’s remaining days, given the amendments we are due to consider, I believe there will be a fuller debate about the issues I have mentioned. However, as things stand, we appear to be shackled to this process and it is therefore vital to enshrine a right of consultation for manufacturers to guarantee the future of UK industry and the 2.7 million jobs bound up within it. No one wants to see a Brexit underpinned by a race to the bottom, leaving the UK susceptible to a repeat of the events that punished Tata Steel in 2016. We cannot risk these being repeated in the rest of the UK manufacturing sector. Parliament must work with and listen to those on the front line, consider their input and let them guide us on what we need to succeed as a global economy in a post-Brexit world, drawing on existing best practice from around the world.

I call on the Committee to support the Opposition’s amendment, to enshrine the right to consultation, to protect British jobs and British manufacturing, and to guarantee that our post-Brexit economy does not leave British industry out in the cold.

[Kirsty Blackman]

This aspect of the clause is about

“considering the rate of import duty that ought to apply to any goods”,

and we have tabled amendments. The Government have chosen not to include in this provision a reference to “any other factor” or even the preferable “any other relevant factor”, but have laid down a number of factors that they are believe are relevant in this case. Both the Scottish National party and the official Opposition, with amendments 1, 78 and 106, are trying to increase the number of factors that will be considered when the rate of import duty that ought to apply is being considered. The clause already includes

“the interests of consumers…the desirability of maintaining and promoting…external trade…the desirability of maintaining and promoting productivity…and…the extent to which the goods concerned are subject to competition.”

On amendment 1, I associate myself with many of the shadow Minister’s remarks about the importance of manufacturing. It has been concerning that the Government have not taken into account the interests of manufacturing in many of the actions that they have taken. Therefore, it would be useful for the House to have the comfort that the Government would have to consider the importance of manufacturing when they were making these decisions.

The Scottish Government are in a much better place in that, in relation to steel and Tata Steel specifically, we have saved the Lanarkshire plants, and we have worked with BiFab. If the UK Government had previously taken actions like that, we would be in the much better position of feeling that they would be likely to protect the interests of manufacturing. We are therefore happy to associate ourselves with the Labour amendment.

Amendment 78 has been suggested by Traidcraft. I will talk about exactly why Traidcraft says that it is important. The UK has signed up to the sustainable development goals. They are incredibly important for the future of the world—for our children and our children’s children—in ensuring that there is sustainable development. Traidcraft says:

“It is therefore vital that consideration of sustainable development is contained in primary legislation to avoid the potential for the UK to inadvertently contravene its global commitments…If sustainable development were added to this list it would ensure the Government were able to fulfil its global commitments.”

That is a strong message from Traidcraft about this aspect of the clause. Because, as I said, the Minister has not included in it “any other relevant factor”, we want to be clear that the Government are protecting the interests of manufacturers, but also the interests of the future of the planet.

Amendment 106 is in my name and that of my hon. Friend the Member for Dunfermline and West Fife. Again, the factors that the Minister is required to consider when setting the rate of import duty are not wide enough. We suggest including a reference to the public interest generally, so that the Minister and the Treasury, in making these decisions, would be required to look at whether the public interest generally would be served by the rate of import duty that they were imposing.

All three proposals are relevant considerations for the long-term future of manufacturing which, given the not-very-good productivity in the UK, is hugely necessary and something that we need to protect. I do not know how anybody could argue with looking at sustainable development, given that the future of our planet is at stake. On the point about the public interest in general, we are all here to represent our constituents—we are here to ensure that their views are heard in this place—so it is completely reasonable that the Minister and the Treasury, in making any rules under this aspect of the clause, would consider the public interest generally, as well as the other four factors already mentioned.

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[Mel Stride]

I will be brief because the Committee is anxious to make progress and move on to some important clauses. I will not repeat the earlier comments that I made other than the overarching comment, which is that the provisions in the Bill as drawn are very broad and will pick up on the concerns that the hon. Lady has raised.

[Jonathan Reynolds]

I appreciate the Minister’s response and his words of reassurance, but if he were being fair-minded he would acknowledge that there is still significant uncertainty and concern in UK industry, particularly in the manufacturing sector. As the evidence session showed the other day, there are more known unknowns than anything else in this area, and amendments that seek to mitigate that and provide more reassurance are reasonable and prudent, so we would like to press the amendment to a vote.

Question put, That the amendment be made.

Division 2

Ayes: 9

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Labour: 7
Scottish National Party: 2

Noes: 10

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Conservative: 9

[Jonathan Reynolds]

I beg to move amendment 2, in clause 8, page 6, line 9, at end insert—

“(b) by a relevant select committee of the House of Commons, or

(c) contained in a resolution of the House of Commons.”

This amendment requires the Treasury to have regard to recommendations of any relevant select committee of the House of Commons or contained in a resolution of the House of Commons in considering the rate of import duty.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 3, in clause 11, page 8, line 18, at end insert—

“(b) by a relevant select committee of the House of Commons, or

(c) contained in a resolution of the House of Commons.”

This amendment requires the Treasury to have regard to recommendations of any relevant select committee of the House of Commons or contained in a resolution of the House of Commons in considering the rate of import duty.

Amendment 4, in clause 12, page 8, line 40, at end insert—

“(b) by a relevant select committee of the House of Commons, or

(c) contained in a resolution of the House of Commons.”

This amendment requires the Treasury to have regard to recommendations of any relevant select committee of the House of Commons or contained in a resolution of the House of Commons in considering whether to exercise the power to set lower rates of import duty.

[Jonathan Reynolds]

I will endeavour to take a little less time on amendment 2, Ms Buck. My enthusiasm and enjoyment of a Bill Committee perhaps gets the better of me at times.

The amendment would require the Treasury to have regard to the recommendations of any relevant Select Committee or those contained in a resolution of the House of Commons in considering the rate of import duty. This goes to the heart of how the Bill is constructed and how we will seek to scrutinise it. For reasons we have already covered, the Bill is very much an outline framework Bill, the details of which must be added at a later date. That relates to the way in which the negotiations have progressed. We must think about how to ensure that there is no democratic deficit in how the detail of the Bill is filled in, and that the core objective of Brexit—greater democratic control for the House of Commons—is achieved.

The Opposition recognise the need for the Government to make the necessary preparations to create the UK’s customs and tariff regimes post-Brexit, but we do not accept that that means allowing the Government to concentrate all those powers in the Executive. It is the Opposition’s view that, in this instance, the Conservative interpretation of taking back control has simply meant moving it from Brussels to Whitehall. That is true not just of this Bill but of many parts of the Brexit legislation. In our view, tariffs should undergo the same parliamentary process as taxation, with similar levels of parliamentary scrutiny.

In the evidence sessions on Tuesday, we heard about the sheer diversity of areas that could be affected and that will need input into the detail of the Bill. We believe that Select Committees could play a crucial parliamentary role in providing some of that detail. If the Select Committees were allowed to engage with a wide range of stakeholders to contribute to the Government’s evidence base, we believe that it would widen the debate. It would also provide for a critical role in holding the Government to account. Select Committees’ ability to compel witnesses to appear to give evidence would allow them to interrogate Ministers about the consequences of some of the details of the secondary legislation and process as it unfolds, which could be invaluable. It could also help build political consensus by identifying common ground between different groups of politicians, which is especially important given how divisive Brexit has been thus far.

Lastly, Select Committees could engage with the media and public, which would be a key contribution to the transparency of the process, accountability and scrutiny. Where there is potential in the Bill for trade decisions to be made seemingly unilaterally by the Secretary of State, having public and transparent debates through parliamentary Select Committees could be critical. I therefore urge the Committee to vote in favour of the amendment, which would be a significant step towards ensuring that we make every effort to handle this once-in-a-generation event with the parliamentary scrutiny, accountability and checks and balances that it demands.

[Kirsty Blackman]

I have previously complained about the composition of Public Bill Committees, given the UK Government’s gerrymandering so that they can have a majority in Bill Committees despite not having a majority in the House. The change would mean that scrutiny would be done effectively, and not just by Committees with a majority of Government representatives who will win every vote by 10 to nine. The amendment is incredibly important and would ensure effective and appropriate scrutiny, and make for better legislation.