Duties of Customs

Kirsty Blackman Excerpts

Ways and Means resolution: House of Commons
Monday 20th November 2017 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

I am pleased that the Government have finally brought forward something that is at least a bit more solid than things were previously, albeit not yet very solid.

The customs White Paper says that we should refer to the future partnership agreement and to the Northern Ireland position paper, and the Northern Ireland position paper says that we should refer to the customs White Paper—this is a complete guddle! Having read all these things, not only am I still not clear about how customs will look after the UK leaves the EU, but I am not clear about how the UK Government want customs to look. The only thing that I am even vaguely clear about is that they want the process to be as close to frictionless as possible, yet they have not made any clear commitments about exactly how they expect that to work. Let us look at some of the things they have said in their various papers. With regard to Northern Ireland, for example, they want to agree

“at an early stage a time-limited interim period, linked to the speed at which implementation of the new arrangements could take place, that allows for a smooth and orderly transition.”

I might be wrong, but I think that now is an early stage. In fact, before now would have been a good time at which to make decisions and commitments, and to be clear to business about at least what the direction of travel is, but we are not there yet. We are very close to Brexit day. Brexit day is coming in March 2019—who knows at what time?—and the Government have not been clear with businesses about even their aspirations for how customs will look.

It is undoubtedly the case that we benefit from being members of the EU single market and members of the customs union. Even those who are most vociferously in favour of Brexit agree that we benefit from those things. The lower estimate of the effect on GDP due to leaving the customs union and the single market is that we will lose 3.8%. The upper estimate of the effect of the trade deals that we will strike with Japan, the USA, the Association of Southeast Asian Nations, Canada, Australia, New Zealand and India all added together is a gain of 2.37 percentage points. That is significantly less than the 3.8% that we are going to lose, so even on the best estimates, we are going to be down. The EU is pretty close to striking a trade deal with some of those countries anyway, so the benefits to us are notional rather than actual.

The single market and the customs union continue to benefit us. We are told by the independent and respected Fraser of Allander Institute that a hard Brexit could cost Scotland 5% in GDP growth. A really interesting paper by the National Institute of Economic and Social Research told us last year that if we have these free trade arrangements instead of being a member of the single market and customs union, Scotland will lose £5 billion of exports in services alone. That is very significant. Analysis by the Scottish Government states that Scottish GDP could be around £11 billion a year lower by 2030 than would be the case if Brexit did not occur.

For those reasons and many others, we in the SNP have been clear from the beginning that we are against Brexit. We are against driving off this cliff, and we are against the incredibly hard landing that will happen when the Brexit bus hits the bottom. Despite our opposition to all these things, we are trying in this House to mitigate the impacts of Brexit. If the Government are determined to drive us off this cliff, we will try to make sure that there are fewer spiky things at the bottom for us to be impaled on.

I do not know how many Members have read the Government’s White Paper on customs, but it refers to the Government’s two proposed scenarios for the working of the future customs relationship. It also talks about contingency options for if the Government do not achieve their aspirational, bespoke deal—nobody has ever managed to get such a deal, and the Government do not really know what it is—and I think that people at home will be really interested to hear what it says. In a contingency situation, there would not be a £15 VAT-free threshold on parcels posted to people by family members, businesses and organisations in the EU. The Ways and Means motions that we are supposed to be agreeing today would allow the Government to charge VAT on gifts sent to people from the EU, which is ridiculous. If somebody gets a parcel worth less than £15 from a person in America, no VAT is payable on it, but the Government propose that such an exemption would not apply to things that came from the EU in a contingency situation. A lot of people would be pretty unhappy to discover that they will have to pay a customs charge on presents or other items that have come from the EU. Such things have not been spelled out to people or fully discussed.

I have referred to the various papers—I think we are up to four—that the Government have published on this matter. They have been pretty comprehensively savaged not just by experts, but by businesses, which are the real experts in this area. The Minister talked about roll-on/roll-off ports and the speed at which things have to come through ports. The Government have tried and failed to solve the problems with Operation Stack at Dover. Only last week, the Under-Secretary of State for Transport, the hon. Member for Hereford and South Herefordshire (Jesse Norman), put out a statement to say, “Our plans for sorting out Operation Stack are, basically, dead in the water, and we’re going to have to start again. But don’t worry: we’ll definitely have something done by March 2019 when the UK leaves the customs union and the single market.”

[Colin Clark (Gordon) (Con)]

The hon. Lady will agree that the oil and gas industry, which is important to both our constituencies, largely trades internationally outside the EU. It does not fear international trade. Is it wrong?

[Kirsty Blackman]

I am not saying that anybody should fear international trade. International trade is a very good thing, particularly for productivity, for example, which the oil and gas industry has been quite good at bringing up. The more international trade a country has, the better its productivity growth, but Brexit is not going to result in more international trade—[Interruption.] Brexit is going to result in the UK having more say over the terms of some trade deals with third countries. It will not result in more international trade, because the EU is international—it is made up of a number of other countries—and there is going to be a reduction in frictionless trade to the EU as a result of the changes. [Interruption.]

[Peter Grant (Glenrothes) (SNP)]

My hon. Friend will have noticed that Conservative Members are expressing a fair degree of anger. Clearly some of them do not believe her when she says that Brexit will not lead to an increase in international trade. The Government have carried out assessments, so is it not the case that if they wanted to demonstrate that Brexit would lead to an increase in international trade, they could quite easily publish those assessments and we could find out for ourselves?

[Kirsty Blackman]

I absolutely agree.

Monique Ebell from the National Institute of Economic and Social Research has written a report that compares participation in very comprehensive free trade agreements with membership of an organisation such as the single market, which is pretty much unparalleled in its encouragement of cross-border trade. Being part of a very close free trade arrangement does not give the same access to trade in services or goods as membership of the single market. Even if we had a comprehensive free trade agreement with every country in the world, we would still lose out as a result of Brexit.

[Dr Murrison]

I am listening with a great deal of interest to what the hon. Lady has to say. The amendments she tabled express commendable encouragement to the European Union, which does her great credit. However, in the interests of being balanced and fair, is she also concerned for much of Africa and South America? At the moment, they suffer the whip end of the customs union, as it makes the export of raw food products to Europe virtually impossible for many of them. Would she like to comment on that, since I am sure that the SNP is very concerned to promote the wellbeing of people in those countries?

[Kirsty Blackman]

The hon. Gentleman raises an interesting case. I have not looked into all the impacts, but the WTO gives developing countries tariff protection, for example. It is likely that some of these things balance out, but I have not looked into the exact details. I am aware that some Brexit supporters are suddenly concerned about how developing countries will cope with international trade, although they were not particularly worried about that before.

I want to move on to talk specifically about some of the impacts of the proposed changes. I have mentioned the problems that people sending and receiving parcels might face. The Government’s “Future customs” paper states:

“Trade is a key driver of growth and prosperity. It stimulates greater business efficiency and higher productivity, sharing knowledge and innovation across the globe.”

It goes on to say that trade

“provides a foundation for stronger and more prosperous communities. It ensures more people can access a wider choice of goods at lower cost”.

Those are all arguments for staying in the customs union, not leaving it.

All the Government’s papers refer to consulting businesses. In all our conversations, the Government have said that they have spoken to businesses. The problem is that although businesses are lobbying the Government as loudly as they possibly can about the impacts of Brexit, the Government are not listening. The Government have an aspirational picture of how wonderful Brexit is going to be and no matter how much evidence to the contrary they are provided with, they continue to push on. Even Conservative Members who supported remain are suggesting, in the main, that we will have benefits from Brexit. In my eyes, that is not right.

The customs declaration service was mentioned by the hon. Member for Yeovil (Mr Fysh). The Minister is generally very good at explaining such things. He has said that he hopes to have pilots soon, with the service up and running by January 2019, but three months is not enough to test a customs declaration service fully. It is not enough to allow businesses to iron out all the problems that might arise or to get used to the red tape.

I want to go back to the issues raised by some of the Government’s aspirations and ideas that are, honestly, unworkable. One of the nine principles they have set out for what they expect to do to deal with trade between Northern Ireland and Ireland is:

“Consider how best to protect the integrity of both the EU Customs Union, Single Market and trade policy, and the new independent UK customs regime, internal market and trade policy, in the context of finding flexible and imaginative solutions, while recognising that the solution will need to go beyond any previous precedents.”

That is an aspiration without a solution. They are not putting forward a potential solution. They cannot even think of anything to square this circle, fix this problem or dig themselves out of the hole into which they have fallen.

This is an unmitigated disaster. The changes that the Government propose, particularly the customs duties that will be put on goods coming from the EU, or leaving the UK to go to the EU, are a disaster for businesses and for people at home. Some of those goods cross the border several times. For organisations such as car manufacturers or aerospace companies, sometimes the widgets—for want of a better word—cross from the UK to the EU and back many times before there is a finished product. If there has to be a customs declaration each time, and if there is an increase of even a few minutes in the time taken on each occasion, real problems will be caused to a huge number of businesses.

Businesses are speaking to the Government and raising concerns, but the Government are not listening. They now need to give businesses a clear direction. They need to make it absolutely clear today that their intention is that we will not have customs duties between the UK and the EU, so they should support the amendments.

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[Ruth Cadbury]

Will the hon. Gentleman give way?

[Kirsty Blackman]

Will the hon. Gentleman give way?

[Ross Thomson]

No. I want to make more progress.

Furthermore, striking new trade deals will unlock the potential of many more Scottish businesses, helping them to make their mark around the world and boosting our economy at home, too. If we are to seize these opportunities and make the greatest possible success of them, Britain needs to be ready on day one of our exit from the EU for new trade relationships. On this point, the clock is now ticking.

[Ross Thomson]

No.

That is why this customs Bill is so important. Irrespective of any agreements reached between the UK and the EU as part of the negotiation and exit process, the UK will need primary legislation to create its own stand-alone customs regime, and to amend the VAT and excise regimes so that they can function effectively after the UK has left the EU.

The Bill will create a framework that lasts for a new UK customs regime. It will lay before us the necessary foundations to allow new arrangements on customs to be put in place depending on whatever the outcomes of the Brexit negotiations are, such as the implementation of a negotiated settlement with the EU, or leaving the EU without an agreement on customs.

I am sure that all Members of this House want our withdrawal from the EU to provide as much certainty and continuity as is possible for our businesses, employees and consumers. Currently, as the majority of rules governing customs in the UK are contained in directly applicable EU law, such as the Union customs code, it is important at this stage that new domestic legislation is brought forward and put in place for when we leave the EU in March 2019.

In the longer term, depending on the outcome of the negotiations with the EU, the Government will want to consult on possible changes to this law to help UK businesses, but now is the time to help businesses in all of our constituencies by providing the continuity of the existing rules, wherever possible.

[Kirsty Blackman]

Will the hon. Gentleman give way?

[Ross Thomson]

No.

Furthermore, the Government will ensure, as they do at present, that their future customs regime is consistent with internationally agreed rules and arrangements. What does this mean in practice? As we all know, trade is not just about the trade deals that we strike or where the growing markets are in the world; it is also about the tariffs, regulatory barriers and terms of trade that we decide to set as part of a new UK policy. The Bill therefore enables the UK to establish a new UK tariff, charge customs duty on goods, set and vary rates of customs duty, and suspend or relieve duty at import in certain circumstances. The UK will be able to set preferential duties and additional duties—for example, to implement a preferential tariff applicable to developing countries.

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[Kirsty Blackman]

I am loth to interrupt the hon. Gentleman’s excellent speech, but I am slightly concerned that he keeps talking about the views of experts. We know that Government Members are not keen on the view of experts. Does he think they might listen this time?

[Ian Murray]

I can answer the hon. Lady’s intervention in one word: no. They clearly are not going to listen to the experts on these issues. In fact, they have sown the seed of doubt that none of us should listen to experts, and the country will be much diminished as a result.

I want to touch on two more sectors. The chemicals sector is another key driver of the UK economy. We have a great chemicals sector—one of the key chemicals sectors across the EU—and it has said that

“the best way to guarantee no adverse disruption to business and trade…and to guarantee only one adjustment before reaching a final agreement with the EU, is to seek to retain our existing membership of the Single Market and Customs Union”.

So we have the automotive industry body—the one we all trust—and the pharmaceuticals sector, and we now have the chemicals sector, yet the Minister has come to the Dispatch Box and said, “Don’t worry. We’ll put more people in place to help all this along”. I suggest that the customs union might be an answer to this particular question.

I will finish with the shipping sector—the very sector that takes the goods from these islands to the continent. The UK shipping sector has warned that the UK is facing an “absolute catastrophe” if it does not sort out a “frictionless and seamless” border at Dover and other ports. The Government keep talking about a frictionless and seamless border but cannot tell us what it means. I suggest that the best way to maintain or enhance the border—to make it frictionless and seamless and operate as a single market—is to maintain our status in the customs union.

If we were starting from scratch—with a blank sheet of paper—and seeking to determine the best way for an island nation to trade with other nations, it would be to have a customs union with those nations. Under such an agreement, we would not need to use the word “frictionless”, because there would be absolutely no friction at all, and it would be completely seamless. The best way to highlight how seamlessly and how frictionlessly a single market and a customs union can operate is to look at the markets between Scotland, Wales and England. They have a completely seamless border: they are completely free market, completely single market, completely customs-free.

I am delighted to see that the Secretary of State for Environment, Food and Rural Affairs has joined us. At the time of the referendum, he claimed, along with me—and I have said this to his colleague the hon. Member for Aberdeen South—that one of the key arguments against an independent Scotland was the lack of a border at Berwick. Now he is arguing the opposite in the context of Northern Ireland and the island of Ireland. That is completely contradictory, and he cannot tell us how it will be resolved. How could it not have been resolved in the Scottish context?

As a member of the customs union, the UK is party to preferential trade agreements. We want to walk away from those agreements, and make our own. It is likely that, outside the customs union, the UK would need to renegotiate many, if not all, of those agreements with those who would become third parties. It is not as easy as just rolling over those agreements, which is what the Government seem to want to do.

I am conscious of time, Mr Deputy Speaker, so let me move on a little. I want to talk about Northern Ireland and the Republic. [Interruption.] I know that the Government do not like to hear these arguments, because they have no answers to them, but I think it important for them to be highlighted in the House. If the Government can provide only limited time for the European Union (Withdrawal) Bill, they may as well rehearse some of the arguments today. We have until 10 pm, after all, and if the hon. Member for Gainsborough (Sir Edward Leigh) wants to intervene and waste time, he is more than welcome to do so.

We have already talked about the massive queues at our ports, airports and rail terminals. Now, as I have said, I want to say a little about Northern Ireland and the Republic. The Foreign Affairs Committee visited Dublin and the border on Thursday and Friday last week to consider the consequences of our leaving the European Union. Let me say again to the Minister that if he wants to name any organisation in either Northern Ireland or the Republic which thinks that Brexit will be good for the isles of Ireland, let him please do so, because I have not heard of any, and am unlikely to hear of any. In fact, the only two people I heard supporting our withdrawal from the customs union and the single market in the context of the isles of Ireland were the two Brexiteers on the Foreign Affairs Committee. Some of the words used were “catastrophic”, “irreconcilable” and “unsolvable”.

I simply cannot understand how the Minister can table motions such as this to pave the way for major Bills without having the basic answers to these questions, while using meaningless phrases such as “frictionless” and “seamless”. I am very concerned about the Belfast agreement, or Good Friday agreement, which is underpinned by the European Union, underpinned by a seamless border, and underpinned by a single market in the island of Ireland. It is almost impossible for the Government to reconcile wanting no borders, and frictionless and seamless trade, with the route that they are taking with a non-deal Brexit.

I have another suggestion, which the Minister may recognise. The way to have a seamless and frictionless border between Northern Ireland and the Republic is the customs union. That would mean that trade in goods could go across the border, unfettered, seamless, and I may even push it to frictionless, which is what the Government have been saying all along.

Our Committee travelled from Cavan—Cavan County Council hosted us on Thursday evening—to drive on to the motorway back to Dublin. It is a distance of about four and a half miles, and we were in a minibus. We crossed the border seven times just to travel a short distance. That is irreconcilable. Many people in Northern Ireland and the Republic who spoke to the Committee—and I am sure that the Minister will be pleased to read its conclusions when they are published—said that it was intellectually incoherent to argue that it was possible to have no border while requiring a border. It is not possible to have frictionless and seamless trade while having to check goods, and it is not possible to have a border at sea level while trying to ensure that the Good Friday agreement is maintained.

Former president Mary McAleese spoke to us in great depth about the passion for the Good Friday agreement. Let me say to the Minister and the Government, in all seriousness, that they ruin that agreement at their peril. It is something of which everyone should be incredibly proud. The way in which the Government are going about the Brexit negotiations, the way in which they are treating the border between Northern Ireland and the Republic, the way in which they are fooling the public that it is possible to have everything and not have everything, is indeed wrong. Michel Barnier, the chief negotiator whom we all know so well now, has said to the Government, particularly in relation to the issue of Ireland, that they cannot have their cake and eat it. Something will have to give, and that is why I tabled the amendments. The Minister must think very seriously about that physical border.

Let me end by saying a little about the Labour party’s position. I think that we are right on this issue, and our position is written into the documents that we have here. We want to stay in the customs union, if possible. I agree with my hon. Friend the Member for Bootle, who tabled the amendments about parliamentary scrutiny. We should always press such amendments, because the Government, who talk of taking back control, are not giving control to Parliament.

All the issues relating to Ireland, to trade, to tariffs and what will happen in the future, to jobs, to borders and to tailbacks at customs can be resolved if the United Kingdom at least leaves on the table—regardless of whether we agree—the possibility of remaining members of the single market and the customs union. That would take away all these concerns. When we reach the end of the process, whether or not there is a meaningful vote in this place, the Minister and his Government will know when the jobs start leaving this country, when borders start being erected, when customs becomes more difficult, when trade becomes much more difficult, when public services become much more difficult to fund, when debt rises and deficit rises, that his Government have let the people down by not telling them the truth about the consequences of leaving the single market and the customs union.

That is why I tabled my amendments, and I hope that many of my right hon. and hon. Friends will join me in the Lobbies.

Taxation (Cross-border Trade) Bill

Kirsty Blackman Excerpts

2nd reading: House of Commons
Monday 8th January 2018 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

On the subject of the negotiations that the UK is having with countries with which it currently has free trade arrangements because it is part of the EU, and on the rules of origin issue, what discussions has the Minister had about cumulation and about whether the EU will accept UK-EU cumulation, or whether we will be required to have parts made only in the UK?

[Mel Stride]

As the hon. Lady will probably know, those are matters of ongoing discussion within the Department for International Trade, but this Bill and the Trade Bill, which will have its Second Reading tomorrow, are about ensuring that country-of-origin issues can be determined by ourselves under our own laws, rather than having to depend upon on those of the European Union.

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[Kirsty Blackman (Aberdeen North) (SNP)]

I am grateful for the opportunity to speak on the Taxation (Cross-border Trade) Bill, which I will call the customs Bill for ease during my speech. I am particularly delighted that we are considering it at the same time as the Finance Bill—that is excellent. I am not sure whether Hansard can capture my sarcasm there.

Is the Minister as concerned as I am about the issues that so many different organisations have raised? Perhaps the Minister and the teams in Her Majesty’s Revenue and Customs have been meeting the organisations that are raising concerns, but I do not think that they have been listening. Part of the problem for me is the wide range of organisations that are raising a wide range of issues. As many hon. Members have said, they include UK Steel, the Manufacturing Trade Remedies Alliance, the British Ceramic Confederation, the GMB and the TUC, but also the British Chambers of Commerce, the British Retail Consortium and the Law Society of Scotland. All those organisations have raised issues, which are not all specifically about trade remedies. There are therefore several problems with the Bill, not just with one aspect but across the measure.

The Bill has 166 pages and creates so many delegated authorities that the Government have had to produce an 174-page document detailing them. The majority relate to the negative procedure, though some relate to the affirmative procedure. In four instances, the UK Government create Henry VIII powers—the power to amend or repeal an Act of Parliament—which are particularly concerning. We have consistently raised concerns about Henry VIII powers, and we will continue to do that. The Chartered Institute of Taxation said:

“The Bill will, we understand, have the powers to amend primary legislation using secondary legislation; raising similar concerns around delegated powers as with the EU (Withdrawal) Bill.”

UK Steel said that

“key aspects of the UK’s trade legislation will evade proper parliamentary scrutiny”.

It is a major concern when UK Steel, a trade body that represents important manufacturers, makes such comments.

The number of organisations that are raising concerns is worrying for Members, as is the fact that so much of the Bill will dodge proper parliamentary scrutiny. Those who supported Brexit as a means to strengthen parliamentary sovereignty are being incredibly badly served yet again by the UK Government. Sovereignty for the Government is very different from sovereignty for Parliament. I urge the Minister to read the Law Society of Scotland briefing on the Bill. It suggests several amendments, and much of its concern is about the lack of requirement for Ministers to consult when making secondary legislation.

[Stephen Kerr (Stirling) (Con)]

The hon. Lady has mentioned at least twice the Law Society of Scotland briefing document, which I have in my hand. It is a very useful and positive contribution to informing Members of all parties about the Bill. I will quote from it so that we are all clear about the context. In its general remarks, the Law Society of Scotland says:

“We recognise the necessity for this Bill”.

That conclusively states that the Bill is a necessity. Does the hon. Lady accept that?

[Kirsty Blackman]

Because the UK Government decided that we are leaving the customs union and we will therefore need our own customs procedures, it is sensible, given that it was an entirely EU competence, for the UK to create its own customs framework. However, if the UK Government had done what we suggested and remained part of the customs union, the Bill would not be necessary. Although the Law Society of Scotland says that the Bill is necessary because of the decisions of the UK Government, it raises several concerns. I ask the Minister to read the briefing, which suggests a number of amendments, particularly on consultation.

[Hannah Bardell (Livingston) (SNP)]

Further to the point made by the hon. Member for Stirling (Stephen Kerr), has my hon. Friend seen the briefing from the Manufacturing Trade Remedies Alliance? It says:

“These proposals are much weaker than we have in the EU (and also weaker than those of most other Trading Nations). Weaker remedies cost jobs.”

Just because we have legislation—and bad legislation—it does not make what is happening a good thing.

[Kirsty Blackman]

I absolutely agree with my hon. Friend, who speaks for us on international trade. She is right about trade remedies and I will come on to that specific point later.

Although the Bill is general, it is also wide ranging. I want to consider some of the issues relating to HMRC that the Minister mentioned earlier. The new CDS software is set to replace CHIEF—customs handling of import and export freight—the current system, in 12 short months. The Public Accounts Committee report in November stated:

“It would be catastrophic if HMRC’s new customs system, the Customs Declaration System (CDS), is not ready in time and if there is no viable fall-back option.”

It expects the number of customs declarations that HMRC must process each year to increase fivefold. Every time I and other hon. Members have questioned the Minister about this, he has been particularly blasé and unflustered about the tight timetable. The PAC also said that HMRC’s timetable is incredibly tight, given the amount of work still to do. HMRC will only know by July 2018 whether the system works as intended—I am surprised that HMRC will only know by July 2018, but the Minister thinks it will all be fine—which is only one month before the first traders start to use it, and gives very little time to take remedial action if anything goes wrong.

It is vital for our exporting businesses that the customs software works. We have consistently raised concerns about this and we will continue to do so. I appreciate that the Minister is nodding, but we will keep the pressure on to ensure that it happens.

[Hannah Bardell]

My hon. Friend is making an excellent speech. How much faith does she have in the Government and the implementation of the software programme, given the disaster they are having with the change programme and the closure of HMRC offices?

[Kirsty Blackman]

UK businesses have several questions about the capacity of HMRC to deal with the volume of customs declarations, and many businesses will have to make customs declarations for the first time. Businesses are already concerned about the loss of the HMRC hotline that they could previously access. One business contacted HMRC with a query and received a reply seven months later. Seven months is not an appropriate timescale. If HMRC cannot respond to complaints and questions timeously now, how will it do so in the future after a fivefold increase in the need for customs declarations?

In a post-Brexit scenario, businesses will—in an incredibly short timescale and whether we have a trade deal or not—have to come to terms with new customs software. They will also have to come to terms with a new system of customs duties, ways to export and other massive changes. That means an incredible amount of uncertainty. When drafting the Bill, the Government could have been clearer about how the new customs system would work, therefore getting rid of a level of uncertainty. I know that they do not yet have a trade deal, but if they had been able to implement the software earlier or be clearer about how the processes will work, it would have been better for businesses.

Broadly speaking, businesses have been in favour of the replication of the Union customs code in the future. I mentioned the issue of rules of origin, and the Minister also referred to it earlier. There is a major problem with those rules. The Minister said that they should be determined by the UK Government in negotiation. As a side note, the current UCC, at 61.3, contains options for declaring origin. That does not appear to have been replicated in the primary legislation, and the British Chambers of Commerce, on behalf of its members, want to see certainty for the future on that matter.

Major problems are brewing on rules of origin, especially the duration of any transition agreement that the UK Government strike. At the very least, the Government need to negotiate interim free trade agreements with countries that the EU currently has FTAs with. Many of those trade deals allow UK companies to export because of the recognition of cumulation with EU content. For example, the trade deal that the EU has with South Korea, for example, says that

“a car will be originating in the EU if no more than 45% of the value of the inputs have been imported from outside Korea or the EU to manufacture it.”

So if the UK—in this brilliant scenario with its amazing negotiating team—manages to convince Korea, at least temporarily, to replicate the trade deal that it has with the EU, changing all references to “EU” to “UK”, for example, that will be all well and good, but it will not solve the issue of cumulation for many of our businesses. Take for example a widget that is created in the UK. It may have many parts from other EU countries. It may have 60% EU content, which it needs in order to be exported to South Korea. However, it may not have 60% UK content. Under the previous rules of origin system that we had as part of the EU, that worked fine and the widget could be exported to Korea. But if Korea says that it wants the widget to have 60% UK content, it will be a major issue for businesses which will no longer be able to export those widgets.

[Eddie Hughes (Walsall North) (Con)]

I am afraid that I am not very familiar with our trade level with South Korea. I wonder whether the hon. Lady has picked a particularly obscure example to demonstrate her point, rather than looking at the countries we will do substantial trade with in the future. I hope that I will be able to get some more information on that point.

[Kirsty Blackman]

I picked South Korea and car manufacturing because the percentage is particularly high. However, many other areas of trade and exports have percentage requirements. Because we have not needed rules of origin for products from the UK—we have been able to add all the EU content—it has not been a consideration for businesses. They have been able to export if they can prove that a certain percentage is from the EU. It is an issue not only for the trade deal with Korea, but for all sorts of trade deals that the UK has because it is part of the EU. The concern is not that we will not be able to do new trading, but that our current trading will become a major issue as of March 2019, if we do not get the appropriate rollover and grandfathering in place.

[Joanna Cherry (Edinburgh South West) (SNP)]

Perhaps my hon. Friend will join me in correcting the hon. Member for Walsall North (Eddie Hughes), as South Korea is very important for Scottish trade. As a result of the EU-negotiated deal, whisky goes to South Korea on a 0% tariff. The former chief executive of the Scottish Whisky Association has expressed the view that without the heft of the EU, Scottish whisky—the UK’s biggest export—would not have had the benefit of that deal.

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[Kirsty Blackman]

I appreciate that information.

There are so many technical issues that will have a major impact on jobs and manufacturing in UK. When I have asked the Government about this, the answers I received were pretty fluffy. I have asked about cumulation—mainly outside the Chamber—as it is a major issue that the UK Government have not taken seriously enough. It has been raised especially by the Society of Motor Manufacturers and Traders. If hon. Members look at how many times cumulation has been mentioned in the Chamber, they will find that it is very few.

[Vicky Ford]

I thank the hon. Lady for mentioning the incredibly important matter of cumulation. It is by cumulation that a British car that has components from other parts of Europe manages to be sold to third countries under existing agreements. My recollection is that the Minister said that the Department for International Trade would look to continue having agreement on cumulation, and that the Bill will give it the legal tools to continue such negotiations. Does the hon. Lady agree that the Bill is necessary as an enabling package to allow us to have a customs relationship with Europe and other parts of the world in the future?

[Kirsty Blackman]

I think that we should remain in the customs union and the single market, because then we would not have any of these issues. I appreciate that the Minister says that the Government are looking at this, but I am trying to make it clear how important this matter is, and I hope that I have been able to do that in my discussion of cumulation.

[Richard Graham]

The hon. and learned Member for Edinburgh South West (Joanna Cherry) raised the importance of the EU FTA deal with South Korea—indeed, it adds some £2 billion to our exports every year—but the interesting question is why the EU has been able to make free trade agreements only with South Korea and Vietnam. What about the rest of Asia? Does the SNP believe that sufficient progress has been made in expanding our trade, especially in Scottish whisky, across the whole of Asia, or could the process perhaps have been done more energetically and dynamically by Britain making its own free trade deals?

[Kirsty Blackman]

There are EU FTAs with many countries and we trade through them. Because the EU has such a large market, it is able to strike much better free trade agreements than the UK Government will be able to strike for their much smaller market. That is just the reality.

On the capacity of HMRC, I also want to talk about the issue of authorised economic operators, which was mentioned a lot in the customs White Paper. Relying on the AEO system causes a bit of a problem, as the UK is just not that good at either promoting or administering it. Some of the rules applied by HMRC are nearly impossible for many of the smaller operators to meet, such as the requirement we have heard about that the person who is in charge of customs in organisations has three years of customs experience. Some of our businesses have been trading exclusively with the EU, so they cannot meet that requirement very easily. HMRC must look at this as a matter of priority, and particularly consider the situation in Austria, where it takes less than three months for an initial AEO application to go through. Germany has increased the number of authorised economic operators incredibly successfully. The UK Government could benefit from looking at those countries when they consider making changes. It is not about making the regime slacker and enabling more people to jump through the hoops for AEOs; it is about making the process of applying for and getting AEO certification more accessible and streamlined. I know the UK Government have had representations on this matter, and I urge Ministers to consider them and act as soon as they can. We need to get the system in place as soon as possible so that companies can register and receive the certification to become AEOs in advance of the exit date.

As we heard earlier, there is also an HMRC capacity and streamlining problem in the area of VAT. That was also raised in the media recently in the context of the British Retail Consortium’s concerns. The changes to the VAT regime could create major cash-flow problems for businesses, and they might have to restructure or take on burdensome new cash-flow loans. The BRC says that there is no impact assessment produced by the Treasury about the costs of these measures in terms of additional compliance burdens for business, nor about what the costs of HMRC collecting and refunding these upfront costs would be. It seems that there is a real problem and that the required VAT changes have been pretty badly thought through.

I also want to raise the issue of virtual free trade zones. The Bill contemplates only physical free trade zones, but a virtual zone would allow businesses along the supply chain to benefit from simplifications and facilitations without having to incur the time and expense of individual applications, such as with inward processing relief. The British Chambers of Commerce has requested that the Treasury consider the possibility of including virtual free trade zones in its powers relating to designated free zones.

In the context of HMRC, I also want to mention import VAT on gifts from the EU, which I have spoken about before. Folk will be shocked when they get a bill because they have received a gift worth more than £39 from somebody in the EU. Such a system currently applies if people get a gift from elsewhere in the world, but the Government are suggesting that it should also apply in the case of goods from the EU. That is a major concern, because as there has been free movement and people have been able to live in other European countries, it is perfectly feasible that an awful lot of people will have family members in other EU countries and therefore will be likely to receive gifts of a value of over £39. I want to make it absolutely clear that if and when people start getting those bills, they will be totally caused by Brexit, leaving the customs union, and the proposed changes to VAT.

Trade remedies have been mentioned, particularly by Labour Members. Some of the evidence about the matter that the International Trade Committee received last year was concerning. The EU currently has anti-dumping and countervailing measures that would normally be expected to still be in place after Brexit day, such as a five-year measure that was put in place two years ago, meaning that it will have about two years to run at the time we leave the EU. Bernardine Adkins of the law firm Gowling WLG told the Committee that

“it won’t be possible to grandfather the measures, otherwise you will face problems with the World Trade Organization.”

If she is right, we have a pretty significant problem, especially because the call for evidence the Government issued at the end of November seems to suggest they do not know which trade remedies are relevant to UK companies. If the UK Government have to create a trade remedies agency, get it up and running, and furnish it with details that have not been provided in this Bill—how to conduct investigations, how subsidies are to be defined, how to assess if a UK industry has been injured, how to define a UK industry, and how to calculate the level of duties and guarantees needed to rectify the injury caused—and if they have do all that before putting in place even the trade remedies that currently exist, we have another problem.

UK Steel has been particularly vociferous in its criticism of this aspect of the Bill. It says that the chief and overriding concern is that schedules 4 and 5 to the Bill, concerning anti-dumping and anti-subsidy measures respectively, contain very little detail. It goes on to point out that for many of our major trading partners, including the EU and US, such issues are covered by primary legislation. The UK Government have chosen to deal with this through not primary legislation, but secondary legislation. That is yet another concern that we have about the Bill. The Bill does not even have the level of detail of the WTO agreements, so if the Government had included those, the Bill would have been substantially better.

The lesser duty rule is also a significant issue, as the UK Government are looking to go in that direction at a time when the EU is looking to move away from it. This is a concern for us, and for UK manufacturers and jobs in particular.

I and my party have general concerns about the loss of the customs union and the single market. We also have very specific concerns, which echo the views of businesses, about aspects of this Bill. A Fraser of Allander Institute report last year said that 134,000 jobs in Scotland are supported by trade with the EU, and Brexit threatens to cost our economy in Scotland £11 billion a year by 2030 and to result in many fewer jobs. The OECD highlighted in June last year:

“In case Brexit gets reversed by political decision…the positive impact on growth would be significant.”

There are major issues about tariffs if we leave the single market. The EU average tariff on imports from outside the EU was 5.2% in 2014. The average tariff on food was 15%. Skimmed milk exported into the EU from outside the single market attracts a tariff of 74%. If our organisations get hit by these tariffs when they are exporting—if we end up outside the EU single market and customs union as part of a no-deal scenario —we will not just have the problems I have mentioned about issues with the Bill, trade remedies and how HMRC will cope with all this. All these things are an incredible problem. Would it not be better and easier, and would it not be in the economic interests of everyone in this country, if the UK Government were to say, “Actually, we are going to stay in the single market and the customs union”?

--- Later in debate ---

[Julia Lopez (Hornchurch and Upminster) (Con)]

If we are to deliver Brexit, the UK needs to leave the customs union and establish its own customs regime. Without doing so, the UK will be precluded from striking its own free trade deals and left open to certain judgments from the European Court of Justice. I fear that those who believe we can honour the referendum result while staying in the single market or customs union are simply wishing to deliver Brexit in name only.

The Bill is widely drafted in order not to prejudice the eventual outcome of any deal we strike with the EU. It instead ensures that the UK can respond to its new status, whatever the circumstances in March 2019. That could include a no deal scenario—something that would represent a wasted opportunity of historic proportions on the EU’s part. Our Government have already made it clear that the UK wants to maintain free, frictionless trade with the EU and that they wish to maintain continuity with EU law at this stage on customs, excise and VAT to give businesses certainty.

There would be no need for chaos at customs or increased tariffs if our standalone regime could be linked closely to the EU’s, potentially in a new customs partnership. The question is whether the EU has the capacity to recognise its own interests and, more crucially, the interests of the people it governs. Until 2008’s financial crisis, global trade had been growing at up to twice the rate of global output for decades. Ever since, trade has slowed to be in line with, or sometimes below, growth in the global economy and political upheaval has followed.

As a founding World Trade Organisation member, the UK has long been a passionate advocate for liberalised trade. It is time to regain that leadership role and push back against the superficial allure of protectionism. The Bill sets the scene for that. While it introduces the potential for levying tariffs, giving us the tools to protect against dumping, it also allows us to adopt a unilateral trade preference scheme for developing countries to ensure trade further replaces aid as the primary poverty alleviation tool.

The Bill also aims to manage the flow of goods at our ports. Over the summer, I visited London Gateway, a state-of-the-art port in Essex with modern HMRC and Department for Environment, Food and Rural Affairs facilities and spare capacity. A logistical hub is being developed to deliver goods directly to London and the south-east rather than via midlands distribution centres. German grocer Lidl has already taken space there. The competition from nearby ports such as Tilbury, with its vast Amazon fulfilment centre, keeps freight costs low and ties into the Government’s ambitions to unlock the entire Thames Gateway with a new river crossing and more homes. This plan and these efficiencies strip out cost to retailers, helping to offset any potential increase in tariffs. Our customs systems are already highly efficient, but the Bill sets up an authorised economic operator scheme to indicate the fulfilment by exporters and importers of recognised compliance standards and makes provision for HMRC-approved warehouse operators. These measures should fast-track shipments. We now need to identify the sectors most exposed to any new cost and resource HMRC appropriately, which is what the Government are doing.

In my capacity as a member of the International Trade Select Committee, I would like to say something about tariff-free quotas. As an EU member, the UK is party to over 60 free trade agreements that permit our trading partners to export a certain volume of goods to the EU tariff-free. Along with the Trade Bill, this Bill provides the foundation for the continuation of these deals after Brexit. We hope that this grandfathering process will be straightforward, but our trading partners may use the opportunity to renegotiate terms, and rules of origin might add complexity to existing trade. Rules of origin define where a product was made and help to determine the application of quotas, preferential tariffs and trade remedies.

At present, the UK can export to the EU with no restrictions on the value of imported intermediates from third countries, and this will likely change once we are out of the customs union. Origin is generally conferred based on where a good was obtained or manufactured or where the last substantial transformation took place. Cumulation of origin allows for greater flexibility when using raw or semi-manufactured materials from certain third countries. Currently, as an EU member state, the UK benefits from the pan- Euro-Mediterranean cumulation zone.

Cumulative rules of origin may prove hard to negotiate, requiring trilateral discussion between the UK, the EU and the third country concerned. None the less, the UK’s departure from existing free trade agreements is not challenge-free for the EU either. Those FTAs were negotiated on the basis of access to an EU economy that included a UK market, which, in 2015, amounted to 17.5 % of the EU’s GDP, and which contains some of its most voracious consumers. If we withdraw that market from the FTA, there will inevitably be an impact on its functioning, if not on its legal character. The EU plans to remove the equivalent of the UK’s market share from the duty-free quotas that it offers its trading partners. Otherwise, EU domestic producers will have to compete with a greater inflow of tariff-free foreign goods. FTA partners, however, are understandably very unhappy at the prospect of a substantial reduction in their tariff-free quotas.

If the EU can think imaginatively and flexibly about a customs link to the UK economy, with potential agreement on rules of origin at least for a transition period, the potential problems of both sides can be addressed. The EU’s default arrangements relating to rules of origin are relatively liberal, and processes already exist for exporters to self-certify origins. Agreeing on those processes, and ensuring that businesses sign up to them now, should be a priority.

[Kirsty Blackman]

May I pursue the issue of tariff-rate quotas? Is it not the case that, even if countries receive the same amount in total—if they were previously able to distribute 100 tonnes of goods, and in future they could distribute 70 to the EU and 30 to the UK—they might challenge that on the basis that if the UK market collapses, they will not be able to transfer that amount to another country, as they currently can?

[Julia Lopez]

My point is that any issues relating to tariff-rate quotas will affect not just the UK but the EU, and it is therefore in the EU’s interests to try to reach an accommodation with the UK.

I welcome the Bill, which is about preparedness and which, given its wide drafting, allows for any negotiated outcome. I hope that it sets us up for a new chapter in our long history as a proud, global trading nation.

--- Later in debate ---

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Ga’i ddymuno blwyddyn newydd dda i chi—may I wish you a happy new year, Mr Speaker?

I wish to confine my remarks to three key points. First, I wish to add my voice to those calling for our continued membership of the largest trading bloc in the world. Secondly, I wish to outline the concerns from Welsh ports, which would face immediate challenges to their existing position as a result of changes to our customs arrangements. Thirdly, the weakness of this Bill’s ability to protect our vital industries will form the final part of my speech, and we have heard many interesting contributions on that point already.

As promised, I wish first to reiterate to the British Government the illogicality of, and harm they will cause by, ripping us out of the customs union. A student of GCSE economics could explain the foundations of international trade as laid out by David Ricardo. His theory of comparative advantage is not complex to grasp. By specialising in particular industries, combined with free international trade, all nations will see positive results. The premise is simple: rather than creating a range of mediocre products, the highly specialised industries of each nation produce better goods, which are then traded internationally, satisfying domestic demand for the products made in other nations. Whether we agree that this commercial international order should be our goal or not, it has underpinned our economic approach to trade for centuries.

International marketplaces have moved on from Ricardo’s time. Instead of cloth and wine, the modern economy trades aeroplane wings, specialised steel products and microchips. To account for this complexity, policy makers have created institutions to manage commerce.

The European customs union is the greatest example of one such institution. By removing physical and financial barriers to trade, it has created the largest, richest, most powerful network of free-trading states in the world. As a result of our membership of the customs union, Welsh businesses can trade on a completely unfettered basis within the bloc, gaining access to 600 million consumers.

As a trading bloc, the EU customs union also applies a common external tariff on entering the bloc, and we should remind ourselves of the extra costs that will hit our exporters if we are no longer members and have no agreement on future tariffs. Carmarthenshire is known for its agricultural produce, so it is worth putting it on the record that the tariff for animal products can be more than 138%, with an average of 20%; the maximum tariff on dairy products can be as much as 134%, with an average of 45%.

I could also point to other major employers in Carmarthenshire who manufacture component parts for export and will obviously follow the upcoming negotiations with great interest. We should not be under any illusion: if it becomes burdensome, financially or through regulation, for those companies to move their goods, they will relocate. Our membership of the single market and the customs union has been invaluable in securing valuable foreign direct investment in areas such as my home communities in the Amman valley.

Before I am accused of scaremongering, today’s shambolic reshuffle was trailed in the press over the weekend as a reorganisation to prepare for a no-deal scenario. The 27 members of the EU are not the only ones with whom we will lose our existing free-trade arrangements. Sixty-seven countries have agreements with EU customs union members which must be grandfathered, although there continues to be some dispute about whether that is possible. The issue will be discussed in greater detail tomorrow when we deliberate on the Trade Bill.

By pulling my nation out of the European customs union in search of some false free-trade, low-tariff Brexit nirvana, the British Government risk the jobs and wages of my constituents. The Minister will undoubtedly claim that this is the will of the people. We can of course engage in a tit-for-tat argument over whether that is the case. However, that denies him the opportunity to outline the purported benefits of the British Government’s approach. For that reason, I ask him the following: if certainty is his aim, and the status quo is certainty, why is rolling the dice on more than half our imports and exports a good idea? Why is he gambling away my constituents’ jobs and wages? Why is he pulling us out of the customs union at all?

I also implore Labour Front Benchers to come to their senses. The constructive ambiguity of the Labour party’s Brexit position may offer marginal electoral advantage, but it provides the silver platter on which the Tories can serve up an extreme and damaging Brexit. Rather than playing hokey cokey with the single market and customs union, I ask Opposition Members to join us and take a clear stand to say we are better off in these great European economic institutions. Let there be no mistake: the Tories can deliver their current policy of an extreme Brexit only because the position of the Labour leadership is to leave the single market and the customs union after the transition phase.

[Kirsty Blackman]

Does my colleague agree that Opposition Front Benchers are not supporting a jobs-first Brexit? If they wanted a jobs-first Brexit, they would keep us in the single market and the customs union.

[Jonathan Edwards]

I am grateful for the intervention, and am aware that during the debate many honourable colleagues on the Labour Back Benches have made that exact point and implored Front Benchers to change their position. Some very interesting reports are coming out of the parliamentary Labour party meeting this evening.

Before the recess, the tangible and immediate chaos created by pulling us out of the customs union was vividly illustrated. The Prime Minister’s attempts to conclude phase 1 of the negotiations were almost scuppered by the issue of customs borders on the island of Ireland. Others will be able to expound with greater invested passion why no such border should exist. However, I would like to raise my concerns about the sea border that my nation shares with Ireland and thus the EU.

Wales and its ports are intimately linked with Ireland. Holyhead, Fishguard, and Pembroke Dock are vital trading links between Wales and the Republic of Ireland. Holyhead is the UK’s second largest port. In excess of 400,000 trucks pass through it every year. A hard maritime border between Wales and the Republic of Ireland will inevitably hit Holyhead hard, and I ask Ministers to read the excellent article of 4 January by my former university lecturer, Professor Richard Wyn Jones, on this specific issue facing Holyhead and his native isle of Ynys Môn, or Anglesey. In Holyhead there is simply no space in or around the port for the kind of infrastructure that will be required to process the number of lorries and trailers that currently pass through it. A hard border in Holyhead can yield only chaos. The same problems apply to Pembroke Dock and Fishguard.

The inevitable consequence of physical constraints in and around the ports is that freight will need to find ways to bypass Holyhead and Wales, especially if there is a soft border between the British state and the European Union in Northern Ireland. Without trade arrangements that mirror the outcomes of what we already have, Welsh ports will be in danger of becoming uncompetitive. With the intention of pulling us out of the customs union, the Bill and the actions of the Minister make it clear to the people of Holyhead that the Government consider their livelihoods to be dispensable.

Finally, I would like to highlight the concerns of an industry central to and symbolic of the Welsh economy—the steel sector. Primarily its concerns centre on trade defence provisions. These are found in clauses 13 and 14 and schedules 4 and 5. I am sure the Minister will have seen last week’s letter in the Financial Times from almost a dozen industry and union representatives highlighting the fact that these clauses

“set up a lighter-touch approach to illegal dumping by China and others than in the remaining EU and any other major economy.”

In the lead-up to the referendum, the exact opposite was promised by the leave side. In an ITV Cymru debate I took part in, Mr Nathan Gill from UKIP, speaking on behalf of the leave side, promised that a British Government freed from the shackles of Brussels would be able to impose prohibitive anti-dumping duties on China. I am sure that that clear promise influenced votes in some communities in south Wales. When he uttered those words, we know the British Government were selling the Welsh steel sector down the river. In March 2016, the British Government blocked attempts to strengthen EU trade defences against imports of cheap Chinese steel that devastated Port Talbot steelworks and took it to the brink of collapse—as we heard from the hon. Member for Aberavon (Stephen Kinnock) earlier. Yet again, it seems that the Government have little concern for steelworkers, preferring to seek dodgy deals with Trump’s America and cosying up to Beijing to protecting Welsh jobs and wages.

Fundamentally, the Bill would be wholly unnecessary, and its deficiencies of no concern, if the policy of the British Government followed the sensible path of remaining a member of the European customs union. For this reason and other reasons I have outlined, my Plaid Cymru colleagues and I will refuse to give the Bill a Second Reading and will vote against it tonight.

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

Kirsty Blackman Excerpts

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

[Mel Stride]

Clause 3 does two important things: first, it establishes an obligation to declare goods that are imported into the United Kingdom; and, secondly, it introduces the concept of declaring goods for a specific customs procedure. Those are the basic building blocks of the UK’s new import duty regime.

The need to declare goods for a customs procedure is fundamental to any import duty regime. The procedure for which goods are declared determines when liability to import duty arises. The clause goes on to introduce another fundamental part of a customs regime—the customs procedures for which chargeable goods may be declared.

The purpose of importing goods may be to make them available for use in the UK, in which case they can be declared for a procedure known as free circulation, at which point they incur a charge to import duty. However, it is not always the intention to make goods freely available when they are imported into the United Kingdom. Goods are often brought to the UK for different reasons, such as to put them into customs warehouses for the time being, or to transport them through the UK on the way to another destination outside the country. In situations such as those, a business may declare the goods for a special customs procedure.

Special procedures either defer when a liability to import duty is incurred, or reduce the rate of import duty applicable to goods, provided of course the relevant conditions have been satisfied. Without those procedures, a business would have no option but to declare imported goods for the free circulation procedure and incur any import duty up front.

UK businesses currently rely extensively on special procedures, which together provide reliefs worth hundreds of millions of pounds each month. The provision made by the clause is supplemented by the detailed rules set out in schedules 1 and 2, to which I shall now turn.

Schedule 1 sets out the obligations to present and declare goods to customs on import. Many of the matters covered are of an administrative nature, such as the information that a declaration must contain or the time limits for when it must be made. I am sure that the Committee would not wish me to explain all those matters in detail, but I should highlight one important matter in which I think the Committee will be interested.

Paragraph 3 of the schedule enables Her Majesty’s Revenue and Customs to specify when goods must be declared before they are imported into the UK. That is an important point. Steps might be needed to reduce the risk of disrupting the flow of traffic at locations where goods need to be cleared quickly through customs. An obvious case in point is a port such as Dover, where significant amounts of goods arrive on roll-on roll-off ferries. It would clearly be of great help, in a situation such as that, to require the goods in question to be declared before their arrival at the port. That situation is therefore addressed by the schedule.

Schedule 2 deals with special customs procedures. There are five in all, namely: storage, transit, inward processing, authorised use and temporary admission. I will briefly describe their purpose.

A storage procedure allows imported goods to be stored without incurring liability to import duty. The goods must be kept in an approved facility, such as a customs warehouse or a free zone. There are currently no free zones in the UK, but should an area be so designated, provision may be made under the Bill for its operation.

A transit procedure allows goods to move between two places in the UK without incurring import duty. For example, goods from another country can pass through the UK en route to another destination, or goods within the UK can move from a customs warehouse to a port for re-export without needing to be declared for free circulation.

An inward processing procedure allows goods to be imported into the UK with the purpose of undergoing a qualifying processing activity without incurring a charge to import duty at that point. Once the procedure is discharged, goods may be exported without any import duty being due. Alternatively, a business may decide to declare the processed goods for free circulation in the UK and incur duty at that point.

An authorised use procedure is designed to assist certain industries by allowing a zero or reduced rate of import duty to apply to goods brought to the UK for a specific use. Finally, a temporary admission procedure allows for a relief from import duty for goods that enter the UK temporarily and for a particular reason. For example, that procedure applies when artworks situated overseas are brought to the UK on loan for display in a public gallery.

Taken together, the special procedures I have outlined exist to support trade fluidity and facilitate the movement of goods into the UK. Provision made by and under schedule 2 will allow HMRC to operate these special procedures. The obligation to declare imported goods is essential to an effective customs regime, and an effective customs regime must include special procedures that offer businesses in the UK the simplifications and reliefs that they rely on.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to serve on the Committee, and to take part in the scrutiny of this important piece of legislation.

The Minister is right to talk about the administrative nature of the clause and its associated schedules. It appears to be the Government’s position that the UK will choose to leave the customs union. We are not yet clear whether they will pursue another form of customs union with the EU, but if they do not, or if they do not manage to get a customs union with the EU, it is likely that significantly more customs declarations will be required because we will not have those coming from the EU.

My concern about the clause arises from Tuesday’s oral evidence sessions, and it would be useful for the Minister to provide an update on that. Various organisations expressed concerns about the resourcing of HMRC and Border Force. Border Force is the first line for many imports, ensuring that customs declarations are made appropriately and that all appropriate processes are followed.

On HMRC, the concern was that no customs officers will be based north of Glasgow or Edinburgh. If goods are coming in to places such as Inverness, it is a three-hour drive for people to get there and look at those goods. What assessment has the Minister made of the extra resourcing that HMRC will need to fulfil the obligations in the clause and the schedules? Reasonable concerns have been expressed by businesses and organisations.

[Mel Stride]

I welcome the hon. Lady to the Committee and thank her for that initial contribution.

In terms of where the final deal with the European Union lands, whether we have a form of customs union with the remaining 27 members is subject to negotiation. The Government have made it clear that we wish the end point to be the facilitation of trade between ourselves and the remaining 27 members of the customs union. The Bill provides for that end point to be as close as possible to the existing rules and regulations around the Union customs code; that is very much what the Bill seeks to achieve. At the same time, the Bill retains the flexibility to ensure that we can put into effect the necessary and appropriate measures no matter where the deal lands—or, indeed, if there were to be no deal at all with the European Union, as we certainly do not expect.

The hon. Lady raised the important issue of HMRC resourcing. As we move towards our day one scenario—whatever that may finally look like—I assure her that the Government are vigorously engaged not just with issues around HMRC’s human resource requirements, but with other infrastructure requirements, whether for hard infrastructure or information technology systems such as the Customs Declaration Service, which will be important.

To address her particular issue, the head of HMRC has made it clear that his feeling is that we will need between 3,000 and 5,000 additional staff across HMRC to ensure that we cover off, wherever the day one deal lands. For an organisation of well in excess of 50,000 personnel, such an increment in staffing, particularly given that some will be reallocated rather than entirely new recruits, is perfectly manageable.

--- Later in debate ---

[Mel Stride]

I welcome the hon. Gentleman to the Committee. He reiterates the point that the hon. Lady just made, so I will spare the Committee a repeat of every element of my answer. However, specifically with relation to the points made in the evidence session by Mr Runswick, the trade unions have been resistant to the changes to HMRC wholesale, right across the piece. Therefore, when it comes to arguments about whether HMRC can be effective in clamping down on avoidance, evasion and non-compliance, bringing in tax yield and so on, the argument has been run that we need a number of offices in multiple locations to do that.

The critical answer is that the very nature of running an efficient tax system and customs regime needs technology, the right skills and the right people. That lends itself to having a concentration of such individuals in hubs, where skills and IT can be developed and brought in to be effective. Without repeating my answer to the hon. Gentleman’s hon. Friend, the Government and HMRC are clear that the configurations of the new hubs will lend themselves to appropriately support the new customs regime.

[Kirsty Blackman]

Other than the resourcing, which the Minister has fully addressed, I am concerned about the geographical issue. We do not want people to be a number of hours’ drive from the customs officials. Can the Minister give us some comfort that even though there might not be hubs in the area, there will be customs officers based closely and able to respond on a 24-hour basis?

[Mel Stride]

I can certainly assure the hon. Lady that the situation as it will pertain when we move to the new hubs—we are making some assumptions about what exactly the end point of the negotiations will be—will be sufficient to make sure we have a customs regime that works, that is low friction, and keeps trade moving and raises revenues on the duties that we may or may not apply.

--- Later in debate ---

[Kirsty Blackman]

I beg to move amendment 104, in clause 8, page 5, line 27, after “other”, insert “relevant”.

This amendment requires the Government to classify goods in regulations giving effect to the customs tariff only in relation to relevant factors.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 105, in clause 8, page 5, line 38, after first “the”, insert “number”.

This amendment clarifies that goods may be defined for the purposes of the import tariff simply by reference to their number.

Amendment 118, in clause 39, page 27, line 5, after second “to”, insert “number”.

This amendment clarifies that goods may be defined for the purposes of the export tariff simply by reference to their number.

[Kirsty Blackman]

I mentioned during Second Reading that the Law Society of Scotland had produced a paper on the Bill, and I offered to provide the Minister with a copy. If he does not yet have one, I am still happy to do that. The paper explains more fully the rationale behind these three amendments.

The amendments are not necessarily about changing the tack of the Bill; they are about making better law and ensuring that the law is clearer. I will quote a short extract from the paper submitted by the Law Society of Scotland. It states that,

“the power under clause 8(1)(a) to classify goods ‘according to their nature, origin or any other factor’ is a very broad one. At the very least, this should be limited to ‘any other relevant factor’ but it would be preferable to limit the scope of this provision by giving an indication of the types of factor which might be appropriate in this context.”

So, in our amendment, we have taken up the “very least” option suggested by the Law Society of Scotland. It seems a bit extreme for the Minister to be able to make changes or decisions on “any” factors, some of which may not be relevant. Adding the word “relevant” would ensure that, under the clause, the Minister was stuck to making changes or decisions in relation to relevant factors. It is simply a small technical change that would tighten up the way the law is written.

Similarly, amendments 105 and 118 are very small technical changes that the Law Society of Scotland suggests would be preferable or useful additions to the clause. It suggests that clause 8(3)(b) say, “the number, weight or volume of the goods or any other measure of their quantity or size.” Again, the aim is just to tighten up the language and ensure that the laws that we are starting off with in this wonderful Brexit Britain are as good and clear as possible and can be interpreted, if they need to be—by a court, for example—in the best possible way. As I said, they are very small technical changes, and I would appreciate it if the Minister would consider them.

[Mel Stride]

Clause 8 requires the Treasury to establish and maintain a customs tariff. The rates of duties set under this clause will apply to goods from every country, unless varied by another clause. It enables the implementation of a range of tariff options, so that the UK can respond to changes in the global trading environment, both now and in the future.

The UK currently applies duty to imports to the UK under the Union customs code. The standard duty rates of the UK, as a member of the EU, are contained in the common external tariff. When we leave the EU, this Bill will require the Treasury to establish and maintain a customs tariff that will, among other things, specify the rate of import duty applicable to goods. The UK is working with the WTO to establish the UK’s bound tariff schedule. That schedule sets the maximum rate of import duty that a country may apply to imports. The UK can then choose what rate to apply, provided it is at or below the bound rate. Import duty rates specified under this clause must be consistent with those international obligations.

Clause 8 sets out what must be contained in the customs—

[Mel Stride]

I am sorry, Ms Buck. I assumed that we were also debating that clause 8 stand part. My apologies. I will turn specifically to the amendments tabled by the hon. Member for Aberdeen North. Although she may see them as clarifying matters, the Government’s view is that they are additional and unnecessary amendments to areas where no further clarification is required.

[Kirsty Blackman]

Just to be clear, it is not just me who sees them as necessary in terms of clarification; it is the Law Society of Scotland, which, I assume, knows quite a lot about the law, and therefore feels that these are appropriate changes that would be helpful in terms of the actual law.

[Mel Stride]

I thank the hon. Lady for that intervention and I fully appreciate that she is taking up recommendations made by the Law Society of Scotland, but let me comment on the two fundamental points she has raised.

First, relating to the relevance—that relevant considerations should be taken into account. The relevance of having the word “relevant” in there, prompts the question whether anybody would ever take decisions based on things that were entirely irrelevant, or at least not relevant. If one went down the road suggested by the hon. Lady, the word “relevant” would probably be inserted in multiple places throughout all the legislation that we ever pass in this House. It is understood that rational Ministers and others would take relevant decisions, rather than irrelevant decisions.

Secondly, before I go too far down this tongue-twisting route—

--- Later in debate ---

[Mel Stride]

I am not a legal expert. I obviously appreciate that different words have different meanings in different legal contexts, but from the Government’s point of view, we are satisfied that there is not a requirement to have the word “relevant” inserted. That would be superfluous—to throw in another term—as would be the insertion of the word “number”, for reasons I have given to the hon. Member for Aberdeen North, because it would not affect the functioning or meaning of that clause.

[Kirsty Blackman]

I am not going to press the Minister on the word “number”, but on the word “relevant”, I think the Minister dug a hole when he was talking about “rational” Chancellors or Ministers in the Treasury. We are looking at ensuring that this regulation is future-proof, ensuring that if a Minister is not as reasonable as the one standing here, we can ensure that they are held to making relevant regulation. The clause states:

“The Treasury must make regulations establishing, and maintaining in force, a system which…classifies goods according to their nature, origin or any other factor”.

The Government are asking for this House to give them a significant level of delegated authority. They are asking for us to trust the Government, or any future Government that come after, in relation to making these regulations. In this case they are asking us to trust the Treasury. I think the Government can understand why there may be a lack of trust at the moment, given that we have been promised things that have not been followed through on. It would not be too much to ask to insert the word “relevant” into that clause, so that in future, if we do not have as rational a Minister as this one, we can ensure that they have to make the regulations on the classification of goods on relevant factors, rather than on ones that may be irrelevant.

[Mel Stride]

I reiterate that the Government are not in the business of taking irrelevant factors into account when they make decisions. I give that assurance equally in respect of the Opposition and other parties when they are or have been in government.

The hon. Lady also raises the issue of delegated legislation. At the introduction of the tariff, delegated legislation will be in the form of an affirmative statutory instrument that will be fully considered by a Committee, passed or otherwise by it and agreed to or otherwise by the House. A higher level of delegated legislative scrutiny will also apply to every occasion on which a duty is increased, as opposed to decreased. There is provision in the Bill for a higher level of scrutiny for the introduction of the tariff and for elements of its operation thereafter.

[Kirsty Blackman]

I thank the Minister. I would like to press amendment 104, but not the other two in the group.

Question put, That the amendment be made.

--- Later in debate ---

[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.

[Nic Dakin]

In opening the debate, the Minister helpfully said that the intention was to introduce things in a way that did not disrupt things that were currently going on. The advantage of amendment 1 is that it would help to bring that about by adding in “the interests of manufacturers” as part of the test. It would give confidence to manufacturing areas.

I speak as somebody who represents a steel town. The confidence of manufacturers and the people who work there, who are also significant consumers in the local economy, is important because those manufacturing sectors desperately need investment in capital and in new ways of working to remain competitive in a competitive world.

The Minister and the Government would do well to consider that, because it would assist in delivering continuity—the outcome that the Minister set out at the beginning—and the confidence necessary for the investment we need. We cannot delay investment, although that might happen, because that would mean delayed opportunity. One of the Government’s overriding responsibilities is to put confidence into the system so that the risks of leaving the European Union are diminished and the opportunities are enhanced.

--- Later in debate ---

[Mel Stride]

We have had a wide-ranging debate on this group of amendments, much of which covers matters that we will come to later in the Bill. I will focus my remarks on the details of the amendments and the clause.

The hon. Member for Scunthorpe rightly pointed out that I said earlier that the Government’s intention was to ensure that we had a minimum of change in the regime, for the obvious reason of providing familiarity and certainty to businesses. That is an important point and it is why clause 8(5) takes precedent from the Treaty on the Functioning of the European Union. It is very much grounded in where we currently are, as opposed to venturing out to pastures new, some of which would be unfortunate or inappropriate, or so the Opposition would have us believe.

The hon. Member for Oxford East mentioned authorised economic operators, which we will come to in clause 22, to make the general point that a number of things do not appear in the Bill, such as our habitats and various other things in existing EU legislation. On AEOs, the Bill introduces powers in clause 22 that will allow us to address exactly those elements when HMRC and the Treasury come to lay regulations as to, for example, what qualifications there might be to become registered as a certified AEO. Those kinds of issues can be picked up at that time and scrutinised further by the House.

The meat of clause 8 is in subsection (5), which states:

“In considering the rate of import duty that ought to apply to any goods in a standard case, the Treasury must have regard to…(a) the interests of consumers in the United Kingdom”

and

“(b) the desirability of maintaining and promoting the external trade of the United Kingdom”.

It is hard to see how that would not have to take into account the manufacturing element and the health of the manufacturing sector. Subsection (5)(c) states that the Treasury must have regard to

“the desirability of maintaining and promoting productivity in the United Kingdom,”

It is very difficult to see how the manufacturing sector, which represents around 10% of the UK economy, could be entirely ignored or in any sense neglected. Subsection (5)(d) states that the Treasury must have regard to

“the extent to which the goods concerned are subject to competition.”

I suggest that manufacturing would be core to any decisions on the setting of duties made in that context.

Subsection (6) states:

“In considering the rate of import duty that ought to apply to any goods in a standard case, the Treasury must also have regard to any recommendation about the rate made to them by the Secretary of State.”

As the Committee will know, the term “Secretary of State” refers to any Secretary of State in any Department, so on concerns relating to sustainable development, the relevant Department—

[Kirsty Blackman]

Actually, subsection (7) goes on to say that the Secretary of State

“must have regard to the matters set out in subsection (5)(a) to (d)”,

and not to other factors such as sustainable development.

[Mel Stride]

The hon. Lady has pre-empted my next point. Although subsection (7) does say that, it does not say that the Secretary of State cannot have regard to any other matter—it does not exclude. It would be strange if a Secretary of State was told that they had to have regard to those four aspects when considering an issue and they took that to mean that they could not consider any other aspect. I draw the Committee’s attention to that aspect of the Bill.

On the specific case of sustainable development, we will debate and scrutinise the provisions in the Bill that accommodate setting up our unilateral trade preferences, which are extremely important in the context of sustainable development. On those grounds, I urge the Committee to reject the amendments.

[Kirsty Blackman]

Specifically on what the Minister has said, it is clear from various evidence we have received that the Government have not chosen simply to replicate things such as the Union customs code. In some places they have chosen to replicate it, but in others they have chosen not to. The concern is that the Government’s judgment has not been great in choosing which parts to replicate and which parts not to replicate. The measure has clearly been drafted in a hurry. From the Minister’s argument in relation to what the Secretary of State would have regard to, it is clear that this section of the legislation has not been particularly well thought through.

Opposition Members are not asking for unreasonable things. Having regard to sustainable development is completely reasonable. If the Minister is clear that that will be looked at anyway, or if the Secretary of State decides to get involved in any decision, it does not cost anything to add that into the Bill. If the Minister is clear that the Government will consider the interests of manufacturers because they are integral, it does not cost anything to add that into the Bill. It would be useful and helpful to businesses and would be a nice sign of confidence in businesses. It would be great for the Government to not just talk about increasing productivity, but to say to manufacturers, “We will support you and ensure that your interests are protected.” If the Minister is clear that such things are going to happen anyway, it would not cost the Government anything and they would lose nothing, but it would ensure that people feel more positively about the Bill.

[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.

--- Later in debate ---

[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.

[Mel Stride]

Amendment 2 would require the Treasury to consider recommendations made by a relevant Select Committee or a resolution of the House of Commons when considering the rate of import duty that ought to apply in the standard case.

The Treasury will listen closely to recommendations from a range of interested parties, including relevant Select Committees and, of course, Members of the House. In addition, Select Committees already have the power to question Ministers on policy within their departmental remit, and the Treasury will answer any questions from relevant Select Committees. Therefore, the Government believe that it is not necessary to include that in the Bill.

Amendment 3 would place the same obligation on the Treasury when considering what provisions to include in regulations related to quotas, such as determining the rate of import duty applicable to goods that are subject to quotas, and amendment 4 would introduce that requirement when making regulations concerning tariff suspensions. For the same reasons that I set out in relation to amendment 2, the Government do not believe that it is necessary to include such provisions in the Bill.

I have one final point in response to the point made by the hon. Member for Aberdeen North about scrutiny and needing provisions in the Bill. This Bill will, of course, have Report stage, which will be an opportunity for scrutiny by a far wider group than a Committee on which the Government might typically have a majority of one. Every Member of the House will have an opportunity to participate in that debate and consideration of further amendments.

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

Kirsty Blackman Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 30th January 2018 Public Bill Committees

[Jonathan Reynolds]

Good morning, Ms Buck. It is a pleasure to begin the second week of our Committee’s consideration of the Bill.

The amendments, like many that the Opposition have tabled, concern the democratic deficit in the Bill. As we have covered in numerous evidence sessions and in our discussions so far, the Bill is far too reliant on secondary legislation. The scrutiny of Delegated Legislation Committees—especially those that consider instruments laid according to the negative procedure, as the majority will be—is insufficient for taxation matters of such potential magnitude. Parliament will have the option to raise objections to the instruments, but they will not be debated on the Floor of the House as a matter of course.

The amendments are important because the Bill introduces an even more troubling concept: that of making law by public notice. After Second Reading earlier this month, the House of Lords Delegated Powers and Regulatory Reform Committee published a report that probed the most worrying aspects in detail. The report emphasises that the concept of public notice, on which the Bill is heavily reliant, is effectively a modern form of rule by proclamation that removes the opportunity for parliamentary scrutiny. It states:

“For Ministers and others to make law by ‘public notice’, without any recourse to Parliament, is highly unusual and such provisions should attract strict surveillance by Parliament.”

It also notes that

“the Treasury’s Delegated Powers Memorandum says that such notices will only make provision that is purely technical or administrative in nature. Nonetheless, clause 32(9) of the Bill allows anything that can be done under public notice to be done by regulations, implicitly acknowledging the importance of things done by public notice.”

It identifies the Bill as a throwback to the Statute of Proclamations 1539, which

“gave proclamations the force of statute law…it was repealed in 1547 after the death of Henry VIII”.

We should all be grateful for the institutional memory of the House of Lords.

Equally problematic are the mechanics by which public notice takes place. As the Delegated Powers and Regulatory Reform Committee emphasises, under clause 37(5) the only qualification for public notice is that the person who issues it has selected a channel that they consider appropriate, but a definition of “appropriate” is absent from the Bill. Public notice could therefore mean anything from a full-page advert in the Financial Times to a small ad in a trade journal or perhaps even a tweet. Clause 24 permits Her Majesty’s Revenue and Customs to establish a system for making rulings to determine the customs code and the place of origin of particular goods, both of which have an impact on the duty. Other rulings could affect the rights and liabilities of an individual.

The Delegated Powers and Regulatory Reform Committee recommends

“the creation of a generally applicable system for making determinations which are capable of affecting an individual’s legal position should ordinarily be dealt with by legislation, subject to scrutiny by Parliament, rather than by public notice without any such scrutiny”—

checks and balances. The Opposition agree wholeheartedly —hence our amendments.

The Government’s manoeuvres are deeply concerning. We would be failing in our duty of scrutiny if we did not step in to raise our anxieties about how powers of proclamation may be used. We are well aware of the volume of new legislation that needs to be produced to create and implement a new customs code, and of the temptation to create or take advantage of constitutional shortcuts to facilitate the process. However, protecting the rights of the individual must come first. Where matters of taxation are concerned, the parliamentary process is usually more rigorous with respect to the reasons for setting the duty.

As I have already said, the secondary legislation process is not optimal, and we believe that the balance between primary and secondary legislation in the Bill is unsound. However, using delegated legislation for these matters instead of creating regulations by public notice would surely be the least-worst option. It would allow for a bare minimum of parliamentary involvement and oversight of new tax and customs law. Even the negative procedure gives Parliament the option to reject a statutory instrument, although no formal debate takes place. Where possible, more significant matters should surely be considered via the affirmative procedure, so that at least there would be the basis for debate.

The Opposition believe that, without such debate, we will be at risk of setting a dangerous precedent that allows the ruling Executive to make regulation by public notice as it pleases, potentially even beyond the scope of the Bill. Therefore I call upon all members of the Committee to support the amendment, to ensure that we can continue to perform our vital role providing checks and balances in the structure of taxation and customs law in the UK.

[Kirsty Blackman (Aberdeen North) (SNP)]

Thank you for the opportunity to speak and for chairing the meeting, Ms Buck. I would like to speak briefly around the amendments. One of my earliest questions about the Bill was: what is a public notice and how does one justify that it has been made sufficiently public? The Opposition raised that case clearly. On the definition of public notice and the fact that the person making the public notice has to make that judgment call, particularly in relation to clause 13, which concerns the dumping of goods, foreign subsidies and increases in imports, and given that the UK has not had provision to make regulations and rules, it seems sensible to say that a public notice is not the best way. Parliament should have some say. We have raised concerns previously that, although Brexit is apparently about taking back control, it appears that control is being taken back to the Executive rather than to Parliament as a whole. I will therefore support amendments 137 to 139 if they are pushed to a vote.

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

It is a great pleasure to serve under your chairmanship again, Ms Buck, and to welcome back the hon. Member for Stalybridge and Hyde. This group of amendments would require trade remedies measures to be imposed and given legal effect by regulations. I appreciate the concerns in relation to the use of public notices, which were raised by both Her Majesty’s Opposition and the Scottish nationalist party representative. I am grateful for the opportunity to set out why this is an entirely appropriate procedure for imposing trade remedies measures.

If you were cynical, Ms Buck, you might think that, because the Opposition have decided to make parliamentary scrutiny the central theme of their critique of the Bill, they are leveraging that into every single argument at every single stage. I am not a cynic, and take the concerns at face value, as the genuine ones that I am sure they are.

The imperative is to act quickly once the Trade Remedies Authority has identified the need to tackle injury to UK industry. I would have hoped that Members on both sides of the Committee would recognise that the imperative is to act quickly when injury to UK producers has been identified, and to move as swiftly as possible to put that right. Measures will be calculated and recommended by a fully expert and independent body, following an extensive investigation that is governed by strict World Trade Organisation rules. Our priority has to be to ensure that those recommended measures are imposed quickly, to provide relief to industries suffering injury.

The additional proposed process would delay our ability to apply measures precisely at a time when UK industry is suffering injury, and when it has been independently established that that is so. It would run counter to the calls we have heard from industry for a swift process. The use of public notices to implement trade remedies measures is consistent with the approach taken in comparable WTO countries such as New Zealand and Australia, and is therefore in line with international good practice.

Therefore I say to the hon. Member for Stalybridge and Hyde that, to suggest that this use of public notice is untoward and could lead to further government by proclamation, even outwith the Bill, is disproportionate. The reality is that this set of amendments, as with so many put forward by the Opposition, would in fact undermine the very principles that they say they are interested in: namely, to protect UK industry to ensure that we have a proportionate and speedy response to unfair dumping or use of subsidy and make sure that injury to British industry is put right. It is a shame that, collectively, the Opposition’s amendments suggest that their priorities are somewhere else.

[Graham Stuart]

The hon. Gentleman has been in the House for some time. I would have thought he would be familiar with the calendar of the parliamentary year, with long periods of recess when Parliament does not sit. Why on earth would Her Majesty’s Opposition, so often accused, doubtlessly unfairly, of being in hock to the producer interest and blind to wider society and the interests of the consumer and the ordinary citizen—though I decry that attitude—because of their links to the trade union movement, wish to put delays in place?

The hon. Gentleman knows full well the delays that can come with secondary legislation. To have that at the end of that extensive, independent and exhaustive expert assessment that has established injury, why on earth would the Labour party, or indeed the Scottish nationalist party, want to get in the way of swift, effective and proper defence of British jobs, British workers and British business?

[Kirsty Blackman]

I am pleased that the Government are now concerned with ensuring that such things are put in place incredibly quickly if there is injury to UK industry. In that case, will the Government bring forward amendments to speed up other parts of the process, given that they will now be taking longer than the EU’s similar processes?

[Graham Stuart]

I apologise for getting the name of the hon. Lady’s party wrong—it is the Scottish National party. We have put forward a proportionate and swift system, and hope that we would be able to deliver a speedier, more proportionate and balanced response than that of the EU. That is certainly our aim. I note again that amendments tabled by the hon. Lady’s party and Her Majesty’s Opposition suggest that their priority is entirely different.

--- Later in debate ---

[Peter Dowd (Bootle) (Lab)]

It is lovely to serve under your chairmanship again today, Ms Buck. The Minister has clearly had three or four Weetabix today, given his assertions. I say to him: legislate in haste and repent in court at leisure—for these are the sort of things that will be challenged in the courts. Unless the judges in those courts are going to be enemies of the people, we are best to get it right first-hand. Lord Judge made that very point today, and he was formerly Lord Chief Justice; so we cannot ignore parliamentary scrutiny on this particular issue.

New clause 5 establishes a system of enhanced parliamentary regulations for setting quotas under clause 13 to give effect to recommendations of the TRA, with a requirement for the House to pass an amendable resolution authorising the quota provisions of the proposed regulations. It also requires that certain regulations under schedules 4 and 5 be subject to the affirmative procedure.

I have made this point in the past and make it again. The new clause seeks to introduce a scrutiny role for Parliament in this crucial area of taxation and trade policy. The current provision in clause 13 gives the Secretary of State powers through regulation to introduce a tariff rate quota to determine the amount of import duty applicable to certain imported goods, after he has accepted a recommendation from the Trade Remedies Authority. It also gives the Secretary of State the power to revoke or suspend the tariff rate quota.

New clause 5 would instead ensure a democratic and open process, by making sure that Parliament has that power—not just the Secretary of State. The enhanced parliamentary procedure also ensures that there is a failsafe in the event that the Trade Remedies Authority makes a recommendation for the suspension of a quota and the Secretary of State refuses. In that instance Parliament has the ability to overrule the Secretary of State and side with the expert recommendation of the Trade Remedies Authority if it so decides.

I am sure that hon. Members of the Committee are hearing echoes from last week in relation to the issue of parliamentary scrutiny. We have heard about it today, and that is our job on this side of the Committee. I am not sure whether the Minister thinks we should not do that, but we will continue to do it. We are concerned that if we do not have parliamentary scrutiny and oversight and the expertise that comes with that, we will end up in the courts. The Minister’s wish that things do not get delayed will be thrown out of the window by the approach that the Government seem to be taking.

Suffice to say that, if the Government are arguing that this is a money Bill, which it is, and it goes to the House of Lords— who will probably have to watch it go past as though it was a bus—they are tacitly accepting that the measures contained here are essentially fiscal. It is therefore appropriate that statements made to the House of any regulatory changes in relation to fiscal matters are Parliament’s responsibility and duty, as they have been for centuries, and we believe that there should be a vote if appropriate. The system outlined would provide a very robust means of doing that. I know that virtually every Minister, not just this Minister, would not want to have that level of scrutiny, but it comes with the job; scrutiny has to be there. Of course, an annual fiscal statement, such as that expected in the spring, with subsequent parliamentary authority could also prove a mechanism for us to test it out.

I hope that Conservative Members will not take a blasé approach and brush aside the issue of parliamentary democracy on the grounds that the Opposition somehow want to drag the matter out in the future. We do not; we want to make sure that this works properly. We all accept that we have to have a process in place, but let us get it right and hold Ministers to account.

[Kirsty Blackman]

The Government have asked for an awful lot of trust. They are asking us to trust them to make the right decision. Given that they do not have a track record of making such decisions over a very long number of years, it is very difficult for us to trust the Government on that. There is also the fact that the Government said that they would table amendments to clause 11 of the European Union (Withdrawal) Bill, and then they did not.

I do not think that the Conservative Government have quite recognised what they are doing with all their decisions to hold power in the Executive over any number of things. When the Conservatives are inevitably no longer in government there will be another Government in place, and they will be in opposition saying, “Why are so many decisions being made by the Executive without parliamentary scrutiny?”

The UK is at a point where we are choosing how our future looks in relation to Brexit. We are choosing how things will go in this Parliament, and into the future. We are choosing how much say we will have over trade policy, so it is vital how we decide to go about this. The way that the Government are setting this up is absolutely wrong. There should be parliamentary scrutiny of such things, and democratically elected Members should have the opportunity to look at them, to have an input and not just have them done by public notice.

[Graham Stuart]

The Opposition parties protest too much. As we all know, the point of a trade remedies system is to be balanced, proportionate and move swiftly to protect British industry. That is why we are setting up, through the Trade Bill, the specialist body to do that: the Trade Remedies Authority. We are talking about the implementation of the Trade Remedies Authority’s recommendations. Why on earth, after that exhaustive effort, with the appropriate, balanced tests in place, would anyone want to create burdensome, parliamentary oversight? It does not make any sense.

The TRA makes the decision. If the Secretary of State disagrees with it, they will have to come to Parliament and make a statement, so there will be the opportunity to deal with that. When the TRA has made an assessment and wants to help British industry, why on earth would the Opposition parties want to make a wider political point about lack of scrutiny, just for the sake of it, when it is totally inappropriate for this measure? I leave outsiders to judge whether that is for political interests or for the interests of either British consumers or producers.

[Kirsty Blackman]

If the Trade Remedies Authority will be so good at making decisions, why will the Government simply have to make a written statement to the House if they disagree with it, rather than go through some kind of regulation procedure? If the Trade Remedies Authority is set up in such a great way that it will always make the best decisions, why will the Minister be allowed to disagree with it simply by written statement, and not by any sort of parliamentary procedure?

[Graham Stuart]

The legislation makes it clear that the Secretary of State should look at it, and various people who have commented on the structure have said that it is right that, although the main body of work should be conducted by experts, ultimately it should be a politician accountable to Parliament, part of a democratic process, who should make that decision. Were they in any way to disagree, they would have to come to Parliament to make a statement. That is appropriate and proportionate, and why on earth the Opposition parties would want to go to such lengths to try to stop us bringing in effective remedy to protect British producers, I cannot imagine.

--- Later in debate ---

[Anneliese Dodds]

We tabled the amendments because the proposed market share requirements will not only put us out of step with comparable nations but stop action being taken to prevent uncompetitive disruption of infant industries. According to the Government’s proposals, applications to the TRA for an investigation will be subject to a UK market share threshold. As with so much in the Bill—as we have been discussing—we do not know how the threshold will be determined nor what its range is likely to be, let alone the actual value for different industrial sectors. The Government have given as their explanation for the measure the filtering out of cases with little chance of success. Yet, as already discussed in Committee, the Government have already set out a range of tests that must be passed before any action can be taken—tests that are already more stringent than is the case under EU legislation, and considerably stronger than those that the EU is moving towards.

I normally agree fully with every word that is uttered by my hon. Friend the Member for Scunthorpe, but I did not completely agree when he said that he was pleased to hear the Government saying, or hinting at least, that we would have a system at least as favourable to British industry as the existing one. With the different tests to do with economic interest or public interest, whether those applied by the TRA or the Secretary of State, that regime is far more stringent than that applied by the EU.

In addition, I am concerned that the measure proposed in the Bill could cause a lot of ambiguity and be problematic for the TRA. We are informed that the TRA must accept an application that meets the UK market share threshold, although of course both it and the Secretary of State can then decide not to proceed as a result of their overly stringent tests once they get into the investigation—but let us leave that aside. If an application does not meet the UK threshold but does meet WTO thresholds, the TRA may use its discretion as to whether to accept it. However, we can legitimately ask why the TRA should be put in a potentially difficult position, especially when legal action could be levelled against it by the company that is deemed to have engaged in dumping precisely because the TRA has used that discretion.

In addition, I do not understand why the UK has decided to adopt an apparently higher threshold of market share before applications may be accepted when, according to the stakeholders I have talked to, no other country seems to have adopted that approach. This is not about criteria within the investigation: it is about the criteria necessary before an investigation is allowed at all. As with the unique electoral system that led to the hanging chad problem in the US, there is a clear reason why this approach is so unique: it is not workable. The Minister rightly referred to learning from best practice, so it would be helpful for us to know which countries have that test in place before an investigation can be started and why it was believed that this is best practice. I have so far not been able to find any countries that operate such a system. If there are some, it would be wonderful to hear about them.

The Minister suggested in his previous remarks that, much of the time, all the Government are doing is simply transposing WTO requirements. However, the terms of the general agreement on tariffs and trade enable countries to take action, particularly to prevent uncompetitive disruption to infant industries. That could be prevented by this kind of test before an investigation can even be started. That process of uncompetitive disruption to infant industries is known as material retardation, which is quite a well-known concept when it comes to trade disputes and is interpreted quite broadly.

Rules within the Mercosur agreement—the South American trade agreement—state that countries can take measures, first, to ensure that infant industries can be established, but also that there can be, without uncompetitive disruption, the establishment of a new branch of production in an existing industry, the substantial transformation of an existing industry or the substantial expansion of an existing industry supplying a relatively small proportion of domestic demand. That is a very wide reading of what measures against material retardation can enable, and a broad reading of the concept of an infant industry as well. Those rules are already in action in the Mercosur agreement, so I hope the Minister will clearly explain why the UK should deny itself those kind of powers that other countries seem keen to avail themselves of.

I hope he will also indicate how he envisages that market share restriction working, which will be used even before investigations start. I read the “Trade Remedies Research” paper, produced by Van Bael & Bellis and Copenhagen Economics, which I am sure other Members have looked at as well. They looked in great detail at some of the methodological issues relating to the use of trade remedies and they indicated in detail the variety of considerations relevant to calculating market share that the EU has used once an investigation has opened—not as part of a test to determine the opening of an investigation but as part of determining the harm caused by dumping.

They indicated the potential drawbacks of, for example, setting a quantitative measure on the evolution of import volumes in relative terms—in comparison with domestic consumption—in order to determine how the market share of foreign exporters against UK industry has changed over time following dumped imports. That is because our market in the UK is small, and so domestic consumption can vary dramatically from year to year because the number of industry operators tends to be more concentrated.

There are some very difficult methodological issues here when it comes to calculations that might be involved in an investigation. We are talking about the TRA having to carry out calculations potentially with a similar level of methodological difficulty, even before an investigation is opened. Will the Minister indicate what kind of methodology he proposes to avoid those problems? Above all, will he please let us know why our country seems to be adopting this approach, which, as I say, I cannot find any analogue for in comparable nations?

[Kirsty Blackman]

I will say just a few things to follow on from the shadow Front Benchers on this. It is strange that market share is being used in this regard as something that will be taken into account. It is almost as if the TRA cannot be bothered to investigate a company if it does not have a certain market share. For that industry, and for manufacturers in particular, it does not matter what their percentage of market share is; what matters is the injury that is being done to them by dumping. Market share is not relevant, and I do not understand why it is included in the Bill. It may be relevant to the Treasury because it affects the tax take it gets from the industry, but it is not relevant to the protection we should be affording to the industry.

This proposal has geographical implications, given that these new goods will be made in the industrial north of the country. Those products may not meet the market share threshold, but they may be incredibly innovative and may improve productivity and make this country a better place to be. Those things will not be taken into account.

I have argued previously that if the fishing industry is decimated as a result of Brexit, that is a geographical issue for the affected communities. It does not have a massive implication for the Treasury’s tax take, but it does for those communities. I fear that this market share test is not only unnecessary, but has implications for the choices that communities make.

[Nic Dakin]

The communities that are the most vulnerable to that disadvantage are often those that voted most strongly to leave because of their fear that they are not getting a fair deal at the moment.

[Kirsty Blackman]

Absolutely, and conversely they are the ones that have been getting the most European funding, so the choice they thought they had to make because of the inequality and uneven economic growth in the United Kingdom will make them lose out in more than one way.

On the issue of new good and fledgling industries, we cannot predict what the world will look like in 20 years’ time. Who could have predicted the rise in the need for electric vehicle charging points, for example? If something suddenly becomes a thing, the effects cannot be predicted. For example, companies making paper straws in the UK are probably seeing their shares going through the roof. We cannot predict the market share of those companies and how quickly it will grow as a result of changes in the culture of the country. I do not think the market share test is appropriate. It is strange to have it in the Bill, and the Government need to rethink it.

[Graham Stuart]

I thank hon. Members for their contributions. I hope I can reassure them about the issues they raised. Perhaps there has been some misunderstanding, which I can clear up.

Amendment 32 and its consequential amendments 34 to 38 seek to eliminate a market share threshold that we have designed to make sure businesses have a transparent benchmark for judging whether their complaint is likely to be successful. On the question of why we have the threshold, an independent evaluation of the EU system suggested that the system should focus on producers’ market share as a way of informing inquiries.

I was also asked which other countries have the threshold. We understand that other countries consider whether cases are likely to result in measures at the point of applications, but they tend to use rather opaque systems. The market share threshold is intended to give industry greater certainty in a more transparent way about how the system will operate in this country. We are learning from experiences in other countries and are seeking to improve on them to the betterment of our system.

The provisions for the market share threshold fit with the industry’s calls for the TRA to focus on the cases that matter most. For instance, the British Ceramic Confederation said in its response to our White Paper that the TRA

“should not spend its time investigating vexatious complaints and needs to focus on cases where there is a real UK manufacturing interest.”

The market share threshold will be part of providing that.

--- Later in debate ---

[Graham Stuart]

I thank the hon. Lady for that comprehensive intervention. As I said in reply to the hon. Member for Bootle, our aim is to make improvements. We want a better system that provides greater certainty for UK industry, and one that makes the TRA focus, as the industry has requested, on the cases of greatest import, not an opaque system as in other countries. The TRA may quickly respond to someone with a de minimis market share who comes forward with no real case and tell them that they have no chance, but what we are doing is creating a system that is much easier to understand and more transparent.

I hope the secondary legislation we implement will include other world firsts, too. So long as what we do is based on a proportionate, balanced approach that is fully compliant with the WTO and better tailored to the needs of British industry, I shall be proud to see us innovate. I am not afraid to innovate if it is in the interests of British industry and a better system. We should aspire to doing that.

[Kirsty Blackman]

The Minister argues that, in the case of a producer with a small market share in the UK, there may be a disproportionate effect on UK consumers. Given that an economic interest test takes into account the impact on consumers, is the market share test necessary?

[Graham Stuart]

For the reasons I have set out, I think the market share test is an eminently sensible part of our regime. I hope the Committee will agree.

--- Later in debate ---

[Graham Stuart]

New paragraphs 12A and 11A, introduced by amendments 39 and 70, would require the recommendations made by the TRA under schedule 4 to be made available to relevant Select Committees of the House of Commons, along with an account for the evidence base of those recommendations. Let me begin by stating that transparency is one of the four design principles set out by the Government for the trade remedies framework. The inherent assumption of a lack of scrutiny implied by the amendments is simply untrue.

To protect the TRA’s status as an independent public body, its recommendations to the Secretary of State should not be subject to political influence before a decision to accept or reject them has even been taken. Those recommendations will be made on the basis of the framework set out in this legislation and underpinned by technical and procedural details to be set out in secondary legislation. Giving the Select Committee a role in that process will undermine the impartiality of the process—an impartiality which is supported by industry. Publishing the recommendation in advance of the decision by the Secretary of State could also further undermine impartiality by increasing lobbying of Ministers by the affected parties, and could also lead to unnecessary disruption of the markets affected.

The Bill provides for public scrutiny of both the TRA and the Secretary of State’s decisions. Whether the Secretary of State accepts or rejects the recommendation, the evidence base for the TRA’s recommendation will be made available to the public, as is required under the terms of the WTO agreements. Furthermore, if the Secretary of State rejects the TRA’s recommendation to apply measures, he or she must lay a statement before Parliament setting out the reasons for that decision. Parliament will then be able to hold the Secretary of State to account if it considers the reasons to be unsound.

[Kirsty Blackman]

It would be lovely if the Minister could explain how parliamentarians can hold Ministers to account if they make a written statement.

[Graham Stuart]

The hon. Lady has been a Member of this House for some time and will know that there is a series of means by which that can be pursued. Making a statement to the House provides the initial spur to start that scrutiny, if that is what the Select Committee or others decide. There are urgent questions, Adjournment debates, Backbench Business Committee debates—I will not list them all, as the hon. Lady is probably rather better on parliamentary process than I am. She will know that there is a huge number and they can all be used. Her Majesty’s Opposition or the SNP and their spokesmen have other means by which to raise the issue.

On that basis, I ask the hon. Gentleman to withdraw the amendment.

Taxation (Cross-border Trade) Bill

Kirsty Blackman Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 16th July 2018 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

Given that there may not be a Third Reading, I will start very briefly with some thank yous. I would like to thank Scott Taylor, one of our researchers. I would also like to thank the work of the Public Bill Office, particularly that of Colin Lee and Gail Poulton, who have been absolutely excellent in their support to all of us who have been here throughout the passage of the Bill.

I want to talk about the history of the Bill and how we got to this point. We had the Committee stage earlier this year. On the Saturday morning after it finished, and almost out of the blue, the UK Government announced that they would not be entering into a customs union. They clearly did not think it through, bringing out the announcement at the most stupid time: after all the debates in Committee. It was totally ill-thought-out.

We then had the Chequers agreement on 6 July. The White Paper was published on 12 July, which Members will note was the day after the amendments were tabled to this Report stage of the Bill—we all had to table our amendments before we had actually seen the White Paper. I thank the Minister for coming to Westminster Hall to give us some level of reassurance, but pretty much all the reassurance he could give was, “Please look at the White Paper that’s coming out on Thursday.” It has, therefore, been really difficult to prepare for the Bill. It has been really difficult to write this speech, trying to game exactly what is going to happen tonight. I am still not clear.

There are too many factions in this House. We have the UK Government, the Conservative remainers, the European Research Group, the Democratic Unionist party, the Labour leavers, the Labour remainers and the Labour Front Bench. The UK Government will not support things put forward by anybody who supports remain. The Labour Front Bench will not support anything put forward by the Conservative remainers. The members of the ERG will not support anything put forward by anybody except themselves. The Democratic Unionist party will support whatever the UK Government tell it to, on the basis that it is being paid to do so. It is a complete shambles. Trying to do anything sensible in this House is incredibly difficult, especially given that we know there is a majority for a customs union among the Members of this House. Despite that, we are going to end up in a situation where members of the ERG, who believe in the polar opposite of a customs union, are having their amendments accepted. When the rest of us put forward anything vaguely sensible, our amendments are not accepted.

This is certainly not about sovereignty for the people or sovereignty for Parliament; it is about sovereignty for a very small group of elite Tories who want to have their say. The Government are letting them have their say. I could not be more angry about the fact that the ERG’s amendments are apparently going to be accepted. I do not want to direct all my ire at those on the Government Front Bench. Those on the Labour Front Bench need to be absolutely clear on their position. They need to be clear that they will support the softest possible Brexit. If they are talking about a jobs-first Brexit, they need to recognise the benefits of the customs union and the single market. They have the opportunity to do that tonight by supporting some of the amendments that have been tabled by those who support a soft Brexit.

The Scottish National party does not support fully a number of amendments that we plan to vote for tonight. Our position is that Scotland voted to remain in the EU, so we would like to remain in the EU. Scotland supports remaining in the single market and the customs union, so the SNP will support anything that keeps us in the single market and the customs union. In the absence of those options being on the table, we will do what we can to protect the economic and cultural interests of the whole United Kingdom. Even though some of the amendments are not brilliant, we will vote for anything that makes Brexit slightly softer than the Brexit that is being proposed. I needed to make it clear that just because we support an amendment here does not mean that it is a preferred option. It means that it is not quite as bad as some of the other options.

I make it clear that I will press new clause 16, in my name and the names of my colleagues, and I would also like to speak in favour of our other amendments. The SNP position is crystal clear, as I said. The UK Government position is not. I welcome some clarity that is given in the White Paper that was published after Chequers, but I have major concerns about some of it. It mentions specifically a trusted trader scheme. On the trusted trader scheme that we have—the authorised economic operator scheme—I have raised concern after concern about it, and I am not the only one; organisations such as the British Chambers of Commerce have, too. If there is to be an expanded trusted trader scheme, it needs to actually work. It needs to be applicable to small businesses and businesses need to be able to access that scheme. We are now at the stage that businesses should know what those schemes are. If the Government are going to bring them forward, they need to do so as quickly as they possibly can so that businesses can be clear on what basis they will be trading in future. That is really important.

I am pleased to see that diagonal accumulation has been recognised in the Chequers agreement. I have been talking about it for some time, and I am really glad that it has been recognised and that we will have a situation where we will possibly still be able to export cars to South Korea, because that is really important for our car industry. I am pleased that the Government have now made it clear that they are pursuing that.

Protective geographical indicators are also mentioned in the Chequers White Paper. I am slightly concerned about the way the Government are going on this. It would be very good to have more information around that. A PGI scheme that applies only to the UK and does not recognise EU PGIs is a bit of a problem, so we need more clarity from the UK Government on how they intend the PGI scheme to work. I know that there is a negotiation, but if we could have their point of view first, that would be very useful.

I want to briefly mention some of the other meat in the Bill and something that the British Retail Consortium brought to us. It encapsulated some of the issues with the Bill very neatly. It said that there are not yet agreements on security, transit, haulage, VAT and people and that we need mutual recognition on veterinary, health and other checks with the EU. It seems that the Government are pursuing some of this, so that is good news. We need investment in IT systems to deliver the customs declaration system. Again, I am still not convinced that this will come through in time, so if the Minister could give reassurance that it will, I would very much appreciate it. We need co-ordination between agencies at ports and borders, as well as investment and capacity and staff at ports. The Government have not done enough on both those things. They have not put the extra resource into ports. They have not told ports how they will be administering these things in the future. If ports are going to have to massively increase their staff numbers, they need to know now how they will do that.

On queuing, a two-minute delay at Dover will create a 17-mile queue, so it is not as though Operation Stack will just happen as normal. This will not be Operation Stack. It will be an incredibly large version of it, and Operation Stack was bad enough. The BRC also mentioned AEOs, particularly in relation to small and medium-sized enterprises. All those things are still concerns about the Bill and I will raise them on Third Reading, if we have a Third Reading debate, because I do not believe that the Bill is fit for purpose as it is.

I specifically want to talk about the new clauses from the ERG. If the UK Government are bound to accept them, we have a very, very severe problem. I have major issues with new clauses 36 and 37 and amendments 72 and 73. New clause 36 relates to reciprocity. Page 13 of the Chequers agreement says:

“At the core of the UK’s proposal is the establishment by the UK and the EU of a free trade area for goods.”

It then goes on to make clear on page 17 that

“the UK is not proposing that the EU applies the UK’s tariffs and trade policy at its border for goods intended for the UK.”

This new clause directly contradicts that.

What is the point in having a White Paper released on a Thursday if the Government are going to ignore it on Monday? I do not understand how we can be in that position. How can businesses know where we are going if the Government do not even know where they are going? For the Government to be accepting amendments by a group of around 14—who knows how many of them there are?—ERG members to get a hard Brexit is absolutely ridiculous. If there is going to be a Brexit, we need a Brexit that does what the Labour party suggests it should do: protects jobs. We need the Labour party to support a Brexit that protects jobs as well, not just us.

The Bill is a mess. It does not do what it set out to do, which is replicate the union customs code, and it does not now do what the Chequers agreement said it would on Friday. We need everybody in the House, from all the various factions I mentioned earlier, to get behind proposals that protect jobs and the sovereignty of the people, not just the sovereignty of an elite few.

[Peter Dowd (Bootle) (Lab)]

I read the White Paper on the train home on Thursday, if only out of a sense of morbid curiosity, but following the Prime Minister’s capitulation to the Brexiteers today, that curiosity has turned to a sense of the macabre. To begin with, we had the woman in the bunker with the blacked-out windows saying we were outward facing. Are we? This from the Prime Minister who invented a hostile environment for the Windrush generation and for disabled people claiming their rightful benefits and whose Government have been on the wrong side of the law more times than Arthur Daley.

The Prime Minister went on to state that we had a dynamic and innovative economy. Do we? Our economy is 35% less productive than Germany’s; we invest less and we have the most regionally imbalanced economy in Europe. Growth is sluggish and inflation stubborn. And on it goes—it gets more surreal. She says we live by common values of openness and tolerance for others and the rule of law. Really? The only thing the Conservative party is open to and tolerant of is big fat donations from Russian oligarchs. But here is where it gets really interesting. When she speaks about sticking to our principles, one has to wonder which principles she is referring to—the ones she referred to yesterday and which are enshrined in the White Paper or those she holds this afternoon, which tear the White Paper to shreds. Perhaps the Minister can enlighten us.

The Prime Minister wanted to deliver an ambition to “once and for all” strengthen our communities, our Union, our democracy and our place in the world. I will take those claims one by one: our communities have been ripped apart by austerity; our Union is in danger from Ministers out of touch with the needs of any nation and afraid to move away from their desks in case someone else takes it; our democracy is threatened by swathes of Henry VIII powers; and our place in the world is a laughing stock due to the Prime Minister’s supine sycophancy to Donald Trump, who humiliated her.

The White Paper—what is left of it—came from the pen of a Prime Minister obsessed with silly soundbites. She used to talk about “Labour’s magic money tree” until she wanted a magic money tree of her own with which to bribe the Democratic Unionist party, when that phrase was quickly ditched. What about the infamous “strong and stable” mantra? It turned out to be more like a strong and stable smell of panic during the election and was ditched as well. Finally, it seems that this White Paper has also been ditched.

As for Northern Ireland, I present, the buffer zone—a 10-mile-wide area along the entire boundary between Northern Ireland and the Republic. Under the EU’s trading rules, to be operational this buffer would have to be policed on both sides of the 10-mile divide. Did we really spend decades trying to get rid of divides in Northern Ireland only to resurrect them? I think not. As for the facilitated customs arrangement, we are not clear what about it constitutes a partnership, as it would effectively leave UK customs officials working to maintain a customs union that we are no longer a part of.

Regardless of who is responsible for managing the duties, it remains unclear how the FCA would be frictionless. Presumably, the final destination of goods would have to be queried as they enter the UK. This would slow down the passage of goods across our borders and prevent intricate supply chains from functioning properly. It would lead to waste, uncertainty and expense for business, to higher prices for consumers and to job losses and production moving abroad, as the right hon. Member for Broxtowe (Anna Soubry) pointed out. In that regard, the comments from the hon. Member for Gainsborough (Sir Edward Leigh) were unconscionable.

What about the UK border? Does the Minister expect checks to be in place to ensure that goods that claim the UK as their final destination are not diverted into the EU once they arrive? Presumably, we would need customs checks and controls between the EU and the UK to reconcile goods to documents when, for example, UK anti-dumping duties exceed those applicable on import. Can the Minister clarify? Can he tell us how many trusted traders—the Tories using the word “trusted”; that’s a laugh, isn’t it?—are currently registered with the Government’s scheme and how many they believe will be registered by the end of the transition period?

Of course, all this can be avoided if the House chooses to support Labour’s clear and pragmatic solution to the issues of frictionless trade within the EU and preventing a hard border in Northern Ireland. New clause 11 presents Labour’s practical solution to the problems that have confounded the Conservatives. In our new clause, we call on the Government to negotiate a new customs union with the European Union, to be in place when we leave the current customs union at the end of the transition period. That is the only way to ensure that we can have frictionless trade with our largest trading partner and help to prevent a hard border between Northern Ireland and the Republic. It is what business needs and producers want, and it is what would most benefit the public.