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

Kirsty Blackman Excerpts

Monday 7th October 2019 General Committees

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a joy to be here under your chairmanship, Mr Hanson, discussing customs once again. Along with the hon. Member for Bootle, the right hon. Member for Central Devon and many others, I have fond memories of going through the customs Bill in the House.

I have quite a few questions, mostly about the process that the legislation has followed and the logic behind our discussing the regulations today. I am very keen to know why this delegated legislation was not brought before the House in good time, before the Prorogation that did not exist. Given that we knew that the previous legislation, as the hon. Member for Bootle mentioned, took us up to only 1 October, why was this change not made previously?

Added to that, why was the change not introduced in good enough time for it to go to the sifting Committee, the European Statutory Instruments Committee, where it could have gone through the normal sifting processes and been looked at by that group of people? I am a member of the sifting Committee, and I have found it incredibly useful to go through the instruments that require sifting. We are able to give Committee members, and other Members across the House, a heads-up on things that require more scrutiny. More notice for Members is always a good thing. We have a ridiculous number of statutory instruments on the agenda today, and we have had a fairly short time to look at them. I would not imagine that the scrutiny that has been done is the best it could possibly have been, as we have not had as much time as we should have had.

The reason why I believe that the Government should or could have brought forward the information before now is the fact that they mention in the explanatory memorandum that an event was held with industry in January, when HMRC heard from industry that it did not have the capacity to comply with the security and safety changes as of exit day. The Government should have known at that point that changes would be required to the legislation, and should have made them much earlier. I would appreciate it if the Minister could let us know why that has not happened. I am focusing particularly on giving HMRC discretionary power to allow up to 12 months extra for a waiver to be granted to individuals.

Paragraph 13.3 of the explanatory notes states:

“Guidance will be published online and on social media platforms and HMRC have customer contact centres that can provide advice on what to do leading up to the UK departure date.”

Can the Minister confirm whether that guidance has already been published, seeing as this instrument was put forward in made affirmative form, and that the Government could therefore have assumed that it was likely to go through, given the choice of process? Has that guidance been published?

This morning, when I walked to school with my daughter, she asked me how many days until Halloween, because Halloween is much more important to her than Brexit day. I looked at my watch and said, “It’s 24 days.” That is 24 days for these companies to look at potential new guidance that may or may not be online at this moment in time. I do not think that that is enough time for companies to work out what they will need to do, or not do; as the hon. Member for Bootle said, there is not a huge amount of clarity about which goods, companies and organisations will be able to get the waiver, and which ones will not.

There are a huge number of instances, especially in the customs Act, but also in a number of areas around financial services, for example, in which HMRC has been given a huge amount of discretion on how to take things forward. It is being given a huge amount of power as to how to take things forward and write guidance. I understand that HMRC is the expert on this and needs a certain amount of discretionary power, but it seems to me that we are giving quite a lot of discretionary power to HMRC on this basis.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

The hon. Lady is making an important point about an area of concern. The explanatory memorandum says,

“HMRC will only use the power if needed to respond to business un-readiness that is greater than anticipated.”

It is not clear how “greater than anticipated” will be determined, how transparent the use of the power will be, or who will not be granted an extension.

[Kirsty Blackman]

I absolutely agree with the hon. Lady. In reality, the legislation does not provide more clarity to businesses. In fact, it provides less, because they do not know whether HMRC will be able to grant them the waiver using this discretionary power. Businesses will still have to prepare to put in safety and security declarations because there is no clarity from the Government on whether they definitely will or will not be included in the new regime. It would have been sensible of the UK Government to lift the clauses from the Union customs code and use them to make the customs Act work, but they chose not to.

[Peter Dowd]

On readiness, as the hon. Lady points out, we are less than a month away from leaving the EU, which we have been told will happen come what may, ditches included. It says on Gov.uk:

“Contact your vehicle insurance provider 1 month before you travel to get green cards for your vehicle, caravan or trailer.”

How many of those who know that they are going away in less than a month have their documentation ready?

[Kirsty Blackman]

Certainly too few. In fact, I discovered relatively recently that France and Spain, for example, have different regulations for those taking caravans, trailers or cars abroad. If someone were planning to do some kind of tour around those countries—that is perfectly feasible, given that they have much warmer weather than us at this time of year—they would need different permissions, depending on the country that they are going to. I am particularly concerned that many individuals will not have contacted their insurer in good time.

More specifically on businesses and the waiver, we know that businesses are not prepared for Brexit. If the Government are setting out to try to make things easier for businesses, they are abjectly failing to do so. In reality, the Government chose not to lift and shift the Union customs code. Had they chosen to lift and shift from the code, they would have had to take out certain parts because of the way that it works, but when the customs Act was written—I made this point at the time—the Government chose to bodge some parts of it and do them completely differently, with no rhyme or reason about the way to take it forward. For businesses, that has made things much more complicated than they needed to be. The Government have chosen that route and made the nuts and bolts and red tape much more complicated for businesses.

In circumstances where HMRC does not decide to grant the discretionary waiver to businesses and requires them to submit two separate declarations of security and safety work, how much additional money will that cost businesses? I understand from the explanatory memorandum that an analysis of the cost to businesses has to be done if it is likely to pass a certain threshold. The explanatory memorandum does not state the amount that it would cost businesses to submit those two separate declarations if HMRC decides that it will not use its discretionary power.

The hon. Member for Feltham and Heston mentioned the “greater than anticipated” wording. What level of unreadiness is anticipated? Do the Government anticipate that 50% of businesses making declarations will fail to do so adequately? Does the power kick in only if 51% of businesses fail to do so adequately? What is the anticipated failure rate by businesses before the legislation kicks in for HMRC? I feel that this has been put together in a shoddy way, and that it could have been done much better. Better scrutiny could have been applied if the Government had chosen the better processes that the House agreed for the sifting Committee. The reason we are in this mess today—aside from Brexit in general—is that the Taxation (Cross-border Trade) Act 2018 was not good enough and did not give enough certainty to businesses. That is why we have had to amend it a number of times before exit day.

--- Later in debate ---

[Jesse Norman]

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

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

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

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

[Kirsty Blackman]

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

[Jesse Norman]

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

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

--- Later in debate ---

[Jesse Norman]

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

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

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

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

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

[Kirsty Blackman]

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

[Jesse Norman]

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

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

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

Question put and agreed to.

Resolved,

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