Trade and Customs Policy

Lord Cope of Berkeley Excerpts

Tuesday 5th December 2017 Lords Chamber

[Lord Cope of Berkeley (Con)]

My Lords, as I have ministerial experience both as a Northern Ireland Minister for security and, subsequently, for Customs and Excise—as it then was—in the Treasury, I cannot resist commenting on the events this week concerning customs and trade across the Irish border.

The start of the problem—we must recognise that it will be a problem throughout this whole process—is that we live in the age of the tweet and the leak, so private diplomatic choreography leading to a carefully planned and phrased communiqué is a thing of the past. It makes many things, including international agreement, much more difficult, but it is no use being nostalgic for a vanished age. The Brits seem to have been playing the game by the old rules, so they arrived at a typical Brussels formula which meant different things to different people, particularly when put into individual phrases.

However, agreement seems near and, I believe, possible. The message is: do not give up and do not allow noisy spectators to put you off your game. Remember, after all, that the Belfast agreement was not eventually arrived at until quite late on Good Friday—well after it was supposed to be.

The argument was never about the Northern Ireland border alone. It is almost as much about Dover and Heathrow as it is about Belleek and Killeen. There was never any question of setting up border crossing points on the road, railway and canal links across the Northern Ireland border. They would not work practically or be acceptable for normal life in the border areas. Ministers in both London and Dublin said from the start that crossing points were unacceptable. It suited some, particularly in Dublin, to pretend that they were likely, but that always looked to me like a bogey put up to claim the credit for having resisted them when they did not happen. No one has been publicly arguing in favour of crossing point barriers—perhaps Brussels has been privately pushing for them to be threatened as a necessary consequence of Brexit, but that is because it wants to make Brexit impossible.

We are leaving the EU. That means that we expect that in due course there will be divergence of both customs duties and regulations. I think it is impossible to have totally frictionless borders in those circumstances. I prefer the phrase, “as frictionless as possible”. I think that that is more achievable. What concerns me today is the practical consequences. It is not only about customs duties. Indeed, as the noble Lord, Lord Kerr, said, regulations and standards are more important. So, for that matter, are indirect taxes, excise and so on.

The UK border—not only in Northern Ireland but the border all around the United Kingdom—is now, and has been for many years, a very important fiscal border. VAT and excise duties differ, as does agricultural support, and so on. Smuggling has long been and is now a paying proposition for those who can get away with it. Customs and other authorities on both sides of all our borders have fought it with some success for many years, and there will be no change in that. I do not mean that no smuggler has ever been successful for a time on any of our borders—either the Northern Ireland one or the English Channel—but other smugglers have ended up in jail and, no doubt, some will in future.

The difference in rates of indirect tax is likely to continue to be much higher than that in customs duties for many years to come, and the incentive to smuggle will still be in favour of smuggling excisable goods—tobacco and alcohol—rather than those relating to customs duties. Customs formalities everywhere are, these days, already mainly carried out electronically, away from the borders.

A new customs declarations system has been mentioned already, and it is forecast to be ready by March 2019. Like my noble friend Lady Verma and her committee, I would like the Minister to tell us, if she can, if it is still on course for that date. It will, of course, take time after that to bed in and for business to absorb it. That timescale is not capable of a precise forecast, but we all know that it will be a year or two before it fully works and works smoothly. In that context, it is essential that HMRC increases its staff to deal with the huge increase in customs declarations that is anticipated after the transitional period. We were told this morning at the seminar to which the noble Lord, Lord Whitty, referred—I think I am correct—that customs declarations were likely to increase from 50 million a year currently to 300 million. That is an enormous increase. Clearly, the statistical arrangements and IT arrangements will have to be able to deal with that. Can the Minister confirm that those figures are approximately correct?

It is also true that many smaller companies will be involved in such matters for the first time and will need help from Her Majesty’s Revenue & Customs and others. Applications for accreditation of the authorised economic operator are now apparently taking about a year to process. That is unacceptable, particularly if the so-called self-assessment customs declarations are to be confined to those with full AEO status, although I hope that that will not be the case. That is particularly serious, of course, if there is no deal—but it is essential in any case, even if there is.

The common transit convention for transit of goods is also important, but it seems to me that the EU would be being particularly difficult if it did not accept that UK membership should continue, as it will help its companies quite as much as ours—so it should not attempt to frustrate continued UK membership. Continental companies widely use trucks, and so on, to bring stuff to, for example, UK airports for onward transmission, particularly to the United States.

The noble Lord, Lord Whitty, and others, including the noble Lord, Lord Kerr, spoke about the timings and difficulties ahead during the transitional period. The difficulties, of course, are not only difficulties for government in negotiating all these complicated agreements with so many people; they are also difficulties for business. Companies have often said over the years to me and others, “We can live with your regulations and your forms when we know them, but not with the Government changing them all the time”. That, of course, is true in general, but it will be even truer over the next few years. The period that faces us involves massive changes in procedures for customs and trade generally. It will be very expensive and difficult for government and companies, large and particularly small, and part of the problem is the timescale. The Government must do all that they can to bring greater certainty to the situation as soon as possible. If they know what faces them, businesses and others can prepare. As part of that, we look forward to these two Bills.