Taxation (Cross-border Trade) Bill

Lord Kerr of Kinlochard Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords
Tuesday 4th September 2018 Lords Chamber

[Lord Kerr of Kinlochard (CB)]

My Lords, it is a pleasure to see the noble Baroness, Lady Kramer, back in such sparkling form after the holiday, and I very much share her view that it is regrettable that we in this House are not allowed to do our normal job on this Bill. There is a lot of technical stuff in it and our job of scrutinising, of considering possible omissions and anomalies, and of suggesting through the contribution of judicious amendments improvements to enable the other place to think again would seem to make a classic case for a Bill of this size, complexity and detail. The House of Lords would have handled it very well, but it seems that by procedural stratagem we are being denied a substantive opportunity, and that for me is wrong. I very much regret it.

I want to ask two questions about the Bill and draw attention to two omissions. My first question is about the Trade Remedies Authority, which turns up in Clause 13 and has its duties relating to imports thought to be affected by unfair subsidies or anti-dumping cases spelt out in two of the schedules. It surprises me that I do not find the Bill establishing the authority. It does not tell me about the authority’s composition. It tells me about some of its duties but where is the power that establishes it? Can we be told how independent of government it will be? How will consumer and producer interests be balanced in its composition? How will the differing interests of parts of the Kingdom be balanced? The October White Paper spoke about the need for UK-specific thresholds but in the smaller Celtic economies, a producer concern that would not be seen as substantive in relation to the UK economy might loom large in particular sectors. Will the devolved Administrations or Assemblies be able to nominate representatives to the Trade Remedies Authority?

I may have missed something: perhaps these questions have been answered already elsewhere but they are not answered in the Bill and I do not understand why. How will the authority be staffed? The section of the Commission that handles anti-dumping is ferociously efficient and equipped with powerful economic analysis, which you need because producer interests tend to get front-page attention and may not advance national—or EU, in this case—interests. Have we recruited these people? What kind of people are we trying to recruit? Are they capable of carrying out this important task?

Secondly, when will the Government give the country some idea of how they intend to use the power conferred on them by the Bill? In mid-August, we were told that Dr Fox’s department decided to terminate 72 of the 114 EU tariffs currently imposed as anti-dumping measures or because of unfair subsidies. Which 72 will they be? Business might like to know that; it would helpful for planning. How does this relate to the role of the Trade Remedies Authority? Does it exist in shadow form? Has it been consulted? Will it be consulted or is it just being pre-empted by a fiat by the department, in which case my question about its powers and composition may be irrelevant?

This relates to a wider concern about uncertainty. The Minister spoke about the need for certainty; he is absolutely right. Current uncertainties are holding up investment and precluding sensible business planning. Dr Fox is keeping very quiet. Presumably, he sticks to his Heritage Foundation/Adam Smith Institute/Henry Jackson Society principles. Presumably, it is with a light heart that he decides to axe 72 import tariffs because he is a devoted free marketeer, but he is not saying that now. He is keeping quiet about which sections of the economy he would prefer to open up to greater competition. He is not stopping Mr Gove assuring the farmers or the environmental interests that they are going to be protected. Yet, if Dr Fox starts negotiating—as I suppose he will one day—with Canadians, Americans, Australians or New Zealanders, he will find that what they want most of all is access to UK markets for their farm products. This conflicts slightly with the assurances Mr Gove has given, although it might be absolutely in line with what Dr Fox, the free marketeer, and the Adam Smith Institute would like.

I do not know whom to believe. I think the Government are trying to speak out of both sides of their mouth. They are trying to please everybody at present by keeping us all in doubt as to what their import policy would be. Of course, Dr Pangloss of the Sunday Telegraph assures us that the consumers are going to win and prices are going to fall. Meanwhile, the agricultural producers are being assured by Mr Gove that they are going to be all right. Everybody is a winner. This is certainly the view of Pangloss in the Telegraph. It would be good if the Government took a view and told us—perhaps next week, when we will be talking about the Trade Bill—what their import policy is. Is the current balance of producer and consumer interest to change, as Dr Fox would presumably like? On agriculture, is it the farmers and food processors who are going to succeed, or is it the foreigners and consumers? Are any tariffs that matter to farmers and food producers among those which Dr Fox has decided should be axed—the 72 that are condemned? At present, everybody is being assured that all will be okay. It is Pangloss time, but to govern is to choose. In the context of this Bill and of the Trade Bill, the Minister should tell us where on the spectrum—from liberal, open markets to protectionism—the Government are going to stand.

What is missing in this Bill is any provision for the two options spelled out in the White Paper: the highly streamlined customs arrangements or the new customs partnership. Under this partnership, our customs authorities would segregate goods designed for consumption in this country from goods heading for onward export to the EU, charging our duties on the former and EU duties on the latter. I do not mourn either omission. As the former Foreign Secretary’s article in last weekend’s press eloquently expressed, the invisible, highly streamlined frontier is a pipe dream which is easily translated by the press into sound and fury signifying nothing. There is nothing underneath it. It is not possible. The EU will not change the rules for its frontier regime which it, with our active participation, has developed down the years. When we leave the EU customs union, we will be outside its frontier, which will be run according to its rules. The touch has got lighter over the years. The turnaround has got faster over time, but we cannot expect a sudden step change, an entirely new regime or a loophole for the British alone. It is not going to happen.

As for the partnership, I thought it was dead on arrival. I knew it was dead when, as the noble Lord, Lord Tunnicliffe, reminded us, the Government immediately changed the Chequers plan in response to ERG pressure. They demanded that the 27 similarly clog up their ports by segregating their imports too and that they should run a two-tier tariff system, charging our duties on goods in their ports where the final destination was our country and tracking them until they got here. Why should they do that? Why should they impose this massive new friction on themselves? It was never going to happen. It was cloud-cuckoo-land. As M Barnier said at the weekend, it would be a bureaucratic nightmare. He is right.

I have a slightly different take on this from that of the noble Lord, Lord Tunnicliffe. I want to ask the Minister whether he can confirm that the absence from the Bill of any provision for the partnership, the absence of any government amendment which would permit them to introduce the partnership and the acceptance by the Government of Clause 54 mean that they have dropped the partnership and that we can waste no more of our time on it? I hope that that is true, because it would very unwise to waste any more of the negotiators’ time in Brussels in talking about it. It will not fly.

That brings me back to the only practical way I see of avoiding the frictions of a customs frontier with our biggest trading partners and our closest neighbours and friends. When in April this House voted by a large majority to amend the withdrawal Bill to ask the Government to explore the possibility of a customs union with the European Union, it was responding to the concerns of British business, manufacturers, the transport industry, importers, exporters, the CBI, the TUC, Keidanren, the BDI and, of course, anyone awake to the potential problems in Northern Ireland.

As far as I know, nothing has happened since 18 April to change the situation that the House considered then, when it thought it justified to explore the possibility of a customs union, except that it has become clearer that solving the frontier issue will determine whether there will be a withdrawal agreement or we face a cliff edge. It has also become clearer that of the Government’s two options for avoiding the choice, neither work.

I hope that the Government will even at this late stage explore the possibility of a customs union between the UK—if it has left the European Union—and the European Union. I think that this House will have to come back to this question next week when we consider the Trade Bill.