Taxation (Cross-border Trade) Bill

Lord Purvis of Tweed 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 Purvis of Tweed (LD)]

My Lords, it is a pleasure to follow the noble Lord. I look forward to, if not a double act, many similar fellow contributions on the Trade Bill. I very strongly agree with him that, regrettably, many issues that we would have raised on the Bill will have to be raised during the passage of the Trade Bill. That is certainly not ideal, but this House’s voice must be heard. When we ask questions, the Government must listen.

We are engaged in the first negotiations in our country’s history to make a trading relationship harder. The Bill is the first key set of barriers to be created in this new relationship of erecting barriers rather than removing them. It is creating unnecessary uncertainty and cost and will make our trading nation’s story one of new barriers and burdens. The relationship can be as frictionless as possible, but there will be new sources of friction. On the basis of the negotiations so far, and from what we are able to discern from the Government’s position and the disagreement within the Government, there will be friction upon friction for the foreseeable future. There were epochal debates in this House on the Corn Laws and on free trade a century ago, referred to by the noble Baroness, Lady Altmann. We now have this Bill, which, owing to the cynical connivance, if not cowardice, of Ministers, we will not be able to scrutinise fully or seek to amend.

Why is it important? It should be important to all sides, whether they supported Brexit or remain in the referendum. Many on the leave side said before the referendum, and many noble Lords have consistently said since—making a compelling argument—that staying in a single market for goods, with all the regulations that that would necessarily bring and the European Court of Justice’s ultimate interpretation power of the common rulebook, is not consistent with Brexit. Now we have the Government saying that that is wholly consistent with Brexit. These are fundamental questions raised by the Bill and we have merely a couple of hours to discuss them. The House has considerable time for the Minister—I agree with other noble Lords in that regard—but this is no time for a tactic to reduce Parliament’s and this House’s proper role of reflection on and scrutiny of the Bill.

Many issues have been raised. My noble friend Lady Kramer raised fundamental questions about how the Bill will interact with rules of origin, which are a core element for many of our key trading businesses, which need certainty on this. Why is it important? It is important because it is critical to any operation of an FCA, but the Government have said that the rules of origin aspect will require no great burden of checks and investigations on whether a product being imported into or exported from the UK will comply with such regulations. Paragraph 17c of the Government’s White Paper referred to,

“for example … the point at which the good is substantially transformed into a UK product”,


and said that 96% of all such goods would not be liable for check. However, more than 40% of all goods that receive an EU tariff are of an intermediate nature. A good of an intermediate nature by definition must satisfy rules of origin regulations. The Government have given no indication of how such checks will be done or whether our goods or those we import into the UK will be able to comply with rules of origin obligations. Clearly, under the Bill there is an intention to have a differential tariff rate on the basis of those regulations. If that is based on no checks, it is incumbent on the Government to be clear about how that can work. That is only one of the questions raised by Peers in this Chamber today. My noble friend Lord Fox asked 17 sensible and substantial questions—I counted them. They were unanswered in the Commons, as the noble Lord, Lord Browne, said. There is a duty on the Government to reply to questions that this House asks them.

Those questions are over and above those asked now by those who were then involved in putting many of these proposals together, including David Davis and many others in the House of Commons who have been referred to. He said that he would not support the White Paper—and, by definition, any of the mechanisms of the FCA enabled by the Bill—because the underpinning operational foundation of it, a common rulebook of regulations, is worse than the situation that we have at the moment, within the European Union.

Will the Minister be clear about the point made by the noble Lord, Lord Hannay? It is not just a case of telling our European partners the position we seek for our future trade relationship; it is also about those 40 other countries and networks where we are engaged in discussion on rolling over existing trade agreements to a new post-Brexit scenario.

The Minister described the Bill, but he did not make a case for it. As the noble Lord, Lord Browne, said, he did nothing to describe the changes made in the Commons to the Bill as introduced to this House. How will new Clause 54, which destroys the FCA, operate? It is telling that the Government clearly do not think that this afternoon’s debate is very important. I think that the noble Viscount, Lord Trenchard, was the only speaker in support of the Government’s position. The Minister is nodding. If he can take that as a ringing endorsement of the Government’s position, he needs to worry later this evening.

As the noble Lord, Lord Hannay, asked, are we pursuing new Clause 54 in the negotiations? Is advice being published on how checks on the estimates on which the formula will be calculated, and are we in discussion with our European colleagues about how that will operate? What are the methodologies for the UK to operate under this system? Have we discussed with our European colleagues the methodology that we would expect them to apply for reciprocity?

When will the necessary changes be made for reciprocity? What is the legal basis from a European point of view? Clearly, if we are asking that of them, we need to understand the legal basis ourselves. As has been said, how can this possibly be squared with the situation in Ireland, where there will be a border where those checks will be necessary if we are asking that of the Irish Government?

How can we expect the European Union to place on other third countries the necessary requirements for them to define their goods when they export to the EU as we will expect them to do when they export to us? What arrangements will the EU be putting in place to ensure that there will be proper dispute resolution of this reciprocity? Those are just some questions that we would have hoped and expected to raise at a further stage of the Bill.

However, the uncertainty continues. At least the Government have now provided advice on the basis of there being no agreement. Their advice to businesses of 23 August on the new customs relationship ended with very clear advice: seek advice from your business advisers. If that is what our Government are saying to our businesses when the clock is clearly ticking, we are in considerable difficulty.

I asked a Question of the Minister for Health regarding medicines just before the Recess. Forty-five million packs of patient’s medicines are exported from the UK every month and 37 million are imported into the UK. Merck, GSK and AstraZeneca all forecast that if we leave the customs union, it could take five to 10 years for any technological solution—which would be under the FCA—to replace the system we have at the moment. They are now stockpiling, given the level of extra documentation. That is not project fear, nor is it a statement from the Treasury which the Department for International Trade can criticise; this is a fact from our business community.

The noble Viscount, Lord Trenchard, made a very powerful case, I think in support of the Government’s position, that we should rid ourselves of the European Medicines Agency regulation, and that we can thank God that we are leaving it. I suspect that there will have to be amendments to get rid of Clause 6 of the Trade Bill, of which the House of Commons asked that we should continue to be a part, and I am glad that that is the case.

We are often asked by people to offer scrutiny in this House, but there were clear voices from many on the other side of the argument, when we amended and asked the Commons to think again on the withdrawal Bill, saying that we were abusing our parliamentary processes. The Minister at the Dispatch Box said that we were going beyond our constitutional powers. However, contriving to classify this Bill in such a way to avoid proper scrutiny undermines that argument considerably. We shall have to come back on many specific issues, which regrettably we are unable to discuss today, whether on the regulations on anti-dumping referred to by the noble Lord, Lord Kerr, on the relationship with the FCA and our trading partners, or on the Treasury’s position and the advice it is giving about the state of the British economy if we leave without any agreement. We will need to come back to this, and from these Benches, we will do so consistently and strongly as a point of principle. That is why I endorse my noble friend’s comments: this House should express in the Division Lobby our position that we are not satisfied with how the Government are handling the Bill.

--- Later in debate ---

[Lord Bates]

My Lords, this has been a good debate. I now have the challenge of trying to respond to, by my calculation, 33 specific questions in the time allotted; if I am to abide by the Companion I should not exceed 20 minutes for winding up.

Before I address the key themes raised, I will say that a lot of the debate centred on the constitutional nature of what we seek to achieve through the procedure by which we are considering the Bill. I want to set out the context. The proposition made was, effectively, that this piece of legislation was being railroaded through both Houses and on to the statute book without sufficient scrutiny. To that challenge, I point out that it was on 9 October last year that the customs Bill White Paper and the trade White Paper were published; that it was on 20 November last year that the Taxation (Cross-border Trade) Bill was introduced to the House of Commons in a Ways and Means debate; that it was on 5 December last year that both the trade and the customs elements were the subject of take-note debates in your Lordships’ House; that it was on 8 January this year that the Second Reading of the Bill was debated in the other place; that, during debate on the EU withdrawal Act in your Lordships’ House, customs and trade implementation issues were readily and frequently the subject of amendments and of debate; that on 12 July the Government published their White Paper on the future economic partnership, which set out in detail the proposal for a facilitated customs arrangement; and that on 16 July the Bill completed its Commons Report stage and therefore now comes to your Lordships’ House.

[Lord Purvis of Tweed]

The Minister is making the point that the Bill started so long ago that we have had sufficient time to consider it—but some fundamental changes were made a week before the House of Commons rose for its recess. There has been no other parliamentary time to scrutinise the amendments made by the ERG, which could fundamentally change the Government’s whole proposal for a facilitated customs arrangement. There has been zero opportunity to have that consideration, and there will now be zero opportunity for it in this House as well.

[Lord Bates]

The noble Lord says that, but I am not suggesting what he has just accused me of suggesting for one minute. I am placing this in context. There has been substantial scrutiny and time for debate on the issues. The Trade Bill will follow; it has its Second Reading on 11 September, as referred to by the noble Lord, Lord Stevenson. We hope that an agreement with our European friends will take place this autumn, and there will then be a meaningful vote. Following that, there will be an agreement and implementation Bill. Following that, a piece of legislation on the future economic framework will have to come before your Lordships’ House. Placed in that context, this Bill represents the fact that at the moment our customs, trade and tariff policies are hardwired into the European Union, so there is a legislative necessity for us to have a standalone trade and customs arrangement, legislatively underpinned, so that we can prepare for any eventualities that the negotiations throw up. We have been clear throughout that it is in the best interests of this country and of the European Union that we conclude in an orderly way, with an agreement, and that we move to frictionless trade as far as possible.

The debate has focused essentially on the following issues; I will summarise them as a way of trying to work through and answer as many questions as I can in the time available.