Taxation (Cross-border Trade) Bill

Lord Whitty 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 Whitty (Lab)]

My Lords, the Minister gave a very succinct introduction to the Bill but, looking at it, it is pretty hefty. It would normally be dismissed as technocratic and complex, but it is nevertheless more substantial than perhaps the Government or the Minister suggest. Moreover, it is on a subject that neither this House nor the whole of Parliament has considered as part of a legislative programme for more than 40 years. All the issues, such as tariffs and some of the other things that are either dealt with or partially dealt with in the Bill, have been matters for the EU. Moreover, the denial of this House’s detailed scrutiny by designating this a supply Bill is an affront to this House and its committees’ constructive role in dealing with this very difficult Brexit issue.

Broadly, I make three points. First, it is a nonsense for us to consider the Bill separately from the Trade Bill that will reach us next week and from wider issues. There are a number of reasons for that, many of which have already been spelled out. Among other things, the Trade Bill sets up the Trade Remedies Authority. It contains the outline of the powers of that authority and the situations in which they would arise. But the actual fiscal remedies and some of the reasons for engaging with those fiscal remedies are in this Bill but without the overall framework, which is in the Trade Bill. The two need to be considered together and we need to address what kind of new, independent trade remedies body we need in those circumstances.

One problem with the Bill is that it is inevitably a contingency Bill, like much of the other legislation that has passed through this House in the Brexit context. But a contingency Bill should be able to deal with all the potential contingencies. As far as I can see, it deals with very few of them. It gives the powers, and some of those powers are subject to Henry VIII procedures, but it does not specify in which contexts those powers will operate.

We all know that there is still a range of possibilities for the final outcome of negotiations, which will probably not be known in November and will involve a long drawn-out process of coming up with a full-blown trade agreement with the EU. It is looking on the optimistic side that we will eventually reach such a deal, but it will be complex. If it is a free trade agreement, certain consequences follow. There will be consequences for our tariff levels, which will presumably be dealt with in the EU, but countries that are not in a free-trade agreement with us would have to abide by WTO rules. In other words, there would have to be an equivalent for all non-free trade agreement countries. That is a constraint on the powers that appear to be in this Bill.

We are of course in a situation where the Government are proposing the Chequers proceedings, which have in part been cut off at the knees by some of the amendments, referred to by others, that were passed in the Commons the other month. However, some are not appropriate for the different potential outcomes. If we are in a Chequers-facilitated customs arrangement, which the EU is at present rejecting, certain requirements need to be laid down in the Bill itself, including procedures, for example, on rules of origin. I think it was my noble friend Lord Tunnicliffe who said that at the moment there is a contradiction on how rules of origin are likely to be proceeded with. They will be proceeded with in one context for imports and another for exports from the UK to the EU.

A lot of questions have not been answered and they can be answered only by a full debate on all the aspects of trade policy and trade legislation before us, and how they would apply in different situations. To take another example, we know that currently both this Bill and the Trade Bill reflect the Government’s intention to roll over the existing EU-third country arrangements and simply apply them to the UK. However, you first have to ask the third country whether it will agree to that, and indeed in some circumstances whether the EU would agree to it because it is not as simple as all that, particularly when dealing with agreements involving a high degree of agricultural trade. You then have issues such as import quotas, which have to be split between the UK and the EU in the event of our leaving. Those quota issues are not addressed in the Bill.

There are other internal contradictions in the legislation, most of which have already been referred to because they arise from the amendments made at the behest of the ERG in another place. I happened to be in Brussels with your Lordships’ Select Committee on the day those amendments were passed. I am the only member of the committee present because the others are meeting upstairs. There was bemusement on the part of EU officials, including Monsieur Barnier himself, about what seemed to have happened; namely, the Prime Minister’s shiny golden Chequers agreement had been undermined within days by accepting the amendments produced by the ERG. Some of the amendments are ambiguous and I hope the Government’s lawyers are addressing the particulars. I will take just two examples, one of which is now Clause 54. It arose because of the need for reciprocity as far as the movers of those amendments were concerned, but no one is proposing reciprocity. We said in the Chequers proposals that we would be prepared to collect EU taxes at our borders. We have made no proposition that the EU should collect our taxes. Since we know that the EU is sniffy about the notion that we should collect its taxes, its representatives are hardly likely to fall over themselves with glee at the proposal that they should be subcontracted to collect our taxes. Reciprocity in itself does not make sense in the context of the Chequers agreement.

It is also true—potentially disastrously so—that the following clause, Clause 55, which deals with Northern Ireland, could scupper any agreement on Northern Ireland, which is difficult enough in any case. Let me make it clear that I am not in favour of a border down the Irish Sea, but it is true that already, before we have left the EU, Northern Ireland is dealt with separately in some respects on trade issues. It has a regulatory structure for food and farming that is effectively the same as that of the Republic of Ireland. It is a single epidemiological area in relation to animal disease. There are other provisions in terms of the ability to acquire Irish citizenship and therefore EU citizenship, which mean that Northern Ireland is being dealt with differently from the rest of the United Kingdom. As my noble friend has said, the common electricity market will also have to be dealt with differently from the energy market in the rest of the United Kingdom. To lay down in that amendment that no such separate provision, which implies no regulatory provision, should apply to Northern Ireland that does not apply to the rest of the United Kingdom, seems yet another barrier to a proper agreement on the Northern Irish border.

My last point is probably the most important. I cannot find anywhere in the Bill provision for parliamentary scrutiny of future trade negotiations and outcomes—and therefore tariffs and tariff regulation —which is the subject matter of the Bill. Before we were EU members, all treaties were regarded as deliverable through the royal prerogative; they were therefore a matter for the Government, not Parliament. That was modified slightly in 2010 as far as treaties in general are concerned, but trade treaties over the past 40 years have very much been subject to scrutiny in great detail in the European Parliament. Our negotiating stance and tactics and the final outcome have been subject to scrutiny by European Parliament representatives. We propose moving to a situation where such trade agreements will not be dealt with like that, at least not explicitly, in default of any government commitment. We are reverting to the time when medieval monarchs made these deals between themselves and we were sheltered under the royal prerogative.

It is not only Europe that is subject to detailed parliamentary scrutiny; so are potential partners with Europe. Congress had a major role when the US was trying to negotiate the TTIP with the EU, as did the Canadian Parliament. We need a determination by this House and another place for a strong, authoritative international trade committee, either jointly or in both Houses, to oversee our future arrangements, in the context of which the detailed propositions in the Bill will operate. Without that, we will take back control not for the people’s representatives but for the benefit of the Executive alone.