Duties of Customs

Marcus Fysh Excerpts

Ways and Means resolution: House of Commons
Monday 20th November 2017 Commons Chamber

[Mr Marcus Fysh (Yeovil) (Con)]

It is a pleasure to stand here tonight and to talk about this Bill on behalf of my constituents. Having listened to the speech by the hon. Member for Bootle (Peter Dowd), they might have been a bit surprised to hear that there was no point to this place at all. However, what we are doing tonight, if we pass these resolutions, is giving our consent to the Government bringing in a Bill that is a key part of enabling us to have the proper machinery of Government if, and as, we leave the European Union. This is not a warm-up act for the Bill itself; this is a gateway we need for the Bill, and it is entirely sensible. This is about giving our consent to the Government making changes to financial matters that will affect every one of our constituents.

As part of those mechanics, we have a massive opportunity to set our own tariffs and duties as we go forward as a nation and to set our own trade policy and all that goes with that. However, this is a very technical matter.

[Kerry McCarthy (Bristol East) (Lab)]

The hon. Gentleman talks as if it was an entirely unilateral decision on our part what tariffs and trade agreements we have. We have to get out there into the wide world and try to negotiate these trade agreements. Does he not acknowledge that we are in a much weaker bargaining position than we were when we were negotiating those as part of the EU?

[Mr Fysh]

I do not accept that at all, but I thank the hon. Lady for her intervention. We have a major opportunity to think about what tariffs are best for all of our economy, rather than always having to think about just the EU. This is a really big opportunity to shape many of our industries, when we have just had to cope with a one-size-fits-all solution for many years now.

Our ability to cope on day one is dependent on the measures in the Bill being effective. I have to thank my right hon. Friend the Minister for listening so intently when I have slightly harangued him about trying to ensure that we have enough resource and application on these detailed matters. It is absolutely right that leaving the European Union is a complex business; it is not something we can just assume will be fine. We really need to devote resource, time and application, and to get as much as we can out of the private sector advising and helping us, to make sure we have the necessary technological solutions as part of these processes.

[Wendy Morton (Aldridge-Brownhills) (Con)]

Does my hon. Friend agree that the Bill is very much about preparing the way for when we leave the EU? When we talk about going forward with a global Britain, that is about seeking every opportunity we can to take our country forward.

[Mr Fysh]

My hon. Friend makes an important point, and I completely agree.

It is massively important that we look at the data systems, and I have talked a lot with Ministers about the customs declaration service that we are putting in place by January 2019. I have met industry representatives, and I have to thank my hon. Friend the Member for Dover (Charlie Elphicke) for organising some of those meetings in a very efficient fashion. They have been incredibly useful in bringing key civil servants and key stakeholders up to date with exactly what is required.

I do not think we need to reinvent the wheel. We do not need to go for full, all-singing, all-dancing, new solutions overnight; there are some practical steps we can take in the interim. We heard from one panel about a system called Intrastat, whereby economic flows around the European Union, based on actual transactions, are recorded. It was suggested that it is possible to, effectively, bolt the tracing of different liabilities on to that system, with the customs system operating in parallel with it.

What our partners in the EU, or in any other part of the world, want to know when goods are moving across one of their borders is what is in those consignments and whether they need to think about a tariff or take into account some other regulatory provision. It is massively important that we can talk to our counterparts on the other side. I implore Ministers to try to persuade the EU, even though so far it has been very reluctant, to allow member states’ national customs authorities to talk properly to us about what data interfaces are going to be required for what will probably be quite a lot of extra transactions and considerations that will have to be made. I certainly stand ready to help with my contacts, if I can, to enable some of those conversations to happen. Whether it is a ramped-up trade facilitation exercise—the “option 1” that the Minister described—or a partnership based on a new type of tracing of the way in which goods move around our economy and across our external borders and those of the EU, at the moment, we will need to make and record lots of declarations of one kind or another, and the other side will have to be confident that what we say is the status of these goods is in fact the case.

VAT processing has been the Cinderella of this conversation over the past few months. Everyone has been focused on the duty side, and not enough focus and attention has been given to the VAT side. The manner of the processing of VAT really makes a difference to very many businesses, and it is a major cash-flow issue for most businesses. If we want to stay open to ideas, as we do, with our EU friends and allies, and if we want to have good facilitation of cross-border trade, we need to address, for example, the ability of a vendor to attend a trade show and take a load of samples with them, because if there is a VAT issue, that could really be a problem. It is also a problem in the art world where very high-value objects are moving around. We need to think about that.

[Stella Creasy]

I entirely agree with the hon. Gentleman’s comments. Does he share my concern that because the Government are not giving any clarity on this issue, it is very likely that British businesses will have to deal with all the vagaries of the 13th directive on VAT unless we look for some clarity on retaining our current systems for trading, whether through the customs union or the single market?

[Mr Fysh]

I thank the hon. Lady. I agree that we need clarity as early as possible on all these issues, and I encourage Ministers to come forward with ideas on that.

Returning to what we heard about Ireland in various interventions on the Minister, I would like him to think about whether, in the VAT resolutions, we are confining ourselves a little too much by saying that the Government may not, through the Bill, make any amendment relating to VAT rates, exemptions and zero rating. One of the issues with the Irish border historically, and where the real problems came from when Ireland was given its independence, was the amount of smuggling, and the rates and tariffs on goods going into the UK were a major factor in that. Perhaps we could look to smoothing the feelings and the actual processes on the Irish border to make sure that, as far as possible, our VAT rates are as harmonised as they could be so that there is no temptation to smuggle there.

[Dr Murrison]

My hon. Friend makes some extremely important points. In connection with the Irish border, a derogation already exists, potentially, between the European Union and its neighbouring states through EC regulation 1931/2006, which allows, particularly within a certain distance of the border, small and medium-sized enterprises legally to avoid duties and customs, thus ensuring and promoting cross-border trade. Does he agree that that model could be appropriate on the island of Ireland?

[Mr Fysh]

I thank my hon. Friend. That is a very interesting point, and I am sure that Ministers will look at it.

The Irish economy probably has more to lose than any other party in the negotiations between us and the EU. We have been talking in our papers about wanting to maintain the common transit convention, and that is probably right. Ireland is incredibly dependent on that because 80% of its trade with the mainland EU goes via our UK land bridge. There are many issues with that, not least the licensing of drivers who currently drive these goods across the borders in a seamless fashion. We need to make sure that we focus on enabling that if we want—

[Ian Murray]

Will the hon. Gentleman give way?

[Mr Fysh]

I cannot take any more interventions, I am afraid, because other people want to speak.

Given the apparent attitude of the Government of the Republic of Ireland to some of these matters at the moment, we should not automatically assume that we will allow them access to the common transit convention. Ministers should take a pretty firm view of that given that we certainly do not want our islands and our nations to be split into different areas. I am very happy to support these resolutions.

Taxation (Cross-border Trade) Bill

Marcus Fysh Excerpts

2nd reading: House of Commons
Monday 8th January 2018 Commons Chamber

[Mr Marcus Fysh (Yeovil) (Con)]

I was hoping this evening that we might begin to get past some of the old arguments and debates over whether to leave the EU that we have been having ad nauseam over the past year and more, but it seems as though some people cannot understand that if we do not leave the single market and the customs union, we simply have not left the EU. It is by virtue of being a member of the EU that we are in the customs union, and we automatically leave it on the day we leave the EU.

The opportunities that are there for this country as a result of leaving the EU simply will not be there if we stay in the single market. The behind-the-border trade reforms that can give advantages to our service industries will not be possible if we do not have control of our own regulation, and being a member of the single market will obviate that entirely. Similarly, on the customs union or, indeed, a customs union, if we leave the control of our customs and trade policies with the EU, everybody would judge that to mean our not having left the EU. What we need, and what I have argued for consistently, is an advanced and modern form of customs co-operation that enables our trade to be as frictionless as possible. There will be frictions, however, and we should not shy away from talking about them. The Bill begins to allow us to have control over all the levers that enable us to put such things into place. This enabling legislation is vital so that we can have the systems that are required for things to operate properly on day one after we leave the EU.

I will certainly support the Bill’s Second Reading, which will give it this House’s support in principle. We have heard quite a lot of discussion about the different policy stances that the Bill will enable us to take up in future, and there will obviously be much more discussion about what our trade policies should be. It is entirely right that that should happen in this House in a constructive and, I hope, cross-party manner, because this is about our futures and those of our children and grandchildren, too.

I want to address a few of the things that have come up this evening. The point about VAT and cash flows is interesting and I have raised it before, and it is worth remembering that the EU is going through its own change process on VAT. It intends to impose a directive that would essentially mean that the country from which a good is being exported will collect the VAT at its own rate rather than have a good exported on a VAT-free basis and then get the receiving country to account for the difference after having collected VAT on receipt. That in itself will change a lot of the cash flows around intra-European trade, and it is worth examining more closely whether it makes sense in that context for us to think about having a system that enables us to collect VAT for each other in the future. I am not necessarily against being party to some sort of arrangement with the EU on VAT to enable that smooth process at the border to continue, but we need to look at it much more closely. I hope Ministers will give some thought to that and inform the House of their thinking.

We have also heard today about rules of origin, and it is right to raise that—I have previously raised rules of origin both in the International Trade Committee and in the Chamber. The hon. Member for Aberdeen North (Kirsty Blackman) made the excellent point that the cumulation of rules of origin is very important in any trade deal. We will have to think about those things anyway, and we absolutely have to think about them in the context of rolling over the trade agreements we already have by virtue of being in the EU. There is a lot of good will on the part of foreign nations that are party to those deals, but rules of origin will definitely have to be addressed in our negotiations with the EU.

As my colleague on the International Trade Committee, the hon. Member for Hornchurch and Upminster (Julia Lopez), said earlier, tariff-free quotas are also important in that context, and the EU has to think about that. When it comes to rules of origin, we also have to remember that our supply chains are highly integrated, and it is not as simple as saying that we just cannot trade with the EU anymore. It would also be very damaging for the EU, as having to find suppliers that are not part of our supply chain would create a lot of pressure on EU businesses, and it would create a lot of pressure on the EU to find resource from within its own economies to meet those supply chain needs. That is not something the EU would want.

[Christine Jardine (Edinburgh West) (LD)]

The hon. Gentleman is talking about European suppliers needing to find someone to supply, and about companies in this country needing to use such supplies. Is there not a danger that, particularly in the car industry where companies from other parts of the EU are currently in this country, we will lose viable industries? They will simply go where the supply chain is easier and where they will not be tied up in the red tape proposed in this Bill.

[Mr Fysh]

The hon. Lady is right that, particularly in the car industry, rules of origin are an issue across the world. In the North American Free Trade Agreement, for example, the ability of US and Canadian car manufacturers to integrate their supply chains makes a big difference. Under the Trans-Pacific Partnership, which the Canadians are considering re-entering in a modified form, rules of origin on cars are probably one of the main determining issues. The degree to which local content needs to be demonstrated is a major factor.

Among other things I hope that, through this process, car manufacturers will look at sourcing more UK content in order to raise the proportion sourced in the UK, or indeed in the EU. It is all to play for, and there are lots of different ways of organising it. I would not necessarily say it is impossible or too hard but, yes, it needs to be thought about.

In that context—I have also said this before—the Customs Declaration Service that HMRC is working on has to be flexible enough to change the values that are put into the system. Whether on VAT, import duty or the cumulation of rules of origin, we need to make sure the system is able to be changed flexibly and easily at a later date. If that is not the case, this will be a nightmare and we will have a computer system that fails. I hope HMRC is well aware of that fact and of the need for that flexibility.

We have also heard about trade remedies, and it is right to say that the Trade Remedies Authority needs to be put in place very soon. The sooner it can get on with doing the work of analysing what the competitive position in various of these industries where existing or potential future remedies are going to be needed, the better; that has to be done with a good lead time in order for us to be able to argue at the WTO that we should potentially think about renewing trade remedies or putting new ones in different industries in place.

We also heard a little about lesser duty. It is fair to say that the lesser duty provisions in the WTO agreements are there for a reason: to try to prevent an arbitrary and egregious application of trade remedies. However, we need to make sure that we use our opportunities arising from coming out of the EU to make these arguments for how the global trade system should work in a non-egregious and non-arbitrary way, one where we can have rational dispute resolution mechanisms for our trade.

Having said those things and having said how necessary this Bill is, I must say that I have some concerns about the text, which I would like to discuss with Ministers and think about during the later stages of the Bill. I am concerned about clause 42, which deals with the EU law relating to VAT, and the potential for statutory instruments to be brought forward to alter the rights, remedies and procedures which have been imported by virtue of the European Union (Withdrawal) Bill. Similarly, I would like more clarity on clause 47, which deals with EU law relating to excise duty. We need to think a bit more about it, because it seems to give the Treasury and Treasury Ministers the power to alter fundamental concepts of EU law and the application of it in the future.

We also heard about clause 31, which relates to the potential implementation of a customs union, with fairly draconian Henry VIII powers. Admittedly they are subject to an affirmative procedure in the House of Commons, but it would be worth knowing a bit more about what the intent of this is and exactly how it would operate. Overall, we need to make sure we use this opportunity and this Bill to get a positive new customs co-operation system in place with our EU friends and allies. What we want is a good relationship with the EU, and it does not have to be at the expense of the rest of the world. This is not an either/or situation. I have heard many commentators say that if we are not part of the EU, we cannot do anything with the EU and that all the other deals we might do around the rest of the world cannot replace that. That is a false argument because we are looking to build on what can be as near as possible to our current relationship with the EU, and if we can do that really well and are smart about it, we can make a great success of leaving the EU.

Taxation (Cross-border Trade) Bill

Marcus Fysh Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 16th July 2018 Commons Chamber

[Yvette Cooper]

I completely agree with the right hon. Lady. The former Brexit Secretary seems to be arguing that because companies trade across borders that involve customs checks, we should rip up our customs-free borders. He is saying that because those trades take place, it is okay somehow to add costs to our trading process. Why on earth would we do that? Why on earth would we add burdens to businesses that do not face them at the moment? Why on earth would we make the process difficult and more costly for them? It is not that we think all trade will stop—of course it will not—but the point is that that trade will become more costly and burdensome, and our businesses and manufacturers will be at a disadvantage compared with their European neighbours and competitors. That is unfair on our manufacturers, which we in this House should be standing up for. I certainly believe in standing up for Yorkshire manufacturing.

The former Brexit Secretary also seemed to be arguing that, because we coped with Operation Stack before, let us have more delays again. Yes, we can cope, but Operation Stack cost businesses coping with those long delays a fortune.

[Mr Marcus Fysh (Yeovil) (Con)]

Will the right hon. Lady give some consideration to supporting our new clause 36, which will become a key piece of legislation if the UK is to operate proper trade defences? She mentioned manufacturing, and I note that many Labour Members have constituencies where workers may depend on the UK’s having good trade defences. Under the facilitated customs arrangement, that would not be possible without new clause 36.

[Yvette Cooper]

Let me just deal with new clause 36. If the Government are saying that they will accept it, I do not understand how that does not rip a hole right through their White Paper. New clause 36 explicitly states that we cannot collect customs and excise duties at the border on behalf of another country unless that country is going to do the same for us, but the White Paper states:

“However, the UK is not proposing that the EU applies the UK’s tariffs and trade policy at its border for goods intended for the UK.”

That is the opposite of what is said in new clause 36. Have the Government ripped up their own White Paper in the space of a couple of days? This is a chaotic approach to a matter that is so serious, and it shows a ridiculous wobbling in the face of a small group of people who I do not believe speak for the majority in this country.

[Yvette Cooper]

I think that the right hon. and learned Gentleman is right on two counts. First, I think that this inconsistency and buckling in the face of objections from what I consider to be an unrepresentative group is the wrong approach. Secondly, I think that these customs arrangements are immensely important.

[Mr Fysh]

Will the right hon. Lady give way?

[Yvette Cooper]

No, I will not, because there is a time limit and I want to finish my speech early so that others can contribute.

Members who oppose any form of customs union are underestimating the significance of rules of origin checks which, according to the Government’s own analysis, can burden businesses with additional costs amounting to between 4% and 15%.

--- Later in debate ---

[Caroline Lucas (Brighton, Pavilion) (Green)]

I support all those who have been arguing for continued membership of the customs union, and therefore I support new clause 1. It is clear from everything we have heard today that, if we are to avoid serious economic hardship, membership of the customs union is essential. Frankly, the wrecking ball that the hard Brexiteers would bring to British business and industry is pretty extraordinary, and all for what?

The Prime Minister had it pretty much right when she spelled out:

“We export more to Ireland than we do to China, almost twice as much to Belgium as we do to India, and nearly 3 times as much to Sweden as we do to Brazil. It is not realistic to think we could just replace European trade with these new markets.”

She said that in April 2016, and I contend, as the Prime Minister herself is fond of saying, that nothing has changed.

In the brief time available to me, I will raise the issue of standards, particularly in relation to my amendment 71. Clause 8 sets out factors to which the Treasury must have regard when considering the rate of import duties that apply to goods. Those factors include the interests of UK consumers and the desirability of maintaining and promoting productivity and external trade.

Amendment 71 would add to those factors. First, it would add the interests of UK producers, particularly farmers. Secondly, it would add the desirability of ensuring that UK standards of animal welfare, food safety and environmental protection are not undermined by imports produced to lower standards.

The Prime Minister said at Prime Minister’s questions in February 2017, and many times since:

“We should be proud that in the UK we have some of the highest animal welfare standards in the world—indeed, one of the highest scores for animal protection in the world. Leaving the EU will not change that…we are committed to maintaining and, where possible, improving standards”.—[Official Report, 8 February 2017; Vol. 621, c. 424.]

Similarly, we have heard the Secretary of State for Environment, Food and Rural Affairs say on many occasions that we need to maintain, and where possible enhance, environmental and animal welfare standards. However, if the UK is unable to protect its farmers from being undermined by lower-quality imports, those farmers are likely to find it hard to be competitive and to go further on improving their animal welfare and environmental standards. Accordingly, when negotiating new trade agreements, it will be vital that the UK insists on the inclusion of a clause permitting it to require imports to meet UK animal welfare and environmental standards. I have tabled an amendment to the Trade Bill to that effect.

If that were not to happen and we were to lose the principle of prohibiting products that do not meet our standards, we would need some kind of backstop, which is where amendment 71 comes in. It would give Ministers the power to place differential tariffs on imports. Imports that do not conform to UK welfare standards would be subject to tariffs high enough to safeguard UK farmers. It would ensure that UK farm businesses were not undermined by low-quality products and that UK consumers would be protected from goods of a lower standard—chlorine-washed chicken, ractopamine-fed pork and hormone-treated beef, to name but a few—through tariffs on imports that do not meet UK standards. These tariffs would effectively make the cost of these lower-welfare products an awful lot higher to protect our standards here in the UK.

[Mr Fysh]

The hon. Lady makes an important point about the value of trade defences in our armoury. Would she consider supporting new clause 36, which is essential if the UK is to be able to operate its own trade defence policy, because if the EU is not collecting our tariffs for us at our border, there will potentially be nothing we can do about that?

[Caroline Lucas]

I am afraid that I do not share the hon. Gentleman’s faith in our own Government continuing to keep higher standards. We have already heard clear criticisms of new clause 36 for many other reasons, including the way in which it drives a coach and horses through the kind of customs union that we want, so I will not be supporting new clause 36.

I was going on to give examples of ways in which food standards in the US are much lower than our own. Many may find the prospect of eating chlorine-washed chicken disturbing. Although there appears to be no clear scientific evidence that it poses a substantial risk to human health, it is linked to poor animal welfare on farms and at slaughter. Similarly, ractopamine is a feed additive used to promote growth in pigs, and its use is permitted in the United States, but prohibited in the EU. There is evidence that it has a detrimental impact on pig welfare, with the Humane Society of the United States stating that it

“causes death, lameness, stiffness, trembling and shortness of breath in farm animals”.

Concerns have been expressed about its impact on human health as well.

My amendment 71 would simply require the Treasury, when considering the rate of import duty that ought to apply to any goods, to have regard to the interests of UK producers, such as farmers and to the desirability of ensuring that UK standards of animal welfare, food safety and environmental protection are not undermined by imports produced to lower standards. I will wrap up my comments about it there.

I am supporting a number of other measures, including that on dealing with impact assessments, which are vital when we talk about impacts on the economic situation in this country and on the Northern Ireland border. However, I just thought that it was important to put something on record in this debate about the impact on animal welfare and environmental standards, too.