Duties of Customs

Peter Grant Excerpts

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

[Kirsty Blackman]

I am not saying that anybody should fear international trade. International trade is a very good thing, particularly for productivity, for example, which the oil and gas industry has been quite good at bringing up. The more international trade a country has, the better its productivity growth, but Brexit is not going to result in more international trade—[Interruption.] Brexit is going to result in the UK having more say over the terms of some trade deals with third countries. It will not result in more international trade, because the EU is international—it is made up of a number of other countries—and there is going to be a reduction in frictionless trade to the EU as a result of the changes. [Interruption.]

[Peter Grant (Glenrothes) (SNP)]

My hon. Friend will have noticed that Conservative Members are expressing a fair degree of anger. Clearly some of them do not believe her when she says that Brexit will not lead to an increase in international trade. The Government have carried out assessments, so is it not the case that if they wanted to demonstrate that Brexit would lead to an increase in international trade, they could quite easily publish those assessments and we could find out for ourselves?

[Kirsty Blackman]

I absolutely agree.

Monique Ebell from the National Institute of Economic and Social Research has written a report that compares participation in very comprehensive free trade agreements with membership of an organisation such as the single market, which is pretty much unparalleled in its encouragement of cross-border trade. Being part of a very close free trade arrangement does not give the same access to trade in services or goods as membership of the single market. Even if we had a comprehensive free trade agreement with every country in the world, we would still lose out as a result of Brexit.

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[Ross Thomson]

No. I want to make more progress.

Furthermore, striking new trade deals will unlock the potential of many more Scottish businesses, helping them to make their mark around the world and boosting our economy at home, too. If we are to seize these opportunities and make the greatest possible success of them, Britain needs to be ready on day one of our exit from the EU for new trade relationships. On this point, the clock is now ticking.

[Peter Grant]

Will the hon. Gentleman give way?

[Ross Thomson]

No.

That is why this customs Bill is so important. Irrespective of any agreements reached between the UK and the EU as part of the negotiation and exit process, the UK will need primary legislation to create its own stand-alone customs regime, and to amend the VAT and excise regimes so that they can function effectively after the UK has left the EU.

The Bill will create a framework that lasts for a new UK customs regime. It will lay before us the necessary foundations to allow new arrangements on customs to be put in place depending on whatever the outcomes of the Brexit negotiations are, such as the implementation of a negotiated settlement with the EU, or leaving the EU without an agreement on customs.

I am sure that all Members of this House want our withdrawal from the EU to provide as much certainty and continuity as is possible for our businesses, employees and consumers. Currently, as the majority of rules governing customs in the UK are contained in directly applicable EU law, such as the Union customs code, it is important at this stage that new domestic legislation is brought forward and put in place for when we leave the EU in March 2019.

In the longer term, depending on the outcome of the negotiations with the EU, the Government will want to consult on possible changes to this law to help UK businesses, but now is the time to help businesses in all of our constituencies by providing the continuity of the existing rules, wherever possible.

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[Richard Graham (Gloucester) (Con)]

It is a great pleasure to follow the hon. Member for Edinburgh South (Ian Murray), who spoke, at considerable length, of his conviction that the customs union is the way forward. He has always spoken with great clarity and certainty, although I suggest that he is more compelling in his usual manner as Tigger than as the Eeyore whom we saw tonight. I would also say that the difficulty of assuming that business is monolithic, and always speaks with one voice, is that it does not. There are businesses in my constituency with which I deal as a trade envoy that are concerned about the future, but there are others that are relaxed. Both those views will depend, ultimately, on what sort of arrangement we reach on trade and customs, and on what terms.

That brings us to this preparatory Bill. As the Minister has explained, it is fundamentally nothing other than necessary preparation for when we leave the European Union. It is a framework, not a position on a preferred type of future customs relationship. It allows for either of the Government’s options: a streamlined system that is, as far as I can see, identical to the current one; and a new customs partnership of which I am sure we shall hear more when the Bill is published. This preparatory work will be even more important in the sad event of future arrangements not being agreed with the EU.

The Minister confirmed that HMRC arrangements at our roll-on/roll-off ports will be in place in January 2019, ready to deal with worst-case scenarios. I believe that there is an important political point behind that, which Members who, like the hon. Member for Edinburgh South, would much prefer to stay in the customs union need to consider very carefully. There are some who believe that leaving the EU without a future deal or any implementation period would be a walk in the park, whereas others believe that it would be impossible to operate our ports, and, perhaps, much of our trade, and that it would therefore be a disaster to leave the customs union at all.

However, many of us who have always thought that both the UK and the EU would benefit hugely from a strong customs partnership for the future, and what Michel Barnier calls a “new partnership” in general, believe that this preparatory Bill is essential to that. It is absolutely vital that the EU does not overplay its strong hand at this delicate stage of negotiations, for if it decides that negotiations on citizens’ rights, Ireland and finance have made insufficient progress to allow us to move on to debating an implementation period, future trade and other partnerships, there is a real danger that the momentum will move behind those who believe not only that no deal is possible, but that it is likely or even desirable, and that we need to prepare for that situation above all else.

[Peter Grant]

rose—

[Richard Graham]

I am sorry, but I will not give way.

For those of us who want the negotiations to succeed and a new partnership, it is therefore incredibly important that our partners in the EU encourage us to build momentum for that by moving to detailed talks on future trade and customs arrangements as soon as possible. For now, this is simply an enabling Bill of changes, allowing for future UK tariffs, VAT levels, goods classifications and so on. As the hon. Member for Bootle (Peter Dowd) said, it is both practical and necessary. Today’s amendments close off the options and it would be sensible to avoid them.

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[Tom Brake]

If I am indeed following a pragmatist, I hope that the hon. Gentleman will listen to what is being said by many economic sectors, and perhaps read carefully the 58 sectoral reports once they are published, and come to the very pragmatic conclusion that he, as a pragmatist, will want to start to be more outspoken about the Government’s agenda of taking us over the cliff.

Members have suggested that the UK needs to leave the EU to be able to trade, but that is clearly not true. Many European countries are just much more successful than us at trading with other countries, including Germany, France and Italy. They do so within the EU, so there is no reason why we could not do so more effectively than at present. If we are unable to trade while we are part of the EU, I wonder why previous Prime Ministers, particularly David Cameron, spent so much time and effort sending trade delegations to various countries around the world to drum up trade. Was that a completely pointless exercise? Was that just about having 10-course banquets in Beijing, or was it because we can do a lot to boost trade while we are in the European Union? I think it was the latter, rather than a desire to have big dinners courtesy of foreign Governments. Of course the UK is in a position to trade—and, perhaps, to do so more effectively—with other countries while we are members of the EU.

It is nice, as a Liberal Democrat, to be able to make a speech that is longer than three minutes, so I might take full advantage of that in the couple of hours that remain for me to make a contribution, before the Front Benchers make their response. First, I want to focus on the issue of Ireland and Northern Ireland. Frankly, Opposition Members have had enough of listening to Ministers’ platitudes about how they will sort out the problem that is the border between Ireland and Northern Ireland. We do not want to hear about “frictionless” any more, or about blue-skies solutions that do not yet exist. What we want to hear from Ministers is the solution to this problem, because if the Irish Prime Minister was asking on Friday for a written guarantee from the UK Government that there would be no border controls, that was because he is worried and because he has heard nothing from our Government to explain how we will be able to leave the customs union, yet have no border and no border controls between Ireland and Northern Ireland.

[Peter Grant]

Does the right hon. Gentleman also agree that if the Government were to have a change of heart and agreed to ask to remain in the single market, that would take out two of the three stumbling-blocks? The rights of EU and UK citizens would be solved immediately, and the Irish question, although not completely answered, would be made a lot more soluble. We would then be left with the financial settlement as the only stumbling block to getting on to talk about trade deals, which is what we want to do.

[Tom Brake]

I entirely agree. Like other hon. Members, I am perplexed as to why the Government ruled out several obvious solutions to the dilemmas they face from the outset.

I am sure that a number of Members in the Chamber will have visited Northern Ireland. When I did so, which was about five weeks ago, one of the communities I visited was Forkhill in South Armagh, which was very badly affected during the troubles. A garrison of 3,000 soldiers in that town was responsible for the safety of approximately 24,000 people. The people of Forkhill reckon that when the garrison was there, it was the most militarised place in western Europe, and they are worried about returning to the troubles they experienced there in the ’70s, ’80s and so on. People were placing improvised explosive devices in culverts, under roads and on the approach roads to the border, and the residents of Forkhill are worried that there will be no means to control safely the 275 border points between Ireland and Northern Ireland. If the proposal is that part of the solution will be to conduct ad hoc checks at separate border points, or at some distance from the border, those people are worried that the British customs officer, the British police officer, or perhaps the British soldier will become a target.

All we have heard from a succession of Ministers is dismissive comments. The Secretary of State for Exiting the European Union dismisses any concerns expressed about the difficulties that could arise at the border. We need reassurances from Ministers, not the dismissive comments they are making.

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[Peter Grant (Glenrothes) (SNP)]

I am pleased to speak in favour of amendments (c) and (e) in the name of the hon. Member for Edinburgh South (Ian Murray). I sincerely hope that he will press them to a vote later this evening.

No one here would disagree with the need to have new customs legislation in place. Given that much of the customs legislation that we currently have is derived from EU legislation, nobody would argue with the fact that when the UK leaves the European Union that legislation will have to be replaced. However, as is so often the case in the debate about the European Union, we have moved very quickly from, “We need to have something in place” to being told that, “You will agree to put this in place whether you like it or not.” It is quite clear that there is a fundamental disagreement between—I suspect—a substantial majority of Members of this House and the Government on whether we should also be preparing to leave the customs union and the single market.

As well as paving the way for new customs tariffs, which is what this resolution is about, the resolution also implicitly paves the way for all the additional bureaucracy, all the additional infrastructure and all the additional border delays that leaving the customs union will inevitably create for every single journey of every single person and every single lorry and every single suitcase that travels to and from the European Union in future. It has been estimated that there will be an additional 548,000 customs declarations needed every day—that is six and one third declarations per second.

[Angela Smith]

I am sure that the hon. Gentleman will recognise that this particular problem will apply pretty severely to perishable goods such as food, agricultural produce and fresh fish.

[Peter Grant]

Absolutely. There are significant implications for perishable goods and, as was mentioned earlier, for the manufacturing supply chain where the goods can cross borders several times. There are also implications for medical supplies such as radioisotopes, which are useless if they are held up for a few hours at customs. That, of course, is before we even think about the massive inconvenience to travellers—either for business or leisure. Even if they have nothing to declare, they have no guarantee that they will not be on a plane when, for whatever reason, UK or French customs decide that they are going to search every single passenger coming off that plane.

We are told that in return for that, we will have this brave new world of trade deals with everybody and anybody. The hon. Member for Aberdeen South (Ross Thomson), who is no longer in his seat, harked back to the glory days of Glasgow’s place as the second city of the empire, blithely forgetting that, to our eternal shame, that empire was built on slavery. We cannot go back to the days when Glasgow was a huge trading port for tobacco, sugar and cotton because—thank God—we no longer have the slave plantations that were such an important part of that economic model.

We are not going back to the days of empire and too many virtual reality Government Members—well, there are not currently many Members on the Government Benches—need to understand, once and for all, that empire has gone. It is now partnership. Partnership means that when we are in a weakened position and the big players such as the Chinese, the Singaporeans and the Malaysians are in a strong position, we are not going to get a favourable deal from them if we negotiate on our own.

I do not want this motion to apply to goods going to and from the European Union or the customs union, because I want us still to be in the customs union. It has been made clear that that offers by far the simplest and least disruptive way of giving effect to the referendum result in June last year. The referendum, as far as the voters of England and Wales were concerned, certainly gave a mandate to leave the European Union, and we have to respect that. But there has never been a referendum mandate to leave the customs union or the single market. There was what looked to be an almost spontaneous, hasty and precipitate decision by the Prime Minister; a red line was drawn that has now painted the Government into a corner.

It is becoming clear that many of the Government’s highly plausible-sounding objectives simply cannot happen if we leave the single market. Those highly plausible-sounding objectives include the “deep and special partnership” that we are going to have with the European Union, the “continued close association” with the customs union, and the

“freest and most frictionless trade possible”

with the single market. Except it will not be as deep and special a partnership as it would if we were in the EU, it will not be as close an association with the customs union as being in the customs union, and it certainly will not be anything like as free or frictionless a trade deal as we can get by staying right where we are now in the single market.

As an indication of how much substance there is to these sound bites that the Government Whips are so fond of encouraging their Back Benchers to use, it is worth remembering that they were doing the same thing just over two years ago. But the sound bites that got cheers on the Tory Benches then, on the days when there was anybody there to cheer, were “long-term economic plan” and “Majority Conservative Government”. “Hear, hear”, they would shout. The Government’s current platitudes about easy trade deals are likely to be consigned to history just as quickly as the things that they thought would be around for a long time back in 2015.

We are now more than halfway through the journey from referendum to leaving day, and there is not one single major policy area where the Government have put forward a clear, concrete proposal for discussion. That means that on every major policy decision, the Government have taken longer to come up with an idea than 27 Parliaments—and 27 Governments will have to agree it. Putting pressure on those Governments and telling them that it is not fair to delay it will not work; they will act and speak in the interests of their people. It is ridiculous to condemn the Irish Prime Minister for speaking in favour of the interests of the people of the Republic of Ireland. That is what Prime Ministers are supposed to do. I wish that some Prime Minister would maybe listen to that.

As it stands, we are in serious danger of crashing out of the EU without a deal, but there is a simple way that the Government can avoid that. There is a simple way that they can move very quickly to clear the logjam—to avoid having interminable discussions about Northern Ireland that do not have a solution and to avoid having interminable discussions about the rights of 4.5 million citizens. Both those major problems can be substantially resolved simply by the Government having the humility to say, “We got it wrong. We have to change tack and stay in the single market.”

There is an urgent need for the Government to follow their own advice, listen to their own rhetoric and listen to the advice that the Brexit Secretary gave to the Germans last week: stop putting politics before prosperity, because it is never a smart thing to do. The Government should take the decision that they know as well as I do will prevent the worst economic and social damage of Brexit. The Government should confirm today that they want to remain in the single market and the customs union, and they should signal that intention by accepting the amendments of the hon. Member for Edinburgh South without forcing the House to a Division.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

It is a pleasure to follow the hon. Member for Glenrothes (Peter Grant), who made another powerful case for what is becoming incredibly evident in British society.

Let me start by trying to find some common ground on something that has divided us for more than 18 months now. I do not think that anybody here tonight wants to re-run the referendum; we all recognise the referendum result. I do, however, disagree with the right hon. Member for Broxtowe (Anna Soubry). I think we can get deals with anybody. The question is, what kind of deal and what are the consequences? And that includes no deal. Yes, we could get a free trade deal with other countries but, as we saw when Switzerland tried to negotiate with China, when big goes against little, the results are often not good for little. It is a real Hobson’s choice. China now has immediate access to the Swiss market, while the Swiss will have to wait decades to get similar access to the Chinese market.

All the options have consequences, including the option that this Government have taken over the past 18 months: trying to fudge and bombast their way through. Like many Government Members, I welcome the fact that we are finally having this debate because I want to speak up, above all, for the people whose lives, livelihoods and businesses depend on the certainty of knowing what happens next. That is a certainty that they are not getting from this Government. Some 18 months after the referendum, there are some 759 different treaties that have to be renegotiated, but there has been no progress on any of them, and we are fewer than 18 months away from the date on which we are supposed to leave the European Union.

The Government are spending money, hand over fist, to try to sort out the mess that they are creating every single day. We have had it confirmed that that money is coming from our armed forces, and the Minister has confirmed to me today that it is also coming from our education services. Money is being reprioritised to try to figure out what on earth a deal with Europe would look like. Eighteen months on, we have no answers. And all because the Prime Minister simply cannot admit that she simply got it wrong in the Lancaster House speech when she ruled out of access immediately the customs union and the single market.

I support the amendments in the name of my hon. Friend the Member for Edinburgh South (Ian Murray) because the British public deserve better. If the Government are going to make a mess of it, it is up to us as parliamentarians to try to give the people we represent—who need certainty and to understand what their future holds—the clarity that they desire.

[Peter Grant]

Does the hon. Lady think that it says something about the Prime Minister’s priorities that she took the time to apologise to her own Back Benchers for the disastrous general election that she dragged them into, but she will not apologise to the people of these islands for the disastrous Brexit that she is dragging us into?

[Stella Creasy]

I was struck by the discussion earlier about making decisions so quickly. I, too, did not vote for the article 50 legislation to be triggered, because I was concerned it was too soon in the process. However, some disasters are of our own making, and a snap general election in which the public thoroughly rejected her hard Brexit is certainly something the Prime Minister should learn from.

In her Lancaster House speech, the Prime Minister said that she wanted associate membership of the customs union—a membership that does not exist. The legislation that will come from the motion before us tonight is supposed to answer that question. Yet, I have read the Government’s White Paper, I have asked the Prime Minister repeatedly about the idea of associate membership, and I have asked her whether she has raised it with her European counterparts, and we have no answer.

It is a bit like someone asking to be an associate member of a gym—to use the swimming pool, but not to pay for all the weights or classes. Oddly enough, most business people would turn them down flat or at least give them an answer. I am very struck by the fact that, 18 months on, the Government cannot even tell us whether they have asked whether the wonderful, mythical, innovative, creative, dynamic partnership they believe they can get is even on the table.

This approach literally makes no sense. If we look at the reality of how we trade as a nation, we see that we are not an island factory; we are a nation that works with other countries to produce goods, and we are proud of the goods we produce through our hard endeavour. Let me give a great example. In the food and beverages industry, the EU accounts for almost 70% of our supply chain. In our car industry, 44% of the value of UK car exports comes from imported products. In the UK, we are great at making bumpers, brakes and clutches, but we are not so good at radiators, suspension or gearboxes. That is why we work with other countries to produce the great British cars that we are all so proud of. That is what is at stake when we reject the customs union out of hand: the ability to navigate and manage those relationships effectively and efficiently. For every £1 in car exports from the UK, 44p is spent on importing foreign parts. Some 24% of all imports from the EU are from the car industry. That is at stake when we suddenly rip up the rules under which that relationship happens.

The car industry is not alone. In 14 different sectors, at least 15% of the supply chain is dependent on the European Union—dependent on not having the kind of customs tariffs we are talking about and on having frictionless trade. That is true of some sectors much more than others. In the paper industry, 71% of the supply chain is dependent on the European Union. In the rubber and plastics industry, the figure is 69%; in pharmaceuticals, it is 66%. That is why we know that leaving the customs union will cost us £25 billion. These new tariffs alone will add at least £4.5 billion a year to importers’ costs—money they can ill afford to spend.

Then we get on to the practicalities—this is not just about the money that being part of the customs union and the single market helps us to save. We will see delays at Dover because nobody has yet invented the technology that will allow this frictionless trade. When we talk about pre-lodging customs checks, we know that that means still more paperwork and more complexity in the supply chain. It is no wonder the car industry is desperate for us to continue our membership of the customs union. So too is the National Farmers Union; so too are the leading pharmaceuticals brands. Being part of the EU gives us access not just to markets in the EU but, through our free trade agreements, to a third of all global markets at preferential trading rates.

When we look at the case for the customs union and at what it gives us now, it is clear that this is not about nostalgia for the “Ode to Joy”; cold, hard business sense says that if we have a good way of working, why would we rip it up? But ripping it up is exactly what the Government are doing—for something that, 18 months on, they still cannot tell us will exist. [Interruption.] I am sorry to see that I have made the Ministers entirely leave the Front Bench by pointing that out, because I really hope that at least one Minister will be here to answer one of my concerns about this legislation and particularly about the VAT proposals.

We have all talked about tariffs and customs tonight, but I want to unmask myself as a geek interested in VAT. When I talk to small businesses in my local community, VAT is one of their prime concerns. [Interruption.] I am grateful to the Minister of State, Ministry of Justice, the hon. Member for Esher and Walton (Dominic Raab) for being here. I am particularly looking for answers on the 13th directive—I know it is something he knows intimately.

VAT is one of those issues every business will say is a nightmare. I never thought that Labour Members would be arguing for less red tape than Government Members were, but that is exactly what we are talking about tonight. Some 63% of small businesses say that Europe is their priority market. If we add to the paperwork they have to deal with by removing the customs union and the single market, we will of course make trading harder for them. Compared with the bigger companies, they do not have the flexibility that Ministers blithely suggest they have.

Currently, businesses incurring VAT in the EU are able to claim it back through intra-country mechanisms. If they sell printers to Sweden, and they incur VAT as part of that, they can claim it back—it is relatively easy. Specifically—I am sure the Minister will want to look this up—we are talking about articles 170 and 171 of Council directive 2006/112/EC—the prime VAT directive. The detailed rules are in Council directive 2008/9/EC, and they are in our legislation. These Ways and Means resolutions will therefore have to address this point. I am sad that the Financial Secretary to the Treasury is not here to hear it, because I have been raising it with him for some time. I can see that he is talking to his officials. I very much hope that in his concluding remarks he will finally be able to tell me the answer.

Right now, because we have the single market, businesses trading with Europe can reclaim their VAT and manage VAT relatively simply. If we leave the single market, they will have to move on to the 13th directive, which covers non-EU companies trading in the EU. The details of the 13th directive are clearly written to be advantageous to companies, saying that they can set their own VAT terms. Let us think about that for a moment. A UK car manufacturer trying to trade across Europe in radiators and the pieces and parts that make them will suddenly have to deal with VAT across 27 different countries, and 27 different pieces of paper. I am glad that the Financial Secretary is now here because he and I share a concern to remove red tape for our businesses to make sure that British businesses are not facing additional paperwork and additional complexity.