Taxation (Cross-border Trade) Bill

Simon Clarke Excerpts

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

[Mr Leslie]

Perhaps we all just dreamed about that—it was something that we conjured out of thin air and imagined.

[Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

The Prime Minister at the time was perfectly clear that leaving the European Union did indeed involve leaving the single market and the customs union. It is sophistic in the extreme to suggest that people did not mean to leave the European Union and its institutions when we voted to leave.

[Mr Leslie]

Well, let the Prime Minister of the time come to tonight’s debate and say that himself.

[Mr Simon Clarke]

He is not here.

[Mr Leslie]

Oh, that’s right—he is not here anymore. I vaguely remember who the Prime Minister was at the time.

The ballot paper text is a matter of record for all to see. It asked whether we should remain in or leave the European Union, but it did not go into the details, because in a parliamentary democracy those sorts of details are naturally left to us. This is on our shoulders. We are accountable to our constituents for interpreting that referendum result and putting it into effect, always with an eye on protecting their best interests. That is our job—it is what we are elected to do.

Government Members may think that it is in their best interests to leave the customs union, but that was not on the ballot paper. I disagree with them. I do not think that leaving the customs union is in our best interests, and certainly not those of my constituents. We are talking about a potential impact on half the goods traded by the United Kingdom, as half our goods trade goes to the European Union. These are not inconsiderable issues. Some 2.5 million lorry journeys a year through Dover might be affected. Whole businesses have set up “just in time” business models, down to a matter of minutes, for how goods and components will be sourced throughout supply chains and how inventories will be sourced from across the whole European continent, but they now face being upended not only by the potential duties imposed by the Bill, but by other, non-tariff barriers including bureaucracy, additional form-filling, registrations and inspections. Goods coming in might have to go to one side, both at the port of departure and at the port of entry, to be checked for sanitary and phytosanitary compliance. There are all sorts of inhibitors to the free flow of goods. I and other Opposition Members are talking about free trade. That is what we should be standing up for, which is why this is an incredibly important issue.

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[Tom Brake (Carshalton and Wallington) (LD)]

Let me start where the Minister started. He spoke of wanting to secure the greatest possible economic advantage for the United Kingdom, but I am afraid that what we have is a series of Ministers who are wilfully proceeding with Tory Brexit decisions that they know are damaging to the UK’s economic interests.

Some Conservative Members—although not Ministers —state openly that they realise that what the Government are pursuing is damaging to our economic interests. Some are embarrassed by that, and I shall not embarrass them by naming names; they are keeping their heads down and staying quiet. Some think that this is a price worth paying. Some believe that it will benefit the United Kingdom, although sometimes the advice that they give to others is the complete opposite of their claims to that effect.

All those who follow this debate, whether they are leave or remain supporters, ought to be aware that Ministers are advocating a move that they know is damaging to the UK’s interests and that they are doing so because on 23 June 2016, on one day of the electoral cycle, people voted to leave the European Union. People need to remember that Conservative Members who were overwhelmingly in favour of our remaining in the EU know that this will cause us damage, but are proceeding with it nevertheless. The Government will not admit that, and they will not release the information that would enable us to know it. We have already had the rather circular argument about sectoral analysis, impact assessments and so on. The one thing that the Government are not willing to do is share the information about what the economic impact of Brexit will be.

The hon. Member for Folkestone and Hythe (Damian Collins), who is no longer in the Chamber, made a very sensible point. He understands perfectly well the impact that leaving the EU and the customs union would have on the port of Dover. He rightly pointed out that countries trade more effectively with countries that are close to them. That is why the idea that there is a trade deal out there with Australia or New Zealand that will replace the trade deals that we have with the European Union is a fiction.

There have been many references to frictionless, seamless trade. That is fine; everyone wants to achieve that. The only problem is that, so far, no one has actually identified how it will work. It is great to have the aspiration, but in practice no solution is available. The same is true of the border between Ireland and Northern Ireland. The hon. Member for Nottingham East (Mr Leslie) confirmed that that can has been kicked down the road. No solution has been identified in phase 1 of the negotiations. It has been accepted that there is a huge problem, but also that the can will be kicked a little further down the road.

[Mr Simon Clarke]

The whole point is that the Irish border issue cannot be resolved until we know the wider context of the trade agreement that has been established. The right hon. Gentleman is getting the logic back to front.

[Tom Brake]

We will wait and see whether I have got the logic back to front. I suggest to the hon. Gentleman, however, that the idea that it is possible to have on one hand a completely seamless border and on the other hand a United Kingdom that is outside the European Union does not work. There must be one of two solutions. The first, relating to where that border sits, would be very unpopular with members of the Democratic Unionist party, while the second goes against everything that the party in power is advocating. I do not think that there is a simple solution, and that is why I think that the issue has been kicked down the road. I suppose people are hoping that, perhaps as a result of phase 2 of the negotiations, there will be a miracle solution that will make possible a frictionless, seamless border between Ireland and Northern Ireland, but given that no one has identified it so far in the 18 months or so that have elapsed since the referendum, I am not confident that anyone will come up with it in the time that remains.

I believe that the Bill is unnecessary and, indeed, highly damaging. It was required only because the Government have set themselves against the solution that is our staying in the customs union. The hon. Member for Gloucester (Richard Graham) tried to highlight the differences between Labour Front Benchers and some of his hon. Friends, which is easy enough to do, but he could equally have chosen to highlight the differences on the Tory Benches. At least one Tory Member, the right hon. Member for Broxtowe (Anna Soubry), considers the solution that the Government are trying to identify in all their fudges and workarounds to be staying in the customs union, and I agree with her. If there are differences of opinion, they exist on both sides of the House, not just between Labour Front and Back Benchers.

We will oppose the Bill’s Second Reading, not for—I was going to say mealy-mouthed reasons, but that might be unfair. I do not know the hon. Member for Bootle (Peter Dowd) terribly well, but I have no reason to believe that he is, in fact, mealy-mouthed. I must say, however, that Labour Members are trying to sit on the fence for as long as is physically possible, in spite of repeated interventions from their own side. At some point, they will have to jump in one direction or the other. It must be getting very uncomfortable for them, sitting on that fence. The longer they sit on it, the sharper and more uncomfortable for their backsides it will become. At some point, they are going to have to jump. I hope that they will jump in the direction that they are being encouraged to do by some of their Back Benchers and by the Liberal Democrats, the Scottish National party, Plaid Cymru and the Green party—namely, in favour of staying in the customs union and the single market long term, not just as a means of massaging support over the next few months but in the long-term interests of the United Kingdom.

As I have said, I do not want to describe Labour Front Benchers as mealy-mouthed, but there is clearly some difficulty with the position that the Labour party is trying to adopt, and I would like some clarity on this. Labour Members say that they are interested in preserving jobs, for instance, and I wonder what work they have done to assess the impact of a substantial number of job losses in the transport industry. A lot of goods are transported from the Republic of Ireland to Dover through Northern Ireland and the United Kingdom. Those involved are thinking of simply cutting out the rather complicated business of crossing the UK border altogether and instead shipping the stuff straight from Ireland to, say, Cherbourg. That would result in the loss of many jobs in Britain along the way.

We have heard many references to the VAT change, which could affect between 100,000 and 150,000 businesses. Concern was expressed earlier that some larger businesses can be quite aggressive towards small suppliers, but a lot of the businesses affected will be small businesses that suddenly find themselves in difficulties with their cash flow. I wonder what analysis the Government have carried out on that. I am afraid that, as in so many areas relating to Brexit, the answer is that there has been no impact analysis and that the Government are simply proceeding with these changes.

One of the key claims by the leave campaign was that leaving the EU was about cutting red tape. I would love the Minister to confirm that the measures in the Bill will cut red tape for businesses, but frankly I cannot see how businesses will benefit from a reduction in red tape in any shape or form as a result of this legislation. Instead, businesses that are not subject to red tape at the moment will have to take on red tape that they have never previously had to deal with. The Minister must at least try to address that point, given that one of the main claims made by leave campaigners was that leaving the EU would cut red tape for businesses.

We could talk at length about the delegated powers, as we have done on many other Bills relating to Brexit, but there is no point in rehearsing the arguments that have been made on those Bills, because the Government are clearly intent on taking advantage of the situation and cutting Parliament out of the loop as much as possible.

If the Government want to proceed in the way that they are doing at the moment, trade remedies will be essential. Members will be aware that trade remedies are currently implemented by the EU, which has more than 100 such measures in place against imports from 25 countries. To what extent does the Minister expect those measures to be replicated? Also, does he believe that it will be possible for the UK, operating alone, to have more effective trade remedies than those currently implemented by the EU with its 28 member states? Again, we need clarity, honesty and accountability. We need to hear from the Minister whether he thinks that the trade remedies available to the United Kingdom on its own will be weaker and less effective than what is currently available to us as a member of the European Union.

I welcome the fact that the Government will legislate to ensure that we can maintain a system of trade preferences for developing countries. I have already referred to the VAT issue and to the impact on red tape. I hope that the Minister can confirm that the Bill will have no red tape implications, although it is hard to see how he could possibly do so. [Interruption.] Would my hon. Friend the Member for Edinburgh West (Christine Jardine) like to intervene on me?

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[Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

After the successful conclusion of the first phase of our Brexit negotiations last month, it is great to see Ministers pressing forward to build our future trading relationship with Europe and the rest of the world. This Bill, as Opposition and Government Members have identified, will be critical in establishing the framework within which that trade is conducted. It is of huge significance to my constituents in Middlesbrough South and East Cleveland and for the people of Teesside as a whole. I never forget that the north-east is the only net exporting region of England. In that regard, there are two main elements that I want to address tonight. The first is trade remedies, which are vital for the UK and Teesside steel industries, and the second is the special customs procedures that will be central in allowing Teesside to fulfil our ambition to host the first free port in the UK after Brexit.

Turning first to steel, as we know, the past two decades have been extremely challenging for the industry. Most recently, a combination of a surplus of global production, shamelessly exploited by the Chinese to dump steel, and our high domestic industrial energy costs led to the crisis experienced by the industry in 2015, but the steel sector remains a cornerstone and an enabling sector of our wider economy. The Government’s own study of the future of the industry estimates a massive £3.8 billion opportunity in steel demand by 2030. That progress, however, depends in large part on having a strong trade remedies regime, which brings me back to the Bill.

I am a passionate advocate of free trade, but free trade does not mean trade without rules. State-subsidised exports and those dumped at artificially low rates are a distortion of the free market. Steel producers, as people in Redcar and Cleveland know only too well, are particularly vulnerable to unacceptable trade practices. As the hon. Member for Aberavon (Stephen Kinnock) identified, more than one third of the 92 EU trade remedy measures currently in place appertain to steel. It is therefore critical that our post-Brexit trade remedies framework is robust and firm. On the whole, I am confident that the Bill will deliver that, but there are three areas where I believe improvements could be made.

Given that the Financial Secretary has already been generous enough to meet me before Christmas and that the Minister for Trade Policy has agreed to meet me later in the week, I will limit myself to touching on those areas in outline. First, there is the broad lack of detail. For example, there is currently very little detail of how investigations by the Trade Remedies Authority will be conducted and remedies applied. There is also uncertainty about how injury to producers will be calculated and quantified. Finally, the Bill enables the Secretary of State to overturn TRA recommendations on the grounds of public interest, but it is not yet clear how that public interest will be defined. I urge Ministers to put more detail into the Bill where possible. Where such technical details would be inappropriate, I encourage them to publish secondary legislation as soon as possible, even if only in draft. Although I appreciate that some of the finer details may depend on the outcome of the negotiations, some clearly do not.

Secondly, although it is entirely reasonable that an economic interest test is conducted by the TRA prior to the recommendation of definitive measures, it is not clear why such a test is required before the recommendation of provisional measures. My concern here is time. The reason provisions measures exist at all is that trade investigations can necessarily be lengthy and it may take some time before the authority reaches a definitive decision. It is possible that a great deal of damage could be inflicted on our domestic producers before a definitive investigation could be completed. Will the Minister therefore agree to review the extent to which the economic interest test may delay provisional measures, especially those safeguarding against a flood of exports?

Finally, the Bill states that the TRA will be unable to open an investigation if the UK market share of a domestic industry filing a complaint is below a certain threshold, which is as yet unspecified. That provision will leave many producers uncertain whether or not they fall within the scope of the Bill’s protections. In addition, while I understand the rationale for requiring a threshold in theory, I am concerned that a too onerous threshold could serve to undermine the World Trade Organisation right for infant industries to seek protection and also to prevent industries that mainly export from seeking relief.

The special customs procedures outlined in the Bill will be central to allowing Teesport to fulfil its ambition of being the first major free port in the UK. A free port, for Members who are not aware of the concept, is an area that is physically within a country but legally outside it for customs purposes. Goods that enter a free port do not incur import duty. Instead, import duty is paid only when goods pass from the free port into the domestic economy. The hon. Member for Redcar (Anna Turley), who is not in her place but it is so good to see her back in the House today, made a very good case for why Redcar and, by extension, Teesside are so well qualified to host the first free port in the UK after Brexit.

Worldwide, there are approximately 3,500 free ports located in 135 countries. We do not have any. Our membership of the customs union and the stringent state aid regime have acted as a block on their creation. Brexit therefore presents a fantastic opportunity to introduce free ports in the UK.

Teesport handles more than 5,000 vessels each year and about 40 million tonnes of cargo on an estate covering almost 800 acres. Situated immediately adjacent to the mayoral development corporation, Teesport is undergoing huge investment to prepare it to rival the largest ports in Europe. It has all the qualities that will allow it to prosper as an international hub for trade and supply chain processing. A free port at Teesport would aid the Government’s wider objectives of rebalancing the economy from south to north and from the service sector to manufacturing.

To that end, I am pleased that the Bill makes express reference to free ports and sets out the regulatory framework under which a free port would operate. My only request to the Minister is to provide additional clarity on paragraph 9 in part 4 of schedule 2, which states that processing in a free port could take place only if

“the processing of the…imported goods…results in the production or manufacture of other goods in which the imported goods can be identified”.

I would be grateful if the Minister gave examples of which manufacturing processes would and would not be permitted under that definition. That is important because it will mould the future shape of free ports in this country by determining the extent of the economic activity that may take place within them. To my mind, it is important that at this early stage, we maximise flexibility so as not to unduly hinder the new and unique opportunities that an independent trade and customs regime will bring.