Taxation (Cross-border Trade) Bill

Stephen Doughty Excerpts

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

[Mel Stride]

My hon. Friend is entirely right. That is why we have consulted ports so extensively, most importantly that of Dover, which I visited myself. I met the port authorities down there, and members of Her Majesty’s Revenue and Customs have been closely involved in consultations with the ports. Of course, the Bill allows the facilitations that we will require—both unilateral and bilateral—to ensure that the smooth flow of trade occurs at those vital ports. It is particularly essential that we do not have any delay to the processing of imports and exports that go through roll-on/roll-off ports.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

On the specific need to keep trade frictionless, HMRC, which is part of the Minister’s Department, said that we would need an additional 5,000 customs officials. The Home Office said that it was already recruiting 300 additional staff, although I understand that they will backfill places rather than taking on additional roles. How many new customs officers are currently in training to prepare for the new customs regime in March 2019?

[Mel Stride]

The important point is that we are in discussions with HMRC about its funding—[Interruption.] If I may, I will answer the hon. Gentleman’s question. We are discussing with HMRC the funding arrangements it will need in the 2018-19 financial year. As he suggested, Jon Thompson has said that between 3,000 and 5,000 staff will perhaps be required. Incidentally, they need not be new recruits; they may be people who are reallocated from other parts of HMRC as we change priorities, depending on how the negotiations pan out. I am very confident that an organisation of in excess of 50,000 people will be capable of recruiting sufficient individuals of the right calibre and with the right skills to ensure that the job is done.

--- Later in debate ---

[Mel Stride]

I will make two points. First, as the hon. Gentleman will know, such matters are for the usual channels, and his party is an important part of the usual channels. Secondly, the Bill will of course receive the normal high level of scrutiny as it passes through the House—line by line, clause by clause. Amendments can be tabled, debated and divided on if necessary. The Bill will then come back to the House on Report and for Third Reading. If he has any particular representations to make about the number of sittings in Committee, he should perhaps speak to his Whips, who can then speak to our Whips, and I am sure that we will all end up in a happy place on the issue he has raised.

[Stephen Doughty]

The Minister is being generous, as he always is. Having been opposing Whips at various points on various financial matters, I know that he always does these things in good faith, but I share the concern of my hon. Friend the Member for Nottingham East (Mr Leslie). Both Front-Bench teams are currently tied up with the Finance Bill that is going through—an important piece of legislation that we quite rightly oppose many parts of. Given that, we will not be able to start the scrutiny of this Bill in Committee for quite some time, and the Bill is due to be out of Committee by 1 February. The Bill will not receive full scrutiny in the House of Lords because this is a money Bill, so will the Minister tell us how many Committee sittings there will be to scrutinise a large, substantial and important Bill?

[Mel Stride]

The hon. Gentleman is being typically tenacious, but he asks the same question as the hon. Member for Nottingham East and he will have the same answer. I will spare the House my eloquence by not going through, once again, the same answer that I just gave.

--- Later in debate ---

[Peter Dowd]

There is no one in training and the staff on the ground take a completely different view from the hon. Lady.

The Bill outlines the trade remedies the Government will enforce against the dumping of unfairly priced goods. At the moment, these remedies are provided by the EU, but on leaving, the UK will have to enact and manage its own trade remedies. These measures are spread across this Bill and the Trade Bill and are of great importance to UK manufacturers. As I have said at this Dispatch Box on previous occasions, the Opposition will oppose any attempt by this Government to undermine UK manufacturing and jobs by the weakening of trade remedies, as well as any attempt to dismantle unilaterally the external tariff and open up UK markets to unfairly priced goods. This is a question not of protectionism, but of fairness and the rule of law, as countries that allow or encourage state dumping are not playing by international rules.

The manufacturing industry remains an indispensable part of the UK economy. According to the Office for National Statistics, manufacturing accounted for 2.3 million jobs in 2016 and 10% of the UK’s total economic output. These jobs are shared out across the minerals and ceramics, paper, steel, glass, chemical and fertiliser sectors. They are also spread across communities across the country, where manufacturing remains one of the largest employers. In my constituency alone, more than 2,500 people are employed in manufacturing, and the same will be true of the constituencies of many Members here today.

The trade remedies proposed in this Bill are pitiful to say the least. They are far weaker than the remedies currently in place in the EU and are weaker than those in most developed trading nations, and if they remain unchanged, they will put manufacturing jobs at risk.

[Stephen Doughty]

I agree very much with the point my hon. Friend is making about the pitiful nature of the trade remedies in the Bill. Indeed, I think that it poses much greater risks for industries such as the steel industry in my constituency. Does he agree that it is necessary to put paid to the myth that existed that we could not take trade remedies when we were part of the EU? Indeed, the former Steel Minister who is sitting opposite, the right hon. Member for Broxtowe (Anna Soubry), took a good decision, for which I praised her at the time, to introduce remedies on certain steel products that affected steel in my constituency. Whether these decisions are taken or not is a political choice; it is not about whether we can do this or not under the EU.

[Peter Dowd]

My hon. Friend is absolutely right on that point.

What is concerning is the fact that UK manufacturers and key industries have not been consulted on the trade remedies in the Bill. Perhaps the Minister can explain why, if the Prime Minister is happy to meet representatives from Toyota to agree a deal and the Environment Secretary is in regular contact with the National Farmers Union on future agricultural subsidies, he has failed to consult an industry that represents nearly 10% of the economy and employs millions on the trade remedies it needs to protect UK jobs.

--- Later in debate ---

[Mr Leslie]

If only that were the case. In fact, that same point is raised in paragraph 9 on page 6 of the explanatory notes, which states:

“The Taxation…Bill does not presuppose any particular outcome from the UK’s negotiations with the EU.”

That is not true. The Government have absolutely presupposed that the customs union is off the table. It is the ultimate presupposition, if ever anyone wanted a definition. This Bill apparently does not allow us to stay in the customs union, but it should allow us to do so, because I happen to believe that there is a majority in this House of Commons for membership of the customs union. I have a little job of work to do to continue to persuade my own party’s Front Benchers of that particular point, but I will try my best to do so because I think they will eventually recognise that being part of the customs union is incredibly important for our economy not just in the transition period, but for the longer term. I believe that the numbers are here in the House of Commons to support that and that it will eventually be proven.

I am disappointed that the Government have tried to twist parliamentary procedure by deeming this measure to be a money Bill. It is Mr Speaker who will decide whether or not it is a money Bill, and I think he will do so at the end of this particular Commons procedure. The Government, though, in a slightly tricksy way, are putting through the Bill following a Ways and Means resolution. Why have they done that? They have gutted the Trade Bill and stuck everything they possibly can into what was the customs Bill so that it cannot be amended by the House of Lords. It is the most obvious trick in the book—rule 101 for a Minister. I have been around the block a number of times, and I have to tell the Minister that there are whole clauses in the Bill, such as clause 31, that are about the formation of a customs union. How is that a matter purely for a money Bill? It is absolutely an issue of public policy to do with our trading alliances that the other place should have every right to pass comment on. If it has advice and suggestions for this place, it should be allowed to amend the Bill.

[Stephen Doughty]

I completely agree with my hon. Friend’s point. Is it not underlined by the fact that the Government’s programme motion neglects to state how many days’ scrutiny the Bill will receive in the Public Bill Committee, let alone on the Floor of the House, but does state that the Committee will be done by 1 February? If the Committee does not start for a week or a couple of weeks because the Finance Bill and other measures are going through, there will be an extraordinarily small amount of time for detailed scrutiny of a 56-clause Bill with numerous schedules that will potentially have serious impacts on our economy.

[Mr Leslie]

That is why I suspect that the other place will look at the truncated scrutiny. I tried to get this out of the Minister earlier—not the Minister before us, but the Financial Secretary to the Treasury. It was not a Cabinet Minister who came to the Chamber to introduce the Bill, by the way, but I am told that a reshuffle might be going on, so perhaps the Chief Secretary or even the Chancellor are in negotiations. The junior Minister acquitted himself reasonably well at the outset—as well as he possibly could, given the line that was scripted for him to take—but I think that a Cabinet Minister should have presented a Bill of such scale and importance. It deserves proper scrutiny in this place, with the right number of Committee sittings, because otherwise the other place will have to do that job for us.

--- Later in debate ---

[Mr Leslie]

Of course, that is an unamendable procedure. I think that, at the very least, the Government will be pushed by the other place into a super-affirmative procedure whereby the Commons has a Committee that looks at the details and suggests amendments and changes. Ministers may then plough ahead if they want, but a super-affirmative procedure would mirror more the powers of MEPs in these matters. A simple aye or nay would be a dilution of the scrutiny powers that we currently have democratically via elected Members of the European Parliament.

I want to focus on part 3 of the Bill. In the past couple of days, a lot of attention has been given to the number of firms that do business across the European Union. They think of their trade not as imports and exports, but as arrivals and dispatches. Whether they are buying components from Birmingham or Bristol or from Brussels or Berlin, they treat them all the same for customs and excise and VAT purposes. That will potentially not be the case under the Bill.

Even if we stayed in the single market and the customs union, we would not necessarily be in the EU VAT area, which is outwith the customs union. That is another decision that Ministers will have to face up to and take. I would like the Bill to be amended so that we stay in the EU VAT area or, at the very least, have a proper impact assessment of the implications of leaving it. That is the position of the British Retail Consortium, which argues that leaving it would mean a potential bureaucratic burden for businesses that currently, if they are importing goods from EU member states, can treat the acquisition VAT through the normal quarterly lodgings of their VAT returns. Henceforth, those firms will potentially have to pay VAT up front—it is known as import VAT—at the point of entry, so at the border, at the port, at Dover, at the channel tunnel or wherever it comes in, each time there is that level of transaction. To look at it in the round, the customer would pay the same amount of VAT at the end point, but it would be incredibly disruptive to the cash flow of those firms.

I looked online and at the explanatory notes, thinking that there must be a regulatory impact assessment of that situation, because the Bill abolishes acquisition VAT and introduces import VAT on goods, including those from the European Union. There does not seem to be a particularly rigorous impact assessment. I do not know whether I have missed it. There was one for the Trade Remedies Authority, but there does not seem to be one for the import VAT proposals. There ought to be an impact assessment, because that is Cabinet Office best practice, but I cannot seem to find it.

Again, I do not think voters were necessarily tuned into the implications on the EU VAT area when they cast their votes on the ballot paper. I may be criticised again for saying this, but I did not see the EU VAT area on the ballot paper. Perhaps I was not looking closely enough. Perhaps Government Members will help me out and point to where it was.

Currently, 140,000 British companies have to go through the rigmarole of registration and compliance when importing from outside the EU. A further 132,000 firms that do not trade beyond the EU but source their imports and components from within the EU will potentially be added to that. Knocking on for 300,000 businesses will be hit by this. According to HMRC’s own statistics, the number of transactions that are hit by customs duties and, therefore, potentially by import VAT will go from 55 million trades to 255 million trades a year, with all the paperwork and rigmarole associated with that level of bureaucracy.

[Stephen Doughty]

My hon. Friend is making incredibly important points about the practical implications of the Bill and the proposed changes. Was he not concerned, therefore, that the Financial Secretary refused to confirm whether any additional customs officers were being proposed or were in training? In fact, he seemed to suggest that they would be reallocated from other roles within HMRC or the Home Office. Given the scale of the additional bureaucracy that is being proposed, is that not deeply worrying?

[Mr Leslie]

We will have to hear from Ministers how they propose to deal with the extra 200 million trades going through the new system. I hope to read more in the impact assessment. If the Government can cope with, or have proposals to ameliorate, some of that administrative burden, we would like to see it in the impact assessment.

On top of that, my hon. Friend should know that, as I think was mentioned earlier, HMRC currently has a computer system or IT software called CHIEF. What does it stand for? I will not try to deal with the acronym—oh no, I can; you will be glad to know, Madam Deputy Speaker, that it stands for “customs handling of import and export freight”. CHIEF will be retired in January 2019—keep that date in mind, as it is crucial in the transition. We are moving to a new system called the customs declaration service. It is costing £157 million to implement and is potentially great news, but all these 130,000 new traders will suddenly be brought into this new system, and they will need to be given time, leeway and flexibility to get used to a system that they currently do not have to operate. I want to hear from the Minister what approach the Government will take to gradually phase in the new system while bringing so many extra businesses into that procedure.

[Mr Leslie]

That is not quite the impression I am getting from the business community. Trade bodies, such the British Retail Consortium and others I have mentioned already, are voicing their concerns, but many businesses are also waiting to see if there is any clarity on the details of how this will pan out. The warm words about phase 1 agreements—“We can sort these things out”, “Don’t worry, it will all be fine”—will only butter so many parsnips. Ultimately, businesses want to know how it will affect their bottom line, how they will cope, what sort of new systems they will need to put in place, what sort of employees they will have to bring in, and so on.

[Stephen Doughty]

I am afraid I disagree with the hon. Member for Strangford (Jim Shannon). He and I get on very well, but I am not hearing the same thing. The Freight Transport Association has made very clear the consequences of even marginal delays to customs procedures, such as those caused by the introduction of a new IT system and the additional time spent processing declarations. It has said that the addition of an average of two minutes to customs processing would result in a 17-mile queue from Dover back to Ashford; four minutes takes the queue back to Maidstone; six minutes back to the M25; eight minutes, and we are at the Dartford crossing and Essex. We could not have a clearer illustration of the types of problems that could be caused. These are substantial changes and, even with the best will in the world, they will have substantial impacts on trade.

[Mr Leslie]

That is why we should not just rush the Bill through as though it were a minor, technical copy-and-paste exercise. These are fundamental decisions we are having to grapple with, both in this House of Commons and in the other place, and it is not appropriate that it be deemed a money Bill. Yes, aspects are to do with taxation, but others are not and broaden out into trade and other areas. The Government might think they can deal with this tactically in that way but I do not think it appropriate.

I encourage my Front-Bench team, and all hon. Members, to support remaining in the customs union. I give notice to my Front-Bench team in particular. I asked the shadow Chief Secretary to the Treasury about the Labour party’s policy on the EU VAT area, a specific area of policy we need to get to grips with. The Bill should be amended so that we retain our involvement and participation in the EU VAT area, as that is the clearest, simplest way of retaining the current benefits. I am sure that amendments will come along on this issue, and when they do, I hope that all hon. Members will think carefully about what to do.

As for this evening, I worry that this VAT issue is yet another potential horror story in the Brexit saga. We pull at one thread and yet more issues start to tumble down on top of our constituents and the business community. It is not right to facilitate duties being put on trade with our nearest neighbours and closest economic allies across the EU, and that is why I hope that we will oppose the Bill this evening.