Taxation (Cross-border Trade) Bill

Vicky Ford Excerpts

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

[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.

[Vicky Ford (Chelmsford) (Con)]

I thank the Minister for giving way and for drawing attention to the “Future customs arrangements” paper that came out in the summer and the two potential solutions: the highly streamlined option or the new customs partnership. Will he confirm that the Government are still open minded about both options and that this Government’s priority is to maximise stability and minimise uncertainty not only for British consumers buying products from the continent, but for continental suppliers trying to sell to us and vice versa?

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[Kirsty Blackman]

I appreciate that information.

There are so many technical issues that will have a major impact on jobs and manufacturing in UK. When I have asked the Government about this, the answers I received were pretty fluffy. I have asked about cumulation—mainly outside the Chamber—as it is a major issue that the UK Government have not taken seriously enough. It has been raised especially by the Society of Motor Manufacturers and Traders. If hon. Members look at how many times cumulation has been mentioned in the Chamber, they will find that it is very few.

[Vicky Ford]

I thank the hon. Lady for mentioning the incredibly important matter of cumulation. It is by cumulation that a British car that has components from other parts of Europe manages to be sold to third countries under existing agreements. My recollection is that the Minister said that the Department for International Trade would look to continue having agreement on cumulation, and that the Bill will give it the legal tools to continue such negotiations. Does the hon. Lady agree that the Bill is necessary as an enabling package to allow us to have a customs relationship with Europe and other parts of the world in the future?

[Kirsty Blackman]

I think that we should remain in the customs union and the single market, because then we would not have any of these issues. I appreciate that the Minister says that the Government are looking at this, but I am trying to make it clear how important this matter is, and I hope that I have been able to do that in my discussion of cumulation.

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[Vicky Ford]

Will the hon. Gentleman give way?

[Mr Leslie]

I give way to an eminent former Member of the European Parliament.

[Vicky Ford]

I remind the hon. Gentleman of what the Financial Secretary said from the Dispatch Box: any new free trade agreement that the UK signs up to will be subject to the affirmative procedure in this place.

[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.

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[Vicky Ford (Chelmsford) (Con)]

It has been a great pleasure to listen to the debate tonight. I have always said that when it comes to EU negotiations, the devil is in the detail. It has been good to hear many Members discussing real detail tonight, because that will give us more confidence that we will be able to address the specifics in the negotiations ahead.

Some colleagues have suggested that we should try to maintain the status quo and stay in the customs union permanently, but I do not believe that that is practicable. I speak not only as a former Member of the European Parliament but as the person who chaired the European Parliament’s Committee responsible for the customs union. Staying in the customs union might help to sort out our trade with Europe, but what would it do for our trade with the rest of the world? Perhaps we would be able to negotiate to continue the existing free trade agreements that Europe has with other parts of the world, but the EU does not stand still. It will be negotiating new trade agreements. Trade negotiations are always controversial and always involve trade-offs. British interests are not always directly aligned with the rest of the EU, and having to accept future trade deals without any say over the terms is not a practicable solution, so a new relationship with the EU is needed.

It is also not practicable simply to do nothing and to try to cut and paste the relationships that we have with other parts of the world on to our trade with the EU. That particularly applies to our trade across the channel, because the journey times are too short for paperwork to be processed and the trade volumes are too high. There would be delays, which would push up costs and raise prices, hitting the interests of consumers and businesses on both sides of the channel. It is therefore good that both the UK Government and Governments across Europe are looking at bespoke solutions, and the Bill keeps our options open, including the potential for a customs union with the customs union, which may be the exact sort of deep partnership we look for in the future.

It is important to look at the detail. Import VAT and when it falls due is really important for small businesses in all our constituencies, but the Government have recognised the issue and do not want small businesses to face more costs. The Manufacturers’ Alliance has pointed to concerns about the detailed methodology on calculating remedies, the supremacy of the lesser duty rule, and the timing and nature of the economic interest test, but all those issues can be dealt with in Committee and are not good reasons to vote against the Government tonight. There is the really important issue of the cumulative rules of origin, which are vital for advanced manufacturing and the car sector, but Ministers have again made it clear that they are aware of the issue, which affects manufacturers on both sides of the channel.

In an ideal world, we would want our future customs relationship to be agreed before we agree the legislation here, but we are not in a position to do that. Any future trade deal with Europe needs all 27 other countries to agree to it, and we need to be ready to act with whatever the solution is. I am particularly pleased that Ministers have said that they are committed to delivering either the streamlined customs arrangement or a new customs partnership, and I urge Ministers and Governments on both sides of the channel not to give up on an innovative solution yet, because it is in the interests of businesses and consumers on both sides of the channel to find and deliver such solutions.

[Mr Leslie]

On a point of order, Mr Speaker. The Bill that we are discussing has been designated as an aids and supplies Bill, and potentially as a money Bill, which I understand is in your gift at the end of the Commons proceedings. Could you confirm that no decision is imminent on your part on the designation of the legislation as a money Bill? I am not seeking a ruling from you this evening, but perhaps you could reflect on whether it is fair use of procedure for the Government to have unilaterally designated the Bill as an aids and supplies Bill, because there are measures in the Bill, particularly in relation to the customs union, that the other place might have a great appetite for amending. Obviously it is not for us to determine the procedures that take place in the House of Lords, and while that is not a matter for you, will you confirm that you have not yet made a decision on the designation of this Bill as a money Bill and that, as far as you are concerned, the House of Lords can do what it will with the Bill, should it pass to the other end of the building?