Taxation (Cross-border Trade) Bill

Viscount Trenchard Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords
Tuesday 4th September 2018 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I am grateful to my noble friend Lord Bates for introducing this Second Reading debate. I realise that this Bill has been designated a money Bill and therefore, perhaps fortunately, your Lordships’ House cannot amend it. The House will have opportunities to review and improve the associated Trade Bill at length following its Second Reading next week. It is most unhelpful, and detrimental to the country’s interests, that the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Kramer, have introduced the amendments to which they have spoken, because whatever agreement may or may not be reached with the European Union on our future trading relationship, we need a new customs regime to be in place before we leave the EU on 29 March 2019. This is necessary whether we ultimately agree a form of the proposals adopted by the Cabinet at Chequers, whether we enter a Canada or Canada plus-type free trade agreement with the EU or whether we leave the EU with no deal agreed and initially trade with our European partners under WTO rules.

The noble Lord, Lord Tunnicliffe, argues that the Government accepted amendments to this Bill without adequate parliamentary scrutiny, but these matters have been debated at length both in your Lordships’ House and in another place and the Government have committed to giving the House of Commons a vote on the final agreement that they reach with the EU. The passage of either amendment would have no effect on the legislation and this Bill, as a money Bill, can be passed without your Lordships’ consent. Nevertheless, adoption of an amendment expressing regret will strengthen the perception, held widely across the country, that your Lordships’ House does not respect the democratically expressed will of the people that we should leave the EU. That does further harm to the standing and reputation of the House. In addition, it gives further solace to the EU negotiators, who want us to agree to a deal where we remain closely tied to their regulatory regime, and encourages them to believe that we will blink first and ultimately agree to an arrangement whereby we are unable to take advantage of new opportunities to expand our trade with the wider world and whereby we will continue to pay vast sums towards the ever-growing budget of the Union but without any say over how those funds are to be applied.

How can the noble Lord object to the amendment ensuring that we should agree to collect tariffs on behalf of the EU only if the EU agrees to do the same on our behalf? Is my noble friend the Minister confident that the facilitated customs arrangement could be made to work efficiently and that it would not be a deterrent to third countries that might otherwise be keener to enter a free trade agreement with the UK? The FCA clearly would work better if it were reciprocal than if it were just one way. If goods from a third country are imported into an EU member state for onward delivery to the UK in a sector where the UK would have applied a lower tariff rate than that applied by the EU, unless the FCA is made reciprocal the EU state initially importing the goods destined for the UK would have to apply the higher EU tariff and the importer would later have to seek a refund from the UK Exchequer, which would seek reimbursement of the difference from the EU. This would be very cumbersome and would have a negative effect on trade between the third country and the UK via the EU. The FCA is cumbersome enough anyway.

Of course, as noble Lords are aware, Monsieur Barnier has indicated that the EU will have difficulty in accepting the FCA in its proposed form. Surely the noble Lord, Lord Tunnicliffe, agrees that if we were to agree to collect duties on behalf of another state, we should certainly expect that other state to collect the same on our behalf. Is he also objecting to the amendment that binds the Government by law not to accept a difference between the tax regimes operating in Northern Ireland and in the rest of the UK? It would again be most unhelpful if the amendment were to be passed, giving the impression to the EU negotiators that your Lordships’ House would be willing to see Northern Ireland develop into a semi-detached province, still effectively a member of the EU in fact, if not in name.

Both the Conservative Party and the Labour Party clearly stated in their manifestos at the general election last year that the UK would leave the customs union, yet the noble Lord’s amendment laments the fact that the Bill introduces barriers to securing a UK-EU customs union. Has the Labour Party’s policy changed since the general election? Has this been made clear? The policy adopted by the Conservative Party and maintained by the Government consistently is that we should leave the customs union and the single market. Those who now seek either to remain in the customs union or to create a new customs union do so in the belief that it is more important to continue to trade with the EU in exactly the same manner as we do today, submitting to EU regulatory standards over which we have enjoyed steadily decreasing influence. Those standards are, in many cases, unnecessarily cumbersome and unduly inhibit innovation—for example, in the medical and scientific fields. In recent years when the UK has objected to the adoption of new EU regulations in both goods and services we have invariably been overruled.

Why do we not hear about the costs in terms of jobs that would have been created here, and tax revenues lost to the nation, as a result of companies establishing businesses outside the EU in order to avoid the EU’s suffocating regulatory tentacles? I can understand that the establishment of borders across which supply chains operate will require change and increased reporting, but technology can mitigate that in the same way that it does across the United States-Canada border. I am absolutely not advocating a race to the bottom. I wholly agree with the Government’s policy of maintaining the highest standards across the board, especially in areas such as the environment and food safety. However, high standards do not require in all fields adherence to the unnecessarily bureaucratic standards set by the EU, which offer no real additional protection to the consumer over standards applied by the United States, Japan or other non-EU countries.

In the medical field, for example, too much weight is given to the precautionary principle, which makes it more difficult to gain approval for new life-saving drugs and makes the EU an unfriendly jurisdiction in which to conduct research and development. The chief executive of a major Japanese pharmaceutical company told me during my visit to Japan in July that it is true that Brexit will increase the cost of its European operations, but it has already invested a considerable sum in adapting its corporate structure to what may be necessary post Brexit. On the other hand, he believes that the UK will remain the best place in the world to conduct research and development and introduce new drugs, and that the regulatory environment in the UK post Brexit should encourage such innovation with a more constructive and less bureaucratic approach.

I believe that those who want to avoid changing anything are misguided because they want to keep a relationship with the EU which does not really work well for us and never has. They are prepared to forgo the considerable upside which will accrue if we are truly free from EU shackles and can again apply our influence at the global level, where our enhanced voice in the development of sensible, global-level regulation will offer appropriate and necessary consumer protection without unduly restricting the freedoms to innovate and develop new processes which are necessary for a brighter, more prosperous future for our citizens.

The amendment of the noble Lord, Lord Tunnicliffe, seeks to tie us into the customs union. The amendment of the noble Baroness, Lady Kramer, further seeks a second divisive vote, in the misguided hope that the Liberal Democrats can persuade the people to vote to remain in the customs union and single market. But 80% of the UK’s economy comprises services, of which 75% do not form part of the single market. Only 15% of our output is exported to the single market and in recent years the EU has taken a declining share of our exports.

Noble Lords should read the excellent paper on CPTPP, Trading Tigers, published by Policy Exchange, which illustrates the opportunities available to the UK from acceding to that partnership. The authors do not claim that increased trade with the TPP 11 would immediately replace our EU trade but I believe that the UK’s increasing trade with them and other non-EU trading partners would soon outstrip any damage to UK-EU trade, even under the undesirable scenario where we fail to agree a deal with the EU and trade under WTO rules. The noble Baroness forgets that when Jacques Delors was driving through his plan to create the single market, its negative aspects were widely seen as a move to create a “Fortress Europe”. At that time, the chief concern was the threat posed to European manufacturers by Japanese exporters; Edith Cresson attributed Japanese economic success to her view that they lived like ants.

The Government’s policy—reflecting the manifestos put forward at last year’s general election, which were supported by 85% of voters—is to leave the customs union and the single market. It is therefore absolutely necessary and strongly in this country’s interest to support this Bill, which is necessary to enable the UK to establish its own customs regime and implement its own trade remedy measures. Although the noble Lord, Lord Tunnicliffe, has said that he will not seek to divide the House, the noble Baroness, Lady Kramer, has indicated that she will press her amendment. This is also unhelpful and, I believe, contrary to the country’s interests and I urge the House to reject it.