Taxation (Cross-border Trade) Bill (First sitting)

(Limited Text - Ministerial Extracts only)

Tuesday 23rd January 2018 Public Bill Committees

[Kirsty Blackman]

Q Customs and immigration forces were put together in the Border Force. Given the Government’s political priority around immigration, do you feel that there is a resourcing issue with customs staff or do you feel that it is a structural issue and that decoupling customs and immigration would fix that?

Peter MacSwiney: I think there is a structural issue. It is the view, certainly at the airports, that freight is the poor relation where the Border Force is concerned.

Anastassia Beliakova: I would say it is both. It is very difficult to assess within the Border Force how much emphasis is given to goods checks versus checks on people. We have heard from members that it seems as if the focus has definitely shifted over the years. It is therefore an area that would require either a change of focus with more focus to goods, or more people dedicated just on goods checks, from our perspective.

[The Financial Secretary to the Treasury (Mel Stride)]

Q First, thank you very much for coming. It has been a really helpful session. I have two questions, which you have two minutes to answer; if you can give me a one-word answer for each one down the line, that would be perfect.

Would you describe HMRC’s engagement with yourselves—your own organisation, in the context of the discussions and the issues we have gone over today—as having been good, average or poor? Starting with Gordon.

Gordon Tutt: Very good.

Peter MacSwiney: I endorse that.

Anastassia Beliakova: Very good.

William Bain: Good, but we need answers on what is going to happen.

[Mel Stride]

That is more than one word—you can tell who the former politician is. My final question has clearly been identified. Naturally, there are many challenges and uncertainties out there. Some come from the sheer fact that we have decided to leave the EU and the short time frame, for example, for decisions. Many of the issues we have described come out of the negotiations and the uncertainty about where we may land in that respect.

However, what the Bill is doing and the focus of this Committee is to make sure that we are as close as we can be to existing arrangements and, secondly, that we have the flexibility to be nimble enough to move and adjust our configuration to accommodate wherever we land on day one. Very quick answers down the line: in essence, in broad terms, do you think the Bill is about right?

Gordon Tutt: Yes, I do.

Peter MacSwiney: I think it probably is, but it needs to focus on implementation and people must have the attitude that they are using it to facilitate trade and not to inhibit it.

Anastassia Beliakova: Yes, but more clarity on policy is needed, particularly on VAT.

William Bain: We would advise that it also deals with the other issues we have spoken about today which affect the flow of goods in and out of the UK.

[Mel Stride]

Thank you very much.

[The Chair]

I also thank the witnesses very much for their attendance. We will now close the session and move on to the next panel.

Examination of Witnesses

Sue Davies, Jeremy White, Barbara Scott and Helen Dennis gave evidence.

--- Later in debate ---

[Kirsty Blackman]

Q My question is specifically for Barbara Scott on the issue of HMRC resourcing. Is the authorised economic operator system working as it should, and will it work post Brexit? Is there enough focus within Border Force on customs issues, or does that need to change as well?

Barbara Scott: Currently, we have a bit of a divide between HMRC and Customs and how it operates processes such as economic operators, which Border Force does not come online with. No matter what we do to facilitate authorised economic operators—I detest that term—Border Force will still carry out the same controls whether a trade is authorised or not authorised. That really is something that discourages businesses from actually becoming an AEO.

There is a lot of talk about our not having a high number of AEOs in this country. That is because UK Customs has looked at trade facilitation as far as it can, and was quite facilitative to business before we even had an AEO system. For larger traders, there was a lot of facilitation allowed, whereas perhaps some other EU countries, particularly before the UCC, were not so facilitative and have used that AEO process to be more facilitative, which is why traders in, say, Germany have become authorised and in the UK they have not.

The benefits of AEO currently are very small, which is why I was pleased to see within this Bill that there are opportunities for having different levels of AEO. That could be a particular help to small businesses that cannot get over the extremely high bar that exists at the moment. Something that is smaller—a sort of bronze star for SMEs—might be better than the gold star that a multimillion-pound business can afford to obtain.

[Mel Stride]

Q Thank you all for your evidence today, which has been really helpful. I have a specific question for Mr White regarding his assertion, which I generally agree with, that the simplest way forward would be to effectively take the UCC on board, but modify it as required. Is there anything in the Bill that would prevent us from doing that? If your thought is that we should be required to do it, given that we might not be prevented from doing it by the Bill, would bringing it into the Bill not just risk us tying our hands in a way that would be unhelpful, given that we do not know exactly where the negotiations are going to land in that respect?

Jeremy White: Technically, I think you would be safe if you amended the commencement provision. At the moment, the way that it operates on exit day is that the repeal in schedule 7 of the taxation Bill automatically repeals the effect of the withdrawal Bill, which would otherwise preserve the UCC as retained EU direct legislation. You would have to effect the taxation commencement provision. That would have to be amended, so that on exit day it no longer immediately repealed the UCC. Then the withdrawal Bill would operate.

Clearly, we would identify some modifications that are required, some deficiencies, and we would have power under regulations, under the withdrawal Bill, to make regulations amending an unnecessary effect or remedying a deficiency. There would also be power under regulations under the taxation Act itself to make regulations. Those regulations would have to be enforced on exit day.

[Mel Stride]

Q But would there not be provisions? The EU withdrawal Bill would annul the effect of the UCC, you are right, but what would stop us from bringing that in, using this Bill, on day one to achieve what you are attempting and would like to see as the outcome?

Jeremy White: At the moment, I think it is schedule 7 of the Bill that itself does the business to repeal the effect of the withdrawal Bill.

[Mel Stride]

Q But, through various powers in the Bill, we could then bring in those aspects and elements that we wished to do so.

Jeremy White: That is right. If you had a qualified commencement provision, so that schedule 7 did not take effect straightaway but had to have a commencement provision, so instead of Royal Assent you had a commencement provision, you would still have the flexibility, if sadly it became appropriate, in a no-deal situation, immediately to bring this into effect. That would be possible.

Someone is still going to have to do the work. As Barbara outlined, someone in HMRC and the Treasury will have to do the work for all of these scenarios for the regulatory framework. Even if they wanted to have a recast, now is not a good time.

To pick up for a second or two on the preference agreements on replication, everything there that will be done will have to be proved. There will have to be proofs of origin. We have got a serious problem outlined, because of the Commission’s adoption yesterday of the road map to put back the information systems, which could have included common databases, as we have in other free trade agreements, particularly with China and Switzerland, that that computer system would not be available in the EU until 2025. In the earlier session you were told that a transition to 2025 is better, even legally technically for getting what we want by way of free trade agreements being replicated and being frictionless. If they are not replicated and not frictionless, then we have to be back to all of the paper certificates. We know that we will have to on the anti-dumping—we will have to employ our own police force to investigate in other countries; we will need reciprocal agreements. At the moment we benefit from the Community policing. There will be no police force—no OLAF. That is a serious problem we face on implementation in this area.

[Mel Stride]

Q I am sorry to be a real dog with a bone, but I have one last quick question on this point. On the UCC, your contention is that you would have to amend the Bill under schedule 7 to stop it being switched off, to allow the time to bring it in to UK law and amend accordingly. Why could you not just continue with the provisions of schedule 7 and have secondary legislation that comes into immediate effect at the appropriate time, by way of a made affirmative statutory instrument, for example?

Jeremy White: You could allow schedule 7, part 1 to take effect. That would repeal the UCC and you could have an affirmative instrument that applied it; yes. You could use that structure.

[Mel Stride]

Q In that sense, the Bill as it stands does accommodate your desired outcome.

Jeremy White: Except for the fact that the affirmative instrument, the SI, would have to repeal those parts of the Bill that make specific provision already. The trouble is that it is not just repealing the UCC. There are 33 pages of provision in the Bill that would have to be repealed by the affirmative statutory instrument, which will be messy. It could work, but it is better to amend the commencement provision, I would say, so that part 1 and schedule 7 do not commence as they do now.

[The Chair]

Order. We have now come to the end of the allotted time for the Committee. I thank all four of the witnesses very much for their attendance.