Taxation (Cross-border Trade) Bill

Catherine McKinnell Excerpts

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

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

Last July, the North East England chamber of commerce—which represents about 3,000 businesses of all sizes across the region, and therefore several thousand more jobs—set out its five key priorities for the Brexit negotiations. Back then, it said:

“Uncertainty has been a condition that the business community and wider economy has had to deal with since the EU referendum. We need a positive and consultative approach to Brexit that causes minimum disruption to our businesses across the region throughout these negotiations and further.

This is particularly important for our invaluable international traders who are having to deal with fluctuations in sterling and potential changes to the way they may have to trade in the future.”

It went on to set out two of its five key Brexit priorities:

“A new trading relationship with the EU that gives our exporters frictionless and un-bureaucratic access to European markets”,

and

“A positive and consultative approach to Brexit that causes minimum disruption to business interests, particularly for those who trade overseas.”

It is difficult to emphasise enough just how critical achieving those priorities is for the economy of the north-east, which, as we heard from my hon. Friend the Member for Sedgefield (Phil Wilson), is the only part of the UK that consistently exports more than it imports. Some 61% of the region’s exports currently go to the EU, which makes it our largest market by some measure. As the House of Commons Library has previously stated, the proportion in the north-east, along with that in Wales, is higher than in any other country or region in the UK. The north-east is therefore significantly exposed to the effects of a bad deal, and to the frankly unthinkable prospect of no deal at all.

What does the Bill actually offer to the north-east’s businesses, and, indeed, to businesses throughout the country, in terms of the ability to plan for the future? How will it help to deliver the frictionless and unbureaucratic two-way access to European markets and the minimum disruption which are needed by the north-east’s firms and the hundreds of thousands of jobs that they support, with many of the region’s exporters having EU-based firms as part of their supply chain? I do not know the answer to that, but what it does provide is a very real prospect of endless red tape and customs duties on goods traded with the EU, which may or may not be levied after Brexit, and for which those firms may or may not need to prepare and budget. That depends entirely on the Prime Minister’s ability to deliver a Brexit deal to British businesses and consumers.

As a result of the Bill, some 130,000 UK firms face the possibility of paying VAT upfront for the first time on all goods imported from the EU, with all the bureaucratic nightmares and cash-flow crises that that will create. Indeed, one of the north-east international trade advisers has told me:

“This will be a huge concern to all importers, but in particular to those who won’t yet know the consequences because they only currently import from the EU. The issue of managing cashflow will become a major problem because businesses will have to pay out VAT, and then claim it back through their VAT return three or six months down the line.”

Understandably, they want to know what support the Government will provide to help the region’s firms through a significant period of adjustment, and so do I and my colleagues.

What impact assessment have the Government carried out of the proposals for the stand-alone UK customs regime contained in the Bill, and of its effects and costs for businesses of all sizes up and down the country? Given that a recent Federation of Small Businesses survey found that small businesses already spend one working week every year complying with their existing VAT obligations, is it not crystal clear that the Bill will have serious implications for UK productivity rates, projections for which have already been seriously downgraded in the autumn Budget? What effect do Ministers think the Bill’s proposals will have on the many ports, airports and rail terminals across the UK, including Newcastle international airport and the Port of Tyne in the north-east? Who will foot the bill for any necessary infrastructure changes?

Perhaps equally importantly, what evidence is there that Her Majesty’s Revenue and Customs will be able to cope with what is being proposed, after years of staff reductions, office closures and the loss of senior experience? Indeed, when I asked the Institute of Chartered Accountants in England and Wales during a Treasury Select Committee session last month whether it thought that HMRC had the capacity to manage the myriad challenges thrown up by Brexit, I was told:

“We all saw the evidence session where HMRC’s CEO was up before the Public Accounts Committee, and indeed he has been in front of this Committee as well. The clear message there is that HMRC has the largest change-management project currently in Europe in terms of its regionalisation of its computer systems, and their CEO was clearly worried that adding Brexit on top of that is potentially going to push HMRC over the edge. That was the clear message.”

The ICAEW went on to comment:

“It is quite clear that the CEO of HMRC is worried about Brexit, if you like, being the straw that broke the camel’s back. If the CEO of HMRC is worried, it is fair to say that it clearly worries us as well...We need to have an honest and realistic assessment of the capabilities of HMRC in this climate, and what is going to be needed in terms of Brexit, and an honest assessment of whether they can do it all.”

This does not exactly inspire confidence, and I am sure that it will make concerning reading for firms up and down the country.

Finally, I want to touch on the concerns being expressed by a number of international development non-governmental organisations in relation to this legislation. It is a matter of particular concern that the Bill refers to the set of criteria to which the Treasury must have regard when considering the rate of import and export duty to impose under the proposed new regime, but that no reference is made in the legislation to the principle of sustainable development or to the UK’s commitment to the sustainable development goals. I therefore join organisations such as Traidcraft and the Fairtrade Foundation in urging the Government to rectify this by making the principle of sustainable development and the SDGs a core consideration. In an article published during last year’s Fairtrade fortnight, I wrote:

“As part of its proud history of leading the way on international development, the UK has long championed the hugely important role that trade can play in improving living standards around the world. So, just as nobody wants to see Brexit weaken the countless EU-derived protections we all benefit from in the UK—whether employment rights, environmental legislation or consumer standards—nor must it result in making life even harder for some of the poorest producers in the world.”