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

Anneliese Dodds Excerpts

Tuesday 23rd January 2018 Public Bill Committees

[The Chair]

I have Anneliese Dodds, Jonathan Reynolds and Peter Dowd, and we must finish by 2.45 pm.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Q Thank you, Mrs Main, for chairing the session. I share concerns that there is very little in the Bill on the issue of distorted economies. It would be helpful if you could indicate what provisions you think might be necessary to remedy that current deficiency.

Rosa Crawford: A step forward would be to use as a baseline the new rules that the EU has adopted, whereby non-market economies are not regarded as reliable in having a price indication for the goods that they export. Rather, an analogue country of a similar level of development would be used to judge whether an unfair pricing practice was used. We hope that that will allow the EU to take stronger measures against countries—not just China, but Vietnam and other countries that are using undue levels of Government influence to set prices at a low level.

In the current UK legislation, we do not see any approach like that. Indeed, we know that the UK Government have been holding back EU attempts to take stronger measures against China and other non-market economies. I think we can be forgiven for not quite believing it when we are told that in the secondary legislation we will have adequate measures to deal with non-market economies. We do not have an indication that the Government are likely to introduce secondary legislation on that.

Ben Richards: A key new development within the European Union is that, when they are assessing an analogue country, where there is more than one, they can now also take social and environmental factors into account. That is obviously absolutely crucial, because if a country is abusing labour rights or environmental regulations, that is also trade distortion, and should be taken into account in our trade remedies regime.

Kathleen Walker Shaw: There are two more points that are vital in terms of dealing with the distortions in the UK within the Bill framework, the first of which is the timing of it. To expedite these procedures at a time when they can actually help the companies while they remain competitive and able to see off the challenge was a problem that we had in the steel crisis, as some of you will be aware. Even the EU timetables at that time were dragging on too long and exacerbating some of the problems that we had across the steel industry, so the speed with which we can move the procedures is vital. The placing of the economic interest test in there makes me doubt that we will be able to do that.

Again, setting the tariffs at a level at which they will have the effect of adding the effective protection that we need was something that we struggled with agreement on at European level. The European Commission was going to set the levels on certain types of steel much higher than the UK Government. In the end, it became a political process rather than an economic process of what was required to protect and maintain the competitiveness of British industries and other European industries in that case.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Q During the steel crisis, I sat in this very room as a member of the Business, Innovation and Skills Committee taking quite a lot of evidence from some of you as well. It is clear that if this bit on trade remedies is got wrong, the consequences will be severe.

My worry on the public and economic tests is that, even in something like the steel crisis, there were people arguing for the benefits of very cheap steel coming into UK for construction and so forth. If those tests are not drafted correctly, frankly, we do not have any trade remedies at all. If we are going to have them in the Bill, how can we draft them to ensure that they are robust and fair? Who should be involved in the Trade Remedies Authority to ensure that that is the case?

Ben Richards: We need an opportunity to have that debate, which we will not have at all with the Bill as it is currently drafted. It will simply be written into secondary legislation—we will not have that ability. We have four or five minutes left to have a discussion about how it should be drawn up. It would take us another couple of hours. That is what we want, as a trade union movement: an involvement in these discussions and debates.

We have huge concerns about the way in which the appointments are being made to the Trade Remedies Authority. In effect, in the way that the Bill is currently written, we are not seeing one economic interest test but three. To give you a one-sentence answer about how it should be is very difficult: we want to engage in that debate. We want to have a role in that process in the future to ensure that our members are confident that those decisions are being taken with their interests in mind.

Kathleen Walker Shaw: On the Trade Remedies Authority, its structure is very important. We would like to see it set up in line with the Health and Safety Commission, where we have three employers, three trade unions and three other interests. I am a bit concerned that we are limiting that to nine, because I have a strong concern that devolved Administrations need to be involved in that process as well.

I would also like to see the Bill developed to give a role for parliamentary scrutiny—for the TRA to be liaising with structures within wider parliamentary scrutiny—on the European economic area IT, and on the decisions of the TRA, and to remove the power of the Secretary of State to veto a decision of the collective scrutiny of Parliament and the TRA on remedies. In that way, we might be some way to getting to the bottom of a justified and effective remedy.

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[Anneliese Dodds]

Q Thank you, Mrs Main. In response to the points already made, surely it is not just about the preparedness of parliamentarians, but also the preparedness of the Government and Ministers to answer questions that are asked about the detail of the legislation that they are meant in theory to be ready to defend.

The question that I wanted to ask was, do you think there might be a role for sunset clauses in relation to some pieces of delegated legislation?

Joel Blackwell: I warmly welcome the House of Lords Delegated Powers and Regulatory Reform Committee report, which took the unusual step of publishing its report on this Bill while it was still in the Commons, as it did with the European Union (Withdrawal) Bill. Usually it waits until its introduction in the Lords. The report raised the issue of sunset clauses, which are very important in terms of the links between making changes to EU law in the European Union (Withdrawal) Bill and doing that through clauses 42, 45, 47 and 51. It makes valid comments on the potential of those powers. The powers are not required to be used in perpetuity, and sunset clauses, such as the ones inserted for clauses 7, 8 and 9, would bring some consistency, and that makes perfect sense. We would support the view of the Delegated Powers Committee on that point.

[Kirsty Blackman]

Q On the different procedures for delegated powers—the negative procedure, the made affirmative, the draft affirmative and the super-affirmative procedures—in this Bill specifically, do you feel the balance is right? Or do you feel, for example, that there are too many negative procedures, which are quite difficult for parliamentarians to get involved with?

Joel Blackwell: The negative procedure is the default procedure for scrutiny of delegated legislation, and in this Bill that represents that fact; the majority are subject to the negative procedure. Again, referring to the Delegated Powers Committee report, we would agree with the clauses they highlight that they think are negative and should be affirmative, particularly the ones that are what we call Henry VIII powers amending primary legislation. That Committee has always said that there needs to be a compelling reason why a negative procedure would be adequate for Henry VIII powers. Reading the delegated powers note, I cannot see a compelling reason; I think they should be made affirmative.

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[Kirsty Blackman]

Q With all the issues that have been raised, especially about the negative procedure and the ways in which the House of Commons can scrutinise this, given it is not going to the Lords particularly, do you think this is a good way to do things or would there be a better way?

Joel Blackwell: I think that the Hansard Society would like to see an equivalent Delegated Powers and Regulatory Reform Committee, first off, in the lower House—or some MP in the composition of a Joint Committee or what have you. That would be a good opportunity.

I think that delegated powers notes are extremely useful documents. This one is 174 pages long. There are well over 150 delegated powers in the Bill. Some of the justifications I am struggling with, particularly as regards the use of urgency and non-urgency. I think time is an issue here, particularly if you do not have the backstop of further scrutiny by a Chamber—the second House—that is usually very good at looking at delegated legislation and has taking the lead on it in the past.

When we were doing a similar Bill, which became the Welfare Reform Act 2012, a call by many MPs on the Public Bill Committee at the time was that it would be really useful if they had draft regulations alongside the scrutiny of the Bill. You could do things like that to improve scrutiny of delegated powers but, fundamentally, the lack of representation, the fact that you would have to wait for the Bill to get to the House of Lords for a report to be published, is an issue.

Perhaps one way around that is that the House of Lords Delegated Powers Committee does what it has done for this Bill and the European Union (Withdrawal) Bill, and publishes, as usual practice, the Bill as soon as it enters the House of Commons.

[Anneliese Dodds]

Q I have two quick questions. One is to ask you to comment on the use of not just secondary but tertiary legislation in this Bill on public notice law. That would be helpful for us. Secondly, in our previous discussion we talked a lot about the new Trade Remedies Authority, and some of the witnesses suggested that the Secretary of State will be able to overrule its suggestions, without, it appears, any parliamentary process underlying that. I wonder whether the Hansard Society has any comments on that.

Joel Blackwell: On the first point, with regards to sub-delegation or tertiary legislation and this use of public notice, the fact that they will not be subject to any parliamentary scrutiny is concerning. We basically reiterate the points made in the Delegated Powers and Regulatory Reform Committee: that if public notices can do the same as regulations they should be subject to parliamentary scrutiny, just as regulations would be. Sub-delegation is an issue for us because there is a lack of parliamentary scrutiny. In some cases it might not be appropriate, but it should still be considered as usual practice, and at the moment it appears not to be.

With regard to the Trade Remedies Authority, the Hansard Society has not really considered that yet. My colleague Brigid has probably, as I speak, just finished on the Trade Bill, so I am happy to write to the Committee about our points on that.

[Peter Dowd]

Q On the point about tertiary, are you saying that you have fundamental issues with tertiary legislation?

Joel Blackwell: The fact that it is usually not subject to any parliamentary scrutiny is of concern to us.

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[Kirstene Hair (Angus) (Con)]

Q As a follow-on from that point, how feasible would it be to ensure that smaller ports, such as Montrose port in my constituency, have dedicated customs officers? Would there be a detrimental impact for these smaller ports, whether in Scotland or in any other part of the United Kingdom, if customs support was not provided on site?

Richard Ballantyne: It is a concern. You can imagine that a lot of the Government’s attention is on the Dover corridor, and probably rightly so—that is where the main challenge is.

Going back to my opening statements, if we remove ro-ro for one minute, for a lot of bulk shipments—Robert may correct me if I am wrong—where there is one commodity on a shipment, there is a bit more time, and the environment is one where shipping agents are usually helping out, submitting information that then is facilitated to HMRC. We hope that either those agents or inventory linking as part of the Union customs code, which is coming forward, would mean that smaller ports such as Montrose are not disadvantaged.

There are concerns that there could be certain delays at the border—we would not want to see that, but perhaps the sensitivity at a bulk handling port or a port with break bulk is less than at a ro-ro terminal, where lorries basically want to get out as soon as possible. If they are stuck in a terminal, backlogs and queues start and the operational challenges associated with that.

[Anneliese Dodds]

Q My first question relates to the point just made by Kirstene Hair, about the staffing at different ports and the availability of HMRC staff. We have seen quite significant ongoing changes and consolidation of staff into regional and specialist centres. We have heard that the Border Force relies on those HMRC staff on certain occasions. I wonder whether any of your members are raising problems with you that might be arising due to that change in the availability of HMRC staff.

Robert Windsor: My members are very concerned about that. The Dover straits corridor is causing particular concern because it is a 24/7 activity—those lorries are coming in all the time. There have been issues with staffing at those areas. You have to differentiate between Border Force activity, which tends to be frontier, and the work done at the national clearance hub based in Salford. They provide 24/7 cover but, in air and sea, you could basically say that from about 6 o’clock or 7 o’clock in the evening there is a noticeable decline in the workload. If you put ro-ro coming in through Dover with a customs declaration, there will be less of a decline in the work being undertaken there.

It is not just Border Force that we have to consider. A lot of foodstuffs potentially could do with some sort of inspection. Even if there is a risk-based system, a certain proportion of that may still require inspection. Multiple Government agencies at a national level and a local level will face this impact. It will have an impact on my members because you will require more people to work in what is regarded as an out-of-hours situation. That will have a considerable impact on costs.

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[Kirsty Blackman]

Q We heard earlier that some suppliers are leaving their supply chains, for example, in order not to have to go through a border process, particularly for things that come in and then go out again from the UK. Are you seeing that from people and organisations that you are in touch with, or is that just an “out there” thing that is not really happening very much?

Tim Reardon: We hear a lot of talk about it, but I think on every route that has published its traffic stats for last year the freight volumes have risen from what they were in 2016. First, of course, that is a national success story; it is an indication of economic health. It is great for all the businesses that we all represent, which handle that traffic, but of course it means that the system overall is increasingly full. There is not a great deal of spare capacity cumulatively across the UK.

The issue is more than just space on the terminal. The road network serves two or three main gateway points into and out of the UK. There needs to be a really good-quality landside connection from the terminal, to enable it to flourish; it needs more than just space on the berth. It would be very, very difficult to flick a switch and say, “Actually, the traffic will go somewhere else”.

Richard Ballantyne: Towards the end of last year, there was a new direct service from Zeebrugge to Dublin for roll-on roll-off traffic, and there was a lot of noise about, “Look! That’s a consequence of Brexit”, but when you actually looked into that investment, it was probably made before the referendum. There may be people looking at further direct calls from the Republic of Ireland to continental Europe, but as of yet we have not seen them.

Robert Windsor: Many of my members are multinationals —European-based forwarders. I know that there are discussions about this issue, which is inevitable given the situation, but we have not seen anything move yet, as such. What we are receiving is a lot of inquiries from European-based freight forwarders with no UK base who are inquiring whether they can establish in the UK because they obviously see an opportunity the other way round.

Richard Ballantyne: The warehousing industry is looking at potential new sites because they see that there could be further interruptions to trade flows, where they would need more storage.

[Anneliese Dodds]

Q I have a question related to what happened back in 2015 with the first major Operation Stack problems in Kent. They were not caused initially by developments on the British side; it was due to problems on the French side. The capacity issues on the French side were very relevant. To what extent are you aware of activity happening in our partner ports to prepare for a no-deal scenario? Are you discovering that talking to your colleagues in other countries? Are you aware of the UK Government doing anything to promote that preparedness?

Richard Ballantyne: The British Ports Association is part of the European Sea Ports Organisation, which has a meeting tomorrow on Brexit that I am going to. It includes some of the main UK-facing ports, such as Dublin, Zeebrugge, Calais and beyond. It has been quite difficult. Some of those ports are state-owned, and it is quite difficult for the UK Government to talk with them, although there have been a number of information-type visits looking at customs arrangements as they are and what the operational situation will look like post-Brexit. We have good conversations.

In terms of what is going on with the customs authorities in those countries, it is varied. There is a French customs taskforce—that is an internal taskforce—that I think the ports there are plugged into. I went to see the French ports association to talk about Brexit, and it seemed on top of things, but it is a difficult one. There is a lot of mystery there. Just as the UK Government cannot divulge all the discussions they are having, the ports cannot divulge everything to us. They have to remember that negotiations are being led through the European Commission, so that is the correct avenue.

[Peter Dowd]

Q On the point of infrastructure, which you raised before—interestingly, you raised a point about state-owned ports—our ports are fully privatised. That makes it more difficult in a sense for the Government to control their development, which is understandable. Have you got any evidence that the Government have taken proactive action to improve the infrastructure around the ports in the light of the potential challenges you are facing? I say that as a Member of Parliament who has a pretty big port in his constituency.

Richard Ballantyne: As you know, the ports industry in the UK is market-led and market-driven. We have three types of port: local authority-owned ports, which operate on a commercial basis in competition with private ports; full private sector ports, or equity ports; and the trust ports, which are Dover, Aberdeen, London and so on, and they are still run on a private basis and pay corporation tax on any profits they make. Significantly, all of them are financially and strategically independent of Government decisions. That has worked. Effectively, the Government have delegated the authority to run the ports because they understand that you need technical experts to manage such things as safety and the commercial arrangements.

In terms of what is going on at the moment, the Government do influence the connections to ports. Ports have publicly owned road and rail connections. Following a lot of lobbying from my association and others, the Department for Transport is undertaking a port connectivity study, which is not about spending any money on connections but about assessing the state of the road and rail connectivity of the UK ports industry, and how we get ports more on the radar when big investment decisions like the road investment strategy and rail strategies are made and Treasury spending budgets are allocated. It is about us, perhaps, rising up. There has been a lot of big-ticket passenger-focused spend, such as HS2, Heathrow and Crossrail. Freight has felt a bit of a poor relation. We are working to improve that, but unfortunately freight does not vote, so it is a challenge for us.

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[The Chair]

I am going to Anneliese Dodds next. We must finish at 5 o’clock and I am conscious that there are several people wanting to get in.

[Anneliese Dodds]

Q I will be brief. That has been enormously helpful for clarifying some of the situation. One of the issues that came up in the previous panel was around the lack of measures in the Bill generally relating to the distorted economies. Obviously, they would be covered by some of the measures that we have been talking about to a lesser or greater degree, but I wondered whether you had any suggestions about whether there should be more explicit recognition of the problem of distorted economies within the Bill or any measures taken beyond those that we have just been talking about.

Dr Laura Cohen: Particularly on the methodology, I will suggest two provisions that are not mutually exclusive; the UK needs to alter the Bill to include them both. The first provision is how the dumping margin will be calculated in highly distorted economies such as China. The UK should be stating clearly that there should be a special methodology for non-market economies. That would allow the UK to keep that option open for China until the WTO jurisprudence is clear. Indeed, that needs to be in place anyway for countries such as Tajikistan and Vietnam.

The second provision is a methodology that constructs what is called a normal value wherever price distortions occur. That is the EU’s new approach, which takes into account a number of price distortions, including several non-market economy indicators and an absence of labour or environmental standards. That can be used against a country, including former non-market economies such as Russia, which I know has been a problem in the chemicals sector. Indeed, the pasting in of EU legislation is an important principle of Brexit, as is being done in the EU (Withdrawal) Bill, and this part should be done as a default.

Gareth Stace: In the EU, that became law on 20 December. The UK Government are saying that they will broadly follow it. It would be the easiest thing to say, “That is what happens in the EU on those sorts of economies, and we will do the same”—done! They do not need to invent anything else.

Ian Cranshaw: It is a theoretical debate that we have been having with the DIT about where the risk is. Is the risk in following the new methodology that the EU is introducing or in the approach that the DIT are now taking in going with something that we have been delivering for x number of years, so that they believe they are following something we already have? The EU is moving in a different direction. From our industry the concern was that many of our companies here are EU-based or EU-headquartered, so they want something consistent. Then you have the political debate that we are leaving the EU because we want more flexibility. That is more of a political decision.

[Emma Hardy]

Q This is more of a clarification question, so forgive me if you have answered it in other ways and I have not taken in all the information you have just given me. You are talking about the economic test and the public interest test. How would you propose improving those systems of tests as is set out in the legislation at the moment?

Dr Laura Cohen: First, do you need them at all? It is not compulsory under the World Trade Organisation. Secondly, we should definitely have the text that is in the EU: weighing and balancing the competing interests, and special consideration to the need to eliminate the trade-distorting effects of injurious dumping and to restore effective competition. That would help.