Trade Bill (Eighth sitting)

Bill Esterson Excerpts

Committee Debate: 8th sitting: House of Commons
Thursday 1st February 2018 Public Bill Committees

[Alan Brown]

It will come as no surprise that I completely agree with my hon. Friend. The closing of HMRC offices is yet another example of the left hand not knowing what the right hand is doing and of a complete lack of strategic thinking.

Jon Thompson, the chief executive of HMRC, has warned that border and tax checks post-Brexit could require an additional 5,000 staff, with new customs checks costing the taxpayer up to £800 million. Given the uncertainty about future customs arrangements, the fact that HMRC is already undertaking a system overhaul, that the number of declarations could increase fourfold and that transitional arrangements are still unknown, it makes complete sense to assess the impact on HMRC, which is responsible for the taxing and checking of trade that will arise from the Bill.

The new clause would allow for greater parliamentary scrutiny and force an internal departmental impact assessment. This week alone has shown that it takes much effort to force the Government’s hand on impact assessments and for them to be up front about what the impact of Brexit will be. That is why I move the new clause.

[Bill Esterson (Sefton Central) (Lab)]

Welcome back to the Chair, Mr Davies.

May I say how much I agree with the comments of the hon. Member for Kilmarnock and Loudoun? The impact of HMRC closures, which the hon. Member for Livingston mentioned, on communities and on those losing their jobs was well stated. The same is true of my constituency, with the closures in Bootle and Liverpool.

The Minister advised the Committee in an earlier sitting that

“the resources given to HMRC post Brexit to deal with Brexit are already there.”

He also said that

“the power has been assessed and its likely cost looked at. It has been deemed to be relatively inexpensive and overall will not add a cost burden on HMRC.”––[Official Report, Trade Public Bill Committee, 30 January 2018; c. 261.]

I therefore trust that Government Members will support the new clause, as the hon. Member for Kilmarnock and Loudoun said. The Opposition will support it.

Of course, the Minister may well see fit to release the cost analysis he referred to in order to allay not only our concerns but those of the business community about the impact of additional duties on HMRC, given the significant task it faces in preparing for Brexit and in the light of the up to 40% cuts in staffing levels it has faced over recent years. The Minister referred to funding that has been made available to HMRC to support its preparedness to be Brexit ready. Will he tell us what that funding is, or confirm that it is the £250 million that the Government have made available to the cross-departmental and inter-agency border planning group?

[Faisal Rashid (Warrington South) (Lab)]

Does my hon. Friend share my concern that HMRC is already significantly understaffed? There have been widespread complaints over the last two years about poor customer service and the closure of hundreds of offices across the country.

[Bill Esterson]

Absolutely. I know that many of my hon. Friend’s constituents in Warrington are affected by those closures. We clearly cannot on the one hand see cutbacks, and on the other hand expect an expansion of HMRC’s work commitments.

The Public Accounts Committee recently published its report, following an inquiry into our Brexit readiness, in respect of the border planning group. It raised concerns that

“HM Treasury’s usual business model is inadequate for allocating Brexit funding to departments who are forced to operate together, at pace, to a hard deadline.”

That seems pretty clear to me. When giving evidence to that Committee, representatives of the relevant bodies on the border planning group explained that funding was released on a case-by-case basis, and demonstrated that much of the funding had yet to be drawn down.

HMRC is still wrangling with HM Treasury over a £7.3 million drawdown to cover upgrades to the CHIEF customs system—I think that is what the hon. Member for Kilmarnock and Loudoun was referring to—in order to level up functionality. HMRC also told the Committee that it was not expecting any shift in the risk profile of goods coming into the UK from the EU, and that it had “no evidence to suggest” that there would be increased trade flows with non-EU countries after Brexit. Will the Minister confirm whether his Department’s assessment matches that of HMRC, and that our standards and regulations will match entirely those of the EU, such that the risk profile of goods in or out remains the same?

HMRC has planned operating resources for no change after we leave the EU, per the evidence it gave to the PAC. Will the Minister confirm that it is Government policy for there to be no change in the regulations? Will he also confirm whether HMRC was right to say that there is “no evidence to suggest” that there will be increased trade flows with non-EU countries after Brexit? He is looking at me with a puzzled look, as he often does.

[The Minister for Trade Policy (Greg Hands)]

Don’t take it personally.

[Bill Esterson]

I was not taking it personally. I have seen him with that puzzled look on many occasions, not just when I am speaking—often it is in response to comments from those his own side.

If the Department for International Trade has any purpose, it is surely to absolutely change the volume of trade after Brexit. That, in turn, suggests that HMRC was not right to say that there would be no changes in trade flows. It also suggests that HMRC is significantly under-resourced, which is more to the point, if it is operating on a no-change assumption. HMRC’s new customs declarations service is geared up for a fivefold increase in customs processing once we leave the EU. Surely the Minister accepts that that is likely to put severe strain on HMRC’s capacity and significant strain on its resourcing.

What the Government and HMRC have said appears to be at odds when it comes to standards and regulations, and whether they will match—especially the comment about there being “no evidence” of increased trade flows. [Interruption.] I thought that the hon. Member for Livingston was trying to intervene, but she is not.

[Faisal Rashid]

I will give my hon. Friend a rest. Does he share my concern that if HMRC is not adequately resourced to collect and disseminate data in relation to our exports, placing any additional burdens on businesses to furnish that information is entirely unhelpful?

[Bill Esterson]

Absolutely. We made that point earlier in our proceedings and my hon. Friend makes it extremely well.

Coming back to what the hon. Member for Kilmarnock and Loudoun said, HMRC has suggested to the Public Accounts Committee that it will need 3,000 to 5,000 extra staff to perform effectively post-Brexit, but that will depend on the level of risk that Ministers are willing to take. The Public Accounts Committee received written evidence suggesting:

“There are very few International Trade businesses, both importers and exporters, who take Customs compliance seriously”

and that businesses need more support from HMRC to deal with post-Brexit requirements.

If that is the case, clearly a voluntary information disclosure, which the Minister has assured us the Trade Bill makes provision for, would be entirely futile as a means of gathering the information his Department requires. I note, as I did on an earlier occasion, that the Bill does not suggest that it is voluntary, and we are not aware of any business that would ever consider a request from HMRC to be voluntary in nature. The second point—that businesses require more support from HMRC to deal with post-Brexit requirements—is more telling; it further suggests that there will be a significant strain on HMRC’s resources if it is to carry out its existing functions, let alone carry out new ones.

If those new functions are subject to voluntary application, will they also be subject to voluntary roll-out from HMRC? In that case, perhaps there will be nothing to report in 12 months’ time. The additional burdens being placed on civil servants to prepare for Brexit are significant, and with limited resources being made available to support those endeavours, we are right to be concerned about the ongoing operability of HMRC, and indeed other public bodies. That is why we shall support the new clause.

[Barry Gardiner (Brent North) (Lab)]

Very briefly, I commend the hon. Member for Kilmarnock and Loudoun for tabling the new clause.

We have seen in recent days that the Government are usually reluctant to release any impact assessments or reports of any substance, for fear that they will prejudice negotiations and put the Government in the most awkward position. However, I am sure that the hon. Gentleman will take heart from the fact that it is now usual for the Government, 24 hours after saying that they will not publish a report, to decide that they will do so anyway. I confidently expect the Minister to stand up and say that those on the Government Benches cannot support the new clause—we will support it, as my hon. Friend the Member for Sefton Central said—but the hon. Member for Kilmarnock and Loudoun should not worry or be discouraged, because I have no doubt that within 24 hours, the Government will see sense.