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

Emma Hardy Excerpts

Tuesday 23rd January 2018 Public Bill Committees

[The Chair]

I am going to call Emma Hardy. I ask witnesses to make their answers a little shorter, because several Members wish to ask questions.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Q Thank you, and welcome. If the Bill is passed in its current form, do you think it will prevent excessive delays when importing freight?

Ben Richards: We represent members in the transport industry. In its current form, it is very hard to know whether the Bill will prevent excessive delays in importing freight, simply because we see so much of the detail being pushed to secondary legislation. That is where we would want to have these sorts of conversations to give evidence and have the discussion. One of our major concerns is that the real crux of the detail of our future system is being left to secondary legislation, where we and you will not have the opportunity to engage in detailed debates about exactly those issues.

[Emma Hardy]

Q Is there anything specific that you would want to see to prevent delays?

Ben Richards: It goes back to what Rosa was just talking about with the need to have a frictionless aspect to trade. That may be through a type of customs union arrangement, but in the Bill as it stands it is simply not clear. It is very hard to say whether this is the right or wrong way, but we know that with the automotive industry, in which we have tens of thousands of members, on average each part in a car built in the UK crosses a European border and our border anywhere from five to six times. Even a delay of five or 10 minutes added into the just-in-time production systems could create significant problems for such industries.

Alan Runswick: Briefly, on processing, my union is unable to say whether the new Customs Declarations System will be able to cope with the vast increase in the volume of declarations that would come under one of the scenarios we have, because we do not know that it will be that scenario. Similarly, some scenarios will require a big increase in staffing, as has already been mentioned, and those people have to be trained as well. Nobody knows yet what the rules will be. There is a great uncertainty about that position, and that means we have to be very concerned about whether HMRC could cope with the new situation to assist with frictionless trade.

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[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.

[Emma Hardy]

Q Welcome. Could you discuss in more detail the proposals you have for sift and scrutiny committees to deal with the delegated legislation?

Joel Blackwell: Of course. At the moment, the Chair of the Procedure Committee, Charles Walker, has tabled amendments that would introduce a sifting mechanism for clauses 7, 8 and 9 of the European Union (Withdrawal) Bill, which means that for those SIs laden with those powers that are subject to the negative power, a new European statutory instruments Committee—in the House of Commons only at the moment—would have the ability to recommend an upgrade if it thinks it more appropriate that the negative should be subject to the affirmative procedure.

At the moment that is only a recommendation; the Government is not obliged to follow that recommendation, and we have concerns about that. We proposed in September our variation of a sifting committee, which would combine the sifting mechanism with Committee scrutiny. That is in keeping with what we call the strengthened scrutiny procedure, but many others call the super-affirmative procedure: if you see a power in a Bill that you think is extremely wide—particularly if it involves numerous policy areas and Government Departments—you would say, “The affirmative is probably not rigorous enough; we would like a more rigorous procedure than the affirmative.”

You would create what we call a strengthened scrutiny procedure, which is in essence Committee scrutiny work. It is not just sifting; sifting is one element of that super-affirmative, but it potentially involves the ability to table conditional amendments as a Committee, and the Government being obliged to listen to those recommendations. That was the Committee we wanted to see—a Committee with teeth. At the moment, we do not think the amendments tabled by the Chair of the Procedure Committee go very far, and we would like to see more amendments tabled to the Bill, particularly in the Lords, that would give that Committee more bite, in keeping with strengthened scrutiny procedures.

[Nic Dakin]

Q What is your view on the Henry VIII powers in this Bill and their impact on this area of legislation?

Joel Blackwell: It is a good question. Referring back to Ms Blackman’s question, I think all Henry VIII powers should be subject to the affirmative procedure unless the Government give a compelling reason, and we do not think that that has happened in the Delegated Powers Committee note. The six Henry VIII powers contained in this Bill are not as wide as clauses 7, 8 and 9 of the European Union (Withdrawal) Bill or the clauses we have seen in the Legislative and Regulatory Reform Act 2006 and the Public Bodies Act 2011. They are constrained merely by the fact that this Bill is focusing particularly on taxation, border trade, customs arrangements and what-have-you. So I think, in keeping with the views of the Delegated Powers Committee, that the affirmative procedure would be sufficient in this context.

However, parliamentarians, particularly in the House of Commons, have made it clear over the last few months that there are issues with the scrutiny of delegated legislation—more so than they have since we have been doing our research. In particular, there seems to be a view that they would like to have more meaningful and effective oversight over Brexit SIs. The sifting committee was intended to be part of that, but at the moment the sifting committee will only look at clauses 7,8 and 9 of the European Union (Withdrawal) Bill and will not touch the other Brexit-related Bills. If it is still the view of the House of Commons that they would like to look at all Brexit-related SIs then you could, for example, insert into Standing Orders that the new European statutory instruments Committee looks at clauses 42, 45, 47 and 51 of this Bill if it so wishes.

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[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.

[Emma Hardy]

Q I am so delighted that you said that. I am completely biased, coming from Hull where there are major problems with port connectivity. Is that something you have already given recommendations to Government on, or is it something you are working on now?

Richard Ballantyne: The Department is considering a lot of feedback from the ports. I know Sir John Randall, a former Member of this House, oversaw that as an independent chair. The officials are now working on the final detail. I hope it will make a number of recommendations, and it should be out within the next month. As I say, I think Sir John went to visit Hull.

[Emma Hardy]

He probably got stuck on the way there. That is good news, thank you.

[Peter Dowd]

Q I want to ask a question, Chair, but I am conscious of the interruption that may come. This question is specifically to Mr Windsor, on the information you provided to us. In that document you said,

“It has been commented that the Bill is not as precise as Members would have hoped for”—

I suspect you were a diplomat in a different life—

“in terms of either the areas covered by the legislation or in certain cases the powers vested in the authorities. Also from our understanding this document will have to be read with other documents such as CEMA and secondary legislation which still has to be written which has the potential to cause confusion and thus perhaps hinder compliance from Trades perspective.”

To what extent will compliance be hindered? How extensive, how comprehensive, how problematic will that compliance be?

Robert Windsor: It is always more difficult where you have more than one source to draw the compliance requirements from. One of the things that my members have been used to are the codified laws and regulations that have come from Europe, in particular customs codes and things like that. They got more complex as time went on. Basically, there was a single point of reference, so people would go to that and at that point they would pretty much know what was written, how it could be interpreted in different member states—[Interruption.]

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[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.

[Emma Hardy]

To put that into the Bill.

Dr Laura Cohen: Into the Bill. Can I give an example on the tiles review? This goes back some of the evidence given this morning. The European Commission contacted more than 1,000 known importers and users of tiles. Only 11 companies replied to the sampling form. No user or user association came forward. After the review was published, the Tile Association, which includes UK retailers and tilers as well as overseas manufacturers, published in its magazine an article saying that when they had surveyed their members a year ago,

“A sizeable majority of respondents were in favour of the tariffs continuing and also believed that the level of tariff was about right.”

The EU—an example similar to Gareth’s—as part of its calculation had said that this would add about €1 to a square metre of tiles. It is not a large amount.

Gareth Stace: We do not have any detail of what that economic interest test is going to be. It could be there on the face of the Bill in primary legislation; it could be wishful thinking that it might be elsewhere. It cannot be that the Government do not know what that might be. We set out in July in a paper here exactly what we felt the economic interest test should be and the weighting it should apply to producers, users and importers and so on. We set it out in firm detail there, so there is no reason why it could not have been in the primary legislation.

[Graham Stuart]

Q Laura, thank you for your evidence; it has been helpful. You said definitively that we will have much lower duties than the EU.

Dr Laura Cohen: We could have much lower duties.