It is a pleasure to follow the hon. Member for Stoke-on-Trent Central (Gareth Snell). I concur with many of his remarks on the ceramics industry, although I am the MP for Denby Pottery, so we may have a slight disagreement on the premier manufacturer of such products. Perhaps we should move swiftly on.
I welcome this important Bill. It is absolutely right that the Government have brought it forward at a relatively early stage in the Brexit process, and it is important that it clears this hurdle tonight. If we are going to leave the EU’s customs union when we leave the EU, it is a simple fact that we will need to have our own customs arrangements and rules in place for that day. By doing so, we can keep collecting the tariffs we get from non-EU imports. As well as keeping that revenue, we can keep important trade matters flowing and the important reliefs in place.
A Bill like this can be quite frustrating because there are lots of interesting customs issues that we would like to debate, such as what the EU deal and any new tariffs will or will not look like, what the administration process will be and how we will fix the Irish question—if we can perhaps refer to it as that—but this Bill does not answer all those questions. Instead, it puts in place the architecture that we can then use to answer those questions when we know what our deal with the EU will be. It is right that this Bill goes through because we need to get all the nitty-gritty detail of our new customs process in place as early as we can, so that it can be understood by all the businesses out there that will need to comply with it
and all the software producers that will need software in place. A lot of people will need to be trained on the new duty codes, including which ones apply to their products, how they comply with all these rules, what software systems will be needed and how they will interact with the new HMRC ones. All those things have to be done as early as possible if this is going to work on the day that we finally leave.
I have some comments on specific parts of the Bill. I was not really trying to find in the Bill the detail of what the customs rules will be and exactly what the text says. I think that what we have pretty much mirrors the EU customs rules, and we are just creating our own regime to do much the same thing. That is probably the spirit of the European Union (Withdrawal) Bill, and I appreciate we have to do this as a separate Bill for ways and means purposes. Most people who operate in this area will understand the mechanics that the Government are trying to produce, but what we want to understand is how we can make complying with the burdens of that as easy, straightforward and cheap as possible for the businesses that have to do it. A key part of that is the authorised economic operator system.
When the Public Accounts Committee took evidence on authorised economic operators, it found that about 604 businesses in the UK had that status. Now, that is not a very large proportion of the existing importers that could be using that status. It is about a 10th of the number that Germany has. There needs to be a real impetus during the passage of this Bill and afterwards to ensure that HMRC is doing everything it can to get businesses signed up to that process, so that we have as many of those operators in place as we possibly can when we really need them. That will help those businesses, but it will also help HMRC because it will know which businesses they do not have to check and which will be compliant, rather than having to do risk assessments on them all. What is not entirely clear in the Bill is the status of a business that is already an AEO. If someone has been approved under the EU regime, will that approval grandfather into our regime, or will they have to reapply for it? If someone signs up now, will they be in the same position? I think we should be very clear that if we think a business has that status now, there is no reason why they cannot have it going forward as well.
The Select Committee on Northern Ireland Affairs, which I serve on, has been doing quite a lot of work on customs issues, including visiting Switzerland to see how the border with the EU works. We saw that we can actually minimise the amount of declarations needed if we can make the systems mesh, synchronise and talk to each other. We do not want to see a business making a declaration in the UK for the export of something and then making an equivalent declaration in France when that is imported into the EU system. If a system is designed so that businesses can make one declaration for both regimes, it will halve the work and make things a lot easier. I cannot quite see in the Bill a provision whereby we can take the power to create a system that talks to the other regime in that way. I cannot see a measure whereby, for example, a business could make a declaration in France and where we could then get that data and deem that business to have complied, and vice versa—if a company makes an export declaration here, can that be passed on to the French? Clauses 25 and 26 are about co-operation, but I hope that in drawing up these rules the Government
have thought through how we can get a simplified, joined-up system so that we can minimise the amount of compliance we need for those compliant businesses.
Clause 27 is an interesting provision, as it will give the Government the power to create fees in connection with the import process. Perhaps the Government could just reassure us that they are not planning on charging an import fee for the pleasure of complying with these new rules; that might be an unnecessary cost to trade. Will the Government be clear exactly where they see the role of fees and what they think those fees might be? I just cannot see that every time someone imports a widget, they should pay HMRC a fee for that pleasure.
There was some debate on clause 31 in the opening remarks. That clause is about forming customs unions. I have some concerns about what the Government are trying to achieve here. I can see that it is attractive to have the power in place, if we want to create a customs union with our overseas territories as we all leave the EU at the same time in our various different ways; I have no particular objection to that. I can also see that when we do a transitional deal with the EU, we want to be able to bring it into force effectively. But we are supposed to be agreeing the transitional deal by March, which will give us a year to put it into place before we actually leave. I am not quite sure why we need such a broad-ranging power in the Bill because, as far as I can tell, there is no time limit or geographic limit on this power. In theory, we could do a customs union with the trans-Pacific trade area in 25 years’ time, and it could go through on the affirmative resolution process. I am not sure that that is what we intend.
Customs unions are generally quite significant and powerful things, where we agree not only not to charge tariffs on the other side and vice versa, but to have a common set of external tariffs. Indeed, there is a provision in clause 31 that says we will accept that when a Government change dates on a tariff, that change can apply in the UK. Now, I suspect that we are not envisaging the Jersey Trade Minister setting our tariffs for us. I am guessing that that is aimed at some kind of EU arrangement.
If we do have a year to put in place a transitional provision, it would be better to do that in a considered way through primary legislation so we understand what it means rather than have it go through by some kind of parliamentary back-door process where we cannot talk about the detail or try to amend the substance. These things can be very significant. There can be large amounts of revenue at stake, or issues about which industries we choose to protect. We need to try to clarify exactly what the Government are trying to do in clause 31, and exactly how long this power needs to exist for and what geographical extent we are prepared to give to it.
On the Irish customs question, we cannot expect anything in this Bill to look at that specifically. One of the proposals that we have come up with for fixing the customs border is to exempt all micro, small and medium-sized businesses from needing to comply with the customs rules, presumably so that they would not need to do the declarations or pay any tariffs on goods going across the Irish border. However, I cannot see where in the Bill the Government have taken the power to do that. One could argue that it is covered by the reliefs in clause 19, but is that really the solution that we are expecting in the Northern Ireland context? Perhaps the Government should sensibly take the power to deliver this in the Bill and make sure that it can be achieved if negotiated.
I have some final points on the VAT issue, which was raised earlier. It is clearly perfectly fair for importers from the EU to point out that they are going to be cash-flow disadvantaged compared with their current situation if they have to pay VAT immediately when they import the goods rather than on their next VAT return once they have processed the transaction. That would put them in the same position as somebody importing from outside the EU. It is encouraging that the Treasury, for once, is prepared to be generous in that situation and create a regime where those businesses may not face that cash-flow implication. We ought to think very carefully about whether we want to treat an import from France differently from one from the USA in this situation. Will this generosity on cash flow apply more widely than the EU?
A lot of the lobbying on this has come from the British Retail Consortium. Businesses in my constituency that trade with the large retailers tell me that they are being pretty brutally squeezed on the amount of credit that they have to give to those large retailers—up to 120 days in some cases. If the Government intend to create a targeted, generous regime to help the cash flow of people importing goods from outside the UK, perhaps they should make it available only to businesses that treat suppliers within the UK with some kind of fairness, to have a level playing field. It would be a bit crazy for it to be better for their cash flow to import goods from the EU than to buy them from the UK supplier round the corner. I hope that could be another stick to encourage large businesses that treat their small suppliers quite badly by saying, “Yes, we accept that there is an issue, but we will only let you have this cash-flow advantage if you’re behaving fairly to others in terms of their cash flow.”
I welcome this important Bill and hope it gets a speedy passage through the House.
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