Brexit: The Customs Challenge (European Union Committee Report) - Motion to Take Note

– in the House of Lords at 3:12 pm on 1st April 2019.

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Baroness Verma:

Moved by Baroness Verma

That this House takes note of the Report from the European Union Committee Brexit: the customs challenge (20th Report, HL Paper 187).

Photo of Baroness Verma Baroness Verma Chair, EU External Affairs Sub-Committee

My Lords, I am grateful for the opportunity to debate the EU Committee’s report, Brexit: The Customs Challenge, this afternoon. As chair of the EU External Affairs Sub-Committee, I extend my thanks to the members of the committee for their important contribution to this report, to Members speaking today, and to everyone who provided written and oral evidence to the committee. I also thank the committee’s secretariat, as it was constituted at the time—Jennifer Martin-Kohlmorgen, Julia Ewert and Lauren Harvey—for its assistance with the inquiry and preparation of this report.

Last year, the EU External Affairs Sub-Committee investigated the customs challenges in the event of no deal and considered the Government’s Chequers proposal for a facilitated customs arrangement. I strongly regret that—even though the committee published its report in September 2018, and despite the rule that commits the Government to respond within two months of a report’s publication—more than six months on the committee is still awaiting a response. Not only is the response outstanding, but the Government have not proposed an alternative date for its submission. I urge the Minister, who I know will take this seriously, to provide the official government response as soon as possible and ask him to confirm when he expects to provide it to the committee.

The first half of the report covered what trade with the EU under WTO rules, commonly referred to as “no deal”, would look like. Despite the various votes in the Commons on avoiding no deal, a no-deal Brexit will continue to be a risk unless and until a withdrawal agreement is passed. I also remind the House that, even if there is a transition period, if the two sides fail to agree on their future relationship, there could still be a delayed no-deal Brexit.

Our report warned that no deal would cause significant disruption and be costly. Tariffs would apply and traders would be required to make customs declarations, with customs and regulatory checks also to be carried out. Overall, HMRC has estimated that if customs declarations were introduced between the UK and the EU, there would be a cost to businesses running into billions each year. The completion of customs declarations would raise the cost of UK-EU trade by £13 billion a year. Half of that—£6.5 billion— would be shouldered by UK businesses. There would also be additional tariff costs. HMRC originally estimated an additional £5 billion per year in such costs, though the UK Government’s intention to reduce 87% of tariffs by value in the event of no deal should lower the amount somewhat. Having said this, UK businesses will still face tariffs on most exports to the EU by value. Although EU tariffs are generally low, some sectors, such as the agricultural and automotive sectors, will be disproportionately affected.

I also emphasise the report’s finding that no technology currently exists, or will be available in the short term, which would dispense with the need for border checks. In all cases, some form of physical infrastructure will be required. This is of particular relevance to the Northern Ireland/Ireland border, where trade under WTO rules risks reintroducing a hard border. We also found that the introduction of new customs checks at the border under no deal would cause congestion and delays at roll-on roll-off ports. The Port of Dover’s ability to handle its trade volume, for example, depends on vehicles flowing through the port without stopping for customs controls. Even if the UK adopts a light-touch approach to these checks, roll-on roll-off ports such as Dover operate in a closed loop with their French counterparts in Calais or Dunkirk. Congestion on the French side will inevitably have a knock-on effect on the UK. This poses a significant challenge to just-in-time production and agri-food businesses, and could lead to the disruption of highly integrated supply chains. In turn, this could make UK businesses that are part of such supply chains less attractive.

Mitigation options are limited, but it is critical that the UK Government have contingency arrangements in place to manage the negative impacts of no deal. While no specific plans were in place at the time of publication of the report, I welcome the fact that the UK Government have now set out their contingency arrangements and provided guidance to businesses. Last month it was announced that, in the event of no deal, the UK would set temporary tariff rates that would be in place for up to 12 months from exit date, leading to the elimination of tariffs in 87% of imports by value, which compares with 80% before Brexit. Consequently, in practice many importers will be exempt from paying customs duty, yet this approach is not without risks. While there are some protections for the car industry and the agricultural sector, this unilateral reduction of tariffs, which under WTO rules applies to EU and non-EU goods, could affect the competitiveness of UK production. Will my noble friend confirm when the Government intend to publish an impact assessment of their tariff reduction plan?

The elimination of 87% of tariffs will go hand in hand with simplified customs procedures for traders importing goods from the EU into the UK. These simplified transitional procedures will be in place at least until July 2020. However, they will not eliminate the need for customs declarations altogether, but simply reduce the amount of information that importers will have to provide during a defined period. In summary, the costs, the disruption to the flow of goods and, potentially, the imposition of customs checks on the Northern Ireland/Ireland border in the case of no deal all underline the need for the Government to reach an agreement with the EU on the terms of our withdrawal and the future economic relationship.

As regards the future economic relationship, a facilitated customs arrangement was put forward by the UK Government in July last year. However, the initial reaction from the EU has been sceptical at best, and the parliamentary deadlock over the terms of the UK’s withdrawal has all but sidelined it. Since the proposal, the political declaration setting out the framework for the future relationship between the EU and the UK has been published, even though it has not yet been agreed. The section on customs calls for “ambitious customs arrangements” and is worded in a way that could be used to support a wide variety of negotiation outcomes. Can my noble friend say whether the facilitated customs arrangement is still the Government’s preferred option? What further thinking, if any, has taken place?

Other members of the committee will raise a number of further questions, so I will leave it at that. However, many of the witnesses who gave evidence to us were very concerned that this uncertainty was having a large impact, not just on businesses but on supply chains.

Photo of Lord Triesman Lord Triesman Labour 3:20 pm, 1st April 2019

My Lords, it was a pleasure to serve on the sub-committee chaired so effectively by the noble Baroness, Lady Verma, whom I thank.

After all these months of delay, waiting for the Government to respond, we should consider where we are overall. The Government are hardly prepared for the customs arrangements that would be needed for any version of hard Brexit, and the businesses and individuals who will have to operate in this environment have few clues as to what to expect. People in haulage, ports and administration have a sense of application to do their best, but nobody has been able to tell them which best they should do.

All the time, the clocks are ticking. Complex supply chains face multiple difficulties without any real prospect of resolution. With the small cavalcade of lorries in Kent, the appointment of a ferry company with zero experience, zero ships and zero port agreements, the emergency plans for food and medical shortages and the declaration of the possible need to contain civil unrest with military deployments, it is hardly surprising that nobody is oozing confidence. The sunny uplands are a fantasy. We Brits are a pragmatic and phlegmatic lot, but this has felt to me like launching Eddie the Eagle down a precipitous slope to jump against seasoned athletes, our best aspirations amounting simply to hoping he will survive.

In the area of customs, I still do not know what our national vision is. How does that vision, if there is one, link trade and customs provisions with economic performance, and thus with other vital interests such as security, defence, foreign policy, justice, home affairs and other key sectors? Customs and trade are essential components of a successful economy, and a successful economy holds the key to everything else.

In all markets between nations, including the WTO’s often dysfunctional system, we generally acknowledge that there must be rules so that everybody knows the standards within which they will trade. Even outside the EU’s customs union, checks and intrusive procedures are still inevitable. How else will we deal with, for example, the enduring compliance with preferential rules of origin? If we are to enjoy the frictionless benefits of being inside, do we really think it right to do so without accepting that there are both rights and responsibilities?

Customs arrangements underpin many of the things the United Kingdom values very highly: mitigating risks to public health, reducing environmental risk, food safety, the operation of financial regulation, the social market and decent workers’ rights. None of these is a second-order issue for the quality of our social fabric.

The sub-committee pulled me back to thinking about our national strategy. The United Kingdom may no longer be a great power, but we can be a very good second-tier power and project ourselves internationally with effect. To do so we need to demonstrate our ethical trustworthiness, and this must be underpinned by serious intellectual endeavour. We need credible forces, as the noble and gallant Lord, Lord Stirrup, and my noble friend Lord West often remind your Lordships’ House, and the foundation for it all is a sustainable economic capacity to deliver on these other interlocking attributes. No nation on earth can do these things on its own—not one.

Let the House be candid about the economic world we inhabit today. Customs problems are not the only problems on the economic horizon, and we had better understand the cumulative effect of all the problems we may well face. China’s growth is now far weaker than it was before 2007, and in essence has been driven only by the injection of a $586 billion stimulus in 2009. That is now impacting on much of the world’s economic prospects. The recovery of the United States is evidently unstable. The poor are becoming poorer. Average wages last year retreated to the purchasing power of 1978, and US retreats always have their effects in Europe and Japan. Europe is sluggish at best. Germany had zero growth in Q4 last year and barely sidestepped recession. Italy has negative growth, and the UK’s growth was the weakest since 2012. There is a correction as the post-2007 recovery regimes are changed and monetary tightening takes effect. The yield curve has inverted, showing how anxious investors have become—always a warning of recession. The eurozone crisis deepens.

Private debt once again threatens the stability of many major economies. In the United States, private debt is higher than before the housing and mortgage crisis of 2007, and is now fuelled by borrowing to speculate. Global debt is three times global GDP. It impacts on corporations and individuals, and in China on just about everything and everybody. Growth is squeezed out by unsustainable and unpayable debt. Investment in wages and productivity continues to be in grim decline. In short, the predictive indices that have preceded past financial collapses are as visible today as the queues once were outside Northern Rock.

This is the economic climate into which we want to add the uncertainties of trading without proper customs arrangements, reintroducing significant friction between us and our nearest huge markets, and our political, trading and security partners. It is hard to believe that anyone would take such a course willingly. Of course, there may be no certain and smooth economic path open to us, but following the worst options could well be the straw which breaks the camel’s back.

Our country has been served very poorly, both by its Government and by the Official Opposition, but it would surely prefer to meet its global and domestic strategic objectives in leadership and values, intellectual capability, security and defence through a viable military—to meet its obligations in the world as it has always tried to do. While customs may appear to be just a piece of this jigsaw, it is about economic capability and therefore about the interplay of the overall strategic fabric. We can do without cutting unmendable holes in that fabric.

Photo of Baroness Suttie Baroness Suttie Liberal Democrat Lords Spokesperson (Northern Ireland) 3:28 pm, 1st April 2019

My Lords, I too thank the noble Baroness, Lady Verma, for introducing this extremely useful and comprehensive report this afternoon. I also thank the members of the excellent committee secretariat for all their hard work and commitment, as well as for their dogged determination to seek out the facts in this constantly rather opaque process.

When I was rereading the report yesterday afternoon, ahead of today’s debate, as well as reading my own notes from our committee’s extremely informative visit to the port of Dover last July, it was difficult not to feel both angry and depressed. The lack of progress since the report was published last September is shameful. Clearly, the debate taking place at the other end of the building this afternoon, and the second set of indicative votes, will have a direct impact on these issues, not least if the proposal on the customs union passes.

The fact that more than 6 million people have now signed a petition calling for Article 50 to be revoked shows just how concerned people are by Brexit, and in particular by the prospect of a no-deal Brexit. As the Brexit debate has increasingly taken on the quality of a quasi-religious fundamentalist debate rather than an analysis of the facts, it is not surprising that people—most especially people working in small and medium-sized businesses—are increasingly in a state of despair.

I shall focus my remaining remarks this afternoon on the impact on businesses and the preparations for a no-deal Brexit. An estimated 145,000 businesses in the UK trade only with the EU, and an estimated extra 100,000 more may be in the same situation. These are businesses which, over past decades, and certainly since the creation of the single market in 1992, have been accustomed to trading with our EU partners without barriers or friction. Trading with Hamburg or Lyon has been little different for those companies from selling their products from Newcastle to London.

A no-deal Brexit would involve those companies acquiring expertise in customs procedures that they previously never needed. It would involve them facing urgent training, delays and costs. Indeed, as the report makes clear, HMRC estimates that the cost to UK businesses of a no-deal Brexit would be £18 billion per year. Given the reports over the weekend that a number of Cabinet members are now actively calling for a no-deal Brexit, what measures are now being put in place ahead of the new date of 12 April to help small and medium-sized businesses prepare for this situation?

As the report sets out very clearly, roll-on roll-off ports such as Dover will be particularly strongly impacted by a no-deal Brexit. The evidence we heard from the experts on the ground at the port of Dover was extremely powerful. Currently, in the eastern dock in Dover, lorries coming in to the UK from the EU take an average of two minutes to process. In the western dock, where non-EU lorries are processed, the average time for a lorry to be processed is one hour and 15 minutes. At the moment, only 1% of the traffic coming through Dover is non-EU. The port currently handles up to 10,000 trucks per day.

It is a slick operation at the port of Dover, which has developed over many decades, and it currently works as a well-oiled machine. There are 60 crossings per day, and, as the noble Baroness, Lady Verma, said, any delay at either Dover or Calais has a direct impact on the other port. A no-deal departure without any transitional arrangements in place could, it is estimated, result in up to 17 to 20-mile queues of traffic in Kent. The knock-on impact to just-in-time deliveries, food, pharmaceuticals and other industries is of genuine concern to both businesses and ordinary people.

I declare an interest as a resident of the very beautiful town of Broadstairs on the Isle of Thanet in Kent for the past five years. Broadstairs is next to Ramsgate, where the now infamous Seaborne Freight—the ferry company with no ferries—is based. In recent years, Ramsgate has lost its channel ferry crossing to Ostend and its international airport at Manston. Both of those losses have had a very negative impact on the local economy. The Isle of Thanet voted strongly to leave the EU, and it is one of the ironies that, like many other regions, such the north-east of England, it is those areas that voted strongly to leave the EU that are now most likely to be negatively impacted by a no-deal Brexit.

One of the relatively few visible signs of contingency planning for a no-deal Brexit in Kent has been Operation Brock. The results so far have been mixed. The trial run carried out at the abandoned Manston international airport in Ramsgate in January this year saw only 89 of the planned 150 lorries turning up. Given that Dover deals with up to 10,000 lorries a day, a rehearsal with only 89 surely cannot be seen as anything other than tokenistic. The rollout last week of the new contraflow system under Operation Brock on the M20 has also caused concern locally, not least regarding access for emergency vehicles. Can the Minister—who I fully appreciate is one of the good guys and in no way responsible for this mess—update us on contingency planning in the light of these recent events?

The solution to this is in the hands of the other end of the building as we speak. Remaining in the European Union, or at least remaining in the customs union and single market, would solve this customs challenge.

Photo of Lord Lilley Lord Lilley Conservative

I congratulate the noble Baroness and the other committee members on the report. She mentioned the current delays at Dover. I noted in the report that they relate to lorries from Turkey, which is in a customs union. Last week, I met a number of customs agents who told me that the paperwork involved in trade with Turkey, with its customs union, is worse than that for trade with America or China. Do the noble Baroness and her party think that a customs union would solve these problems?

Photo of Baroness Suttie Baroness Suttie Liberal Democrat Lords Spokesperson (Northern Ireland)

I do indeed—not least because of the figure I just gave: 1% of all traffic currently going through the port of Dover comes from non-EU member states. The other 99% goes through in a slick operation. With a no-deal Brexit, that will change overnight—not necessarily because of the Dover side but because of the Calais side, which will have to introduce restrictions.

To conclude, as the report makes clear, the consequences of a no-deal Brexit would be not merely “a bit bumpy”, as some Brexiters have claimed. They would have a real and damaging impact on businesses and the lives of ordinary people for generations to come.

Photo of Lord Horam Lord Horam Conservative 3:36 pm, 1st April 2019

My Lords, I join other noble Lords in congratulating my noble friend Lady Verma on her excellent chairmanship of our committee. I thank my colleagues and our ever-diligent staff for their contributions to our long and sometimes exhausting —but sometimes rather exhilarating—meetings.

This is our third report on customs and trade. It is right that we concentrated so much attention on this, because whether we remain in a customs union or not, the issue is central to the binary choice that the Government are, I am afraid, not making at the moment, and which we will have at some stage to make. The noble Baroness, Lady Suttie, has just made the point that down the Corridor a very important debate on indicative votes is taking place. The most popular Motion so far, as we saw last week, was moved by my right honourable friend Ken Clarke in favour of remaining in the customs union.

On the point just made in an intervention, I make a distinction between remaining in the customs union and, like Turkey, having a customs union with the customs union. That is a different and separate point. As I understand it, Ken Clarke was arguing for us remaining in the existing customs union, which is the only way to maintain the entirely frictionless trade we have enjoyed with our colleagues in European Union countries for 45 years—and the only way to avoid a hard border in Ireland and keep the United Kingdom together. I fear that if there were a hard border in Ireland, the problem of Scottish independence would loom its hoary head. Therefore, this is a way of keeping the United Kingdom together.

We should not forget the value of inward investment into this country. As an economist, I am extremely aware of this. It exists simply because we are part of a huge market of 500 million people. It is the jewel in the United Kingdom’s crown. We have far more inward investment than Germany, and twice as much as both France and Italy. That would undoubtedly be threatened—indeed, is already being threatened—if we removed ourselves from these arrangements. Politically, this may well be the ultimate compromise we have to make. I voted remain; if the remainers can accept that we will leave the European Union, as we are targeted to do, perhaps the Brexiteers could accept a soft, sensible Brexit that we could support. The 52% to 48% split in public opinion suggests that that is one possible way forward, and I note that the Chief Whip is going to be revealed on television this evening as saying that it is something which the Prime Minister should have thought about when the results of the last general election became apparent.

However, it has to be acknowledged, and I do so now, that important arguments can be made against remaining in the customs union. We would not be able to have our own independent trade policy, and of course we would be a rule taker—the “vassal state”, as it is called: the “servile state” is another phrase that is used—but I would argue that these are overrated as disadvantages. The idea of no independent trade policy is too strong a point to make. In fact, having an independent trade policy from where we are now would be a disadvantage. That is because, if you have an independent trade policy, you are selling entry to a market of 65 million people, whereas at the moment we are selling entry to a market of 500 million people. That is a hugely easier sale than if we had our own independent trade deal. So that is not really an argument that can be sustained.

The other argument is about the vassal state and how we would have to accept regulations decided by the European Union. That is to misunderstand the way in which regulations are made inside the European Union. They are made in expert committees. On those expert committees sit not only Members of the European Union but Members of European countries that have an interest outside the European Union. Norway has been represented on 200 expert committees, even though it is not in the customs union. Britain, given its size, could expect to be on expert committees of that kind, making the rules as we go along—even though ultimately we would not have any say in the parliamentary committees.

However, as the House will fully appreciate, it is very rare for a parliamentary committee to get involved in the detail of what is put before it by experts. Such committees tend to accept the proposals, with only the occasional disagreement. The fact is that, as long as we were in the customs union, we would have a strong position inside the system of making regulations in Europe even if we were not actually in the European Union. Fundamentally, when the question of sovereignty and the right to rule ourselves is discussed, you have to make a trade-off in business between access and sovereignty. If you want access, you have to give up a bit of sovereignty. If you have no access, you can keep all your sovereignty but you will have no access. That is the trade-off you have to make, and we should recognise the reality of that.

A bigger objection to remaining inside the customs union is that others in the European Union may not agree to give us such a deal. They may argue that it is too good a deal for Britain, because once again we would be getting many of the advantages of being inside the European Union without actually being a member. That is something which would have to be explored in the negotiations which I hope would take place. The EU could say, for example, that the UK has to remain inside the single market, and it may want to retain control of our fisheries and agriculture. Once we go down that path, I agree that the issue of “Brexit in name only” is raised. At that point we would have to consider whether we wanted a clean break and a free trade area. Another factor is that the Cabinet is split on this and there is no sign of a resolution.

Finally, I bring good news to noble Lords. Agreement was reached before lunchtime today on the “Politics Live” programme on BBC television between a hard Brexiteer, a remainer who is willing to be a Brexiteer, and a remainer. The three people involved were Steve Baker—there is no harder Brexiteer—Margot James, the industry spokesman, and Jonathan Powell who was Tony Blair’s chief of staff when he was Prime Minister. They agreed—that is the good news. The bad news is that they agreed that there is bound to be a long extension—so I am afraid that, whether we like it or not, we are in for further debates on this subject.

Photo of Lord Dykes Lord Dykes Liberal Democrat 3:44 pm, 1st April 2019

My Lords, in this House we are fortunate to have had many reports about Brexit and all its complications from the various sub-committees and the main European Union Committee. I am sure we are very grateful to all Members who have worked hard on those reports. They are of immense detail and complexity, but also immense conviction and persuasion. That does not gainsay my feeling at the end of reading them all carefully, which I try to do if I can: one comes to the inevitable conclusion that there is no substitute for actually staying in the European Union.

I very much congratulate the noble Baroness, Lady Verma, on leading this discussion of the report and the other three members of the committee who have spoken so far. I thought the concluding remarks of the noble Baroness, Lady Suttie, on the numbers were very relevant and need looking at again. I also thank the noble Lord, Lord Horam, for his words highlighting the dangers and difficulties of producing the customs union concept in the way that my great friend Kenneth Clarke was trying to explain properly on the radio this morning. He did a very good job but there are many minuses as well as many pluses.

On the report itself, I agree very strongly with all the remarks made by the three ensuing speakers, with their worries and anxieties about what this all means. I hope the Minister will kindly look at the report’s conclusions, on page 48. I am particularly concerned about paragraph 191, which states:

“The UK Government’s estimate that 96% of UK goods trade would be able to pay the correct or no tariff up front and not go through the repayment mechanism has been challenged. We call on the Government to clarify the methodology it used to arrive at the 96% figure”.

Then, on a totally different subject, paragraph 193 states:

“We welcome the Government’s stated intention to uphold current UK food standards and not lower them in free trade agreements with third countries”.

All that is a danger if we go ahead with this matter. I beg to differ, and conclude with a few remarks about the broader scene now facing us in what is yet another—although not the final—emergency, drastic week for this House, and particularly for the House of Commons.

Photo of Lord Wigley Lord Wigley Plaid Cymru

Will the Minister address the difficulties arising from the lack of infrastructure for customs dealings between Ireland and the UK using the UK as a land bridge, particularly at Holyhead? I do not think it was visited by the committee; nor did witnesses from Holyhead come before the committee.

Photo of Lord Dykes Lord Dykes Liberal Democrat

This is not the first time I have agreed with the noble Lord, Lord Wigley, on these matters, and I do so strongly—partly in the nervous realisation that I know much less about Holyhead than he does. The noble Lord has referred to this in a number of speeches; I agree with the broad outline of his comments and thank him for intervening today.

The background to what is happening is a tragedy and a matter of great sadness for this country. No Prime Minister with any wisdom and good sense would have set out to totally ignore the wishes of almost 50% of those who voted in what was only an advisory referendum, even though David Cameron said he would abide by the decision. Even after the futile election of 8 June, after she had lost her mandate and was able to carry on only artificially via a dubious deal with and huge bribe to the DUP, the Prime Minister defiantly carried on. She chose not only to ignore the wafer-thin majority in the first referendum but to deal just with the ERG—not even with the whole of her own Conservative Party. The ERG came first in all her dealings and all her discussions. This again reveals the huge weaknesses in our now totally dilapidated political and parliamentary system, which can be removed only with drastic and radical reforms, which should not be done by politicians—they would never agree—but by sensible outside experts and professorial characters of distinction, men and women. We have to get rid of this bandit politics disease in Britain and come back to reassuring the public.

In that context, I conclude by saying something in contrast to the miseries we are all experiencing with this Brexit process—Brexit is on the verge of being registered with the NHS as an official disease, and anti-Brexit is part of it. However, public opinion has changed, and it was, at last, reassuring to go on the march on 23 March with over 1 million like-minded people from all over the country, including many former leave voters who now grasp the looming disaster of Brexit. The 6 million-plus signatories to the petition underline the huge change in public opinion on this matter. None of these reports is rendered less important and valuable because of this, but that is the reality.

This is especially true for our precious and increasingly internationally minded younger generation, and often, at the other end of the age scale, for the many thousands of UK citizens working and living elsewhere in the European Union—perhaps a more relevant union for us than that other union Mrs May refers to. The European Union is precious to the modern populations of its modern member states.

Finally, I want to quote Margaret Beckett, speaking in the Commons debate on 27 March. She said,

“I invite colleagues who … resist a confirmatory vote to look starkly at … what they are saying. They are willing … to terminate our membership of the European Union even if it may now be against the wishes of the majority of the British people”.—[Official Report, Commons, 27/3/19; col. 391.]

Photo of Baroness Randerson Baroness Randerson Liberal Democrat Lords Spokesperson (Transport) 3:50 pm, 1st April 2019

My Lords, I did not have the privilege of being a member of the committee responsible for this excellent report, but it is a very interesting read. It is, unfortunately, a historical document, and it would have been a lot more appropriate to debate it some months ago. It is striking that, in the six months since it was published, although we have learned a lot more about the problems associated with customs arrangements, there have not been any solutions. Therefore, what the committee advises is as relevant now as it was then.

The report draws attention to the fact that, as my noble friend said, there are 145,000 VAT-registered businesses in the UK, and a further 100,000 under the VAT threshold, that currently trade abroad but exclusively with the EU. That means that they have not had to deal with the paperwork and bureaucracy associated with international trade. In addition, the report draws attention to the huge cost to business of no deal, estimated by HMRC at £18 billion per year. It is a pity that figure was not on the side of a bus.

The report also emphasises that all the talk of using technology to overcome border issues, particularly in Northern Ireland, is basically so much hot air—those are my words, not the report’s. There is no technological solution. Essentially, there are bound to be hold ups at the border, and, however brief they are, they will have a huge impact. Since the publication of this report, we know quite a lot more about the details of that impact.

I will start with Dover, which has already been mentioned, the largest roll-on roll-off port in the UK. Noble Lords will be familiar with the expectation that there will be long queues. The report acknowledges that there is no space for additional checks, examination sheds, checkpoints or additional barriers, and no space for lorries to park as they wait. Of the UK’s total trade in goods, 17% goes through Dover, and it depends on going through without stopping. Indeed, both Dover and Eurotunnel market themselves as a continuous, non-stop motorway to Europe. Some weeks ago, I met the Road Haulage Association. Its representative told me that an Amazon lorry can have 8,000 individual shipments on it, and would normally have an individual customs declaration for each of those 8,000 shipments. Each customs declaration has 36 different fields that must be completed. The RHA estimates that it would take 170 staff one day’s work to process that lorry. The implications on a grand scale are serious.

The Government have sought to combat these problems in two ways. One is by saying, essentially, that we will ignore the need for border checks and everything will continue as it always has. There are a couple of problems with that. First, why are we leaving if we are going to continue exactly as we have done? Secondly, as a representative of the freight industry said to me, the moment we do not apply the rules we lose control of the border. That will lead to various kinds of smuggling—of people, drugs, armaments and so on, as well as ordinary, everyday goods. It will also lead to the introduction of substandard goods—a serious issue for those trying to produce good-quality goods in the UK.

The Government have also attempted emergency preparations—the M20 being turned into a giant lorry park and the use of Manston Airport for emergency long-term parking—and we are all familiar with the fact that they have not gone well. Then there is the Seaborne ferry company with no ferries, which seemed to think it was providing the Department for Transport with pizzas rather than ferries.

The serious point is that the subsidy for ferries led to Eurotunnel seeking compensation for its products and services being overtaken by the subsidy for ferry services. Last week we discovered that the contract the Government signed with the ferry operators started on 29 March, even though we have not left the EU. I am told that tickets for these additional ferries are now being sold on the open market. It might be a good time to catch a ferry in the next week or so but, if you meet a tall, bald man called Chris trying to flog a few tickets in the ferry terminal, it would not be good value for money.

It has already cost £89 million for the ferries; £6.5 million for the extra weeks of the ferry subsidy that the Government have to cover until we leave the EU; £800,000 for the financial advice; £33 million in compensation to Eurostar; and £30 million for the design, build and operation of Operation Brock on the M20. By my calculations, that is almost £160 million, and counting, as the cost of Brexit to the DfT alone.

I have dealt with the costs to us—the taxpayer—but most importantly we should remember the costs to the businesses of Britain. The SMMT referred to the production of a single fuel injector. To make it takes 35 components from 15 countries and it requires 39 border crossings between the UK and the EU. Now we can see why the automotive industry is thinking of leaving this country fast and why the producers in the supply chain are extremely concerned about their future.

Photo of Lord Bilimoria Lord Bilimoria Crossbench 3:59 pm, 1st April 2019

My Lords, this report once again illustrates that the best deal for this country by far is the deal that we have at the moment as a member of the European Union. When the noble Baroness, Lady Verma, introduced her committee’s report Brexit: the Customs Challenge, which was published on 11 September 2018, I was shocked that more than six months later the Government have not provided an official response. Will the Minister, who I respect greatly, explain why that is the case?

On 17 January 2017, the Prime Minister famously put down her red lines which involve leaving the European Union, the single market and the customs union. Then she progressed towards a facilitated customs arrangement. Throughout this Brexit process the Government’s approach has been to continue to try to have our cake and eat it. The 27 countries of Europe have given a clear mandate to one individual, Michel Barnier, and they have stuck to their guns. They have been intransigent but fair in that they have not moved on their position that we cannot leave and expect to have the same terms as if we are a member.

HMRC has said that the estimated annual cost to UK traders of no deal is £18 billion, which is more than twice what we contribute annually for membership of the EU and which I would pay for the peace we get thanks to being a member of the European Union. If we go for WTO rules, there is no question that it will be disruptive and costly, as the noble Baroness, Lady Verma, said earlier. Tariffs will apply and although they are low we will see them go up in many areas. We have heard that 145,000 VAT-registered UK businesses and potentially a further 100,000 businesses under the VAT threshold currently trade exclusively with the EU. That is a huge number of businesses, and we are reliant on roll-on roll-off ports. The introduction of any new customs checks under no deal will be highly disruptive. There is no question about it. We have heard in this debate that many companies rely on just-in-time. Many manufacturers send products backwards and forwards to and from the EU. It is quite frankly—what word should I use?—laughable that when Dominic Raab was Secretary of State for Brexit, he said that he did not realise how important the Calais-Dover corridor is for frictionless trade. That is astonishing, to put it mildly.

Then we have the implications for the UK-Ireland relationship. The UK’s role as a bridge between Ireland and the EU has already been mentioned in the debate. It is 10 hours door to door for a lorry leaving Dublin for Calais using the land bridge. If it has to go all the way round, it will be 40 hours. At the moment there is no technology that will sort out the issues and keep the Irish border frictionless and open. Will the Minister confirm that I am not mistaken and that HMRC has admitted that it does not have the technological ability to cope with a no-deal Brexit, even with a two-year implementation period?

Here is the reality: the EU is the UK’s largest trading partner for goods. Last year exports to the EU accounted for 49% of the total value of UK goods, and imports from the EU were worth 55% of the value of all UK goods imports. That is 50% of our trade, whichever way you look at it. The Government are openly admitting that they have limited options to mitigate any no-deal scenario, yet more than 170 MPs signed a letter saying that we must go for a no-deal situation—that we must commit suicide as a country. That is what they are saying.

The ports of Dover and Calais operate on a closed-loop system. The Government spoke about temporary tariffs on 13 March, but the reality is that tariffs will still apply to 13% of goods and some of them will be really high for products such as beef, lamb, pork and poultry. Half the UK’s food is imported: 30% comes from the EU, and another 11% comes from non-EU countries under terms of trade negotiated by the EU. Brexit is likely to result in an average tariff on food imports of 22%. Does the Minister agree with that? All the trade agreements that we have with more than 56 countries cannot easily be rolled over. As we have seen, the Government will hardly be ready to roll over six of them.

The political declaration is a wish list—it is wonderful. It says:

The Parties envisage having a trading relationship … The economic partnership should ensure no tariffs ... The Parties will put in place ambitious customs arrangements”.

Nothing is definite. It is not a legal document; it is a wish list full of platitudes. Professor Catherine Barnard of Cambridge University and Professor Anand Menon have said:

“WTO terms provide a basic floor for world trade … However, the inadequacies of these arrangements provide incentives for countries to go further and seek preferential access to tackle issues inadequately covered through WTO rules”.

That is why we have free trade agreements, and it is why we are part of the European Union. They continue:

“The WTO option alone would have a significantly disruptive impact on trade between the UK and the EU, and even on some UK trade with other parts of the world. Falling back on WTO terms would be, to say the least, suboptimal politically, economically and socially”.

Pre-Brexit, we know that—we have low tariffs. However, let us look at the average EU tariffs on agricultural products. Some of them are very high, so our agriculture sector is protected by our being a member of the EU. The EU explains that its customs union has very clear principles: no customs duties on internal borders between EU member states; common customs duties on imports from outside the EU; common rules of origin for products from outside the EU; and a common definition of customs value. UK businesses are therefore saying, “Please, please, let us remain in the customs union”. The EU says that it is ready for no deal but, quite frankly, the Irish Government are not. Angela Merkel is going to Dublin. Whatever happens with Brexit, the EU wants to make sure that the Irish border is properly protected.

To conclude, Simon Jenkins has said today that it is time for common sense on Brexit—that a customs union must prevail. He says:

“May will be accused of repeating Robert Peel’s split in 1846 over the corn laws. She should remember that Peel faced down his backwoodsmen and created a Conservative party fit for the Victorian age. He was in the right”.

The Conservative Party was also out of power for 28 years. The Evening Standard has just said:

“Titanic crash looms for the Government”.

Finally, the UK chief executive of German manufacturer Siemens is pleading with Britain, saying:

“Brexit is turning Britain into a laughing stock”.

Siemens turns over £5 billion and employs 15,000 people in this country. He is asking for us to stay in the customs union.

However, the customs union itself is not enough. We need to stay in the single market as well, and the best option by far, if we had the guts, would be to revoke Article 50 and then to put it to the people, saying, “Now that you know everything, are you sure that you really want to damage our economy, our livelihoods, and our citizens’ and our children’s future?” I am convinced that the public would say, “Absolutely not. Now we know, we would rather remain in the European Union”.

Photo of Lord Taverne Lord Taverne Liberal Democrat 4:07 pm, 1st April 2019

My Lords, I was not a member of the committee but, having read its report several times—it is not an easy read—I am impressed. First, as many speakers have pointed out, it provides convincing evidence once again of what would be the disastrous consequences of a no-deal Brexit, and I trust that the Commons will rule out that option conclusively.

The report should be, or should have been, compulsory reading for those who plan to vote for the Clarke amendment, for a form of customs union presumably on the lines of the facilitated customs arrangement analysed in this report. This, the Government claim, would enable the UK to control its own tariffs for trade with the rest of the world. It is the option which seems to be the present favourite to win the Commons beauty contest to be voted on today.

However, that option has many serious snags. As pointed out in chapter 5 of the report, the present EU customs union requires a common commercial policy—in effect, a single market. To allow for the freedom to make separate trade agreements with the rest of the world, the customs union proposed by the Government, and, one must assume, by the Clarke amendment, seeks to avoid this. But the committee tells us that, for this kind of customs union to work and for us to enjoy a frictionless border with the EU as a non-member, there would still have to be convergence of regulations. We would, we were told, become “a regulatory satellite” of the EU. Would this be acceptable to most Brexiteers, or to those who support a soft Brexit? Instead of winning back control, we would, we are told, be subject to control by satellite.

The facilitated customs arrangement would also be immensely complex, involving different tariffs for EU and non-EU countries, including possible payments and repayments collected or paid on behalf of other countries. Compliance would, as many other speakers have pointed out, be a very hard and costly task for small to medium enterprises. Being part of a customs union without being a member would also require very complex negotiations, which are hardly likely to be welcomed by the 27 after their recent experience of endless delays and changes of tack by a succession of incompetent Brexit negotiators.

But what all Brexit advocates—even soft Brexit advocates—ignore is the most important development of all, to which the noble Lord, Lord Dykes, referred. There is strong evidence that the people’s will has changed since the referendum and is no longer the people’s will today. The evidence is not just the march by over a million people, or the petition to revoke Article 50 signed by some 6 million. Professor Curtice, who is much invoked by the Government and Brexiteers, long maintained that opinion had not shifted. He has now changed his view. A vote today, according to his findings, would be 54% to 46% in favour of remain; according to YouGov, it would be some 56% to 44%.

This shift should not come as a surprise, and there is every reason to suppose that it will grow. Nearly all Brexit news is bad: on overseas investment; a growing number of manufacturers and service companies which are planning to leave the UK; a likely crippling shortage of nurses and other professionals in the NHS, caused by the exodus of EU citizens; and so on. It is true that there are lots of leavers crying, “We want out”, and “Why haven’t we left yet?” No evidence will change their minds. However, there must be many of the 52% who voted leave who care about the future of their jobs and the prospects for their children, and they will not be impervious to what manufacturers such as those in the motor industry and Airbus tell us.

There was an extremely extensive poll of intending leavers on the eve of the referendum about the reasons why they intended to vote “out”. Many gave different reasons, but they all agreed that leave would have no downside—no prospect but that of life in the sunlit uplands. Now it is becoming plain what Brexit means: any form of Brexit, however soft, will make us poorer, especially the most vulnerable. It would be a strange twist to the present confusion if we left the EU because MPs believed they were obeying the people’s will, when—

Photo of Lord Dykes Lord Dykes Liberal Democrat

I am sorry to interrupt the noble Lord, as I agree strongly with his words, but in the context of what he was saying two sentences ago can he estimate the number of people who accompanied Nigel Farage on his long trip from Sunderland?

Photo of Lord Taverne Lord Taverne Liberal Democrat

It was not exactly over a million; I cannot give more details.

It would be an extraordinary travesty of justice if people who voted to leave because they thought that was what public opinion wanted now find that most want to remain. The only way to ensure that such a travesty of justice will not happen—and indeed to solve the present impasse among Government and MPs—is to give the final decision to the people.

I much admire the MPs who have spoken out for this cause, in defiance of party pressures: those Conservative MPs who cannot support a party 170 of whose public representatives have recently signed a letter in which they seem quite happy to tolerate the prospect of a no-deal Brexit. What an extraordinary retreat from sanity by a once-great party. No wonder people abroad feel we have gone mad. Similarly, I admire the Labour MPs who decided they could not support a party that aimed to make its leader Prime Minister, a role for which they believe he is totally unsuited.

Finally, I want to mention one other MP—one of Labour’s strong leaders in the battle against Brexit and the cause of a new people’s vote. It is my old opponent in Lincoln, who nowadays has my admiration and respect, Dame Margaret Beckett. More power to her elbow.

Photo of Lord Kerr of Kinlochard Lord Kerr of Kinlochard Crossbench 4:15 pm, 1st April 2019

I will make a small and typically unpolemical point in the gap. This admirable report says at paragraph 17:

“The UK Government has repeatedly ruled out entering into a customs union with the EU on the grounds that this would tie the UK to the EU’s Common Commercial Policy”.

That statement is true, but what the Government say, as reported in that statement, is not true. The customs union and the common commercial policy are completely separate in the treaty. They are legally distinct. The example of Turkey shows that you can have a customs union with the EU without having the EU running your trade policy. The Turks are outside the common commercial policy. Customs union means no tariffs between you and your partners and common tariffs against the rest of the world. It does not mean that the Commission would be negotiating for us with the rest of the world. It does not mean that we would benefit from existing EU free trade agreements. It does not mean that any new EU trade agreements would apply to us.

We know all that; why am I saying it? It is because next door in the other place, the issue of a customs union, as the noble Lord, Lord Taverne, said, is being talked about right now. Do not get me wrong: I still believe that Brexit plus customs union is still a complete disaster and a dreadful thing to do, but it would be wrong to argue against a customs union on the grounds that it ties you to the EU’s trade policy, because it absolutely does not, even though the Government have frequently said that it does. We would be entirely free in the areas of services, intellectual property, public procurement, regulatory barriers and data. The only area where we would be bound by the EU’s decisions would be on the level of tariffs in goods—a relatively small proportion of world trade now.

I repeat: do not get me wrong—it is still a very dangerous way to go. However, when the House of Commons considers the customs union amendment written into the Trade Bill, it would be good if the Government, when they took a view on it, took a view on the merits of a customs union. We said nothing in our amendment this time to the Trade Bill or last time in the withdrawal Bill about losing our ability to do trade deals around the world or acceding to the common commercial policy, which is a completely separate question. The question of a customs union should be addressed solely on its merits.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Opposition Whip (Lords) 4:18 pm, 1st April 2019

I am very grateful to the noble Lord for not being polemical, but being very precise in helping us with our arguments. It also gives me a chance to share with the House my favourite moment of the march last Saturday, which was more than 1 million strong as far as I could see—certainly if you counted the people who were not able to get on to the march without wandering around and making London their home for the day. There were many placards, many of them very witty and erudite, some rather clever, and some a bit rude and certainly not to be repeated in polite company. My favourite, because I am sure that we all have one, was one I saw just about half way round. Of course, stupidly, I managed to drop my camera and could not pick it up in time to take a picture of it to give it to the noble Lord, Lord Kerr. It said very simply, in bold Times font: “I concur with John Kerr”.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Opposition Whip (Lords)

I hear calls that it was he himself; it was not. I actually have no idea what it means, but it says quite a lot about the debate. I thought it was rather good.

This has been a useful and helpful debate on a report that probably had its peak impact a few months ago, but is nevertheless important. I want to explain why as we go through it.

Today we have been reminded of what was in that report and heard speeches from four of the committee members. These helped to explain why it was such a good report. They all said that it was a well-run and well-organised series of sessions with good evidence. Out of that, a fine report, crafted by the staff but signed on by the committee, was done.

We have also attracted an equal number of external Members who have contributed to the debate. That is always to the good and does not always happens in these debates on committee reports. Our committee system is one of the strengths of your Lordships’ House. It is a source of tremendous information, evidence and good and important things that we need to consider. It is therefore very sad that the Government have not honoured it here with a response. That is disrespectful to the committee itself, to the House and to the country. I hope that when the Minister comes to respond, he will have a satisfactory explanation as to why we have been let down in this way. Unless the Government are prepared to support the committee system by providing timely responses to its work, we will lose the quality which we currently have.

The debate today has ranged far and wide, because I think we all share a worry about how to respond to a report that was of its time and is perhaps no longer quite so on the debate. With events happening only a few yards away in another place, it is difficult to be precise and draw conclusions from this report in relation to what we might hear later and which is probably pinging out on the news channels as we speak. However, the evidence that was presented to the committee from those who wrote in to submit it, as well as those who attended, provided a very interesting narrative about the situation described in the report. We would be foolish not to learn lessons from that for any scenario going forward. There has been a tendency in some speeches to use the committee report for a wider debate, but I will try to restrict my comments to the report itself, and hope that the Minister will respond in kind when he comes to reply to the debate as a whole.

The first section is about what happens if the UK fails to secure a deal with the EU. This is still relevant, and therefore it is quite important to understand what the committee was saying. It would be interesting to get a response from the Government to the recommendation in paragraph 86, regarding the administrative burdens that businesses involved in trade will have. Have the Government made any assessment of that and, if so, where might we find consideration of it? There will be considerable extra work for anybody involved in trade, whether or not it is on WTO terms. These burdens need to be assessed.

In paragraph 88, there is a familiar point for the Minister, who I think has had to answer this question on a number of occasions. I am sure he is well briefed on this occasion. Of 145,000 VAT-registered UK businesses trading only with the EU, and 100,000 businesses under the VAT threshold who may be trading—we do not know that—how many have now registered on this magical form which will give them all the answers they want? I think the last number was just 52,000. I am sure that it has gone up, and that he will be able to update us. This is important.

In paragraph 90, the report records that HMRC has estimated that the cost to UK businesses under no deal would be about £18 billion per year. I would be grateful if the Minister could respond to the point made in the report that HMRC could provide an itemised breakdown of those figures. The committee were keen to see it but were unable to get it. It would be helpful if we had that read into the record. If it is not possible to provide it today, perhaps he could write to those who have spoken in this debate.

In paragraph 92, there is a question about technological solutions. This comes up a number of times in the report, here with reference to the Northern Ireland border, where trade under any sort of rules requires, or at least might imply, the reintroduction of a hard border. At the time the committee was meeting, technological solutions were being prepared. Could the Minister update us? Is it still the Government’s assertion that in the event of no deal a technological solution is available to help with that problem? In relation to the points made on paragraph 93 by a number of members of the committee—including the chair—about the impact of checks at ports, particularly the Port of Dover, we all understand that there has clearly been further work on that, including various trial runs. Again, it would be helpful if the Minister could support that.

The main issue in this part of the report was a bit difficult for the committee to get into because it did not know what the tariff regime would be. Many of us in this House have been asking for a number of weeks and months for such detail; it is now available and has been published. I cannot remember the total number of pages but it is very large and there are 4,000 lines of tariff information, which have to be read and understood if one is to get to its basis. Luckily, most of the tariffs are zero so it is a relatively straightforward issue but the reason that they are zero is sometimes elusive. I am sure that the Minister will want to respond to that.

The best comment I have seen on that issue is from the UK Trade Policy Observatory at Sussex University. That organisation has done a number of pieces of work on the customs impacts that are likely to arise from deal or no deal. Its conclusion on the tariffs—I will not quote it but put it in general terms—was that even these tariff arrangements, which I think most commentators have broadly welcomed, will result in a negative impact on the UK economy. Although there are some positives in having a more liberal policy with regards to tariffs, there will still be additional costs, competitive pressures on firms and difficulties. The results also highlight that the policy means that with zero as the main tariff line, even though there are exceptions for certain goods which are protected, the scope for using those tariff lines for any future negotiation in any trade is very limited.

One wonders why we go on and on about how tariffs in relation to goods are going to be so important to any future negotiations when it is quite clear that, when all tariffs are at zero or close to it, you have no room for negotiation as far as goods are concerned. That has always been the case in the UK’s economy; the issue is about non-tariff regulations in services, about which the Government are still very quiet. No doubt this agenda item might be recommended to the chair of the committee as something that it might want to look at in its next workload.

Having dealt with that I can move on to mitigations, where there is only one issue which I wanted to ask the Minister to respond on. It is to make sure that, as in paragraph 120, there is some sense of what the Government’s plan will be,

“to ensure fair and equal treatment of all imported goods coming in on most-favoured nation terms”.

If he is able to respond on that, it would be helpful.

On the third and final part of the report, which is the broader discussion about the facilitated customs arrangement, two points need to be answered. First, when Ministers were giving evidence to the committee, the information from the Government was predicated largely on the role that was to be played by authorised economic operators. I think that scheme is not yet fully developed so I would be grateful if the Minister could give us a bit of an update on where it has got to, in particular whether there is any chance that special arrangements will be made for SMEs. It is argued in the report that SMEs will have difficulty accessing that scheme. Clearly, if they are to be successful—they may well be the way forward—AEO schemes will need a lot more support from government. Where is that going to come from?

Secondly, in paragraph 189 there is a very important question about the rules of origin, which perhaps do not get as much discussion as they need in the customs debate. In that paragraph there is the suggestion that the Government should elaborate on their intended definitions for the “sufficient transformation” of intermediate goods. Again, I would be grateful if the Minister could help us on that.

It is clear that the majority view in the debate today, at least for those who have participated in it and possibly in the House, is that we should be staying in the EU. I do not dissemble from that but it is not an option that this House will be able to exercise much influence on, given that the responsibility must lie with the elected House. For instance, the noble Lord, Lord Horam, and others made the point that even if we are leaving the EU we should stay in a customs union because of the need to maintain frictionless trade, because of the way that it solves the Irish problem, because of rules of origin difficulties and because, as he put it, we actually benefit from the ability to secure deals with other nations based on being within a market of over 500 million people, compared to that of our own.

These are all crucial points, and I end with one thought to which I invite the Minister to respond. As was said by the noble Lord, Lord Dykes, and others, the ambition of the Government in their deal is to have a free trade agreement with the EU that is sans pareil. It is the best, most inclusive and intensive deal, so much so that it would appear able in many ways to be judged by the WTO as a customs union. If that is the case, why is it not possible for the Government to accept that that is where we need to be? A customs union and the ability to be part of the single market are what industry wants and what the trade unions have argued for. It is clear to just about everybody in the country now that that is what we want. There is little point in trying to argue whether there is a difference between a fully-fledged FTA plus engagement with the single market and staying in the EU, but if we are moving out that must be the way forward. Perhaps the Minister could respond.

Photo of Lord Bates Lord Bates The Minister of State, Department for International Development 4:30 pm, 1st April 2019

My Lords, I begin with one or two points on which we can all agree. The noble Lord, Lord Stevenson, mentioned the work of the committees in your Lordships’ House, how outstanding it is and thorough they are. Nowhere is that more the case than in the European Union Committee, its six sub-committees and the External Affairs Sub-Committee—chaired by my noble friend Lady Verma—whose report we are discussing today. They do an incredible amount of work. I commend Appendix 2 to anyone who has not had the opportunity to study the full report, where they will see the list of people who gave oral evidence. The quality and range of people from whom evidence was taken have contributed significantly to the strength of the report, if not also to the difficulty of the Government being able to respond—a theme to which I will return shortly.

It has been good to have this debate. Although narrowly focused, it has managed to touch on all the key points that needed to be raised, in a systematic way. My noble friend Lady Verma, began the debate with an excellent speech, in which she set out the terms and focused particularly on tariff policy. My noble friend Lord Horam spoke about the challenges of Northern Ireland; the noble Baroness, Lady Suttie, about the implications and risks of no deal; the noble Lord, Lord Triesman, about the impact on business; the noble Lord, Lord Dykes, about standards; the noble Baroness, Lady Randerson, about technology at the border; the noble Lord, Lord Bilimoria, about the importance of supply chains; the noble Lord, Lord Kerr, about the common customs policy; and the noble Lord, Lord Stevenson, about the facilitated customs arrangement.

Rather than using the set response that I have, I will zero in with a short update on where Her Majesty’s Government are at present with a statement of policy. Then I will respond to as many of the questions that have been asked as possible. I also give notice that it would be good for the committee and the House to have a written response to this high-quality debate, and I will ensure that that happens in a timely way.

The Government always seek to provide the committee with the latest and most comprehensive information possible. The ongoing negotiations with the EU and recent developments within Parliament can sometimes make providing the most up-to-date information difficult. My colleagues in the Department for Exiting the European Union regret the lengthy delay in responding to this report, but I assure noble Lords that a response will be sent to the committee as quickly as possible.

Before discussing the detail of this report, I will touch briefly on the broader context for this debate. The Government’s clear preference is to leave the EU with a deal and we remain committed to doing so. We were disappointed at the result of last week’s vote on the withdrawal agreement. Nevertheless, our priority is to press the case for an orderly Brexit that delivers on the result of the referendum.

In addition, while a no-deal scenario, mentioned several times in the report, is not the Government’s preferred outcome, preparations are continuing for such an outcome. Indeed, in relation to the report, leaving the EU without a negotiated deal would result in customs controls at the UK’s borders and tariffs on our exports to the EU. This is why the Government have been focused on putting a deal in place.

I turn now to questions that were raised and I start with further explanation of the delay in responding. The report, as has been said, was published in September. A response would therefore, in the normal routine, be due sometime in December. Noble Lords will recall that December was a pretty fast-moving time, with discussions taking place, and it was not possible to get clearance between the different departments for the release of the response at that time. We thought that that might ease in January but it did not: it is a story of that nature but I emphasise that this is not normal. I have responded in debates in your Lordships’ House to a number of reports from committees, so this is not normal government practice: we take reports very seriously and this is merely a reflection of the times. I convey again my apologies to my noble friends Lady Verma and Lord Horam, the noble Lord, Lord Triesman, and the noble Baroness, Lady Suttie, who were members of the committee, and to all members of the committee.

My noble friend Lady Verma asked about the impact assessment and tariffs. The impact is summarised in the tax information and impact note published alongside the temporary tariff. Tariffs are a tax and therefore a tax information and impact note is, we believe, the most appropriate document for communicating tax changes. The noble Baroness, Lady Suttie, and others asked about the implications for roll-on roll-off ports. Although it was mentioned in the context of Dover, and I know the committee visited Dover, I take on board the point raised by the noble Lord, Lord Wigley, in an intervention, about the importance of Holyhead. The Government recognise that roll-on roll-off locations depend on a fast flow of traffic, which could be significantly affected if customs controls and regulatory checks were reintroduced for EU trade. Maintaining frictionless trade is therefore a priority for the Government.

In a no-deal scenario the Government have been clear that we will prioritise trade flows at the border, but not at the expense of security. HMRC has continued to carry out targeted checks on goods entering the country, as we do now. In the event of no deal, the Government’s day one roll-on roll-off model aims to move customs formalities away from the border, easing the pressure at the ports and at Eurotunnel, helping to avoid delays. We have published roll-on roll-off bridging guidance, last updated in March, to support businesses to understand fully how to comply with the new model. We will continue to update business on these matters.

My noble friend Lady Verma asked about the facilitated customs agreement. It is still the preferred outcome. The political declaration on the framework for the future relationship between the UK and the EU, agreed with the EU, set out a plan for a free-trade area for goods, including no tariffs or quotas, with ambitious customs arrangements. The Government recognise the need to discuss the future customs model in detail with the EU in the next phase of discussions, in line with the commitment set out in the political declaration. The Government are aware that there is currently a live debate in the House over the future relationship and we will contribute to that ongoing debate.

My noble friend Lady Verma and the noble Baroness, Lady Randerson, talked about the need for technology and asked whether such technology is currently available. The Government will continue to consider the potential application of technological solutions to streamline customs processes. There is a range of technologies that could help facilitate trade over the Northern Ireland/Ireland border—for example, by streamlining any requirements that may emerge after the UK leaves the EU.

Photo of Lord Kilclooney Lord Kilclooney Crossbench

As one living near the Irish border, I realise that it has two sides. Sometimes I get the impression that people in London do not realise this. Can the Minister confirm that Her Majesty’s Government have decided that there will not be any infrastructure on the United Kingdom side of the border? On the Irish side, it is a matter for the European Commission. Has the Commission yet confirmed that it will have no infrastructure on the Irish side of the border?

Photo of Lord Bates Lord Bates The Minister of State, Department for International Development

The noble Lord will be aware that this is a fast-moving situation. There have been some statements by the Taoiseach on this in relation to the Republic of Ireland. The Good Friday/Belfast agreement states that there will be no hard border on the island of Ireland. I know that that does not answer the noble Lord’s question; he asked in particular about the differences in how tariffs might be collected between Northern Ireland and the rest of the United Kingdom. We have made some statements on that; given that it is such a delicate matter, I will cover that point in my written response at the end of the debate. The Government continue to be committed to developing alternative relations to replace the backstop, and we have agreed a specific negotiating track with the EU which will form part of the next phase of negotiations.

The noble Lord, Lord Dykes, asked whether the Government’s estimate that 96% of UK goods will be able to pay the correct tariff up front has been challenged. The Government published further detail on this calculation on 21 December 2018 in response to the request of the UK Statistics Authority. The publication set out:

“Up to 96% of UK goods trade would be likely to be able to pay the correct or no tariff upfront under the FCA”.

These goods would be:

“Trade (imports and exports) with the EU or exports to non-EU countries”.

I think the question put by the noble Lord, Lord Stevenson, was discussed during one of the regulations on the EORI registrations. At that point it was 52,000; I can report that it had risen to 67,000 as of the week ending 22 March—so we are making some progress.

This has been an excellent debate, in response to a very thorough report with some 31 recommendations. I reiterate to the committee and to those Members who have been party to the report’s production that our delay in response is due to what are the hopefully understandable challenges of the present time, and in no way takes away from how valued this is.

Finally, I will respond to two comments from the noble Baroness, Lady Suttie, and the noble Lord, Lord Triesman. The noble Baroness said that our discussion on this topic resembled a fundamentalist debate, with no ground being given and an absence of facts. The noble Lord, Lord Triesman, was fair-minded in recognising that none of us can say that we have distinguished ourselves in this very difficult situation in which the nation finds itself. I am sure that I speak for the whole House in saying that past performance does not necessarily guarantee future performance. I remember that my father often used to say to me as I left the house, “Remember, this is the first day of the rest of your life. Treat it as such”.

This is an opportunity for us to look forward and do something different. This debate on Brexit has descended into a bitter courtroom divorce battle in which the parents’ hatred of each other has meant that they have forgotten their shared love and responsibility for their children. We hope that now is the time to seek selfless solutions that will put the well-being of all the people of this great country at the centre of our deliberations. We hope that that starts today, and continues tomorrow. I thank my noble friend for her debate.

Photo of Baroness Verma Baroness Verma Chair, EU External Affairs Sub-Committee 4:44 pm, 1st April 2019

My Lords, I am extremely grateful to the Minister for his—as usual—very polite and considered response. The debate has been excellent, highlighting once again the complexities facing us as a nation. As the Minister said, it is time for us to reflect in a much more considered manner on how we approach this debate.

I will quickly give my own thoughts. Colleagues on the committee—the noble Lord, Lord Triesman, the noble Baroness, Lady Suttie, and my noble friend Lord Horam—all said that it is essential that we look at customs and trade. They are essential to our economy, and it is critical that they are properly protected, especially our small and medium-sized businesses and the supply chains. As my noble friend Lord Horam said, inward investment is the jewel in the crown of the UK, which is why it is so critical that every Member today spoke of the importance of that. We do not have the technology today, and we are marching faster and faster towards leaving Europe without all the processes in place, and none of the protections that small and medium-sized businesses are asking for.

I urge the Minister to take back to his department and to his colleagues across government that, if this debate is to bring people together, because we are an incredibly divided nation, they have to look at what committees’ reports are saying. They are considered, they take time, evidence is given and, as the Minister said, the evidence sessions he saw, along with the recommendations he has witnessed, mean that we ask government to look long and hard and then respond in a timely manner. I know that the Minister will have read our report page by page and word for word, and I hope that he will recommend it to his colleagues across government, because it will be helpful to them. On that note, I beg to move.

Motion agreed.