Taxation (Cross-border Trade) Bill – in a Public Bill Committee at 2:00 pm on 23rd January 2018.
It is a pleasure to be in front of the Committee. I am a senior researcher at the Hansard Society. We are a non-partisan, independent research charity that seeks to promote representative democracy in the UK and across the world. In particular, we do a lot of work on parliamentary procedure and the legislative process.
In 2014, I co-authored the first comprehensive study of delegated legislation in more than 80 years, called “The Devil in the Detail: Parliament and Delegated Legislation”. I am here in the capacity of having a keen interest in research in the delegated legislation processes, particularly Parliament’s role in the scrutiny of statutory instruments.
ItQ is good to see you. You were on the panel that came before the Procedure Committee, of which I am a member, when we were drawing up the amendments that were accepted by the Government on the European Union (Withdrawal) Bill about a sifting committee for secondary legislation. It appears that secondary legislation is talked about more than ever at the moment. Is it a problem of the system or just an excuse for ineffectual parliamentarians?
That is a good question. In 2014, with our “The Devil is in the Detail” report, we wanted to tell the story of delegated legislation. The research that we did, as far back as the Statute of Proclamations, but particularly in the 20th century, showed that many reports had been published that raised big concerns with the way that the House of Commons in particular scrutinises statutory instruments. In 1933, the Donoughmore Committee reported on the inadequate procedures in place and the inadequate scrutiny of SIs by Parliament. We wanted to raise the point that the issues raised by that Committee in 1933 had not been resolved.
There has been a problem in the past, particularly in the House of Commons, with engagement with the scrutiny of delegated legislation. Part of that could be because it is very technical and can be, dare I say it, quite boring at times.
Q Would you not think that given all the interest expressed in it, whether it is boring is neither here nor there? People are able to do it.
Exactly. We think that the lack of engagement has been primarily because of the inadequate procedures in the House of Commons—particularly two things. The first is the way that MPs, if they want to debate a negative instrument, have to use the early-day motion procedure. Secondly, we think the Delegated Legislation Committees for debating under the affirmative procedure are inadequate. We think that has been the issue with engagement thus far.
Do you think it is perhaps not the system but rather the ignorance of parliamentarians?Q
It is a very complex, convoluted process. During our research, which started in 2011 and culminated in the report in 2014, that was a big issue for parliamentarians and, more importantly, for individuals and businesses that are supposed to adhere to the rules and regulations that are being brought forward in Parliament. Complexity is a problem, but I think it is more to do with the processes, particularly in the House of Commons.
Forgive me—just one more question, Mrs Main. I was playing devil’s advocate there. You mention that this goes back as far as a report in 1933. So it really is not the case that somehow our Brexit legislation and this legislation brings forward new questions about secondary legislation.Q
It is bringing forward old questions that are yet to be addressed, despite numerous parliamentary Committees trying to, and then putting them on the “hard to do” pile. Knowing that the Brexit Bills are going to have to be framework Bills—based on the fact that the legislation for Brexit is going to need some speed and flexibility—the Hansard Society thinks that this is a perfect opportunity to highlight the problems and for parliamentarians to get to grips with them, when challenged and faced with one of the most complex legislative tasks that Parliament has seen.
Q Thank you, Mrs Main. In response to the points already made, surely it is not just about the preparedness of parliamentarians, but also the preparedness of the Government and Ministers to answer questions that are asked about the detail of the legislation that they are meant in theory to be ready to defend.
The question that I wanted to ask was, do you think there might be a role for sunset clauses in relation to some pieces of delegated legislation?
I warmly welcome the House of Lords Delegated Powers and Regulatory Reform Committee report, which took the unusual step of publishing its report on this Bill while it was still in the Commons, as it did with the European Union (Withdrawal) Bill. Usually it waits until its introduction in the Lords. The report raised the issue of sunset clauses, which are very important in terms of the links between making changes to EU law in the European Union (Withdrawal) Bill and doing that through clauses 42, 45, 47 and 51. It makes valid comments on the potential of those powers. The powers are not required to be used in perpetuity, and sunset clauses, such as the ones inserted for clauses 7, 8 and 9, would bring some consistency, and that makes perfect sense. We would support the view of the Delegated Powers Committee on that point.
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?
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.
Q Welcome. Could you discuss in more detail the proposals you have for sift and scrutiny committees to deal with the delegated legislation?
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.
Q What is your view on the Henry VIII powers in this Bill and their impact on this area of legislation?
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.
Q Thank you for your evidence. The negative SIs, on balance, given that they do not necessarily get “called in”, for want of a better expression, are on average scrutinised less than affirmative SIs, but is there anything that would in any circumstances stop an Opposition party calling one in? Is there any reason why they would be out of the reach of scrutiny, should the Opposition decide that more scrutiny was appropriate?
A Member of either House who wants to pray against or seek to annul a negative instrument has to do so within a 40-day period. That is one of the restrictions: you have to do it within 40 days, otherwise you have the situation that arose with the personal independence payment regulations and the student fees regulations. The Opposition wanted to debate those regulations but the 40-day period had ended, so they used Opposition day debates in another Session. They had to hold the debates on “revoke” motions, and there was the issue of whether those would be statutorily binding if the Government were defeated. It turned out that the Government did not vote at that point. So there is that limit.
We think the negative procedure is fundamentally flawed, because in order to debate a negative SI, an MP has to use an early-day motion, for which no fixed time is allocated. That means that whether a negative instrument is debated is purely in the hands of the Government. We would like to see that changed. In “Taking Back Control”, we proposed that a new sift and scrutiny committee should be created, and that that power should be given to that committee. You would have to tweak Standing Orders to ensure that the debate was heard, but that is our view.
Q Given where we are with secondary legislation and Brexit, which means there is rather a lot of it, can I clarify that your position is not that we should not have negative-procedure SIs, but just that some of them should perhaps be affirmative?
Yes, absolutely. The negative procedure plays an important role. There is legislation that is extremely technical and almost administrative in nature, for which the negative procedure is appropriate. In our view, the scrutiny procedures in the Commons—not in the Lords—are inadequate. Our position is not that the negative procedure should not exist, but that something needs to be done to improve MPs’ ability to debate those SIs.
Q This is one of the biggest political and constitutional shifts that most people in this room can remember. The House of Lords Delegated Powers and Regulatory Reform Committee, to which you referred, said it is a massive transfer of powers from the House of Commons to the Crown. There is also the general issue of all the delegated powers that go with the withdrawal Bill, this Bill and the Trade Bill. In those circumstances, do you agree that this is more like a new constitutional precedent for a land grab by the Government from Parliament, and it has nothing whatsoever to do with the aptitude or the adroitness of Members of Parliament? It is about a constitutional and parliamentary stitch-up.
I do not think I would agree in those terms. There are serious constitutional issues raised by the withdrawal Bill and the related Brexit Bills. This is not the first time that the Government have used Henry VIII powers. This is not the first time, nor will it be the last time, that we see framework legislation, or skeleton legislation. In all honesty, the use of delegated legislation is unavoidable in legislating for Brexit. Framework legislation is probably unavoidable for Bills that deal with issues such as welfare and indirect tax law, particularly if they are subject to change and involve highly complex and technical detail. The key is parliamentary oversight of that.
There are numerous ways that you can constrain powers in Bills. We have seen some attempts to do that in the House of Commons, and no doubt we will see that happen in the House of Lords with the European Union (Withdrawal) Bill. Fundamentally, though, although you can try to tightly define powers or to insert a list of actions that you are not able to use SIs for, you are ultimately going to have to confront the inadequate procedures for scrutinising negative and affirmative instruments in the House of Commons; otherwise, it will not matter. If you really want to take back control and have meaningful and effective oversight of delegated legislation, you have to focus on improving the negative and affirmative procedures in the House of Commons.
Q Given what you have just told us, do you acknowledge at the very least that the concerns in the House of Lords and all the delegation around the Trade Bill, the withdrawal Bill, this Bill and other Bills to come, show a significant constitutional shift in the balance of power between the Executive and the legislature for whatever reason? I am not making a judgment. Do you think that is a fair assessment?
I am not sure it is a significant shift; the problem has always been that the balance between Parliament and the Executive in the control of delegated legislation has always been on the side of the Executive. We have always argued, and have argued in this report, that you need to redress that balance, and part of that would be to improve the scrutiny procedures that I have mentioned. I would not say that there has been a fundamental shift from this Bill onwards. There has always been an issue regarding the balance of power in the use and scrutiny of delegated legislation.
Are you saying, therefore, that this is neither a quantitative nor a qualitative shift of power from Parliament to—
Q I was going to follow on in pretty much the same area. Despite that desperate effort to lead you, you were quite clear that there was no fundamental shift, that we need frame- work legislation, that this is an appropriate vehicle for such framework legislation and that, despite the shortcomings as you see it in the scrutiny of delegated legislation within this House, there is nothing untoward about the way that the Bill is set up or uses secondary legislation.
It is important that Members take note of the delegated powers Committee’s concerns on particular issues that it has highlighted. I do think that there is an issue with the use of the made affirmative procedure for cases that do not seem to me to be urgent; that procedure is used for reasons of urgency and should be confined to that. I have never been entirely clear or comfortable with the use of the first instance affirmative procedure. If it has been viewed that a provision should be subject to the affirmative procedure for the first time, it should be subject to the affirmative procedure all the time. The two Henry VIII powers are subject to the negative procedure as well. So there are issues with the Bill.
In terms of saying that the Bill is fine, yes, you have to use framework legislation for issues like this. What concerns the Hansard Society is when framework Bills are laid before Parliament and contain no detail whatsoever on the powers that they wish to confer on Ministers. The lack of an opportunity for the Government to provide draft regulations alongside scrutiny of this Bill, for example, will be a matter of concern, and is something we raised about the Welfare Reform Act 2012. So there are issues with framework Bills.
If there is a huge lack of detail on what the Government intend to do with delegated powers, what usually happens is that you get situations that we would like to avoid where you have clause 7s of the European Union (Withdrawal) Bill that are so wide that there are issues regarding the balance of power between Parliament and the Executive.
Q Are there any specific areas of the Bill that currently put significant powers in the hands of the Secretary of State but that make you think we should consider the arguments for an enhanced degree of parliamentary oversight?
That is a question I have been posing to myself for the last few days. Honestly, no. We have to be careful, knowing that the procedures for the scrutiny of delegated legislation in the Commons are inadequate, that we do not just fall back on using a strengthened, enhanced or super-affirmative procedure for everything when the affirmative procedure would be appropriate. We need to play the ball rather than the man, to use a football analogy. You have to look at the powers that are brought in front of you and decide there and then whether the scrutiny period is appropriate.
The problem with this Bill, and with other supply Bills, is that the vehicle to highlight inappropriateness in the degree of scrutiny and the appropriateness of delegated powers is the House of Lords Delegated Powers and Regulatory Reform Committee, and there is no counterpart in the House of Commons. The Bill just highlights the lack of that counterpart. But no, looking at the powers, I do not think that the strengthened scrutiny procedure would be useful in this case.
Q What are the constitutional similarities between this Bill and the European Union (Withdrawal) Bill?
Having said that I do not think the strengthened scrutiny procedure would be appropriate for any of the powers, they are wide powers. If we look at clause 51 in particular, the wording is very similar to that used for clause 7, so I think there are similarities. What has been highlighted is that people would like, potentially, to use a Committee to look at all Brexit statutory instruments and at the moment that will not happen. You could insert a change into the Standing Orders that would allow you to do that, which is something to consider.
Q But do you recognise the fundamental difference between this Bill and the European Union (Withdrawal) Bill, on which the Government accepted five of the amendments that concerned enhanced scrutiny? Do you recognise that distinction?
Q With all the issues that have been raised, especially about the negative procedure and the ways in which the House of Commons can scrutinise this, given it is not going to the Lords particularly, do you think this is a good way to do things or would there be a better way?
I think that the Hansard Society would like to see an equivalent Delegated Powers and Regulatory Reform Committee, first off, in the lower House—or some MP in the composition of a Joint Committee or what have you. That would be a good opportunity.
I think that delegated powers notes are extremely useful documents. This one is 174 pages long. There are well over 150 delegated powers in the Bill. Some of the justifications I am struggling with, particularly as regards the use of urgency and non-urgency. I think time is an issue here, particularly if you do not have the backstop of further scrutiny by a Chamber—the second House—that is usually very good at looking at delegated legislation and has taking the lead on it in the past.
When we were doing a similar Bill, which became the Welfare Reform Act 2012, a call by many MPs on the Public Bill Committee at the time was that it would be really useful if they had draft regulations alongside the scrutiny of the Bill. You could do things like that to improve scrutiny of delegated powers but, fundamentally, the lack of representation, the fact that you would have to wait for the Bill to get to the House of Lords for a report to be published, is an issue.
Perhaps one way around that is that the House of Lords Delegated Powers Committee does what it has done for this Bill and the European Union (Withdrawal) Bill, and publishes, as usual practice, the Bill as soon as it enters the House of Commons.
Q I have two quick questions. One is to ask you to comment on the use of not just secondary but tertiary legislation in this Bill on public notice law. That would be helpful for us. Secondly, in our previous discussion we talked a lot about the new Trade Remedies Authority, and some of the witnesses suggested that the Secretary of State will be able to overrule its suggestions, without, it appears, any parliamentary process underlying that. I wonder whether the Hansard Society has any comments on that.
On the first point, with regards to sub-delegation or tertiary legislation and this use of public notice, the fact that they will not be subject to any parliamentary scrutiny is concerning. We basically reiterate the points made in the Delegated Powers and Regulatory Reform Committee: that if public notices can do the same as regulations they should be subject to parliamentary scrutiny, just as regulations would be. Sub-delegation is an issue for us because there is a lack of parliamentary scrutiny. In some cases it might not be appropriate, but it should still be considered as usual practice, and at the moment it appears not to be.
With regard to the Trade Remedies Authority, the Hansard Society has not really considered that yet. My colleague Brigid has probably, as I speak, just finished on the Trade Bill, so I am happy to write to the Committee about our points on that.
Q On the point about tertiary, are you saying that you have fundamental issues with tertiary legislation?
Q On that specific point: if, for example, HMRC was to produce a small amount of guidance on a small part of the customs process, why would it make sense to make that subject to potentially being a regulation, rather than having it as a public notice? Why would you want to clog Parliament up with all these additional items, which may be very insignificant in some senses—in a grander sense?
It is a good point. Specifically on this Bill, it is the fact that it says it can do what regulations could do and that would be an issue. In terms of guidance codes of practice, they are laid before Parliament and that is not the case for this Bill. You would not necessarily have to clog up the system with things that are extremely administrative in nature, but there is the fact that Parliament is delegating a legislative power to the Government and if you can do what is done in regulations, it would make sense that they should be subject to the same level of parliamentary scrutiny as those regulations.
Q Is there a difference in how strong something is in law, depending on whether it is in primary or secondary legislation? Is it easier for lawyers, for example, to use primary legislation, rather than secondary legislation that was made further down the line, in making their cases?
I am afraid I am not a lawyer, so I am not particularly comfortable answering that question, but there is an issue with regards to the hierarchy of primary and delegated legislation. As much certainty as possible is a big thing for lawyers.
I am the director of the British International Freight Association and my primary responsibility is to do with policy and compliance.
Good afternoon. I am from the UK Chamber of Shipping, which is the trade association for shipping companies based in the UK, carrying goods and passengers into and out of the country. My role there is as policy director looking after, among other things, the industry’s relations with Customs and Excise.
Good afternoon. I am the chief executive of the British Ports Association. My role and association covers all areas of ports policy. I have to apologise: I am not a technical or customs expert, but I am here in the spirit of co-operation and to help you where I can.
Brexit with no deal is likely to massively increase the number of customs declarations required for transporting goods through ports. What impact do you think that will have on your membersQ ?
Our members are carriers of goods. The obligation to submit a customs declaration falls on the importer—it does not necessarily fall on the carrier, although the carrier can do it as part of the service that he offers to his customer. Our concern is that unless the process for submitting and processing those declarations does not interrupt the physical movement of the goods, then the movement of the goods off our ships, through the terminal and into the domestic market will be interrupted. Similarly, leaving the country we would want to be able to ensure that those vehicles, particularly in a ferry context, are able to drive straight through the docking gate, through the terminal and on to the ships in the same seamless way as they do now.
Following Tim’s points, it is probably fair to say that the majority of UK port authorities are relatively calm about Brexit, but we have the operational interest. Tim alluded to the ro-ro ferry terminals, such as Dover, Holyhead, Portsmouth and many others, which provide and facilitate around 10,000 lorry movements a day between the UK and the EU. It is a substantial part of trade. The operational impact—how those customs processes will be facilitated at the border—is a big concern for a large portion of my membership.
My members are heavily involved in the provision of customs entries. I am sure that you have seen the figures of what the new numbers could be—they are substantial. It would depend largely on the type of customs entry—whether it was a simplified or non-simplified entry that had to be submitted at the frontier—and on how that will impact on trade.
Back in 1992, we had 125 members in the Dover area alone doing customs entries. We now have 24 members and they take care of all aspects of it. My members are quite categorically saying that we cannot go back to 1992: that would gum up the thing completely, and the impact on my members would be more staff, facilities, time taken for training, and how all that will work. There is the big impact of the re-imposition of VAT on goods coming in to the country, because if you have a duty deferment with customs, you have to fund it. The point is that you fund two months’ deferment, not one. Those elements are definitely concerning my members.
As a follow-on from that point, how feasible would it be to ensure that smaller ports, such as Montrose port in my constituency, have dedicated customs officers? Would there a detrimental impact for these smaller ports, whether in Scotland or in any other part of the United Kingdom, if customs support was not provided on siteQ ?
It is a concern. You can imagine that a lot of the Government’s attention is on the Dover corridor, and probably rightly so—that is where the main challenge is.
Going back to my opening statements, if we remove ro-ro for one minute, for a lot of bulk shipments—Robert may correct me if I am wrong—where there is one commodity on a shipment, there is a bit more time, and the environment is one where shipping agents are usually helping out, submitting information that then is facilitated to HMRC. We hope that either those agents or inventory linking as part of the Union customs code, which is coming forward, would mean that smaller ports such as Montrose are not disadvantaged.
There are concerns that there could be certain delays at the border—we would not want to see that, but perhaps the sensitivity at a bulk handling port or a port with break bulk is less than at a ro-ro terminal, where lorries basically want to get out as soon as possible. If they are stuck in a terminal, backlogs and queues start and the operational challenges associated with that.
Q My first question relates to the point just made by Kirstene Hair, about the staffing at different ports and the availability of HMRC staff. We have seen quite significant ongoing changes and consolidation of staff into regional and specialist centres. We have heard that the Border Force relies on those HMRC staff on certain occasions. I wonder whether any of your members are raising problems with you that might be arising due to that change in the availability of HMRC staff.
My members are very concerned about that. The Dover straits corridor is causing particular concern because it is a 24/7 activity—those lorries are coming in all the time. There have been issues with staffing at those areas. You have to differentiate between Border Force activity, which tends to be frontier, and the work done at the national clearance hub based in Salford. They provide 24/7 cover but, in air and sea, you could basically say that from about 6 o’clock or 7 o’clock in the evening there is a noticeable decline in the workload. If you put ro-ro coming in through Dover with a customs declaration, there will be less of a decline in the work being undertaken there.
It is not just Border Force that we have to consider. A lot of food stuffs potentially could do with some sort of inspection. Even if there is a risk-based system, a certain proportion of that may still require inspection. Multiple Government agencies at a national level and a local level will face this impact. It will have an impact on my members because you will require more people to work in what is regarded as an out-of-hours situation. That will have a considerable impact on costs.
Q Anneliese has stolen my thunder slightly. Clause 31 opens up the possibility of the UK going into a customs union with other territories—let’s say it hypothetically goes into a customs union with the EU. Would that be a better outcome and increase the likelihood of frictionless transport?
From our perspective, it would depend on what the nature of the customs union was—whether it provided for goods to move freely between the UK and the EU without any form of declaration, or whether it related only to customs fiscal controls. For example, if the agreement did not also cover animal and plant health standards, you would end up with a significant chunk of the traffic still being controlled. Only stuff that did not contain foods or anything like that would be within the scope of that customs union agreement.
Clearly, if the effect of any agreed union was to replicate the existing arrangements, we would expect no disruption to the movement of goods, but to achieve that it would need to be a very broadly drawn union agreement that extended beyond purely customs fiscal issues.
I run an association. We are not a political organisation, so we took no side in the referendum. Statements such as, “We think the UK should or should not be in the customs union” are difficult for me to make. What I would say, which is a bit of a cop-out, is that we are looking for a deal that might be able to secure as many of the current benefits that we have through customs union membership as possible. That is a basic, raw point for us. It is all about trade facilitation, so any kind of arrangement that continues the frictionless transport of goods between the EU and the UK is essential. That is felt most at the roll-on, roll-off ferry terminals that we have mentioned.
BIFA’s position is always that we should maintain something as close to the present arrangements as possible. That would be a customs union that is as close as we can possibly get.
That is important for two reasons. People tend to focus on import work, but we venture that exports are actually more important. If we can have an agreement that the EU27, as they will be, find acceptable, we feel that that is important. That gets particularly important when you put a truck into France. If you have an accepted agreement, it can pass through other member states. That is one of the things we are concerned about. If you have a shipment going from here to Poland, for instance, it may have to transit two or three member states. We think it is very important to have something that would permit that. My colleagues are absolutely right that it is not just the fiscal stuff; it is all the agreements that are not in it about access to the market, truck regulations and all those sorts of things.
Q You have all mentioned Dover, but nobody has so far mentioned the ports in Wales, for example, where there is an awful lot of movement between Wales and Ireland. Is that also a concern?
It is very much a concern. Dover has by far the biggest number of vehicle units entering and leaving the UK. It is the biggest gateway to the UK— 2.6 million trucks passed across that terminal last year. That compares with, for example, 750,000 between Dublin and Holyhead and Liverpool collectively, or 750,000 across the north channel between Northern Ireland and Great Britain. There are big flows out of the Humber and the Thames, but we tend to use Dover as a shorthand because it is where the problem is. It is the UK’s biggest gateway for roll-on, roll-off freight.
As it happens, the Welsh Affairs Committee is visiting both Dublin and Holyhead in two weeks’ time, so I shall look forward to chatting to your members about those concerns. For those of us who are slightly uninitiated with the ports’ authorities and the way that the ports work, would one of you give a very brief overview of the differences between accepting a ship coming into this country from the EU and one coming from outside the EU at present, and how long it would take, differentially, time-wise, for a ship from outside the EU and one from inside the EUQ to dock and go through the procedures?
Certainly. There is not a straightforward comparison because, by and large, the types of ships that come from our near neighbours are different from those that come from further afield, but in principle a vessel arriving from one of our European neighbours needs nobody’s permission to come here because its movement is free. The port to which it goes does not need to have approval from anybody to handle it, because it falls within the scope of free movement within the European Union. In theory, the ship could pole up anywhere around the coast and do what it wanted to do. In practice, of course, it goes to a place that has facilities to handle it. Just as the ship is free to come and go as it pleases, so the goods and vehicles on board are not subject to control and can drive straight off the ships ramp, through the terminal and out through the dock gate, unless one of the control agencies has intelligence that leads it to want to make an exceptional intervention in that movement.
By contrast, a vessel coming into the UK from outside the European Union can arrive only at a port that has been approved by Her Majesty’s Revenue and Customs to receive traffic from outside the European Union. It is required to tell Revenue and Customs that it is unloading cargo on to the quay, and to tell it what that cargo is. That cargo is then not permitted to leave the confines of the port until Revenue and Customs has given permission for it to go. You have a contrast between essentially a completely free arrangement, as you would have for any domestic traffic—a ferry between Hampshire and the Isle of Wight, for example. Traffic goes, the ship goes, and there is no intervention on it anywhere unless the police have a reason to stop it. Compare that with an international arrival from outside the European Union where every single stage requires somebody’s permission.
Q Subject to HM Revenue and Customs being efficient, it should not take that much extra time to get a ship unloaded?
Q Going through the system basically, not just unloading.
Our real concern—I will take Holyhead as an example—is that the ability to discharge the ship depends on a flow of traffic through the terminal. There typically is not space in any ferry terminal to discharge a complete ship, park its traffic there and reload it. The terminal’s ability to handle the traffic is predicated on the traffic flowing continually through it. As soon as that flow is interrupted, you end up with the backlog that Richard mentioned a moment ago, and the whole process is slowed.
Q If and when we set up free trade agreements with the rest of the world, will the ships come in and receive the same treatment as if one was coming from Europe at the moment?
It would depend on what the agreement said, but on the experience of ones that exist elsewhere, that is extremely unlikely. The effect of a free trade agreement tends to be to reduce, perhaps to zero, the customs duty that an importer has to pay. It tends not to make a material difference to the administrative process of getting that unit across the quay.
My members would be relatively calm about free trade agreements, actually. I thought when we had the vote, and in the time after, that a lot of ports would be getting concerned about potential tariffs on a lot of commodities. There are one or two high-profile exceptions where there are relatively high tariffs, such as the automobile trade—new cars and trade cars—but a lot of the trade and the ports are reporting that tariffs are relatively low. As, operationally, they are collected away from the border—they are not a condition of entry —they are not seen as a direct issue for port authorities. Obviously, if they have an impact on trade, ports will be interested.
Just to bring up a very general point, you may find it useful to know that roughly 500 million tonnes of freight is handled at UK ports. That is 95% of UK international trade. About 20% of that is roll-on, roll-off ferry traffic, which by definition and by its nature is overwhelmingly—99.5%, I think—with other EU ports. Then you have the container sector, which accounts for about 10% or 11% of tonnage and is probably about 70% from third-country sources—countries outside the EU. The other big area is bulk commodities—liquid bulks and dry bulks—which, from memory, account for about 40%.
Q When the Home Office had its e-border thing, it appeared to fail through lack of engagement with key partners. How much engagement have you had with HMRC on the new CDS system? Are you confident that it is getting to the right place?
I will take the lead on that, because the freight borders are heavily engaged in this. CDS has been an ongoing project for about three and a half years. Customs did quite a lot of research with industry on what its requirements were. They have been doing a development stage, which, I have to be honest, is highly technical and way beyond anything that I can understand, although software suppliers and the community service providers have been part of the technical workshops on it. They are now starting to talk directly to us and, as a trade association, we are receiving quarterly updates on the project. I really do not want to comment on whether we think it is going to succeed or be delivered on time, because at the moment it is still under development. Part of the problem that they have, which is not of the team’s making, is that some of the data elements are still to be defined within the Union customs code, such as the format of a unique consignment reference. That matter still needs to be resolved.
This is a technical area, and Robert and his colleagues will be concentrating on that, but all three of us sit on the Joint Customs Consultative Committee, which is HMRC’s main stakeholder committee, and there are opportunities to get briefings on CDS. I feel personally that if we want the information, it is there.
What I would say on CDS is that it is an importers and exporters system. As carriers, we have very little interface with it, but our engagement with Revenue and Customs has been constant and continual since the referendum result, when it became apparent that there was a significant new element of uncertainty about whether the 40% of the UK’s international trade that arrives and leaves in trucks on ferries was going to be able to continue doing as it did.
Yes, at a very general level, ports touch many Government Departments in terms of policy regulation, and of all the Departments, HMRC has been the most forthcoming since the referendum. The amount of engagement has been quite unprecedented. That is not necessarily to speak negatively about the other Departments, but HMRC has really taken the lead.
Q I want to talk about the Joint Customs Consultative Committee. I understand that you are all members. How often has it been convened in the past year, for example? Are there any plans to increase the regularity of its meetings in the run-up to Brexit? What sorts of things have you been discussing at those meetings—maybe the last two or three, for example?
The Joint Customs Consultative Committee meets three times a year, and it covers areas of strategy that are impacting on importers, exporters, freight forwarders, shipping lines, whatever. Since Brexit, the JCCC has established sub-committees specifically dealing with Brexit as an issue and that group, if I remember correctly, meets about four times a year.
Q I am trying to get to the heart of this. It is absolutely important to the Bill, to be frank, Mrs Main, because it is about the consultation on the Bill via that particular body. That goes directly to the heart of the ability to tease out those discussions that are taking place and how they have informed the Bill. I am trying to tease out from our witnesses the extent to which they can engage with the Bill and help to form it. I will come on to a question or two to tease that out a bit further.
There was consultation about the White Paper but there has been no consultation about the actual Bill as it has come out.
The clauses of the Bill were not exposed to consultation at all before the Bill was published, as far as I am aware, and certainly not through the forum of the JCCC.
No—we are all on circulation lists so we get the information directly but, as you both say, it has not been formally considered, although part of that is because this has been quite a quick process. When we had the proposals to update CEMA—the Customs and Excise Management Act 1979—which I think was four or five years ago, there was time and consideration at the JCCC, so perhaps we had a better experience last time .
Q May I follow through? Mr Reardon, you say in your views on the Bill—there is a bit of a preamble, but it is important to get this in:
“The Government’s White Paper…outlined an intention to apply a requirement for the goods in such vehicles to be declared prior to shipment so that, on arrival in the port, they can pass straight through in all but exceptional circumstances”.
You go on:
“Schedule 7, paragraph 28, appears to create powers for such an arrangement but is expressed in notably vague terms: their practicability will depend absolutely on detail that is absent.”
How significant is that at this stage, given that we are 15 months away from Brexit? When do you think that you will actually need the detail, especially in light of the fact that you have not been consulted on the Bill in the first place?
We would have liked it about four years ago, to be honest. The Bill—that particular paragraph in the schedule—provides for the concept that nothing may be shipped unless the vehicle operator has checked that a declaration has been put in. As a concept, that is unobjectionable, and it has the potential to work, but the devil is entirely in the detail.
Who will the vehicle operator be deemed to be, for example? The Bill widens the definition of a vehicle beyond what anyone in this room I would imagine understands a vehicle to be, so it is no longer simply a thing on wheels but a ship maybe, a train or an aircraft—all of those fall within the scope of “vehicle”. The vehicle operator is any one of those parties in the chain. What is the process by which that business will be required to establish that something has happened? All of those things are critical details to work out whether the thing can work or not.
The issue for us is that it is impossible to tell purely from the powers in the Bill that we will end up with a system that works. We might, and I have absolutely no doubt that everyone’s intention is to create a system that works, but it is impossible to say on the basis of something that is as vaguely drawn as the Bill that it will work. If this is the sole stage of the process where any scrutiny is applied, then clearly one has to take a great deal on trust and faith.
Q You said, partly jokily, that you would have liked it four years ago, but in practical terms when do you think it will be? I must ask the question again. Given that there are 15 months to go before the button is pressed so to speak, when would you reasonably expect to be consulted on the detail, basically? At what point do you think it would be reasonable for you to be consulted within the next 15 months in practicable terms?
To be honest, the answer depends on how different where we end up is from where we are now, because what takes time is changing of business processes, construction and reprogramming of IT systems and—worst-case scenario—civil works in terminal infrastructure development. All those things have lead times. How long the lead time needs to be depends entirely on what it is you are trying to do and how much you are trying to change from the current practical reality. Until we can define how different the end state is from where we are now, then—to be honest—it is impossible to put a timeframe on how long it will take to get there.
To follow on from that, all three of us were at a meeting this morning on border processes and so on, and one of the things we were talking about is the fact that the operators—the port operators, the carriers, the customs providers and other specialists—will not want to make any investments until they know exactly what the detail of the deal is and when that is firmed up.
Q Are there ports that have space for lorries to be stacked up, if you like, after they come off the boats, or is that a utopian land that we do not yet see?
Not easily, but some will have slightly more space than others, and they may have facilities down the road that could be turned into use. We hope it does not come to that. We are working with Government to push forward some kind of arrangement that is not conditional on checks that cause such delays. That is not good for freight, or for prices of goods and products, and things that manufacturers use, and things that end up in shops.
Q We heard earlier that some suppliers are leaving their supply chains, for example, in order not to have to go through a border process, particularly for things that come in and then go out again from the UK. Are you seeing that from people and organisations that you are in touch with, or is that just an “out there” thing that is not really happening very much?
We hear a lot of talk about it, but I think on every route that has published its traffic stats for last year the freight volumes have risen from what they were in 2016. First, of course, that is a national success story; it is an indication of economic health. It is great for all the businesses that we all represent, which handle that traffic, but of course it means that the system overall is increasingly full. There is not a great deal of spare capacity cumulatively across the UK.
The issue is more than just space on the terminal. The road network serves two or three main gateway points into and out of the UK. There needs to be a really good-quality landside connection from the terminal, to enable it to flourish; it needs more than just space on the berth. It would be very, very difficult to flick a switch and say, “Actually, the traffic will go somewhere else”.
Towards the end of last year, there was a new direct service from Zeebrugge to Dublin for roll-on roll-off traffic, and there was a lot of noise about, “Look! That’s a consequence of Brexit”, but when you actually looked into that investment, it was probably made before the referendum. There may be people looking at further direct calls from the Republic of Ireland to continental Europe, but as of yet we have not seen them.
Many of my members are multinationals —European-based forwarders. I know that there are discussions about this issue, which is inevitable given the situation, but we have not seen anything move yet, as such. What we are receiving is a lot of inquiries from European-based freight forwarders with no UK base who are inquiring whether they can establish in the UK because they obviously see an opportunity the other way round.
The warehousing industry is looking at potential new sites because they see that there could be further interruptions to trade flows, where they would need more storage.
Q I have a question related to what happened back in 2015 with the first major Operation Stack problems in Kent. They were not caused initially by developments on the British side; it was due to problems on the French side. The capacity issues on the French side were very relevant. To what extent are you aware of activity happening in our partner ports to prepare for a no-deal scenario? Are you discovering that talking to your colleagues in other countries? Are you aware of the UK Government doing anything to promote that preparedness?
The British Ports Association is part of the European Sea Ports Organisation, which has a meeting tomorrow on Brexit that I am going to. It includes some of the main UK-facing ports, such as Dublin, Zeebrugge, Calais and beyond. It has been quite difficult. Some of those ports are state-owned, and it is quite difficult for the UK Government to talk with them, although there have been a number of information-type visits looking at customs arrangements as they are and what the operational situation will look like post-Brexit. We have good conversations.
In terms of what is going on with the customs authorities in those countries, it is varied. There is a French customs taskforce—that is an internal taskforce—that I think the ports there are plugged into. I went to see the French ports association to talk about Brexit, and it seemed on top of things, but it is a difficult one. There is a lot of mystery there. Just as the UK Government cannot divulge all the discussions they are having, the ports cannot divulge everything to us. They have to remember that negotiations are being led through the European Commission, so that is the correct avenue.
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.
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.
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?
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.
He probably got stuck on the way there. That is good news, thank you.
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?
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 times 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.]