The customs tariff

Taxation (Cross-border Trade) Bill – in a Public Bill Committee at 2:00 pm on 25th January 2018.

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Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Amendment 7, in clause 32, page 19, line 14, leave out subsections (2) to (4).

This amendment is consequential on NC1.

Amendment 8, in clause 32, page 19, line 31, leave out

‘other than regulations to which subsection (2) applies’.

This amendment is consequential on NC1.

New clause 1—Setting the customs tariff: enhanced parliamentary procedure—

(1) This section applies to—

(a) the first regulations to be made under section 8, and

(b) any other regulations to be made under that section the effect of which is an increase in the amount of import duty payable under the customs tariff in a standard case (within the meaning of that section).

(2) No regulations to which this section applies may be made by the Treasury in exercise of the duty in section 8(1) except in accordance with the steps set out in this section.

(3) The first step is that a Minister of the Crown must lay before the House of Commons a draft of the regulations that it is proposed be made

(4) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (3)—

(a) the rate of import duty applicable to goods falling within a code given in regulations previously made under section 8 or in the draft of the regulations laid in accordance with subsection (3);

(b) anything of a kind mentioned in section 8(3)(a) or (b) by reference to which the amount of any import duty applicable to any goods is proposed to be determined; and

(c) the meaning of any relevant expression used in the motion.

(5) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (4) (whether in the form of that motion or as amended).

(6) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (4)(a) to (c), give effect to the terms of the resolution referred to in subsection (5).

This new clause establishes a system of enhanced parliamentary procedure for regulations setting the customs tariff, with a requirement for the House of Commons to pass an amendable resolution authorising the rate of import duty on particular goods.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

It is a pleasure to see you in the Chair, Mrs Main.

The new clause establishes a system of enhanced parliamentary procedure for regulations setting the customs tariff, with a requirement for the House of Commons to pass an amendable resolution authorising the rate of import duty on particular goods. It requires a vote in the House of Commons to authorise the rate of import duty on particular goods through enhanced parliamentary procedure. The details are set out in the new clause—it is indeed quite detailed.

I do not consider asking for normal parliamentary oversight to be a controversial request, as shocking as that might seem to the Government. They have made it clear that this is a money Bill and will therefore avoid proper scrutiny in the House of Lords. I sound like a stuck record, but Parliament’s ability to scrutinise has been a theme since the general election.

That concession highlights a key point, however: this is Parliament’s power of the purse. That convention dates back to Charles II and ensures that taxes cannot be collected without the consent of the Commons. We should be deeply concerned about this Bill getting through because we were not alert to or cognisant of the significant issues that face us. In all the melée of Brexit, the EU (Withdrawal) Bill, this Bill, the Trade Bill and the other Bills that will come through, we must assert our right as parliamentarians to hold the Government to account, particularly when it comes to taxes.

The raising and lowering of tariffs is effectively the taxation of goods coming into the country. It will bring revenue to the Exchequer that will have a significant impact on public finances and departmental budgets, not to mention the economy as a whole. I could push further on the £350 million a week for the NHS, but I will not on this occasion—I know the Minister will be pleased.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

The Opposition believe that, just as changes to tax are brought in in the form of a money Bill, so should changes to tariffs and customs duty. That is practical, reasonable and very responsible, if I may say so. We are not suggesting that there should be a vote every time that a tariff is raised or lowered; instead we envisage the Government regularly introducing to Parliament a list of changes for Members to scrutinise and vote on.

The alternative to a democratic and open process is the hoarding of power in the Treasury or the Department for International Trade, which alone will set the UK’s future customs tariffs. The workings and logic behind their decisions will be largely unknown, and hidden from the scrutiny of the House. That is the theme of our amendments with regard to the Select Committees. The Minister says that Select Committees will be able to bring the Minister in, question them and have a chat with them, but I am afraid that is not strong enough.

This is the biggest constitutional change we have had for as long as anyone can remember, and it is incumbent on us to ensure that when we have major shifts in power between the Executive and the Commons, we can challenge them. I think a confident Government would acknowledge that. I would not use the word “concede”, but I think a Government, who were confident in their own abilities—

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

I refuse to use the phrase “strong and stable”, but if the Government had confidence in their policies, they would not shy away, in any way, from the proposals that we have set out. I am interested to hear what the Minister says about them. In the oral evidence sessions, several witnesses expressed concern, and were reluctant to agree that the lines of communication between businesses, between organisations, between agencies and so on were conducive to getting a proper hearing. I think Members most probably got that message from the witnesses. Communication lines are there, but in a sense no one is at home; that is certainly the perception that I got.

Customs tariffs will be unamendable and unchangeable except, in effect, at the whims of the Chancellor and a Trade Secretary. It may well be that those individual Ministers are very open to dialogue and persuasion, and are in listening mode. Then again, they might not be, and this Parliament has always challenged the whim of whoever might be in power. [Interruption.]

Order. I am sure the hon. Member for York Outer (Julian Sturdy) knows where the off switch is. Perhaps he would like to find it?

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

The Government have done precisely the same thing in relation to scrutiny—they have turned it off.

As I said, we cannot allow this to be left to the whims of a Minister, because as has been suggested in the last day or two, the amount of Ministers coming and going has been vast, and it is causing a certain amount of dissonance in the operation of Government from what I can gather, and from what the report says. So, we cannot have a system that is at the whim of this dissonance, so to speak, in two or three years’ time—whichever party is in power.

Ultimately, this comes back to the phrase by James Otis, which must have been quoted millions of times in the House in the three or four centuries since it was spoken: “No taxation without representation”, because that leads to tyranny.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

It is a pleasure to be here and to have you in the Chair this afternoon, Mrs Main. We support new clause 1, which has been tabled by the Opposition, and we would be happy to support it if they decide to put it to the vote.

I have concerns about clause 8 because of the deficiencies that we discussed earlier. I hope that, by Report, the Government will have come back to some of the suggestions that the official Opposition and the Scottish National party have made, and given them some level of consideration. Although clause 8 has deficiencies, it is my working assumption that even if we were in a customs union—which would be my preferred option—we would still need to set our tariffs and to lodge those schedules with the World Trade Organisation, so, even in the event of the UK being in a customs union with the EU, I imagine that there would still be a requirement for the Government to have the power to set tariffs.

On that basis, clause 8 is necessary whether or not the Government decide to come out of the customs union or to pursue a customs union. So, although it is deficient, we need to do something. It would be useful if the Minister was to say that he might consider coming back on Report to some of our amendments—even if he said he would consider it, that would be incredibly helpful—but as I said, we will support Labour’s new clause.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

It is a pleasure to serve under your chairmanship, Mrs Main. I thank the hon. Member for Bootle for his remarks. His usual brilliance was enhanced by an unknown quality of being able to summon dramatic music to enhance his comments. He gets better and better, the longer we hear from him.

The hon. Gentleman raised various general points, including the fact that this is, in effect, a Finance Bill and therefore will not be amended in the House of Lords. There are good reasons for that. There is a very, very long tradition for Bills that relate substantially to tax and the rating of charges to be handled in that way—both by this Government and by Labour, when it was in government.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

But the Bill does go into the House of Lords, and I am sure that the Government will be listening carefully to what their lordships say.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

The Government of course listen to everybody who has an opinion—or, should I say, a relevant opinion; a rational opinion, even—on the matter in hand, and we will continue to do so.

The hon. Member for Bootle raised the obvious and important point that with Brexit in the round, we are looking at a big constitutional change—I think that was the expression he used—which is undoubtedly true. However, he seized on that known fact to suggest that in the narrow case of the change in the duties on specific goods, we should therefore have a highly augmented level of scrutiny. I do not think that the two things are linked. The Bill deals narrowly with duties, and more robust scrutiny is suggested through the affirmative statutory instruments for the first introduction of the tariff and for all duties that are changed in an upward direction afterwards. He stated that there will be a huge change, but the Bill’s purpose is to narrow down that change wherever we can, not least regarding our tariff arrangements.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

I understand exactly where the Financial Secretary is coming from. Given the level of change and the surety that we must give people that these matters are being carefully and assiduously considered, the parts are in a way greater than the sum. Does he therefore agree that it is important to send a message that Parliament—appropriately, through a proper mechanism, and not through ministerial diktat—should be able to consider these matters in more detail than it can under the mechanisms and frameworks being provided by the Government?

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

The hon. Gentleman has eloquently revisited the points that he made in his opening remarks. We have a narrow scope for the tariff’s introduction, with all the thousands and thousands of different categories, duties, goods and so on that will be contained within it. It allows for provision to vary those duties. As I mentioned, we have said that when the tariff and all the duties that are under it are introduced—and indeed, when the duties are increased, or the Government seek to increase them—the affirmative procedure will be in place. Given the narrowness of the scope of the regulations and the fact that enhanced scrutiny will be in place through the affirmative procedure, I hope that the hon. Gentleman feels that that will be enough under the circumstances.

Before I deal with the specifics of clause 8 and the new clause, I will respond to the hon. Member for Aberdeen North. She exhorted me to consider her pleas carefully—how could I possibly not, under those circumstances? I can reassure her. As we were discussing earlier, I had haggis for lunch, with some mashed potato and swede, and I now have the “Braveheart” spirit—although that did not end all that well, did it? However, fortified with that spirit I will do my utmost, as I would in any case, and consider the amendments very carefully. I am sure that the hon. Lady will return to the matters on Report.

Clause 8 requires the Treasury to establish and maintain a customs tariff. The rates of duties set under the clause will apply to goods from every country, unless varied by another clause. It enables the implementation of a range of tariff options so that the UK can respond to changes in the global trading environment, now and in the future.

The UK currently applies duty to imports to the UK under the Union customs code. The UK’s standard duty rates, as a member of the EU, are contained within the common external tariff. When we leave the EU, the Bill will require the Treasury to establish and maintain a customs tariff that will, among other things, specify the rate of import duty applicable to goods.

The UK is working with the WTO to establish the UK’s bound tariff schedule. The bound tariff schedule sets the maximum rate of import duty that a country may apply to imports; the UK can then choose what rate to apply, provided it is at or below the bound rate. Import duty rates specified under the clause must be consistent with those international obligations.

Clause 8 sets out what must be contained in the customs tariff. The customs tariff is a system by which goods are classified and given codes and an applicable rate of import duty and contains rules for determining the amount of import duty applicable. That enables the UK to classify goods and determine the amount of import duty that they should be subject to.

The clause allows the UK to calculate the amount of any import duty due. That could be by reference to the value of the goods, the weight or volume of the goods, or any other measure of their quantity or size. The Treasury must have regard to any recommendation from the Secretary of State as to the rate of import duty applicable under the customs tariff. That is because the tariff is an important lever of trade policy, as well as a fiscal lever with impacts on the domestic economy.

We carefully considered what would be the appropriate level of parliamentary scrutiny for regulations made under the clause. As I have explained, the first regulations made under clause 8 and any subsequent regulations that increase the rate of import duty payable in a standard case will be subject to the made affirmative procedure and will therefore cease to have effect after a prescribed number of days unless formally approved by Parliament.

Our import duty rates will have a wide-ranging impact on the economy, and it is therefore right that the Secretary of State and the Treasury, when recommending and setting the rate of import duty, should have regard to the interests of UK consumers, the desirability of promoting the UK’s external trade, and maintaining and promoting UK productivity.

New clause 1 and the consequential amendments 7 and 8 would put in place additional parliamentary processes for setting the tariff. For indirect tax matters, it is common to have framework primary legislation supplemented by secondary legislation. The Bill introduces a comprehensive framework for a new stand-alone customs regime, which will be underpinned by detailed and technical secondary legislation. The Bill ensures that the scrutiny procedures that apply to the exercise of each power are appropriate and proportionate, taking into account the technicality of the regulations and the frequency with which they are likely to be made.

The tariff is long and complex, with more than 17,000 different types of good, and potentially subject to regular amendments. For example, the Commission currently makes daily changes to the tariff, some of which would, if the Government continued to take that approach, fall into the scope of the additional procedure. That is simply not practical. For the tariff powers under clause 8, the made affirmative procedure will apply the first time the tariff is set, and for any increases in duty payable under the tariff in a standard case. The negative procedure will otherwise apply.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9