I beg to move amendment 17, in clause 55, page 38, line 15, leave out

“on the day on which this Act is passed” and insert

“when the condition in section (Pre-commencement review: resource implications for HMRC) is met”

This amendment is consequential on NC9.

With this it will be convenient to discuss the following:

Amendment 20, in clause 55, page 38, leave out line 23 and insert—

‘(1A) Section (Pre-commencement review: resource implications for HMRC)and this Part come into force on the day on which this Act is passed.”

This amendment is consequential on NC9.

New clause 9—Pre-commencement review: resource implications for HMRC—

‘(1) The condition in this section is met when—

(a) HMRC Commissioners have carried out a review in accordance with the provisions of this section, and

(b) the Chancellor of the Exchequer has laid a report of that review before the House of Commons.

(2) The review by the Commissioners under this section must consider—

(a) the staff requirements for implementation of the provisions of this Act,

(b) the extent to which provision has been made to meet those requirements;

(c) the information technology requirements for implementation of the provisions of this Act, and

(d) the level of certainty about the meeting of the requirements considered in accordance with paragraph (c).

(3) The review shall have regard to information provided by the Treasury and the Secretary of State about the likely outcome of negotiations between the United Kingdom Government and the European Union.”

This new clause requires HMRC to provide an assessment of the staffing and IT requirements for implementing the provisions of the Bill, and the prospects of those requirements being met prior to commencement of the main provisions of the Bill.

To make things totally clear, amendments 17 and 20 are consequential on new clause 9, so I will focus on that. The new clause would insert provision for pre-commencement review into the Bill. That relates to clause 55, which is about the conditions for commencement. We have asked for the HMRC commissioners to carry out a review that the Chancellor of the Exchequer would then lay before the House. We have asked for that review to examine a number of areas, such as whether the appropriate staffing requirements have been met for the Bill to be implemented properly, the extent to which information technology is ready for implementing the Bill’s provisions and the extent to which the Government believe that all the requirements in the Bill have been met.

The new clause is necessary for a variety of reasons; I will not go through all of them, because we covered some of the material when we talked on Tuesday about a review of resources in relation to the authorised economic operators scheme and the SNP amendment. None the less, there are matters that it is important this Committee covers before we finish. We heard some compelling evidence from witnesses last week who talked about changes that have occurred within HMRC and the resourcing of the customs element of HMRC. In particular, they talked about how a helpline for businesses with customs problems had been removed, the potential impacts of the new regionalised system for HMRC, and how the removal of local offices would mean that HMRC staff will no longer have a physical presence in Scotland north of Glasgow and Edinburgh, and none on the whole south coast of England. The Minister responded by saying that of course customs officials would be able to travel. Yes, that is definitely the case, but as someone who has frequently had to get to Dover by road and by public transport, I can say that that is often not easy. There are significant concerns about that.

There are also continuing worries about whether staff numbers are appropriate. We had a little bit of discussion about that at close of play on Tuesday, again in relation to an SNP amendment. The Minister said then that it was possible that, to deal with the requirements of the Government’s approach, the number of customs officers might increase from 5,000, according to figures submitted to the World Customs Organisation, by between 3,000 and 5,000. Let us say that they increase by 5,000 to 10,000, doubling the current number. I have redone the calculations that I did last Tuesday. That would mean that every British customs officer would still be required to process about 7,700 customs declarations a year. That is still substantially more than their counterparts in other countries: 20 times more than in Australia, six times more than in America, almost twice as many as in Norway and about 20% more than their Swiss counterparts, who seem to process the largest number after the UK, by my calculations on comparable countries. That is without the many additional declarations that might come if the Government decide not to form part of a customs union with the rest of the EU. Therefore, there are legitimate questions to ask about whether HMRC really has the capacity to deliver what is being asked of it.

That is particularly important today. I understand that there are leaked documents suggesting that the EU is concerned that the UK might seek to undercut standards, particularly on taxation requirements. I am not sure whether it mentions customs in that regard, but it is important for the UK to send out a strong message that we want to uphold standards—particularly on something like customs, where there is the potential for a large amount of fraud that could affect other countries, but also on many allied problems mentioned by our witnesses, such as phytosanitary measures, veterinary standards, control of illegal trafficking of goods and so forth. I hope that the Government will give us a strong commitment to properly review resources. We need more than what we have already.

I completely agree with everything that the hon. Lady is saying. It is important for businesses to have certainty about how the extra resourcing will work—if there is extra resourcing—so that they will know how to interact and have confidence that the system will work after exit or implementation day.

I am grateful for the hon. Lady’s support. Due to the changes to the deployment of HMRC in Scotland, the issue is very relevant to many of her constituents. I am pleased that the Government seem to be moving in the right direction. We have a commitment to more staff, which is positive, and the Minister’s responses to my written questions seem to focus more on additional numbers and less on redeployment, as they did in the concerning responses previously. Surely, given the potentially increased amount of activity that a new customs regime would necessitate, we need to be on stronger ground if we are to avoid a difficult time for British businesses and retaliatory measures from the rest of the EU if it feels that we are not upholding our obligations.

Amendments 17 and 20 and new clause 9 seek to require HMRC to review its staffing and IT requirements, with the Chancellor to report that to Parliament before commencement. The Government oppose the amendments. It is not appropriate to legislate to require such a review, because HMRC staffing and IT requirements largely depend on the outcome of the negotiations with the EU and the details of the new customs regime, which will be set out in secondary legislation.

I assure the Committee that the Government are preparing for every possible outcome, and the activities required by the amendments are already happening as part of HMRC’s business planning. I am in discussions with HMRC on a regular basis, including with the head of HMRC, on the details of how we will ensure we have the technology in place.

We have had a number of conversations in Committee about the customs declaration service and the challenges of all the additional declarations that that system may yet have to handle, as well as the hon. Lady’s points on personnel. I am aware of the points she made on access to the various ports, given the changes to the structure of offices in the transformation programme that HMRC is undergoing. She is correct that the figure we will be looking at in terms of additional personnel is between 3,000 and 5,000. I suspect it will be nearer the upper limit than the lower limit, but those decisions are imminent. I hope that those reassurances will lead her not to move her new clause and to withdraw the consequential amendments.

I am grateful to the Minister for those clarifications and commitments, particularly on staffing. It is good to hear that the Government are considering ensuring that there are sufficient human resources. However, as I hopefully made clear in my remarks, I am concerned that, from an international perspective, we will still be under capacity. There may be reasons for that, but I would like the Government to explain them. We seem to be radically below par compared with other comparable nations.

When it comes to IT, the Government have now accepted that there are many challenges, and I understand that the CHIEF—customs handling of important and export freight—system will now be run on for a period. That is sensible, but it would have been good to get that agreement earlier, because not having that assurance before caused business some concern. Obviously, the CDS programme was announced before the European referendum—it has been a long-running process—but it is important that we recognise the additional pressure that that switchover will put on services at the very time a new customs regime might be coming in. I will not press the amendment, but we may move the new clause, as with a number of other new clauses. I am grateful to the Minister for those clarifications, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 18, in clause 55, page 38, line 15, leave out

“on the day on which this Act is passed” and insert

“when the condition in section (Pre-commencement review: effects on frictionless trade with European Union) is met”.

This amendment is consequential on NC10.

With this it will be convenient to discuss the following:

Amendment 21, in clause 55, page 38, leave out line 23 and insert—

“(1A) Section (Pre-commencement review: effects on frictionless trade with European Union) and this Part come into force on the day on which this Act is passed.”

This amendment is consequential on NC10.

New clause 10—Pre-commencement review: effects on frictionless trade with European Union—

“(1) The condition in this section is met when—

(a) the Treasury has carried out a review in accordance with the provisions of this section, and

(b) the Chancellor of the Exchequer has laid a report of that review before the House of Commons.

(2) The review by the Treasury under this section must consider the likely effects of implementation of the provisions of this Act on the prospects for frictionless trade with the European Union after the United Kingdom’s withdrawal from the European Union.

(3) The review must consider separately the matters specified under subsection (2) in relation to—

(a) circumstances in which there is no withdrawal agreement with the European Union (within the meaning of section 9 of the European Union (Withdrawal) Act 2018),

(b) any implementation or transitional period after the United Kingdom’s withdrawal from the European Union, and

(c) the period subsequent to that specified in paragraph (b).

(4) The review shall have regard to information provided by the Secretary of State about the likely outcome of negotiations between the United Kingdom Government and the European Union.”

This new clause requires the Treasury to provide an assessment of the effects of implementation of the Bill on the prospects for frictionless trade staffing and IT requirements for implementing the provisions of the Bill, and the prospects of those requirements being met prior to commencement of the main provisions of the Bill.

The proposals seek to provide commencement for various provisions in the Bill under parts 1 to 5. New clause 10 seeks to require the Treasury to carry out a pre-commencement review considering the likely effects of the implementation of the provisions of the Bill on the prospects for frictionless trade within the EU after the United Kingdom’s withdrawal from the EU.

The review should also consider circumstances in which there is no agreement with the EU and an implementation or transitional period after the UK’s withdrawal. It would also have regard to information provided by the Secretary of State about the likely outcome of negotiations between the UK and the EU. As the explanatory statement that accompanies the new clause makes clear, we seek to ensure that the Treasury makes a proper assessment of the impact of the implementation of the Bill on staffing and IT requirements in the context of maximising frictionless trade across the UK border.

In evidence to the Committee, the Public and Commercial Services Union commented on staffing, which the new clause seeks to ensure is properly addressed, as my hon. Friend the Member for Oxford East also indicated. Since 2006, the number of HMRC staff has roughly halved, from more than 100,000 staff members to 56,000, and the proposed office closures suggest that more might be on the way. It is not just PCS that is concerned. Anastassia Beliakova said:

“Another concern…is that there is an evidenced shortage of staff dedicated to goods checks. That has been ongoing for a number of years, and questions are being asked about whether there is sufficient resource and focus allocated to goods checks and support. Those questions will become much more acute with all the coming changes.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 4, Q1.]

At the end of the day, it is incumbent on the Government to hear what we have to say and act before it is too late to enable frictionless trade, which is one of their primary concerns.

I will be brief. Jeremy White from the Chartered Institute of Taxation said:

“The only frictionless trade known to man is customs union.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 28, Q33.]

I wholeheartedly agree. The Scottish National party’s position is and has always been that we should remain in the customs union with the EU. That is the only sensible way of eliminating all barriers to frictionless trade.

The thing about having a free trade agreement that removes tariffs is that tariffs are not the only barriers to trade. They are not the only thing to cause friction at borders and problems for companies and individuals. The non-tariff barrier issues include things like stacking lorries, which we heard about in relation to the issue of roll-on/roll-off; how companies and organisations will make customs declarations; the digitalisation or not of customs declarations; and the standardisation of rules of origin, which is the biggest issue relating to the customs union. Those who are exporting to the EU will have to complete rules of origin documentation, having never had to do it before. If we do not have a shared external tariff, that will happen.

I am absolutely clear that this is a good new clause. We need frictionless trade with the European Union, but I am clear that the only way to achieve that is by being in the customs union.

Amendments 18 and 21 to clause 55 and new clause 10 seek to require the Treasury to review the likely effects of the Bill on frictionless trade with the EU, and for the Chancellor to report that to Parliament before commencement. I assure the Committee that the Government are committed to providing information on the impact once the outcome of the negotiations is clearer.

We believe that putting those requirements on the face of the Bill is unnecessary. Any changes will be set out in secondary legislation, and Parliament will of course have the ability to consider, scrutinise and decide upon the content of that legislation in the normal way. Furthermore, any review that is carried out before the outcome of the negotiations will necessarily be somewhat speculative.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 19, in clause 55, page 38, line 15, leave out

“on the day on which this Act is passed” and insert

“when the condition in section (Pre-commencement review: effects on border experience) is met”.

This amendment is consequential on NC11.

With this it will be convenient to discuss the following:

Amendment 22, in clause 55, page 38, leave out line 23 and insert—

“(1A) Section (Pre-commencement review: effects on border experience)and this Part come into force on the day on which this Act is passed.”

This amendment is consequential on NC11.

New clause 11—Pre-commencement review: effects on border experience—

“(1) The condition in this section is met when—

(a) HMRC Commissioners have carried out a review in accordance with the provisions of this section, and

(b) the Chancellor of the Exchequer has laid a report of that review before the House of Commons.

(2) The review by the Commissioners under this section must consider the likely effects of implementation of the provisions of this Act on the border experience of importers and exporters and those engaged in associated economic activities.

(3) The review must consider separately likely effects on the border experience of those importing goods from or exporting goods to the European Union.

(4) The review must consider the matters specified under subsection (3) in relation to—

(a) circumstances in which there is no withdrawal agreement with the European Union (within the meaning of section 9 of the European Union (Withdrawal) Act 2018),

(b) any implementation or transitional period after the United Kingdom’s withdrawal from the European Union, and

(c) the period subsequent to that specified in paragraph (b).

(5) The review shall have regard to information provided by the Secretary of State about the likely outcome of negotiations between the United Kingdom Government and the European Union.”

This new clause requires HMRC to provide an assessment of the effects of implementation of the Bill on the border experience of importers and exporters and those engaged in associated economic activities, with particular reference to trade with the European Union, prior to commencement of the main provisions of the Bill.

The amendment seeks to oblige HMRC commissioners to carry out a pre-commencement review of the effect on the border experience. The Chancellor of the Exchequer will then be mandated to lay a report of that review before the House.

The reasoning behind new clause 11 is simple: we are facing a shift of enormous magnitude, which demands a corresponding change in our approach to how we practically handle the processing of customs at the border. The change comes at the same time as existing resource challenges to HMRC. We are concerned and will continue to be so about the issue of provision to the appropriate authorities. I have made that point to the Minister time and again, and I hope he listens to what we are saying, even at this late stage.

I have significant concerns about the way this clause is going to work, given that the UK Government’s priority in the Border Force has been immigration rather than customs staff. Therefore, there has been an erosion of the customs staff who have got experience and understanding of the frontline. I am not yet convinced. Although the Government are talking about putting extra people into HMRC, I have not heard enough about equivalent extra staff being put into the Border Force so that it can appropriately police things in relation to customs. I have significant concerns about the border experience, and I note that that is not just on the south coast of England. We have borders when things come in on international flights or ports outside the south coast of England. It needs to be taken over the whole geographical spread of the United Kingdom.

Amendments 19 and 22 to clause 55 and new clause 11 seek to require HMRC to review the likely effects of the Bill on the border experience of importers and exporters, and those engaged in associated economic activities, and the Chancellor to report that to Parliament before commencement of the Bill. The reasons why the Government will resist them are similar to the reasons given for resisting the last group of amendments. It is not appropriate to legislate for such a review, because the experience of businesses at the border will depend on the outcome of the negotiations with the EU, the resulting details of the new customs regime and the resulting changes needed to maintain a fully functioning and legally operable VAT and excise regimes.

To respond to the specific points the hon. Member for Aberdeen North made about the Border Force, it is absolutely vital, as she has suggested, that we have appropriate resource. Of course, that is a Home Office matter and not within the direct remit of HMRC or the immediate scope of the Bill, but I reassure her that we are working across Government and closely with the Home Office to ensure that, whatever occurs in the negotiation and whatever the results for our day one arrangements, we will be ready in terms of both the Border Force and Customs and Excise.

The Minister has heard what I have to say. We will not be pressing the amendment, although we will press the new clause. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 102, in clause 55, page 38, line 17, after “(2)”, insert “and (2A)”.

This amendment paves the way for amendment 103.

With this it will be convenient to discuss the following:

Amendment 103, in clause 55, page 38, line 32, at end insert—

“(2A) The following provisions come into force on such day as the Secretary of State may be regulations under this section appoint—

(a) section 41 (abolition of acquisition VAT and extension of import VAT),

(b) section 42 (EU law related to VAT), and

(c) section 43 and Schedule 8 (VAT amendment connected with withdrawal from EU).

(2B) Regulations under subsection (2A) may not be made until the Secretary of State has laid before the House of Commons an impact assessment that considers—

(a) the effect of leaving the EU VAT area on the lawful importation of goods into the United Kingdom from the European Union, and

(b) the effect of abolishing acquisition VAT and extending import VAT on the lawful importation of goods into the United Kingdom from the European Union.”

The effect of this amendment would require the UK Government to make an impact assessment on the effects of leaving the EU VAT Area before any system of upfront import VAT could be applied to goods lawfully being imported into the UK from the European Union under EU Law.

New clause 13—VAT deferral scheme—

“(1) This section applies if it appears to the Secretary of State that the United Kingdom will cease to be a member of the European Union taxation and customs union.

(2) The Secretary of State must by regulations introduce a domestic deferral scheme for UK importers.

(3) In designing a scheme under subsection (2), the Secretary of State must consult with whichever relevant stakeholders deemed by the Secretary of State to be appropriate.

(4) Regulations under subsection (2) may be made only if a draft of the regulations has been laid before, and approved by resolution of, the House of Commons.”

This new clause ensures that in the event that the UK is no longer a member of the EU VAT area, the Secretary of State must by draft affirmative regulation introduce a VAT deferral scheme.

This is the last section on which I will be moving anything. Amendment 102 is a consequential amendment and relates to amendment 103. Amendment 103 requires an impact assessment to take place on the changes of the EU VAT area, as we have rehearsed, and the move from acquisition VAT to import VAT.

I am neither convinced nor clear that the Government have adequately undertaken an assessment of the impact. Some 132,000 new businesses will come into paying import VAT for the first time. I do not know that the Government are aware of how much of an impact that will have on those businesses. I am not yet at the stage where I believe the Government have done enough impact assessments.

I was pleased that the Minister talked earlier about looking sympathetically at having a system of VAT deferral or something of that sort to improve cashflow issues for businesses. I appreciate his saying that and look forward to more details about how that will work, so that businesses can make adequate plans. That is not the only issue that occurs on leaving the EU VAT area. For the other issues mentioned earlier, for example on triangulation simplification where companies would have to register for VAT in more countries, I am again not convinced that the Government have adequately assessed the impact they will have on businesses. They are therefore not in a position to explain that impact to businesses and assist them in mitigating it.

On new clause 13, I appreciate that the Minister has said he is sympathetic to making changes on the VAT deferral scheme, but I intend to press new clause 13 to a vote so that it is written on the Bill and is not just words from the Minister that the Government agree to a VAT deferral scheme. The new clause would ensure that. I do not intend to push amendments 102 and 103 to the vote, but I may seek to return to amendment 103 on Report.

I will start by addressing new clause 13. The hon. Lady will be aware that the issue of the potential move from acquisition VAT to import VAT and its effect on cash flow for businesses was raised by the Chancellor in the autumn Budget. We are very aware of that, as the Chancellor has indicated.

On Second Reading, from memory, I was intervened on by my right hon. Friend Nicky Morgan, the Chair of the Treasury Committee, who raised the same issue. Prior to that, I had had a meeting with her to discuss the matter in some detail. I was able to provide her with an assurance on the Floor of the House that was sympathetic—I think that word was used—to the issue. We certainly do not wish for a situation in which we are significantly damaging businesses as a consequence of any changes. Indeed, in this debate I have clarified that, under the terms of section 38 of the Value Added Tax Act 1994, we have the powers to make the kind of changes that my right hon. Friend and I would probably agree are appropriate.

I am grateful to the hon. Lady for not pressing amendments 102 and 103, which seek to prevent the Government legislating for a future outside the EU VAT area before we produce an impact assessment on the effects that leaving the EU will have on imports.

I welcome that point. I would speak to the amendment but I will not, given the time. Does the Minister have any indication what the timetable might be for that structure in relation to deferrals, or can he come back to us?

That question prompts another question: at what point do we reach that matter in the negotiations with the European Union? It is not possible to answer that question because it depends on when we get our deal and where the parameters around VAT, imports and exports are. All those matters land in that negotiation. I reiterate the reassurance that we have the ability and the powers within the VAT Act to act accordingly and we have a firm intention to ensure that we deal with the concern we have all identified.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 55 ordered to stand part of the Bill.

Clause 56 ordered to stand part of the Bill.

New Clause 1