Duties of Customs — House of Commons, 2017-11-20
Topic: Foreign Trade
Stella Judith Creasy (Labour, Centre-left): I was struck by the discussion earlier about making decisions so quickly. I, too, did not vote for the article 50 legislation to be triggered, because I was concerned it was too soon in the process. However, some disasters are of our own making, and a snap general election in which the public thoroughly rejected her hard Brexit is certainly something the Prime Minister should learn from In her Lancaster House speech, the Prime Minister said that she wanted associate membership of the customs union—a membership that does not exist. The legislation that will come from the motion before us tonight is supposed to answer that question. Yet, I have read the Government’s White Paper, I have asked the Prime Minister repeatedly about the idea of associate membership, and I have asked her whether she has raised it with her European counterparts, and we have no answer It is a bit like someone asking to be an associate member of a gym—to use the swimming pool, but not to pay for all the weights or classes. Oddly enough, most business people would turn them down flat or at least give them an answer. I am very struck by the fact that, 18 months on, the Government cannot even tell us whether they have asked whether the wonderful, mythical, innovative, creative, dynamic partnership they believe they can get is even on the table This approach literally makes no sense. If we look at the reality of how we trade as a nation, we see that we are not an island factory; we are a nation that works with other countries to produce goods, and we are proud of the goods we produce through our hard endeavour. Let me give a great example. In the food and beverages industry, the EU accounts for almost 70% of our supply chain. In our car industry, 44% of the value of UK car exports comes from imported products. In the UK, we are great at making bumpers, brakes and clutches, but we are not so good at radiators, suspension or gearboxes. That is why we work with other countries to produce the great British cars that we are all so proud of. That is what is at stake when we reject the customs union out of hand: the ability to navigate and manage those relationships effectively and efficiently. For every £1 in car exports from the UK, 44p is spent on importing foreign parts. Some 24% of all imports from the EU are from the car industry. That is at stake when we suddenly rip up the rules under which that relationship happens The car industry is not alone. In 14 different sectors, at least 15% of the supply chain is dependent on the European Union—dependent on not having the kind of customs tariffs we are talking about and on having frictionless trade. That is true of some sectors much more than others. In the paper industry, 71% of the supply chain is dependent on the European Union. In the rubber and plastics industry, the figure is 69%; in pharmaceuticals, it is 66%. That is why we know that leaving the customs union will cost us £25 billion. These new tariffs alone will add at least £4.5 billion a year to importers’ costs—money they can ill afford to spend Then we get on to the practicalities—this is not just about the money that being part of the customs union and the single market helps us to save. We will see delays at Dover because nobody has yet invented the technology that will allow this frictionless trade. When we talk about pre-lodging customs checks, we know that that means still more paperwork and more complexity in the supply chain. It is no wonder the car industry is desperate for us to continue our membership of the customs union. So too is the National Farmers Union; so too are the leading pharmaceuticals brands. Being part of the EU gives us access not just to markets in the EU but, through our free trade agreements, to a third of all global markets at preferential trading rates When we look at the case for the customs union and at what it gives us now, it is clear that this is not about nostalgia for the "Ode to Joy"; cold, hard business sense says that if we have a good way of working, why would we rip it up? But ripping it up is exactly what the Government are doing—for something that, 18 months on, they still cannot tell us will exist. [Interruption.] I am sorry to see that I have made the Ministers entirely leave the Front Bench by pointing that out, because I really hope that at least one Minister will be here to answer one of my concerns about this legislation and particularly about the VAT proposals We have all talked about tariffs and customs tonight, but I want to unmask myself as a geek interested in VAT. When I talk to small businesses in my local community, VAT is one of their prime concerns. [Interruption.] I am grateful to the Minister of State, Ministry of Justice, the hon. Member for Esher and Walton (Dominic Raab) for being here. I am particularly looking for answers on the 13th directive—I know it is something he knows intimately VAT is one of those issues every business will say is a nightmare. I never thought that Labour Members would be arguing for less red tape than Government Members were, but that is exactly what we are talking about tonight. Some 63% of small businesses say that Europe is their priority market. If we add to the paperwork they have to deal with by removing the customs union and the single market, we will of course make trading harder for them. Compared with the bigger companies, they do not have the flexibility that Ministers blithely suggest they have Currently, businesses incurring VAT in the EU are able to claim it back through intra-country mechanisms. If they sell printers to Sweden, and they incur VAT as part of that, they can claim it back—it is relatively easy. Specifically—I am sure the Minister will want to look this up—we are talking about articles 170 and 171 of Council directive 2006/112/EC—the prime VAT directive. The detailed rules are in Council directive 2008/9/EC, and they are in our legislation. These Ways and Means resolutions will therefore have to address this point. I am sad that the Financial Secretary to the Treasury is not here to hear it, because I have been raising it with him for some time. I can see that he is talking to his officials. I very much hope that in his concluding remarks he will finally be able to tell me the answer Right now, because we have the single market, businesses trading with Europe can reclaim their VAT and manage VAT relatively simply. If we leave the single market, they will have to move on to the 13th directive, which covers non-EU companies trading in the EU. The details of the 13th directive are clearly written to be advantageous to companies, saying that they can set their own VAT terms. Let us think about that for a moment. A UK car manufacturer trying to trade across Europe in radiators and the pieces and parts that make them will suddenly have to deal with VAT across 27 different countries, and 27 different pieces of paper. I am glad that the Financial Secretary is now here because he and I share a concern to remove red tape for our businesses to make sure that British businesses are not facing additional paperwork and additional complexity.