Alison McGovern: Brexit has exposed a strange political ignorance about trade

Posted On: 
24th November 2017

Preparing HMRC for Brexit is an almost impossible task – and it’s just the tip of the iceberg when it comes to the challenges facing UK trade, writes Alison McGovern

The scale of what HMRC has to do in the next 18 months is hard to get your head around, writes Alison McGovern
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It is strange to think of it now, but there was a time just a few years ago when Westminster was not consumed by talk of trade deals. Yes, there was the odd rumbling about the Transatlantic Trade and Investment Partnership (TTIP) and a small tremor about the EU deal with Canada, but for the most part trade was off the political radar. It was something that just happened.

Perhaps that explains the strange political ignorance about trade that has been exposed now it has risen to the top of the agenda because of Brexit.

The signs are obvious. The focus on tariffs instead of non-tariff barriers, the general glazing over of eyes whenever someone utters the phrase ‘country of origin rules’, and the inability of some MPs to recognise that regulatory convergence is what trade deals are all about. All of it points to a political world fundamentally unfamiliar with the basic concepts surrounding trade and customs, let alone the finer details.

But it is not just politicians who are having to come to terms with the idea that trade is not simply a thing that just happens. For thousands of businesses across the country, and for the civil service itself, the adjustment is necessary, urgent, and extremely worrying. The logistical challenge necessary to prepare our customs system for Brexit is vast and underappreciated.

The scale of what HMRC has to do in the next 18 months is hard to get your head around. At the moment, HMRC deals with around 55 million customs declarations every year. If we leave the customs union in 2019, as the government proposes, that will go up by nearly 500% to 255 million.

The problem is that the current customs system, CHIEF, can only handle about 100 million and, according to the Institute for Government, the new one, CDS, is “under real pressure and successful delivery is in doubt”. HMRC is recruiting around 5,000 extra staff to help deal with the increased workload, but doubts remain about its ability to deliver.

Of course, HMRC is only one part in all of this. The consequence of all these extra customs transactions is a huge red-tape burden on businesses.

There are a staggering 130,000 UK businesses that currently import and export solely to the EU and therefore have no dealings with customs at all. That means 130,000 businesses that HMRC is going to have to walk through the customs process in the tiny gap between the new arrangement being agreed and it being implemented.

HMRC also needs certainty to start training new staff and preparing for exit, including some clarity on what regulatory divergence we will have with the EU after we leave.

If this all sounds impossible, it is because it is. The wasted summer of brinkmanship from David Davis and the government has only reduced the time we need to get arrangements in place for ‘exit day’. We cannot simply agree a deal at the last minute and expect things to magically work afterwards.

It should not be news to ministers that delivering huge and complex projects in government is hard work. They only need to look at the mess of Universal Credit to understand that sometimes things that look good on paper simply do not work in practice. Compared to Brexit, Universal Credit looks like a fag-packet calculation.

The woes of HMRC are just the tip of the iceberg for organisational change that will need to be introduced. If we are leaving Euratom, how will nuclear materials be regulated? If we are leaving the open skies arrangement, how will we make sure that planes can legally take off and land at UK airports on exit day? These are not minor questions, and the government needs to start coming up with some answers, for its own officials as much as for the public.

Threats of ‘no deal’, already a nuclear option for our economy, become hysterical when it is obvious that we would be physically unable to implement such an outcome.

All of this could be avoided by remaining within the single market and the customs union and I am convinced that the argument for this pragmatic approach will only grow in strength as the reality of Brexit becomes more obvious in the weeks and months to come. 

 

Alison McGovern is Labour MP for Wirral South and a member of the Treasury Select Committee