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Committee delivers damning verdict on Brexit border regime – updated

[ February 9, 2022   //   ]

There has been a clear increase in costs, paperwork and border delays for UK business since Brexit, not helped by repeated delays to new import regime, says the UK Parliament’s Public Accounts Committee in a report published on 9 February.

EU Exit: UK Border Post transition says that while trade volumes have been suppressed by the Covid pandemic since the end of the transition period on 31 December 2020, and wider global pressures, “it is clear that EU exit has had an impact, and that new border arrangements have added costs to business”. The PAC adds that it remains concerned about the impact of changes to trading arrangements on businesses of all sizes.

PAC further warns that if cross border passenger volumes recover as may be expected during 2022 there is potential for more disruption at the border, exacerbated by further checks at ports under the EU’s new Entry and Exit system.

PAC argues that this is a particular risk at the juxtaposed controls, such as Dover, where EU officials carry out border checks on the UK side of the border and where queues might build up in the UK. It says the Home Office is in conversation with the French authorities about how they might operate the new controls without causing queues but this is at an early stage. It is important that the checks that will apply to HGV drivers do not cause delays, it says.

The report adds that the EU introduced full import controls at the end of the transition period. The UK government originally intended to do the same but has delayed three times over the last year and officials could not give a complete assurance that they would not do so again. Much remains to be done to introduce import controls, and in particular to ensure that traders and hauliers across the 27 EU member states are ready as the controls are phased in.

The government now intends to introduce full import controls in phases between January 2022 and November 2022, says the report. Departments have made progress towards introducing the systems, infrastructure and staff necessary but there is still much to be completed. For example, currently, the Import of Products, Animals, Food and Feed System (IPAFFS) for SPS checks cannot communicate with the Goods Vehicle Movement Service (GVMS) system to tell hauliers where they should go if the goods they are carrying are selected for SPS checks. In addition, some of the staff and infrastructure required for the implementation of import controls are not yet in place. Port industry representatives told PAC that it needs greater clarity from government regarding the charging regime that government intends to implement to cover the operating costs at its inland sites and on the actual arrangements for checks at ports, such as the percentage of products that will be selected.

It continues that there is more to be done to ensure that traders and hauliers across the 27 EU countries are prepared for UK import controls. Departments have consistently rated a lack of trader and haulier readiness for new border controls as a high risk to the operation of the UK border after the end of the transition period.

UK traders have been dealing with EU import controls since January 2021 and the Cabinet Office was very positive about the extent to which UK hauliers, logistics companies and traders had adapted. The focus now is on EU trader and haulier readiness for UK import controls when they are imposed throughout 2022.

HMRC told PAC that it was focussing on the 90,000 smaller traders who account for 15% of imports from the EU who are less familiar with international customs procedures. HMRC said that while it was confident that traders will be ready for 1 January 2022, EU hauliers were less ready and that improving readiness in 27 countries is significantly more challenging than improving it in the UK. “We share others’ nervousness about the state of EU trader readiness for the controls to be introduced throughout 2022 and the lack of visibility and metrics on this,” PAC commented.

The arrangements for goods arriving from the EU is untested and could be exploited, the report continues. Defra is introducing pre-notification in advance of physical checks and may take a pragmatic approach as people learn the system and HMRC accepted that the sooner import controls are implemented, the better its ability to manage fiscal risks and was confident that controls can now be stepped up without disrupting flow. PAC however said it was less confident, and shared concerns that many companies are still not fully aware of all the new requirements, for example around rules of origin, and it would take time for them to get up to speed.

It added: “We also note the potential risks caused by delays putting in place the necessary permanent infrastructure: for example, until the Dover White Cliffs site becomes operational in 2023 trucks arriving in Dover that are carrying goods selected for physical checks will have to travel 60 miles to Ebbsfleet. The further the inland sites are from the ports, the greater the risk that goods could be offloaded on the way. HMRC agreed it would be ideal to have the infrastructure at the port itself and goods controlled at the port but said that it was not possible. It told us it was looking at what surveillance it would need to manage those risks.”

It adds that government plans to create “the most effective border in the world” by 2025 is a “noteworthy ambition” but “it is optimistic, given where things stand today” and is not convinced that it is underpinned by a plan to deliver it.

This ambition “relies on cross-government digital programmes, in which it does not have a good track record”, said the report. The strategy published in December 2020 does not contain any significant detail about the delivery plans underpinning these. To support delivery of the strategy, the October 2021 Spending Review provided £838 million to deliver critical customs IT systems and £180 million to deliver a single trade window. HMRC considers these investments should make it easier for traders by making the system simpler and ensuring they only have to submit information once.

Defra is also working on a range of digital solutions to reduce burdens on traders. While departments did well putting in place the initial IT capability needed for January 2021, government does not generally have a good record delivering large-scale IT projects, as illustrated for example in PAC’s own recent report on challenges in implementing digital change.

HMRC also needs to migrate all users from its existing customs system from Chief to the new Customs Declaration Service (CDS). This will be challenging given that, by October 2021, only 42 of 5,000 users had moved across. HMRC expects to see a big increase in traders migrating after January, once they have adapted to the introduction of import controls.

Businesses have faced challenges operating under the Northern Ireland Protocol which need to be resolved and both the UK and EU have recognised that there are issues with its implementation.

The Cabinet Office told PAC that the results of its monitoring of the impact of the Protocol had been very concerning, revealing considerable diversion of trade. “The government is also concerned that the Protocol does not have support among significant parts of the Northern Ireland community,” it warned.

Although the UK government reserves the right to trigger Article 16 safeguards if required, it is seeking a comprehensive negotiated solution. The UK set out its proposed changes to reduce checks required under the Protocol in a July 2021 Command Paper and the EU has also put forward some proposals, including some new suggestions it had previously rejected. The two sides remain in negotiations.

PAC chair Dame Meg Hillier MP, summarised: “One of the great promises of Brexit was freeing British businesses to give them the headroom to maximise their productivity and contribution to the economy – even more desperately needed now on the long road to recovery from the pandemic. Yet the only detectable impact so far is increased costs, paperwork and border delays.”

She added that the PAC has repeatedly reported on Brexit preparedness and at every step there have been delays to promised deadlines, saying: “It’s time the government was honest about the problems rather than overpromising.

“In our view, there is much more work that Government should be doing in the short term to understand and minimise the current burden on those trading with the EU, to address the immediate delivery and readiness risks in introducing import controls, and to have a border in place which is operating effectively without further delays or temporary measures.”