The Public Accounts Committee of the House of Commons has just (9am) published a consensus, all party, report suggesting that it would be catastrophic if a viable Customs system was not in place at the time of Brexit. It added:
The Government must address risks and ensure contingency option in place well before January 2019
The report's summary says:
Under current plans, the UK is set to leave the European single market and the customs union in March 2019. It would be catastrophic if HM Revenue & Customs' new customs system, the Customs Declaration Service, is not ready in time and if there is no viable fall-back option.
In 2015, around 55 million customs declarations were made by 141,000 traders. The UK's exit from the EU could see the number of customs declarations which HMRC must process each year increase five-fold to 255 million. A failed customs system could therefore lead to huge disruption for businesses, with delays potentially causing massive queues at Dover and resulting in food being left to rot in trucks at the border.
This is a programme of national importance that could have a huge reputational impact for the UK if it is not delivered successfully.
The uncertainty regarding the outcome of UK-EU negotiations is a complicating factor but it should not be used by HMRC to avoid taking action now in areas including: scaling up the CDS service to handle 255 million declarations; ensuring a viable contingency option is in place well before January 2019; and communicating with traders.
There are financial as well as operational implications of not acting now. This is a tight timetable at the best of times. With the hard deadline of Brexit, delay is not an option.
The Treasury needs to ensure there is funding in place to develop contingency options so that there are no barriers to continuity of service. HMRC also needs to do a lot more to work with the many businesses affected.
Much remains to be done to have an effective Customs Declaration Service in place, on time, and that traders know how to use.
We intend to keep a close eye on this programme and expect to review progress early in the Summer of 2018, following a further review by the NAO.
As Meg Hillier, who chairs the committee noted:
Failure to have a viable customs system in place before the UK's planned exit from the EU would wreak havoc for UK business, trade and our international reputation. Confidence would collapse amid the potentially catastrophic effects.
HMRC is under considerable pressure to deliver the new Customs Declaration Service in time, but it does not yet have funding to increase the capacity of CDS to deal with the consequences of Brexit — nor to develop contingency options.
This is deeply worrying. HMRC requires a relatively small sum to upgrade the current CHIEF system — a move which would provide some peace of mind to traders, many of whom are still operating with limited information and in great uncertainty.
HMRC tells us it is merely ‘in conversation' over CHIEF upgrade costs when, on behalf of business and the British public, it should be banging on the doors of the Treasury.
HMRC must press the case to secure this funding now and ensure that, if other plans fail, customs will be fit for purpose.
So let's be clear what is going on here. The government is driving us, inexorably, towards a cliff edge and is at the same time refusing to plan for that fact, and the costs involved, with the inevitable consequence that economic mayhem will follow.
There is no point pretending, as some do, that this is any indication of competence: it is not.
And there is equally no point pretending that this is not happening: the PAC has a history of telling things how they actually are. Of all parliamentary committees this one has a proud record in this regard.
So there is a crisis coming, and it's in IT systems, where HMRC has an appalling track record.
But it's more than that. It's also about recruiting and training all those who will have to make those, now nigh on inevitable, declarations, because right now the skills do not exist in the private sector. And it is also about recruiting those who will appraise them in HMRC, which will be no small task. It's hard to see how that is going to happen now. And yet what this report says is that the thinking required to even start the process has not yet been undertaken.
I have understated my case on the risks that we face. The existential and political risk may be gargantuan. But I am out of words to describe the mayhem that may hit the economy.
My advice is simple: if you have the room and the budget start stockpiling tins from late next year. I will be. It's always food supplies that are the literal weak under belly of a nation, and ours will be at risk. A bit of panic buying in response to that and who knows what will be happening by April Fool's Day 2019.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
“It’s also about recruiting and training all those who will have to make those, now nigh on inevitable, declarations, because right now the skills do not exist in the private sector”
It is the private sector (freight forwarders, customs brokers etc.) who do the entries both export and import but right we do not have sufficient numbers. Takes a good couple of years to be considered experienced.
Of course and the elephant in the room is that will also apply across the channel.
Agreed – and the other side may be even less prepared
As a veteran of 15 years working on government IT projects (now thankfully moved across to the slightly more sane private sector) I would bet a lot of money that this system will not be ready on time.
Me too
Mike M says:
November 14 2017 at 1:44 pm
“As a veteran of 15 years working on government IT projects (now thankfully moved across to the slightly more sane private sector) I would bet a lot of money that this system will not be ready on time.”
If it were to be ready on time it will probably be the first government IT project that has been. 😉
And it probably won’t work very well either. Though having said that I was impressed and surprised at how easily I could access information on my State Pension qualification recently.
My suspicion, based on knowledge of human nature rather than expertise in the IT field, is that the underlying problem is that the people drawing up the specs do not understand well enough how systems work and what they can achieve.
As ever, if you ask the wrong question the answer will not be much use.
According to the Tory government it can’t afford the extra HMRC staff because the government has no money of its own!
https://www.theguardian.com/politics/2017/oct/18/pmqs-verdict-corbyns-easy-win-on-the-economy-should-worry-tories
To lift your focus above Brexit for a moment, it seems that Venezuela has defaulted on its debt. Do you have any idea why?
Yes
The debt is not denominated in its own currency
Any country doing that is at risk of default
“The debt is not denominated in its own currency
Any country doing that is at risk of default”
Indeed. Venezuela’s courageous reclaim of state assets has meant neo-liberal external investors don’t want to partake of the Venezuelan currency which must be a good thing.
All Venezuelan government borrowing should have been raised inside Venezuela and in local bolivars?
That’s what we do
Graeme says:
November 14 2017 at 3:16 pm
“To lift your focus above Brexit for a moment, it seems that Venezuela has defaulted on its debt. Do you have any idea why?”
I blame the Americans. American meddling in South America has kept the entire sub-continent in perpetual chaos.
It is surely no coincidence that for three decades or more US foreign policy has focused on oil. To the extent of turning the entire Middle East into a war zone – a programme which is still dominating US foreign policy with current machinations in Saudi Arabia and Syria and Iraq.
Venezuela’s economy is probably no more than collateral damage in the oil wars, but there might have been more focused malign intent aswell.
Russia is said to be ‘restructuring’ Venezuelan debt. That is not the same as default. The US can probably be relied on not to restructure debt because it can cause greater disruption that way.
Where there is international tension there will be overt or covert US presence looking out for Uncle Sam’s financial interests and creating the chaos from which those interests can prosper.
As the quote goes, by failing to prepare, you are preparing to fail.
There is something to said for the Mormon practice of each household building up a stockpile of food that could last them for 3 to 12 of months, just in case. Not just tins, but any dried or preserved goods that store well – pasta, rice, beans, sugar, powdered milk, etc. And gradually using and replacing the stock, of course. They have been doing this sort of thing for decades. https://www.lds.org/topics/food-storage
(They also recommend storing water, although that is bulky. And keeping a financial reserve. The old-fashioned virtues of prudence and self-reliance.)
Rather than store water, which is problematic the best strategy is probably to source water ‘purification’ technology or pharmaceuticals.
I am not personally doing this. When there is chaos I will be one of the suffering masses. making it up from day to day. I will hope to ‘muddle through’: it’s the British way.
Thinks: perhaps I need to stockpile tea bags 🙂
By chance I met a former Customs colleague today still working who tells me that the department is in a shambles over Brexit and they are trying to train formerly desk bound ex Inland Revenue staff in Inland Customs work who do not want to do it and are afraid to go out on inspections. He predicts that international trade and Customs freight work will be hived off out of HMRC to a new body- perhaps they will call it HM Customs and Excise !
I’d smile if it was not so serious
HMRC seem far too busy concentrating on the rather more provincial if equally difficult objective of launching MTD to be focused on CDS . Ministers ( even Gauke) hardly aware of CDS existence .
Will have to ditch MTD to focus totally on CDS given the timeline..
Hobsons………
channelling Rees-Smog “but… with free trade why would you need customs officials”. Maybe that is what the Brexit fools actually think?
Mogg isn’t a fool.
Remember that old American saying: “follow the money”
Brexit will be a pot of gold for a few….
JohnM says:
November 15 2017 at 7:23 am
“Mogg isn’t a fool.” The jury is out on that.
“Remember that old American saying: “follow the money”
Brexit will be a pot of gold for a few….2
And they will discover, as King Midas discovered, that Gold is not edible. It has no more intrinsic value than fiat currency or cryptocurrency.
BUT……I think Armageddon is less likely than SNAFU. Ever the optimist 😉
Let us imagine that it is a total disaster. (That will not be difficult.). So, how much revenue would be at stake?
To put it in proportion, customs duties currently raise about £3.5 billion each year. What, half a percent of total tax revenues. No doubt more if we charge duties on EU imports, but are customs duties really so very important in the grand scheme of things? Perhaps we can give up on collecting them for a temporary period until the systems are ready and working?
Excise duties are significantly more, but don’t we collect those on most EU imports already?
So you fancy a break down in law and order?
And have you considered the knock on effects?
Then there are the other issues, like whether the goods shipped are legal
And info;loved smuggling of goods and people
Feel blasé if you wish about this: the spillovers are enormous
“The principle of non-discrimination means that WTO members must not treat any member less advantageously than any other: grant one country preferential treatment, and the same must be done for everyone else”
Why should law and order break down if we decline to collect customs duties on goods imported from the EU? Why should the issues of illegal goods, or smuggling, be any greater than they are with free movement of goods within the EU at present ?
I’m not being blasé or suggesting it is a good solution, but I can see it being a possible stop-gap if the alternative is interminable border queues and disruption to supply chains.
Because if we ignore regulation in one aspect of tax the spillovers are enormous
But maybe you’re also rather too blase about smuggling and its consequnces
I am not
they’ll probably outsource it to G4S
Benz0 says:
November 15 2017 at 9:23 am
“they’ll probably outsource it to G4S”
I’m afraid you are probably right in essence here if not in the specific.
The dominant dogma will see the solution as being something that will need to be contracted out to the private sector (because the private sector is supposed to be able to ‘get things done’. Despite widespread evidence to the contrary)
The necessary basic clerical skills are currently abundant in the public sector and being massively misapplied in the DWP to everyone’s detriment (including the mental wellbeing of staff).
In the present febrile atmosphere of pants-soiling and firefighting the chances of any remedies other than reactive and ineffective ones being implemented are a bit slim.
An acquaintance of mine working in HMRC suggested to me recently that post Brexit there won’t be queues of lorries on the M20 and A2 outside Dover because in the absence of anyone to process the paperwork they’ll have just have to waved through.
That’s not exactly a desirable state of affairs either
Oh yes there will but it isn’t anything to do with us, he is assuming French Customs will waive it through … not going to happen.
For the truck drivers it will be choice of sitting in an English lay-by or sitting in a French lay-by.
Tradition has it that the food’s better over there, but I wouldn’t know.
Roy, I think you’re right. There’s absolute no way they will be able to get this system up and running in time. I said recently that 5 years would be an ambitious time frame, let alone a little over a year. It’s just not possible. They will have to just wave stuff through – meanwhile our export goods to the continent will not be offered that in return. That will go down well with businesses in the UK.
I have said myself for a long time that the red-tape argument is nonsense. In my job I fairly regularly ship large courier shipments of legal documents around the world. When I have to ship them to a country where we have to submit invoices with them, it takes about 20 minutes to prepare the shipment instead of 5 normally. For that reason I hate doing it. Try telling me that leaving the EU will reduce that burden on businesses? It won’t, it will create new burdens that we have forgotten about. The red-tape saving means cutting workers rights and various standards (including environmental) to save on costs.
We’re similar in this regard.
Our business ships out dozens, sometimes hundreds, of small packages (up to 5kg) to Europe and the rest of the world each week. At present, we don’t need to bother with a customs declaration in the EU and, truth be told , it is very easy to fill in and stick a CN22 customs declaration label for packages going outside the EU (it’s always printed papers so no tariffs to worry about from our end). However, in this modern era where volumes of packages sent around the world have increased enormously, it has been decided that, in the not too distant future, pre-advise of customs information is going to be required for most destinations. Fundamentally, this means that instead of a quick note written on a label listing general contents and total price, we are going to need to enter details of the contents which includes HS Tariff codes, weight, description and price. Also required is the dimensions, weight and value of the package and if the item weights don’t add up to the exact package weight (which they never do, of course, due to weight of the packaging which simply isn’t considered by the Royal Mail DMO system at present), you have to go back and edit this information again to ensure the totals match before processing the shipment.
Hugely time-consuming, though at least we don’t need to include 5 printed and signed invoices attached to the outside of the package as we do with the courier service we often use for larger or time-sensitive orders for packages outside of the EU. This is something else which will be required for all EU destinations once we’re out of the customs union. Again, increases manifold the amount of time spent to process a shipment.
Ultimately, my fear is that this may be time-consuming enough to just about put our small family concern out of business when we need to start doing the same for the EU. Exit from the customs union along with the pre-advise stuff is a real ‘double whammy’, so to speak.
Oh well, if the Brexiteers are to be believed, our booming economy following our departure from the EU will more than make up for the many hundreds of man hours extra clerical work required for our business to stay afloat. Unfortunately they are obviously talking so much *expletive deleted*.
Well, well. Will the IT work be driven by senior officials who are determined to make it work, or led by a desire to funnel money towards generous IT consultants who reward cost overruns the management of failure?
Nile says:
November 15 2017 at 9:56 am
Well, well. Will the IT work be driven by senior officials who are determined to make it work, or led by a desire to funnel money towards generous IT consultants who reward cost overruns the management of failure?
Oh, Nile, you ask such hard questions.
I can’t imagine what the answer to that one is. 🙂
Having posted this on FB (Bella Caledonia) the first response I got was this:
-Nigel Cropper Er, I’m not an expert, but surely a five fold increase on 55m would be 275m, not 255m? So how reliable are the other claims in this?
Ian Sanderson have you asked in the article comments section..? The author is a ‘fast-responder’…
Nigel Cropper For some reason my phone won’t let me comment. It crashed twice when I tried to access the comments section.
Ian Sanderson I’ll ask on your behalf….
Nigel Cropper Thank you.
I’d take the HMRC inactivity as more evidence there will be no Brexit. Mind you, Richard’s right about food shortages, that’s almost inevitable due to the sun going into what’s known as the solar minimum and a couple of our local planets lining up to tug us into an orbit round it that’s a teeny bit wider than we’re used to. Going to be chilly, then. On top of that we’re entering a new area of space, and the reduced size of the sun’s magnetic bubble will mean we won’t be protected from what’s coming to be known as space weather as we normally are. Unpredictable weather ahead, then, not the best of times to be involved in farming or, indeed, reliant for your food supply on commercial farmers. I can see domestic hydroponic farming being big, myself.
Bill, I think you’re over-estimating the likely effects of the solar minimum, especially with the global warming we currently have pretty locked into the system.
If there is a short pause in the increase in temperatures, you can rest assured that the usual suspects (clowns such as Lawson) will be trumpeting it as an indication that AGW is a myth/left-wing conspiracy as usual.
That said, assuming we do leave the EU, it would be very sensible if the government looked seriously into food security. I get the feeling that the current useless bunch haven’t given it the first thought.
Mariner says:
November 16 2017 at 9:02 am
“Bill, I think you’re over-estimating the likely effects of the solar minimum […..],
That said, assuming we do leave the EU, it would be very sensible if the government looked seriously into food security. I get the feeling that the current useless bunch haven’t given it the first thought.”
I’d be interested to know what they HAVE given the first thought to.
Bill Kruse says:
November 15 2017 at 3:07 pm
“Richard’s right about food shortages, that’s almost inevitable due to the sun going into what’s known as the solar minimum […..] I can see domestic hydroponic farming being big, myself.”
Wire netting stapled to the dining table legs makes a handy chicken coop and shredded paper can be used for bedding instead of straw. Both geese and Guinea pigs are edible and earn their keep by keeping the lawn neatly cropped (the bits you haven’t turned over to potatoes). A garage is plenty big enough for a pig sty. Video boxed sets of the ‘Good Life’ are curiously at a premium in the charity shops. Haven’t seen one for ages.
Are we getting hysterical here? I’m not sure.
Indeed – I did try vertical farming, but the cows kept falling off 🙂
Bill, try goats; they’re pretty nimble. And I’ve seen Cumbrian sheep grazing on shelves not much bigger than a window sill. (I cannot imagine how they got there. Are their seeds wind dispersed do you know?)