Conclusions
1.Despite our previous concerns that departments were moving too slowly in preparing for Brexit, planning and action for a no deal scenario has still happened too late in the day. We have been concerned since early 2018 that departments were not progressing quickly enough from planning to implementation should the UK leave the EU without a deal. The Department for Transport told us that it has been thinking about border issues since March 2018. But the Department did not decide to take action to procure freight capacity until late autumn 2018. The Department told us that its decision was triggered by a general increased focus on no deal planning across government, a lack of preparations for no deal by other Member States at their borders and the absence of any action by UK-EU ferry operators. The Department told us that its decision to procure additional capacity was also in response to changes in the government’s assumption that in a “reasonable worst case” scenario, flows of goods across the short channel crossings might be reduced by up to 87 per cent, and disruption could persist for six months, longer than the six weeks previously assumed. We are not convinced that the Department needed to wait for the situation to get this bad before developing deliverable plans and taking action especially as it was buying capacity only if it needed to use it.
2.The Department for Transport and the Department for the Environment, Food & Rural Affairs have been, and remain, over-optimistic in their preparations for a no deal Brexit. The Department for Transport’s optimism in awarding a contract to Seaborne Freight, a start-up company with no proven track record in delivering services, to operate a new ferry route has quickly proved to be misplaced. The additional freight capacity provided by the contracts awarded to the three winning bidders was equivalent to 11 per cent of normal flows of freight across the short crossings, substantially less than the Department’s initial goal of 25 per cent. The termination of the Seaborne contract means that the additional capacity procured has reduced further to 7 per cent of normal flows of freight across the short crossings. The limited additional capacity that will now be available will limit what government can achieve with it. Defra told us that its understanding is that food will not be carried on this additional capacity, but it is optimistic that there will not be shortages of food in a no deal scenario. We are concerned by Defra’s admission there could be reductions in the availability and choice of some foods and that some groups, including “geographically vulnerable communities”, will be harder hit by interruptions in the food supply in a no deal scenario.
3.The departments’ preparations for Brexit have lacked transparency and stakeholder engagement has been inadequate. We have previously expressed our concern about the lack of transparency surrounding departments’ preparations for Brexit. The Department for Transport claims it engaged with every ferry operator it believed capable of delivering services, yet still felt the need to communicate under non-disclosure agreements. While DfT accepts that this is not its usual practice, it asserts that it took this approach to avoid disturbing the wider market. Eurotunnel’s subsequent legal challenge against DfT gives the impression that the Department did not sufficiently engage and manage the wider range of stakeholders. As part of its broader Brexit preparations, DfT claims that it is improving stakeholder engagement. However, we are concerned that it is still over-reliant on third parties, such as local resilience forums, to solve issues like transport disruption. Similarly, Defra’s engagement with stakeholders has been slow off the mark. It has relied on guidance being provided by the European Chemicals Agency to the chemical industry, and specific guidance for UK companies was only published by the European Chemicals Agency on 8 February 2019.
4.The pace at which the Department for Transport had to procure freight capacity forced it into a rushed and risky approach with significant consequences. The Department for Transport knew that ferry operators required three or four months to introduce new services. By the time it took action in autumn 2018 the options available to the Department were restricted. It carried out what it described as “an emergency accelerated procedure” to procure additional freight capacity and used the condition of “extreme urgency” to bypass government’s normal procurement procedures. The Department has struggled to get ferry operators to follow government processes, and took forward all three of the bids it received despite the fact that two did not comply with the department’s requirements. We are concerned that the Department did limited work to review the bids it did receive. It has acknowledged that its contract with Seaborne was high risk, but went ahead without any written guarantees as to what Seaborne’s backers were prepared to provide, taking too much assurance from what Seaborne told it. The department received a letter from Arklow, via Seaborne, on 28 December some 8 days after DfT and the Treasury signed off the contract and 6 days after the contract was signed with Seaborne. The DfT received a letter of comfort from Arklow on 18 January which underlined that no formal contract had been signed for Arklow to supply ships to Seaborne. The Department has ultimately terminated the contract because Seaborne’s backers have pulled out. The procurement was the subject of a legal challenge from Eurotunnel, demonstrating the risks the Department took in following this non-standard process.
5.Time has run out for the Department for Transport to procure the level of freight capacity it planned for to help secure the supply of critical goods in a “reasonable worst case” no deal scenario. In November 2018, the Department for Transport recommended additional options, such as rail or air freight, be taken forward at a later date, but told us that time has now run out to procure them before 29 March 2019. The Department for Health and Social Care has taken matters into its own hands to procure its own additional air freight capacity. The Department for Transport asserts that preparations that have now begun at French ports to reduce the likelihood of the “reasonable worst-case” scenario occurring if there is no deal. However, it is not in a position to guarantee that the French ports will be ready on time and this reliance cannot be a substitute for its own planning.
6.We are not convinced that the departments’ current plans will be enough to address the practical challenges they would face in the event of no deal. Both DfT and Defra were unable to explain to us how the additional freight capacity DfT has procured would be used or how goods would be prioritised. They were unwilling to speculate about using emergency powers to manage freight, such as prioritising certain categories of freight, claiming to do so would be “playing in markets”. We are not convinced that they are sufficiently taking into account the potential behaviour of the public in such a scenario. DfT told us that Operation Brock, which is designed to manage disruption in Kent, remains challenging to deliver in time. We remain concerned that any significant displacement of traffic away from Dover could have a proportionately larger impact on the smaller ports it would move to. Defra is developing new IT systems in the event of no deal. These backup plans include introducing manual processes which will be slower, have a higher error rate and be more burdensome for users. Both departments are currently considering the staffing requirements for the issues that will be created by a no deal scenario, including the creation of 24-hour emergency centres.
7.It is not clear what benefits the department’s £33 million settlement with Eurotunnel will secure for the UK. The department has provided us with a redacted copy of the settlement agreement and has published a document setting out Eurotunnel’s obligations under the agreement. The department argues that the settlement contributes to the Government’s plans to ensure the flow of vital medical supplies in the event of a no-deal Brexit.1 It argued that, without a settlement, there was a risk that the courts might render the existing contracts with the ferry companies ineffective. It is not, however, clear what additional value the types of projects Eurotunnel will undertake in return for the £33 million will secure for the UK, the timescale over which they will be delivered, how the benefits will be measured, or whether the department tested whether settlement of the case with Eurotunnel was the most efficient and effective method of securing the desired benefits. We will pursue these issues with the department.
1 Q156
Published: 12 March 2019