2Post-Brexit risks and planning
8.Individual departments have their own individual responsibilities for managing the border. Border Force for example has five mandates it has to follow, including an operating mandate which sets out how it should manage immigration. This includes setting targets for processing passengers at the border quickly and efficiently. No single government department however has overall accountability for managing the border.18
9.The Border Planning Group (the Group), set up in March 2017, contains representatives from 21 departments and Agencies, including the Home Office, HM Revenue & Customs (HMRC) and Department for Environment, Food & Rural Affairs (Defra), from which we took evidence. The Group is not an operational body; instead it provides strategic oversight of the Government’s plans to manage the impact on the border of withdrawing from the EU.19 HMRC told us that the Group ensures there is a shared understanding of plans and objectives and alignment of systems, designs and funding requests. HMRC also said that the Group provides a warning system for government about the impact of policy negotiations decisions on border operations.20 HMRC told us that this Group has met seven times since March 2017.21 HMRC conceded that the Group’s role is challenging, given that it is operating in an environment of uncertainty and having to run multiple scenarios based on different negotiation outcomes.22 HMRC told us that some critical issues have not yet been considered by the Group. For example, on the question of the Irish border and its 300 crossing points, HMRC was not able to say what the challenges to plan for were, commenting that the issue was not within the scope of the Group at this stage, with arrangements on Ireland still being subject to negotiations and ministerial discussion. HMRC said it needed the political process to go a bit further before the Group could fully get into understanding the issue.23
10.HMRC told us that it currently assumes there will be no additional risk associated with freight arriving in the UK immediately after the UK leaves the EU.24 This assumption is based on the fact that “the trade that comes across the border today is likely to be the same trade that comes across the border the day after we leave the EU”.25 HMRC used the example of a French lorry carrying wine presenting the same risk after the UK leaves the EU as it does currently.26 It also told us that Border Force would continue to carry out as many intelligence-led checks on EU trade as it currently does.27 HMRC recognised that a “different pattern of trade” is likely to develop over time subject to new trade routes, tariff arrangements and free trade deals.28 However, it told us that it currently has “no evidence to suggest” that trade flows with non-EU countries will necessarily increase.29 HMRC also told us that Ministers have not yet made a decision about whether tariffs would be imposed on EU goods in the future, although it is a variable being considered in HMRC’s staffing forecasts in the lead up to leaving the EU. The Group’s assumptions include HMRC’s new Customs Declaration Service (CDS) being fully implemented by March 2019 in order to handle an estimated 200 million increase in the number of customs declarations made each year, a five-fold increase on current volumes.30 We have previously found that the timetable for delivering CDS is tight, especially in the context of the hard deadline of Brexit, and that much remains to be done to have an effective system in place by March 2019.31
11.The Home Office told us that it currently checks 100% of passenger arrivals into the UK on scheduled services and will continue to do so from March 2019. Although it does not check all arrivals at smaller ports and airfields, Border Force plans “on an intelligence basis and a risk basis”. This includes targeting EU flights and passengers, with 1,300 EU nationals stopped in 2016. On this basis, Border Force told us that there was no reason to suppose that that level of risk will change in a day-one scenario.32 The Home Office did not say anything about what the long-term requirements for EEA nationals might be, for example the potential to require visa applications from these citizens.33 It told us it is currently planning a project to allow the more than 3 million EU nationals in the UK to register to benefit from their status as settled EU nationals prior to the UK’s departure from the EU.34
12.HMRC told us that there are various EU conventions on data sharing that relate to a number of different departments and cover areas including criminality and money-laundering. Important from HMRC’s perspective is the Naples II customs convention which provides for mutual co-operation on “things like joint surveillance, controlled delivery, data exchange and providing intelligence across boundaries”. HMRC confirmed that a loss of access would reduce its effectiveness and that in a no-deal scenario “the reasonable assumption would be that you have lost that information flow, which would be a pity”.35 Border Force told us that it is currently planning as to what the alternative mitigations may be for every single EU tool that the UK uses for law enforcement and national security activity. HMRC told us that all government departments are ensuring Ministers are aware of EU system access requirements as negotiations progress.36
13.Written evidence to us suggested that “there are very few international trade businesses, both importers and exporters, who take customs compliance seriously”. We were also told that businesses need more support from HMRC to deal with post-Brexit requirements.37 HMRC confirmed that it had not yet started to engage with traders but planned to do so once Ministers had decided whether to engage on a department or government-wide basis. It told us that it is currently setting out its advice to ministers on the pros and cons of each approach.38
14.The Government has considered two broad approaches to a future customs relationship with the EU that meet its objectives. These broad approaches are a ‘new customs partnership’ and a ‘highly streamlined customs arrangement’.39 HMRC told us that if the UK reached an agreement with the EU to implement the highly streamlined customs arrangement it would need a transitional period to implement the “basket of changes” required. Some of these changes could be implemented immediately, but “some will take a year, some will take two years and some will take three years” depending on the precise elements adopted.40
15.HMRC told us that it assumes that the number of physical checks of goods at roll-on roll-off (RoRo) ports such as Dover will not increase if the UK leaves the EU with no deal. It acknowledged that this was partly a pragmatic response as it would avoid the need for more infrastructure and space at key ports, which could not be made available in a day one, no deal situation in March 2019.41 The assumption that there will be no additional risk when the UK leaves the EU, as well as the capacity challenge in key ports, means the Group is not anticipating that infrastructure being in place for March 2019. HMRC told us “we would neither expect to need it at that time nor expect it to be in place”.42 HMRC told us the Group accepts that additional infrastructure will be required in the future and plans for this to be inland, rather than at ports, where possible. It does not yet know exactly what infrastructure will be required, for example for food and customs controls.43 It also does not yet know how long its current assumptions will last and therefore at what point after March 2019 any new infrastructure will need to be in place.44 An additional consideration is what happens in other EU member states. HMRC admitted, for example, that the UK could be fully prepared on day 1 with no deal but that “the closed-loop system of Dover-Calais does not work because of what happens on the other side of the channel”.45
16.Government departments have started planning for their additional staff requirements for Brexit activity. HMRC has assessed that it will need between 3,000 and 5,000 new staff in the department depending on the level of risk that Ministers are willing to accept.46 Border Force told us that it has already started to recruit an additional 300 staff in order to give existing staff time to undertake training and to have a reserve of staff to deal with Brexit work. This would constitute a 3.9% increase on the 7,670 people employed by Border Force as at March 2017.47 It expects these staff to be in place by April 2018.48
17.HMRC told us that the Border Planning Group has six primary tasks. One of these is to work with the Treasury on funding bids “to make sure that they align”.49 Departments individually have funding in place for the current year. The Home Office told us that it has £60 million for this financial year from the £250 million allocated by the Treasury to all departments. Defra also confirmed that it had received funding for the costs it is incurring this year. Both departments confirmed that they are still in discussions with the Treasury about funding for future years. Defra told us it expects to need to ask for a ministerial direction “because of the timing issue” associated with the withdrawal bill receiving royal assent.50 HMRC confirmed that it remains in discussion about the additional £7.3 million it requires to upgrade its CHIEF system. This is its main contingency option if its new Customs Declaration Service is not in place by March 2019.51 We have previously concluded that this is a relatively small sum to pay to guard against the wider financial and reputational costs of failure, and recommended that HM Treasury should ensure that HMRC has sufficient funding by December 2017 to develop functioning contingency arrangements.52 HMRC’s Permanent Secretary told us that he is “going to spend the money, whether I get the funding or not”. He noted that this might mean overspending and having to deal “with a qualification that might have breached Parliament’s limits”.53
18.HMRC acknowledged that the border system in place if the UK leaves the EU with no deal in March 2019 “would not be optimal in any way” and that, after April 2019, it would have to make further changes to make the system optimal. Leaving the EU with no deal is not the Government’s preferred scenario.54 A negotiated transitional period of two years is therefore a high priority for members of the Border Planning Group, who all agreed that it would help ensure a smooth transition, save money and manage risks.55
18 Qq 16–20
19 Q 21
20 Q 24
21 Q 21
22 Q 159
23 Q 118
24 Q 79
25 Q 105
26 Q 59
27 Q 80
28 Q 105
29 Q 81
30 Qq 84–86, 106–107
31 Public Accounts Committee, Brexit and the Future of Customs, Second Report of Session 2017–19, HC 401, 14 November 2017
32 Qq 40–45, 112
33 Q 101
34 Q 99; Prime Minister’s statement to the House of Commons on the European Council, 26 June 2017
35 Qq 127–130
36 Qq 131–132
38 Qq 56–57
39 HM Treasury, Customs Bill: legislating for the UK’s future customs, VAT and excise regimes, CM 9502, October 2017
40 Q 167
41 Qq 78, 106
42 Q 139
43 Qq 134, 135, 138
44 Q 111
45 Q 107
46 Q 59
47 Q 76; Home Office, Annual Report and Accounts 2016/17, HC 20, 13 July 2017
48 Q 92
49 Q 24
50 Qq 148–151, 155
51 Q 25
52 Public Accounts Committee, Brexit and the future of Customs, HC 401, Second Report of Session 2017–19, November 2017
53 Qq 24, 152
54 Q 159
55 Qq 167–168
5 December 2017