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Boris and his Bureaucrats are Bungling Brexit

Summary:
The referendum promised that the UK would regain sovereignty but continue to trade with the EU much as before – no duties and frictionless trade across borders.  The consequential Trade and Cooperation Agreement (TCA) was received with much rejoicing. Unfortunately, “cooperation” has not extended to minimising regulation and controls at the EU/UK borders nor to maintaining the EU practice of each country retaining the VAT it collects rather than leaving collection to the country of the ultimate buyer.  The former system is much simpler and the swings pretty much offset the roundabouts. These two oversights first showed up with the Northern Ireland Protocol. Mr Johnson was persuaded that the UK/EU border along the traditional Northern/Southern Ireland border (border posts) would infringe

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The referendum promised that the UK would regain sovereignty but continue to trade with the EU much as before – no duties and frictionless trade across borders.  The consequential Trade and Cooperation Agreement (TCA) was received with much rejoicing. Unfortunately, “cooperation” has not extended to minimising regulation and controls at the EU/UK borders nor to maintaining the EU practice of each country retaining the VAT it collects rather than leaving collection to the country of the ultimate buyer.  The former system is much simpler and the swings pretty much offset the roundabouts. 

These two oversights first showed up with the Northern Ireland Protocol. Mr Johnson was persuaded that the UK/EU border along the traditional Northern/Southern Ireland border (border posts) would infringe the Belfast Agreement. This is, and always was, total nonsense as that Agreement goes nowhere near the topic and moving the border to the Irish Sea neither prevents smuggling across the land border nor sectarian issues.  It has probably made the latter worse.  Some, e.g. Sir Bernard Jenkin and other MPs, claim the Protocol is diverting business from Great Britain to Ireland which would be itself enough to justify triggering Article 16 but it is too soon to be sure. 2020 Northern Ireland exports were flat to both.

UK negotiators were so preoccupied with trade with Ireland, north and south, being duty free, that they failed to recognise that imposing the EU’s regulatory regime on the north would, in effect, colonise it. It seems likely that this was a deliberate plan by the EU, some of whose senior officials made no secret of their view that Northern Ireland was the price the UK would have to pay for Brexit. Given that Mrs May had brought UK regulation into conformity with that of the EU in 2021, the excessive zeal applied to customs controls for regulatory, not duty, reasons smacks of ill-will and certainly not the cooperation outlined in the TCA. Brussels has not denied that goods from Great Britain bound for Northern Ireland suffer 2.5 times the number of customs checks borne by Rotterdam’s imports from all the world.

Boris Johnson was foolish to sign it but he was under pressure to Get Brexit Done and in negotiations of this type, the larger player, the EU in this case, always has the advantage.  The fisheries deal was another example of claimed UK victory which was far from it.  In looking at how the UK government snatched defeat from the jaws of victory, we need to focus on the impositions it freely, i.e. without any negotiating pressure to do so, imposed on its own citizens and businesses, as distinct from negotiations it lost. 

High on this list is the new set of customs regulations coming into effect in 2022, starting on 1st January and phased in with two further tranches at three monthly intervals.  It has been reported that one third of UK importers are unprepared and HMRC IT systems are so “medieval” (scholars may be surprised that there were any IT systems then), they will not be able to cope. For example, the main new Commons Library briefing page helpfully says: “The Brexit checker personalises information on HMRC processes for importing, exporting or customs relief” but if you press on the link you get a page saying it is insecure and you must return to the previous page. “Medieval” is about right. 

More modern is the set of “step by step webinars [which] provide an overview of the new rules and border requirements that will be required from January and then July for moving goods from the [following] EU [countries] to Great Britain”:  Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal and Spain. If you want to import from other countries than those and Ireland, you are on your own. Ireland is not affected by these new rules and regulations which raises the question: if they are not needed for Ireland why are they needed for any other EU country? 

These webinars are all very similar.  I sat through most of the Polish one and doubted whether many business people would last as long as I did.  The civil servants presenting were remarkably pleased with themselves but their slides were low-grade and uninformative. 

I will not detail these new regulatory customs requirements in this blog, suffice it to say that they are complex and burdensome. The government’s “overview” runs to 159 pages of small type. The question is not what they are but why the UK government is imposing them at all, along with the costs and delays, on its own citizens and businesses.  Of course, customs arrangements are necessary for imports from third countries but why those from the EU where we have just concluded a TCA eliminating duties?  As a sovereign state, the UK is under no obligation to introduce any of these rules, so why are we? 

So far as VAT is concerned, the UK and EU could simply return to the far simpler EU system with each country collecting from its own citizens and businesses. The new system is unfair: my grandchildren’s German grandmother had to pay German VAT and then UK VAT on top of that when her Christmas presents clear UK customs (if they ever do). 

The main justification given for this UK customs bureaucracy is the need for verification that the goods originated in the EU; otherwise, duty is payable.  This makes sense until you think about how it got into the EU if it did not originate there.  Duty should have been paid then and it should not have to be paid twice. Importers should declare non-EU originated goods arriving via the EU and spot checks would be needed for suspect items but not a whole, huge paper mountain.  And, by the way, all paperwork (or the electronic equivalent) is required twice: once with the goods and a copy one day in advance, one day, not two, please note.  Then we will be paying for the army of clerks comparing the two. That could be computerised but if HMRC specifies the system, it will take too long and cost too much. 

A watered down version of all this was operating in 2021. HMRC requires importers to use agents to assemble the paperwork and ensure it complies with HMRC requirements, so, in theory, all HMRC has to do is to rubber-stamp them. The trouble with that, as the children’s German grandmother discovered is that the agent’s (who had better be nameless) employees were too stupid to understand the requirement or admit their ignorance.  The Christmas presents posted in November have yet to get to HMRC for clearance.  Maybe they never will but she cannot claim on insurance because, technically, they are not lost. One swallow does not make a summer but I have heard of many similar cases. 

The bottom line is that Brexit is being bungled by the UK’s own bureaucrats.  Maybe it is because they never liked Brexit in the first place but more likely it is because they are petty minded and get satisfaction from creating hoops for citizens and businesses to jump through and penalising them when they fail. If eliminating customs duty and VAT on imports from the EU might be expensive, then HM Treasury should publish their arithmetic for expert review.

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Tim Ambler
Tim Ambler (born 1937) is a British organizational theorist, author and academic on the field of Marketing effectiveness. Ambler featured on Marketing's list of the 100 most powerful figures in the industry. He is cited by the Chartered Institute of Marketing as one of the top 50 marketing experts in the world

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