Chancellor Philip Hammond has refused to rule out the UK being in a customs union with the EU as part of its end-state relationship, fuelling concerns that continued uncertainty over trading arrangements will result in confusion once Brexit takes place in March 2019
Nicky Morgan, chair of the Treasury committee, wrote to the Chancellor following an evidence session on Brexit arrangements last year, asking him, should he wish to do so, to explicitly rule out the UK participating in a customs union with the EU. The Chancellor has declined to do so in his response.
Morgan said: ‘It was widely thought that being in a long-term customs union with the EU had been ruled out by the government. But the Chancellor’s letter confirms that this is not the case.
‘It is vital that the Cabinet reach agreement on these central questions about the UK’s future relationship with the EU, as a matter of urgency.’
The EU customs union is established by the EU treaties. After Brexit, the treaties will cease to apply to the UK, and so the UK will no longer be a part of the EU customs union.
However, in his evidence to the committee, and subsequent correspondence with the chair, the Chancellor did not rule out participation in a different customs union with the EU as part of the UK’s end-state relationship.
He did, however, note in correspondence that the decision on future customs arrangements would be ‘guided by what delivers the greatest economic advantage to the UK, and by three strategic objectives: ensuring UK-EU trade is as frictionless as possible; avoiding a “hard border” between Ireland and Northern Ireland; and establishing an independent international trade policy’.
In December the Chancellor told the committee that leaving the EU single market and the customs union was a ‘logical fact’, and that it ‘would be a logical consequence of a decision to leave the EU’. HMRC was already in the process of upgrading its existing computer system for handling customs declarations at the UK borders at the time of the EU referendum, and this project has now been pulled forward as a result of the vote for Brexit.
However, both the Treasury committee and the public accounts committee have expressed concerns about whether HMRC’s new customs declaration system (CDS) will be ready by March 2019 and whether it will be able to meet potential demands for monitoring and administering a much wider range of tariffs and checks than is currently the case.
In 2015, there were around 55m customs declarations, a figure which is set to increase to 255m after Brexit. However, CDS was originally designed to handle 150m declarations each year.
