POLITICS

Seven Reasons The UK's New Customs System Might Not Be Ready For Brexit

HMRC is spending £160million on the system - but it's not enough.

18/08/2017 07:01 | Updated 18 August 2017
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Not enough money, too few staff and a lack of capacity – that’s the damning assessment of the Government’s system to process customs post-Brexit.

This week it was announced the UK would push for a “highly streamlined customs arrangement” with the EU after Brexit – and a new Customs Declaration Service (CDS) will be at the core of the system.

Yet just last month a report from the National Audit Office said CDS, which is due to be rolled out in January 2019, did not have the ability to process the expected 255 million customs declarations every year.

The report also criticised the Government for not giving enough financial or strategic help to HMRC – the department responsible for developing CDS.

Here are seven problems the National Audit Office flagged up in its report:

  • The system is set to go online in January 2019 – just two months before the UK is due to leave the EU. “This provides little contingency time should the programme overrun or unexpected problems occur,” the report says – something which would be exacerbated if no post-Brexit transitional period is agreed, or no deal is struck at all. HMRC would however get more time to develop the system if the EU supports the UK’s plan to create temporary customs union for a limited period after March 2019.

  • The system has never been used on the scale the UK is planning. The Netherlands uses part of the programme, but only to process 14million declarations each year. Even in tests it has only been used to process 180million declarations a year – far short of the 255million the UK is predicted to get through. The report says: “Until it is shown to work at this level and with the UK’s specific systems, there is a risk that this new component may not meet the UK’s requirements.”

  • The team responsible for putting the new system together has significant staff shortages. “At the end of March 2017, there were 67 vacancies in the programme team, with 9 required immediately to prevent an adverse impact on delivery of the programme. By 27 June 2017, the vacancies had reduced to 48, with 4 required immediately. These totals include some planned future resource requirements.”

  • Not enough money has been given to HMRC to get CDS running at the capacity needed. The customs office has only been given £157million – which will find a system able to process 150million declarations a year. Again, this is far short of the estimated 255million.

  • HMRC has not properly worked on contingency plans in case the CDS system fails. The current system CHIEF (Customs Handling of Import and Export Freight) could be upgraded to act as a safety net, but there is no money in the budget to do this.

  • HMRC doesn’t know enough about the businesses who will be using the system – especially the smaller traders. “There is a risk that these users might not be ready to use the system by March 2019,” says the report.

  • The Government is not giving enough help to HMRC to get the system ready in time, and is providing a lack of guidance on what the contingency options should be.  The report says: “The whole of government must choose now whether it needs to do more to help HMRC to mitigate the risk of the system being needed, but not ready in time. For example, by prioritising funding and resources to speed up progress with the programme, and by supporting HMRC to develop contingency options. What is not reasonable is leaving HMRC to decide alone what mitigating actions are needed. Government as a whole must decide what priority it attaches to the CDS programme, and whether any extra costs linked to having a suitable customs system in place by early 2019 are an insurance premium worth paying.”

An HMRC spokesperson sought to play down any concerns around the new system, and said: “The Customs Declaration Service (CDS) is on track for delivery by January 2019 and will support international trade once the UK leaves the European Union. 

“We took the decision to bring in a new declaration system before the EU referendum, but the service remains fully capable of dealing with how the UK’s exit from the EU will impact on customs declarations at the border.”

A source told HuffPost UK that despite the concerns raised by the National Audit Office, CDS is a priority programme within government and has the resources it needs.

It is fully funded and additional funding is available if any extra costs arise from the UK’s departure from the EU‎, the source added. 

NAO

One was the “highly streamlined customs arrangement”, which would involve a dramatic increase in the number of checks on goods at borders.

The other was for the creation of a “customs partnership” with the EU, which would mean no border checks. The Government acknowledged this is an “innovative and untested approach that would take time to develop and implement”.

Key facts

  • The number of customs declarations could increase from 55 million a year to 255 million.
  • 180,000 traders will make customs declarations for the first time under the new system when the UK leaves the customs union, according to HMRC estimates. This is in addition to the 141,000 traders who currently make customs declarations for trade outside the EU.
  • There was £696billion estimated trade in goods across the UK border in 2015.
  • The approximate value of duties collected by HMRC is £34billion a year.
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