Whichever of the two options being considered by the Cabinet to replace the existing customs union with the EU is chosen, it will not be in place before Brexit happens, and one of them will cost businesses in the UK billions.
This possibility was explained to Members of Parliament’s (MPs) Treasury Committee by Jon Thompson, Chief Executive of HM Revenue & Customs (HMRC), the man charged with examining the practical problems of implementing the two systems.
The Prime Minister is said to favour a “customs partnership” under which the UK would collect tariffs set by the EU customs union on goods coming into the country.
Some members of the Cabinet, including particularly Foreign Secretary Boris Johnson, have backed what is known as the maximum facilitation (max fac) option, relying on technology and trusted trader arrangements to minimise customs checks at borders.
However, according to Mr Thompson’s calculations, firms would have to pay £32.50 for each customs declaration under the latter system – adding up to between £17 billion and £20 billion a year (more than the UK paid the EU in 2016).
The customs partnership model could end up being cost neutral but, according to Nicky Morgan, who chairs the Committee: “It will take three to five years to get new customs arrangements in place depending on which of the two options is chosen, but that can’t even start until a political decision has been made.”
Given that HMRC has more than 1000 staff working on Brexit at the moment, at a cost of £360 million, she asked Mr Thompson if it would be a relief if Parliament “just voted for a customs union”.
He said that was for MPs to decide.
Downing Street responded to his evidence to the Committee by saying: “The Prime Minister has asked for work to be done on both customs models. That work is ongoing and therefore any speculation about implementation is just that.”
