UK border could be exposed from first day of Brexit, say MPs

REPORT SUMMARY

Government departments are assuming that the risks to managing the border will not change immediately when the UK leaves the EU, and that border checks will therefore be the same after March 2019 as they were before.

They are therefore not planning for any major new physical infrastructure at the border by March 2019, and do not expect all new or updated IT systems to be ready by that date.

Departments say they are planning for a no-deal scenario, but do not expect there to be many changes whatever the position in March 2019.

We are very concerned that their assumptions are risky and do not allow for changes in behaviours by companies trading across the border or people crossing it. Particularly in the event of a no-deal scenario, the border could be exposed to risks on day 1 of the UK’s departure. 

Officials are relying too much on there being a transitional period in order to have the time to develop the new systems and infrastructure that may be required.

The current negotiations bring significant uncertainty, but the new Border Planning Group and government departments need to step up and be prepared for the possibility of a no-deal scenario and for the costs of all potential options.

It is worrying that we were told that the Group could not plan for any challenges around the Irish border and the 300 crossing points, as it needed the political process to go further before it could fully understand the issue.

COMMENT FROM PAC CHAIR MEG HILLIER MP

“Government preparations for Brexit assume that leaving the EU will present no additional border risks from freight or passengers. It has acted – or rather, not acted – on this basis.

“This approach, in the context of what continues to be huge uncertainty about the UK’s future relationship with the EU, might generously be described as cautious.

“But against the hard deadline of Brexit it is borderline reckless – an over-reliance on wishful thinking that risks immediately exposing the UK to an array of damaging scenarios.

“Last month we reported on the threat of chaos if HMRC’s new customs system is not ready in time for Brexit and there is no viable fall-back option.

“We were deeply concerned by the lack of progress on this back-up plan. It is now alarming to note such weak contingency planning extends across Government departments.

“The volume of traffic at the border under current arrangements is substantial: in 2016, around 300 million people and 500 million tonnes of freight crossed it.

“After Brexit, the number of decisions required about people or goods crossing could more than treble and more than quadruple respectively.

“These figures should concern all in Government and in our view its current approach is not fit for purpose.”

CONCLUSIONS AND RECOMMENDATIONS

The Border Planning Group’s assumption that the risks to border activity will remain unchanged immediately post-Brexit is a risky approach. The Group currently assumes that there will be no additional border risks from freight or passengers when the UK leaves the EU. This is based on the assumption that cross-border trade and travel will not change immediately in the days after we leave the EU. We find this extremely worrying for a number of reasons. HMRC estimates that customs declarations could increase five-fold to 250 million each year and is currently implementing a new Customs Declaration Service to handle them – we have reported separately on the risk of the new service not being in place on time and with traders not knowing how to use it. We also know that the UK will be looking to negotiate new trade deals after leaving the EU, which could change the current balance of trade between EU and other countries. We do not yet know whether there will be additional entry requirements for EEA nationals, which could bring additional risks. Nor do we know whether negotiations with the EU will increase revenue risks, for example through changes to tariff rates. In addition, if we leave the EU with no deal in place, government departments could lose access to certain information flows from EU data sharing agreements that provide important data and intelligence to manage border risks. Finally, user behaviour also affects the level of border risk. For example, we have been told that many international trade businesses fail to take customs compliance seriously and therefore the risk of non-compliance could increase if more traders are required to comply with customs requirements. We are surprised, therefore, to hear that engagement with traders has not yet started. In light of the huge number of variables, we are concerned about the robustness of the Border Planning Group’s assumptions, including how regularly they will need to be updated to ensure they remain fit for purpose.

Recommendation: By March 2018 the Border Planning Group should provide evidence to us that its assumptions on border risks are realistic, take account of the possibility that stakeholders might change their behaviours, and are regularly reviewed.

Departments’ current planning for the post-Brexit border relies too much on there being a negotiated transitional period. HMRC accepts that it cannot implement all elements of the ‘highly streamlined’ customs arrangement, set out as a preferred option in the Customs Bill, by March 2019. Whatever the result of negotiations, the Border Planning Group does not expect to have any additional border infrastructure in place by March 2019. This includes any infrastructure needed to undertake additional physical checks of goods in ports such as Dover, due to capacity constraints. The Group also does not expect that all the new or updated IT systems required as a result of leaving the EU will be ready by March 2019. Based on its assumptions on risk, the Group assumes that no additional physical infrastructure, for example parking bays for lorries subject to checks, will be required immediately after the UK leaves the EU. However, the Group does not know how long its current assumptions will hold true and therefore how soon after March 2019 new border infrastructure would need to be in place. Government departments have started to plan their staffing requirements from March 2019, but we are concerned that these plans are insufficient to reflect the risk of the UK leaving the EU with no deal. The Group accepts that the overall border ‘system’ in place would not be “optimal in any way” if the UK leaves the EU with no deal in March 2019, and further changes would be needed in the future.

Recommendation: The Border Planning Group must accelerate the detailed planning for managing the border in the event of a no-deal scenario and report back to us by June 2018.

In the lead up to Brexit, we are not convinced that government departments have put in place the necessary clear leadership and accountability for effective border management, or are showing enough urgency. The Border Planning Group was set up in March 2017 to provide strategic oversight of government departments’ plans to manage the impact on the border of withdrawing from the EU. The Group is a forum for departments to share their border strategies, plans and objectives and ensure their systems, designs and funding requests are aligned. The Group contains representatives from 21 departments and agencies, but no single person or department has overall accountability for managing the border. We are extremely concerned to hear that this crucial group has only met seven times in the eighteen months since the EU referendum. Some incredibly important issues have not yet even been considered by the Group: for example arrangements for the 300 crossing points across the land border in Ireland are currently outside the scope of the Group. 

Recommendation: By March 2018 the Border Planning Group should report back to us with a summary of the activities it is carrying out, the programmes it is overseeing and the risks it is managing. We also expect someone to be put in charge and accept lead responsibility for co-ordinating the work of the Group.

We are concerned that HM Treasury’s usual business model is inadequate for allocating Brexit funding to departments who are forced to operate together, at pace, to a hard deadline. HMRC confirmed that one of the primary tasks of the Border Planning Group is to work with the Treasury on funding bids “to make sure that they align”. However, departments are still negotiating with Treasury on a case-by-case basis to secure their shares of the £250 million available to all departments. The Home Office told us it has received £60 million for 2017-18 but remains in discussions with the Treasury about future funding. Defra told us that it has been in discussion with the Treasury since the end of 2016 but, while it has funding for this year, is only now starting to discuss future costs. Defra expects to need to ask for a ministerial direction in the future, as it is likely to need to spend funds before it has parliamentary authority to do so. HMRC told us it is still negotiating for £7.3 million to upgrade its CHIEF system as a contingency option if the new Customs Declaration Service is not ready on time. We have previously recommended that HM Treasury should ensure HMRC has sufficient funding for this important work by the end of the year.

Recommendation: HM Treasury should review its business model to ensure that it makes timely decisions about releasing money to departments so as to facilitate their preparations for Brexit.

Government departments’ poor track record of delivering critical border programmes, such as e-borders, leaves us sceptical that they are up to the challenges of planning for the border post-Brexit, including having enough people to manage it. There have been significant failures in the past when implementing programmes intended to improve the management of the UK border. Most notably, the Home Office e-borders programme to improve the collection, analysis and exploitation of advance passenger information started in 2003 but was delayed and eventually cancelled in 2010, leaving government with a major contractual dispute that cost £150 million to resolve. A successor programme, Digital Services at the Border (DSAB), will not be complete until 2019, some sixteen years later. Around 30 of the 85 IT systems used at the border will need to be replaced or changed in some way when the UK leaves the EU. This includes requirements for five entirely new systems and three replacements, including systems currently provided by the EU. Major changes to border management are difficult to make and will require strong coordination across government and with many stakeholders. Given the track record it seems unlikely that all the new systems needed to manage the border effectively after we exit the EU will be successfully delivered, and even if things go to plan, departments accept already that not all the systems would be ready by March 2019. Difficulties in the past delivering improvement programmes have meant that too many border processes still rely on ageing IT systems or are paper-based. Departments have also struggled to predict demand to allow them to identify their staffing needs. Border Force currently plans to recruit 300 additional staff, which is an increase of under 4% of their existing workforce, in spite of the likely substantial increase in border management after Brexit.

Recommendation: The readiness of the border to deal with the UK leaving the EU is a vital issue and we will monitor progress closely. We expect all departments to be in a position to update us on progress at future evidence sessions.