Civil servants have a “patchy” understanding of the customs process, and retention of specialist and frontline staff is vital for the implementation of customs changes following Brexit, the Institute for Government has argued.
In a new report, the IfG calls on government to be clearer on its customs priorities, to build capability in the civil service, and not to underestimate the technological challenge facing HMRC as it updates its customs systems ahead of Brexit.
In Implementing Brexit: Customs, the think tank points out that preparing the UK for a new customs system is a “major cross-government exercise”, with 36 government departments and public bodies – ranging from the Government Diamond Office to the Food Standards Agency – involved in policy and operations relating to the border.
The government must therefore focus on coordination across departmental and agency boundaries, and build on its use of the cross-government Border Planning Group, which is chaired by HMRC chief executive Jon Thompson and includes representation from other departments.
The report says this group – though “too new to be judged a success” – has been welcomed as an opportunity to address the “lack of clarity and information” on customs preparations, and focus accountability.
Government has so far been too vague on its priorities for customs following Brexit, the report continues. HMRC and the Home Office, the two key players in developing a system of movement of goods in and out of the country, have very different remits – trade facilitation and security respectively – which need to be reconciled.
“The government needs to be clear on its position and how decisions will be made on future customs policy,” says the report. “Border Force and HMRC must be tightly aligned to implement changes in customs.”
It also says that while civil servants have been drafted in to key Brexit departments, the boost in staff numbers has been largely confined to policy and legislation positions in Whitehall, and not enough frontline recruits – particularly in Border Force – have been made to prepare for the possibility of a hard Brexit.
In some parts of government, the report adds, important experience has been lost over the past five years due to problems with retention, and some private sector organisations report having to “brief civil servants” on certain parts of the customs process.
HMRC tech upgrade faces ‘significant issues’
Last month, the Department for Exiting the EU released a position paper indicating that Britain will leave the customs union but seek to negotiate a transition period following Brexit in March 2019.
The IfG report says that regardless of the kind of deal worked up between the UK and the EU, the UK will require a new and expanded system of customs to handle trade to avoid disruption at the border.
But, it explains, the technology underpinning the UK’s current customs system was supposed to have been scrapped five years ago, and attempts to implement replacement ICT systems have so far failed to deliver.
HMRC’s Customs Handling of Import and Export Freight (CHIEF), which was built in 1989, can only process about 60 million declarations a year – and HMRC will need to process around 200 million more on Britain’s exit from the EU.
A planned upgrade, Customs Declaration Services (CDS), is designed to manage volumes of up to 150 million declarations, and was due to be delivered in January 2017. However, it is facing “significant issues”, and received an amber/red rating from the Infrastructure and Projects Authority in January 2017.
The IfG calls on HMRC to prioritise delivery of the CDS “in its current form” – resisting the temptation to tinker and introduce additional functionality – to ensure that the basics are in place when the UK leaves the EU in March 2019.
It also warns against relying on “undefined modern technology”, which would take too long to develop and implement, to solve customs challenges.
Instead, the Department for Exiting the European Union should “prioritise continued access to EU customs systems during the negotiations and throughout any time-limited transition, in particular the EU’s New Computerised Transit System”.
The report authors say that despite the potential for new ICT in the use of sensors, scanners and data, they are not a viable solution in the short term.
“By the time the UK formally leaves the EU in March 2019, it would have only had two years and nine months to design, build and implement any new technology.”
The report also pointed out that HMRC’s CDS delivery programme was carrying around 50 vacancies as of 27 June 2017, four of which were “required immediately to prevent adverse effects to delivery”.