On Wednesday, MPs were informed that a ‘no deal’ Brexit would see the United Kingdom without a fully functioning customs system for at most two years.
In a sobering warning, senior officials from the HM Revenue & Customs informed the Treasury committee that the moment to start planning for the collapse of the negotiations already passed months ago.
MPs were told that the United Kingdom would find it hard to properly collect tariffs, while the potential for traffic chaos at various ports was a “known unknown.”
Jim Harra, an HMRC official, informed the Treasury committee: “We would start off with a functioning but clearly sub-optimal customs border.”
He continued: “I think we are looking at a minimum of two years from the no deal to get to a point where you can say we have a steady-state system where we are comfortable that we can manage all the fiscal risks in a way we would like and trade can flow in the way we would like.”
The chief executive of HMRC, Jon Thompson, flagged up the lack of preparations for a ‘no deal’ planning, stating: “The date for putting in an optimal customs system for the UK in the event of no deal was passed months ago.”
He also warned that the controversial backstop plan of Theresa May might not be able to be executed until nine months after the transition period has ended.
He said that it could take up to 30 months for the customs system of the United Kingdom to be set up for such an arrangement. Thompson said that it would come into force in the absence of a Brexit trade deal being ready to be implemented.
Since the United Kingdom is only signed up to a post-Brexit transition period that will span for 21 months, there is a high possibility of the borders not being ready to cope up with a customs arrangement that could see Northern Ireland operating a different regulatory regime as compared to mainland Britain.
Thompson was asked what the HMRC need to do in order to prepare for the backstop being triggered. He answered: “We would require further clarity on what is required in order for us to be able to work out what IT systems we would need to build.”
He added: “Secondly, as has been pointed out already part of that would be what IT systems would have access to in the EU. We require clarity on both those points: what needs to be operationalised and what IT systems do we have access to.”
He continued: “In broad terms, if we were to make a number of assumptions we think it could be up to 30 months to do that work.”
Both the EU and the UK have the option of extending the transition period, however, it would need to make that decision by June 2020, and they can only extend it once.