The head of the National Audit Office (NAO) has warned of a “horror show” if customs officials have to manually process imports and exports because a new electronic system is not in place after Brexit.
Amyas Morse made the comment in a briefing to reporters as the NAO produced a report on the new system, which is in development to manage the 255m customs declarations per year expected after the UK leaves the EU, compared to 55m currently.
The NAO said there was a risk the system will not be ready when the UK leaves in March 2019 and the project was operating with uncertainty because changes might be required depending on the outcome of Brexit negotiations.
In 2013-14 HMRC embarked on a project to develop the system, called the Customs Declaration Service (CDS), to manage duties and VAT. This was before the UK voted for Brexit and in response to new EU rules that require all communications to be electronic. Some £34bn a year is collected by the system.
The NAO said under HMRC’s plans the new system is due to be in place just two months before the UK leaves the EU. Meanwhile, HMRC’s business case has total costs of £157m to create a system capable of handling 150m declarations a year, and it is seeking additional funding to cater for the estimated 255m.
“The decision to leave the EU could increase the number of transactions by around 200m and more than double the number of traders having to go through customs processes,” said the NAO.
The report said in 2015 nearly £700bn of goods crossed the UK border, while an extra 180,000 traders are expected to make customs declarations when the UK leaves the EU, “and the continued smooth operation of these crossings is critical to the UK’s economy”.
“Having a fully functional customs system is an important factor in safeguarding against undue disruption to trade after the UK leaves the EU,” said the NAO.
“We know that the UK will be leaving the EU by March 2019 but we do not know what customs arrangements will be in place at that point, or whether the Article 50 negotiations will lead to transitional customs arrangements.
“What is clear is that the timeline for completing the CDS programme under its current scope allows very little flexibility should the programme overrun or unexpected problems occur.”
Morse said: “Customs problems have obvious implications for the flow of goods in and out of the UK, so government as a whole needs to decide whether the extra cost and effort of getting a working system in place for day one is an insurance premium worth paying.”
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