Brexit’s hostile environment

The British establishment has a number of strengths, not all of them positive. Long standing cultural patterns such as racism or mysogyny are not always associated with the toxic knee jerk emotions they unleash. Sometimes stretching back for generations, past prejudices cast veiled shadows over current mindsets. 

A common marker of such underlying tendencies is the urge to promote a hostile environment for groups that the establishment does not feel comfortable around. Avoiding confrontation, but nevertheless antagonistic towards them, officialdom reserves a superficial welcome for people of colour, migrants or women, among others.

At an institutional level, something similar could be seen in the gung-ho pursuit of aggressive tactics throughout the Brexit negotiations, during which concessions were demanded with little thought of any form of quid pro quo

Left to its own devices, the civil service is capable of creating procedures and regulations that contribute to an underlying malaise. This administrative hostile environment casts a shadow on those who are bound by or who enforce such oppressive rules. The Border Transit Operating Model offers a number of examples of the genre, such as the Common User Charge (CUC). 

DEFRA consulted with business leaders last summer, promising to share its findings in the autumn. For months there was talk of a “world class” system, but no operational detail that anyone could use for the day to day running of their business.

On January 19, Walthamstow MP Stella Creasy challenged the government’s wall of silence surrounding the Common User Charge.

She told the House that: 

“The charge is intended to apply to each consignment, whether it is one leg of lamb or a van full of reindeer and frogs’ legs. As 65% of lorries coming into this country carry multiple consignments, known as groupage, it is clear how expensive this way of applying the charge will be. 

“The Government have therefore chosen to fund the new border by imposing fees directly on businesses that import. The pledge that Brexit would be a bonfire of regulation turned into a smouldering pile of paperwork that will kill imports for small businesses. Can I just put it on the record  on behalf of British business — this is mad.”

Parliamentary Undersecretary of State of Environment Food and Rural Affairs, Rebecca Pow, replied: 

“We have provided further facilitation and guidance for importers using groupage models – the honourable Lady referred to groupage models, where a lorry delivers a whole lot of different models in one lorry – in terms of moving sanitary and phytosanitary goods into the UK, in order to make the system of certification more streamlined.” 

The word “consignment” is completely absent from the minister’s frankly incoherent reply, which is a thinly disguised attempt to buy time.

Creasy then asked the government on February 8 whether a decision had been taken as to the rate at which the Common User Charge would be fixed and when such a decision might be published. Secretary of State for Environment, Food and Rural Affairs, Mark Spencer, replied on February 27 that an announcement would be made “imminently.” He added that: “This will help commercial ports in setting charges for their own facilities and provide traders with time to make the necessary finance, accounting and operational arrangements.” More stalling, more flannel, more empty words. 

The simple fact is that by the time the final workings of the CUC were revealed to the public, there was less than a month to do anything about it. For those who are still catching up with reality, the British government is rolling out a punitive tax on imported goods, starting on April 30.

For those who are up to speed with this news, there is a very real prospect of European traders resenting the British government’s crude attempt to monetise inland inspection facilities. The result could be a sudden and brutal drop in shipments to the UK. 

So strange, yet true

The British government’s plans really are as mad as they sound. Try this example for size:

Fresh produce importer PML Seafrigo runs a private BCP at Lympne, near Dover. Company director Mike Parr picks up the story:

“PML Seafrigo has its own 24/7 border control post at Lympne, which is the closest point of entry to the Port of Dover (closer than Sevington), we have a dedicated transport and logistics hub for imported goods and yet our customers will still be charged the CUC even though they will not be using the Sevington facility. 

“The government is effectively asking businesses such as ours to collect taxes on their behalf. And the fact that this fee will be reviewed and updated annually by Defra is itself worrying, it could easily be increased in 12 months’ time. 

Parr is outraged by the casual way the government is abusing the trust of the country’s traders.

“The common user charge (CUC) is effectively another business tax that will be applied to each commodity line in a Common Health Entry Document (CHED). Although fees are capped – £145 for every consignment arriving via the Port of Dover or Eurotunnel –this is another expense for importers and retailers to bear, which will of course be reflected in further delays at the ports and another price hike for essential food items.

“What is particularly frustrating is that the fee is being levied for all fresh produce / plants goods passing through Dover or Folkestone – even if they don’t pass through the government controlled inspection post at Sevington.”

The question that most people would want an answer to is “WHY is the British government waging war on the very people that it claims to support? Any ideas, please add as a comment.

Brexit’s final nail in the coffin (1)

On April 30 the government will roll out the second phase of its Border Target Operating Model (BTOM). The result is likely to be total chaos on a number of counts. 

There is growing unease about the wall of silence surrounding  the computer system at the heart of the BTOM, called the Single Trade Window (STW). This will be the one and only way of getting data into the system. The final version*⁠1 of the BTOM guide, published on February 11 states: “ …the Single Trade Window could be fully operational in 2027.” 

There are a number of reasons why this could be awkward, but one will do. The STW calculates the aggregate cost of wear and tear caused by lorry traffic to roadways at ports. This operational detail is  used to set a levy called the Common User Charge (CUC). This is payable to HMRC within four weeks. While the STW sets a figure for Government operated ports, private operators were invited to fix their own charges, as they would do for anything else. There appear to be a number of sticking points.  Dover and Portsmouth,  the two busiest ports in the UK, both happen to be owned and operated privately.

The Common User Charge scheme comes from the European Directive 1999/62/EC, which was passed by the European Parliament and voted by the Council of 17 June 1999.  The EU framed it as a way of charging heavy goods vehicles for the use of infrastructure such as national road networks. It is no more than a rehashed EU pipe dream.

The scheme was never developed into a fully operational model in Europe. However, faced with the challenge of organising a system of robust controls on EU imports, the UK government saved a lot of  time and effort by reviving the Common User Charge. Stakeholders believed that new processes would cost a lot of money, so the UK government took them at their word and came up with a scheme to absorb their cash. Whitehall covered its back by saying that future costs would reflect how businesses are adapting their working practices and supply chains to the new rules.

The architects of the project assume that a budget of £330 million a year would cover roadway wear and tear arising from EU imports. On the basis of that figure, civil servants argue that the new system represents a  cost of 0.13% of all EU imports, then valued at £259 billion pounds. The value of such arguments cannot be guaranteed, but it is definitely an advantage to have two numbers, one of them large and impressive. However, these assumptions were never put to the test.

On Wednesday April 5, DEFRA unveiled a radical restructuring for the Common User Charge. Officials expect the CUC to be set between £20 and £43 per consignment: there are often multiple consignments in a load. The Government predicts that the new system will generate a 0.2% rise in the cost of food over three years.

1 Feb-11-24-Final_Border_Target_Operating_Model.pdf para 350 page 88

Imminent change

Since leaving the EU, the UK government has operated transitional biosecurity arrangements, including one called Place of Destination. After a number of postponements, the scheme is finally being withdrawn on April 30 to make way for the long-awaited Border Target Operating Model (BTOM).

This will redraw the map for traders, legislators and consumers alike, including a number of far-reaching modifications to the way the border will be managed. It marks the start of a shift away from EU standards to a home-grown hodge podge. In its day, Place of Destination allowed businesses to do their own product checks at a time when UK border facilities were either not available or still under construction.

DEFRA’s own description is an opaque blend of jargon and legalese: “The PoD scheme not only afforded flexibility to businesses as they adjusted to the new requirements following the end of the transition period, but also allowed the UK government time to thoroughly design BCP infrastructure and processes, maintaining frictionless trade, while protecting GB biosecurity.” The present outlook is not encouraging.

On Monday, March 12, the EFRA Select Committee met under the chairmanship of Dr Neil Hudson to discuss the ongoing shortage of vets to carry out routine health checks on inbound food products. The UK’s chief veterinary officer Christine Middlemiss told the committee that when the UK left Europe there was a shortage of vets in the order of 11%, and, that to her present knowledge, this was still the case. This sounds suspiciously disingenuous, since the demand for routine veterinary validations for food imports is rising steadily. Westminster has known for years that the food industry was facing a skills gap. A House of Lords committee warned of this in 2017 [click link to see context] and the idea that demand could be static is a non-starter.

Consolidated Dover background

This extended post replaces a number of earlier posts, to include more detail.

 Two million lorries passed through Dover in 2022, down 17,000 on 2021. This year the government will roll out its Border  Target Operating Model management structure. Part of the new system is a flat rate payment of (£20 to £43) per consignment per lorry. The Common User Charge covers the use of the terminal, but not inspection fees.

International borders and biosecurity are 24/7 commitments, so when Dover Port Health Authority (DPHA) started planning its Point Bastion Border Control point (BCP) for England’s busiest port, it envisaged a 1,200-space lorry park close to the port with customs inspection facility working a 24-hour working day. Dover port received a royal warrant from King James I in 1606 and operates independently to this day, owned by Dover Harbour Board.

The port handles goods worth £144 billion a year, around a third of the goods traded in the UK. There are two distinct strands to its food enforcement workload. There are the ongoing investigations to catch impromptu smugglers with small batches of unhygienic meat in variable states of decay, destined for closed ethnic groups with money to spend on familiar foods and flavours. 

This contraband has no paperwork and is carefully concealed in all manner of vehicles. In the weeks running up to Christmas 2023, five or six tonnes of illegal meat products were confiscated at Dover. Legal lorry loads of meat and animal products pass through the port, destined for UK food industry customers: processors, manufacturers, wholesalers and retailers. 

The scale of this work goes a long way to explaining the original decision to have extensive parking facilities.  

As well as the Common User Charge, the range of foodstuffs that will be routinely tested on arrival in the UK will rise, with the addition of medium-risk plants and plant-based products. Environment ministry DEFRA is quick to point out that any inspection fees are payable on searched consignments in addition to the CUC. 

Dover handles two million lorries in a year and Common User Charge would be expected to generate tens of millions of pounds before factoring in groupage.

The port is unusual but by no means unique to be a major port with an independent management structure. Dover East docks are built on an artificial headland created when the railway was separated from the dockside. Space is at a premium here, a deciding factor in the development of Point Bastion. The House of Commons Environment, Food and Rural Affairs Committee heard on March 1, 2022 that work was progressing well and 500 specialist staff had been recruited. (https://committees.parliament.uk/oralevidence/9794/pdf/)

The same committee hearing had similar news from Sevington BCP, a 174 million pound development close to the Eurostar terminal at Ashford. This site had originally been commissioned by the Department for Transport (DfT) with an expected lifespan of five to 10 years. 

What happened subsequently is not clear, but HMRC revised its parking requirement for Point Bastion from 1,200 spaces to 96. Dover Harbour Board faces cuts to it enforcement activities. Someone in the corridors of power unhelpfully suggested recovering the shortfall from successful prosecutions of illegal meat and animal products. DHB is fending off calls for its food safety checks to be carried out at Sevington, 22 miles away on the A20(M).

More worryingly, the Commons EFRA select committee heard Karen Betts, chief executive of the Food and Drink Federation, expressing her concerns that official vets working for foreign food manufacturers might not fill in the customs  declarations correctly for ready meal products like lasagne. It  is a big ask. 

When the UK left Europe and re-instated third country export rules, the number of qualified vets  plummeted. Where once there had been 1132 vets in the UK to fill in export health declarations in 2019, now there are just 364. There has been a 1255% rise in requests for valid export certificates.

Brexit is far from being “a done deal.”

DEFRA description of common user charge:

Defra has developed a charging model to recover operating costs for government-run border control posts (BCPs) in England ahead of planned implementation of SPS checks on EU imports in January 2024. The legal basis for charging is Article 81(b) of the retained Official Control Regulations (OCR).

Defra proposes administering a single Common User Charge: a flat rate levied on every SPS consignment (Plants and Plant Products (P&PP) and Animal Products) which is eligible for BCP checks and enters through the Port of Dover or Eurotunnel Le Shuttle, whether selected for a check or not. This does not include goods arriving as rail freight via the Channel Tunnel, or personal imports arriving on the Eurostar and Dover Ferry passenger services as these goods will not be subject to SPS checks at a BCP. Imports of live animals will not have charges applied until they are subject to checks at a BCP, scheduled for late 2024.  The Common User Charge approach flattens the rates, spreads the burden, and provides a high level of certainty to importers. These charges are intended to recover the costs of operating the BCP facilities as set out in Article 81(b) of the retained OCR which are necessary to undertake physical inspections. This charge would be separate to any charges applied by the Port Health Authority and Animal and Plant Health Agency (APHA) for inspections. The Common User Charge also does not include charges applied by other government agencies for activities outside of the BCP, such as any customs checks.

https://consult.defra.gov.uk/government-bcp-charging-strategy-implementation/charging-at-government-border-control-posts/Click for source.

In DEFRA’s own words: “The Common User Charge… ( approach flattens the rates, spreads the burden, and provides a high level of certainty to importers. These charges are…) …(is)…intended to recover the costs of operating the BCP facilities(… as set out in Article 81(b) of the retained OCR which are necessary to undertake physical inspections…). This charge would be separate to any charges applied by the Port Health Authority and Animal and Plant Health Agency (APHA) for inspections. The Common User Charge also does not include charges applied by other government agencies for activities outside of the BCP, such as any customs checks.”

Food imports set for price hike

After a couple of years of waving through EU imports of meat and animal products with no dockside checks, the UK government is about to apply a sharp twist to food pricing this year. It will start charging businesses a fixed charge on all shipments passing through government-run Border Control Posts. Referred to as the Common User Charge (CUC), it was put out for consultation over three weeks in July last year. While the CUC will be a single fixed payment, there are uncertainties over inspection charges for food shipments that would be billed by BCP operators*. These can total hundreds of pounds for a large container.

On January 31 2024, DEFRA brought into force a number of measures for each of the three risk categories (https://www.gov.uk/government/publications/border-target-operating-model-information-leaflets-for-businesses/technical-questions-and-answers-about-sanitary-and-phytosanitary-controls-sps#risking-approach).

These are as follows

From 31 January 2024, DEFRA has introduced:

  • health certification on imports from the EU and European Free Trade Association (EFTA) of medium risk animal products and the introduction of health certification on imports from the EU, Lichtenstein and Switzerland of medium risk plants and plant products
  • health certification on imports from the EU and EFTA of high-risk food and feed of non-animal origin
  • import pre-notification and health certification when moving EU and EFTA animal products or EU, Switzerland and Lichtenstein plant products from the island of Ireland, to align with the rest of the EU (for example, any goods other than qualifying Northern Irish goods from Irish ports directly to Great Britain)

As of April 24,in DEFRA’s own words:

From 30 April 2024, DEFRA will be adding:

  • the introduction of documentary and risk-based identity and physical checks on medium risk animal products, plants, plant products and high-risk food and feed of non-animal origin from the EU
  • existing inspections of high risk plants and plant products from the EU will move from destination to Border Control Posts
  • beginning to simplify imports from non-EU countries – this will include the removal of health certification and routine checks on low risk animal products, plants, plant products from non-EU countries as well as reduction in physical and identity check levels on medium-risk animal products from non-EU countries

What will DEFRA deliver?

2.1 How are checks within a port or airport’s perimeter organised, and who does what and has accountability to make it happen?

Within the curtilage of a sea or airport, the port operator will direct the movement of consignments. At the Border control post (BCP), APHA will undertake checks on live animals, or plants and their products.  The Port Health Authority/Local Authority will undertake checks on animal products and High-Risk Feed or Food Not of Animal Origin (HRFNAO). The port operator will not release a consignment from the port until they have been informed that it has been cleared by the relevant inspection authority.

2.2 Will BCPs be ready? Do they have sufficient capacity?

Defra is confident that existing and new BCP infrastructure will have sufficient capacity and capability to handle the volume of expected checks outlined in the BTOM, with robust, dynamic, and effective operational measures ready to call upon if needed. Defra will continue to work with existing BCP operators to ensure they are prepared, and the Government has built new infrastructure at critical locations. Operators have not expressed concerns regarding under-capacity, we are therefore not anticipating queues but will continue working closely with operators to address any concerns they may have.

What next?

Britain’s busiest ferry port faces the risk of bankruptcy following Westminster’s decision to retract millions of pounds in funding for swine fever checks on pigs arriving at the port of Dover. The money has already been spent during the financial years for which it was allocated. The local council meets tonight (Monday February 5) to plan for the coming months, when food testing will be rolled out further.

A third of Dover District Council’s budget is diverted from local government to funding food safety checks at the UK’s largest passenger and freight terminal. In June, this figure will rise to nearly half. Dover handles up to 120 ship movements a day at peak periods and moves a third of the UK’s food imports.

The harbour is run by an independent trust, set up by an act of parliament and given the task of managing the busiest ferry port in the UK. Since the legal requirements are set by national laws, Dover has no choice but to comply. The district council is run by a Labour group with a majority of one elected in May last year. The harbour’s independent status means that theoretically it can set whatever prices it needs for its services to pay their way. The reality is not that simple

The real retail equation

https://www.channel5.com/show/aldi-vs-lidl-supermarket-wars

This evening I watched the Channel 5 documentary Aldi vs Lidl: Supermarket Wars. The program makers correctly identified the standard set of superficial differences that are plain for all to see. However, while setting out to explain the yawning gap between UK and Continental business models, the detail was a bit sparse. For instance, consumer journalist Harry Wallop does his bit to keep alive the 1966 World Cup mindset, evoking a long departed anachronism rather than twenty first century marketing.

The programme’s narrative starts in the 1990s and portrays the discounters as eccentric oddballs with a business model that worked in Germany but needed tweaking for more lavish UK mindsets. British food retailers had established a stranglehold on the postwar consumer economy and raked off substantial sums of cash from suppliers, known as shelf money, hello money, listing fees, the list was endless. Large retail businesses expected to be paid GBP 5,000 a year per Stock Keeping Unit (SKU) to be listed at 200-300 stores. Example: food manufacturer presents a family of six snack products in the early 1990s and would be asked to stump up thirty thousand quid for listings in up to 300 stores. Any subsequent special offers were funded by suppliers, in the form of free product (physical stock); or credit notes or deductions from existing/current invoices.

Given that even a modest hypermarket would stock 25,000 to 30,000 SKUs in those days, the retailers were making lorryloads of money while pretending to be church mice earning a miserable 4% profit on return. The arrival of the German discounters threatened to blow their cover and the major multiples were not keen on this. The reason Aldi and Lidl could run rings round the big four within a few years of arriving was that the discounters only ever discussed prices with suppliers and never asked for shelf money. Carving out a substantial market presence without constantly squeezing suppliers, the discounters have demonstrated that it can be done and done honestly. That spooked the multiples even more.

Footnote: At the time of writing, continental retailer Carrefour is playing the commercial equivalent of Russian roulette with snacks and soda giant Pepsico. Initially limited to France, Carrefour stores across Germany, Italy and Spain are now all locked in to a life and death fight over trading terms (shelf money). Even if Carrefour dumps Pepsico (unlikely) there is no way that the tonnages of product could be secured from other manufacturers. Also in France, the eponymous independents’ chain E Leclerc is reading the riot act to its suppliers. Running a tighter ship than BlueBeard, second generation chief executive Michel-Edouard is threatening hellfire and brimstone for all those who challenge his figures. For years now, the group has only ever paid for one tonne of potatoes out of every 1.2 tonnes delivered, insisting that there is a lot of slack (waste) with this crop. This is simply not true: any fresh produce department anywhere in Europe that is experiencing more than 2.5% slack across a week would be hauled over the coals.

245% duty shock for UK cheese

British cheese exports to Canada will face duty of 245% next year, once the third country duty-free quota is exhausted. Some 95% of this quota is already taken by products arriving from Norway and Switzerland, leaving very little for shipments to any other third country.

This slap in the face for British cheesemakers comes as Canadian negotiators came amid talks on the implementation of the much-vaunted bilateral trade deal. Refusing to roll over previous extensions to zero percent duty available under former EU terms, the so-called cheese letters, the decision vapourises pre-Brexit claims of extensive growth in UK food exports. These will in fact be treated like any other third country products, in the absence from specific terms agreed during the framework negotiations. Last year, the UK exported cheese worth nearly GBP 19 million to Canada.

Growing concern

Hundreds of acres of cultivable farmland will be cleared to make way for houses as far as the eye can see. In the coming months, Mid Sussex District Council will hear applications from developers wanting to build 1500 houses between the villages of Ansty and Cuckfield. As well as residential properties, there will be shops and amenities in addition to a headline-grabbing 30% allocation of social housing. Whether or not the developments will ever release as much as 30% for social housing remains to be seen, but it needs to be there at the outset..

This major development plan faces problems, however. To begin with the new homes will generate additional demand for water in a part of the world where demand for water is already comparabl;e to desert regions.The loss of 250 acres of farmland is nothing short of disastrous: the UK cannot afford to throw away productive land.