Brexit: border delays

By Richard North - August 4, 2023

There is not a lot to add to the Financial Times report that UK ministers are set to announce a further delay to post-Brexit border controls on animal and plant products coming from the EU.

In what appears to be an exclusive story, the paper is telling us that the costs of the “extra bureaucracy” on imported goods is giving rise to fears that they will fuel inflation.

The food industry warned last June that plans to charge a flat-rate inspection fee of up to £43 on each consignment of food coming from the EU would drive up food prices, with the government estimating total additional costs of EU controls at £420 million a year.

Under the proposed controls that were due to be introduced on October 31, EU exporters of food products to the UK would have required “export health certificates” costing several hundred euros each and requiring a physical sign-off by a veterinary surgeon.

Shane Brennan, the head of the Cold Chain Federation lobby group, said any decision to delay the introduction of October requirements was the “right thing to do” given inflationary pressures and the lack of awareness in the EU about the incoming controls.

As it stands, the rise in food prices is certainly causing an amount of nervousness in financial circles, with Bank of England governor, Andrew Bailey, weeping crocodile tears over higher food prices hitting poorest households hardest.

The Bank’s monetary policy report tells us that food price inflation, which has a particularly large impact on the living costs of lower-income families due to it making up a larger share of these families’ budgets, “remains extremely high”. Having peaked at 17.3 percent earlier in the year, it anticipates that it will still be running at about 10 percent by the end of the year.

Of course, major causes of food price inflation are the increased energy costs, on top of rises in wages as the food industry struggles to attract the labour it needs.

Whether or not port inspection costs newly applied to EU imports will have a material effect, the fees charged will represent an easy target for the industry, which can use these costs to deflect blame away from an industry which has been accused of profiteering as prices seemingly soared out of control.

What is not being considered, however, is whether port health inspection adds value to the food chain, in intercepting unsound food which might later have to be removed from the food chain, in reducing the burden of food-borne disease, and preventing the spread of animal and plant diseases.

The problem here is that it is extremely difficult to draw up notional cost-benefit analysis. The effects of sanitary or phytosanitary failures are often diffuse and pass undetected, making it extremely difficult to measure the costs, as opposed to the costs of control measures which are highly visible.

There lies the further problem in that serious failures, while potentially extremely expensive, are relatively rare, so it is possible to skimp on control costs for some time, without being caught out – which is what government seems to be doing.

Undoubtedly, it must be factoring in the obvious advantages of accruing savings by delaying the start of the inspection programme, as opposed to the relatively remote chance of a food scare or other import-related crisis being attributed to inadequate border controls.

Cynics might also recall that, of one of the most recent food-related crises attributed to imported foods – the 2013 horsemeat scandal – was actually detected by internal company monitoring procedures and may not have been detected by any border regime of the type that is being proposed for the UK.

Nevertheless, the government is taking something of a gamble. If there was a similar crisis in the near future, then regardless of the likelihood of the problem being detected by border controls, government inaction could attract strong media criticism, with potentially damaging political effects.

Furthermore, the real costs of a major food crisis, or an animal health emergency such as a foot and mouth outbreak caused by imported produce, could far exceed the savings accruing from reduced controls.

One can easily imagine the likes of the Guardian, which is ever-keen to attribute inflation to corporate profiteering, leading the charge against the government, in the event of a crisis, with the opposition also seeking to exploit the political opportunities afforded.

This becomes an especially easy target when chancellor Jeremy Hunt and Sunak can be accused of prioritising Brexiter orthodoxy over and above public health and related measures, “taking control” of borders and diverging from EU rules in order to cut business costs, thereby protecting profits rather than people.

Despite that, there is an indication in the Financial Times story that the government is planning on rationalising the border control system, having announced as recently as April that a new “border target operating model” would start to be rolled out from October 31 with a full regime in place by October 2024.

This new system – if that is what it is – is still in the process of development, based on careful consideration of feedback from “stakeholders” to ensure they had enough time to prepare for this new model which will be simpler than the one originally proposed last year. But, with the changes, there can be no commitment to the original timeline, so the new system will “be introduced progressively”.

The decision to delay the new regime is also intended to give companies and port operators yet more time to implement the arrangements, albeit that final details of the border plan have not yet been published. Even though publication is expected “very soon”, implementation on the ground will have to be pushed back.

This actually seems to conflict with the claim that the “driving force” behind the delay is the need to bear down on inflation, but since even a simplified system will impose additional costs at the border, there is some logic in the claim.

There is, though, another key issue which is being ignored, in that the absence of border checks on EU imports is distorting trade for UK food exporters, who are already having to bear the costs of controls on produce sent to EU countries.

Thus, Nick von Westenholz, director of trade at the NFU, is cited by the FT as acknowledging that the government needs to protect consumers from price rises but complains that yet another delay would exasperate many farmers, who face barriers for their exports which are not being reciprocated on imports from the EU.

“We need proportionate, light-touch checks in place that can both keep costs for importers to a minimum while properly managing biosecurity risks”, he says. “Government must quickly set out a clear and concrete timetable for the new import regime, so we have a level playing field for UK growers and producers”.

Westenholz may have a more powerful case than he imagines. Full import controls are already imposed on foodstuffs and phytosanitary products from non-EU countries. The absence of similar controls on EU produce is, ostensibly, a beach of WTO rules on non-discrimination between different countries.

There must surely be a limit, therefore, to the tolerance of the delays in implementing a comprehensive border control system, which embraces on an equal footing all food exporters. At some time in the not-too-distant future, a formal case could be taken against the UK for breach of WTO rules.

Whether or not this government is even aware of this possibility, it would be hugely embarrassing for a government to have exposed in so public a manner what amounts to failure to develop a stable, post-Brexit import regime, to add to the multiple failures already experienced.