Customs costs close to zero when computerised, say leading economists

Responding to the evidence given by Jon Thompson (Chief Executive and Permanent Secretary at HMRC) to the Treasury Select Committee today, Professor Patrick Minford, Chair of the Economists for Free Trade said:

“Jon Thomson’s figures apply to the new paperwork involved for a consignment. However, modern customs procedures are computerised and so when repeated will simply transfer figures on existing paperwork or more likely computer to already existing templates. In other words Jon Thomson’s figures appear appropriate only for the set-up costs. Ongoing costs of computerised customs procedures will fall to close to zero.

“This is confirmed by data from Switzerland where it is estimated that the customs cost of 0.1% of the goods value traded. This cost includes both ordinary customs declaration and Rules of Origin declaration and it applies to traffic with the EU. This cost incorporates every conceivable cost affecting traders, down to, for example, the waiting times in queues.

“WTO rules mandate seamless customs procedures including for Rules of Origin, which in any case involve costless repetition once origin is established for a class of goods. For the median developed country 98% of traffic goes through unchecked and the remaining 2% is cleared in less than a day. This suggest virtually zero costs of repeat traffic.

“Civil servants produced a cross-Whitehall report in which customs and other costs involved in a FTA with the EU were absurdly exaggerated. Jon Thomson’s figures are not consistent with what we know are the customs costs of repeat traffic loads when process by the seamless procedures mandated by the WTO.

Edgar Miller, Convener of the Economists for Free Trade said:  

“HMRC’s estimate of the cost of Max Fac before today’s Treasury Committee appears very generous.

“For example, Switzerland is not in the Customs Union and essentially operates Max Fac today.

“If one applies their actual total costs to UK circumstances, a figure of about £2 billion results.

“This is ten times lower than the figure offered by HMRC, which essentially was their estimate of only the cost of completing customs forms.”

ENDS

More details can be found in our report ‘How the civil service has mislead us on the costs of Brexit and the customs union’ here

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