Richard Murphy: Fisking the NAO’s Report on the UK’s Border Preparedness for Brexit

Yves here. Richard Murphy read, and more important, translated the NAO report so you don’t have to! And you can see why May is angling for a longer transition period. It appears to have finally dawned on the less bloodthirsty Tories that no way, no how will the UK have a trade deal with the EU at the end of 2020 unless the EU dictates terms (and even then that’s not a given). So the UK is faced with a crash out with the EU with respect to trade then even with the current outlines of a deal, and all the border requirements that go with it.

And as we flagged some time ago, the UK’s custom system upgrade, which is due to be completed January 2019 (and the Government’s record of completing IT projects on time is poor), won’t be able to handle remotely enough daily transactions to handle EU goods with the UK no longer in the Single Market. No one even discussed whether it would be possible to get the border systems in shape by the end of 2020, which suggested that the experts saw it as so implausible as to not be worth mentioning.

Another issue is that the few official documents put out by the UK on Brexit have been astonishingly flabby, lots of fuzzy high concept, very little concrete detail. And the Joint Agreement (the punt on the Irish border last December that contained the infamous backstop)  had an uncomfortably high amount of aspirational language that didn’t seem clearly related to eventual deal terms. Has this sort of mushy thinking become common in the UK civil service, or is this a verbal protective crouch in response to Brexit?

By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK

The National Audit Office has issued a report today on the UK’s preparedness for border controls as and when Brexit happens (as I think it will, I am afraid).

Their conclusion (with my comments) is as follows:

Effective management of the border is critical for the UK after it leaves the EU.

It’s a pity no one told the Leave campaign, in 2016 or those remnants of it that still exist now.

It is fundamentally important to our national security, economy and international reputation.

Keep reading, and you’ll realise all three are being shredded, right now.

Leaving the EU will trigger some important changes to how the border is managed, but making such changes is not easy. It requires significant effort and the coordination of large numbers of organisations, many parts of government and millions of border users.

It’s a pity no one told the Leave campaign.

If the government reaches a withdrawal agreement with the EU, industry and government will have until December 2020 to design and implement any new arrangements.

That’s mighty wishful thinking.

This could involve significant work, such as the implementation of new customs arrangements, and the time available to meet these challenges is not long compared to many complex government programmes.

In other words, the NAO think it’s nigh on impossible.

However, the scale of this change will be nowhere near that required if the UK and the EU cannot reach an agreement.

Someone smiled when they wrote that. And then went outside and did the honourable thing.

If there is no withdrawal agreement, the government has recognised that the border will be ‘less than optimal’.

No, they didn’t: they came back and added that as a footnote.

We agree with this assessment, and it may take some time for a fully functioning border to be put in place.

In other words, we’ll be a nation-state without a functioning border. Which reduces us to something less than a functioning nation state when you think about it, because one of the identifying characteristics of a nation-state is that it has an identifiable border and we won’t have that.

Individuals and businesses will feel the impact of a sub-optimal border to varying degrees.

The master of understatement strikes again.

The government is putting in place coping responses where it can.

For that read ‘but we can’t find where’.

How effective they will be remains to be seen.

Which in civil service speak is as close to saying that this is going to be a disaster and there is no way around it as anyone dares go.

I should add, I agree with this assessment, barring its optimism, which is significantly over-stated.

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  1. The Rev Kev

    I have been reading all these remarks and conclusions as well as the Report Images but something just seem right. That Brexit vote was held back in what, June of 2016? You could have had some mid-level bureaucrat drive around the country and talking to a bunch of serving border officers and based on the collected information come up with a near identical report with all its conclusions. Maybe quicker and more nuanced if he had talked to three blokes in a pub. By this time they should have detailed plans in place but it seems that there are none. Is the purpose of this report really to cover someone a***?

    And as a reminder, there are just 154 days left til Brexit.

  2. Clive

    Unfortunately, to answer Yves’ question, yes, the U.K. civil service has degenerated so much that, channeling my inner Margot Leadbetter, it’s all just mush, mush, mush.

    I can’t recall a change to IT systems at my TBTF which was driven by legislation that didn’t end up having to second-guess what the eventual legal position would require, have to wait months and months for the minister to ‘fess up what they wanted when it came to some small but crucial detail and then to find that what the agencies which would have to follow and impose the new bill thought and what the text that eventually got royal assent said were not at all the same thing.

    In fairness, a lot of this is down to the unmanageable complexities which our societies are descending into. What might, being charitable, have started off life as a clear and unambiguous intention has so many stakeholders intervening, so many consultations, so much overarching framework (ironically, the monstrously labyrinthine EU aquis doesn’t help matters) and then gets picked over by so many industry lobbyists (and this isn’t just true of finance) that it’s pretty amazing anything emerges which isn’t gibberish.

    The NAO report say in a not very well concealed conclusion that, in a hard Brexit, the U.K. government will have to pick between some semblance of keeping goods flowing, security and product standards compliance and revenue collection. It can have one-and-a-bit out of these. But not all three.

    1. larry

      Clive, since they don’t really need the revenue, they can forego collecting it, at least temporarily. The others are essential, I would have thought. Of course, not collecting the revenue has other drawbacks.

  3. kk

    No the civil service has not declined – they are the servants of the government. If the master says two and two equals five then it does.

  4. animalogic

    Being non-British I obviously lack the nuances of “Brexit”, however, I find it nothing short of wondrous that, given the volumous negatives of any kind of Brexit that the Remain argument (& the need of a second referendum) is still so weak & unappealing. Brexit appears to me an unmitigated nightmare & a catastrophe. Selling Remain should be like selling ice creams in the desert.
    This is political & human dysfunction on a world historical scale.

    1. DaveH

      It’s a whole number of factors. I think chief among them is that people aren’t following it. In our politically obsessed bubbles, it’s easy to forget what a minority we are in – the UK is a country where more than half the people don’t know the name of the Prime Minister (57%, quoting a 2015 survey but I can’t imagine the figure will have changed enough to change the point).

      I reckon a tiny fraction of the population are even aware of the existence of the NAO, much less reading about what it thinks. Of those that do, a large chunk of them are still opting not to believe it. The consequences are so severe and outside of what people expect from experience that they just assume something will be done about it. The issue is that a lot of the people who assume something will be done about it are the ones who should be doing something about it, as Richard North is so fond of pointing out.

      You then have those who are uncomfortable from a democratic perspective of not following through with the result of the referendum, seeing the consequences of that as being worse than the consequences of following through with it. I reckon that a lot of those also fall into the group above.

      Add all of those people up together, and it’s not a huge surprise that there is no great clamour for a reversal.

      1. Anonymous2

        A lot of the UK media are pro Brexit for their own particular reasons. That makes it difficult to get a strong campaign going. People are understandably reluctant to be branded ‘enemies of the people ‘ by the newspapers especially as they can then find themselves the subject of death threats. After the murder of Jo Cox these have to be taken seriously .

        The UK is not what it was.

      2. You're soaking in it!

        Which makes this another “black swan” event slowly unfolding in plain sight. Much like the sub-prime mortgage crisis, it doesn’t take a lot of secret insider information to understand what will happen, but it seems too easy for people on all levels of society to ignore the disturbing consequences until faced with more immediate pain when they have the supportive environment and mind-set that denies those consequences for reasons of comfort. Where the original “black swan” was indeed an “aha” moment that suddenly turned the world upside down, Brexit has seemed much more like watching a train wreck in the old west; pay your quarter, bring a picnic and watch the spectacle! I fear it will turn out we are all sitting too close, though.

      3. disillusionized

        This is also what makes all solutions virtually impossible – because while it’s abundantly clear to those in the know, that there are practically no terms that the EU could offer in a WA that it still would not be in the best interest of the UK to sign.
        But there has been absolutely no expectation management from anyone in this circus, so that’s going to be an unwelcome realization – but that’s pretty much how it’s going to have to be, utter abject chaos, then and only then, will UK politicians have the latitude to cut a deal, by which i mean swallowing whatever terms the EU offers, be they Munich or Versailles.

    2. JW

      But when they point out the coming disaster, they get accused of alarmism.

      It’s the classic Catch 22 that makes it so hard to fight climate change, tobacco use, alcohol abuse, factory farming, racism, perpetual war, state surveillance, fascism…the reality really is so horrific, outrageous, indefensible, etc. that people assume you must be exaggerating because surely our happy normie world would not be capable of such a thing.

    3. vidimi

      brexit is the ultimate vandalism inflicted upon the UK by the murdoch press. perhaps once there will be nearly universal gnawing and gnashing of teeth, rags like the daily mail, express, star will be tossed into the wastebin.

  5. Pym of Nantucket

    This will be a fairly unfocused or vague comment, but for years I have been puzzled by the rapid decline of the UK. It really seems to be an outlier within Europe, I’d love to hear what people think is the main problem compared to other nearby countries. Is it just my perception because I expect strong stable government from them and not from Italy or Greece? How has the place become so dysfunctional? The antics of the political leaders look more like what you see in the developing world – even with the FPTP system there is no sign of a strong government in any direction you look. The two things I guess set it apart are the very strong culture of denial there and the polarization that is locked in place there by their political system. I see the way Northern Ireland has again become the lynchpin of failure, now with respect to organizing Brexit. It seems to me that the absurd position of the Unionists is sadly representative of the entire place’s inability to accept change and the errors of the past empire.

    1. Anders K

      A combination of things; a very strong fourth estate with firm agendas, a judicial system that can make it very costly to dispute people under your own name, a political establishment which have been hollowed out by neo-liberalisms success; blaming a lot of the top level decision-making on the EU while not engaging with it on the same level and a society that basically went “fuck the poors” quite a while ago (thanks Maggie!).

      By intentionally creating an underclass of under educated and with little social mobility in a representative democratic system, you end up with either having to suppress their votes or face the fact that they will vote according to their preferences, which may not always match up with yours. This, in combination with either outright disaster capitalism or some sort of collective self-hypnotic jingoism malady caused the Brexit “they need us more than we need them” delusion to metastasize.

      The charge that Remain did not really engage on the emotional level is true, but they also did have an uphill battle to fight with the press tilted against them (mixed metaphors for the win!). Their main problem was one of not comprehending that they needed to fight – they thought their case self-evident, and only needed to be brought up to convince people. By the time some realized that, the organization they had was one geared to fight another war than the one they had.

      All of this can however be taken back to the main issue of basically giving up on part of your population, designating them as “chavs” or whatnot and fiddling in the Parliament while society burns.

  6. Pavel

    (and the Government’s record of completing IT projects on time is poor)

    Understatement of the decade! I’d suggest:

    Record of completing on time or within budget: non-existent
    Record of producing the desired/promised IT “solution”: poor

    1. Synoia

      Oh, and there are IT projects on time, on budget, and fully functional in the first release?

      Please provide examples.

      I was working on a Bank system the infrastructure side, and we got completed late, and then went to search for the applications which were supposed to be developed in parallel.

      And were to “we are still studying the documentation.”

      I got a crash assignment to get the code done, because I was the “expert” – having never done this before.

  7. Jabbawocky

    The last time I followed this topic at select committee meetings the treasury hadn’t even approved the extra funding to extend the customs IT system upgrade to cover EU trade volumes.

    1. DaveH


      There are some relatively minor roadworks near me that have a sign up saying “work will will continue here until July 2019”.

      If it’s going to take nearly a year to sort out one road on the outskirts of a fairly provincial town, how long will it take them to physically restructure the entire country’s border and regulatory system?

      It might as well be Government policy that gnomes are going to come out every night and sort it, it’s no less realistic than their current ideas – whether it’s needed by March 2019, January 2021 or January 2022.

  8. Tom Stone

    I hope I’m still around to watch this, it is going to be one hell of a show!
    Can we toss in a Pandemic to spice things up?

    1. Synoia

      No Pandemics. The NHS budget has been cut to pay for the wealthy’s perks.

      That is:

      “We won’t die, because you have to!”

  9. Carolinian

    I have a problem with the term “fisking” which someone came up with as a way of dissing Robert Fisk. Perhaps that’s just me.

  10. Phichibe

    Two thoughts, one on IT and one on the bigger customs picture:
    1) The UK is in the nightmare situation of having to develop software on a moving hardware foundation, since there is no way the current hardware infrastructure is scaled to handle the workload that the new customs regime will demand. I’m sure there will be a lot of hand-waving about “using the Cloud”, and Amazon/Google/IBM/Microsoft will make a packet of pounds selling cloud-based capacity but it’s still going to be a mammoth job. Developing a major new application on an existing hardware platform that is adequate to the task is hard enough, but in all likelihood the developers will require more capacity than anticipated, and more time than allotted, to produce a successful implementation. A bunch of consulting companies in the UK, India, etc will also make out like bandits. See the rollout of for a perfect example of the cluster-fork that can be expected.

    2) I’m unclear if UK imports will be more affected or its exports. Worst case, as the Brexiteers point out, the imports can be allowed without inspections or tariffs, although that would be substantially unthinkable for the most part. Imagine the security, health, and immigration holes if lorries are not inspected. On the other hand, it seems to me that the UK’s real exposure is on exports: if France and Holland choose not to adopt a similarly lax (dare I say laissez-faire) inspection/tariff policy, UK exports will pile up in Dover and other British ports, with time-critical exports like produce spoiling and just-in-time supply chains going do-lally, as the Brits might say. The prospective repurposing of those highways in Kent as lorry-parks wouldn’t be necessary if the continental partners weren’t planning on being sticklers. After all, as we’ve discussed in many previous threads on Brexit, the EU countries, especially France, want the experience to be painful as a deterrent to other countries that might want to leave (see Italy).


  11. DaveH

    On the other hand, it seems to me that the UK’s real exposure is on exports: if France and Holland choose not to adopt a similarly lax (dare I say laissez-faire) inspection/tariff policy, UK exports will pile up in Dover and other British ports, with time-critical exports like produce spoiling and just-in-time supply chains going do-lally, as the Brits might say. The prospective repurposing of those highways in Kent as lorry-parks wouldn’t be necessary if the continental partners weren’t planning on being sticklers.

    They’d be following the rules that they have to follow. The ones that they all agreed and the UK helped to develop.

    If the UK wants a situation where it’s exports aren’t being checked for regulatory compliance at the border, then there is a mechanism for that – the Single Market.

    If it rejects that option, then other countries enforcing the necessary checks at their border isn’t really their fault.

  12. phichibe

    Just watched a panel discussion on the BBC and heard a relevant statistic from Chuka Umunna, Labour MP: HMRC currently executes 55 million customs checks; after Brexit it will have to execute 260 million. That means at least quintupling the hardware processing base, assuming no decrease in the efficiency of the new code, something unlikely given that every generation of computer languages and software tools since the 1970s has resulted in bigger programs (code bloat) and required more CPU cycles and storage. The only thing that has allowed this is Moore’s Law and the miracle of quantum mechanics, and that’s going to run out pretty soon. In the meantime, if I were spec’ing the new hardware requirements for the HMRC, I’d want to have a 10x bigger system than they currently are using. Somebody is going to make a lot of money. The shame is that the Brits will turn the key and only then find out nothing is working, a la Sigh.

    1. Yves Smith Post author

      We covered this more than two years ago. And Ununna has the numbers wrong. It’s 350 million transactions.


      As the preceding discussion shows, if UK loses access to the single market, that means tariffs. And for US readers, the UK is now on this path with its plan for a “hard Brexit”. Theresa May and her Brexit boosters have committed themselves to restricting immigration. The EU has insisted from Merkel on down, from the very day the referendum results were in that if the UK wanted to continue to have access to the single market, it had to accept the “four freedoms,” which includes movement of EU nationals in and out of the UK and vice versa.

      What has escaped the notice of many observers is that “tariffs” for manufactured goods means that the charges are levied based on the country of origin of the constituent parts. This means a very elaborate customs declaration and tariff computation for goods of real complexity. And yes, there are customs inspections too (I assume on a sampling basis; readers can clue me in).

      The amount of extra hassle constitutes a non-tariff trade barrier in and of itself. And that over time will encourage manufacturers to simplify their supply chains. Auto-makers, for instance, will find it less attractive to send parts into the UK for further assembly to be re-exported to Europe; they’ll presumably over time restructure production so as to have manufacture for the rump EU market in the EU, and have parts made in the UK mainly to be included in any final assembly there.

      While that is bad enough, a looming problem is far worse. All this border documentation is managed by computer systems. The UK’s present system for handling non-EU-related trade is almost 25 years old and was set for replacement. The new system, called CDS for Customs Declaration System, to be ready by 2018 and to have the capacity to handle 100 million transactions,. At double the current level of 50 million, that would have seemed to be ample headroom.

      Reading between the lines of the Financial Time story, there seems to be some doubt as to whether the original spec could have been pulled off in time. But now with Brexit, the project suddenly has a major spec change: it has to handle 350 million transactions.

      And what the story does not mention, but seems likely to be the case, is that there are tons of other spec changes that have yet to be identified and documented related to EU and UK tariffs on specific goods. And if the system tracks things like port of embarkation and disembarkation, more data fields need to be added for all the EU ports and air cargo locations. And of course, the Euro currency data field needs to go in too.

      In addition, since the negotiations will be in progress, the levels, and potentially even some of the categories are likely to be in flux. Given that olives are a very important export good for the EU, how will olives be treated versus olive oil versus products made from olives, like olive paste? Will green olives be treated differently than ripe ones? How all this sorts out affects the coding.

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