Claims that Brexit border controls have cost taxpayers £5bn do not amount to a proper cost-benefit analysis, says Julian Jessop
The National Audit Office (NAO) has rightly had a go at the government’s handling of the rollout of new import controls after Brexit. But it is still too soon to judge the long-term impact.
The headlines have focused on the estimated government spend of £4.7bn on setting up the new infrastructure and systems. This should be a one-off, even though there will be some continuing running costs on top.
Moreover, it would be wrong to conclude that the taxpayer could have avoided the full £4.7bn if Brexit had not happened. For a start, a proper cost-benefit analysis would need to net off the associated savings on contributions to the EU budget.
There should also be some tangible benefits from improved border security and from the smoother handling of goods imports from non-EU countries. If this is indeed the boot up the backside needed to create the “world’s most effective border”, then this could still be a ‘Brexit win’.
Nonetheless, the initial impact has undoubtedly been negative, and the rollout could have been managed better. Any increase in border frictions means traders will face additional costs, which will inevitably be passed on to consumers.
The repeated delays in implementing the new arrangements post-Brexit have also added to business uncertainty. And there are suspicions too that the new checks go far beyond what is actually needed to protect the UK from unsafe imports, due in part to pressure from the farming lobby.
The impact on overall inflation should still be small. A recent independent report by Allianz Trade suggested that the new checks on EU imports might add just 0.2 percentage points to UK inflation, and that this would be more than offset by the temporary suspension of tariffs on many other imports.
There are some other valid concerns, notably about the disproportionate impact on smaller businesses who might stop importing altogether. The main negative effects could be reductions in choice and reliability of supply, rather than higher prices.
But a final verdict should wait until the new systems have fully bedded down. The delays and some of the additional spending has at least allowed officials to fine-tune the operating model, reducing the costs to traders. The IT glitches are also fixable.
In the meantime, though, is anyone really surprised that another major government infrastructure project has made such a rocky start?
Julian Jessop is an independent economist and Fellow at the IEA