As we accelerate the pace of our negotiations with the European Union, I gave a speech last Friday to lay out the terms of the implementation period for our new relationship. This period, a bridge to the future, will be strictly time-limited and see a continuation of existing structures and rules. We will no longer be a member of the EU, which is a legal requirement for signing a new trade treaty, while still ensuring the continuity of our businesses and their trading relationships. We will use this period to ensure we are best placed to grasp the opportunities of Brexit, and that will mean signing new free trade deals with countries around the world.
Given reports today of a huge gap between the UK and the EU on how financial services will be able to be traded freely in a post-Brexit environment, can the Secretary of State set out exactly how he sees this trade operating successfully in future, and exactly how he plans to protect the jobs of the 1.1 million people in the UK who work in this sector?
First, not only have we not yet engaged in the future relationship negotiation, but the EU has not yet decided its own negotiating guidelines. They will, we expect, be laid down by the March Council on
Can the Secretary of State confirm that we will find a way, during the implementation period, to negotiate a way to address the consequences of any EU legislation that is deemed contrary to our national interest?
The duration of the implementation period should be around two years. Only when the UK is no longer a member state can we take advantage of our status as an independent trading nation. As such, the UK will negotiate our own free trade agreements but not bring them into effect until after the implementation period has concluded. For this period, we will agree a process for discussing laws that might be brought in, on which we have not had our say. This will give us the means to remedy any issues through dialogue as soon as possible.
There have been lots of questions this week about the leaked EU exit analysis Whitehall briefings, but this is the first chance I have had to ask the Secretary of State about it directly, so I will choose my words carefully. Can the Secretary of State confirm when he first knew that economic modelling work on Brexit scenarios was being undertaken across Whitehall?
Actually, the right hon. and learned Gentleman does not have to ask me; he should read the book. In addressing the Select Committee on
“We will at some stage—and some of this has been initiated—do the best we can to quantify the effect of different negotiating outcomes as we come up to them. Bear in mind that we have not started phase 2 yet. In particular, we will try to assess, in bigger categories, the effect of various outcomes in financial services and in terms of the overarching manufacturing industry, agriculture and so on. We will do that a little closer to the negotiating timetable.”
I say that because I read with great interest in Hansard and elsewhere this morning various reports about my being traduced, so I thought that I should tell the House that actually I told the Select Committee that this work was under way last December.
I think it follows that in December the Secretary of State knew that this modelling was going on. Can he confirm when he was first talked through the economic modelling of the Brexit scenarios by his Department—not when he told others, but when he was talked through it?
Let me say something on that as well. One of the things that the right hon. and learned Gentleman has been trying to pretend over the course of the last few days is that somehow my colleagues have been critical of the civil servants doing this job, because the outcome is as yet a work in progress—[Interruption.] That is what it is: a work in progress. I say that because we are trying to do something that is incredibly difficult. Every institution that has tried it has failed—[Hon. Members: “Answer the question!”] I am going to answer the question. Every forecast that has been made about the period post-referendum has been wrong. As I told the Select Committee, the Bank of England—the best forecasting organisation in the business—forecast for 2017 a reduction in exports, but there was growth of 8.3%. It also forecast a reduction of 2% in business investment, but it grew by 1.7%. It forecast a reduction in housing investment, flat employment growth, and growth of 0.5% versus 1.1% being the outcome. What has been going on is an attempt to find a way of getting a better outcome. In those terms, I talked to my own Department and the cross-departmental group in early January on this matter.
This is an important issue. We need to ensure that Europe continues to protect its security and diversity of supply, and that is something on which we will continue to work with colleagues at the Foreign Office and at the Department for Business, Energy and Industrial Strategy.
The UK’s civil aerospace companies are leading the world in the development of future technologies, but everyone from the chief executive of Airbus to the Unite reps at Rolls-Royce says that a hard Brexit threatens that success. Why is the continued membership of the customs union and the single market not on the table to protect the UK’s engineering manufacturing sector?
As a chartered aerospace engineer, this subject is close to my heart. Aviation is crucial to the UK’s economy, and we are committed to getting the best deal possible for the UK. We are focused on securing the right arrangements for the future, so that our aviation and aerospace industries can continue to thrive, that passengers can have opportunity and choice, and that businesses can be profitable. We will seek the right customs arrangements between the UK and the EU to ensure that trade is free and frictionless and that businesses can succeed.
Does my right hon. Friend agree that while the manner of our leaving the EU is rightly a matter for debate and negotiation to secure the best deal for the UK, the fact that we are leaving the EU was decided beyond doubt in June 2016 by the British people?
I am happy to reassure my hon. Friend on that point. The British people voted to leave the EU—17.5 million of them—in the biggest mandate in our history, and we are committed to respecting the result of the referendum. The Government have undertaken a wide range of ongoing analysis to ensure that we get the best deal for the British people in our EU exit negotiations, but whichever outcome we choose to negotiate for—most of that has been chosen—it will involve leaving the EU and respecting that democratic mandate.
The independent “Preparing for Brexit” report commissioned by the Mayor of London found that a hard Brexit will lead to the loss of 56,500 more jobs in London alone than if the UK remains in the single market and customs union. Does the Minister agree that that is clear evidence that a hard Brexit will be catastrophic for jobs?
No, I do not. As I explained earlier, one of the great difficulties with such forecasts is that they have proved to be entirely wrong at every turn so far, and that is not just the view of a politician. The smartest and most innovative economist in the country is probably the deputy Governor of the Bank of England, Andrew Haldane, who referred to the forecasts as having faced a “Michael Fish” moment—in other words, they must find out why they did not work. A forecast is not evidence to be relied upon. It may be an opinion, but it is not evidence.
Over the last 45 years, British taxpayers have had far too much of their money taken from them to go to the EU. Now that we are leaving, can the Secretary of State give an indication of the value of our share of EU assets and what will happen to the share that we have contributed? Is he negotiating to get it all back?
My right hon. Friend picks up on an important point. It is a component of the negotiations that brought the public claim down from £100 billion to £35 billion—part of that was offset by our assets.
The chemicals industry is the largest sectoral employer in the Grangemouth area of my constituency. It exports 60% of its goods to the EU and imports 75% of them from the EU, and it is rightly concerned about frictionless and tariff-free trade coming to an end. Will Ministers tell us what the EU exit analysis projects for that sector?
We have met representatives of the chemicals industry on several occasions. At the most recent meeting, we had constructive conversations that ended positively. We will ensure that we carry through the positions that we have set out, particularly in relation to goods on the market, and we hope to preserve continued registration of chemicals under REACH. We will of course seek to ensure that our deep and special partnership covers the chemicals industry, so that it can flourish after we leave the EU.
Will the Minister confirm that it is possible for non-EU countries to access only three of the single market’s four freedoms, specifically the free movement of goods, capital and services, without being required to accept freedom of movement, as can be seen with the association agreement countries? Is the Department currently looking at that type of arrangement?
My hon. Friend makes an extremely good point. Trade continues all around the world on a free and fair basis, particularly under free trade agreements. It is our expectation and intention to secure a free trade agreement of unprecedented scope and ambition, which should meet just the criteria that she sets out.
“does not yet reflect this Government’s policy approaches”—[Official Report,
Vol. 635, c. 834.]
Given that the Secretary of State has just claimed from the Dispatch Box that everybody knows what the Government’s position is, will the Minister explain why lots of analysis has been done of the options that the Government do not want when apparently no analysis has yet been done of the option that the Government do want?
As I said when I answered the urgent question on Tuesday, the Government cannot control the timing of leaks. The preliminary analysis is a work in progress that does not yet reflect the Government’s policy. Once the analysis has been carried through, I am sure that it will do.
Order. I was about to say that the hon. Gentleman chunters from a sedentary position, but he almost yells from a sedentary position his expression of sympathy for the former Chancellor of the Exchequer. I am sure the former Chancellor of the Exchequer will bear with stoicism and fortitude not being directly referenced by the representatives of the Treasury Bench.
Will the Under-Secretary of State for Exiting the European Union, my hon. Friend Mr Baker, confirm that he heard from Charles Grant of the Centre for European Research that officials in the Treasury have deliberately developed a model to show that all options other than staying in the customs union are bad, and that officials intend to use the model to influence policy? If that is correct, does he share my view that it goes against the spirit of the Northcote-Trevelyan reforms that underpin our independent civil service?
I am sorry to say that my hon. Friend’s account is essentially correct. At the time I considered it implausible because my direct experience is that civil servants are extraordinarily careful to uphold the impartiality of the civil service. We must proceed with great caution in this matter, but I have heard him raise the issue. We need to be very careful not to take this forward in an inappropriate way, but he has reminded me of something that I heard. It would be quite extraordinary if it turned out that such a thing had happened.
I did not say it was correct. I said that the account that it was put to me is correct. It was put to me, and I considered it an extraordinary allegation—I still consider it an extraordinary allegation. [Interruption.] To be absolutely clear, I said it was correct that the allegation was put to me. I did not in any way seek to confirm the truth of it. What I would say is that we need to proceed with great caution, because it is essential that we continue to uphold and support the impartiality of the civil service.
Every day hundreds of trucks criss-cross the channel carrying vital components for the British car industry’s highly integrated supply chain. What assessment has the Minister made of the impact on that travel of customs delays, tariffs and extra bureaucracy if we come out of the customs union?
We are seeking frictionless access to the European market for our automotive industry. We want to make sure that we continue to maintain the benefits of the complex supply chain, which benefits businesses both in the UK and in the EU.
I am happy to give my hon. Friend that reassurance. We have been having some very useful meetings with the science and universities sector to talk about its needs in that respect. We want to ensure that the UK continues to be able to attract the brightest and the best from around Europe and around the world.
Order. I just want to hear from the two colleagues who have not contributed to these exchanges since 9.34 am, or thereabouts.
As I told the House earlier, every forecasting model of the post-referendum performance of the British economy by every major organisation—the banks, Government organisations and, indeed, international organisations—has proven wrong. One of the ways they have been proven wrong is because employment in this country has grown, despite all the forecasts, to record levels today. We will be seeking to do the best we can to ensure that that growth record is maintained.
Order. If the hon. Gentleman’s second inquiry is a single sentence of fewer than 20 words, I will hear it. If it isn’t, I won’t.
Will my right hon. Friend confirm that we will be able to implement decisions during the transition period and not wait until the end to implement everything that is agreed?
We will be able to do some of them, for example, our proposal to put in place a registration scheme and so on. We will also be able to sign trade deals, but not bring them into force.
We have had meetings. My Department alone has had meetings with 350 companies, not all in steel, but in all the user industries. We have a regular meeting between the Chancellor, the Business Secretary, myself and leading business representative organisations, and of course we talk directly to the individual companies.