I am delighted to open the second day of this very important debate. At the outset I want to set out the status of our negotiations and reiterate this Government’s vision for a future economic partnership with the EU. I will in particular focus on the important issue of financial services within any future trade agreement, and remind the House that we have been very clear that the decision to leave the EU does not mean some loveless divorce or division. There is indeed no need for this, given that the economies of the UK and the EU are inextricably connected, and given our long and shared history of common values and shared challenges, and I have no doubt that any future economic partnership must recognise and reflect these facts.
We stand at the threshold of a new beginning with our European partners, and a renewal of our commitment to ensure the continued prosperity and stability of both the UK and the EU. Before I turn to our future economic partnership with Europe, it is important to set out just how far we have come, and what awaits us as we progress our discussions.
The agreement in December was a significant step forward. The joint report issued by the UK and the EU set out progress on three areas: a fair deal on citizens’ rights that enables families who have built their lives together in the EU and the UK to stay together; a financial settlement that honours the commitments we undertook as members of the EU, as we said we would; and an agreement in relation to Northern Ireland. We are confident that this collaborative spirit, which led to the December agreement, will endure as we take our approach forward into the next phase, including at the European Council next week.
On this concept of a collaborative, open spirit, trying to find solutions and securing frictionless trade, the Minister will have seen today’s Sky News report that the Government are insisting on non-disclosure agreements with a variety of industry groups, transport bodies, hauliers and others in trying to find their way through. Why are the Government insisting on gagging business organisations in that way?
It is standard practice for the Government to use non-disclosure agreements, and delivering a seamless post-Brexit border is a top priority for us. Non-disclosure agreements with key delivery partners for the border are crucial to the open exchange of information and opinion on options and scenarios, and they ensure that all planning negotiations and decisions are based on what is achievable and most appropriate for the UK to ensure a safe and secure border.
In respect of our future trading relationship, draft EU negotiating guidelines have been circulated to the EU for comment, and we expect final guidelines to be formally adopted next week at the March European Council. We trust that these will provide the flexibility to allow the EU to think creatively about our future relationship, and, looking ahead, we are confident that we will conclude a deal on the entire withdrawal agreement by the European Council in October. This confidence is not just grounded in our mutual interest of striking a deal, but also because we enter these negotiations from a point of striking similarity: our rules, regulations, and commitment to free trade and high standards are the same. So, as we build this new relationship, we are doing so from a common starting point.
The next milestone in the negotiations will be an agreement of an implementation period. We saw the implementation period prioritised in the Chancellor’s Mansion House speech and the Prime Minister’s Florence speech, alongside a frictionless customs arrangement and a comprehensive agreement on trade in goods and services. The implementation period is the essential first step to ensure that we can all experience an orderly exit from the EU, plan accordingly, and enjoy certainty during the transition.
While being ingenious in his use of language, my right hon. Friend will I am sure agree with me that the purpose of the implementation period is to make sure we have a period of certainty for business, so that when we end up with our final withdrawal agreement we only have one set of changes to make from where we are now to where we will be at that point. That is the purpose of the implementation period.
I do not want to alarm you, Mr Deputy Speaker, but I completely agree with my right hon. Friend John Redwood, which may a be a first in this sort of debate—[Interruption.] He is in a state of high shock. In all seriousness, this is an implementation period—the clue is in the name—but many of us fear that by October we will have achieved nothing more than a woolly set of heads of agreement and that there will be little to implement. How does the Minister see things panning out in reality?
Whether it is a transition period, an implementation period or whatever period one seeks to term it, the important thing is to understand what the period is about, and we have always been clear about that. It is a period in which we will remain closely involved—similar to how we are at the moment—so that when we move into the post-transition or implementation period we have undergone just one set of changes and that we have certainty in the interim for British businesses, which is exactly what they have been telling us they would like.
I repeat these words:
“I propose that we aim for a trade agreement covering all sectors and with zero tariffs on goods. Like other free trade agreements, it should address services.”
Those are the words used by President Tusk in introducing the guidelines, which seem to accept the principle that there should be a comprehensive free trade agreement between the United Kingdom and the EU.
My hon. Friend makes an important point and, as I will say later in my speech, there is every reason to move towards a comprehensive free trade agreement covering not just goods, but services.
My hon. Friend raises an important point. We will be seeking a unique deal for our country that recognises the prime importance of financial services both to our country and to the European Union and of the provision of competitive finance to the EU’s businesses and consumers. She mentioned CETA, and the relevant point there is that the negotiations, which were led by Michel Barnier, recognised the importance of attempting to include areas such as financial services, which is exactly what we will seek in the negotiations that will now follow.
We have the reassurance that the UK and the EU both issued a published text on the approach to the implementation period that reflects the significant common ground between us. The text would codify an implementation period that preserves the current status quo for business and consumers, is time-limited but also provides a sufficient window for the EU and UK to put new processes and systems in place, and ensures continuity in the application of international agreements. As a third country, the UK will have the ability to use the period to negotiate and sign new trade deals, while reflecting the fact that we cannot bring these agreements into legal effect until after the end of the period. We will also introduce a new registration scheme for EU citizens arriving post-Brexit but during the implementation period, when EU citizens should be able to continue to visit, live and work in the UK as they do now.
The Minister has referred to the potential opportunities to negotiate new trade deals after we leave the European Union, and one of his colleagues has been keen to big up the prospect of the riches to be had from that. Can the Minister name any country in the world that has indicated it would be more likely to give a beneficial trade deal to the United Kingdom on our own than it would be to negotiate a deal with the world’s biggest single internal market?
What I can tell the hon. Gentleman is that a large number of trade missions have been led by the Department for International Trade and its Secretary of State. We have had extremely encouraging discussions with a large number of important potential future trading partners with whom we may be seeking free trade agreements. As I have said, we will be able to negotiate deals within the implementation period, although they will not come into effect until we are beyond that point.
I believe that my hon. Friend is right. I certainly read that article this morning, and if what it says is the case, that would be good and sensible news, because it would be entirely logical that we should be in a position to go out and negotiate free trade agreements during any implementation period, although we respect the fact that the deals would not be switched on until we were beyond that point.
As a part of the customs union, we have trade deals with 50-odd countries across the world, and I understand that they are worth some £140-odd billion per annum in UK trade exports. Will the priority during the implementation period be to renegotiate and sign deals with all those countries with which we currently have a trade deal? We know that some of them want to renegotiate the terms and want greater access to UK markets as a result. How many of those deals are we going to be able to renegotiate and sign before we actually leave the European Union?
I reassure the hon. Gentleman that it is an absolute priority for the Government to ensure the consistency and continuity of the existing arrangements as they pertain between the European Union and other countries. I see no reason why we should not benefit from those arrangements, just as those countries will indeed benefit from arrangements with us as we go forward.
We have proposed practical solutions to help deliver a smooth departure from the EU. One such solution is the introduction of a joint committee to resolve issues or disputes that may arise during the implementation period. That approach is a common feature of international trade agreements. The joint committee would, for example, allow the UK to raise concerns regarding new laws that might be harmful to our national interest. We will also continue to discuss our involvement in relevant bodies as a third country during the period to ensure that EU rules and regulations continue to operate coherently.
It is in the interests of both the UK and EU to agree the precise terms of the implementation period as quickly as possible. We are close to delivering that, and we expect it to be formalised at the European Council meeting next week. The implementation period is key to forging the best possible future relationship, giving businesses and Government the time and certainty to plan for Brexit, and preparing the UK for its status as an independent trading nation. It will be a bridge from where we are now to where we want to be in the future—on exit, on day one, and beyond.
Looking further forward, it is crucial that talks progress so that we can agree the terms of our future relationship with the EU. We are now moving at pace to set the parameters of an economic partnership. As a Treasury Minister, I am particularly focused on how our economies will interact and grow together. As the Prime Minister said in her speech on
The Minister is being extremely generous in taking interventions. Taking him back to the implementation period and the negotiation of trade deals, will the priority be renegotiating the trade deals that we already have with all these third countries via the customs union or negotiating new trade deals with countries such as the United States and China?
The hon. Gentleman will understand that both are an extremely high priority. We will be pursuing both avenues vigorously.
As my right hon. Friend the Chancellor made clear in his Canary Wharf speech last week, financial services is a sector that calls for close cross-border collaboration. The Chancellor also reiterated that it is simply not credible to suggest that a future deal could not include financial services. It is in the interests of both parties to ensure that the EU can continue to access and enjoy the significant benefits afforded by our financial services hub, because it is a regionally and globally significant asset, serving our continent and beyond, and near-impossible to replicate.
The UK can claim excellence in many areas, but in trade in financial services we are truly the global leader. We manage €1.5 trillion of assets on behalf of EU clients, and 60% of all EU capital markets activity is conducted here in the United Kingdom. Around two thirds of debt and equity capital raised by EU corporates is facilitated by banks right here in the UK. The huge economies of scale have led to London’s dominant position in EU financial services. As the Chancellor made very clear last week, we should be under no illusions about the significant costs if this highly efficient shared market is fragmented—costs that will ultimately fall to consumers and companies right across Europe.
My right hon. Friend is making a very important point. As the Chancellor set out, those costs are many billions of pounds. One example is the proposed relocation of clearing houses, with an effective cost of some £25 billion a year. Does my right hon. Friend agree in addition that it is critical to have continuity for the legal instruments that underpin financial services, and that continuity of access for legal services must therefore be inextricably linked?
My hon. Friend raises an important point about the significance of financial services, not just to us but to our European partners. On his specific point about regulatory continuity, we are considering the detail of that at the moment. We will certainly look at the prospect of returning to the matter on Report of the relevant Bill.
The UK stands ready to engage on a future trade agreement—one that includes financial services. Our overarching vision is for an economic partnership—including a future trade agreement—that delivers the maximum possible benefits for both our economies in all sectors, respects the integrity of each other’s institutions and seeks to strengthen, not weaken, the prosperity of Europe as a whole. Despite that, some still question the possibility of reaching such an agreement or insist that a trade deal cannot include financial services. The Chancellor addressed those sceptics in his speech last week, when he said that
“every trade deal the EU has ever done has been unique”.
The existing models do not represent the best way forward; nor do they provide a useful precedent to form the basis of any future agreement. Joining the EEA would not give the UK enough control, and a CETA-style deal would present too low a level of market access. The EU and the UK come to the negotiating table from the unique position of having the same rules and regulations on day one, not to mention our deeply interconnected economies. Unlike when other countries negotiate free trade agreements, this is not about aligning two totally different systems. Any new trading agreement should reflect the starting point of deep and historic convergence. We understand that, over time, there will be points of inevitable divergence, so we recognise that any future agreement should set out a clear approach to that aspect.
Our country seeks the deepest and broadest agreement possible—a bold economic partnership that is of greater scope and ambition than any comparable arrangement in history. The ambition of our vision reflects the scale of our mutual interest, our shared history and all that we can achieve together as good friends and trusted neighbours. Leaving the European Union represents an opportunity to chart a prosperous future. Along with my colleagues in Government, I have the greatest faith in our country and in our ability to work with others to achieve a deal that provides and endures for us all.
As we mark the halfway point of this general debate, it is worth reflecting on the fact that we have had a number of thoughtful contributions from Members on both sides of the House. Although I welcome any opportunity for Parliament to debate and, I hope, shape Brexit, no one is under any illusions about the fact that over these two days we are doing anything more than filling time to cover the Government’s legislative paralysis. It is just over a year until we leave the European Union. We have a mammoth legislative task ahead of us, but the Government are holding back the Customs Bill and the trade Bill because they are, understandably, afraid of defeat. They have yet to present Bills on migration, fisheries and agriculture; perhaps they are worried about some of the hard truths in those areas.
The Prime Minister was right to say at Mansion House that we need to face hard truths, on the basis of evidence. Not only do I agree with the Prime Minister, but I agree with her former deputy, Damian Green, who said:
“If analysis is being produced then publish it. And frankly there will be a big political debate about it. Let’s have this argument in public—that’s what democracies do.”
The country faces critical decisions that will define how we live and our place in the world for generations to come. Honesty, openness and hard truths are the very least that people deserve.
That is why the Opposition pressed for the publication of impact assessments and the Treasury analyses of the future of the economy under the different available scenarios. Those analyses, which have now been published, make sobering reading. Ministers have said on several occasions—I think this was repeated yesterday—that the three options that the Treasury modelled do not reflect their desired outcome. But the Minister for Trade Policy, Greg Hands, yesterday told the House that the Government were seeking an ambitious free trade agreement with the EU. I think that that was repeated this morning. The central model in the Treasury analysis was exactly such an agreement—it was described as the best possible free trade agreement—so it has been modelled. What did that model tell us? Over 15 years, such a free trade agreement with the EU would result in a 5% hit to the economy. That would mean 5% fewer jobs and 5% less money for public services. To paraphrase Anna Soubry, this must be the first Government in history who are setting as their ambition reducing the size of the UK economy.
At Mansion House, the Prime Minister was honest about the fact that her plans would result in downgraded access to EU markets. What she did not make clear, and what her Cabinet has resisted making public, is just how damaging that version of Brexit would be to the economy. Initially—this feels like some time ago—we heard Ministers talk enthusiastically about their plans for an ambitious free trade agreement with the United States, which would compensate for the damage to our trade with the EU. But according to the Government’s own analysis, even if they achieved that deal, it would boost GDP by just 0.2%. Let us be clear that that would be in return for dismantling our food health and safety standards, among other US demands. We could end up with nothing but a hard border in Ireland if we diverged from EU agricultural standards, and a US deal would require us to do so. If the ongoing negotiations on open skies are anything to go by, the special relationship will not count for much in the cold, hard light of trade negotiations.
It is fascinating to watch how even the more extreme Brexiteers suddenly decide, as the hard truth of the difficulties involved in a US trade deal dawn on them, that the US is not that important after all. On
“the real opportunities of the future will be with…emerging markets”.
US trade deals, the Northern Ireland peace agreement and Treasury economic analyses have all been casually brushed aside by those who long for the deepest rupture with the EU. But Labour will not do that.
In The Times today, the Government made a song and dance about this apparent concession by the European Union that the UK would be able to negotiate and sign trade deals during the transitional phase. Does the hon. Gentleman honestly believe that the British Government and the British civil service are going to be able to renegotiate 70-odd EU free trade agreements that we already have through the customs union, negotiate new trade deals with the US and emerging markets or whoever they may be with, and carry out the gigantic task of renegotiating the trade arrangement with the EU?
The hon. Gentleman is right to talk about the difficulties that would be faced, and there was naivety on the part of the Government in assuming that these deals can just be rolled forward. This is one of the arguments behind our approach and our policies on the customs union. We want to face the hard truths that the Prime Minister talked about at Mansion House and it is why we believe, along with the CBI and the EEF, that a new customs union with the EU is best for manufacturing and for our economy, and it is the only way of resolving the Northern Ireland border.
Is it not crystal clear to anyone who reads the Labour manifesto that Labour set out its bold vision for an independent UK trade policy—I agreed with some, but not all, of it—but that that would have been completely incompatible with staying in a customs union? It is completely misleading to suggest that it is compatible.
We could draw some interesting conclusions from the Conservative manifesto at the last election, but we all need to face facts and perhaps the Government need to change views in the cold light of those facts. I always find it interesting to take interventions from the right hon. Gentleman. I do not know whether he is still advising—
Well, the right hon. Gentleman’s comment in the column in the Financial Times on
“Time to look further afield as UK economy hits the brakes”, read:
“I sold out of the general share ETFs”— exchange-traded funds—
“in the UK after their great performance for the year from early July 2016 when I saw the last Budget and heard the BoE’s credit warnings. The money could be better put to work in places where the authorities are allowing credit to expand a bit, to permit faster growth.”
So I am completely accurate in my quote.
The hon. Gentleman should look at the whole portfolio, which still had massively more in the UK than in the general global representation, and this was nothing to do with Brexit.
Order. The hon. Gentleman, and all hon. Members, can question other Members’ political attitudes and what they say in this House. What we cannot have is one Member suggesting that another Member has said something, in writing or otherwise, which he says he did not say. [Interruption.] Matthew Pennycook will not question what I am saying. Mr Blomfield might like to consider just closing this down with a withdrawal of his remark about Mr Redwood.
I thank you for that clarification, Madam Deputy Speaker. I apologise for any offence, but I was simply quoting from the Financial Times column by the right hon. Gentleman, which said:
“Time to look further afield as UK economy hits the brakes”.
I hope we can return to the subject we are meant to be debating today. The hon. Gentleman talks about manifestos, and of course his party failed to get elected on its one. Is he familiar with the Conservative manifesto, which some may say we have drifted away from to some considerable extent? It made it clear that the Government’s policy, should they be re-elected to govern our country, was that we would seek a customs arrangement.
I was aware of that manifesto, and the right hon. Lady is right in what she says. I also reflect that the manifesto and the narrative surrounding it sought an overwhelming mandate for a hard Brexit, which the British people failed to give to the Conservative party.
Let me move on to explain why we believe a comprehensive customs union with the EU that replicates the current arrangements also does not weaken our opportunity to develop trade with the rest of the world—certainly not in services. As Germany has shown, we do not need trade deals to develop trade, for example, with China. As the International Trade Secretary acknowledged when he was there with the Prime Minister in February, membership of a customs union will not hold back bilateral trade. Where deals can be done, we think member- ship of a customs union gives us a stronger hand in trade negotiations, as part of a market of 650 million people, rather than just one of 65 million people, and in maintaining strong EU standards.
Members of this place and the Government must be honest about the fact that any trade agreement—
I am listening carefully to the hon. Gentleman and I understand that he is asking to have a customs union with the EU. I listened to the Leader of the Opposition’s speech less than three weeks ago, where he also asked for an exemption on state aid and competition law. Does the hon. Gentleman agree that no country has a customs union with the EU and also has an exemption on state aid and competition law—even Turkey has to apply all EU treaties in this regard?
I recognise that the hon. Lady has enormous experience as a former MEP, but she did ask that question yesterday and my hon. Friend Matthew Pennycook replied. I think she is confusing a customs union with a single market requirement—[Interruption.] Let me answer the point in any case. The Leader of the Opposition did raise a concern that we would want assurances on competition policy, but we are absolutely confident that those assurances would be very easy to get and would not be problematic. As I believe was pointed out yesterday, the Leader of the Opposition said on the Peston show in January that we are absolutely confident that nothing in our manifesto would be thwarted by state aid rules.
I ask the hon. Gentleman to withdraw his accusation that I am somehow confused. It is very clear in reading Turkey’s customs union arrangements that it has to comply with all EU treaty rules on state aid and EU law on competition.
I thank the hon. Lady for that clarification, but we are not seeking a customs union comparable with Turkey’s. We are seeking a comprehensive customs union which replicates the current arrangements that we enjoy with the EU.
Let us move on to another area. We need to be honest about the central issue on which many of those who campaigned to leave focused their campaign and which influenced the votes of many—immigration. Taking back control of our borders was a powerful promise, creating expectations that the Government really have no plan or intention to deliver. The Government have had control of non-EEA immigration for the past eight years and in every one of those years it was greater than EEA migration.
The Government know that things will not be changing significantly. Two weeks ago, that ardent Brexiteer, the Secretary of State for Environment, Food and Rural Affairs, told the National Farmers Union that
“agriculture needs access to foreign workers.”
He promised to maintain that access, for both seasonal and permanent workers. He was echoing the Secretary of State for Exiting the European Union, who said in Estonia last year that it will take “years and years” for British citizens to fill the employment gaps, and that in the meantime Estonians would be welcome to come to work in the UK. At Mansion House, the Prime Minister talked about a future labour mobility scheme with the EU.
The difficulties of squaring the expectations unleashed by the leave campaign with the interests of the economy are no doubt the reason why the Government have delayed the immigration White Paper, yet again, and do not look set to have a new system in place by the time we depart in March 2019.
When the hon. Gentleman referred to the numbers of non-EEA migrants, I was a bit concerned that he almost sounded as if he was sympathetic towards the Government’s obsession with treating immigration as a number that should be brought down rather than as something that benefits our nations economically and socially. Will he comment on the speech made by the Leader of the Opposition at the Scottish Labour party conference in Dundee last weekend, in which he referred to the EU as something that allowed low-paid workers to be brought into the UK, thereby driving down wages? Does the hon. Gentleman agree with a growing number of Labour Back Benchers that the Leader of the Opposition was wrong to say that and should apologise?
We have always been clear—as indeed, have the Government—about the benefits of migration. That was not what the Leader of the Opposition said in Scotland. There is no evidence that migration drives down wages. There is an issue, which Labour would tackle—it has been in our manifesto for the past couple of elections—on the exploitation of European workers, and those from other countries, in the UK. We need tougher labour-market rules and enforcement to tackle those issues.
The Prime Minister was right to say in Munich and at Mansion House that she was ready to cross her red lines on the European Court of Justice in relation to security, because of the importance of security to this country. She is clearly right: security is vital. I think she was influenced by the fact that, as a former Home Secretary, she had an intimate understanding of the issues and recognised the consequences of failing to reach an accommodation. If security is vital to this country, as it is, is not the economy, too?
The Prime Minister was right to talk about hard truths, because the British people, whether they voted leave or remain, will not thank politicians who deliver a damaging Brexit on the basis of a false prospectus. The former Prime Minister John Major was right, too, when he said that it is right not only to speak truth to power, but to speak truth to the people. Let us face up to the hard facts: there will be no Brexit dividend for public services, as the Chancellor confirmed again on Tuesday; there will be no significant change to migration; there are no real red lines on the European Court of Justice; and there will be huge damage to the economy, according to the Government’s own analysis.
It does not have to be like that. If the Prime Minister had said, “This country voted to leave the European Union, but it was a close vote. It was a mandate to go, but not a mandate for a deep rupture”, and if she had said, “We will leave, but stay close: in a customs union, as close as possible to the single market, a member of the agencies and partnerships that we have built together over 44 years”, she would have had the overwhelming support of this House. Instead, she has let a tiny band of extreme Brexiteers in the European Research Group set the agenda. It is not too late: she could reach out to the majority of the House and the majority of the country to adopt a sensible approach—to adopt Labour’s approach—and I hope that she will.
Order. There is plenty of time for debate this afternoon. I hope that we can manage the debate without a formal time limit, because that will allow natural debate to occur without restriction. That will work if Members speak for approximately 10 minutes each. If anybody speaks for much longer than that, we will have to have a time limit.
I shall proceed as quickly as possible. Paul Blomfield rather marred his speech by playing the man and not the ball. It is much better if we deal with the arguments, instead of imputing motives or sentiments that were at that very moment being disowned by my right hon. Friend John Redwood. That was rather unfortunate.
I wish to point out that the agenda is not being set by a small group of MPs; it is being set by the British people—more than 52% of the electorate. Those who argue against leaving the customs union or for staying in the single market are arguing against the right of the British people to take control of their own affairs. Let us make no bones about this: the Labour party has now adopted a position in favour of some kind of weaselly half-Brexit, which is not what the British people voted for. The Prime Minister said that she does not recognise any distinction between hard or soft Brexit; there is leaving the European Union or somehow staying in, which seems to be the position the Labour party has now adopted.
Let me set out two contexts. First, many who supported remain seem to believe that people who voted leave in the referendum were voting to turn their back on the world. They claim that the UK’s decision was driven by isolationist and xenophobic undercurrents and see the leave vote as representing intolerance, prejudice and a call for protectionism. Vote Leave did not campaign for that. We deliberately left the Vote Leave website up—Members can take a look if they like. Vote Leave did not argue for isolation, intolerance or economic protectionism. Those may be the views of a vociferous minority, but the Ashcroft polling that was undertaken at the time of the referendum found that for nearly half of leave voters, the biggest single reason for wanting to vote leave was
“the principle that decisions about the UK should be taken in the UK”.
Lest we forget, that is the first context. The debate was about taking back control—about democratic self-government and our country’s right to make its own laws, to decide its own taxation and spending and to choose how it engages with other countries on matters such as trade, foreign affairs and defence. It was about leaving a bloc that is not only in relative economic decline but increasingly in a state of economic and political crisis.
I very much agree with my hon. Friend. Had the speeches by Mr Juncker and President Macron about moving towards a more integrated Europe—a sovereign Europe, as President Macron says—been put to the British people before the referendum, we would have had a proportion of the vote vastly greater than 52%.
I was going to make that point later in my speech, but shall no longer do so, for the sake of brevity.
The EU undermines democracy, prosperity and international co-operation. It is plagued by high unemployment, high debts, an ageing population that is much too dependent on state welfare, a dysfunctional euro, unaccountable political institutions and a democratic crisis. It puts up barriers to the combination of world-class universities, technological innovation and venture capital that is fundamental to the technological innovation on which the future of our economy depends.
Since the referendum, we have seen the landmark statements to which the Chairman of the European Scrutiny Committee, my hon. Friend Sir William Cash, referred. In fact, Martin Schulz, the former President of the European Parliament, wants a full united states of Europe by 2025. The formation of the euro, which was always a political project, transformed the EU, making full integration an imperative to try to prevent the eurozone from breaking up. In the end, the euro will fail anyway, because there is no political consent for the scale of fiscal transfers necessary to compensate for the huge internal trade imbalances.
The second context is economic. Shortly before the referendum, the Treasury forecast that a leave vote would inflict an economic shock on the UK, leading to reduced trade and foreign direct investment, recession, and the loss of 500,000 jobs. I am sorry to disappoint the hon. Member for Sheffield Central, but the Treasury’s analysis has proved to be manifestly wrong. It also ignored the long-term future of global trade and economic growth. Between 2016 and 2017, UK GDP increased by 1.7%, and economic growth continues to surpass expectations. Tax receipts are higher than expected, and the UK is running a current budget surplus for the first time since the year leading up to July 2002—long before the crash, and two years earlier than anticipated just last year. UK unemployment has continued to fall from 8.5% in late 2011 to 4.4% in late 2017, and the unemployment rate was recently at its lowest point since 1975.
Although some businesses are moving parts of their operations to other EU countries, the number of jobs being moved is significantly lower than expected. Foreign direct investment has continued to grow and, since the referendum vote, there has been a string of major inward investment decisions. In fact, the year of the referendum, 2016, turned out to be another record year for inward investment. We have seen Wells Fargo committing to a new £300 million London headquarters and Nissan announcing its new Qashqai and X-Trail models to be built in Sunderland, making Sunderland a super plant of 600,000 vehicles a year. In December 2017, GlaxoSmithKline revealed its plans to invest £40 million in the UK’s life sciences sector. At the beginning of this month, Siemens committed to building a £200 million train manufacturing plant in the UK if it wins orders for new rolling stock, and, just last week, Toyota announced that it will build the next generation of its Auris hatchback at its Burnaston plant in Derbyshire, including a £240 million upgrade of the plant.
That is not a matter for gloating or complacency, but it shows that inward investment is not dependent on membership of the EU. What about the longer-term prospects for trade and economic growth? In recent years, UK trade has shown a well-established trend, as the proportion of UK exports sent to the EU has been declining. It peaked at 54% of UK exports in 2006. By 2016, that had fallen to 43%. That decline in the importance of our EU trade has set in despite the UK being in the EU, in a customs union and in the single market. Conversely, over the same period, the non-EU share of UK exports has increased. For example, China’s share of UK exports grew from 1.6% in 2006, worth a mere £5.4 billion, to 3.3%, worth £16.8 billion, in 2016.
Trade has also grown significantly with the Commonwealth. UK exports to Commonwealth countries have increased from 8.8% of our exports, worth £21.5 billion, in 1999 to 8.9%, worth £48.5 billion, in 2016. The Commonwealth is a fast-growing market, reflecting much of our language, values and administrative and constitutional heritage, and therefore has great potential for the UK.
The EU is still the UK’s largest trading partner if taken as a bloc, but if we consider individual countries, the UK’s largest trading partner is the United States of America. It seems to have passed the hon. Member for Sheffield Central by that, while the UK has had a trade deficit with the EU every year since 1999—worth £82 billion in 2016—we achieved a £39 billion trade surplus with non-EU countries in 2016. Outside the EU and the customs union, the UK will be able to develop new trading relationships with many of these countries, but not under his party’s policy. Some of these opportunities, including the possibility of joining the Trans-Pacific Partnership and the strong prospects of a comprehensive free trade agreement with the US, including financial services, more than match the potential of our existing relationships with the EU.
The 11 TPP countries have a population of almost 500 million people and represent more than $10 trillion in economic output, which is 13.5% of the global total. The Commonwealth has a population of 2.3 billion people. A comprehensive trade deal with the US, which includes services, would give UK firms better access to its population of more than 320 million and to the world’s largest single economy. With the UK accounting for 7% of world service exports and the USA 15%, they would together account for over a fifth of the global total—a market of huge significance.
Outside the EU, the UK will also be better placed to develop trading opportunities with countries in Asia and Africa, where the most rapid growth is expected to occur in the future. When concluding free trade agreements, we can set our own negotiating priorities that best match our economic interests. The EU has historically represented the UK’s interests poorly not just because it is incredibly slow, but because, inevitably, the EU cannot prioritise UK trading interests such as access for services, which is, of course, of prime importance to our economy. EU negotiators have to take account of 28 states’ interests, which can be very different from our own, and to reflect the protectionist priorities of producer interests, such as the Italian shoe industry, French agriculture and the German chemicals manufacturers.
I am very much enjoying listening to my hon. Friend’s speech and hearing him talk about opportunities for trade outside the EU, but, bearing in mind that nearly half our trade is with the EU, that 40% of that is in services, and that services growth has been increasing year on year, does he not agree that we should try to do both? The EU economy is growing at the moment. We can grow our trade with the EU and with other parts of the world if we strike an amicable trading relationship with the EU as we leave.
I could not agree more with my hon. Friend. We are on exactly the same page, and we can both support the Prime Minister’s negotiating objectives on that basis.
Returning to the UK the power to negotiate and sign trade deals will not only speed up trade negotiation for the UK, but enable the Government to negotiate in the UK national interest. Peter Grant asked which countries we were talking about. The Department for International Trade is pursuing opportunities in countries around the world, and Australia and Brazil, to name just two, have already expressed an interest in concluding free trade agreements with the UK.
I am grateful to the hon. Gentleman for giving way on that point. As a matter of accuracy, may I point out to him that I asked not what countries we hoped to do deals with, but for one country that has said that it will give the United Kingdom a better deal than it would give us as part of the European Union? To date, I have not received a single answer to that question. If he can he tell us now of one country that has said that it will give an isolated Britain on its own a better trade deal than a Britain that is part of the European Union, I am quite sure that his colleagues in the Department for International Trade would be delighted to speak to him.
I think the hon. Gentleman is somewhat playing with words, because nobody will say what kind of deal they will give us until we are actually in the negotiations and making progress. He is asking a question to which he well knows the answer for his own political reasons.
In relation to our trade with the EU, the Prime Minister in her recent speech called for trade at the UK-EU border to be as frictionless as possible. The EU has agreed, as I mentioned earlier, that tariffs and quotas should be avoided and, in the draft negotiating guidelines published earlier this month, it also agreed to the principle of an EU-UK trade deal. Perhaps that is the answer to the hon. Gentleman’s question. There should also be mutual recognition of products and standards, which is no more than the kind of standard agreement that the UK has with many other countries with which it does not have a free trade agreement—incidentally, I think that that is what is meant by a customs arrangement. It means goods need approval in only one country to meet the required regulatory standards in other countries in normal circumstances.
Although we recognise that certain aspects of trade in services are intrinsically linked to the single market, we should note that services trade has nothing whatsoever to do with being in or out of a customs union, because tariffs are not charged on services. The Prime Minister is right to insist that barriers should be introduced only where absolutely necessary. There is no reason for the EU to prevent UK firms from setting up in the EU as we will continue to allow EU firms to set up here. We should agree on an appropriate labour mobility framework and on the recognition of qualifications to provide for the mobility of skilled labour. The Prime Minister also called for the UK and EU economies to remain closely linked in areas including energy, transport, digital, law, and science and innovation. That is perfectly achievable if there is good will on both sides.
The UK is committed to remaining a close friend and neighbour of the EU, and the Prime Minister has made that perfectly clear with a comprehensive economic partnership.
Trade is, of course, of great importance to the economy. In the UK, about 28% of what we produce is sold abroad, and this business activity supports millions of jobs. We also import much of what we consume, and trade allows consumers to access a wider variety of goods, at competitive prices, but the volume of trade is only marginally affected by agreements between countries. Neither the EU nor the UK has a trade agreement with the US, but the US is nevertheless our largest trading partner.
When discussing trade, we must remember that trade agreements are only one factor upon which our economic future depends. How we educate our people, how we regulate our economy, the flexibility of our labour market, and investment in infrastructure, science and technology are far more important to our prosperity than trade agreements. Domestic Government policies have a much bigger impact on economic performance than whether the UK is inside or outside a customs union with the EU. As the hon. Member for Sheffield Central himself pointed out, Germany exports to the rest of the world from within the EU, but with many countries, it does not even have a trade agreement, let alone a customs union agreement.
Let us get all this in proportion. It is far more significant that the UK’s departure from the EU will give us greater flexibility, more responsibility, more accountability and more control over how we manage our economy as we regain: the ability to set our own tariff schedules; the ability to set our own regulatory standards and decide how they should be applied; the unencumbered freedom to set VAT rates; the freedom to relax restrictions placed on UK public procurement; and policy flexibility over things like fishing and farming.
I think that my hon. Friend just said that he did not think that there was value in having trade agreements with other third countries. I would like to clarify that, for example, our trade with South Korea has more than doubled—increased by 100%, as the Foreign Secretary said—since the signing of a trade agreement between South Korea and the EU, of which we are a party.
I am not discounting the value of free trade agreements. I am asking that we dispose of some prevalent misconceptions that our prosperity depends only on free trade agreements and being part of the customs union. It is actually relatively at the margins of the overall prosperity of our economy.
It is not necessary to be a very large country or part of a large trade bloc in order to be prosperous. Many very small states export a far higher proportion of their GDP across customs frontiers. For example, Switzerland’s exports are worth 66% of its GDP, and South Korea’s are worth 42%—far higher than the UK’s. Neither of these countries are in any kind of customs union, so they achieve this across traditional customs frontiers and their people have very high living standards. In fact, the EU is Switzerland’s main trading partner, and it is not even a member. Other small trading countries include Singapore, whose exports are actually far bigger than its GDP at 172% of GDP, and Hong Kong, whose exports are 187%, because it imports and exports such large volumes. But neither is part of a customs union or of any kind of single market; they just get on with it.
Control over our own laws offers far greater opportunities to develop our economy and export than the removal of customs checks when trading with other countries. The cost of customs processes is low and declining in comparison with other costs, such as anti-competitive regulation, behind-the-border barriers to trade and the reduction of tariff barriers. South Korea had substantial tariff barriers before the free trade agreement. We gain the opportunity to focus on those matters in trade negotiations, alongside investment in science and tech, educating our people, and ensuring flexible labour markets and a competitive tax regime. So much of the debate about leaving the EU lacks this perspective.
Even so, our future opportunities outside the EU are important. Even the European Commission expects 90% of global economic growth over the next 10 to 15 years to be generated outside Europe. The UK can flourish outside the EU, perhaps not with a Corbyn Government—that might be a bit of a problem—but certainly with a sensible Conservative Government. The only question is whether we all work hard to embrace these opportunities or continue trying to hide from them. Outside the EU, instead of pretending that that we can insulate ourselves from a rapidly changing world and from the effects of technological and societal change, with a failing model of regulation and centralised power—without all that—we will have the freedom and flexibility to respond, adapt, survive and prosper.
I am grateful for the opportunity to contribute to this debate, although I note with sadness that, having set aside two days to debate European affairs, in reality we are all talking about the same European affair. This place has become consumed with Brexit to the extent that other vital matters in the continent of Europe that we would normally have found the time to debate at length are now hardly even mentioned in this place.
Where is the Chamber debate on the persecution of journalists and dissidents in Turkey? Where is the debate on the crackdown of almost neo-fascist proportions in Catalonia, where academics are now being ordered to hand over anything that they might have written in support of constitutional change and civilians are threatened with arrest for the crime of wearing a yellow scarf? Where is the debate on the worryingly regressive steps being taken in Hungary and Poland, so much so that an Irish court this week refused an extradition request to Poland because Ireland can no longer trust the Polish judicial system to give people a fair trial? Where is the debate on the instability that may engulf the Government of Slovakia—a country that was previously a frontier land for the iron curtain and that is now becoming something of a buffer zone between western Europe and the more worrying developments further east?
Had it not been for the appalling incident in Salisbury, it is unlikely that we would even have found time to debate the growing and brutal expansionism of Russia—whether its illegal actions in Ukraine, its equally illegal and covert actions in parts of Georgia or its increasingly threatening behaviour towards the Baltic states. None of these issues is getting anything like the attention in this place that they are entitled to. None is getting the attention that it would have had, had it not been for Brexit taking up so much of everybody’s time and an increasing proportion of the civil service budget in every Department in Whitehall.
I have only listed the European affairs business that we are not talking about. As a number of Labour Members mentioned during business questions today, a whole host of pressing and urgent social issues in these islands are not being debated or talked about. There is inadequate parliamentary scrutiny, and there is inadequate or non-existent legislation to address these problems because everything has been sacrificed on the altar of Brexit. It might not be so bad if, by sacrificing everything to talk about Brexit, there were some signs that we were getting it right. But all the signs are that, having started off getting it wrong by calling the wrong referendum at the wrong time in the wrong circumstances and on the wrong date, things have gone from bad to worse. The catalogue of disastrous misjudgments from the Prime Minister and her predecessor would be hilarious if the consequences were not so disastrous for us economically and, perhaps more importantly, socially.
The referendum was promised to heal divisions within the Conservative party. That has worked well, hasn’t it? The date of the referendum was set because the then Prime Minister was worried that it would have been engulfed by further controversy if there was another summer of refugee disasters in the Mediterranean. It was also deliberately designed to cut across local and national election campaigns in many parts of the United Kingdom. With indecent haste after the referendum and after the Conservative leadership non-contest, the Prime Minister unilaterally—without consultation, as far as I could see—announced the red lines of leaving the customs union and leaving the single market. Those are two lines with which the Prime Minister has painted herself into a corner, and she now wants to blame the Europeans for being unwilling to knock down the walls to get her out of that corner.
I have raised them all. If it were possible for me to speak quickly enough to debunk even half the nonsense on Brexit that we get from Government Members, I might be able to speak about some of the other issues. The record will show that the Scottish National party has made a number of attempts to raise these issues including, for example, the situation in Catalonia, but we have been pushed back by Her Majesty’s Government at every opportunity.
Having made bad worse by inserting red lines on the customs union and on the single market, the Prime Minister decided to waste three months of negotiating time and six months of parliamentary scrutiny time by having an election to guarantee a three-figure Conservative majority, so that everything else could just be steamrollered through without opposition. That worked even better than the referendum that the Government had to bring the Conservative party together.
As I said, this would be funny if the consequences for 60 million people on these islands, and potentially for several hundred million people in other parts of Europe, were not so grave. They are so grave that the Government still do everything in their power to prevent us and the people we represent from knowing just how bad their own analysis shows that the situation will become. Before the most recent Brexit papers had been fully published, one of the reasons we were told not to be too worried about them was that they only talked about the direct impact of different Brexit scenarios and did not take account of the massive benefit of all the new trade deals we were going to get. Supposedly, everybody would be falling over one another to trade with us after Brexit.
As Paul Blomfield pointed out, the Government’s analysis indicates that maybe we can increase GDP by as much as 0.75% because of those deals. We could be looking at a Brexit deficit of between 7% and 9% of GDP, depending on just how hard the hard Brexiteers are able to push Brexit. A 0.75% mitigation of that will not do an awful lot of good in the communities that will be devastated by this downturn in our economy.
I got them from Her Majesty’s Government. If the hon. Gentleman wants to tell me that we should never believe anything that Her Majesty’s Government’s civil servants tell us, that is a debate in itself. Those were the figures that were released, with significant protest, by Her Majesty’s Government to the Brexit Committee. I highly recommend the document to him.
Having had the analysis done at significant expense, those who instructed it to be carried out now seem to want to downplay it—to discredit it. I am pleased that we are no longer hearing, certainly from Ministers, any suggestion that there was anything incompetent, unprofessional or negligent in the performance of those who produced the figures. Of course, those who think that the Treasury’s figures are wildly too pessimistic have had the opportunity to produce their own. We might even find somebody who produces figures that give the lie not only to the Treasury but to the Scottish Government and to any number of other professional bodies. Those bodies do not always agree on the exact figures, but few, if any, are producing a scenario that looks anything other than deeply, deeply damaging for our economy and for the social cohesion of our four nations.
During the Minister’s speech, he took an intervention from one of his colleagues about an article in The Times. Interestingly, his answer seemed to suggest that it was only when they read it in The Times that the Government knew that there had been some softening of the attitude in Brussels towards our ability to negotiate trade deals. Perhaps the Minister could clarify that when he winds up. Would it not be typical of the shambolic nature of the Government in conducting these negotiations if they were getting their information from the front pages of Rupert Murdoch’s newspapers rather than from direct face-to-face contact with our European friends and allies?
When the Government were asked to name a single country that is saying that it would give us a better trade deal out of the EU than within the EU, yet again not a single country was named that is willing to do so. There is a lot of ambitious and grand talk of all the countries that want to trade with us—a wish list, a pie-in-the-sky list. There is, as yet, absolutely no reason to believe that any of these countries will give us a better deal than we could get by staying exactly where we are. We need to remember that what the Government ask for ain’t necessarily what they are going to get, because there are 27 other Governments over there who are just as determined and just as entitled to look after the interests of the people they represent.
Mr Jenkin used the tired old argument that we have a trade deficit with the EU and a trade surplus with the rest of the world, and we should therefore concentrate on the rest of the world. I leave aside the fact that some of us do manage to have a trade surplus with the European Union. The logical consequence of that argument is that, if the rest of the world has a huge trade deficit with us, why in the name of goodness would they want to continue trading with us? It is not because Europe is bad at industry and manufacturing that it has a trade surplus with us—it is because it is better at it than we ares. The cradle of the industrial revolution has allowed others to overtake us in investment and reinvestment and improving manufacturing efficiency.
I will give way in a moment.
That is why the Germans can manage to have a trade surplus when we cannot. It is not because they are cheating or because the rules are loaded in their favour; it is because they use more of the profits of their industry to invest in it rather than hiving them off to some kind of offshore tax haven where they are never seen again.
I am glad that the hon. Gentleman had the opportunity to add his rather more socialist point. The problem with the regulatory regime in the European Union is that the whole system is not geared towards our interests and our economy, not least because Germany enjoys a very artificially depressed currency. The Germans have by far the biggest trade surplus as a consequence, and their currency never appreciates because they are in the euro. That has cemented in a completely unfair disadvantage, institutionalised by the European Union.
So modern industrialised nations that are in the euro do better than those that are not in the euro. That is an interesting argument for the hon. Gentleman to make. I am not saying that I would necessarily agree with its inevitable conclusion, but he does seem to be tying himself in knots very effectively.
I must come back to the comment with which I challenged the Labour spokesperson, because it is very important. When we are talking about the rights of citizens, whether they have lived here their entire lives, come here from other countries, or gone from here to other countries, we should be absolutely uncompromising in celebrating immigration as a good thing. Yes, it sometimes means that bad people come here, but thousands, millions, tens of millions of times more often it means that good people can come here and that our people can go to other places. The exchange of ideas, for example, is something that we cannot put a price on. As well as talking about free movement of people, I want us to be talking about free movement of ideas, because that is what is at stake more than anything else.
To suggest that immigration is responsible for the low-paid, insecure jobs on these islands lets the Government off the hook. Last week, the Leader of the Opposition told an audience—not a very big audience, admittedly—in Dundee:
“We cannot be held back—inside or outside the EU—from …preventing employers being able to import cheap agency labour, to undercut existing pay and conditions in the name of free market orthodoxy.”
I am disappointed that Labour Front Benchers have not apologised for that and invited their leader to withdraw, as a lot of their Back Benchers have. It is not the European Union that is responsible for low pay on these islands; it is successive Governments who eventually introduced a minimum wage but left us with one that is still not enough for people to live on. It is not the European Union that allows employers and agencies to exploit vulnerable, desperate workers; it is domestic legislation. Coming out of the protection of EU employment law is not going to make it easier for vulnerable employees to speak up for themselves. The gig economy—the low-pay economy—is not going to improve by our coming out of the European Union. Indeed, I worry that it will get significantly worse. If anybody thinks that the Conservatives want to come out of EU employment legislation to improve workers’ rights, they really need to look back at the past 100 years of employment law history on these islands.
As I said, it is unfortunate that Brexit has become an all-consuming obsession for the Government, and now for this Parliament, but it is inevitable, because if we get it wrong, as the Government seem determined to do, generation after generation will be paying the price socially and economically. We discovered that we have moved on from the previous Government policy—that the EU can “go whistle” for any payment—to talking about payment for part of the deal of about £37 billion, which we will still be paying if and when I am 104 years old. Possibly some right hon. and hon. Members here will not be around to see that. That is how long it will take simply to pay for a bad deal.
I have hardly even mentioned the potential catastrophe in Ireland. I am deeply concerned that Ministers still seem quite taken with the “Smart Border 2.0” proposal that was published a few weeks ago. “Smart Border 2.0” explicitly says that it relies on automatic barriers, infrastructure, surveillance cameras and staffed checkpoints at the border of Northern Ireland and the Republic of Ireland. If the Minister says nothing else in summing up, I hope he will say clearly—and in such a way that none of his Back Benchers can try again—that the “Smart Border 2.0” proposals are so inconsistent with the Government’s commitments and so incompatible with the Northern Ireland peace process and the Good Friday agreement that, although an interesting idea, they will go no further, that the Government will take them no further and certainly that the EU will take them no further when it is listening to the Government of the Republic of Ireland.
My hon. Friend makes a good point about the practicalities of the Northern Irish border. Does he agree that the practicalities for the many people whose properties straddle the border are not being addressed at all in this argument?
Absolutely. It was so long ago that neither the Brexit Secretary nor the Foreign Secretary can remember the last time they visited the Irish border. That is a failing that both of them have to put right quite soon. I did not understand just how important a non-border was until I went there with the Brexit Committee and we could not find the border between two sovereign states. That is what borders should be these days. They should not be easy to see on a map or physical barriers; they should be physical routes for the exchange of people and, as I mentioned, ideas.
To date, nobody has put forward a proposal that allows the Government’s red lines of leaving the customs union and single market to be compatible with other red line of honouring the spirit and the letter of the Northern Ireland Good Friday agreement. That irreconcilability cannot be allowed to continue. If the Government cannot come up with their own very clear and detailed proposals within the next few weeks to reconcile those irreconcilable red lines, the red lines of leaving the customs union and single market will have to go, because the red line of continuing the peace process in Ireland cannot be sacrificed in any circumstances. I appeal to the Minister to give assurances that no proposal involving staffed checkpoints on the Irish border will be given any credibility or consideration in these negotiations.
My business interests are declared in the Register of Members’ Financial Interests, but I do not plan to talk about them today.
Before the referendum, I made a speech in the House saying that we had become a puppet Parliament. All too often, regulations came from the EU that we could do nothing about, because they acted directly. In many other cases, even if we had been outvoted or were not happy about a proposition, a directive instructed the House to put through massive and complex legislation whether it wished to or not. We had a situation in which the Front Benchers of the main parties, alternating in government as they tended to do, went along with this. The convention was that the Opposition did not really oppose, because they knew that Parliament was powerless and that the decision had been made elsewhere, whether the British people liked it or not. That even extended to tax matters, such as a number of VAT issues, including areas where we cannot change VAT as we would like, and to corporation tax issues, which included occasions when we thought that we had levied money on companies fairly, but the EU decided otherwise and made us give it back.
Many British people shared my concern, and that was why we all went out together and voted in large numbers to take back control. The British people wanted to trust their British Parliament again. Of course they will find times when they dislike the Government, individual MPs and whole parties, but they can live with that, because they can get rid of us. They know that come the election, if we cease to please, they can throw one group out and put in place a group who will carry out their wishes. They said very clearly to our Parliament in that referendum, “Take back control; do your job.”
A recent example is that of Her Majesty’s Government presenting a very long and complex piece of legislation to completely transform our data protection legislation. Because it was based entirely on new EU proposals, it went through without any formal opposition. The Opposition obeyed the convention and did not vote against it or try very hard to criticise it. I am sure that if the proposal had been invented in Whitehall and promoted actively by UK Ministers, the Opposition would have done their job, found things to disagree with and made proposals for improvement. We will have this “puppet Parliament” effect all the time that we are under control from Brussels.
Given the scenario that the right hon. Gentleman is putting forward, is it not the truth that the Welsh and Scottish Parliaments will also be puppet Parliaments post Brexit?
No, that is not true. In their devolved areas, they have genuine power, which they exercise in accordance with their electors’ wishes, but of course this is the sovereign United Kingdom Parliament, and the devolved powers come from the sovereign Parliament, as the hon. Gentleman well understands, which is presumably why he likes being here.
Will my right hon. Friend also bear in mind the manner in which laws are made in Europe? They are made behind closed doors in the Council of Ministers with no proper record of who votes, how and why—we are outvoted more than any other country—and then those laws come here and are imposed upon us in this Parliament.
I quite agree.
We wish to take back control. We will be a very different and much better country when this Parliament can settle how much tax we levy, how we levy it, how we spend money, how we conduct ourselves and what kind of laws we have.
My main remarks for the Minister and his colleagues on the Treasury Bench, however, concern the conduct of the negotiations. Like the Minister, I wish the Government every success. I hope that they get a really good deal—I look forward to seeing where they get to—but the EU is trying to make the process as difficult as possible by insisting on conducting the negotiations in reverse order. It says first that we have to agree to pay it a whole load of money that we do not owe. It then says that we have to agree a long transition period that coincides with its further budget periods, so that it can carry on levying all that money, and that is before we get on to what really matters: the future relationship and the questions of whether there be a comprehensive free trade agreement, what it will cover, and if it will be better than just leaving under WTO terms.
In order to have a successful negotiating position, the Government have rightly sketched out a couple of important propositions. The first is that nothing is agreed until everything is agreed. That is fundamental, and I urge Ministers to understand that they must not sign any withdrawal agreement unless and until there is a comprehensive agreement that is credible and that can be legally upstanding, because there is no point paying money for nothing. There would only be any point in giving the EU all that money if there was a comprehensive agreement that the Government and the country at large could be proud of, and which enough leave voters could agree with as well as remain voters.
The second thing that the Government have rightly said is that no deal is better than a bad deal. That, again, is fundamental to the negotiations. I have never made any bones about this, because I said before the referendum that no deal was quite a likely outcome, and a fine outcome. For me, no deal is a lot better than staying in the EU: it would give us complete control over our money, meaning we could start spending it on our priorities; it would give us complete control over our laws, meaning we could pass the laws and levy the taxes that we wanted; it would give us complete control over our borders, meaning we could have the migration policy of our choosing; and it would give us the complete right and freedom to negotiate a trade policy with the EU and anybody else. That would depend, of course, on the good will of the other side as well, but I would far rather be in that position than part of a customs union in which I had little influence and that was extremely restrictive against others. There is therefore an awful lot going for no deal.
The Minister and his colleagues must stick to the proposition that they will recommend a deal to the House only if it is manifestly better than no deal. They need to keep reminding the EU negotiators that no deal offers Britain most of what it wanted when it voted to take back control.
Will my right hon. Friend confirm whether he has seen the Government analysis—apparently it involves excellent modelling and is far better than anything they did in the run-up to the EU referendum—showing that if we were to crash out without a deal and rely on WTO tariffs, our projected increase in productivity and economic growth would be reduced by 7.7%? Is that what his remain-voting constituents—the majority—voted for?
No, of course it is not, but that is not true. I have written at great length about that elsewhere. Unfortunately, I do not have time to go into a detailed rebuttal of those proposals, but we know that the Treasury modelling got entirely the wrong answer for the first 18 months after the referendum. Its short-term forecast, which should be easier to make, was massively wrong and predicted a recession. I and a few others put our forecasting reputation on the line during the referendum by saying that there would be growth after an out vote, rather than what the Treasury forecast. We were right.
I assure my right hon. Friend that I have not voted for anything that will make us poorer. We will be growing well, as long as we follow the right domestic policies. It is complete nonsense to say that there will be that kind of hit. It implies that we lose over half our exports to the European Union, and it is not a proper reflection of what would happen to our trade adjustment were anything that big to happen. I want to concentrate on the customs union.
I am sure that my hon. Friend wants me to concentrate on the customs union, because she shares my wish that the Government will be well supported if the Opposition decide to have a third go at voting through a customs union or customs union membership.
I remind the House that we have twice had big votes in the Commons in which Members have voted by a very large majority against our staying in the or a customs union. One was on an amendment to the Queen’s Speech motion, and the other was on an amendment to the European Union (Withdrawal) Bill. I hear that some Labour Members may have changed their minds and want to vote again. I am a democrat, and the Opposition have their own ways of doing what they want to do, but I urge them not to vote to stay in the customs union.
Above all, are Labour Members not at all worried about poverty in emerging markets? Do they not think it is wrong that we place huge tariffs on poor countries’ tropical produce—produce that we cannot grow for ourselves? Would it not be great, when we are outside the EU customs union, to be able to take down those tariffs and give those countries more hope of promoting themselves by good trade, while at the same time benefiting our customers because they would be able to buy cheaper tropical products? Can we not do good trade deals with those emerging market countries across the piece? The tariff barriers are too high, and we could make mutually advantageous changes if we were free to do so. I urge the Labour party to remember its roots in campaigning against poverty and to join me in saying that the best way to get the world out of poverty is to get down the high tariffs on emerging market countries that the EU imposes, which I certainly do not agree with.
The Minister must remind Labour Members that no deal is better than a bad deal, and that no deal allows us to take back control of all the things that he and I promised to take back control of. He must also remember that we do not owe the EU any money. It would be fatally wrong to pay it loads of money if everything else does not work in the way we want.
I am afraid that I am out of time, so I cannot go into detail on all these matters. I believe that we should negotiate strongly and positively. I wish my right hon. Friend the Prime Minister every success, but I wish to strengthen her hand by saying that out there in the country, the message is, “Get on with it.” If that means leaving with no deal, that is absolutely fine.
There is a quote to place on the side of a big red bus, which I hope John Redwood will drive around the streets of Wokingham in the years to come—especially if we do end up with no deal, which he seems to be advocating is absolutely fine, and the UK crashes out of our long-standing alliance with our friends and nearest and greatest trading partners and we end up with, as the Treasury forecasts, a hit of 8% to our GDP by 2033.
The right hon. Gentleman shakes his head. Those on the Front Benches will be noting that figures from Her Majesty’s Treasury have been disputed by their own Back Benchers.
It is important that we talk about European affairs. The right hon. Member for Wokingham advocated taking back control as though he on his own, isolated from all around him, can thrive and prosper without relationships and links with the outside world. It is tempting to envisage him locked in this room on his own, with the doors closed, just to see how he would thrive without the sort of relationships and sustenance that others provide.
So too, for the British economy, there is this fallacy about our independent sovereignty—that as a small island, we can cope on our own, without the rest of the world. These days, in the 21st century and in a modern economy, we rely on the rest of the world, and they also benefit from our engagement with them. We risk serious self-harm if we try to pretend that detaching ourselves from those alliances and relationships and going for the very first time towards less market access, as the Prime Minister advocates, is somehow going to make us better off. It will not; it will make us poorer.
John Redwood is talking about a world that is long gone, in actual fact. We are a big wide world. I remember when the right hon. Gentleman was a Minister; his judgment was faulty then, and it is as faulty now. He goes on about taking powers back from Europe. The last two days have proved that we are not getting our powers back from Europe under his terms. What is happening now is that the Government are trying to tell us what to do without votes.
We have to recognise that in so many areas of policy—not just economic or trade policy—we benefit from these alliances and relationships. They do need to be worked on, and we need to somehow give and take a little bit. That is the nature of the global neighbourhood in which we live.
It would be remiss if I did not at this point voice my appreciation for the statements from France and Germany, which have shown their solidarity and fraternity with the United Kingdom in respect of the Russian chemical attack in Salisbury. We are talking about European affairs, and it is important that Europe stands together at an important moment such as this.
But Brexit is bound to dominate this sort of debate, and there are a number of aspects that I want to pick up on. The first is the question of frictionless borders and the trade arrangements that we absolutely have to maintain, not just for our own economic continuance but because of the Good Friday agreement and the need to avoid anything that could diminish the peace settlement in Northern Ireland.
The phase 1 agreement that the Government signed up to said that if they cannot come up with alternative arrangements, full alignment will be the way forward. My understanding is that the Secretary of State for Exiting the European Union has this morning admitted that the notion of a technological option—the “smart borders” option—is just not viable. It is not going to work because it requires hard infrastructure at the borders. You will know, Madam Deputy Speaker, that there are 275 crossing points on the border between Northern Ireland and the Republic of Ireland. The notion of having hard infrastructure—cameras, inspection posts and who knows what else—is clearly not compatible with the Good Friday agreement, so the Government have ruled that option out.
The only option that therefore exists is some sort of magical deal whereby the UK agrees to administer the external tariff arrangements for the rest of the European Union while simultaneously administering our own separate tariff arrangements for goods that are destined just within the UK. That does not happen anywhere else in the world. As well as being a complete bureaucratic nightmare, it would require reciprocity from our European partners with regard to our arrangements. They would have to administer a dual-tariff system for goods destined for the UK and those destined for Europe. It is just not going to happen. When the Under-Secretary of State for Exiting the European Union, Mr Baker winds up the debate, he would do well to admit that the phase 1 agreement that he signed up to now means full regulatory alignment and, of course, that a customs union is the best and simplest way to achieve that.
The Government are trying their best and scrabbling around, asking the road haulage industry, trade bodies and other cargo and freight companies, “What are your volumes of traffic and what’s happening in trade?”, and making them sign non-disclosure agreements, to try to gag them if they dare to speak, even to their own trade body members, about their conversations with Ministers. That just shows how desperate the situation is.
Has the hon. Gentleman considered the possibility that the reason the Government want non-disclosure agreements in every discussion is that the next time Labour Front Benchers table a Humble Address motion, they will use the fact that they have signed up to a non-disclosure agreement to prevent Parliament or anybody else from finding out what on earth is going on?
It is very tempting to table a series of motions to keep extracting documents from the Government. For all the bluster of the Chancellor’s spring statement, I still regard the best documents published by the Treasury for quite some time, albeit reluctantly, to be the 30 PowerPoint slides that show, among other things, a £55 billion black hole in our public finances by 2033 if we opt for the middle scenario—the FTA-style scenario—and cuts to our public services that would result in the imposition of at least another decade or more of austerity. My hon. Friend Paul Blomfield made an excellent speech and I say to him and my other Front-Bench colleagues that, having got the Labour party to support a customs union, the logic of all their arguments points to supporting retaining our participation in the single market, to avoid that austerity in years to come.
I want to finish on the arguments relating to the single market. We need to remember that the UK is an 80% service sector economy. While being in the customs union is good for the 20% of the economy that is based on physical or manufactured goods, 80% of our economy is based on services. That is why the single market matters—because it applies particularly to trade in services. Many trades and services will not be tariffed, taxed or diminished—they may be banned altogether, particularly in the field of financial services, which the Financial Secretary mentioned in his opening remarks. Financial services alone represent 11% of our economy and contribute £66 billion in revenue to our Exchequer every single year. That £66 billion pays for the schools and hospitals in the constituencies of all hon. Members, but, again, the Government are scrabbling around and trying to find some sort of mutual agreement on financial services. Just getting it referenced in a flimsy, two-sided A4 document on the future trade relationship will definitely not suffice.
In some areas we buy more of their goods than we sell, and in others we sell more goods than we buy. We have a significant surplus in financial services. We do financial services particularly well in this country. The Investment Association is exceptionally worried about the lack of co-operation agreements, which is a particularly technical term. We currently have such agreements by virtue of our membership of the European Union, but they will lapse on exit day. To what extent are the British Government seeking new or rolled-over co-operation agreements with each of the other 27 member states—perhaps the Under-Secretary of State can get advice on this from his officials by the time he winds up—so that the activities of some financial services are even legal in those countries?
The single market is also about goods, because some goods contain services aspects. Medical products require certification in order to be sold around the European Union. On the automotive sector, the Society of Motor Manufacturers and Traders has referred to the dangers of non-tariff barriers: regulatory alignment or divergence could be thrown into chaos if we leave the single market. I think about the single market benefits that consumers in the UK gain because they have safe products, a right of redress and enforcement on consumer goods. That is why the single market matters, and there are other issues besides.
The hon. Gentleman is making an important point. An obvious example are goods that are sold with an insurance policy attached, which is a classic case of an area in which we are world beaters. Once we start to disentangle one part of the financial ecosystem, then we of course damage the whole lot, whether in trade with the EU or elsewhere.
The hon. Gentleman gives a perfect illustration. Let us imagine a driver, with insurance cover, departing from Belfast and crossing the border. At present, doing so does not require any particular change by the time he or she arrives in Dublin. After exit day, however, the applicability of the insurance product might be null and void, and it will certainly require adaptation. This is not just about physical goods or the transfer of manufactured products, because some of these invisible products matter massively as well. If there was a car accident during that journey from Belfast to Dublin, where does the liability rest and who will enforce it? All such questions have been left entirely unanswered as the Government barrel headlong towards March 2019.
Of all the things that a single market would affect, the Good Friday agreement is the one I feel most strongly about, because I cannot see a solution to that particular problem that does not require the UK staying in and participating in the single market and the customs union. I say to all Members, including my Front Benchers and especially Conservative Members, that we cannot just assume that a customs arrangement for hard goods crossing borders will be adequate to maintain the principles maintained in the Good Friday agreement.
The red lines chosen by the Prime Minister were hers; they were not on the ballot paper in the referendum. Indeed, Daniel Hannan MEP and others have said that nobody even questioned the single market during the referendum campaign. It is now for Parliament to say politely to the Prime Minister that those red lines are not correct. If the Government have the courage to take forward the trade Bill and the Customs Bill, and certainly when the European Union (Withdrawal) Bill comes back from the House of Lords, they will have to confront the fact that there is a majority in Parliament for a customs union and, I believe, for a single market. Let us get on with it, and sort this problem out.
It is an absolute pleasure to follow Mr Leslie. On this, we are absolutely as one. It has been a consistent feature not only of the debate in the run-up to the referendum, but in everything that has followed, that there has been so much agreement between those of us on these Government Back Benches and those on the Opposition Back Benches. If I may say so, Opposition Front Benchers are also increasingly recognising the strength of the argument that Opposition Back Benchers and some Government Back Benchers have been making. We also have the agreement of SNP and Plaid Cymru Members; that is about it, unfortunately.
The point is very clear: this issue—the biggest issue that our nation has had to wrestle with in 40 years, and certainly since the second world war—has, on the one hand, divided our country and that division continues, but, on the other hand, has also brought together people from different political parties. We have put aside our party differences, because on this we are as one, and we have put our country first. I pay tribute to all the Members who have spoken out—often in the face of death threats, appalling emails and criticisms, and indeed unpleasantness even from within our own political parties—as doing so has not always been easy. However, it is very important that we do so because this is about our country and of course our constituents—it is not about us—and it is even more about our children and our grandchildren. As hon. Members have said, it is about making sure we get this right because the consequences will affect generations to come.
My view is that people in this country are undoubtedly getting utterly fed up with Brexit. I was going to say that they do not understand it, and that is not a criticism, but when we sit here talking about the finer details of “a” or “the” customs union “arrangement” or “agreement”, and when we delve into the detail of WTO tariffs on bananas, cars or beer—goodness me—people do not want to be involved. That is not because they do not care about our country—of course they care, desperately—but they elect us to this place so that we get on with that sort of stuff, and so that we put the country first and do the best thing for our constituents. They should not have, in effect, to micromanage the politics and detail of all the economic consequences and things that flow from that; they trust us to do it, but when they look at this place, I do not think they are particularly impressed by what they see.
In reality, the two major parties are almost together, although thankfully a difference is now emerging, which I will deal with in a moment. The Opposition have the good sense to come out in favour of a/the customs union—it does not matter what we call it; we now know that it delivers exactly the same arrangement that we currently have. [Interruption.] Sorry, “a” customs union, but I am not interested in the words. All I am interested in is what it delivers, and that is the only difference between the Labour party and the Front Bench of the Government who I obviously support. There is very little between them. Yet, as I have said before in this place, if we were to have a free vote, I have no doubt that the majority of Members would vote in favour of a/the customs union—we all know what we mean because we know what it would deliver, which is the continuation of peace and prosperity in Northern Ireland and the avoidance of a hard border. It would also convey many other benefits. I also have no doubt that Members would vote in favour of us retaining our membership of the single market by being a member of EFTA, and I do not think that the people of this country are particularly impressed by the fact that that is not happening. They voted for us to speak up on behalf of them and their interests, and we should not be held back by three-line Whips and by an attitude that still exists in our society—led mainly by certain sections of the media—that anyone who has the temerity to speak out about or against the decision that was made in the EU referendum is in some way a “traitor” or a “mutineer”. It is an outrage! We come here to speak freely on behalf of our constituents.
That is a really interesting point. Of course we had a referendum, but can we just get real about this? First, 52% of those who voted did so for us to leave the European Union, but not one of them to my knowledge—certainly in my constituency—voted to be poorer. Of course, 48% of people voted for us to remain in the European Union, and they have a right to a say in what now happens. Too many people, including perhaps on the Government Benches, do not understand that a considerable portion of that 48% have accepted the vote, but now feel utterly excluded, sidelined and pushed to one side as we move forward to deliver the result in the interests of everybody in our country.
The right hon. Lady is making, as always, an impassioned and well-informed speech. The ballot paper contained a question about membership of the European Union, but there has never been a referendum on membership of the customs union or the single market. Nobody knows for certain what people want regarding those institutions.
I completely agree; the hon. Gentleman is absolutely right. I take grave exception to the idea that across the length and breadth of this country people were sitting in pubs, cafés, bars or whatever discussing the finer points of the merits or otherwise of the customs union and the single market. The truth is that there are Members of this House who do not know what the customs union is, and there are Members of this House who do not understand what the single market is.
I am not going to name people, but I have had very good conversations with right hon. and hon. Friends about EFTA. I have explained, for example, that members of EFTA can retain their own fisheries and agriculture policies. There are colleagues who have said to me, “Good heavens, I didn’t know that. How very interesting. Can you tell me now about immigration?” So then I explain about articles 112 and 113, and so on and so forth, and about the brakes that could be put on immigration. These conversations have occurred only in the past three or four months, 18 months after the referendum and nearly a year after we triggered article 50. That is why I will say it again: when history records what happened in the run-up to and after the referendum, it will not be in any form of glowing testimony. On the contrary, I think we will all be painted very badly, apart from those right hon. and hon. Members who at least stood up and spoke out. If I dare say it, I think we have been increasingly proved right.
I think people are fed up. They want us to get on with it. They do not quite know what “it” is. Some people actually think we have already left the European Union. But they know that it is getting very difficult and very complicated. I believe that people are becoming increasingly worried and uneasy. It is the dawning of Brexit reality. They know that the deal, which they were told would take a day and a half, or a week and a half, will now take, if not for ever, then a very long time. When I say “for ever”, I mean that, if the Government continue to stick to their timetable, it will not be concluded until way after we have left the European Union. We will get very loose heads of agreement by way of a political statement attached to the withdrawal agreement, which this place will vote on sometime this October or November. People are beginning to realise that they have been sold a bit of a pup.
Only last week, I spoke to a constituent who voted leave who told me, in no uncertain terms—she was quite angry about it—that she had no idea about the implications for the Irish border of not getting this right. People of a particular generation really get it and understand this. Frankly, we are old enough to remember the troubles in all their ghastliness. We also remember the border. Some of us are old enough to remember customs border checks, when we had to go through a particular channel. We remember being terrified that the cigarettes or a bottle of whatever—I certainly would never have done any of these things, of course—might suddenly be uncovered by a customs officer, but that means absolutely nothing to huge swathes of our country. Older people, however, remember the troubles and they know how important it is that the border does not return. They understand how critical not having a border between Northern Ireland and the Republic of Ireland has been to the peace process. They are now not just worried about the return of the border, they are quite cross about it. They are getting cross not just because they do not want it, but because they feel that none of this was discussed and explained before the referendum.
As I have said, we are now having the debate that we should have had before the EU referendum. I am looking towards those on the Scottish National party Benches. The debate held in Scotland in the run-up to the independence referendum was a long, long proper debate. If I may say so as an outsider, every single issue pertinent to the debate was properly teased out and discussed. I do not think anybody could have complained that they did not know the consequences.
I might not quite go that far, but the hon. Gentleman makes a really important point. I was a member of the Government that decided we would have a referendum. To be very blunt, I am now quite ashamed of the fact that I made a decision that we should have a referendum without the proper debate that we clearly should have had and without the long run-up. More than that, this is the conclusion that I think the British people have also reached: how on earth did a responsible Government put in front of us, the people of this country—notwithstanding how brilliant we are—an alternative that we now see will cause our country so much harm? During the referendum campaign, when “Project Fear” was at its full height—the campaign was very poor on both sides, but “Project Fear” in particular was madness and nonsense—I think that subconsciously, people thought to themselves, “No responsible Government would put something to us as an alternative to their preferred option that would deliver all this stuff, when actually, it will harm our economy, and even undermine or threaten our security and the future of peace in Northern Ireland. They wouldn’t do that.” Of course, now we know that that is exactly what that option was, but we have moved on, as I must too.
I thank the right hon. Lady for the speech that she is giving, because it is another good one. The point has been made about the very short period running up to the referendum, when people had to make a very big decision on the basis of very scant information. Does she agree that it was far too short to counteract the decades of misinformation, and that we have a real responsibility as politicians to get more information and more facts out to constituents, so that they can understand the basis on which they are going to make decisions?
The hon. Lady makes a very good point. Look, some people would argue that it is a miracle that 48% voted for the EU. Anybody who plays or watches cricket knows that before a game, they roll the pitch. We have taken a JCB digger to the pitch for the past 40 years. It is astonishing. On both sides, we have all blamed the EU for all our misfortunes: if something was difficult, we just blamed the EU. Then, of course, in a very short period, we said, “You know that thing that we said was really rather rubbish—actually, it is really rather wonderful. Would you go out and positively vote for it?”
The other dawning of the Brexit reality was in the excellent speech that the Prime Minister delivered a few weeks ago. In it, she faced up to the reality in a highly commendable way—her tone was right and I agreed with much of her content. However, the reality of what she said was this: in admitting that there would be, for example, no passporting for financial services and that we would have reduced access to the market, what she was saying—as others have observed—is that for the first time, I think, in the history of any Government in any country in the world, we are actively going to pursue a course, knowing that it will make us less prosperous than we are under the current arrangements. That is the view of Her Majesty’s Government. I hope as we go forward that perhaps the Government, in that spirit of reality, will also understand that this can and must be stopped. We cannot pursue a course that will make the people of this country less prosperous.
We are meant to be talking about the economic side of our EU relations and affairs, so I will make this observation. The OBR’s predictions were to be welcomed because they were better than its previous predictions about our prospects of growth. I observe, as many others have, that we benefit at the moment from a strong labour market. We are almost at the point of having record levels of employment, which means, of course, that we have more money in the coffers by way of taxation and national insurance. In the financial and insurance sectors, we have seen pay rises of some 7%, and as many have observed, services comprise 80% of our economy.
We know that consumer spending has risen, and that, too, would account for the increased money in the coffers, because it means that our VAT receipts have gone up again. The weakness of sterling means that the companies whose foreign earnings are important to them have seen the worth of those earnings go up.
We must take all those factors into account to understand why it is the view of many that, notwithstanding the OBR’s better forecast, our country is actually experiencing some of the slowest growth in the G20. We think we are doing well, but when we compare ourselves to other G20 countries, we see that we are not doing anywhere near as well as we should be. I have given an explanation of why we are not where we thought we might be, but the point, of course, is that if we were not leaving the European Union, we would be doing considerably better and our prospects would be considerably higher.
Let us be clear about this. Investments are already being delayed, and we know that unless we get this transition in place, a number of important businesses will leave our shores. We also know that business wants certainty, and, in my opinion, the certainty that it is crying out for is the certainty of knowing that we will stay in both the customs union and the single market. No one should underestimate the real risks that our country faces. If we do not get this right, businesses will simply leave. We have already seen examples of that. There are Japanese companies that were promised by Margaret Thatcher, one of the finest proponents of the single market, that our country would never leave the single market. They have invested billions of pounds in real, skilled jobs in our country. Anyone who speaks to those companies—as many of us do—should ask them how they see the prospect of our leaving the single market and the customs union, and, indeed, the European Union. The fact is that instead of investing here, they will invest in other European countries, because we were the bridgehead into the EU.
I have dealt with the Government’s analysis in my interventions, and I know that you are urging me to speed up, Madam Deputy Speaker, but I have not had an opportunity for some time to make a long speech about this matter, which is dear to my heart, so I hope you will forgive me. I hear you—or, rather I see you—and I take the hint. I am about to make my concluding remarks. However, these things need to be said.
The Government, quite rightly and responsibly, asked civil servants in all Departments to look at the different options that were available and to analyse the economic benefits that they might or might not convey. I urge Members to read the papers. They should go into the darkened room, or even better, get hold of those papers, because the Exiting the European Union Committee has had the good sense to publish them. This is new modelling—the best available framework, prepared by civil servants who act with complete independence and, as usual, have exercised the huge skills that they possess. They recognise all manner of variances. They believe that these analyses are the very best, and they are keen to sing the praises of the modelling.
What does that modelling reveal? It reveals that even if the House and the Government were sensible enough to accept the single market and the customs union, membership of the European economic area after we had left the EU would cause our projected growth to fall by 1.6%, a free trade arrangement would reduce it by 4.8%, and World Trade Organisation rules—the cliff edge urged by some Conservative Members; the most irresponsible of all options—would involve a reduction of 7.7%. Moreover, those models do not include the value of the customs union.
I want to conclude—you will be pleased to know, Madam Deputy Speaker—by expressing some views on trade deals. It concerns me greatly that the British public are not being properly and fully informed about them. I say with respect to those on the Treasury Bench that it is very important that they are absolutely up front with people and stop putting forward the chasing of what are effectively unicorn deals. We enjoy 50 free trade deals by virtue of our membership of the EU. The idea that we will not get a deal with Australia is madness, because of course the EU will soon be doing a deal with Australia, and who do we think they will be doing a deal with first, the EU or the UK? The EU of course. So we will benefit from all these free trade deals in any event; we are not getting anything different by leaving the EU.
It is very unfortunate that we are not explaining the facts on free trade arrangements—the 50 or so we currently have by virtue of our membership of the EU, and the other arrangements we also enjoy by virtue of our membership. As this analysis shows, the reality is that even if we get every single free trade deal that is available, that still will not make good the loss to our economy of leaving the EU.
So—finally, Madam Deputy Speaker—people must wake up and realise that our EU colleagues will miss us and they want us to stay, and if we leave and a future generation wants us to return we will not be able to re-join on such good terms as we currently have. The EU will not miss us because of our trade—they will find new markets; we must get real on that—but they will miss us because of what our country has always brought to the EU: we are the voice of sanity; we are the check on the excesses; we are the ally that many seek to keep the EU—
My hon. Friend shakes his head, but, with great respect, he should go and speak, as many of us have done, to ambassadors and senior members of Government. They are genuinely upset that our country is leaving, because of the loss from that and the damage and harm it will do to the EU and because of the great role our country has played in many respects in the best part of the EU’s work, which is the advancement of free trade.
I believe that the people of this country are looking for some way out of this mess, because it is a mess, and it is up to us as politicians to provide the leadership. This place cannot overturn the referendum result; the people began this and it is for the people to finish it. However, the people are now entitled to have their say on the final deal—I have no doubt about that—because their future is what is most important and increasingly, as the reality dawns and they understand the full detail of what we have done, it is not that they are regretting their vote, but they do not like what they see on offer as the future out of the EU. So let us be clear: let the people have a final say on the final deal.
I appreciate that, as Anna Soubry said, she had a lot of points to cover. It is also obvious to me that nobody except John Redwood has taken the least notice of my exhortation to take about 10 minutes. If I were to impose a time limit now, it would be seven minutes, but I am still going to try to proceed without a time limit, and I hope that Members will tailor their remarks accordingly. I do not suffer if somebody makes a long speech—more than twice as long as the 10 minutes I recommended—but other colleagues do.
So here we are again. Another day, another debate on Europe—nearly two years after the referendum and at a time when we face enormous challenges both here and abroad. The inescapable truth about Brexit is that our Government are involved in the biggest exercise of reinventing the wheel that this country has ever seen. When a nerve agent has been used in Salisbury to try to kill a former spy, and when we are expelling the largest number of Russian state personnel from our soil for 30 years, I am sure that I am not the only one who regrets that our first foreign policy objective is our departure from the European Union, but we are where we are. Rather than endlessly raking over the referendum, or making the case as to why the public should have a final say on the deal, we need to focus on finding a way through this that limits the damage to our economy, maintains peace in Northern Ireland, protects opportunities for the next generation, and leaves our alliance with the rest of Europe as strong as possible.
We need to start, though, by being honest. If we go out on to the doorstep, we will struggle to find someone who would vote differently in a referendum today from how they voted two years ago. Yes, there might be an increased willingness to listen to a different point of view and, yes, there is an overwhelming sense that the Prime Minister is making a dog’s breakfast of the negotiations, but for all the talk of bringing people together, our country is still divided.
I do not want to live in a country that is dominated by divisions over Brexit for a decade. I do not want to sit in a Parliament that fails to get to grips with the real problems facing this country—housing; how we care for the elderly; how we upskill our population—simply because we are pursuing fantasy trade deals elsewhere. I do not want to listen to any more interminable speeches from Ministers that leave us none the wiser as to what their policy is and which do nothing to clear the fog that exists in Brussels or in the public consciousness here. We have to make this easier for ourselves. We need to cut the complexity, and that means staying in the single market by staying in the European economic area and staying part of a European customs union. The sooner the Government wake up to that fact, the sooner we might make some proper progress.
The Prime Minister bleats on about her deep and special relationship and about her desire for a bespoke deal but, as the clock ticks on, there is no sign of that. Last year, she admitted that she needed more time to sort out future trading arrangements. She calls it an implementation period and Brussels calls it a transition period, but I call it cutting yourself more slack to work out what on earth to do. There is no guarantee that we will get a transition period, but assuming that we do, and assuming Parliament votes for it as part of skeleton withdrawal agreement—that is a big if—we will be legally out of the EU next year. Our trading arrangements will stay the same until the end of 2020, but what then?
At the moment, this is like reading a seven-year-old’s letter to Father Christmas. We see an unrealistic wish list combined with tantrum-like demands. The Prime Minister wants a customs partnership, but not a customs union. She wants no tariffs on goods traded between the UK and the EU, but does not want to sign up to the common set of standardised tariffs that apply to goods coming into the EU from outside. She does not want a border in Northern Ireland to check where goods have come from and nor does she want one down the Irish Sea. She wants a special tracking system for goods coming into the UK that would then be onward bound for Europe. She talks about technology and authorised economic operators, but the customs experts and freight handlers remain unconvinced.
On the standards that goods would need to meet in order to be sold to the EU, the Prime Minister wants us to sign up to the rules in some areas, but not all, and she wants to reserve the right to change the arrangements in future. She wants to be in some of the regulatory agencies that supervise and enforce the rules, but only if a UK court rules on related matters. Even then, she is not sure whether she wants to be part of just the European Medicines Agency, the European Chemicals Agency and the European Aviation Safety Agency, or if she wants to be part of others, too. She does not have an answer on services, the area in which we enjoy a trade surplus with the EU, but rather talks about creativity and ambition in finding solutions. There is no trade deal anywhere in the world that gets close to guaranteeing the access we have to Europe for our services industry. Our major export to the EU is financial services; Canada’s is pearls and semi-precious metals. The idea that we base our future trading arrangements on a Canadian-style free trade agreement while ruling out being part of the EEA is absolute madness.
I am a London Labour MP, and I sometimes baulk at the obscene wealth that I see on display in our city. However, I also know that the wealthy bankers, lawyers and hedge fund managers not only have money, but spend it. For every one of them, there are probably four or five jobs in events management, hospitality, retail and security, and those jobs are done by my constituents. I cannot bear the thought of our great city losing out to Paris, Frankfurt or New York, but mark my words: if we do not get a good deal on services, over the next 10 years—this will not happen overnight—jobs and economic activity will drift away.
I cannot see how we can get this magical deal. Even if the EU wanted to offer us a good deal on services, the most favoured nation clauses in the trade agreements that are already in place with other countries would mean that whatever the EU gave to us, it would have to offer to others, too. If we stayed in the European economic area, we could get around that.
I do not think that anyone really appreciates the extent to which our country depends on EU labour. It speaks volumes that two years after the referendum, the Government have no answer to what the post-Brexit immigration system will look like. Last week, I met the HR director of a major restaurant group. It has about 300 restaurants in the UK, and I discovered that 61% of its chefs are from the EU. When I walk from Lewisham to Catford, I see huge signs outside small domiciliary care agencies that are desperate for staff, and that is before we even talk about the recruitment and retention crisis in the NHS. I do not know how many times I have to say this, but we have an ageing population. We control immigration from countries that account for 90% of the world’s population. We need people to come here to work. Fewer EU migrants means fewer taxpayers and fewer people spending money in our shops.
I have reflected quite a lot recently on why I care so much about Europe. If I am honest, it is intensely personal. We seem to forget that freedom of movement works two ways. People can come here, but we can also go and live in other European countries. I grew up in a working-class family. My dad is an electrician and my mum is a dinner lady, and I was the first person in my family to go to university. I dreamed of travelling the world when I was young, but I knew that the bank of mum and dad was not an option. I lived for a year in Austria and worked as a holiday rep. I fell in love with the country and ended up married to someone who is half Austrian.
I genuinely feel that the ease with which I could go and live in another European country allowed me to live my dreams. It gave me opportunities, and I do not want the next generation to be denied those opportunities. Anyone listening to Nigel Farage would think that the EU was the preoccupation of the middle classes—it is not. I think that we need to stay in a customs union and in the single market to maintain a close relationship with Europe. We should be prepared to preserve the principle of freedom of movement within that, even if we administer the process slightly differently.
We have to dial down the rhetoric on all this because I worry about where it will all end. Just think of the newspaper front pages that we have seen in the last year. Where do the bellicose language, blame and brinkmanship get us? My grandfather and my husband’s grandfather fought on opposing sides in the second world war. Mine walked across Europe after he was liberated from a prisoner of war camp, and my husband’s absconded from Scandinavia and made his way home to Austria. The borders that criss-cross my family’s history should not go back up, and we should not take opportunities away from the next generation.
We should not fool ourselves into believing that there is a golden economic future without a close relationship with the EU, and the Government need to be honest about that. They need to be honest about the fact that the political choices they have made in the past two years are not automatic consequences of the referendum. They need to rub out their red lines and do the right thing for the economy, the next generation and our place in the world. I believe that that means remaining part of the single market and a customs union.
I will endeavour to be as brief as I can, Madam Deputy Speaker. It is a great honour to follow Heidi Alexander, who made her points with great passion and eloquence. I find myself in an interesting position in this debate, because I was well known in my area as a remainer. I was shaking my head earlier because I believe we will still have a very close relationship with Europe. However, 70% of my constituents voted leave, and this was of course 10 months before 62% of them voted for me—Members may extrapolate from that what they will. Perhaps it was because I was a remainer and a Eurosceptic—you can be both.
The aforementioned interesting position in which I find myself is that, although I am a remainer, I am, above all, a democrat. Therefore, I am now determined to follow through on Brexit; we were given a very clear message, not only by my constituents, but by the UK as a whole. It was always going to be a rocky path and, as we have seen, it has been beset by those who might want to make the UK take another path or even, as has been said, hold a second referendum. That would be a serious mistake and take us back to the dark days of destructive populism, and I am sure none of us wants to poke that particular hornet’s nest again.
As we all know, referendums are, by their very nature, divisive. Let us take the example of the referendum in Scotland, a wonderful country where I have had the great pleasure of working on many occasions and in many places. There was always that united joshing at the token Sassenach—that was me, and it was a position I enjoyed very much. It was a part I had to play. Interestingly, shortly after that referendum, I returned to Scotland, where I was working in Glasgow, and found that the Scots were now at each other’s throats in Sauchiehall Street and the token Sassenach was largely ignored. We have now had our EU referendum and the results have had very similar effects, so I reiterate that we do not want a second, even more divisive, referendum.
The only sensible way forward is to ensure a clean break with Europe, while ensuring that we get the best deal possible—a unique deal, as the Minister said. I refer to a bespoke deal that suits the very special relationship that we already have with our European neighbours. Leaving the EU cannot mean long-term membership of the EU’s single market or the customs union. That would mean complying with the EU’s rules and regulations, with the UK having very little or no say over them at all. By remaining a member of the single market and customs union, the UK would, in effect, not be leaving the EU at all. It would mean less control for the UK, not more, and that is not what my constituents or the UK as a whole voted for.
My constituents voted to step out on to the world stage, taking the lead and taking advantage of new opportunities. I am pleased that we are building the economic base that will help our country compete in the world market. I am pleased to say that in withdrawing from the EU, the UK will be leaving the common fisheries policy, a policy that has had a profound impact both on the UK’s coastal communities and on the sustainability of our fish stocks. As an MP for a coastal community—the wonderful, glorious sunshine coast of Clacton, Walton and Frinton—I believe it is imperative that the Government do not give ground to the EU on this issue, especially now that Donald Tusk has requested that reciprocal access to our fishing waters be maintained.
I am also delighted that, according to press reports today, EU negotiators have accepted our demands to pursue an independent trade policy while remaining inside the customs union and single market, but only during the transitory or, as the Minister said, implementation period. Then, we come out of the single market and customs union, and, as we have done so many times before, strike out on our own to a bright new future. That bright new future can be achieved only if we give our negotiators a free hand to do the deal. Those who have challenged the deal makers to declare their hand in Parliament before any deal is struck demonstrate a fundamental ignorance of the whole process of negotiations. The 27 countries of Europe must not be given the luxury of knowing exactly where our bottom line is. That would clearly negate any negotiation. I say to Opposition Members that it is really a case of “Don’t tell ’em, Pike!”
We made a mistake when just before Christmas we narrowly voted for Parliament to have final approval of any deal. That weakened our negotiators’ hand. The EU is now aware that, whatever deal is struck, it might not be approved; thus, it might feel that it can strike a harder bargain. Furthermore, if I may be allowed a small analogy, if I come to buy your car, Madam Deputy Speaker, whatever odd sticker you might have in the windscreen, we both want something: I want your car and you want my cash. At the outset, we must both be prepared to walk away. That is the point that my right hon. Friend John Redwood made, and that, as we all know, is how business works. To sum up with another analogy, one does not play poker and show one’s hand.
I, too, have lived and worked in Vienna in Austria, which is a lovely place; I had a long-term contract to work in Rome—it was five years, I think; and like many of us, I have holidayed all over Europe. Members would imagine that those experiences would make me a classic Europhile, and they did. But I reflected on the fact that I have also worked in America, Egypt, the far east, the Arabian states and Africa. So what does that make me now? A globophile? I think it does. The opportunities to live, work, trade and play all over the world will still be with us but, because we are leaving the EU, we will have control of our own borders. Perhaps more importantly, we will still be able to attract people from all over the world to be a part of the great British economy.
Finally, I declare myself to be wearing two hats in this debate: one as an optimist and the other as an animal lover. I have been an animal lover all my life. I own a house full of yappy dogs and in the 1990s I was part of a team that broke up a puppy-farming ring in Wales. I now see an optimistic future in which we can dramatically strengthen our animal rights laws when we are no longer constrained by the EU. The UK has higher animal welfare standards than any other country in Europe, and the Government have delivered a slew of animal welfare initiatives over the past months alone—for instance, an ivory ban to help end elephant poaching; CCTV in slaughterhouses; an increase in the maximum sentence for animal cruelty; a ban on electric-shock collars; a ban on microbeads; and the cutting down of single-use plastics that harm our fish, birds and sea mammals, just to name a few.
EU law should not be a benchmark for animal welfare. People can keep farm animals in unspeakably cruel conditions in Europe without breaking a single EU law. It would be depressing if that was the standard that we set for ourselves. I wish to focus on strengthening animal rights as we go through Brexit, and I see a good opportunity as we consider a ban on live animal exports as a part of our trade policy. I truly believe that we will, in the end, get a good deal. If we hold our nerve, the future can be very bright indeed.
It was wonderful to hear the speech by Anna Soubry. I cannot say how much I agree with her about how much this House knows that what we are working towards will be an absolute unmitigated disaster for our constituents. Every one of us in the House, apart from the tiny minority who are driving this disastrous move forward, is absolutely clear that we are going to leave our country and our constituents poorer. It will be a disaster.
I have to say to Giles Watling that it is nonsense to say that when the facts change, one does not change one’s opinion. Were that true, there would be no divorce. It would mean saying to every woman in the House, “You would never be able to take back that dress that you thought was wonderful when you first saw it but that looked an absolute unmitigated disaster when you got it home.” The facts are changing and we are finally getting to the truth of the disaster of where we are going, so it is right that we go back to the people and say, “Do you want to change your mind? Is this the right direction?”
The impact on London will be tremendous, as we have heard from my hon. Friend Heidi Alexander, but I cannot begin to talk about how disastrous it will be for Wales. May I start with the issue of gross value added? Gross value added is one of those terms that does not really resonate with constituents, but let us look at what it means in Wales. In 2016, it was £59.6 billion. The Government’s projections mean that Wales would lose about £5.7 billion in the event of no deal, and around £3.3 billion if we secure a trade agreement. That is over a period of about 15 years, but it will have a huge impact on the Welsh economy. It is not the most vibrant economy, but it will have a devastating impact.
I could throw lots of figures about, but one that impacts on families across my constituency is inflation. Inflation remains at 3%. Wages are not going up, but prices are, and my families are becoming worse off. The cost of food and other goods is soaring as a result of the fall in the value of the pound, which remains about 15% below pre-referendum levels. That is a visible and very real impact on the daily lives of my constituents. Having seen that impact, my constituents deserve the right to another opportunity to decide whether this is a bet that they want to take given that, even under the Government’s own policies and analysis, it will bring further poverty, further disaster and limited opportunities for their children.
I have talked to many of my constituents about how they voted. Some of them say, yes, they got a great result. They got the result that they wanted out of the referendum; they got rid of David Cameron—job done. That is what they have actually said to me. It was not about Europe; it was about austerity. They hated what was happening to their families. They hated the fact that so many of them were heading off to food banks. Some of them say, yes, it was about immigration, but really it was about the wages that they were getting and the 1% pay rise that, year on year, meant that they and their families were falling behind.
For many of them, it was about taking back control. They would say to me, “These unelected bureaucrats”, and I would say, “Well, okay, but tell me the name of the director of education in Bridgend County Borough Council.” They would say, “What? I don’t know, Mrs Moon.” Well, that is an unelected bureaucrat. It is not who the bureaucrats are that we need to know; it is who the politicians are. It is the politicians who hold those bureaucrats to account and it is the politicians who make the decisions. It is about knowing who our politicians are and getting behind them that is the important part of democracy.
A grim time lies ahead. Most businesses constantly approach MPs to say that if we leave the customs union there will be severe consequences, which makes me really, really nervous. I have two major employers at two ends of my constituency: the Ford engine plant and Tata Steel. The impact on both the car industry and the steel industry will be devastating when we leave the European Union. I cannot begin to talk about the impact that job losses in those two industries will have on my constituents. I cannot begin to talk about the loss of future opportunities for the children in my constituency. I have fantastic schools and I am so proud of the bright, alert, really eager youngsters for whom we should, as a country, be promoting a future of opportunity, instead of which I hear fantasies about wonderful trade deals with countries that will never, ever bring the benefits—I ask Members to read the submission from Tata Steel—that access to the European markets currently brings to Tata Steel.
The hon. Lady is making a very important speech. I suggest that my hon. Friend Giles Watling visits her constituency, and talks to Ford and Tata Steel in order to understand the importance of frictionless supply chains, membership of the customs union and membership of the single market in the very real industrial world that the hon. Lady and her constituents inhabit.
I thank the right hon. Lady for saying that, because I have those conversations all the time.
When I trotted over to DExEU to read the wonderful insight reports that we were meant to see, I was absolutely appalled by the poor quality of analysis that would be devastating for the people I represent. I will not vote for anything in this House that I think will damage the people I represent. I feel awful guilt—the right hon. Member for Broxtowe also mentioned this—about having voted for that referendum without insisting that we had all these debates before we took it to the people. I recently attended one of my local Women’s Institutes, where a lady said to me, “We shouldn’t have been asked to vote, should we? I didn’t really know what I was voting for. I went with what everybody else was saying, but I didn’t really understand the consequences, and now I’m worried about my grandchildren.” We should all be worried about those grandchildren.
So here we are. It is really quite obvious that we are not going to have frictionless trade. If we leave the single market and the customs union, we are going to make sure that our families are worse off. Europe is on our doorstep. We can get from here into the centre of Europe in a matter of hours. The EU has 37 trade deals with more than 65 countries around the world, covering 15% to 17% of the UK’s trade in goods. The EU has trade deals in place with more countries than the US, which has 20; China, which has 23; and Australia, which has 19. And yet, what are we going to do? We are going to throw that away.
Finally, I am a Member of the NATO Parliamentary Assembly. Every time I attend a meeting, colleagues there tell me of their fear of the consequence of Britain’s departure for the stability of Europe. Every time I see them they ask me, “Is there any chance?” I just hope to God that we wake up in time and say, “Yes, there’s a chance.”
I take the view that this country made an error. It was a democratic error, but it was an error. And because we are democrats, we have to live with the consequence of the error until such time as I hope may one day be the case, when the future generation reverses that error in some way. However, I am also realist and know that that is not likely to happen any time soon. Therefore, we must ensure that we respect the outcome of the referendum—like it or not—but that we do so in a way that mitigates, to the greatest extent possible, the damage that will inevitably flow from it. The Prime Minister at her Mansion House speech was frank and honest, as I have always found her to be, about the fact that there is damage and that we must therefore mitigate the risk.
I do not do my politics in belief and faith; that is appropriate for the confessional, but not government and litigation. I do my politics in hard-headed reality, which is why I want to talk about services. Financial services underpin the economy of this country. We are a service economy or we are nothing. The position on services is worrying. My constituents are dependent on services, as 36% of them work in the financial and professional services sector—the 16th highest proportion in the country. Other hon. Members have already set out the massive contribution that the financial services make to our economy, beyond any other.
Anything that damages financial services damages the economy, the tax take, our public services, and the lives of every man and woman in this country. It directly damages the lives of my constituents. I will not support anything that materially damages the lives, the wellbeing and the services of my constituents. I want to help the Prime Minister to avoid that happening. To do that, I want to give her flexibility. As soon as she expresses realism, seeks flexibility and recognises that there must be compromise, some of my hon. Friends promptly appear with another pot of red paint. They are the ones who make her life harder, not those of us who support her in the realism and honesty that she set out in her Mansion House speech.
Let us then look specifically at what needs to be done to achieve the result that we need for financial services. First, we have to find for the City of London, if possible—it is a big if, and whether it will be achieved I know not, but let us set it out very clearly—a means, where mechanisms exist, to enable maximum access for financial services firms and for the legal services firms that underpin them: the two go together. There has to be an early transitional arrangement, or implementation—what’s in a name?—to ensure day-one continuity.
Secondly, there has to be—I want to hear from Ministers how we take this forward and a reassurance that it is central to their view—mutual market access built on the existing position of regulatory convergence. Moving away from that would damage market access; it is not in this country’s interest. That should be based on a commitment—frankly, an ongoing commitment—to mutual recognition and regulatory co-operation, with a joint UK-EU mechanism to ensure that regulation and principles of supervision are monitored as they evolve over time.
There would have to be a dispute resolution mechanism. We can call it a court or a tribunal—I do not much mind. We ought to think about the costs of a plethora of arbitration tribunals, although perhaps remaining within EFTA, or the EEA, will give us a ready-made dispute reconciliation mechanism through the EFTA court. It might be unwise to rule that out.
Is my hon. Friend concerned about the cost of all the provisions that will have to be made to govern all these various sectors and to manage all these new arrangements? Would he like the Government to produce, before any final meaningful vote in this place, the actual costs of delivering the Brexit deal?
My right hon. Friend makes an entirely fair point. We should do that, because there is going to be an administrative cost that will ultimately be borne by consumers and taxpayers.
The industry itself has done analysis of the costs in some areas of financial services. For example, the wholesale banking industry estimates that if there is regulatory fragmentation, it is likely that $30 billion to $40 billion of extra capital will need to be raised. The London Stock Exchange Group calculates that changing the location of clearing houses—we must try to retain euro clearing, which is critical for the sector—will have a potential cost of some $25 billion, not just to us but to the EU27. It is in our mutual interest, on both sides, to get an agreement. No analysis of costs has been done: we should be honest about that and do so. We have to get these agreements.
We must ensure, too, that there is the ability to hire talent across the board and to move it seamlessly. It has to be possible that people can move staff from an office in Brussels, Paris or Frankfurt to London without any hold-up or delay—not even the need for the slightest bit of paperwork. That has to be achieved sensibly. Again, it is in our interest because otherwise we damage the ecosystem of the global financial hub that London is. As the Chancellor rightly acknowledged in his speech last week, the depth of the London capital markets frees not only businesses but sovereign debt for the EU27 nations. Too much rigidity from either side makes that difficult and puts it at risk.
The other thing that underpins this is the legal structure that goes with the professional services. Our legal services are second to none. We are the venue of choice for international litigation and dispute arbitration. That itself is a great gainer of income for this country. The legal services sector was worth £26 billion to the economy in 2015-16—1.5% of GDP—and is responsible for about £4 billion of exports, about 55% of which goes to the EU.
Fly-in fly-out arrangements are critical to that. We need an arrangement whereby, post the establishment directive, lawyers can have their qualifications mutually recognised in the EU27 states, can move seamlessly from one office to another, have the professional standing to advise their clients in EU27 countries and—this is very important but not often mentioned—have their client legal privilege recognised and protected, which can happen only where a lawyer’s qualification is recognised. Without a deal on that, British lawyers will not be able to advise clients or firms in EU27 countries—because professional privilege will not apply—appear in their courts or have the right to arrive in those countries and be present for negotiations with clients in important commercial contracts. It is critical, therefore, that we do not forget the need to get the legal services sector absolutely squared off in our future arrangements.
We must ensure the recognition and enforcement of judgments. A derivative contract—something we lead the world in—is worthwhile only so long as it can be enforced. We must ensure that they and all other commercial contracts have certainty of enforcement, not only over the transition period, but going forward, as they are typically written for three to five years. At the moment, we do that with one simple EU directive. It would be most unfortunate if we had to replicate that with each country plus those with which the EU has reciprocal arrangements. We can mitigate that by immediate action to join the Hague convention, but that is a back-up, not an ideal situation; we have to go further. I ask the Minister to detail what meetings he and his departmental officials have had with the Bar Council, the Law Society and, where appropriate, the senior judiciary to discuss the practical steps we need to take to safeguard the position of Britain’s legal services sector going forward and how it underpins the broader financial and professional services sector.
Order. Because there have been quite a lot of interventions, I now have to reduce the time limit to six minutes. I am sorry. Hon. Members should bear it in mind, however, that even that will be tight.
Brexit—what a success it’s been, eh? The restoration of greatness is upon this sceptred isle. Except, it’s not. When we finally got some sight of what the Government thought might be the economic impact of Brexit, it was horrific. It was even more horrific given that the Government had exhibited some worrying signs of being massively optimistic about Brexit, when more sober heads could not see much reason to be optimistic at all.
Geographical analysis suggests that we are getting the rather unpleasant end of a sharp stick and sectoral analysis suggests that the stick is sharper than it should be. The Financial Times, as we have heard, estimated the cost as being about the same as the side of a red bus. We should not take a journalist’s word for it, though; Anna Soubry spoke of the OBR’s improved forecasts, but we should recognise that its growth forecasts for this year, next year and the year after are about a third down on the forecasts made in March 2016 for the same years.
The Scottish Affairs Committee has been taking evidence on the impact of Brexit on the immigration Scotland needs, so I will confine most of my remarks to that. There simply is not any organisation coming to the Committee and saying it thinks it is a good idea that we are leaving the EU or that there are fabulous opportunities waiting for us just around the corner. We are hearing from no one who thinks that our economy is going to be bolstered by losing access to the customs union and the single market and definitely no one who thinks that cutting immigration is a good thing.
CBI Scotland says that the Brexit referendum was the stepping-off point for its members putting the prospect of new immigration rules and the uncertainty that has surrounded the status of EU workers at the top of their concerns. The CBI also said that EU nationals make a vital contribution to the Scottish economy.
The same argument was made by the National Farmers Union of Scotland, which pointed to the thousands of agricultural workers from the rest of the EU who keep Scotland’s farms working. I assume that there are many similar stories to be told elsewhere. Jonnie Hall of the NFUS pointed out that our veterinary services in Scotland depend greatly on people who are trained in other EU countries, and that our haulage industry depends on drivers from elsewhere in Europe. Associated industries all rely on EU citizens coming here and working to make sure that our agricultural products get to market.
Skilled jobs need to be done, and we do not have enough skilled people in the UK to do them. It is not a case of employers importing cheap labour to undercut workers here, as the leader of the Labour party suggested in Dundee last week. It is a case of there not being the workers here to do the jobs that need doing. We have already heard stories of crops rotting in the fields because there were not the workers to pick them, as a result of EU citizens not coming to work the fields, and that is before the restrictions bite.
As Jonnie Hall pointed out, the damage is being done before the promised sunny uplands come into view. He said:
“We have experience of our members who have very, very high-value crops in the field that have simply rotted over the winter because there has not been the labour to pick the vegetables. We are always being told by Mr Gove that we will be driving an agricultural industry that is based on new technology. We are yet to discover the technology that can recognise and pick the right crop at the right time as effectively as a human being can.”
The food and drink industries are major players in Scotland’s economy, and this is the agriculture sector telling us that we need immigration to be easy to administer and freely available. Losing the freedom of movement of EU citizens is a disaster for agriculture, and farmers need a replacement quickly.
The NFUS has come up with a solution that might assist. Mr Hall told us that the NFUS has had conversations with the Scottish Government, the Department for Environment, Food and Rural Affairs and other Departments, but the door it simply cannot open is the Home Office’s—the one door it really needs to open. That needs to be fixed, and I hope the Minister can at least give some assurance of assistance.
Our food prices are already being adversely affected by the weakness of the pound and increasing import costs. Families the length and breadth of these islands cannot afford price increases caused by scarcities because farmers cannot get their crops in from the fields. Our agricultural economy needs to be protected and nurtured, and that needs freedom of movement. I am reminded of a speech given by the then Environment Secretary, the current Leader of the House, in a speech in Paris in October 2016, when she said that we would address the economic chaos of Brexit by selling food around the world. Unless she meant that we would offer countries a pick-your-own deal, I am not sure we can sell food that stays in the fields.
The same story is coming through from other sectors. Academia, scientific research and financial services all rely heavily on EU citizens as well as the EU marketplace to make the economy work. Without freedom of movement, we have economic meltdown. Taking back control appears to be the equivalent of being a child sitting in the back of the car with a toy steering wheel—you have the impression of power, but it is just a plastic wheel spinning round and round.
There has been far too much overconfidence from the Government and not nearly enough hard work and proper dedication to the task. Brexit is a disaster and will continue to be the most costly and damaging political decision any Government have made in modern times unless we stop it. Let us end it. For pity’s sake and for the sake of the people we represent, let us find a proper accommodation in the EU.
In my brief remarks, I will consider the security situation with regard to European affairs and the impact that it can and should have on our defence spending.
My approach to Russia, which is the most urgent security challenge when it comes to European affairs, would be one of peace through strength. We must consider that attitude at a time when our own military strength has been significantly reduced following the fiscal challenges of 2010 onwards. Concurrently, we have had the rise of a resurgent Russia, with 1 million men under arms, that invaded Georgia in 2008, has invaded Ukraine and Crimea and has recently prosecuted this outrageous attack in Salisbury. We need to be very clear-eyed about that and realise that we need to regain this ground if we are to have a credible deterrent.
The strategic defence and security review 2015 laid out a very good plan for regaining that ground, but the bottom line is that if we want a strong, capable military, we have to pay for it. We need to urgently address the £2 billion black hole in the SDSR 2015 plan. The Treasury is seized of the importance of that in terms both of national security and of our security posture in Europe.
The issue is also urgently important because we have an enhanced forward presence. We have 800 soldiers in Estonia. General Sir Richard Shirreff, the former Deputy Supreme Allied Commander Europe, has said that investment in their capabilities is important because without it they will remain a political token and that
“without proper command and control and the artillery, engineers, attack helicopters and logistics to turn individual battalions into an effective fighting brigade, and spread over four countries, those four battalions would be picked off piecemeal should Russia attack.”
The need for urgent investment is very clear indeed.
Of course, we prosecute our defence posture in Europe through NATO. We must also urgently make the argument to our allies about the need for them, like us, to spend at least 2% of their GDP on defence. We are one of only five countries that do that. If NATO is to be a credible deterrent to a resurgent Russia, that needs to change.
NATO is not without its problems, but we must express a collective political will in NATO if it is to be credible. It is alarming that in 2015 the Leader of the Opposition called for NATO to be “closed down” and for it to
“give up, go home and go away.”
It is on the record that he has refused to say whether he would defend a NATO ally if it was invaded by Russia. That is astonishing, because a collective deterrent and collective defence is the fundamental basis of NATO, as stated in article 5.
On another outrageous Russian foreign policy act, namely the invasion of Crimea, an adviser to the Leader of the Opposition is on the record as saying that, in his view, it was not an invasion but an annexation that was “clearly defensive” and that
“western aggression and lawless killing is on another scale entirely from anything Russia appears to have contemplated, let alone carried out—removing any credible basis for the US and its allies to rail against Russian transgressions.”
If NATO is to be the basis of our collective deterrent, we need to express political will and political conviction.
On Crimea, I will conclude by quoting a former Prime Minister of Great Britain who understood the importance of peace through strength and of deterring Russian expansionism and aggression through a credible military force. Speaking in 1858, Lord Palmerston knew a thing or two about dealing with Russia, because back then, of course, we were engaged in the Crimean conflict. He said:
“The policy and practice of the Russian Government has always been to push forward its encroachments as fast and as far as the apathy or want of firmness of other Governments would allow it to go, but always to stop and retire when it met with decided resistance”.
We must provide that decided resistance, and we must not allow the voices of apathy or those who want firmness in their political conviction to our collective security to undermine that. I hope that that attitude of peace through strength will guide not just our investment in our defence and our engagement with Europe, but our security policy as a whole.
There is an old saying that nature abhors a vacuum. Similarly, business abhors uncertainty, and in no industry is that more true than in the automotive sector. As the Government’s sector report makes clear, investment decisions and sourcing choices in the industry are often made by European or global headquarters, and the continued uncertainty about training arrangements are making it ask serious questions about whether it will invest in this country in the future.
Uncertainty across a sector can have a real impact, particularly in communities such as mine where the sector represents a big chunk of the jobs market. The Vauxhall Motors factory in my constituency is currently facing huge uncertainty. Until recently, it employed 1,800 people directly, with many more jobs in the supply chain, so there is no doubt that it is of pivotal importance to the area I represent. How such companies fare in the post-Brexit world will decide how I and my constituents judge the Government’s handling of the negotiations, because when it comes to the crunch, what happens on people’s doorsteps is what really matters to them.
The key choices about Vauxhall’s future rest in the hands of its owners, PSA, which is based in France. We know from decisions already made that it shows no sentiment. We have already lost about 700 jobs since it took over, and these job losses are extremely serious. We are told that they are a reaction to market conditions, with a decline in sales of the Astra. Market conditions are not of course within the gift of the Government, but what is within their gift are the conditions within which business can trade, and this is where the Government really need to start listening to the industry—and acting. Traditionally, the automotive sector makes investment decisions about three to five years in advance, so decisions about investment in a post-Brexit world will be made shortly. The current model in production in Ellesmere Port is due to be discontinued at about the same time in 2021. The chief executive of PSA recently told the BBC:
“We cannot invest in a world of uncertainty”, so now is the time for the Government to provide them with that certainty.
The automotive sector, as we know, is one of the most productive and successful we have, directly or indirectly employing over 800,000 people and generating almost 10% of the country’s manufacturing output. We know that about half of all UK car production is exported to the EU, and that figure rises to 70% to 80% for vehicles produced at the Vauxhall plant in my constituency. The Business, Energy and Industrial Strategy Committee recently found that
“leaving the EU without a deal would undoubtedly be hugely damaging to the UK automotive sector, more so than to other European countries.”
“Overall, no-one has argued there are advantages to be gained from Brexit for the automotive industry for the foreseeable future.”
Now that we are leaving the EU, it is important to recognise that this is one of our most vulnerable sectors, and there is no upside for it. We therefore need to do everything possible to safeguard jobs and investment. History shows us that once manufacturing jobs are lost, they very rarely come back. So far the response from the Government has been inadequate and complacent, and the sense of denial is palpable.
Of course, it was never meant to be this way. Both during and after the referendum, too many people have exaggerated the simplicity of all this. The Brexit Secretary assured us that we would soon be able to access
“a very, very large trade area, much bigger than the European Union, probably ten times the size”, despite the fact that if it was that big, it would cover an area twice the size of the planet. The Foreign Secretary promised us that without
“the job-destroying coils of EU bureaucracy we can survive and thrive as never before.”
The International Trade Secretary said that securing a UK-EU trade deal would be
“one of the easiest in human history”.
Yet even with such esteemed and self-confident people negotiating on our behalf, we still do not know— 629 days after the referendum—what the deal will be.
When Cabinet Ministers are pressed on these issues, I have seen them bluffing complacently with dangerous fantasies about the promised green and pleasant land that will apparently emerge before our eyes without any effort being invested. The Prime Minister in her Mansion House speech said that new trading arrangements would need good will to succeed, but that sounds more like crossing ones fingers and hoping for the best. My constituents’ jobs need more than that and the people who employ them need more than that to invest, so the Government need to understand that the once proud automotive heritage will be lost to the past unless we can secure its future. This is an industry that will survive and flourish only if we are prepared to fight for it. Even if it turns out to be the simple negotiation that the International Trade Secretary promised us, he needs to realise that for there to be an automotive sector in this country that will continue to trade with the rest of the world, it needs to be protected now, so the Government must act.
For me, a commitment to a customs union is the only sensible way to restore certainty and confidence, not some vague and ill-defined customs partnership that may or may not be the same as it is now. We know the argument about how a customs union will have an impact on future trade deals elsewhere, but I do not think that getting a couple of quid off trainers from China is actually a price worth paying for the destruction of the UK car industry. In response to a written question from me about which non-EU countries had been identified as the best ones for future trade deals in the automotive sector, the Minister for Trade Policy said:
“We are working with a number of other countries to explore the best ways to develop our current trade and investment relationships”.
That did not tell me anything, including about whether there are any such opportunities outside the EU.
If it is a choice between preserving trade with up to 80% of our existing customers, as against perhaps getting some new business with some unspecified countries at some unspecified time in the future, I know what every person with an ounce of common sense will choose. The choice for the Government is clear, and if they make the wrong one, we will never forgive them and we will never forget.
It is a pleasure to follow Justin Madders, who made a really important speech on defending the car industry. I appreciate the ongoing concerns about Vauxhall in his constituency and the impact that that may have on jobs. I also understand that the Astra model is drawing to the end of its life, and the Vauxhall plant in Ellesmere Port needs to gear up for the next model that comes along. We must do all we can to ensure that the British car industry is ready for the next Astra model and for many other firms. The infrastructure that goes into the car industry is so important, and we have made progress in recent years. Just two or three years ago, we became a net exporter of cars for the first time since the ’70s, and that progress was founded on the other qualities of our United Kingdom. That is why Nissan and Toyota are investing in the United Kingdom.
There are many different arguments in the Brexit debate, and I understand why my right hon. Friend Anna Soubry said earlier that the tone of the debate is not what it could and, indeed, should be. A significant part of the reason for that is the interpretation that some people choose to make of other people’s arguments. It is better and healthier for people to make their own case and their own arguments and to enable others to compare those contrasting arguments and see which is best.
People continue to raise a point about the red bus touring the country and swaying the votes of so many people. In the run-up to the referendum, I held numerous events in and around my constituency to listen to people’s concerns, but I did not meet one person from the leave side of the argument who said, “I’ve been convinced to vote to leave the European Union because of the red bus.” People no more switched their view because of that bus than they did because of Labour’s pink bus in 2015. We must be cautious about ascribing motivations to other people.
By and large, I believe that people made their judgment and voted on whether to leave the European Union based on their experiences over the past 40-plus years, whether under a Conservative, Labour or coalition Government. People have seen that the European Union has been failing to reform over that time. We do not have in the European Union a sufficiently responsive organisation that can adapt quickly to the increasingly rapidly changing world we face.
The ability to adapt is key in any dynamic economy. Artificial intelligence, increasing automation and many different things are coming along the line, and if we are able, independently, to make laws and regulations to suit our needs in the United Kingdom, as opposed to having regulations and laws that suit the needs of the European Union, with its different competing interests, we will be in a far better place to face the ever-changing world.
A key part of that is immigration. The contribution by Heidi Alexander was really important and she highlighted her relationship with Austria. Just as we want a close relationship with Austria, Germany, Italy and many other European Union countries, we ought to reflect on what Barbara Castle, the former MP for Blackburn, said many years ago. She suggested that we ought not to put Italians, Germans and the French above Malayans, Australians or Indians, and we ought to be seeking that equality.
There is a certain toxicity to the debate on immigration in the United Kingdom. I loathe that; it is repugnant. I believe that we can have an immigration system post Brexit that objectively looks at the qualities, values, experiences, abilities and talents of those people who we want in the United Kingdom and optimise an immigration policy that works for Britain. The British people will then increasingly see how positive our independence from the European Union can be.
In conclusion, I want to highlight an area that has in the past few months been absolutely fascinating. The Secretary of State for Environment, Food and Rural Affairs has made incredible strides in demonstrating the progress we can make and deliver on in relation to animal welfare post Brexit. I believe the British people did not have confidence in belonging to the European Union, but that with a good negotiation, deal and ongoing relationship, we may have confidence in our ongoing partnership with our European friends post Brexit.
In the time available, I would like to touch on a number of points that are relevant to the debate, starting with what has been its main crux this afternoon: the future trading relationship between the EU and the UK.
Yesterday, the European Parliament passed a resolution on the framework of the future trade relationship, which will feed into next week’s EU summit and the EU negotiating position. It reiterates the position taken by Plaid Cymru from the very first day since the referendum result: the best course of action would be for us to stay in the single market and the customs union. That is the only realistic solution to avoid a hard border on the island of Ireland and—this of equal concern to me—a hard border in Wales at the ports of Holyhead, Fishguard and Pembroke Dock. The EU has frozen talks until the British Government come up with a solution to this problem, but it is on a plate for the British Government, if they would only listen to the evidence.
This is perhaps an opportunity to discuss the Labour party’s policy on a customs union, which is completely different—it is more or less a souped-up trade deal. A customs union is what Turkey has. It does not benefit from all the international trade agreements that the EU currently has. We have had a long discussion today about the 50 or 60 trade areas that they entail, which are cumulatively worth about £140 billion to UK trade. We would lose that. The other factor with a customs union is that while the UK would lose the benefit of the deals with third countries that are currently aspects of the EU customs union, those countries would be able to import into the UK. I had thought that Labour’s solution was a way of dealing with the problem of Northern Ireland, but Turkey needs lorry parks on the border with Hungary and Romania to deal with its border issues. That would be the case in Northern Ireland, so the proposal would not deal with the major issue of the border on the island of Ireland.
The National Institute of Economic and Social Research says that the cost to households in the UK will be about £600 per annum. Rabobank has put the cost of a no-deal Brexit at £11,500 per person. I think that the biggest cost relates to our public services. Some 20% of doctors working in the Welsh NHS come from the European Union. A number have already left. Some 45% of EU doctors in Wales have said they are considering leaving and another 12% have already made plans to go. Last week, I attended a summit with Hywel Dda University health board in my constituency about huge reorganisation plans for the health service in the west of my country. The closure of hospitals is on the table because staff cannot be recruited and retained, and Brexit will make that problem far worse.
Plaid Cymru recently won a vote on the Floor of the House for the first time in our 50-year history of service in the House of Commons on a motion on protecting EU citizenship for UK subjects. Now that the British Government have been mandated by the House of Commons, I look forward to them making progress on that. Indeed, yesterday’s resolution in the European Parliament yesterday reaffirmed Plaid Cymru’s position.
Throughout the entire process of Brexit, people have been talking about taking back control and respecting the sovereignty of the House. I am sure that, like me, my hon. Friend is therefore looking forward to the UK Government adhering to that motion, which was passed unanimously by this House.
We look forward, as I am sure my comrades in the SNP do, to holding the Government to account on the result of last week’s very important debate.
With regard to a meaningful vote, Members should not be in a position in which we can vote for either a bad deal or no deal. That position was outlined in the other place yesterday when my colleague, Lord Wigley, raised this issue. That strengthens the argument put forward by a number of Members, in particular Anna Soubry, who made the case for a second referendum on the terms of the deal.
I disagree slightly with the argument of Heidi Alexander that there has been no change in public opinion, and I speak from my experience. When I was at the hairdressers in Ammanford on Friday, I spoke to many people who voted out. They were pleading with me to sort out mess that we now face and said that they would now vote differently. On Saturday morning, when I was buying tiles with my wife in Cross Hands for the bathroom in our home, everybody there said exactly the same thing. I think there has been a big change in public opinion. If people were given the opportunity to vote on the facts before them, there would be a change of opinion.
The next issue I want to discuss is the prospect of no deal. We often hear from pro-Brexit MPs that that should be a bargaining position to hold against the European Union. As Mrs Moon excellently set out, a no-deal scenario for Wales would be absolutely catastrophic, and I see no reason to reiterate her points.
I will conclude on perhaps one of the biggest issues, which relates to Brexit’s constitutional implications: the power grab that is now facing and impacting on the Welsh Government, the Scottish Government, the National Assembly for Wales and the Scottish Parliament.
I fully agree. We have had two referendums in Wales to enshrine our constitutional settlement, but we have a British Government who are driving a sledgehammer through that settlement. I enjoyed the phrase “puppet Parliament” that was used by right hon. Member for Wokingham (John Redwood). The reality is that if clause 11 of the European Union (Withdrawal) Bill goes through unamended, and unless the British Government accept the recommendations of the Welsh Government and the Scottish Government, our respective Parliaments would be puppet Parliaments within the British state.
That brings me to the new UK internal market that will have to be created following Brexit. Of course, we currently have the EU internal market, which deals with issues of trade within the British state. As somebody who supports Welsh independence, I recognise that there will have to be a UK internal market, if we end up leaving the EU single market, but the challenge at hand is who constructs that UK internal market. Will that be done on the basis of the political reality that we face in the British state—a multipolar state with four national Governments—or will it done through direct rule from Westminster? That is about not only the construction of the internal market, but how it is regulated.
Let me finish on this point: Westminster plays about with the constitutional settlements of Scotland and Wales at its peril. Unless respect is shown to the Welsh Government and to the people of Wales and the people of Scotland, instead of the disrespect agenda that we have at the moment, we will be discussing not Brexit in the years to come, but “Wexit” and “Scexit”.
Order. I am sorry, but on account of recent interventions, the time limit for the remaining Back Benchers will have to be reduced to five minutes each, because otherwise the Front Benchers will not have adequate time to wind up. That is the consequence of interventions that some people might think are superfluous, but others will think are essential.
I was going to conclude slightly early anyway, Mr Speaker, out of courtesy, so that another Member could make their speech.
It has been interesting to listen to much of this debate this afternoon. Some right hon. and hon. Members have held their positions on this issue for a very long time, but for me, this is about trying to set out briefly—in the five minutes I have—the vision we should have for the future.
It seems a long time ago when we think back to the end of the cold war and the iron curtain across Europe. The idea of free trade and a free market zone spreading into the east of Europe—potentially even to Russia—was something that people started to debate and think about. Of course, some 10 or 14 years back, we saw the European Union expanding to many countries that had been decimated by communism. They have now been able to become free democracies and have started to become prosperous. The difference is that what then came was another attempt to try to turn the European Union into a federal state, for example through the creation of its own currency. I remember at university 20 years ago people arguing that London would be decimated and that people would move out if we did not join the euro. I remember buying a book by my right hon. Friend John Redwood that argued that that was a load of nonsense. I did vote remain in the referendum two years ago—on balance, I felt that that was the right option at the time—but we now need to look at how we deliver on the outcome of the referendum vote.
I do not think that my vision of free trade and the removal of barriers between countries and economies should end merely because we intend to leave a particular political structure, and I do not think that we should focus entirely on the 27 other members of the EU. I have always felt that in the long run, subject to all the usual caveats about preserving our national sovereignty and about our ability to decide key public policy matters regarding health and welfare standards, we should seek to unite the economies of north America and Europe in particular, along with, potentially, those of other countries that are developed and have moved on.
Free trade cannot be a one-way process. It cannot be what we started to see a few years ago in Africa: a one-way trip of dumping subsidised products on to developing world markets to put people who were trying to compete with us on a level playing field out of business. One of the reasons why I have always supported free trade is the principle that it must work both ways, although that can sometimes lead to a more difficult argument.
Brexit gives us a chance to review our agricultural policies, which date from an era when we were concerned about whether we would be able to feed ourselves if the next convoy coming across the Atlantic was torpedoed. That consideration is now completely irrelevant. Nevertheless, there are some difficult discussions to have. As we move away from subsidies—there will be those who have become quite comfortable as a result of particular subsidies—we must discuss how we can shift from a system based on production to a one that is based more on sustainability and diversification, perhaps with a greater focus on smaller producers than on large agribusinesses.
I welcomed what my hon. Friend Leo Docherty said about security. If I had a little more time, I might dwell slightly more on that subject, and on the fact that European affairs could well be dominated by what Russia decides to do over the next few years. We should be clear about one key fact: someone who is Russian, or of Russian descent, is not automatically a supporter of Vladimir Putin. It does a great disservice to many people who were oppressed in that country and fled to safer nations to take Putin’s line that someone with a Russian passport must be a supporter of united Russia. Many such people are not, and many have paid for that with their lives.
Sadly, Putin seems to be starting to tread the well-worn path that has led Europe to conflict in the past. If he decides to continue down that path, we must make it very clear that we will be resolute in standing with our allies across Europe to ensure that any provocation or further attempts to destabilise countries in the way in which Putin has destabilised Ukraine would be met with a united and firm response. That is why what the Prime Minister did this week was absolutely right. We must also look towards the south, where other threats to European stability and security may arise, especially given the growth of instability in parts of sub-Saharan Africa, which is an aspect of what drives migrant flows towards our southern shores.
I do not have much time left, so let me conclude by stressing that Brexit is about leaving a political structure, not a continent. It is about viewing our neighbours not as opponents, but as future allies.
It is a pleasure to follow so many eloquent—and some long—contributions.
I wonder how many arch-Brexiteers have actually spoken to people who work in or run businesses to learn about the impacts of not only Brexit but uncertainty about Brexit, and how it is affecting decisions in their constituencies at this moment. I have done that, and I am going to share just two examples with the House. One is a specific small company, and the other is in a major sector. I would have covered more, but have had to cut and cut my speech as the second half of the afternoon has progressed.
The owner of a small and medium-sized enterprise, a research company, wished to remain anonymous, but wanted me to know his position. He wrote to me:
“I run a small business and have already lost out because of Brexit (due to the drop in sterling putting up the cost of our cloud computing by 20% and uncertainty over future research funding). There are lots of detailed questions for my business that I have no idea how to answer, and I don’t have armies of lawyers and accountants to work out for me. So much for the Tories cutting red tape. Such as, if there is a hard Brexit, will there be an uninterrupted service from all the cloud computing currently supplied via companies based in Ireland? Will I be able to access all my data and information on day one—or need new customs clearance or change my data protection set up? Will cloud computing be treated as an import with tariffs—and therefore add to my operating costs and accounting costs as I grapple with new HMRC rules? These are things that could tip my very small, struggling, business over the edge. I’m sure we’re not the only vulnerable SME.”
He goes on:
“More generally, MPs say they will protect jobs. In my sector income”— rather than jobs—
“is already moving judging by conversations I am having with partners and in my networks. Contingency plans are already being enacted by SMEs. I know of companies who have set up offices in mainland EU and are starting to channel work through there, even if it is UK-based staff doing it, for now. I am being paid in Euro for some work that previously would have been in sterling, which exposes me to risks I can’t offset. This is all completely legal. Two of my most talented EU colleagues have left the UK because they ‘don’t feel welcome’—they both lived here as children but having become parents themselves believe the situation is too uncertain to keep their roots here…In my view, the loss to Britain will be this invisible drip-drip of lost talent and money rather than announcements of big job losses by big employers and will only become apparent when it is too late.”
Secondly, my constituency is home to a large number of broadcast organisations—household names such as Sky, and myriad others, many whose main market is not even in the UK—and many of my constituents work in broadcasting, including a few household names. The UK dominates Europe’s broadcasting sector due to the availability of skilled employees and English being the dominant language in the industry. Thanks to the country of origin principle, hundreds of international media organisations are based here and can broadcast to anywhere in the EU without restriction. The trade organisation COBA—the Commercial Broadcasters Association—fears:
“International broadcasters based here would, reluctantly, be forced to restructure their European operations”, particularly with a hard Brexit. It said a month ago that Brexit could cost the TV market £1 billion per year in investment, put at risk thousands of jobs in the UK broadcasting sector, and undermine the sector’s long-term global competitiveness. It says:
“Like many sectors, broadcasters cannot wait until the cliff edge of March 2019 to make decisions about the future of their European businesses.”
So even if no deal is not the Government’s intention now, these companies are having to make a risk assessment, divert management resources into contingency planning and make a decision on whether the risk of no deal is too great—they will jump ship anyway, taking jobs and investment with them. This means additional cost on otherwise unnecessary contingency planning and diversion of management time and energy, or just cutting and running.
These are the real of impacts of Brexit now. If we multiply this by tens of sectors and hundreds of thousands of businesses making millions of decisions about their future, we see that this is what is leading to the UK tumbling down the international growth tables. It undermines Government income that funds our vital public services and, as looks increasingly likely, makes our constituents poorer. The Government must wake up, and focus not on the outliers in their own party, but on the economic prospects of the UK and its place in the world.
First, I apologise to the House for missing the start of the debate, which was entirely beyond my control.
I also thank my hon. Friends for their contributions: my hon. Friends the Members for Nottingham East (Mr Leslie), for Lewisham East (Heidi Alexander), for Bridgend (Mrs Moon), for Ellesmere Port and Neston (Justin Madders) and for Brentford and Isleworth (Ruth Cadbury). I will just mention the comment of my hon. Friend the Member for Lewisham East, who described the Government’s approach and their fantasy trade deals as a dog’s breakfast; I have to say that my dog would turn up his nose at these fantasy trade deals on offer from the Government.
It cannot be right that the Government have so little regard for the sovereignty of this House that they provide little more than a two-day general debate and offer no meaningful vote, when most of this debate was always going to be about the single biggest issue to face this country in generations. As my hon. Friend Matthew Pennycook told us in his opening remarks yesterday, the Government are attempting to look like they are doing something when in fact they are not only doing nothing, but have no idea what they even should be doing. Instead of filling two days of parliamentary time on this general debate, the Government should be bringing back the Trade Bill and the Taxation (Cross-border Trade) Bill and introducing the other Bills that they promised, including those on fisheries and agriculture.
“they have been designed to prepare us for every eventuality, although they will be needed regardless of the outcome of our negotiations with the EU. They will give us a strong trade remedies regime.”—[Official Report,
Vol. 637, c. 915.]
However, they have not prepared us for every eventuality. In fact, they prepare us for no future eventuality whatsoever as they fail to set out any legislative procedure for future trade agreements or for the protections of our rights and standards. As for the trade remedies authority, it has been described by the Manufacturing Trade Remedies Alliance, the industry body representing our manufacturing sector, as being the weakest in the world. The Opposition recognised the need for a trade remedies authority in our reasoned amendment on Second Reading. In Committee, we tried to strengthen the powers and the contribution that the authority will need to make, but the Government voted against and defeated every single one of our amendments. The Government know that they are in trouble with those Bills, which is why they are afraid to bring them back here. As many right hon. and hon. Members have pointed out, significant matters remain unresolved, and no credible solution has been presented by the Government, but they are none the less eager to rule options out.
The UK’s trade with the EU accounts for 44% of our total exports—some £229 billion. A further 16% of our exports go to those 70 or so countries that are party to some form of a trade agreement with the EU, including South Korea, Norway and Switzerland. In short, the majority of our trade is with EU or countries with whom the EU has a trade agreement. The EU is of course the largest trading bloc in the world, and it is inconceivable that any trade agreement that the UK might be able to conclude with countries outside the EU would make up for the potential loss of trade once we leave. Of course, the UK will have to conclude new agreements with those countries that have an agreement with the EU, and the Government have attempted to spin the Trade Bill as being simply about that.
However, some of the agreements may well be significantly different from existing arrangements. South Korea, Chile and the other countries involved may well want an agreement with the UK after we leave the EU, but the question is why those countries would want to agree to the same terms that we currently enjoy as EU members. Furthermore, they will want to ensure that there is no overall disruption to their current trade with the EU. Of course, they will want a clear picture of what our future agreement with the EU looks like. Everybody is out for the best they can get for themselves. Every opportunity to take a little more and give a little less will be capitalised upon.
We already know that some of these countries, such as South Korea and Chile, have told the EU that they want to revise terms of their existing deals once the UK has left. Meanwhile, other countries have publicly called for changes to their trade with the UK after Brexit, calling for divergence from EU standards or liberalisation of tariff rate quotas. They do not want the same terms as before; they want better terms—for them, not for the UK. It will come down to who has the upper hand and the benefit of experience in trade talks.
Investors want to know whether they will be able to continue to participate in European supply chains and how rules of origin will apply after Brexit. Will they have to complete arduous customs declarations and advanced screening applications? Will their goods be held up at ports and train stations? It is clear that the Government have absolutely no idea what to do about the border on the island of Ireland. The Government have repeatedly told us that they will not have a hard border, nor will they have a border at sea. They have told us there will be no infrastructure on the border, yet they have also suggested that a digital border will be put in place and have hinted that it will involve CCTV and automatic number-plate recognition technology. Quite how CCTV and ANPR can exist without infrastructure, I do not know; that is a step even further in the Secretary of State’s blue-sky thinking. That proposition is untried and untested, and it has been dismissed categorically by businesses, the Irish Government and the European Union. Even if that were not the case, it would require a substantial systems overhaul across the European Union as well as in the UK, and HMRC has already said that it would not be in a position to roll that out by the time the UK leaves the EU.
Further, the success of any border arrangement, if such an arrangement could be found, would depend entirely on the extent to which UK regulations and standards were compatible with those of the EU. Those are fundamental questions, but despite 20 months having passed since the referendum result and a year since article 50 was triggered, the Government are no further on with answers to them.
Many of those issues would be substantially resolved if, as the Opposition have suggested, the Government were to negotiate a new, bespoke, comprehensive UK-EU customs union. Such a customs union would allow existing trade arrangements to be rolled over with minimal changes. That is what the Government say that they want. Disruption to trade, such as changes to rules of origin requirements and diagonal cumulation, would also be avoided.
Under Labour’s suggested approach, we would work alongside the EU in new trade arrangements. It is shocking that the Government have drawn a red line of not being in a customs union, without modelling the effects either way. If we agreed an EU-UK customs union, the EU would be enhanced by having the strength of the world’s sixth-largest economy joining it in negotiations, and we would be strengthened by negotiating alongside the largest trading bloc in the world.
Our approach would also remove the need for customs checkpoints and accompanying infrastructure on roads between Northern Ireland and the Republic of Ireland. Our approach recognises that the EU is the largest market in the world, and that we are stronger in future negotiations alongside it. The Labour party seeks solutions to the problems that the Government have presented to the country.
I am grateful for the opportunity to respond to today’s debate, and I thank all right hon. and hon. Members who have taken part. I have very much enjoyed closely following the debate and the valuable contributions that have been made, and I am sorry that I will not be able to acknowledge them all in the eight minutes that remain.
I want to acknowledge the range of advice that the Government have been given, from my right hon. Friend John Redwood, who made a strong case for no deal, to my right hon. Friend Anna Soubry, who made a strong argument for the customs union and EFTA, to which I will return in a moment. I was also grateful to my hon. Friend Giles Watling for representing his constituents by supporting the Prime Minister’s centre ground position.
The Prime Minister has been very clear that the UK will leave the EU on
I want to take a little time to talk about some of the solutions that have been proposed in relation to off-the-shelf models. As we have emphasised, we do not want an off-the-shelf solution or an existing model; we want the greatest possible tariff-free and barrier-free trade with our European neighbours, as well as to negotiate our own free trade agreements around the world, particularly in relation to our comparative advantage in services.
We want to ensure that UK companies have the maximum freedom to trade with and operate in European markets, and we want to let European businesses do the same in the UK. But we have always said that we are not looking for a Norway-style deal or a Canada-style deal. There is no point starting from scratch as we build our new relationship, because, unlike a country such as Canada, we start from the position of already having the same rules and regulations as the EU. Seeking a Norway-style agreement based on participation in the EEA agreement would not pass the first test that the Prime Minister set out for our future economic partnership with the EU. It would deliver control of neither our borders, nor our laws.
On borders, remaining in the EEA agreement would mean that we had to continue to accept all four freedoms of the single market, including freedom of movement. On laws, continued participation in the EEA agreement would mean the UK having to adopt at home, automatically and in their entirety, new EU rules, over which in future we will have little influence and no vote. This would not deliver the British people’s desire to have more direct control over the decisions that affect their daily lives.
Membership of EFTA, in and of itself, does not deliver any market access to the EU; it is a trading bloc between four European countries, Switzerland, Norway, Iceland and Liechtenstein. Three of those countries participate in the EU’s single market through the EEA agreement, while Switzerland participates in some areas through a series of bilateral agreements with the EU. Therefore, joining EFTA does not say anything about our future economic partnership with the EU. Although we want to maintain our deep and historical relationships with the EFTA states, the UK is in many ways different from those countries. Our population is about 65 million, whereas the EFTA states together comprise about 14 million people. In 2015, the EFTA bloc’s collective GDP amounted to £710 billion, which compares with the UK’s £1.9 trillion. So the UK’s participation in EFTA would fundamentally change the nature of that group and would not be an appropriate model for our future relationship with the EU or with those countries.
I listened carefully to the words my right hon. Friend used and I am sure the record will show that she referred to EFTA, but I am glad she has clarified that, in saying she supports EFTA, she means EFTA as an EEA member. But I stand by the remarks I just made. I hope she will not mind my saying to her gently that from the perspective of many who want to leave the EU, saying that we want to solve the problems of leaving the EU by staying in the EU’s internal market, with all that that entails for non-member states, and staying within the EU’s customs union, so that we have to accept the EU’s common commercial policy, appears to suggest that we must solve the problems of the EU by, de facto, staying within it. That is how it comes across to many people who wish sincerely to leave the EU. I did listen carefully to her—[Interruption.] Mr Leslie mentions transition, and of course we have set out the case for the implementation period.
I must press on, because I want particularly to pick up a point relating to borders and migration.
I want to make this point, but if I have time, I will give way to the hon. Lady. Remaining in the EEA agreement would mean having to continue to accept all four freedoms of the single market, including freedom of movement. Although it is true that Liechtenstein has unique arrangements on the movement of people, the UK is in many respects different from Liechtenstein, a country whose population is less than almost every UK constituency. We can safely anticipate that this exemption afforded to a micro-state would not be afforded to the UK.
I very much regret that, with only two minutes to go, I will have dramatically to shorten my speech. On the customs union, Turkey’s customs union with the UK does not cover certain sectors that would be vital to the UK economy and it does not guarantee frictionless trade across the whole economy, because of course a customs union alone does not solve some of the—[Interruption.] Opposition Front Benchers are saying that this is not what they are looking for. They are looking to be in the customs union and remain harmonised with the regulations of the EU—that is the implication of their position. The implication of their position is that they do not wish to leave the EU. They want the EU to control our tariffs. They would be happy for it to control our laws. They would be happy to accept free movement. This is not what people voted for.
We must not lose sight of our ultimate aim to build a new comprehensive partnership that sees us stay the closest of friends and allies. As the Prime Minister has set out, our vision is of a UK that is a champion of free trade, based on a high standard, thriving as a global Britain which forges a bold and ambitious comprehensive economic partnership with our neighbours in the EU and reaches out beyond to foster trade agreements with nations across the globe. As we approach this March Economic Council, both sides in these negotiations have agreed that we want a common fight against terrorism and crime; we want participation and co-operation on research, innovation, culture and education; we want to avoid the absurdities of the interruption of flights; and we want a trade agreement covering all sectors, with zero tariffs on goods and addressing services. We shall succeed.
Question put and agreed to.
That this House
has considered European Affairs.