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EU Single Market Access: Manufacturing and the Economy

Treasury – in the House of Commons on 11th February 2020.

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Photo of Matt Western Matt Western Labour, Warwick and Leamington

What assessment the Government have made of the potential effect on the (a) manufacturing sector and (b) economy of the UK not having access to the EU single market.

Photo of Sajid Javid Sajid Javid The Chancellor of the Exchequer

We want a relationship with the EU that is based on friendly co-operation between sovereign equals and is centred on free trade. The economy has grown every year since 2010. Employment is at a record high and wage growth has outpaced inflation for 17 consecutive months. The upcoming Budget will set out ambitious plans to level up across the UK and usher in a decade of renewal.

Photo of Matt Western Matt Western Labour, Warwick and Leamington

The Chancellor will be aware that the CBI has spoken out and claimed that business is not ready for Brexit, which has already cost businesses billions of pounds in planning. But the advice is unclear. I spoke to the Federation of Small Businesses and to several small businesses last night, and they are extremely concerned that neither the infrastructure, nor the advice, are in place.

Photo of Sajid Javid Sajid Javid The Chancellor of the Exchequer

I can assure the hon. Gentleman that we are working very closely with individual businesses and their representative groups. The one thing they have certainly welcomed in the past few weeks is that we have ended the uncertainty around Brexit by actually leaving the European Union, as we said we would. We will be working very closely with business as we forge that new free trade agreement, which I know we will do.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury)

Three years ago, at my first shadow Treasury questions from this Dispatch Box, I asked the Government about their plan to continue market access for financial services to EU countries after Brexit. Since that time, the Government’s ambitions have faded from the wide-ranging access-all-areas free trade deal that we were promised, to a basic agreement barely covering goods. The Chancellor has announced this morning that he is asking for enhanced equivalence for financial services, which the EU has already ruled out and which does not even exist in sectors such as insurance. This is our largest export sector, so how is it that we are still waiting for a credible plan after three years?

Photo of Sajid Javid Sajid Javid The Chancellor of the Exchequer

The hon. Gentleman needs to get his facts right. The EU has not ruled out equivalence. Indeed, it agreed in the political declaration to work at speed on an equivalence decision by the end of July this year, and that is welcome.[This section has been corrected on 13 February 2020, column 12MC — read correction] We are working very carefully and closely with the EU on having a broad agreement that will mean that our financial services continue to thrive—not only for our benefit, but for its benefit.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

Figures released this morning by the Office for National Statistics show that GDP was flat in quarter four, growth is at one of its slowest rates since the financial crisis, the service sector is stagnating, and manufacturing has been particularly hard hit. When will the Chancellor accept the reality that these Tory Brexit plans are playing havoc with the economy, and damaging the wellbeing and prospects of all our constituents?

Photo of Sajid Javid Sajid Javid The Chancellor of the Exchequer

The hon. Lady will know that growth would have been hit by the uncertainty created in this Parliament before the general election. Since the general election, confidence is back because this country has said no to Marxism and has got on with Brexit.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

The Chancellor puts forward a ridiculous prospect of the choices facing this country, because Brexit is the real and present danger for the economy. Just-in-time manufacturing is a critical part of the economy. Elizabeth de Jong of the Freight Transport Association has said of the revelation that the Chancellor of the Duchy of Lancaster’s smart border will not be ready until 2025:

“Frictionless trade has been kicked to the touchline… It’s going to be really costly for business.”

Can the Chancellor tell me what impact four years of Brexit chaos at the border will have on the UK economy and jobs in manufacturing in all our constituencies?

Photo of Sajid Javid Sajid Javid The Chancellor of the Exchequer

The hon. Lady talks about the importance of manufacturing. Since the change in Government in 2010, we have seen 58% growth in auto manufacturing and 22% growth in aerospace manufacturing. Again, because of the recent general election result, a survey of manufacturers carried out by the CBI a few weeks ago saw the biggest increase in confidence in the history of that survey—in more than 60 years.

Photo of Greg Hands Greg Hands Conservative, Chelsea and Fulham

The financial services sector generates 7% of UK GDP, provides 1.1 million jobs and is responsible for £29 billion-worth of tax revenue. Does the Chancellor agree that we need to ensure that the financial services sector is looked after in any trade agreement with the European Union if we are to pay for the infrastructure projects that we expect an announcement on today?

Photo of Sajid Javid Sajid Javid The Chancellor of the Exchequer

My right hon. Friend, as always, is absolutely right. The financial services sector employs millions of people—not just in London, but in Edinburgh, Birmingham and so many other parts of our great country—and generates more revenue for public services than any other industry. He is right that financial services will be a key part of forging that new relationship with our European friends.

Photo of Jacob Young Jacob Young Conservative, Redcar

Does my right hon. Friend agree that the best way to boost our manufacturing sector, and the economy, is by creating 10 new free ports—and the best place for a free port is, of course, in Redcar?

Photo of Sajid Javid Sajid Javid The Chancellor of the Exchequer

I absolutely agree with my hon. Friend on the importance of free ports. It is a reminder that, as we forge a new chapter for our country outside the EU, there is so much we can do to boost opportunity in our country, and free ports are a key part of that.

Photo of Vicky Ford Vicky Ford Conservative, Chelmsford

About 3,000 people work in the insurance sector in Chelmsford—it is a massive contributor to our economy and to the tax take. Given that the EU grants equivalence in the insurance sector to countries such as Bermuda, is it not perfectly reasonable that the EU should offer the UK the same?

Photo of Sajid Javid Sajid Javid The Chancellor of the Exchequer

My hon. Friend is absolutely right. On day one, we will have exactly the same rules. We will not be rule takers. We will have the right to diverge in future, but on day one we can absolutely see why the EU will be looking very carefully at the equivalence decision.

Photo of Tim Farron Tim Farron Liberal Democrat Lords Spokesperson (Communities and Local Government), Liberal Democrat Spokesperson (Housing, Communities and Local Government), Liberal Democrat Spokesperson (North of England) (Northern Powerhouse), Liberal Democrat Spokesperson (Food and Rural Affairs)

In the South Lakes we have 3,000 local families waiting for a council home, yet the Government’s own Migration Advisory Committee says that the Government’s plan for visas and migrant pay will see an 8% reduction in the construction workforce. So will the Chancellor explain who is going to build the homes that families in the South Lakes so desperately need?

Photo of Sajid Javid Sajid Javid The Chancellor of the Exchequer

The hon. Gentleman will know that, under this Government, since 2010, we have seen a dramatic increase in the number of homes being built. I think that last year there was the highest number of homes built in all but one of the past 30 years. When it comes to building more of those homes, of course we do need enough workers in the industry. That is exactly what our points-based system is about—making sure that it focuses on those areas where we need most support.