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Queen’s Speech - Debate (5th Day)

Part of the debate – in the House of Lords at 5:13 pm on 28th June 2017.

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Photo of Lord Mandelson Lord Mandelson Labour 5:13 pm, 28th June 2017

My Lords, in the spirit of the noble Lord’s plea for cross-party agreement, perhaps I may say how much I agree with his successor as Chancellor of the Exchequer. I agree with Philip Hammond when he said that we cannot retain the trade advantages of EU membership without shouldering certain costs and compromises. These are precisely the costs and compromises which the Government’s inflexible red lines rule out.

After Brexit, we can trade with the European Union —of course we can—but on our present trajectory, the frictionless border and preferential treatment that we currently enjoy will be things of the past. Let us assume that the Government get through the withdrawal phase of the negotiation. The Government say that they want to negotiate a deep and ambitious free trade agreement that is as good for services as it is for goods. But even if we achieve an agreement to eliminate tariffs on goods—and that is the easier hurdle we will have to cross—we will face considerable customs costs and barriers unless we stay in the EU’s customs union, with its streamlined bureaucracy, its automatic mutual recognition of standards and assured origin rules governing trade. In principle you could still seek something like this via a negotiated customs agreement—but this would be less robust; it would be neither quick nor easy; and we would still have to show considerable flexibility to get it.

On services, at the point of departure we will have regulatory harmonisation, but we will have to continue this model to maintain the status quo in cross-border trade in services. The alternative is to lose our rights and our automatic access, and no amount of wishful thinking will change this. Any free-trade agreement worth its name, furthermore, will have to ensure a level playing field in competition policy and state aid, as well as in tax, social, environmental and regulatory measures and practices—and all subject to enforcement by the ECJ or some equivalent body if our market access is to be sustained.

These are the facts of which Philip Hammond is acutely aware, and which the Prime Minister chose to obscure in her original Lancaster House speech, when she talked of some form of “regulatory co-operation” with the EU, which she thinks will preserve sovereignty on both sides while simultaneously creating full market access for goods and services. This is not going to happen—unless, of course, she means that we are going to exercise our sovereignty by freely aligning ourselves with European rules and regulations over which we will have no control following our departure from the European Union.

People say to me that, in trade, “Leaving the EU is like a divorce in which you can then pay to get all the access you want”. This is not so. It is not just about money, it is about rules—rules for access, especially for cross-border trade in services. That is why at every stage in this negotiation we will face difficult choices in deciding how far we take our regulatory autonomy outside the single market versus securing our current trade in it.

We know where the hardliners will come down. They will come down for maximum autonomy. But they should also tell the truth about the implications of this for our future trade and prosperity. This is what lies at the heart of Philip Hammond’s disagreement with his colleagues. He knows that those who want Brexit at any cost are prepared to give up any amount of trade for the sake of the sovereignty they crave. He tries to mask this disagreement by saying, “Let’s leave the single market and the customs union by means of a slope rather than a cliff edge”. That is certainly very sensible as a temporary way of protecting cross-border trade and the integrity of pan-European supply chains, but it postpones rather than eliminates the ultimate difficult choices we face, including what concessions we will make for visa-free travel for EU citizens with jobs to come to here in the UK. That is why I suspect he privately hopes that, once on the slope, we will not leave it—an eternal slope that stretches for ever into the far blue yonder.

We can only enjoy the exact same benefits of the single market and the customs union—and we have to face up to this and be clear with ourselves and the public in recognising it—by staying in them in some form. This is the real choice facing us as a nation. We must grasp this nettle and be honest about the implications either way. Parliament must provide this clarity by coming clean and being truthful with the British people that there are more options available to us than a hard deal or no deal—options that, yes, will leave us with less autonomy as a nation but which will give us none the less, very importantly, more prosperity, more economic growth and more to spend on those vital schools, our healthcare, our policing and our security. In my view, the British public are slowly beginning to wake up to this reality.