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Brexit: Trade in Non-financial Services (EUC Report) - Motion to Take Note

Part of the debate – in the House of Lords at 9:27 pm on 18th December 2017.

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Photo of Baroness Noakes Baroness Noakes Conservative 9:27 pm, 18th December 2017

My Lords, I, too, am a member of the EU Sub-Committee on the Internal Market, and I pay tribute to the noble Lord, Lord Whitty, for his excellent chairmanship. Brexiteers may well be part of the majority who voted to leave the EU but, as noble Lords are aware, in Parliament, and in particular your Lordships’ House, it is a different matter. It was therefore no surprise to find that I was not in the mainstream of views within EU Sub-Committee B. Put another way, EU Sub-Committee B is well endowed with those whose sympathies are for remain, and I believe that this colours the sub-committee’s findings.

I certainly do not accuse my fellow committee members of bias in the report, but there is a pervasive worldview that Brexit is a negative thing and that keeping things much as they are is a desirable outcome from the Brexit negotiations. This desire to avoid change indeed reflected many of the views of those who gave evidence to us—but, as is customary, many of the people who gave evidence to the sub-committee were taken largely from trade bodies, and they are the very people who have a lot invested in the status quo. It would have been really surprising if those bodies had argued for anything radically different.

I shall refer to the question of statistics relating to trade and services, which has already been referred to. It is true, as the report points out, that there are problems with current statistical data. The report’s conclusion at paragraph 37 is:

“The Government therefore needs more accurate and detailed statistical information … than is currently available … Entering negotiations without such data could risk long-term, unintended consequences for the UK economy”.

In a narrow sense, these are plausible conclusions. Who can doubt that decisions should be made on the basis of the best information? But is it actually necessary? We have managed for a long time to be a successful service economy without perfect data. What long-term unintended consequences for the UK economy could arise if we do not have perfect data? The report finds a negative, but does not explain how or why.

More importantly, this view—that we need to know precisely what has been going on in the service sector in order to avoid unintended policy consequences—ignores one vital element of the UK economy and the service sector in particular: adaptability. Over the centuries, the UK became and remained a great trading nation because of two things: we successfully adapted to changing economic circumstances and we constantly sought new opportunities. In the last 500 or 600 years, the UK has repeatedly reinvented itself in trading terms, moving from an economy based on agriculture through the industrial revolutions and the creation and dismantling of the empire. More recently, we have witnessed the evolution of a service economy and the establishment of our pre-eminence as a centre for financial services.

Innovation and adaptation are hallmarks of the UK as a trading nation. That is why we must not be afraid of the consequences of change, intended or otherwise. We need to go into negotiations with Europe about the future trading relationship between us mindful of the strength of the current shape of the economy but not hidebound by needing to preserve it for all time.

If we look at wider forces at work, one thing we can be sure about is that doing business in the UK, Europe and globally will change. Disruption is pervasive. In particular, the scale, scope and economic impact of technology are accelerating. We have been saying this for some time but it remains true. Artificial intelligence and robotics are already with us and are changing both how we live our lives and how enterprises create value. We are only now starting to glimpse what the future may yet hold for us. Secondly, the world is becoming more interconnected. In the past, trade was built on physical trade routes, but information does not have that constraint. Data and communications advances mean that traditional trading connections have been surpassed by complex global webs.

None of this means that it is not important to seek a comprehensive trade agreement, in particular to cover services. In that, I concur with the central finding of the report. Equally, the avoidance of a cliff edge via an implementation or transition period is sensible—this featured in the early report dealing with the options for trade post Brexit. These are non-controversial findings and are indeed core elements of the Government’s policy. But my gloss on that—and my advice to the Government—is to ensure that they do not focus on setting in concrete the current trading arrangements. Far more important is flexibility to accommodate shifts in trading patterns, particularly those outside the EU. I do not know what those shifts will be but I am sure that they will happen.

I end with a compliment to the Government which is buried in the report. When the sub-committee started to examine Brexit last year, there were many doubts within the sub-committee about the depth of the Government’s engagement with the services sectors. That is no longer the case. At paragraph 289, the report states that the sub-committee recognises,

“the Government’s current high level of engagement across the services sectors”.

It is followed up by something along the lines of “the Government should keep it up” or do some more, but the essential message is a good one: the Government are doing the right thing.