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United Kingdom-European Union Future Economic Partnership - Statement

– in the House of Lords at 7:20 pm on 5th March 2018.

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Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal 7:20 pm, 5th March 2018

My Lords, with the leave of the House I will now repeat a Statement made by my right honourable friend the Prime Minister in another place. The Statement is as follows:

“With permission, Mr Speaker, I would like to make a Statement on our future economic partnership with the European Union.

In December, we agreed the key elements of our departure from the EU and we are turning that agreement into draft legal text. We have made clear our concerns about the first draft that the Commission published last week but no one should doubt our commitment to the entirety of the joint report. We are close to agreement on the terms of a time-limited implementation period to give Governments, businesses and citizens on both sides time to prepare for our new relationship, and I am confident we can resolve our remaining differences in the days ahead. Now we must focus on our future relationship: a new relationship that respects the result of the referendum, provides an enduring solution, protects people’s jobs and security, is consistent with the kind of country we want to be and strengthens our union of nations and people. These are the five tests for the deal we will negotiate.

There are also some hard facts for both sides. First, we are leaving the single market. In certain ways, our access to each other’s markets will be less than it is now. We need to strike a new balance but we will not accept the rights of Canada and the obligations of Norway.

Secondly, even after we have left, EU law and ECJ decisions will continue to affect us. The ECJ determines whether agreements the EU has struck are legal under the EU’s own law and if, as part of our future partnership, Parliament passes a law identical to an EU law, it may make sense for our courts to look at the appropriate ECJ judgments so that we both interpret those laws consistently—as they do for the appropriate jurisprudence of other countries’ courts. But the agreement we reach must respect the sovereignty of both our legal orders. That means the jurisdiction of the European Court of Justice in the UK will end. It also means that the ultimate arbiter of disputes about our future partnership cannot be the court of either party.

Thirdly, if we want good access to each other’s markets it has to be on fair terms. As with any trade agreement, we must accept the need for binding commitments. So we may choose to commit some areas of our regulations, such as state aid and competition, to remaining in step with the EU’s.

Finally, we must resolve the tensions between some of our objectives. We want the freedom to negotiate trade agreements around the world. We want control of our laws. We also want as frictionless a border as possible with the EU, so that we do not damage the integrated supply chains that our industries depend on and do not have a hard border between Northern Ireland and Ireland.

However, there are tensions in the EU’s position and some hard facts for it, too. The Commission has suggested that an off-the-shelf model is the only option available to the UK. But it has also said that in certain areas none of the EU’s third-country agreements would be appropriate, while the agreement envisaged in the European Council’s own guidelines would not be delivered by a Canada-style deal. Finally, we need to face the fact that this is a negotiation and that neither side can have exactly what we want. But I am confident we can reach agreement so I am proposing the broadest and deepest possible future economic partnership, covering more sectors and co-operating more fully than any previous free trade agreement.

There are five foundations that must underpin our trading relationship: first, reciprocal binding commitments to ensure fair and open competition so that UK businesses can compete fairly in EU markets and vice versa; secondly, an independent arbitration mechanism; thirdly, an ongoing dialogue with the EU, including between regulators; fourthly, an arrangement for data protection that goes beyond an adequacy agreement; and, fifthly, free movement will come to an end. But UK and EU citizens will still want to work and study in each other’s countries, and we are open to discussions about how to maintain the links between our people. We then need to tailor this partnership to the needs of our economies. We should be absolutely clear that this is not cherry picking. Every free trade agreement has varying market access, depending on the respective interests of the countries involved. If this is cherry picking, then so is every trade arrangement. What matters is that our rights and obligations are held in balance.

On goods, a fundamental principle in our negotiating strategy is that trade at the UK-EU border will be as frictionless as possible, with no hard border between Northern Ireland and Ireland. This means no tariffs or quotas and ensuring that products need undergo only one series of approvals in one country. To achieve this, we need a comprehensive system of mutual recognition. This can be delivered through a commitment to ensuring that the relevant UK regulatory standards remain as high as the EU’s, which, in practice, means that UK and EU regulatory standards will remain substantially similar in future. Our default is that UK law may not necessarily be identical to EU law but should achieve the same outcomes. In some cases, Parliament might choose to pass an identical law. If the Parliament of the day decided not to achieve the same outcomes as EU law, it would be in the knowledge that there may be consequences for our market access. We will need an independent mechanism to oversee these arrangements, which, I have been clear, cannot be the European Court of Justice.

We also want to explore the terms on which the UK could remain part of EU agencies such as those critical to the chemicals, medicines and aerospace industries. This would mean abiding by the rules of those agencies and making an appropriate financial contribution. The UK would also have to respect the remit of the ECJ in that regard. Parliament could decide not to accept these rules, but with consequences for our membership and linked market access rights.

Lastly, to achieve as frictionless a border as possible and to avoid a hard border between Northern Ireland and Ireland, we need an agreement on customs. The UK has been clear that it is leaving the customs union. The EU has also formed a customs union with some other countries but those arrangements, if applied to the UK, would mean the EU setting the UK’s external tariffs, being able to let other countries sell more into the UK without making it easier for us to sell more to them; or it would mean the UK signing up to the common commercial policy. That would not be compatible with a meaningful, independent trade policy and it would mean we had less control than we do now over our trade in the world. We have set out two potential options for our customs arrangement: a customs partnership where, at the border, the UK would mirror the EU’s requirements for imports from the rest of the world for those goods arriving in the UK and intended for the EU; or a highly streamlined customs arrangement, where we would jointly implement a range of measures to minimise frictions, together with specific provisions for Northern Ireland. Both would leave the UK free to determine its own tariffs, which would not be possible in a customs union.

Taken together, the approach we have set out on goods and agencies and the options for a customs arrangement provide the basis for a good solution to the very specific challenges for Northern Ireland and Ireland. My commitment to this could not be stronger: we will not go back to a hard border between Northern Ireland and Ireland; nor will we break up the United Kingdom’s own common market with a border down the Irish Sea. As Prime Minister, I am not going to let our departure from the EU do anything to set back the historic progress made in Northern Ireland, nor will I allow anything that would damage the integrity of our precious union. The UK and Irish Governments and the European Commission will be working together to ensure we fulfil these commitments.

This approach to trade in goods is important for agriculture, food and drinks but here other considerations apply. We are leaving the common agricultural policy and the common fisheries policy, and will want to take the opportunity to reform our agriculture and fisheries management and regain control of access to our waters. I fully expect that our standards will remain at least as high as the EU’s, but it will be particularly important to secure flexibility here to make the most of our withdrawal from the EU for our farmers and exporters. We will also want to continue to work together to manage shared stocks in a sustainable way and agree reciprocal access to waters and a fairer allocation of fishing opportunities for the UK fishing industry.

On services, we have the opportunity to break new ground with a broader agreement than ever before. For example, broadcasting and financial services have never previously been meaningfully covered in a free trade agreement. We recognise that we cannot have the rights of membership of the single market, such as the country of origin principle or passporting, but we should explore creative options, including mutual recognition, to allow broadcasting across borders. My right honourable friend the Chancellor will set out more detail on financial services later this week. We will also look to agree an appropriate labour mobility framework that enables travel to provide services in person, as well as continued mutual recognition of professional qualifications. Finally, our partnership will need to cover agreements in other areas including energy, transport, digital, civil judicial co-operation, a far-reaching science and innovation pact, and cultural and educational programmes.

We cannot escape the complexity of the task ahead. We must build a new and lasting relationship, while preparing for every scenario, but with pragmatism, calm and patient discussion I am confident we can set an example to the world. Yes, there will be ups and downs over the months ahead, but we will not be buffeted by demands to talk tough or threaten a walk-out and we will not give in to the counsels of despair that this simply cannot be done—for this is in both the UK’s and the EU’s interests. As we go forwards, foremost in my mind is the pledge I made on my first day as Prime Minister: to act not in the interests of the privileged few, but in the interests of all our people, and to make Britain a country that works for everyone. My message to our friends in Europe is clear. You asked us to set out what we want in more detail. We have done that. We have shown we understand your principles. We have a shared interest in getting this right, so let us get on with it. I commend this Statement to the House”.

Photo of Baroness Smith of Basildon Baroness Smith of Basildon Shadow Leader of the House of Lords, Shadow Spokesperson (Northern Ireland) 7:32 pm, 5th March 2018

My Lords, I thank the Minister for repeating the Statement. It seems that the Prime Minister is trying to create an optimistic, upbeat tone to quell the fears of those who are concerned about negotiations, so first I welcome the greater degree of candour from the Prime Minister. While others around her told us how easy was going to be to leave the EU, she has admitted that it is complex, difficult and uncertain. She was clear that we have to face up to some hard facts, that life is going to be different and that our access to each other’s markets will be less than it is now. Her honesty recognised that we will not be allowed to have all the benefits without all the obligations, which is a far cry from Ministers telling us that we would have the exact same benefits. She also admitted that even after we have left the EU we will still be affected by decisions of the ECJ and that to ensure good access to each other’s markets,

“we must accept the need for binding commitments”, and she accepted the principle of regulatory alignment in some areas. She has also accepted that in these negotiations neither of us can have “exactly what we want”. These statements are welcome in recognising the harsh reality of what has to be achieved with so little time left.

The Prime Minister has regularly stated her red lines—no single market, no customs union and no role for the ECJ—which we have consistently said she was unwise to use as a starting point for negotiations, yet some of those red lines are now looking distinctly pink.

On Northern Ireland, the Prime Minister said more about this in her Friday speech than in her Statement today, but it still seems to me, and others, that there is an inherent contradiction at the heart of the Government’s commitment that there will be no hard border between Northern Ireland and the Republic of Ireland while they remain opposed to any form of customs union. We were relieved to hear the Prime Minister reject the Foreign Secretary’s assertion in his private memo to her that it is not the responsibility of the UK to resolve the Irish border issue. The Prime Minister was absolutely clear on Friday that it is her Government’s responsibility to resolve this issue. She spoke of her personal commitment and said she recognised the anxieties caused by Brexit and the “desire for concrete solutions”. It is not a desire; it is a necessity, and it is fast becoming an urgent one. If the Government really believe that this issue can be resolved without any form of customs union, they need to start telling us how and to do so soon. The Prime Minister remains resolute against a customs union, but she is seeking a customs arrangement or a customs partnership, so we look forward to hearing more details about the “not a customs union” as negotiations continue.

The Prime Minister has also recognised that some of her early red lines have had to fade. We appreciate her acceptance of the necessity to remain in at least some of the EU agencies, even as an associate member. The Prime Minister identified the European Medicines Agency, the European Chemicals Agency and the European Aviation Safety Agency as being critical. We agree with that description. Many of us are bitterly disappointed that given the importance of the European Medicines Agency, the UK is losing it. Have there already been exploratory discussions with the EU on the principle of remaining, in whatever capacity, in these agencies? Are the Government prepared to negotiate similar arrangements for other agencies? Does the Minister accept that this may well mean a continuing role for the ECJ in the UK? Before she answers, it may help if I tell her that at the weekend, when I did a radio debate with Jacob Rees-Mogg, he described this as “perfectly sensible”. The Minister will be aware that we were a member of Euratom before we joined the EU. She will have heard the debate on Euratom last week in your Lordships’ House. We have now had the Prime Minister’s comment that she wants a “close relationship” with Euratom. Can the Minister tell us what that means? The Prime Minister has not gone as far as she has on the agencies, where she wants associate membership, but she talked about a close relationship. This is also a critical agency for the UK.

In the same way that there has been an evidence-based shift on the position regarding the agencies and the role of the ECJ, the Government have to recognise that if they are genuinely serious about the Northern Ireland border, they need to look at it without unrealistic and unnecessary red lines. We are clear that remaining in a customs union is the best way to deliver the frictionless trade the Prime Minister wants. For Northern Ireland, that means no customs duties or checks at the border. It means no checks for transporters, food, animal hygiene and so on. It will resolve the issue.

I welcome the fact that the Prime Minister says that Brexit is not an end in itself, yet in a further contradiction she has repeated that no deal is better than a bad deal. Surely both statements cannot be true.

Finally, on Saturday morning I was very fortunate to enjoy the company of the political editor of the Sun, Tom Newton Dunn, as he hosted “The Week in Westminster” with two MPs, Jacob Rees-Mogg and Sarah Wollaston, and me. Perhaps that is where the Prime Minister’s biggest achievement was evident because with such divergent views, they both supported the content of the speech. Indeed, Jacob Rees-Mogg admitted that it was “very encouraging for the unity of the Conservative Party”. So much of the Brexit journey has been about internal Conservative Party management. As we have heard, that canny blend of “We’re leaving the EU” with some red lines becoming pink smudges or fudges just might buy the Prime Minister some time. She said that all negotiations are about cherry picking on all sides. Michel Barnier has welcomed her acceptance that negotiations require trade-offs. Perhaps the Prime Minister has finally accepted that negotiations must be less about red lines and more about a pragmatic Brexit.

The noble Baroness knows from our previous discussions that we welcome a pragmatic approach, in the interests of the economy, of jobs, and of maintaining rights and standards. As part of that, I hope she will be able to confirm that she understands that it becomes even more crucial that Parliament has not just a meaningful vote but an ongoing meaningful role.

Photo of Lord Newby Lord Newby Liberal Democrat Leader in the House of Lords

My Lords, the Prime Minister has set five overarching tests for a successful Brexit. Three are simply vacuous: respecting the referendum, being enduring and being consistent with the kind of country we want to be. Two are more substantive, but both are being actively undermined by the Government’s own Brexit stance.

The first is protecting people’s jobs and security. Has the Prime Minister given any thought to how that sounds to the 300 Ryanair workers at Glasgow Airport as the company closes its international base there, on the basis of Brexit, to the 288 workers at Landis+Gyr in Stockport as it moves its production to Romania, or to the small businesses which have contacted me explaining how leaving the customs union and single market will impose costs on them that will force them out of business? The Statement contains some welcome shafts of realism, none more so than the statement that our access to EU markets will be less than now. Does the noble Baroness the Leader accept that less access means less trade, which in turn means fewer jobs, lower national income and higher prices?

The second substantive test set by the Prime Minister is that Brexit must strengthen,

“our union of nations and our union of people”.

Leaving aside the impasse in discussions with the devolved institutions about the transposition of EU law, how does the noble Baroness think that sounds in Northern Ireland? The Prime Minister has come up with absolutely nothing new to reassure people that there will be no customs border between the north and the Republic. Of the options on the table, one simply says that SMEs, which represent 80% of trade, can carry on as if the border did not exist. How could that possibly work if standards diverge or if the UK strikes its own trade deals with different tariffs from those applying in the EU? This is the only example I know of where the Government’s policy is indeed bold and imaginative—but it is hardly credible.

As for the technological solution to the border, does the noble Baroness agree with Pascal Lamy that there is no such thing as a virtual border? Does she agree with the report, much touted by Brexiteers, from Lars Karlsson, which explains on page 11 that, on the highest tech option he can see, an app on a mobile phone of a lorry driver “opens the gate automatically” as the lorry approaches the border—that is, a gate, a physical thing, not a virtual border. Has she read his description of the Norway/Sweden border, the most technologically advanced in the world according to him, where at staffed customs posts most goods traffic is cleared “within 3-9 minutes”? There is no soft border there either.

The Prime Minister refers briefly to our being able, in theory, to negotiate new trade agreements after Brexit. When she rang Donald Trump over the weekend to complain about his plan to slap a punitive tariff on UK steel, did she ask him how that fitted into a comprehensive free trade deal? Did she consider that in fighting any US steel tariff, the EU as a whole was likely to have a bit more clout than the UK on its own?

More generally, the speech sets out a range of areas where the Government plan to follow EU rules but pay for the privilege and lose any say in how they are set. Having associate membership of various EU bodies is better than nothing, but in reality we become rule-takers. On the trade in goods, the PM admits that we will have to follow standards “substantially similar”—that is, as near as makes no difference to identical—to those set by the EU.

The rationale for becoming rule-takers instead of rule-makers is that Parliament retains the right to diverge from the EU rules if it chooses. But the speech demonstrates how in practice it will not dare do so because of the damage it would cause to business and the economy. The Prime Minister wants to exchange the reality of influence for the pretence of sovereignty—and what is worse, she clearly accepts that it is a pretence.

The Government are going through extraordinary contortions of both policy and language to try to replicate as far as possible the existing terms of our EU membership. It all begs the question, “Is it worth it?”—and invites the response, “No”.

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

My Lords, I am grateful to the noble Baroness and the noble Lord for their comments. I particularly welcome the noble Baroness’s constructive comments and assure her that we take the scrutiny and involvement of Parliament as we develop our new relationships with the EU extremely seriously and will continue to do so.

The noble Baroness asked about agencies. As the Statement set out, we want to explore with the EU the terms on which the UK could opt to remain part of EU agencies—as she rightly said, the European Medicines Agency, the European Chemicals Agency and the European Aviation Safety Agency. There may well be other agencies, such as those related to our future security partnership, that the UK chooses to remain a part of, and we will continue those discussions. Again, in relation to Euratom, it will be of benefit to both sides for the UK to have a close association, and that too will continue to be part of our ongoing discussions. As Prime Minister said, after we have left the jurisdiction of the ECJ, EU law and the decisions of the ECJ will continue to affect us, including through our respecting its remits where we agree that the UK should continue to participate in an EU agency.

The noble Lord asked about access to the EU market. He is right that the Prime Minister has said, in relation to hard facts we have to face, that in certain ways our access will be less than it is now. But we are also seeking the broadest and deepest possible agreement, covering more sectors and co-operating more fully than any free trade agreement anywhere today, and of course we will have the freedom to negotiate new trade agreements—so the future is bright.

The noble Baroness and the noble Lord touched on the very important issue of Northern Ireland. I repeat again that, as we have said constantly, we want trade at the border to be as frictionless as possible, with no hard border between Northern Ireland and Ireland or between Northern Ireland and the rest of the UK. We believe this can be achieved by a commitment to ensure that the relevant UK regulatory standards remain at least as high as the EU’s and by a customs arrangement. We acknowledge that there will be technological solutions to this, and we believe we have set out a structure by which we can begin and continue the negotiations with both the Irish Government and the European Commission to make sure we all achieve the aims that we have all clearly set out and to which we are extremely committed.

The noble Lord asked about future free trade agreements. I assure him that we have opened 14 informal trade dialogues with 21 countries, including the US, Australia and the UAE. These will form the groundwork for future FTAs. The Department for International Trade has a presence in 108 countries, and we have begun appointing a new network of trade commissioners. We are committed to new trade and new opportunities across the globe, but of course maintaining a strong, deep and positive relationship with the EU is what we are focused on in our negotiations with it.

Photo of Lord Howell of Guildford Lord Howell of Guildford Chair, International Relations Committee 7:49 pm, 5th March 2018

Does my noble friend agree that this Statement is a welcome blast of common sense into an otherwise madly polarised debate? Will she also accept that the principle of mutual recognition, which has been embedded in EU law for the last 25 years and was in fact a British invention, can allow a welcome degree of flexibility in any kind of alignment or regulation or the development of different regulatory arrangements? It applies to all members inside the EU and to everyone associated with it, and there is no reason why we should not apply the same principles of mutual recognition, as the Prime Minister is arguing. Lastly, does my noble friend accept that of course there are cherries to be picked, but sometimes it is better to pick the cherries than to leave them to rot on the bough?

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

I thank my noble friend for his comments. I entirely agree. It is important to remember that many regulatory standards are themselves underpinned by international standards set by non-EU bodies so we are certainly committed, and believe it is absolutely achievable, to ensuring that our relevant UK regulatory standards remain as high as the EU’s. As I have said, many of these standards are underpinned by international standards—for instance, the UN Economic Commission for Europe sets vehicle safety standards—set by organisations of which we will continue to be a part.

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Labour

I express my gratitude to the noble Baroness the Leader of the House for repeating the Statement. The prosperity of the nation is one of the principles that the Prime Minister referred to in both her Mansion House speech and her Statement to the Commons today. I assume, and I would be grateful if the noble Baroness could confirm this, that some economic assessment was made of what the impact would be of achieving all the things that the Prime Minister set out to achieve in her Mansion House speech. In that speech she set out what the UK’s negotiating position would be, recognising that we would have less market access than before. I invite the noble Baroness to confirm to this House that that work was done and to indicate when it will be published, because the nation is entitled to see it.

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

As I said in my response to the noble Baroness and the noble Lord, yes, the Prime Minister has said that obviously we will have different access to the European market, but we are also committed to developing a broad and deep relationship with the EU and to having trade agreements elsewhere. We have committed to providing Parliament with appropriate analysis ahead of the final vote on the deal.

Photo of Lord Higgins Lord Higgins Conservative

Will my noble friend confirm that it is now the Government’s view that withdrawing from the customs union and the single market will have a damaging effect on the UK economy, as well as creating a problem for the Northern Irish border? If that is so, is that not a very strange position from which to start the negotiations? Should Parliament not have an option of voting at this stage on whether those particular red lines, which would have a damaging effect on the entire population of this country, are going to happen?

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

I am afraid I do not agree with my noble friend. As the Statement set out, the EU has formed a customs union with other countries but those arrangements, if applied to the UK, would mean the EU setting the UK’s external tariffs, being able to let other countries sell more into the UK without making it easier for us to sell more to them, and the UK signing up to the common commercial policy, which could not be compatible with a meaningful trade policy. We are leaving the customs union and the Prime Minister has set out two potential options for our future customs relationship.

Photo of The Bishop of Leeds The Bishop of Leeds Bishop

My Lords, I am grateful to the noble Baroness the Leader of the House for repeating the Statement, which seems to express a realism in some areas that many people have been articulating for the last year. It is just surprising that it has come so late. What worries me is the language, and I would be grateful if I could have a response to this. In the section on agrifood and fisheries in the Prime Minister’s speech on Friday, we read:

“I fully expect that our standards will remain at least as high as the EU’s. But it will be particularly important to secure flexibility here to ensure we can make the most of the opportunities presented by our withdrawal from the EU for our farmers and exporters”.

Which is it to be? “Flexibility” implies that standards could go down as well as up. If that phrase is in, the language is fairly woolly. I “fully expect” that I will be a millionaire by the time I am 65; I doubt it, though—my full expectations do not necessarily accord with reality. Could we please have some reflection on the language? It still seems dominated by assertion and aspiration rather than the sort of hard-nosed detail we need.

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

The UK, rightly, has some of the highest environmental and animal welfare standards around our agrifood sector; we want that to continue and we fully expect that it will. However, what we want is an agreement that ensures consistency of outcomes and standards for agrifood, while adding scope for flexibility in how we achieve this, and to make sure that our farmers and fishermen are able to take advantage of the freedoms that we may have by now leaving the EU.

Photo of Lord Kerr of Kinlochard Lord Kerr of Kinlochard Crossbench

I would like to ask the Minister a couple of practical questions. I admire the detail in the speech; there is a lot to learn in it, and I wish it had been given 18 months ago. However, I do not fully understand the “customs partnership” concept. Is it the case that if a container ship from Asia docks in Hamburg or Rotterdam, for containers coming on to Britain the authorities there will be expected to apply our definitions and rules of origin and the rates of duty that we set? If so, what is their incentive to agree to that additional complication for them? As for the agencies, what is the incentive for continental pharmaceutical or chemical industries to agree that we—uniquely, as no one outside the EU has membership of the single market’s agencies—should be allowed membership of them? Why should they agree? These are very interesting proposals, but are we sure of their negotiability? We present them as our offers; in fact, they are our requests. Why should the EU let us pick the cherries?

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

A customs partnership would mean that at the border the UK would mirror the EU’s requirements for imports from the rest of the world, applying the same tariffs and the same rules of origin as the EU for those goods arriving in the UK and intended for the EU. By following this approach, we would know that all goods entering the EU via the UK paid the right EU duties, removing the need for customs processes at the UK/EU border. In relation to agency membership, there are indeed precedents. Switzerland, for instance, is an associate member of the European Aviation Safety Agency, which means that airworthiness certifications are granted by its own aviation authority and disputes are resolved through its courts.

Photo of Lord Wallace of Saltaire Lord Wallace of Saltaire Liberal Democrat

On managed divergence and regulatory alignment, the phrase “managed divergence”, which I gather the Cabinet agreed on 10 days ago, does not appear in the Prime Minister’s speech or this Statement. What we have on regulatory alignment is the very odd statement that Parliament in many cases will pass identical laws to an EU law. That sounds remarkably like a sort of Potemkin sovereignty, in which we do it independently but we simply follow what the others have done. That is not real sovereignty at all. Do the Government now accept that the advantages of regulatory alignment across the whole goods sector are such that, in practice, we will want to maintain the same standards, or do they accept, as the Foreign Secretary and others wish to go on insisting, that there are some rules out there that we will somehow want to diverge on?

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

It will be not just for this Parliament but for future Parliaments to decide what our regulations look like. As the Statement set out, we may choose to commit in some areas of regulation, such as state aid and competition, to remain in step with the EU. The UK drove much of the policy in this area, so we have much to gain from keeping proper discipline on the use of subsidies and anti-competitive practice. The noble Lord is right: the Statement said that Parliament may choose to pass an identical law. Businesses that export to the EU have told us that in some instances it is strongly in their interests to have a single set of regulatory standards. However, if the Parliament of the day decided not to achieve the same outcomes as EU law, it would be doing that in the knowledge that there may be consequences for market access, but it would be its decision to do so.

Photo of Lord Wigley Lord Wigley Plaid Cymru

My Lords, the Minister has emphasised the need to be flexible and the need for give and take and to be reasonable. Does that go as far as extending to being flexible and reasonable about the date of 29 March if, by being flexible, it is possible to get a negotiated outcome rather than a no-deal solution?

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

We are very confident of getting a deal and, as we have said, we will be leaving the EU in March 2019.

Photo of Lord Hannay of Chiswick Lord Hannay of Chiswick Crossbench

My Lords, can I ask the Minister about two points on what I join others in recognising is a more pragmatic approach than we have had in the past? For example, in the Statement that she read out today were the words,

“we may choose to commit some areas of our regulations, such as state aid and competition, to remaining in step with the EU’s”.

I am sure that the Minister knows that state aid and competition issues are ruled on by the European Commission after lengthy inquiries and are subject to the jurisdiction of the European Court of Justice. If we are going to do the same, how are we going to do it? By osmosis?

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

Well, as the Statement made clear, if, as part of our future partnership, Parliament passes, for instance, an identical law to an EU law, it may make sense for our courts to look at the appropriate ECJ judgments so that they can interpret those laws consistently.

Photo of Lord Davies of Stamford Lord Davies of Stamford Labour

It is an unconvincing Statement in many ways but there are three particular delusions and contradictions in it. First, the Prime Minister still has not explained how you can have two countries with different tariffs and no controls at the border, but that is exactly what she promised the Irish before Christmas. Secondly, and very importantly, the Prime Minister is still under this extraordinarily naive delusion that she can sign trade agreements with Mr Trump without obliging us to take American agricultural products, which is quite inconceivable, and that she can sign a trade agreement with China while retaining quotas on Chinese steel imports. She obviously does not know Mr Xi Jinping. She also does not take seriously Mr Modi’s statements about the need for Indian immigration as a priority, in the event that he signs trade agreements with this country.

Thirdly, it really must be almost unprecedented in history for a Government to adopt policies that are directly designed to weaken a major staple of economic activity in that country, which is exactly what is happening here with the rejection of the idea that we should retain passports for the single market in financial services, banking and insurance. Will the Minister commit to making a study of the economic costs of that very self-destructive policy?

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

Well, I am afraid that I do not agree with the noble Lord’s extremely pessimistic view of every aspect of both the Statement and the Government’s approach. We believe that we will be able to develop a deep, special and productive relationship with the EU, which is what we are committed to, and the Prime Minister in the Statement set out the principles underpinning that.

In relation to the noble Lord’s point about passporting, the reason why we are not looking for passporting is that we understand that it is intrinsic to the single market, and it would require us to be subject to a single rule book over which we have no say. We are looking for a collaborative, objective framework that is reciprocal, mutually agreed and permanent, and therefore stable for businesses—and we believe that we can achieve this.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Chair, Economic Affairs Committee

I note the question asked by the noble Lord, Lord Kerr—why should we allow the European Union to pick the cherries for us? Could my noble friend perhaps not suggest that, given that the Prime Minister’s speech has been extremely well received, not only within the Conservative Party but by the media and the wider country, now is the time for all of us, whatever our views on Brexit and whatever our party, to get behind the Prime Minister and, while we are about the nation’s business, to get the best deal for our country? Could my noble friend also confirm that what Donald Tusk said, which is that nothing is agreed until everything is agreed, applies to this process and that, in particular, it applies to our commitment to provide finance to the European Union?

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

My noble friend is absolutely right that we want to enter into the next phase of negotiations in a positive and productive manner and believe that that is the same for both sides. Of course, our future partnership will need to be tailored to the needs of our economy, and this follows the approach that the EU has taken in the past. The EU’s agreement with South Korea, for instance, contains provisions to recognise each other’s approvals for new car models, whereas the agreement with Canada does not. The EU’s agreement with Canada contains provisions to recognise each other’s testing on machinery, while the agreement with South Korea does not. So it is possible to develop relationships that work for both sides, and that is exactly what we intend to do.

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour

If I may echo the Leader of the Opposition, this is a movement towards realism. However, is this Statement not really on two rather inconsistent themes? On the positive side, the calculus is, on page 4:

“What matters is that our rights and obligations are held in balance”.

That is an excellent idea of a calculus. But in the same Statement, on page 2, it makes the unqualified statement,

“we will not accept the … obligations of Norway”.

So how is this calculus going to be carried out, and with what degree of transparency? How do we know that the rights and obligations of Norway are incommensurate with what we need as a country? How is this calculation going to be carried out? It could be argued that, in the case I have mentioned, it is perfectly possible to show that the calculus could be positive. Could the Leader of the House enlighten us as to how these obligations and rights, advantages and disadvantages, are going to be balanced out in public?

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

That will be part of the negotiations, but what I can say—and I have said many times—is that we are seeking the broadest and deepest possible future economic partnership with the EU, covering more sectors and co-operating more fully than any free trade agreement. We believe this is achievable, because it is in both our interests, but also because of our unique starting point that on day one we have the same laws and rules. Rather than having to bring two different systems closer together, the task will be to manage the relationship once we have two separate legal systems. That is why we believe that we need to look beyond precedents and find a new balance.

Photo of Lord Hay of Ballyore Lord Hay of Ballyore DUP

I rise also to support the Statement from the Leader of the House. I also welcome the commitment from the Prime Minister that there will be no return to a hard border and no border in the Irish Sea. I live closer to the border, probably, than any other Member of this House. I live in the city of Londonderry, about 20 miles from the border. I have listened to some very good speeches in this House on Brexit and on the border, and some not so good. I never believed in my lifetime that there would be so many experts on the border between Northern Ireland and Ireland in this House. I say that very sincerely.

I also believe that there are some Members of this House—and I hope that I am wrong but only time will prove it—who are using Brexit and especially the border issue as a political stick to beat the Prime Minister with. I say that very sincerely. Certainly, in Northern Ireland there are parties who are using the border to undermine Northern Ireland’s position within the United Kingdom. People talk about a hard border and a soft border, and then people talk about keeping Northern Ireland in the customs union and within the single market. That is undermining the position of Northern Ireland in the United Kingdom.

I want to ask the Minister a question very clearly. I am very happy when our Welsh and Scottish colleagues talk about their Assembly. Unfortunately, in Northern Ireland at this moment in time, we have no Assembly. Would the Minister agree that, with an Assembly in Northern Ireland, some of these issues would be more easily resolved?

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

Certainly, the Government are working very hard with the main parties in Northern Ireland to try to re-form the Northern Irish Assembly, because we absolutely want that body back representing the people of Northern Ireland. I can also say that the UK and Irish Governments are equally committed to ensuring that our departure from the EU does not lead to a hard border. The Prime Minister and the Taoiseach have committed to work with the Commission to explore proposals and develop practical solutions to this question; that is something that we are focusing a lot of energy on, because we absolutely agree on its central importance.

Sitting suspended.