My Lords, I voted remain but I none the less share the widespread acceptance that the verdict of the referendum must be honoured. It is unfortunate, to say the least, that it has taken the governing party, racked by internal division, two years to produce a White Paper on the form of Brexit—a White Paper which is long on generalisations and short on detail, particularly, as others have observed, in respect of the mainstay of our economy: services.
In the Times last week, Sam Coates, an excellent journalist, convincingly delineated 14 colourfully labelled factions in the other place, each with its own distinct outlook on Brexit, from “Paramilitary Brexiteers” to “The Known Unknowns” and “The Sammy Wilson One”. Self-evidently, Britain remains bitterly fragmented and divided on how precisely Brexit is to be delivered. Yet the challenge we face is truly monumental, as the Government’s own excellent context papers compellingly illuminate.
Britain is trying to unravel and reorder an existing relationship of extraordinary complexity with our nearest neighbours—our biggest trading partner and by far the world’s largest economic bloc. This is a divorce negotiation, not a marriage contract. UK financial services have £1.4 trillion of EU assets under management. Nearly half of all EU equity capital is raised in the City. UK banks underwrite half the debt issued by EU companies. Negotiating a new regulatory dispensation for the City in a period of months is a very tall order, and WTO rules have limited application for this sector if there were to be a car-crash Brexit. In aviation, we are Europe’s biggest player by far, flying to 370 cities. Eight out of 10 of the leading destinations are in the EU, but international travel is governed by bilateral agreements between countries, not by the WTO. We have but months to negotiate new arrangements. Finance and aviation are but two sectors among many.
The long, bitter division that we are experiencing has cost us time; it has lost us momentum; it has provoked disenchantment within the EU; and it has placed us in a perilous position. Moreover, absent a compelling incentive, it seems highly unlikely that the EU will agree to extend Article 50 and allow us more time. Some in Parliament, of course, welcome the prospect of an early hard Brexit, but we are ill prepared for that eventuality, which would deliver an enormous shock to the UK economy. Moreover, we have nothing in the locker to withstand such a shock, as our public finances have not yet fully recovered from the global financial crisis of 2008.
Whatever our reservations, our only immediate hope is to support the Government’s White Paper as the basis for an urgent, full and detailed negotiation with the EU. Plainly, the EU’s negotiators are lukewarm about the White Paper, but let us hope that the gallant President Macron, the wise Chancellor Merkel and other country leaders will recognise that our Prime Minister, as we all know all too well, has very little room for manoeuvre, and that they will show some flexibility, rather than themselves face the disruption, pain and disharmony that a hard Brexit would bring us all.
If, in the event, the Prime Minister cannot fashion an economically sound deal with the EU then I doubt, as I think others have said already, that Parliament will ratify an immediate hard Brexit. Our political nightmare will then intensify. Political realignment across the spectrum may well result, but even if that occurs, only a referendum on the true and limited options then remaining will resolve uncertainty and begin to end Britain’s long-lasting division and trauma.