Brexit: Withdrawal Agreement and Political Declaration - Motion to Take Note

Part of the debate – in the House of Lords at 7:45 pm on 9th January 2019.

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Photo of Lord O'Neill of Gatley Lord O'Neill of Gatley Conservative 7:45 pm, 9th January 2019

My Lords, I want to start by flattering the noble and learned Lord, Lord Hope, for his very wise words early in this debate, which have given me a little more belief in my own hunches. As suboptimal as the Government’s deal is, it might be the least suboptimal of them all.

Based on my experience of thinking about the world economy and world trade, I think it important to remember that the biggest determinants of a country’s trade performance are its domestic savings performance, the size and growth rate of domestic demand in other markets as well as at home and, specifically for exports, the quality of goods and services that it has to sell. While the precise terms of a trade agreement are important, they are nowhere near as important as those factors. For the past two or three years, Germany has sold more goods and services to China than to Italy. EU membership has neither caused nor hindered this outcome.

That said, leaving a well-established, large, rules-based trade area such as the EU will undoubtedly cause major problems in so-called global supply-related businesses, our auto industry being a particularly good example. In this regard, the idea of the UK leaving the EU with no agreement whatever should surely be for the birds and resisted at all costs, as it will potentially lead to major dislocation of the UK’s central position in any such industries as well as causing all the havoc that has been discussed recently.

I would describe myself as unexcited remainer. The biggest point that I want to make, linked to my opening comments, is that membership of the EU is not the most important issue facing Britain’s economic future. Our persistently poor productivity performance, and with it our severe regional geographic inequality, our intergenerational inequality, our education and skills challenges and our tremendous housing crisis are all more important. Being a member of the EU, and its usefulness in opening up further the UK to international trade and investment, has probably boosted UK productivity compared to if we were not members—I repeat, probably—but it has not stopped the ongoing relative decline in our productivity performance.

The underperformance of UK productivity just since 2008, compared to the pre-crisis trend, accumulates to being between 15% and 20%. This is larger than any single estimate that I am yet to see about even the hardest of Brexits, although my own hunch is that if we went down that ridiculous path, it would probably feel like it in the first year. Our trade position should not be an end in itself but part of an overall economic and broader policy aimed at boosting the country’s productivity, incomes and equal opportunities.

Since the 2016 vote, it is concerning how so few new government initiatives have appeared and how many existing ones have essentially become frozen, including, crucially, many of those that relate to our productivity challenge—of course, I cannot miss the chance to mention here the northern powerhouse and the Midlands engine; I am sure that there are many others like them. It is surely unacceptable that Brexit requires so much time and resource that there is no scope for things that in my view are more important. Whatever the outcome of the current EU debates and plans, this needs to urgently change.

I also continue to suspect, in this regard that, if previous Governments had pursued such goals with rigour and vigour, it is entirely possible that the results of the referendum might have been somewhat different. The way I put these comments might lead to a conclusion, as I hinted in my admiration of what was said by the noble and learned Lord, Lord Hope, that the Government’s withdrawal Bill should therefore be supported. Certainly the quicker we get on and do something about what that vote showed, we should be able to more seriously turn to these issues. If the evidence were that the Government had not been able at all to focus on these issues, then I would lean towards that conclusion. As suboptimal as the Bill may be, as highlighted by so many, this would suggest, “However, let us just get on with it”.

Against this, I am also open-minded and easily persuaded, of course, by those who argue the case for seeking a more substantial agreement or an alternative one which might further minimise negative trade and labour consequences of our departure. Indeed, the case for yet more time with a delay to Article 50 so that Parliament could eventually find some sort of majority also has its merits. Like many others, at least superficially, the case for a second referendum, on the presumption that people who voted to leave would change their minds, has some appeal. However, contrary to what I have heard a number of others say this afternoon and this evening, surely this would require a much more substantial regular shift in the opinion polls to take such a risk with delicate aspects of our democracy.

While none of these alternative options is especially appealing, despite what I have just said, if they mean a continued lack of government attention to issues that I have outlined, they should be avoided. However, they certainly should not be avoided if they are done to stop the ridiculous idea of crashing out without any deal.

I will finish by reiterating my central point, that we must no longer neglect so many crucial domestic policy issues, whatever our end relationship with the EU.