My Lords, since last we debated EU withdrawal in this Chamber, “no deal” has changed its meaning. It used to be a negotiating stance, but it has become a test of virility, a metaphor for how tough each candidate in the Conservative leadership race promises to be in the face of any resistance to reopen the withdrawal agreement on the table. I am grateful to the noble Baroness, Lady Smith of Basildon, for providing this opportunity to remind ourselves what no deal really means, not to the electoral prospects of prime ministerial hopefuls nor to the future of the Conservative Party, but to the people who live, and make a living, in the UK.
In any normal negotiations, no deal assumes maintenance of the status quo but in this scenario it means cutting loose from the frameworks that have defined business as usual for many decades. We have heard in so many powerful speeches today the impact on many crucial areas. I want to speak briefly about the impact on one of the sectors I know best: the creative industries.
First, no deal would end the free movement of talent on which the sector has built its success, without any replacement regime in place. This would leave businesses with no immediate route to recruit—as they do now—EU staff to plug the chronic domestic skills gaps that exist in at least 20 different creative occupations. Anyone offered a contract to work here would have to apply through the tier 2 visa system currently in use for the rest of the world. However, this route is open only for jobs worth at least £30,000 a year and many vital roles in the sector do not command a salary at that level. Some 30% of the creative workforce is freelance, but there is currently no system that allows small creative businesses to recruit vital freelance skills from non-EU countries in a way that matches their operating model—that is to say, on shoestring budgets and a project-by-project basis.
Let us not forget that freedom of movement works in two directions, allowing UK citizens the chance to work in 27 other countries with their professional qualifications recognised and key regulatory issues aligned. No deal would throw reciprocal social security arrangements up in the air, adding new paperwork, costs and risks to working in a country beyond the one in which you have residency.
Secondly, businesses would face new administrative and financial burdens in moving sets, costumes, kit and equipment across borders. Drivers would need international licences, vehicles would require permits and goods would need a carnet. This might sound like just a bit more form-filling, but the Royal Shakespeare Company estimates that the additional expense would increase the cost of taking a show abroad by 10% to 15%. Larger organisations might be able to sustain this but much of the sector is made up of small companies, many of which are reliant on a lucrative European market that pays performance fees at four times the UK rate. A combination of reduced income and increased costs will hit these companies hard.
Thirdly and finally, no deal would mean an immediate end to EU funding, including Creative Europe money, which has contributed nearly £17 million a year to UK cultural organisations and benefits one out of every three artists annually. This is the reality of no deal for the creative industries—a sector that contributes £101.5 billion a year in GVA, provides over 3 million jobs across the creative economy and is responsible for 11% of the UK’s total service exports. All those issues are echoed, and even exacerbated, in the service sector as a whole—a sector that is particularly vulnerable to no deal because of the complex web of “behind the border” rules and regulations that underpin trading across the EU. Services account for 80% of UK GDP and four out of every five jobs across the country. They are the goose that lays the golden eggs, yet in the Brexit story they are treated like Cinderella.
Of course, we would adapt in the long term to whatever changes resulted from a new relationship with the EU. Businesses with large reserves and individuals with significant resources would probably ride out any storm. However, without a transition period, smaller businesses and the people they employ would be at risk, and expert opinion is that in a no-deal scenario the economy as a whole would take a hit, impacting on tax revenues and the resources available to support the most vulnerable in our society.
Frankly, it beggars belief that with everything we know—with all the warnings that the Government themselves have pointed out—we are once again careering towards a cliff edge, as the Tory leadership contest turns no deal into a measure of machismo. The 2016 campaign never mentioned this—quite the opposite, as we have already heard. Both Houses have rejected no deal, and the latest YouGov poll confirms that there is no popular mandate either, with only 28% of the public favouring departure without a deal. Yet the likelihood of no deal increases day by day, as leadership hopefuls dice with stability and security in their efforts to win the votes of the 0.3% of the population who will choose our next Prime Minister.
Therefore, I too support the Motion in the name of the noble Baroness, Lady Smith of Basildon. It has become abundantly clear, over the last three years, that Brexit splits opinions in ways that cut across conventional party lines. Avoiding no deal seems to be the only thing on which there has been consistent alignment, in both Houses and across political divides. If we start by working together on an issue on which most of us are able to agree, who knows what might be possible? Perhaps the same group might then move on to tackle the really big question: where do we go from here?