My Lords, it is a pleasure to follow the noble Lord, Lord Balfe. We have before us a Bill concerned with avoiding a no-deal Brexit and, like the right reverend Prelate the Bishop of Leeds, who is not in his place, I have been taking note of a timely and helpful report from the academics at the UK in a Changing Europe research unit about the issues, implications and impacts of leaving the EU without a deal. At this point I declare my interest in King’s College London, as set out in the register.
I support this Bill and will confine my remarks to explaining why I believe that it is so important to avoid no deal. The report I mentioned usefully reminds us that while the Prime Minister’s “no ifs, not buts, no maybes” approach is presented as offering a clean break and allowing us all to just get on with it, it is, in reality, nothing of the sort. As the report says, no deal:
“Is not a neat way of resolving a complex problem”,
“a way of rendering a complex problem infinitely more so”.
No one should delude themselves that no deal will in itself be the end of the story. There is no realistic possibility—and indeed no suggestion from anyone on any side of the debate—that we will not have a future relationship with the block of countries that represents our largest trading partner and our nearest neighbours. No deal will not be the end of the negotiations but the beginning of a new, more complex and likely even more prolonged set of negotiations. And without them taking place under the framework of a deal, do we really think that those negotiations are going to be any easier? In this scenario, any future deal will almost certainly require unanimous agreement from all member states and ratification by their parliaments. These negotiations will all be set against a backdrop of bruised and damaged relationships, both within the UK itself—as we are already seeing—and between the UK and the EU.
Leaving with a deal would mean a transition period, during which trade would continue as now while the two sides negotiated a future relationship. No deal means a cliff edge, with the UK treated by the Union as a third country. The impact on trading goods would be immediate, with new regulatory and customs arrangements coming immediately into force. This would mean disruption to supply chains, impacting crucial sectors such as food, medicines and just-in-time manufacturing. Larger businesses might be able to withstand the storm; smaller companies are unlikely to have the reserves to do so. Trade in services, always the Cinderella of the Brexit story, would be hit particularly badly. If the UK exits without a formal deal, it will no longer be covered by the services agreement of the European Economic Area but will have its trade with the EU governed by the General Agreement on Trade in Services, a treaty under the WTO. GATS provides far less access than the current EEA arrangements and therefore fewer opportunities for the UK services sector.
This disadvantage will be compounded by another challenge: professional qualifications will no longer be automatically recognised in other European countries. Under the EEA, UK qualifications are subject to mutual recognition agreements, so if you are a UK-qualified accountant or architect you can provide services in other EU countries. Under no deal this would immediately cease to be the case. Professional services suppliers would have to apply not just to have their qualifications recognised but for working visas. This sector is the second largest services exporter in the world, with 2018 services exports valued at £283 billion, or 45% of total UK exports; of this, £117 billion-worth were exported to the EU. This is a sector, let us not forget, that provides four in five jobs, up and down the UK.
There is also no clarity on what no deal will mean for freedom of movement from
A further, little discussed consequence of no deal is the immediate loss of access to EU databases and other forms of co-operation, including the European arrest warrant, the Schengen information system and Europol. In a world where data is key, this will present very real challenges to policing and security operations. I fear that it will provide a welcome window of opportunity to criminals intent on illegal access to and use of data.
Then, of course, there is the island of Ireland. This is almost certainly the greatest and most serious unknown at this point, already discussed in real and compelling detail by other noble Lords today. Many of the worst consequences of no deal—such as severe disruption to road and air transport links—will be averted in the short term because of temporary workarounds that the EU has put in place, but some of these expire as soon as the end of December, just two months into no deal. It is interesting to speculate what will happen to those temporary workarounds at that point, when we could well be engaged in an unedifying dispute over moneys due under a so-called divorce bill.
Whatever happens, we will eventually come through, as the right reverend Prelate the Bishop of Leeds suggested, but we cannot pretend that there will not be significant costs to no deal, socially, culturally, and economically. Research from the academic research unit I mentioned has found that trading with the EU on WTO terms would, after 10 years, reduce the UK’s per capita income by between 3.5% and 8.7%, and it is not the only credible source coming to a similar conclusion.
As we consider the Bill today, I ask that we be under no illusions that no deal will provide closure on this sorry period in our nation’s history. It will be just the beginning of a process that will not be easy but will be time-consuming, politically fraught and damaging to our economy. Let us not forget that the inevitable reductions in public spending that will be the consequence of economic downturn will hit hardest those people who are least able to stand it: the poorest, the most vulnerable and the marginalised in our society. For all these reasons, I support the Bill.