My Lords, I thank my noble friend Lord Callanan for his optimistic and confident introduction and congratulate my noble friend Lord Barwell and the noble Lord, Lord Mann, on their inspiring maiden speeches. I am enormously excited and heartened by the ringing mandate given to the Prime Minister in the general election last month. As he said:
“Now is the time to act together as one reinvigorated nation, one United Kingdom, filled with renewed confidence in our national destiny and determined, at last, to take advantage of the opportunities that now lie before us.”—[Official Report, Commons, 20/12/19; col. 146.]
During the years that I worked in Tokyo, and later when I worked in Brussels, I too believed that the UK should remain a member of the EU. However, with the passage of the Maastricht and Lisbon treaties, it has become increasingly clear that the EU is different from the body we joined. We had become increasingly uncomfortable passengers on the European train because we knew or suspected that its intended destination was different from where we wanted to go.
The Government have rightly recognised that there is nothing to be gained from providing for the possibility of an extension to the implementation period beyond the end of this year. Anyone who has experience of negotiations knows well that parties are willing to make their most significant concessions only when it has finally become clear that their interests depend on reaching agreement within a certain timescale. As long as the EU could hold out the hope that we would ultimately decide not to leave—or anyway not leave the customs union or the single market—it would continue to try to prolong the negotiations. As my right honourable friend Dr Liam Fox said at Second Reading in another place:
“We will face a political issue rather than a technical issue,”—[Official Report, Commons, 20/20/19; col. 154.]
if the EU were to prevent our reaching a satisfactory trade deal before the end of this year. The debate will not be about tariffs, fees and quotas, but about regulatory alignment.
There are two diametrically opposed systems for conducting global trade. One is to require your trade partners to harmonise their regulations with yours, as the EU is increasingly demanding. The only other major economy seeking to do this is China. The other system is to work towards outcomes-based equivalence, leaving each country free to determine its own rules and standards and to achieve that in a way which best reflects its legal system and its business practices. This way is consistent with parliamentary democracy, but the EU’s way is not. It is very important that our negotiators make it clear that we cannot accept any concept of dynamic alignment with EU rules. Mark Carney, who is not one of the strongest advocates of the merits of Brexit, has warned that the City must not be forced to accept EU financial regulations after we have left.
There has been much talk of the risk of damage to the City if it is denied access to European markets. However, surely a bigger risk is that faced by continental users of the London markets. For example, what damage would German car makers suffer in the event that EU regulators were to prevent them raising funds in the liquid international capital markets based in London? Their cost of funds would rise significantly. It is in our discretion to allow European financial institutions to continue to operate here, and I cannot believe that their regulators will really wish to circumscribe their activities here.
Finally, I shall say a word on the union. I believe that leaving the structures of the EU will of itself immediately start to reduce the support for independence for the constituent nations of the United Kingdom. EU membership, as the EU elite in Brussels perhaps knows better than we do, of itself diminishes the significance of being British and a part of the United Kingdom. Remove the European umbrella and the Scots will suddenly come to appreciate the British umbrella—especially the Barnett-lined umbrella—much more than they did. That is why I believe that the threat to the unity of the United Kingdom will be diminished, not enhanced, by Brexit.