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Antoinette Sandbach (Eddisbury) (Con)
I beg to move,
That this House has considered alternatives to a no-deal outcome in negotiations with the EU.
It is a pleasure to serve under your chairmanship, Mr Sharma.
Up until now we have focused on the binary choice between the Government successfully achieving a good Brexit deal or a departure on the terms of the World Trade Organisation that almost nobody wants. That stands in stark contrast to the promises of senior leavers prior to the referendum. We were promised that Britain would have access to the single market and told that the idea that our trade would suffer is silly. Now we face leaving the single market and, in the worst-case scenario, on WTO terms. We were promised that there would be no change to the border between Northern Ireland and the Republic. Now we see that there are huge uncertainties about the issue of the Irish borders, with a few hon. Members even going so far as to criticise the Good Friday agreement.
We were promised that an EU trade deal would be the easiest in human history. Now we see just how ambitious that claim was. This is why I am calling this debate: we were promised a smooth and simple exit from the EU, and instead we have complexity and the risk of chaos. It is even more important now in light of the leaked letter from a small minority of my colleagues. These hard-line Brexiteers have a very strange view of what WTO rules or terms would mean. This is in marked contrast to the views of the vast majority of my colleagues, who would prefer to assess all the options available.
First, I would like to outline why a no-deal or WTO-terms Brexit would be quite so chaotic. A WTO-terms hard Brexit is greeted by some of my colleagues with considerable sangfroid. My right hon. Friend the Member for Wokingham (John Redwood) told the “Today” programme last year that
“we will do just fine”
if we leave on WTO terms. He was joined earlier this week by my right hon. Friend the Member for Clwyd West (Mr Jones), whom I see in his place, who told the Daily Express:
“I’m entirely happy to continue trading with the EU on WTO terms.”
I am afraid that I and many others are not entirely happy with this. Some 43% of UK trade is with the EU and I am not willing to see that prosperity put in jeopardy. It would be economically catastrophic to simply walk away from the negotiating table, crashing out.
Crashing out with no deal would lead to a reduction in EU trade of between 40% and 60%. That translates into between 4.8% and 7.2% of GDP. The impact of new tariffs on our trade would be hugely damaging. Around 45% of UK exports of goods and 54% of UK imports of goods would become newly subject to tariffs. While the simple average tariff is 5.1%, in some sectors this can be much higher: for dairy products—a key sector for my constituency— it is 39%; for preparations of meat and fish it is 40%; and for cars it is 10%. Tariffs would drive up prices for ordinary consumers. A Credit Suisse report last year said that food prices could rise by 8%, with UK dairy warning of a staggering 51% increase in the cost of Cheddar. Credit Suisse also said that car prices could rise 15% and predicted a 20% drop in sales as a consequence.
Non-tariff barriers would also have a significant impact on industries where the supply chain is deeply integrated across borders. A KPMG study for the Dutch Government cites a number of concerns. It estimates the costs of customs formalities to be between €78 and €126 per shipment. These costs would likely be passed on to consumers in addition to tariff costs. They also have concerns about the capacities of ports, both here and on the continent, stating:
“Even brief delays will probably lead to long queues at terminals in the Netherlands and the UK.”
This is not just a matter of physical capacity either, as we will need to ensure that our workforce develops customs expertise that has not previously been necessary. There are also questions about the capability and capacity of regulatory authorities. A National Audit Office report last year estimated:
“The number of decisions that have to be made over whether to permit people and goods to cross the border could increase significantly (potentially 230% and 360% respectively).”
I will make one final point about the border. There has been a recent push to suggest that an EU-UK hard border in Northern Ireland would not be an issue, as technology would solve every problem. These advocates cite the US-Canada border as an exemplar. I cannot agree. I refer colleagues to the evidence heard by the Business, Energy and Industrial Strategy Committee in which Dan Mobley of Diageo said explicitly:
“It is not completely frictionless.”
If the Government are convinced that this is an approach that can work and meet the need for a frictionless border, I would press Ministers to publish detailed plans of how it would work. Overall it is easy to see why the Treasury estimates that the cost of a WTO-terms Brexit would be around 8% of GDP over the next 15 years. It is also easy to see why it is important that we assess the alternatives to this disastrous course of action.
Nigel Huddleston (Mid Worcestershire) (Con)
I congratulate my hon. Friend on securing this debate. Does she share my concern about not only the potential of tariffs, but the fact that the WTO is unsatisfactory in many other ways? For example, it is simply non-existent or silent on swathes of industry, including the aviation sector. It is either WTO or nothing, but in the aviation sector, for example, there is not a default to WTO. That is the same in several other industry sectors and that is causing alarm and concern for business.
Antoinette Sandbach
I absolutely share my hon. Friend’s concerns. There are concerns in relation to intellectual property and the vast majority of our service industry, which is a huge contributor to our balance of trade. He is quite right to outline the deep flaws that a WTO Brexit would bring.
The most preferable option in terms of a Government deal is the Government successfully completing their negotiation with the EU and securing the “deep and special partnership”. I support the Government’s work and the comments by the Brexit Secretary in his speech yesterday that we need to ensure a broad base of mutual recognition of standards. Without those, we would risk many of the drawbacks that we would face under a no-deal Brexit, especially with regard to the non-tariff barriers that are in fact the biggest concern for our economy. However, I press the Government to ensure that the service sectors are included in the deal that they strike. Services make up nearly 80% of our economy. Service industries such as legal services, insurance services, consultancy services, the music industry and the aviation industry contribute to our balance of payments surplus in service trade with the EU. A failure to strike a deal could cost us about 75,000 jobs and £10 billion in tax revenue.
Some hon. Members may think that simply remaining in the EU is an option. Rather than pressing for this currently unachievable choice, I would encourage hon. Members to see if we can deliver a Brexit that removes us from ever closer union and the political institutions of the EU, while seeking to maintain our prosperity and our trade links, which brings me on to my final option. This final option is the one that, aside from the Government’s plan, would be the best for Britain. Re-joining the European economic area/European Free Trade Association would be a bold step towards preserving our prosperity and provide many answers to the questions that are currently vexing Ministers.
EEA-EFTA would give us access to its free trade agreements spanning 27 countries. EFTA has free trade agreements with, among others, Turkey, Canada, Columbia, Mexico, Egypt and Israel. There are ongoing negotiations with India, Indonesia and Vietnam. These agreements, as well as EEA membership, would give a market of over 900 million customers for our products and services.
Kevin Hollinrake (Thirsk and Malton) (Con)
I congratulate my hon. Friend on securing this important debate. Is she proposing EFTA-EEA membership as a transition or a permanent safe harbour?
Antoinette Sandbach
I am proposing a permanent safe harbour. If we went into EEA-EFTA, we would have an opportunity to shape and influence that trade body going forward. It delivers what many of my constituents originally voted for in the 1970s, an economic free trade area, but its great benefit and advantage is that it removes us from the ever closer union, which is what many of my constituents who voted leave were concerned about.
Antoinette Sandbach
I will give way to my hon. Friend the Member for South Cambridgeshire (Heidi Allen), and then to my hon. Friend the Member for Carlisle (John Stevenson).
Heidi Allen
At the end of the day we have to try to find some peace on both sides of this argument. This could be the common market. It could, in some ways, be what many people who voted leave were hoping that we would go back to, and it could actually be the best compromise for everybody.
Antoinette Sandbach
I completely support and endorse my hon. Friend’s comments.
John Stevenson
My hon. Friend the Member for South Cambridgeshire (Heidi Allen) raised my question. In the referendum our country was divided between 52% and 48%. Does my hon. Friend the Member for Eddisbury (Antoinette Sandbach) agree that the EFTA solution potentially unifies those two groups?
Antoinette Sandbach
I certainly do. It delivers what many people voted for, which was to leave the political institutions of the European Union while continuing our prosperity and building on our common links with the European Union. It would enable us to be in that common market that so many people originally voted for, with all the benefits that it entails for our businesses and constituents.
Mr Dominic Grieve (Beaconsfield) (Con)
My hon. Friend makes a powerful and compelling argument. Does she agree that we cannot ignore the fact that we are now 20 months down the road from the referendum? Whatever people might have voted for in the referendum, the reality of our current negotiating position will have to dictate the public’s acceptance of what we are eventually able to deliver. To simply live in the past as to what people’s views were in the middle of 2016 is to fly in the face of the reality of the evolving picture at a European level and what we can in practice achieve that is best for our country.
Antoinette Sandbach
I am grateful for my right hon. and learned Friend’s intervention. He calls to mind the comments of Bismarck, who said that
“politics is the art of the possible.”
It is my view that this is a possible and realistic achievement. It should be the Government’s plan B. We should be looking at this option as a realistic alternative. I cannot understand why, when we talk about a no-deal Brexit, we discuss only WTO rules and this eminently sensible, common-sense option, which would help to preserve economic prosperity in this country but deliver leaving the EU’s political institutions, is not treated with more seriousness by the Government.
My right hon. and learned Friend has rightly made the point that we are 20 months into the negotiations. We need to ensure that our plan B is credible and deliverable in a way that does not damage this country’s future, our shared values or the prosperity with the EU that has delivered for us over our 40 years of membership. The EFTA option gives us a huge opportunity not to throw the baby out with the bathwater, which nobody voted for.
Mr David Jones (Clwyd West) (Con)
As my hon. Friend knows, membership of EFTA-EEA connotes membership of the single market, which was rejected by the British people when they voted to leave the European Union. Is it her proposal that membership of EEA-EFTA also be put to the British people in a referendum?
Antoinette Sandbach
I am interested by my right hon. Friend’s comments. The quote that I referred to at the beginning of my speech—
“Britain will have access to the Single Market”—
came from the Vote Leave paper, “‘Leave’ looks like...”. So I would argue that the British public were promised that we would stay in the single market by Vote Leave.
Vicky Ford (Chelmsford) (Con)
I recall listening to the wonderful BBC’s “Today” programme on the eve of the referendum and the leading Brexiteer Daniel Hannan MEP describing the EEA as an economic free trade area that stretched from Iceland to Turkey, and how possible it would be for the UK to consider staying part of that even if Britain voted leave. Does my hon. Friend recall that type of message?
Antoinette Sandbach
I certainly do recall that type of message. It was one of the big messages that was being sent out: our prosperity would not be threatened, we would be able to stay in the single market and we would have the “exact same benefits” as before.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I am intrigued because I thought the whole basis of my hon. Friend’s very fear-based analysis of Brexit is that the EU wants to stick tariffs on trade between the UK and the EU. Which leader around the European Union has said that they want to put tariffs on trade between the UK and the EU?
Antoinette Sandbach
No. The consequences of a WTO Brexit mean that we fall back on rules that require the imposition of tariffs, unless we waive them as a most favoured nation status for all other countries. That would then expose our manufacturing, farming and other industries to competitors with far lower standards than us, some of which have far cheaper labour costs, when we have very high quality products in this country. That is the consequence of WTO terms.
Stephen Kinnock (Aberavon) (Lab)
I congratulate the hon. Lady on securing this debate. One of the common misconceptions is that the EEA and the single market are exactly the same thing. That is not the case. There is no common fisheries policy and no common agricultural policy. The writ of the European Court of Justice does not run to the full EEA; there is the EFTA arbitration court. Articles 112 and 113 of the EEA agreement allow for safeguard clauses suspending things such as free movement of labour. So it is important that in this debate we clarify that the European economic area and the single market are not synonymous.
Antoinette Sandbach
I entirely concur with the hon. Gentleman. My hon. Friend the Member for Wimbledon (Stephen Hammond) is in his place, and in a previous debate he eloquently outlined the benefits of and difference between EEA-EFTA membership and full membership of the European Union.
Mr Grieve
Does my hon. Friend agree that there seems to be a misconception about the nature of the European Union? Listening to the intervention made by my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), I picked up the idea that the EU is some sort of sovereign entity. But it is not; it is an international treaty organisation, and therefore to ask it to change its rules base to accommodate the kind of access that was wanted, but which comes without subscribing to the rules, will be impossible in practice.
Antoinette Sandbach
I fear that my right hon. and learned Friend may be right, but I am very happy to give the Government the benefit of the doubt in their negotiations and to seek to achieve the aims that they aspire to. However, I am outlining the consequences of a no-deal, and if the Government are unable to achieve their aims, EEA-EFTA membership should be the plan B, alternative option, which the Government need to give greater consideration to.
Heidi Allen
It seems to me that whatever side of the argument the public started on, what they want from Parliament more than anything is to find a way through this and to secure the best outcome. That involves compromise, which my hon. Friend’s suggestion of EFTA-EEA could be. On behalf of the country, as Parliament we should get behind the Prime Minister and offer that as a solution. No side gets absolutely what they want, but that is the nature of democracy. It is about compromise.
Antoinette Sandbach
I entirely agree with my hon. Friend. My personal view is that I would much rather remain in the European Union. That is what I voted for and believe in, but in seeking to honour the result of the referendum, we need to look at this credible and deliverable option that removes us from ever-closer union. As my hon. Friend the Member for Wimbledon outlined in his debate two weeks ago, this option has significant advantages in terms of taking us out of the jurisdiction of the European Court of Justice and delivering on many of the issues that concerned the UK public.
I was talking about the potential access to 900 million consumers for our products, which I would say is an optimistic, not a fear-based outlook. When compared to EU membership, EEA-EFTA membership is significantly cheaper. In 2015, Norway’s net contribution was €115 per person, compared to €214 per person from the UK.
An EEA-EFTA agreement would protect our services industry, as it would give us continued access to the common market. The impact on our GDP and trade would be barely a quarter of that of a WTO-terms departure, which would cause a drop in trade of between 40% and 60%. EEA-EFTA would substantially reduce that.
Some hon. Members insist that EFTA membership would not respect the referendum result, but I disagree. The referendum told us that we should leave, but not how. If we value prosperity above ideology, and pragmatism above all, there is a clear case for an EEA-EFTA-style agreement. We would be free of the risk of ever-closer union; the organisation is clear that it is strictly an economic grouping. We would be rid of the prospect of ever having to join the euro. EEA-EFTA decisions require the agreement of all members rather than the votes of a qualified majority, so the risk to sovereignty would be reduced. Disputes would be resolved through the EFTA court, not the European Court of Justice. We would be free to set our own agriculture and fisheries policies.
My hon. Friend the Member for South Suffolk (James Cartlidge) put my argument in its most succinct form:
“if EFTA-EEA is such a bad idea, why are its four constituent countries among the richest and most successful on the face of the planet?”—[Official Report, 7 February 2018; Vol. 635, c. 560WH.]
None of my proposals regarding EEA-EFTA are incompatible with the Government’s ambition. In the previous debate about EFTA, the Under-Secretary of State for Exiting the European Union, my hon. Friend the Member for Worcester (Mr Walker) said that the Government seek
“a partnership that in many ways goes beyond the EFTA arrangements we have discussed.”—[Official Report, 7 February 2018; Vol. 635, c. 569WH.]
I would welcome such an end point and I am sure many colleagues would too. All we seek is the reassurance that if the Government fail in that laudable aim, we will fall back on an EEA-EFTA arrangement, rather than no arrangement at all.
Several hon. Members rose—
Mr Virendra Sharma (in the Chair)
Order. Before I call hon. Members to contribute, I note that there is a huge interest. Priority will be given to hon. Members who have already requested to speak in writing. The time limit will be four minutes, because I want to accommodate as many people as possible. I call Stephen Kinnock.
Stephen Kinnock (Aberavon) (Lab)
It is a pleasure to serve under your chairmanship, Mr Sharma. I congratulate the hon. Member for Eddisbury (Antoinette Sandbach) on securing this important debate.
As the Government’s own analysis shows, a no-deal outcome would mean that growth would be 8% lower nationwide, 10% lower in Wales and 12% lower in the midlands, Northern Ireland and the north-west—and the north-east would take a huge 16% growth hit. Tariffs would be 10% on every movement along the supply chain of an industry such as the automotive industry, which is so vital to the steel industry in my constituency. It would crush not only that industry but connected industries.
Kevin Hollinrake
Anybody—any hon. Member—can see those figures in the Treasury report, but the report caveats them by saying that that is without any other Government interventions or reaction of businesses in adjusting to a new world of trade with the European Union. Does the hon. Gentleman accept that?
Stephen Kinnock
Clearly, the figures are a forecast, which is more of an art than a science, but the fact is that leaving our largest market—where 43% of our exports go—will inevitably have a negative impact on growth. Whatever remedial measures businesses attempt to take, they will always be playing catch-up with the impact of that seismic event. It seems inevitable to me, therefore, that there will be a contraction in the economy.
At the end of last year, the head of HMRC told the Brexit Committee that preparing for Brexit is set to cost £1 billion over the next five years—and that is on the basis of our securing some kind of deal. That tells us that no deal is simply not an option, as the hon. Member for Eddisbury so eloquently set out. It also underscores the importance of the final part of the Brexit negotiations, in which the framework for the future relationship will be set out. If this House wishes to shape that, we must move quickly.
Today’s debate could not be more timely, because we are in a race against time. Later this month, the EU will publish the legal text of December’s joint progress report. In mid-March, the European Parliament plans to publish a resolution to be adopted ahead of the European Council meeting on the future relationship. That will be akin to the 3 October resolution, which made it clear that there would be no regulatory divergence across the Irish border, and that transition could
“only happen on the basis of the existing European Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures”.
That must sound familiar to hon. Members, and it means that we cannot dismiss it as just white noise. The October resolution was effectively the blueprint for the deals that have followed. That will also be the case for the resolution that will be passed in March about the negotiating guidelines for the future relationship.
When it comes to the future relationship, Michel Barnier has been clear: our options are a deal based on the Canada model or one based on the European economic area. Once that basic model has been agreed, there will be some scope during the transition period to add or subtract from it, but to all intents and purposes the choice will be made, and it will be binary—and it is coming very soon. That matters because the Canada model offers little on services, which make up 80% of the UK economy and almost 40% of our exports. As Mr Barnier has said, there is no place for services, because
“There is not a single trade agreement that is open to…services. It doesn’t exist.”
The Canada model also leaves us without a customs partnership, which is incompatible with the desire to have a frictionless border in Ireland.
Our conclusion must be clear: our preferred model—the only conceivable model, in fact—for the future relationship is one based on EEA-EFTA membership. EEA-EFTA offers the best possible terms of exit by providing the maximum possible access to the single market from outside the EU while allowing for differences that preserve our desire for greater control and self-determination. The EEA ends the principle of direct effect, so this House would have to pass all rules relating to the EEA internal market into law. It ends the jurisdiction of the European Court of Justice. Instead, we would move to the governance of the EFTA court, which frequently forges a path different from that of the ECJ, and which would have British judges on its bench if the UK were an EEA-EFTA member.
In EEA-EFTA, we could shape the rules of the single market, of which only 10% are relevant to the EEA. With the right of reservation, we would possess a veto over anything we considered inappropriate. That is not being a vassal state; that is not an empty vessel. The Norwegians have used their veto almost 20 times, most recently in rejecting the third postal directive, for which they suffered absolutely no repercussions.
Articles 112 and 113 of the EEA agreement allow for suspension—
Paul Masterton (East Renfrewshire) (Con)
It is a pleasure to serve under your chairmanship, Mr Sharma. A Brexit that put trade restrictions and tariffs between us and the continent would be an unacceptable outcome; it would make us an island off the coast of northern Europe, rather than a truly global trading nation. That is why we must support the Government in their aim to achieve the best possible free trade deal with the EU. However, a deal is by no means certain; we still have plenty of hurdles to jump.
Even if we have heads of terms by October, it will be some time before a formal, fully fledged deal is signed and in place. That interim period will be rife with uncertainty, because a contract simply cannot be managed and run on heads of terms, however well drafted. We are now negotiating with 27 nations at once, with 27 different opinions. Diverging interests among the EU28 have led to frequent delays and dilution in previous EU trade deals, or even their collapse, and the new deal with the UK may be no exception. Although I have no doubt that the UK can and will form new trading partnerships across the world, I am not convinced that a full suite of shiny new trade deals with key markets will be in place and ready to go on day one.
For me, for my constituents and indeed for my children, the alternative to a deep and special free trade agreement cannot be no deal. Only seven countries trade on WTO-only terms; most nations trade with the EU via trade facilitation, customs co-operation and bilateral standards. Independent WTO membership would require agreements on division of EU import quotas from the EU27 and consensus, if not unanimity, from the other 164 members. If we start unilaterally reducing tariffs, “most favoured nation” rules will also come into play.
Of course, WTO barely covers services. Some 24% of people in the general insurance, life assurance and pensions sector in the UK work in Scotland. Many of them are in my constituency, East Renfrewshire, because of its access to the burgeoning Glasgow financial district and the central belt, and its easy links to London and the continent. Having no deal would mean that banks, insurance companies and fund managers could not provide services across the UK from the EU. Contracts that run over exit day, particularly for derivatives, could simply become unenforceable. Business liability insurance contracts often stretch decades ahead, so a no-deal Brexit could result in insurers losing their licences in a customer’s jurisdiction. Cross-border pension payments between the UK and the EU simply could not be paid.
Numerous investment funds used by pension providers are set up under Irish law or other EU-based jurisdictions; in fact, more than 150 UK managers are managing Irish funds right now. More than 2,000 Irish-domiciled funds have been sold in the UK—more than €600 billion in fund assets is managed by UK managers in Ireland on behalf of UK investors. Collective investment schemes are established and authorised under a harmonised EU legal framework. Whatever route we choose, there will be huge issues with authorisation, with passporting under the alternative investment fund managers directive and with maintaining the ability to distribute, say, Irish funds into the UK post-Brexit, but under a no-deal scenario those issues will be absolutely magnified.
Securing country-by-country authorisations for each business line will be time-consuming and expensive, which is why the Association of British Insurers said very clearly last summer that a no-deal Brexit would be “unacceptable”. The Pensions and Lifetime Savings Association was even more blunt:
“WTO-only would cause major disruption. On no account could the pension fund industry support a regime based only on WTO rules. This would be likely to cause economic harm, create regulatory barriers and undermine essential pensions support services.”
The impact of a no-deal Brexit on the economy would have significant issues for pension funds. Not only would it lead to weaker investment return—it might put defined-benefit schemes at additional risk by weakening employer covenants, because sponsoring employers in the sectors worst hit under a WTO scenario would struggle to meet their deficit reduction payments.
I accept that Government contingency planning for all scenarios must cover a no-deal Brexit, but it should never advocate it as a preferred outcome. It must also cover a range of other possibilities, including entering EFTA with the EEA bolt-on, as I have said before. I will not repeat the arguments I raised in our debate on 7 February. Instead, I will conclude by saying that I will not allow my constituents to face the choice between a deal on the table and a no-deal quagmire on the floor. If a deal cannot be reached or is rejected, our plan B can and must be EFTA-EEA. I urge the Minister not to dismiss that out of hand.
Peter Grant (Glenrothes) (SNP)
I am grateful for the chance to speak in this debate. I congratulate the hon. Member for Eddisbury (Antoinette Sandbach) on securing it and on her forensically detailed devastation of the prospects of a no-deal Brexit. Sadly, 62 of her colleagues are not listening, but I hope that the Prime Minister and her Cabinet are.
Yesterday, among other Brexit hyperboles, the Environment Secretary announced that his colleagues the Foreign Secretary and the Brexit Secretary were the Lionel Messi and Cristiano Ronaldo of the UK Government. I had never thought of Ronaldo before when thinking about Brexit, although the word “messy” has crossed my mind on a number of occasions over the past couple of years. However, it strikes me that they are two people who perform all over the world, but always on opposing sides—never on the same team. They also have a very clear vested interest in getting the Brits out of Europe as quickly as possible; with apologies to Chelsea fans, Messi did his wee bit for that last night. I assume that neither of the Cabinet Members in question can copy the tax evasion conviction that Señor Messi acquired a few years ago, so perhaps the analogy breaks down there.
Peter Grant
I hope the hon. Gentleman is not about to contradict me on that point.
Crispin Blunt
No, although as a Chelsea fan I feel the pain of the hon. Gentleman’s Messi remark.
Since we are talking about the movement of people and services, what is the hon. Gentleman’s understanding of the implications of an EEA-EFTA arrangement—if that turns out to be the deal—for free movement of people post-Brexit and for the United Kingdom’s contributions to the European institutions?
Peter Grant
I am not actively promoting the EEA-EFTA option. Although it is significantly less bad than the no-deal option, it is still not good enough. For the record, I repeat that the position of the Scottish Government and the Scottish National party has always been that free movement of people is a good thing, not a bad thing that we have to accept in return for the benefits of free movement of goods, services and capital. It is a good thing for Scotland and—I believe—for the rest of the United Kingdom; I am disappointed that so many people in the rest of the United Kingdom do not accept that point of view. The contribution that EU foreign nationals have made to my constituency is far too important even to attempt to measure in purely financial terms.
The hon. Member for Aberavon (Stephen Kinnock) commented that this debate could not be more timely. That is certainly true, especially given the publication yesterday of a letter by the 62 out of 650 MPs who have taken it upon themselves to dictate to the Prime Minister what to do. It is interesting that the demands of 62 out of 650 have to be followed, but the expressed wish of 62 out of 100 people in Scotland in the EU referendum can simply be swept aside and ignored.
I commend the hon. Member for Eddisbury for reminding us that there is no democratic mandate for leaving the single market or the customs union. There is a mandate for two of the four nations in the UK to leave the European Union, but there is no mandate for leaving the single market.
Luke Graham (Ochil and South Perthshire) (Con)
Will the hon. Gentleman give way?
Peter Grant
I am sorry, but I really do not have much time and many other hon. Members wish to speak.
It is significant that the 2015 election, in which the Conservatives stood on a manifesto that said yes to the single market, was the only one in the last 25 years in which they secured an overall majority in Parliament. Two years later, they entered an election with a 20% lead in the opinion polls, published a manifesto to leave the single market and then lost their overall majority. That does not mean that single market membership was the only thing that mattered, but as an indication of a mandate from the public it certainly does not point to a hard no-deal Brexit.
We always talk about WTO terms as if they would solve all our trade problems. However, apart from the fact that international trade deals cannot be created overnight—the transition period gives the opportunity to complete them, either substantially or totally—it is against the treaties of the European Union to agree to allow the United Kingdom or any other member state to sign and implement trade deals unilaterally or bilaterally outside EU deals.
That part of the 62 Brexiteers’ demands simply will not be accepted by the European Union, and I think they know that; I think that demand is the wrecking amendment with which they are trying to wreck any deal whatever. WTO terms do not cover the single sky agreement: if we leave without a deal, the planes will stop flying. Nor do they cover Euratom: if we leave without a deal, the life-saving medical isotopes will stop coming across the channel in time to be of any use.
A lot has been said about Northern Ireland. I am frankly terrified by the number of hard Brexiteers who are prepared to sacrifice the peace process in Northern Ireland for their ideological obsession with a hard Brexit. I hope that they genuinely do not understand what they are putting at risk, but I fear that they are prepared to risk it all.
If we go for a no-deal Brexit, we will be getting rid of a lot of the boxes on Mr Edmonds’s table. It may well be that the only box left is the one with the penny in it.
Kevin Hollinrake (Thirsk and Malton) (Con)
It is a pleasure to serve under your chairmanship, Mr Sharma. I congratulate my hon. Friend the Member for Eddisbury (Antoinette Sandbach) on securing this debate.
The alternative to no deal is, of course, a deal, and that is what the Prime Minister has set out to get. I was pleased to hear her support a deal that will mean free and frictionless trade in goods and services between the UK and the European Union.
That is a perfectly sensible position. Why would the European Union not want to adopt it? We have a trade deficit with the EU, particularly with Germany, of course, so it is sensible economics that the EU would give us a deal. That is a win-win situation, as Dr Stephen Covey said in his book, “The 7 Habits of Highly Effective People”, which is a habit that I aspire to but will probably never achieve. Nevertheless, win-win is hugely important.
Stephen Covey also refers in his book to the “dialogue of the deaf”. That is when one negotiator is speaking one language—I am not talking about foreign languages—and the other negotiator is speaking a different language. The difficulty is that we are, quite rightly, talking sensible economics, yet the EU is talking politics. It is talking about the politics of survival of the EU. For us to leave with a good deal would almost undermine the very fabric of the EU, which calls into question the EU’s ability to agree a deal. Therefore, it is difficult to get the deal that the Prime Minister is setting out to achieve. It is possible—politics is the art of the possible—but it will require compromise on all sides. That has to be the key to this negotiation.
None of us should accept being locked into the EU or it holding us to ransom by threatening us, for its own reasons. That is not an emotional point; it is simply a point of the negotiations. We cannot be held to ransom in achieving and delivering on the objective that the British public gave us of leaving the EU.
That is the reason I did not support the “meaningful vote” amendment to the European Union (Withdrawal) Bill. We have to accept at all cost the deal that the Prime Minister negotiates with Europe, and the EU needs to understand that. We will then give effect to the decision of the British people.
Nigel Huddleston
On the question of a meaningful vote, does my hon. Friend agree that we may as well at least discuss the EEA option? The political reality is that, at either the 2022 or the 2027 general election, one of the major political parties is highly likely to adopt it as a potential option, depending on how the scenario plays out in terms of the Brexit deal. Why not have that discussion now, because it is almost certainly going to come back to us in a future election?
Kevin Hollinrake
My hon. Friend makes an interesting point. My point is that I will accept the deal that the Prime Minister negotiates. We will get a deal. I guess that it will not be the deal that we are all hoping for, but we will get a deal and I will accept it in Parliament. However, others may not and that is where plan B possibly comes in.
We should look at other options. Clearly, EFTA and the EEA have been discussed as an option and promoted by my hon. Friend the Member for Eddisbury as a return to the Common Market. There are difficulties, however, with regard to timescales and non-tariff barriers, which would still be an issue in terms of customs checks, border checks and sanitary and phytosanitary checks. The Northern Ireland situation has improved to some extent but it is still an issue, with the potential for a hard border. We are potentially rule-takers, of course, but there are fewer rules—we currently have to take 20% of the rules, according to the House of Commons Library. Free movement of people is a consideration, of course, although there are potentially some ways to control that, using articles 112 and 113. Another question is: is the proposal a transitional arrangement or a permanent state?
Ultimately, leave we must and therefore compromise we must, in order to deliver on and honour the decision made by the British public. I call on all sides in this debate—by which I mean Members of our party and of the Opposition—to look at all possible options, be willing to compromise over a deal that comes back, and consider where we will get to. Hopefully we will get the deal we want, but if we do not we have to consider a sensible plan B and I think that is what my hon. Friend the Member for Eddisbury was alluding to.
Dr Rupa Huq (Ealing Central and Acton) (Lab)
I congratulate the hon. Member for Eddisbury (Antoinette Sandbach) on her speech. She spoke much sense, as she has done throughout this whole process, which neither of us ever wanted to be in.
I share the hon. Lady’s dismay at waking up this morning to see that leaked letter by 62 of her colleagues—the hard Brexiteers—who have, in effect, written a ransom note. However, they are holding a gun not only to the head of an enfeebled Prime Minister but to the whole country’s head, given that the Government no longer have a majority.
What is at risk here? First, there is 20 years of peace in Northern Ireland, which is one of the proudest achievements of the last Labour Government, through the Good Friday agreement. Also, the Prime Minister made a speech last week about security arrangements; if we leave the European arrest warrant system, all the things that follow would make us less safe. And as has been mentioned by right hon. and hon. Members from both the Government and the Opposition today, leaving the customs union and the single market would make us less prosperous, because those two things are our passport to the world’s biggest single trading bloc. We would lose the unfettered access that we have enjoyed. I completely understand, appreciate and support the hon. Lady’s arguments for taking the EFTA-EEA route as a form of damage limitation if we are to leave the EU.
The motion states:
“That this House has considered alternatives to a no-deal outcome in negotiations with the EU.”
That is what we are being asked to do. To my mind, a no-deal option would be the worst possible outcome. The Minister has enjoyed a rapid rise. We are from the same intake and she is a nice person who I get on with, but I am curious to know this: if no deal appears to be a likely outcome, even if we are not making projections for it, will the Government reconsider altogether their position on the withdrawal of the article 50 application?
I am a London MP, so other Members will know more about issues such as fisheries. I want to talk about London. It is often said that the EU referendum result was the biggest electoral event that this country has gone through. The politician in this country with the biggest personal mandate ever is the Mayor of London, Sadiq Khan, and the independent research by Cambridge Econometrics that he commissioned has produced some quite scary figures. It projects that 87,000 jobs will be lost in London, with 27,000 of those in the creative industries alone. The research also mentions a “lost decade”, with £5 billion of lost investment by 2030 and GDP dropping by 3%.
For a London MP such as me, who knows about the economic powerhouse that is our financial services sector and in which many of my constituents are employed, a no-deal scenario seems unthinkable. We were promised a land flowing with milk and honey, with sunlit uplands ahead; now the best that we can hope for is not to have a Mad Max-style dystopia. The bar is being set rather low.
The complete lack of preparation is irresponsible. Yesterday’s debate on sanctions and anti-money laundering showed that even leavers want to transpose into our law what we already have, with the fifth anti-money laundering directive coming our way. Surely, therefore, if we must leave the EU, we must aim for the most prosperity-ensuring and pragmatic approach, and not a damaging and dogmatic exit, if we are to ensure that the road to Brexit is not—to use what I think is the Government’s own phrase—paved with broken glass.
Vicky Ford (Chelmsford) (Con)
I had not intended to speak in this debate. The Prime Minister has set out her intention to have a smooth, orderly Brexit, delivering stability on security and maintaining trade. That is key for many jobs in the UK, but it is challenging to deliver.
In my constituency of Chelmsford, people voted 50:50—almost exactly—and I have always said that we need to try to find an outcome to the EU-UK negotiations that works for both sides, respecting those who voted to leave but also reassuring those who voted to remain.
Delivering that deep and special partnership is important for my constituents, many of whom work in the service sector. The insurance sector is the largest employer in the city and many of my constituents commute to work in the City of London, but we also have people involved in science, research, advanced manufacturing and other areas.
I was prompted to speak this morning after reading the letter signed by some of my colleagues last night, because instead of helping the Prime Minister it seeks to tie her hands. I genuinely believe that some of the people who put their names to that letter did not fully understand the potential consequences, particularly the limitations and restrictions that would be imposed on an implementation period, which would make it much more difficult to have a smooth bridge between where we are today and that deep and special partnership.
Let me be clear: no deal is not an attractive deal. Falling back on the WTO pushes up tariffs, which pushes up the costs for consumers for food and shopping, and it brings in checks at customs, and I am fearful especially for Northern Ireland and Ireland. WTO rules would bring delays for producers, and they do not cover key areas, such as aircraft.
The Canada deal is also not an attractive deal. When I talk to key sectors of the British economy about what they want from a new UK-EU relationship, they tell me that it is about much more than just eliminating tariffs. A year ago I wrote that,
“for the digital entrepreneurs, it is access to cross-border data flows; for the car manufacturers, it’s knowing that once a vehicle has passed its safety…tests”
in this country, they can sell it across Europe;
“for the creative sector, market access includes being able to have a joint action to stop…infringements of copyright; for pharma companies, it is being able to continue to run cross border clinical trials”
and, once a drug has passed, to sell it across Europe;
“for scientists, it is being able to take part in collaborative research”.
Banks and financial services want to know that once a product has been approved by the regulators here they can sell it across Europe, and high-value manufacturing wants to be able to source parts “from all across Europe” and to sell and manufacture them easily. All of those are covered by our current trading relationship with the EU, but not by the Canada free trade agreement. We need to be able to put the pluses on CETA.
The Norway EEA-EFTA option is also not particularly attractive, because it would mean that we would need to have common rules in many areas to keep a frictionless border. Having said that, I believe that Britain will want to continue to have high standards on many products. There will be very few areas where we would be likely to choose to diverge, because I do not see it being a race to the bottom in standards. That is not in our interest or that of consumers. The WTO is not attractive. CETA does not have enough pluses. The EEA is not perfect, but let us at least use it as a starting point. Fundamentally, any new trade deal is not in our hands alone. We need to agree it with all 27 other countries, and we need to give our negotiators space to talk.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
It is a pleasure to serve under your chairmanship, Mr Sharma. I congratulate the hon. Member for Eddisbury (Antoinette Sandbach) on bringing forward this hugely important debate. I want to go off at a slight tangent, Mr Sharma, but it will become apparent why as I do so. As usual, I want to use examples from my constituency and from history.
Members will have heard of the highland clearances, which depopulated vast chunks of the highlands, but the fact is that throughout the following years, the depopulation continued. The export of our youngest and best was the most dismal feature of the history of the highlands. Indeed, if we look at the populations of towns and villages in my constituency in the far north of Scotland, we see populations falling steadily during the 19th and 20th centuries. Indeed, my father said to me in the late 1960s, “Young man, when you are grown up, you will go south and you’ll work”, because that was what happened in the past.
Someone travelling to the west of my constituency today will see very large signs saying, “This stretch of road was built with the assistance of the Scottish Government and the European Union.” I cannot overemphasise how important that infrastructure investment was to my constituency and to remote parts of the highlands. Members may have heard of objective 1. It was a deliberate targeting by the Common Market or the EU—call it what you will—of the most deprived parts of Europe. Additional funds were put in. To that end, new harbours were built, town centres were completely revamped and we saw a completely new, positive approach. In the early to mid-1980s, the population decline in my constituency and neighbouring constituencies in the highlands had halted and reversed. That strikes me as being hugely important.
I will not only mention what was good about the EU, but it is against that candle that I will hold all proposals in all their complexity. What do they mean for my constituency? Where will the replacement investment come from, whether we have hard Brexit, soft Brexit, membership of one organisation or membership of another? I need to know what will happen. Let us put it this way: my constituents voted remain by a majority and they can see that change is probably upon us, but they want to know where we are going, who is taking us where, and why all these people signed that letter to the Prime Minister. It seems slightly dotty to my constituents.
As has been said, we need to find our way through this. I for one will always be watching closely to see what things mean for my constituents. Without the EU, the tragic depopulation of the highlands would have continued. It is a fact on the record for history that the EU halted that and helped turn the situation around. That has made a huge difference to my constituents. It means that young people are being brought up and educated where they come from, rather than being sent south. The final question my constituents ask is, “What are you saying down in Westminster? Can you get people in the south to understand where we are coming from? The EU was not always a bad thing—it has done us good.” I leave Members with that question. It is hugely pertinent to me, and I mean every word of it.
Stephen Gethins (North East Fife) (SNP)
It is a pleasure to serve under your chairmanship, Mr Sharma. I congratulate the hon. Member for Eddisbury (Antoinette Sandbach) on securing this important debate, and I thank her for bringing it forward. I am sure she will not mind me saying that we do not always see eye to eye on everything, but the thoughtful way she has gone about the contributions she has made in this and other debates is a credit to the House. I am grateful to her for that. I am also grateful to her for bringing some facts into the debate. With some elements of her parliamentary party, those facts are so often sadly lacking.
The right hon. and learned Member for Beaconsfield (Mr Grieve) is not in his place at the moment, but he made a strong and good point that we should all reflect on. We are now 20 months—almost two years—on from the EU referendum. If people outside this place think we are going round in circles, I have some sympathy for them, but those who voted leave and those who were central to the Vote Leave campaign bear a huge amount of responsibility for that. It was grossly irresponsible to go into an EU referendum that everyone knew could have gone either way without setting out a White Paper, a manifesto or any detail of what leaving the European Union could actually mean.
When there is a referendum, those of us who are elected have a responsibility that we are held to by those who have elected us. That lack of detail means that the mess we are in at the moment sits at the door of the Vote Leave campaign. I have some sympathy—they will not hear it often from this side of the House—for Ministers for the mess in which they have been left, but not that much given that senior members of the Vote Leave campaign are in senior positions in Government and have been since the day after the EU referendum. They need to bear some responsibility for the devastation and uncertainty we are facing.
As usual, the hon. Member for Aberavon (Stephen Kinnock) made some pertinent points. It is worth reflecting on the devastation in every part of the United Kingdom. That is not just something that those of us who backed remain or who want to have a closer relationship with the European Union think; it is borne out by the Government’s own analysis and by the Scottish Government’s analysis. Incidentally, the Scottish Government had no problem with publishing their analysis. The Scottish Government’s and the UK Government’s analyses appear to be very similar, which is interesting. It was reflected by the hon. Member for East Renfrewshire (Paul Masterton), who rightly highlighted some of the problems that his constituents face.
The hon. Member for Eddisbury was correct when she mentioned Northern Ireland. Some Members of Parliament have been utterly and grossly irresponsible in their talk about the Good Friday agreement. I give credit to the previous Labour Government, John Major’s Government and Members across the House for their work on that agreement. I give credit to the bravery and far-sightedness of politicians across the island of Ireland, but in particular in Northern Ireland. The agreement was endorsed by a referendum on both sides of the border. That gross irresponsibility is something that those seeking to unpick the Good Friday agreement should reflect upon, and reflect upon well.
One thing that we can learn from Northern Ireland is the need for compromise, however hard won. I back the compromise set out by the Scottish Government to remain a part of the single market. As somebody whose constituency and nation voted overwhelmingly to remain part of the European Union, I might not like that very much—I want to remain part of the European Union—but that is the nature of compromise. It is tough on everybody. I am not saying that this is the end point in compromise—that can never be the case—but what has been very striking is the Government’s lack of willingness to engage with different parties, with the exception of the Democratic Unionist party, perhaps. That again is an irresponsibility that two years on we should all reflect on.
Moving away from the Government for a moment, I appeal to colleagues on the Labour Front Bench. We might think we are looking at an internal Conservative party squabble at the moment, but it is not. I wish it was only an internal Tory party squabble. A fierce one it is—I do not deny that—but one that impacts on each of us and on every constituent. My appeal to the Labour party is this: the Government are on the ropes and there are people and reasonable voices we can reach out to. I appeal to the Labour party to look again at the customs union and the single market and perhaps listen to their Back Benchers.
Luke Graham
Does the hon. Gentleman recognise that more people in Scotland voted leave than voted SNP at the general election? The issue is not a Conservative one. There are plenty of issues in the Labour party and in the SNP as well. We have to work across parties to try to get the best solutions to avoid what might be a WTO exit.
Stephen Gethins
The hon. Gentleman is right; we have to work across parties. It is a great pity that the Government will not do that. They will not sit down with the other parties, apart from the DUP, which is a great pity. He talks about the number of people who voted SNP and voted leave. A lot more people voted SNP than voted Conservative, and many more people voted remain than ever voted Conservative.
I want to ask the Minister a few questions. What happens to issues such as REACH and Horizon 2020? The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) made an excellent point about immigration. Scotland, like other parts of the United Kingdom, is losing people. We need freedom of movement. My hon. Friend the Member for Glenrothes (Peter Grant) made an extraordinarily powerful point about the need for freedom of movement and the benefit that EU nationals bring us, and also how young people and others from across the UK have benefited from freedom of movement. I am one of them. I benefited from freedom of movement and was able to come back.
What happens to seasonal workers? James Orr, who farms next door to my house, relies on seasonal workers to pick broccoli, which has to be picked by hand. What happens in universities? The excellence of the University of St Andrews relies on EU nationals. Finally, does the Minister think that the implementation period should be based on WTO principles?
Paul Blomfield (Sheffield Central) (Lab)
It is a delight to wind up for the Opposition with you in the Chair, Mr Sharma. I join other Members in congratulating the hon. Member for Eddisbury (Antoinette Sandbach). A large majority in this House respects the outcome of the referendum, but wants to ensure that we leave the EU on terms that protect the economy and people’s jobs and livelihoods, as well as the rights and protections that we gained through 43 years of membership. It is a majority that recognises our future lies in a close and collaborative relationship with the European Union. The hon. Lady is very much part of that majority, and she has done us all a service by securing this debate and in the way she opened it.
There is a heavy responsibility on this Parliament, on all our shoulders. We face the most important choices in our lifetimes that will affect generations to come. That demands that we are honest and open in evaluating the decisions we face. That is why Labour has consistently pushed for the publication of impact assessments and economic analyses so that we have the information we need to inform our decisions. We need to avoid what the Prime Minister’s former deputy, the right hon. Member for Ashford (Damian Green), described on Monday as the
“problem of politicians who won’t accept evidence.”
He was also right when he said:
“If analysis is being produced, then publish it. And frankly there will be a big political debate...Let’s have this argument in public, that’s what democracies do.”
The referendum was a clear decision, but it was a painfully close vote that we should implement in a way that unites the country, which involves the sort of compromise that many Members have talked about. Whether people voted remain or leave, they will not thank politicians who lead them into a Brexit on a false prospectus that fails their expectations and damages their prospects. We need to be honest about the expectations created by the referendum. Everybody now recognises that £350 million will not be released for the NHS, or for anything else, as the Chancellor confirmed in his 2016 autumn statement.
Nor will taking back control mean a significant change in migration. As the Environment Secretary told the National Farmers Union yesterday,
“agriculture needs access to foreign workers...both seasonal and...permanent.”
He echoed the Brexit Secretary who said in Estonia last year that the door will not “suddenly shut” on EU immigration, as it will take “years and years” for British citizens to fill the employment gaps.
On the ECJ we need to recognise that any trade agreement will involve ceding sovereignty to bilateral or transnational bodies. People need to know that trade deals will have consequences. The US Commerce Secretary, Wilbur Ross, has made it clear that a
“critical component of any trade discussion”
with the UK would be the scrapping of EU food rules. And for what? For 0.2% growth anticipated by the Government. So open discussion of all the options is vital as we move forward.
I have been to the reading room and I should make it clear that I am complying with the confidentiality requirements, so I quote from information in the public arena. We should pay attention to the Government’s own analysis that EEA membership would see 2% lower growth than otherwise projected over 15 years. A comprehensive free trade agreement with the EU would result in 5% lower growth, and no deal would almost double that: an entire 8% lower growth.
No deal is, of course, the most damaging of all the options. The hon. Member for Eddisbury made that case extremely clearly and well. We should look at everything. The Labour party wants to keep a customs union and a new relationship with the single market on the table. We want to consider the EEA-EFTA model, as my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook) argued when we last debated the issue.
Vicky Ford
Did the hon. Gentleman say he wants to keep membership of “a” customs union or “the” customs union on the table?
Paul Blomfield
I really love the pedantry of this. I was clear that we are talking about a customs union that serves the needs of the British economy and British manufacturing.
As my hon. Friend the Member for Greenwich and Woolwich argued previously, the EEA-EFTA model raises challenging issues and would need to be supplemented by customs arrangements, but it should not be lightly discounted, because there are features of the EEA-EFTA model that we would want to see as part of any final deal.
Paul Blomfield
I was just about to mention the hon. Gentleman, so I am delighted to give way.
Kevin Hollinrake
I await with anticipation what the hon. Gentleman will say. When he said he would not lightly discount EFTA and the EEA, does that mean the official Opposition are not discounting it as an option?
Paul Blomfield
I think that is fairly clear: we want to keep options on the table, in an economy-first Brexit negotiation. I was going to say that the hon. Gentleman’s points about the political ideology of the EU27 were reflected, ironically, at the weekend in Munich by the Prime Minister, when she warned the European Union not to let “political doctrine and ideology” stand in the way of a good deal on security—the hon. Gentleman is nodding. She was right, but if that is good enough for security, why is it not good enough for the economy? Political doctrine and ideology from the European Research Group has framed the Government’s approach from day one, ignoring not simply the 48%, but so many of the 52% who did not vote for an extreme and destructive Brexit.
We have now had two of the series of Cabinet speeches apparently defining the “road to Brexit”, and they highlight the depth of divisions. We had the Foreign Secretary’s damp squib, setting out his ambition for regulatory divergence, contradicted yesterday by the Brexit Secretary, who tried to reassure everybody that little would change. Tomorrow, of course, the Cabinet will try to resolve the differences.
At this moment, out of the shadows, comes the European Research Group again, with a letter echoing the one co-ordinated by the Minister when she was its chair, seeking to derail the Government’s policy on the transitional period, and with it to ensure that the country stumbles towards the extreme and destructive Brexit that the vast majority of people simply do not want. Perhaps the Minister will take the opportunity, having not yet replied to my letter of several weeks ago, to reject that approach, and make it clear that she supports Government policy on the transition.
There has been a lot of common ground in today’s debate. The Opposition hope, even at this late stage, that the Government can reach out to the common ground in Parliament and in the country, with a sensible approach to the negotiations that face us in the few short months that we have left, seeking a Brexit that puts the economy first and keeps all options on the table.
The Parliamentary Under-Secretary of State for Exiting the European Union (Suella Fernandes)
Thank you, Mr Sharma, for your chairmanship of today’s very interesting, fascinating and useful debate. I am grateful to my hon. Friend the Member for Eddisbury (Antoinette Sandbach) for raising this issue and securing a debate on the alternatives to a no-deal outcome in the EU negotiations. She has raised this topic on many occasions in the House, both in Westminster Hall and in the main Chamber. I gladly respond to her points, and those raised by many hon. Friends and hon. Members this morning.
My hon. Friend raised a number of ways in which the UK could leave the EU, including becoming a member of EFTA, having a Canadian-style deal with the EU, the Government’s preferred objective of creating a deep and special partnership with the EU, and the very unlikely scenario where we leave the EU without a deal. The Government are confident that we can negotiate a close relationship with the EU that is mutually beneficial to the UK and the EU. Alternatives, such as EFTA and the EU-Canada comprehensive economic and trade agreement, are not outcomes that the UK is pursuing. As the Prime Minister set out in her Florence speech, we want to
“be creative as well as practical in designing an ambitious economic partnership”
that works for both the UK and the EU. We believe that that is a reasonable expectation.
Stephen Gethins
Does the Minister support the implementation period, or does she back the letter, published this morning by her colleagues, that said that the implementation period should be based on WTO principles?
Suella Fernandes
The hon. Gentleman pre-empts my comments. The implementation period has been set out and explained in considerable detail by the Secretary of State, and I will come to it later. If he will bear with me, I will deal with his point in my later comments.
We believe that it is reasonable to expect that we can secure an ambitious new economic partnership with the EU, because we start from an unprecedented position: one of convergence. We have the same rules, regulations and values as the EU. That starting point is unmatched by any of the other options explored today—a vital distinction, which makes the prospects of securing a mutually beneficial agreement high. That is why the Government continue to seek that new deep and special partnership with the EU.
Given that much of this morning’s debate has centred on the scenario where the UK leaves the EU without a deal, it is worth setting out the Government’s position on that. As the Secretary of State and my colleagues have clearly explained, the Government are not aiming for—nor do we want—a no-deal outcome. We want to secure a new free trade agreement with the European Union that benefits both parties, our citizens and our economies, and that respects the result of the EU referendum.
There are grounds for optimism that that is eminently possible. We have achieved considerable success in the first phase of the negotiations. We have secured joint agreement on issues previously thought to be insoluble. I am confident that we can build on that success with an agreement about the implementation period, as set out recently by the Secretary of State in his speech at Teesside, and agree on the future relationship with the EU.
As my departmental colleague, my hon. Friend the Member for Wycombe (Mr Baker), the Under-Secretary of State, said in response to a question asked by my hon. Friend the Member for Eddisbury in the House:
“We approach the negotiations anticipating success and a good deal for…the UK”.—[Official Report, 1 February 2018; Vol. 635, c. 957.]
However, let me be clear: although it is in the interests of both the UK and the EU to secure that good deal, we have a duty to plan for all outcomes, including one where no agreement is reached. The Government continue to prepare responsibly for a range of results from the negotiation, including the unlikely scenario in which no agreement can be reached. In reflection of those preparations, the Treasury has already given Departments nearly £700 million to prepare for Brexit, and is making an additional £3 billion of funding available over the next two years to ensure that we are prepared for every outcome.
Stephen Hammond (Wimbledon) (Con)
The Minister remarked that the Government are, quite rightly, looking at all potential outcomes. In the unlikely scenario that there is no deal, the Government must surely prepare for what would ameliorate the economic damage that has been shown by the Government’s economic impact studies. Would it not be sensible to make sure that we have preparations for other solutions as well, one of which could be EFTA-EEA?
Suella Fernandes
As I will come on to, the Government do not think that the EFTA-EEA option meets the objectives that my hon. Friend sets out, because it falls short of what we are seeking in our new arrangement with the EU on many fronts. I will elaborate on that in a few moments.
The first alternative to a no-deal scenario, and the Government’s preferred outcome, is a new settlement with the EU, as set out by the Prime Minister in her Lancaster House and Florence speeches. As she explained, we seek
“a new framework that allows for a close economic partnership”
between the two parties and that honours the instruction of the British people to take back control of our laws, borders and money.
As an existing member state, we share fundamental beliefs in fair competition, consumer rights and strong regulatory standards. Our position as the EU’s largest trading partner means that finding a meaningful deal along those lines is in both our interests. As my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) pointed out, the current trade deficit between the UK and the EU means that tariff-free trade benefits not only UK businesses and citizens, but EU businesses and employees who benefit from cross-channel commerce.
Antoinette Sandbach
Will the Minister explain what the Government’s approach is towards the service sector and non-tariff barriers?
Suella Fernandes
As my hon. Friend rightly pointed out, 80% of the UK economy is based on services, so it is important that we seek an agreement that will further enhance the possibility for our services to be exchanged, and for collaboration to continue. Reducing non-tariff barriers is, of course, a priority in any agreement that we seek with the EU, and is something I believe would be possible.
We will agree a comprehensive economic partnership, underpinned by high standards and a practical approach to regulation, that ensures continued trade and prosperity between the UK and the EU, based on mutual recognition. Again, the Secretary of State set that out in his speech yesterday. That partnership will aim for as frictionless as possible trade between the parties and will ensure access to each other’s markets, so that our consumers and businesses can benefit.
On security, the Prime Minister said last week that we are proposing a new partnership on future security, law enforcement and criminal justice co-operation—a strategic agreement treaty that will allow us to work together with the EU to promote our shared interests globally. That new partnership is ambitious and will not only reflect our history and the practical benefits of co-operation in tackling shared threats, but demonstrate the UK’s genuine commitment to maintaining a secure and prosperous Europe.
We are not pursuing EEA membership or aiming simply to copy the Canada-EU free trade agreement. The Norway option is not for the UK. We seek a collaboration on trade and security. We want to enable control over migration, autonomy over our laws and regulations, and the freedom to implement our own independent trade policy with the rest of the world. Only the deal that this Government are aiming for strikes that balance, which is why that is the best outcome for the UK and the EU.
As part of the deal between the EU and the UK, we are seeking a strictly time-limited implementation period.
Antoinette Sandbach
The Minister seeks to rule out a Norway option as not satisfactory. Will she also rule out a WTO option?
Suella Fernandes
We are not working towards a no-deal scenario, if that is what my hon. Friend is implying. As I have set out just now, we want an agreement based on tariff-free access, reducing our non-tariff barriers and with the ability to strike our own free trade agreements, but it is clear that we are a founding member of the WTO and plan to take up our seat at that organisation in due course.
Stephen Kinnock
The Minister has set out all the reasons why the Norway option does not work, but has also said that the UK wants collaboration on trade and security; access for services, which are a vital part of the economy; the ability to strike our own free trade agreements; and no ECJ jurisdiction. The Norway option ticks every one of those boxes.
Suella Fernandes
I disagree with the hon. Gentleman because Norway, although part of the EEA and EFTA, does not have much say on rules and regulations that come to it through the EEA agreement.
Suella Fernandes
One last time—I am running out of time and need to finish my comments.
Vicky Ford
Norway does have a say on rules and regulations. It sits in various standard-making bodies, for example, and contributes to legislation. It does not have a full vote, but then we are leaving the single market so we will need to have a new relationship with that single market. It gives market access, which is, as the Minister has said, so attractive. Will she again consider that that may be worth investigating—perhaps not in its entirety, but elements could be of interest?
Suella Fernandes
Norway does not have a seat in the European Parliament. It does not have a vote on whether regulations coming through the EEA agreement apply to it or not. It generally has to follow those obligations in line with its obligations under the EEA agreement. To diverge from that agreement would be a breach and would therefore lead to questions about its membership and subscription to that agreement. That is a fundamental point that makes membership of the EEA and the Norway option not attractive for the UK.
In response to calls from business, the implementation period is there to benefit businesses and individuals, so that they avoid the need for two sets of changes. It will also give them more time to adjust to the new future partnership.
Suella Fernandes
I will not, unfortunately. I have only six minutes and I have quite a lot to get through. I am sorry; I cannot.
The implementation period will also ensure that businesses have time to adapt to the new relationship between the UK and the EU. Crucially, only under a deal with the EU and the UK can this essential period take shape. None of the alternatives suggested in today’s debate can offer that level of continuity and clarity to businesses and citizens in the short term. That is why the deal that the Government are seeking is the best alternative to a no deal and is an alternative that we are confident of securing.
On EFTA—
Paul Blomfield
Will the Minister give way? There is a tradition of accepting an intervention from a shadow Minister.
Suella Fernandes
I must continue because I do not have much time, and EFTA has been a big issue in this debate. I will give way if I have time after my comments—I hope the hon. Gentleman will have patience with me.
Several hon. Members have raised EFTA membership today as the main alternative. Although we recognise the benefits of ensuring continuity in our relationships with the EFTA states, we have no plans to seek membership of the EFTA agreement for four key reasons.
First, EFTA is a trading bloc of four countries. Membership of EFTA does not in itself deliver any market access to the EU. Norway, Iceland and Liechtenstein effectively participate in the EU single market by virtue of the EEA agreement. That would not deliver more direct control over decisions affecting the UK, nor would it deliver control over migration, which is a key aspect of our leaving the EU.
Switzerland participates in some areas of the single market through a series of bilateral agreements with the EU, but many of those do not cover the areas in which the UK has interests. In any case, the Government have made clear on a number of occasions that we are not pursuing an off-the-shelf arrangement; we are not copying and pasting other agreements. We are seeking a particular bespoke agreement relevant to the UK’s economy. The model I have been discussing does not strike the right balance on democratic control and mutual market access that we want in our future partnership with the EU.
Secondly, our ambition as a global trading nation goes beyond the scope of EFTA’s existing free trade agreements with third countries. EFTA’s FTAs are not suited to the size and type of the economy in Britain. They are not with the larger economies of the world—countries and economies with whom we would wish to be pursuing new economic partnerships. They are not in the sectors where our economy has strengths, which are areas in which we would want to pursue new agreements. Leaving the EU offers the opportunity to negotiate our own free trade agreements and to be a positive and powerful force for free trade in the world.
It is also worth mentioning that membership of EFTA would not be the quick and easy solution that some here have argued. Even if EFTA members were to welcome us back into EFTA, we would not have immediate or automatic access to their 27 FTAs. Our entry into each one would need to be negotiated individually with the third countries involved.
Thirdly, membership of EFTA means accepting free movement between EFTA member countries, as the EFTA convention provides for free movement of EFTA nationals. Liechtenstein has been raised as a derogation, but it is not a comparable example. Liechtenstein is a country with a population that numbers less than that in almost every constituency in the UK, at 37,000. It is very difficult to see how the example of Liechtenstein can be applied to the UK, with its population of 65 million.
Finally, although we want to maintain our deep and historic relationships with the EFTA states, the UK is in many ways different from those countries. The EFTA states have a combined population of 14 million people, compared with our population of 65 million. The EFTA bloc’s combined GDP in 2015 was around £710 billion, in comparison with the UK’s £1.9 trillion. The UK’s participation in EFTA would fundamentally change the nature of that group.
Mr Virendra Sharma (in the Chair)
Minister, would you bring your remarks to a close?
Suella Fernandes
I note your comments, Mr Sharma. I thank my hon. Friend the Member for Eddisbury for raising this issue for debate today.
Antoinette Sandbach
I thank all right hon. and hon. Members who have contributed to the debate today.
Question put and agreed to.
Resolved,
That this House has considered alternatives to a no-deal outcome in negotiations with the EU.