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Madam Deputy Speaker (Dame Rosie Winterton)
We now come to the general debate on European affairs. The theme of today’s debate is international trade.
The Minister for Trade Policy (Greg Hands)
I beg to move,
That this House has considered European Affairs.
I welcome the fact that we are having this debate, which is perhaps a return to the tradition of a pre-European Council debate in the House of Commons. I used to take part in those twice-yearly debates. When I checked my last contribution, which was in June 2008, I was reminded that I, like so many other Conservative Members, called for a new approach in Europe in the immediate aftermath of the Irish rejection of the Lisbon treaty. The purpose of today’s debate, however, is not to dwell on missed opportunities in the past, or to reflect on what might have been had the EU reformed itself; we are here to look to the future, and the Department for International Trade is at the very centre of that bright future.
Before I turn to the future of our trade with Europe and the negotiations under way, it is important to take stock of what we have achieved so far. The joint report issued in December sets out a financial settlement that honours commitments we undertook as EU members, just as we said we would. It agrees to avoid a hard border in Ireland, while respecting the UK’s integrity, which was and is one of the Government’s priorities for these negotiations. Very importantly, it safeguards the rights of EU citizens living in the UK and of UK nationals living abroad, which the Prime Minister has always said was her first priority. Some 17% of my constituents in Chelsea and Fulham are nationals of other EU countries; indeed, my wife is an EU national. I have put in a lot of time and effort in outreach to them, and I can report to the House that the December agreement landed very well among EU nationals there. Ireland, the budget and citizens’ rights—these are strong foundations for the ongoing negotiations, and we should all welcome the progress that has been made on them.
Emma Reynolds (Wolverhampton North East) (Lab)
I have listened very carefully to what the Minister has said. Will he acknowledge that there are still very serious concerns about what needs to happen to preserve an invisible border on the island of Ireland—one that does not have any physical infrastructure—and that there is seemingly a misunderstanding in some parts about what is actually meant by the fall-back option of full alignment?
Greg Hands
We have been absolutely clear that we will of course abide by the December agreement in full. Let me remind the hon. Lady that the three priorities we laid out include a strong commitment to avoid a hard border, but also to preserve the integrity of the UK market—I remind her that having access to the UK market is very important for the people of Northern Ireland. No UK Prime Minister could accept a new border down the Irish sea.
We are also making strong progress on our trading relationships outside the EU, which is my primary responsibility as Minister for Trade Policy.
Mr Kenneth Clarke (Rushcliffe) (Con)
To follow on from that point, my right hon. Friend has repeated two points from December, and at Prime Minister’s questions the Prime Minister repeated her full commitment to the December agreement on Ireland. When he says there will be no hard border, I assume that means there will be no physical infrastructure. I of course recognise that we will not have a border down the Irish sea, but does he accept that, if there is no other way of achieving it, we are going to have the full regulatory convergence to which the Government signed up in the December agreement?
Greg Hands
I reiterate that what the Prime Minister said at Mansion House and at Prime Minister’s questions this week still stands. I refer my right hon. and learned Friend to the papers published last summer by the Department for Exiting the European Union on how a proper border between the two parts of Ireland can be effectuated through the two possible types of customs agreements between the UK and the European Union.
Karin Smyth (Bristol South) (Lab)
I asked the Prime Minister during her statement, and I have written to her, about paragraph 47 of the December agreement, which mentions the mapping exercise on north-south co-operation. Will the Government commit to publishing that mapping exercise?
Greg Hands
The Government are undertaking analyses of so many different factors involved in this particular arrangement and question. We have always made clear our commitment to ensuring that the House is properly apprised of all the relevant facts when it comes to examine the actual withdrawal agreement in due course.
As we prepare the ground at the Department for International Trade, its Ministers have made more than 100 overseas visits in the past year and a half. We have set up 14 trade working groups, covering 21 countries with a substantial market size. None of that would have been possible without the excellent work of our Department for International Trade staff, both at home and in post in 108 countries around the world. I put on the record my thanks for their hard work, professionalism and invaluable expertise.
Chuka Umunna (Streatham) (Lab)
The Minister is right to pay tribute to his Department’s staff. First, has he noted the comments of the Department’s recent former permanent secretary to the effect that, if we are to leave the European Union, non-EU trade will not make up for the loss of trade that we currently enjoy with the EU? Secondly, the Secretary of State was part of a campaign that promised that we would start negotiating new trade agreements with other non-EU countries as soon as we voted to leave. How many of those new trade agreements are being negotiated right now?
Greg Hands
The hon. Gentleman knows full well that this is not an either/or situation: it is not a choice between having trade with the European Union or with the rest of the world. The Government’s objectives are clear, namely, to secure a deep and comprehensive partnership with the European Union while still being able—crucially, outside the customs union—to pursue an independent trade policy and to secure those agreements with the rest of the world.
On what was said during the campaign, the Department for International Trade has the capability in place and we have built up the Department. I have mentioned the 14 trade working groups. We are clearly not able to carry out a trade negotiation while we are still members of the European Union, but the hon. Gentleman seems to be demanding that we have those negotiations while at the same time saying that we should stay in the EU, which would prevent us from having the negotiations in the first place.
Vicky Ford (Chelmsford) (Con)
Does my right hon. Friend agree that, given the incredible depth and complexity of the UK’s trade with Europe, there is no off-the-shelf solution available from any other trade relationship? Does he also agree that, if we are to have as frictionless trade as possible, there clearly needs to be some form of agreement for what will happen at our customs, such as a partnership or another type of agreement?
Greg Hands
My hon. Friend is right on both counts. There is no off-the-shelf agreement that would be suitable in this case. We are clear that we are seeking a bespoke arrangement between the United Kingdom and the European Union. Neither something like the comprehensive economic and trade agreement nor something like the European economic area would be suitable. On co-operation, we are clear that we seek a good agreement with the European Union that creates as frictionless trade as possible across all our borders, not just the internal border on the island of Ireland.
Sir Desmond Swayne (New Forest West) (Con)
May I take the Minister back to the former permanent secretary? When Mr Donnelly was interviewed on the “Today” programme that morning, so keen were the presenters to get his soundbite about the packet of crisps that they gave no analysis whatsoever of his figures, which were about 10% awry from those issued by the national statistics office. Has the Department done any digging into where his figures came from?
Greg Hands
My right hon. Friend tempts me down a path which I think I ought to resist. I am not exactly sure what figures the former permanent secretary used, but the figures are clear: European Union trade is extremely important to this country, but it is none the less a declining part of our overall trade, down from 56% in 2006 to just 43% today.
Greg Hands
I am going to make a bit of progress.
We are not working purely on non-EU trade. A common misconception is that the DIT is a purely Brexit Department. Our ongoing work of encouraging investment and exports is equally important, and that applies just as much to trade with Europe as it does to trade outside it. DIT has over 300 staff across continental Europe. I myself have made 16 European visits to 10 countries while in this position, as have all our ministerial team, including the Secretary of State. We have brilliant teams in commercial centres right the way across Europe.
Anna Soubry
I am very grateful to my right hon. Friend for giving way. It is very good, kind and generous of him. May we just return to the comments made by Sir Martin Donnelly, because I do not think the record will be accurate? We have heard mention of a bag of crisps. What he said was that, based on his experience of 15 years and beyond in the specific area of trade, our country was in effect embarking on a course that was the equivalent of swapping a three-course meal for a bag of crisps. Has my right hon. Friend seen the Government’s own analysis of the various options available to us that show that, even if we get a trade deal with every single country with which we do not have one by virtue of our membership of the European Union, which is about 50, we will still not be as prosperous as we are now by virtue of our membership of the European Union?
Greg Hands
I thank my right hon. Friend for her lengthy intervention. What I would say is that there is no such analysis of the kind she describes. What I am clear on is that it is our objective to maintain frictionless trade with the European Union as we go forward. It is our objective to conduct an independent trade policy and to seek, when the time is right, trade agreements with those partners. It is also our objective to seek the continuity in existing EU trade agreements for the UK, which I note the Labour party voted against on Second Reading of the Trade Bill. Labour is actually opposed to us seeking the continuity of existing trade agreements.
Antoinette Sandbach (Eddisbury) (Con)
Going back to the analysis published by the Government and the risk presented by non-tariff barriers, it was clear in that analysis that, even if we had an EEA-style agreement, there would still be damage to the UK economy. Is the Minister saying that he wants EEA-plus?
Greg Hands
I think I understand my hon. Friend’s intervention, but the Government have been clear for more than a year, since the Lancaster House speech, that our objective is not to seek an EEA-style agreement. Nor is it our objective to seek a CETA-style agreement. It is our objective to seek a deep and comprehensive agreement with the European Union, the like of which, I remind my hon. Friend, who I know studies these matters very carefully, was not modelled in those analyses. That is the most important point.
Greg Hands
I am going to make a bit of progress.
I am going to give a few examples of our work around Europe. I promoted the UK’s defence industry in Sweden, visiting Saab, whose new generation Gripen fighter jet could be worth £1.1 billion to UK industry. I and my colleagues engaged with the Polish Government directly on behalf of UK companies to discuss high-value retail opportunities in the Czech Republic—in Czech, I might add, Madam Deputy Speaker. I and my colleagues from DIT and the Department for Exiting the European Union have addressed chambers of commerce right the way across the European Union—in Austria, Hungary and Bulgaria, among many others. I enjoyed making use of my language skills when I gave speeches in German to senior business leaders in Munich, Düsseldorf, Osnabrück, Tegernsee and so on.
DIT’s relationship with Europe does not just extend to export and investment promotion. The vote to leave the EU was not a vote to undermine the EU. It is very important to understand that it is in this country’s interest to have a strong and effective EU. We continue to engage constructively in ongoing EU trade policy, as we currently are a full and equal member of the EU. As the House heard on Monday, we are working closely with our European partners as well as bilaterally to respond to President Trump’s decision to impose tariffs on imported steel and aluminium.
Greg Hands
I will make a bit more progress. We are committed to ratifying the CETA agreement with Canada, which provisionally came into effect in September. I was delighted that we were joined by 86 Labour MPs—many of whom are in the Chamber at the moment—who, in defiance of their Front-Bench team, supported the EU’s trade agenda in making sure that CETA was passed. In defiance of the party Whip, they voted for that important agreement with Justin Trudeau’s Canada.
We are supportive of the EU’s work to sign third-country trade agreements in future, and I have attended four Trade Ministers’ Foreign Affairs Councils, which included discussion of these. The Commission has been particularly focusing on agreements with South America’s Mercosur union and with Mexico. We continue to support the ongoing negotiations for both free trade agreements. On Mexico, we would like to see progress made wherever possible in the negotiations, although we recognise the complexity of North American Free Trade Agreement renegotiations running in parallel. We will continue our support for EU-Mercosur trade negotiations and would like to emphasise the urgent need to progress the trade components. It is essential to keep momentum and to achieve a swift political agreement.
Another high-profile agreement is the EU-Japan economic partnership agreement, which the Commission is strongly pushing to fast-track, so that it can be signed during Japan’s Prime Minister Abe’s visit to Brussels in July 2018. As a champion of free trade, the UK has been one of the strongest advocates—actually, I believe the strongest advocate—of this EPA, and we warmly welcome the work of both sides to reach this agreement, which will support global prosperity. We continue to engage constructively on EU business and with our European partners, and we continue to push UK trade and investment to businesses on the European continent. It is important that our trade engagement includes Europe, because our trade with Europe—our nearest and largest neighbour—will always be of great importance.
I often hear the criticism that trade deals outside the EU cannot make up for a loss in EU trade—that has already been referred to in a couple of interventions—but, as I say, this is not an either/or choice. I can assure the House that the Government fully understand the importance of European trade. The EU is our largest trading partner, accounting for 43% of our exports and 54% of our imports. Complex and integrated supply chains across the UK and EU show the importance of making cross-border trade as free and frictionless as possible, and that is why it is important that we get our relationship with Europe right.
Phil Wilson (Sedgefield) (Lab)
On frictionless trade, will the future be better than what we have now or worse?
Greg Hands
As I said, we are seeking a good, comprehensive, deep and wide trade partnership with the EU that is as frictionless as possible. That is why the right relationship is this deep, comprehensive and unique free trade agreement with Europe, based on the principles the Prime Minister set out throughout 2017 and in her speech a fortnight ago. We should oppose Labour’s latest Brexit policy of apparently keeping the UK in the, a, or perhaps any customs union with the EU. We want the greatest possible tariff and barrier-free trade with our European neighbours, as well as to negotiate our own trade agreements around the world.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
In the pursuit of this future relationship, will the Minister update the House on what progress has been made on the continuity of trading terms for our food and drink producers, especially in relation to the protected designation of origin and protected geographical indication schemes? Last week, the Secretary of State for Scotland guaranteed that there would be absolutely no change, but yesterday the Minister for Agriculture, Fisheries and Food said that absolutely nothing could be guaranteed. Who is correct?
Greg Hands
It is a bit rich for the right hon. Gentleman to vote against the European Union (Withdrawal) Bill and then to call for something that would be a consequence of that Bill: creating a new geographical indication scheme—by the way, we will be doing that in consultation with the devolved Administrations—to make sure that we continue to protect the UK’s 84 registered GIs within the UK. That is the Government’s objective, which I would hope he would support.
Greg Hands
No, I will make a little more progress.
We have heard questions about why we would want a bespoke trade agreement rather than taking one off the shelf, which, the argument goes, would involve easier negotiation. I remind the House of the Government’s reasons for choosing this approach over existing models, such as the EEA or CETA, and why whatever model we choose must involve leaving the customs union. A Norway-style deal might seem superficially attractive, but we would be subject to any new rules that the Commission chose to enact, automatically and in their entirety, with no endpoint. Most importantly, we would have little influence over those rules and no vote, which would be too much of a loss of democratic control, and also no guarantee—far from it—that whatever the EU27 did would also be in the interests of UK businesses and consumers.
Nor should we look to a Canadian-style agreement for the answer. Even if it were easier to achieve a CETA-style deal, we start from a unique position of regulatory alignment with the EU. Unlike other countries, we start from the position that our systems are already the same. It is precisely because the Government recognise how important EU trade is that we must look to an ambitious deal, rather than starting our relationship from scratch with something like CETA.
As important as trade with the EU is, however, we must also look outside Europe. The IMF—this statistic is also on the Commission’s website—estimates that over the next decade or so, 90% of global growth will come from beyond the EU. China adds an economy the size of Switzerland every year. There will be over 1 billion middle-class African consumers in 2060, and Commonwealth GDP is predicted to hit $13 trillion in two years. These represent unprecedented opportunities, yet they are harder to reach from behind the EU’s customs wall. Only once we can sign our own independent trade deals can we take full advantage of them.
Signing those deals means being outside the customs union. We need look only to Turkey to see that being in the customs union, in whole or in part, can sometimes be the worst of all worlds.
Several hon. Members rose—
Greg Hands
I want to make progress—it is very important that Members understand the point that I am making.
The EU is currently negotiating a deal with Japan. If it finalises that deal, of which, as I say, we are strongly supportive, Turkey will need to reduce tariffs on Japanese imports, but it will not get reciprocal access to the Japanese market. It will have to negotiate its own access, but those negotiations will be more difficult because Turkey will already have reduced its own tariffs and therefore will not have as much to give in return. As the Prime Minister has set out repeatedly, we are looking for a bespoke agreement. For goods, this will be based on a comprehensive system of mutual recognition, so that products need be approved only once. On services, we have an opportunity to establish a broader agreement than ever before.
Anna Soubry
My right hon. Friend is being very kind and generous in giving way, especially as I am really not helping him. With the greatest respect, he knows, as everyone else does, that we will and can achieve all these deals with countries such as China as a member of the EU. By way of example, I have met the Australian ambassador, and while he would of course want to do a trade deal with our great country, Australia will look first to do a trade deal with the EU, with its 500 million customers. Is it not important that we make all these things very clear to the British people? We do trade deals at the moment by virtue of our membership of the EU, and the only reason why we are leaving the customs union is to chase unicorn deals, but we can get deals with the EU.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. It was quite in order for the Minister to give way to the right hon. Lady, but she knows that her intervention was too long, because she said so the last time—I heard her.
Greg Hands
It was a long intervention, Madam Deputy Speaker.
With all due respect to my right hon. Friend—she and I served alongside each other in government—the British people have made the decision to leave the European Union. That was the crucial decision made in June 2016. The Government’s purpose is now to ensure that we have the best possible frictionless trade deal with the European Union, while still being able to take advantage of trade opportunities beyond the EU. As I have stated repeatedly during this debate, that is the Government’s objective.
Greg Hands
No. I have already used up 25 minutes, and I am going to make a little more progress.
On services, we have the opportunity to establish a broader agreement than ever before. Of course we recognise that we cannot have the rights of single market membership, such as passporting for financial services, just as we understand that we cannot have all the benefits of single market membership without the obligations, but that does not mean that we should be shackled by existing precedent.
I know that some Members will ask how we can be sure that the EU will agree to our approach. The main point to bear in mind is that it is strongly in EU countries’ interests—economic and otherwise—to sign and agree such a deal. On the day we leave, the United Kingdom will overnight become the EU’s second largest trading partner—larger than China, Japan or India. The Commission estimates trade between the UK and the EU27 to be worth €812 billion. That is only 8% behind the EU27’s main trading partner, the United States, but it is 60% more than with China, which comes third.
Given the effort that the EU has put into deals with the likes of Mexico, Vietnam and Singapore—all of which, crucially, we support, but each of which is significantly less important to the EU than ours—it would be odd indeed for it to reject proposals from us. Furthermore, both the EU and the UK need to send a loud and clear message that we are strong believers in free trade. What message would be sent if we could not reach a free trade agreement?
However, even that underestimates our importance to the EU, because it is the type of trade that matters, not just the volume. Our strongest comparative advantages are in the business, professional and financial services that other businesses need to grow, and in the pharmaceutical goods that no one wants to exclude. For an advanced economy, good financial infrastructure is just as important as physical infrastructure, even if it is not as obvious. Restricting Europe’s access to the City’s financial infrastructure would be the act of a latter-day Beeching—although this time the main line would be closed, not the branch. Yes, the rest of the network could try and pick up the slack—the Frankfurts or Parises—but as I know, because I have worked in the sector, that network has less capacity and is less efficient, and EU businesses and manufacturers could not connect with the capital market that they need. The EU talks about a capital markets union, but how tenable is that without access to Europe’s main capital market?
Our relationship goes beyond mutual economic interest, however. Our membership of the EU is only one part of our relationship with Europe. We can still be neighbours when we leave: we are 30 km from the coast of France. We have cultural ties from before the EU was founded. We will still be in the same core organisations that the EU or its members are part of, from the European Court of Human Rights to the UN to NATO, and from the International Monetary Fund to the World Trade Organisation—the economic, security and humanitarian firmament that holds the international system together.
Greg Hands
No. I am about to finish.
Nevertheless, the Department for International Trade is preparing this country for life outside the EU. We are proceeding with trade and customs Bills that will give us a functioning customs regime on day one. As one would expect, they have been designed to prepare us for every eventuality, although they will be needed regardless of the outcome of our negotiations with the EU. They will give us a strong trade remedies regime. Free trade does not mean trade without rules, but Labour opposed these new powers when they were considered on Second Reading. Our independent trade remedies regime will allow us to protect UK industry from unfair dumping or subsidy, while balancing its interests against the interests of UK consumers and other UK businesses. It will be delivered through an independent trade remedies authority, so that businesses have the confidence they need that it will be impartial and will not act against the interests of wider industry. I want to make sure that this new regime works as well for business as it should from the start. We are consulting on which existing EU trade remedies we should carry over, and I encourage any business with an interest to respond before the consultation closes at the end of this month, and any Members with producer or consumer interests to help to publicise this.
The Taxation (Cross-border Trade) Bill will also allow us to create a UK unilateral trade preferences regime for developing countries. Shockingly, this was also opposed by Labour, the Scottish National party and the Liberal Democrats on Second Reading. The UK is a proud advocate of supporting developing countries to reduce poverty through trade, and I hope that Labour will reconsider its stance. This Bill will let us continue the UK’s existing system of preferential access for developing countries, which reduces or removes import tariffs from a number of countries, while also allowing us to explore improvements on the EU’s current system.
Leaving the European Union will allow us to negotiate trade deals across the world, but at the same time, this Government understand the importance of EU trade. That is why we seek a deep and special partnership with the EU. This is the only appropriate option. Members of all parties should be optimistic that that can be achieved.
Several hon. Members rose—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. Before I call the Opposition spokesman, let me say that while it is clear that a great many Members wish to speak, we have limited time, so there will be an initial time limit of eight minutes on Back-Bench speeches, which is likely to reduce. I make this announcement so that Members can tailor their speeches accordingly.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
It was a year ago yesterday that this House voted overwhelmingly to give the Prime Minister the authority to trigger article 50. It is almost a year since she did so and nearly 20 months since the referendum result that set that process in train. The Government accepted the EU timetable, and while the cut-off point might ultimately slip by a week or even two, the draft withdrawal agreement, including the framework for the future relationship, will have to be wrapped up in just seven months’ time.
We welcome the joint report published in December last year and the progress it represented, but the fact remains that the Government are running out of time and of road, so, frankly, it is extraordinary that, despite the scale of the legislative task confronting us between now and exit day, the Government have decided that the best use of our time is two days of general debate on European affairs without even the possibility of a vote.
While we welcome any and every chance to debate Brexit and Europe, this is a farcical situation. No date has been set for the Report stage of either the Customs Bill or the trade Bill, as the Government rightly fear a possible defeat. The immigration Bill we are now told will hopefully be with us before Christmas, a year after it was initially expected, but as the Home Secretary has made clear, it might not even be law by the day we leave. And there is absolutely no sign of the fisheries or agriculture Bills, or, for that matter, anything that could reasonably be described as a domestic legislative agenda. As Philip Cowley, professor of politics at Queen Mary University of London has said:
“This is an approach to parliamentary democracy known to procedural experts as: Run Away.”
The reason for this legislative paralysis is obvious: the Conservative party remains bitterly divided over how to implement Brexit and what the future relationship with the EU27 should be.
Anna Soubry
Does the hon. Gentleman agree with me, and I am going to be honest about all this: that there is some division on these Benches, but, equally, there is division still on the hon. Gentleman’s Benches? While the move to a customs union has been welcomed, does he anticipate that we might see more movement to the customs union and of course to accepting that the single market would also be a good way to settle it?
Matthew Pennycook
I thank the right hon. Lady for her intervention. We do need to be honest about this. An issue of this magnitude and importance is bound to create different views in all parties, but I would argue that the divisions on the Labour Benches are nothing like the fundamental divisions in the Cabinet and on the Government Benches. Certainly, the divisions on our side are not preventing legislation from being brought forward for us to vote on.
Caroline Lucas (Brighton, Pavilion) (Green)
Will the hon. Gentleman give way?
Matthew Pennycook
I just want to make a bit of progress, if that is okay.
The Prime Minister’s Mansion House speech on 2 March was as much an attempt to muffle those divisions as it was to provide clarity on the Government’s vision of the end-state relationship. To be fair, it was a more serious and detailed speech than those that had gone before, and it was pleasingly devoid of empty sloganeering. There was no repeat of earlier banalities such as “Brexit means Brexit” or “a red, white and blue Brexit”. At last, we heard a speech that started to engage with many of the hard truths about our departure from the EU. It stressed the need for compromise on all sides and conceded that inevitable trade-offs would have to be made if we were to avoid the hardest and most damaging of departures. As with her Florence speech in September last year, one wished that that content could have been delivered far earlier in the process. Had it been, I suspect that the country would have been in a better position today.
Judging by the raft of tortuous cherry and cake metaphors that we heard from the Government Benches in response to the Prime Minister’s statement on Monday, she might have succeeded in her immediate objective of holding together her deeply divided Government and party and in giving herself a small degree of room to manoeuvre in the months ahead. However, it is patently obvious that those divisions remain as deep as ever. That is blindingly obvious. If they had been healed, we would now be considering the Report stage of the Customs Bill or the trade Bill, rather than having a general debate such as this. Make no mistake, those divisions will have to be confronted, and the sensible majority in this House will have to be given the opportunity to shape the Brexit process sooner rather than later, not least because, although the Prime Minister’s speech was more realistic in important ways, it was still not realistic enough.
Emma Reynolds
One of the things that the Prime Minister said in her speech was that we will inevitably have less access as a result of the hard Brexit that the Government are pursuing. Does my hon. Friend agree that less access to our biggest market will mean fewer jobs, less investment and less economic growth?
Matthew Pennycook
I absolutely agree with my hon. Friend. I could not have put it better myself.
The theme of today’s debate is international trade. The sections relating to customs were arguably the least convincing parts of the Prime Minister’s speech. In contrast to other areas, there was no attempt to engage with the hard truths about what leaving the customs union will mean for the UK, and particularly with the impact of that decision on manufacturing and the Irish border. As the House knows, the Prime Minister simply went back to the two propositions that the Government set out in their future partnership paper published on 15 August last year. They were a
“customs partnership between the UK and the EU”
or
“a highly streamlined customs arrangement, where we”—
that is, the UK—
“would jointly agree to implement a range of measures to minimise frictions to trade, together with specific provisions for Northern Ireland.”
The first proposition is untried and untested. By the Government’s own admission, it would take at least five years to implement and it would be ripe for abuse. It was roundly rejected by the EU last year, not least because it would require EU member states to completely reconfigure their own national customs systems. The idea is not simply “blue sky thinking”, as the Secretary of State described it in September last year; it is pie-in-the-sky thinking.
The second option would, according to the chief executive of Her Majesty’s Revenue and Customs, take three years to put in place and would result in friction on our borders. It would therefore require a range of measures, including unproven “technology-based solutions”, to minimise frictions to trade. In her speech, the Prime Minister claimed that both those options were serious and merited consideration, but they were widely rubbished in the wake of that speech. The EU immediately ruled them out as non-starters.
The truth is that the Government have absolutely no idea about what to do about the issue of customs and the Irish border. The fall-back that surfaced in the EU Commission draft legal text published on 28 February—namely, that Northern Ireland should go into a customs union with the south and that the UK border should be shifted to somewhere in the Irish sea—is clearly unacceptable. The Prime Minister quite rightly made it clear that no UK Prime Minister could accept such an outcome. The Irish border issue remains unresolved.
One part of a wider solution to the border issue would be, as the Opposition have suggested, to negotiate a new comprehensive UK-EU customs union. Such a customs union would ensure that goods covered by the agreement could still be traded with the EU tariff free, with no new customs or rules of origin checks. The exact terms of such a customs union would, of course, have to be negotiated, but this represents a pragmatic proposal, reflecting current arrangements, and it has been welcomed by trade unions and by business, including the Manufacturers Organisation—formerly the EEF—and the CBI. It would be a win-win for both the UK and the EU27. A new UK-EU customs union would not prevent the UK from trading globally or improving our export industry, just as the EU customs union has not stopped Germany making China its largest trading partner, for example. Germany now exports four times more to China than the UK. The UK would still be free, as we are now, to negotiate in the areas of services, data, investment, procurement and intellectual property, and UK businesses would still be able to export to non-EU markets just as other EU countries do. In short, there is no question but that the UK could and would still increase trade inside a customs union with the EU, as the Secretary of State for International Trade said earlier this year in relation to the Prime Minister’s visit to China.
A new, comprehensive UK-EU customs union, were it agreed, would of course require the UK to adopt a common external tariff with the EU, and we would of course seek both to replicate existing EU trade agreements and benefit from negotiated future deals. It is true that we would not be able to negotiate independent third-party trade deals, but as many hon. Members have already mentioned, we need to face up to some hard facts in this area, because the notion that future free trade agreements will offset the inevitable economic costs of exiting a customs union with the EU is nonsense. To say, as the Minister did, that it is simply not an either/or question does not get to the heart of the issue that confronts us.
Vicky Ford
When the hon. Gentleman says that he wants to stay in a customs union with the EU, will he confirm that he will continue to comply with EU state aid and competition law as a condition of staying in that customs union? I cannot find a single example of a country that can stay in the customs union while disregarding state aid laws.
Matthew Pennycook
The hon. Lady has great expertise in this area, but I think she has slightly misjudged the fact, as I understand it, that that is not about customs, but about the elements that make up the single market. We have said that we would seek, in principle, to negotiate protections, clarifications or exemptions where necessary, but I cannot imagine a situation in which those exemptions would be necessary. As I think the Leader of the Opposition said on “Peston on Sunday” some time ago, there is nothing in the current state aid rules that would prevent us from implementing, for example, our manifesto.
Many hon. Members have already mentioned this, but Sir Martin Donnelly, the former permanent secretary at the Department for International Trade, said that the reality is that what the Government are proposing is akin to giving up
“a three-course meal... for the promise of a packet of crisps in the future”.
The EU currently constitutes 44% of our exports and 53% of our imports. It must be our priority. Increases in trade from new free trade agreements with the USA, Canada, Australia and New Zealand combined would be worth less than 3% of our current trade in goods and services.
Matthew Pennycook
I will make a bit of progress.
FTAs with the BRIC countries would be worth just over 2%. Any such trade deals, even if they could be secured reasonably quickly, would in all likelihood also involve detrimental trade-offs and compromises in standards and regulations with which the British public would rightly take issue.
Alex Sobel (Leeds North West) (Lab/Co-op)
On that point about regulation, the Government’s leaked cross-Whitehall EU exit analysis paper outlines the regulatory opportunities of Brexit and states:
“A cross-Whitehall work-stream is working through these opportunities.”
Does my hon. Friend agree that that is code for deregulation and the ripping up of our workplace environment rights? The Secretary of State for Environment, Food and Rural Affairs is already unable to give us any clarification about the European Environment Agency. Is this not just a bonfire of our rights?
Matthew Pennycook
I thank my hon. Friend. That is certainly the fear. I read the same analysis as he did—I had to surrender my phone to do so and then found that it had been released publicly a week later—and it does say in several places that there are opportunities to deregulate. Perhaps the Minister can tell us why those things are being modelled and to what they might refer.
One has only to listen to the noises coming from the United States Government on issues ranging from the replacement of the EU-US open skies treaty to the inclusion of agriculture in any FTA to get a sense of how difficult things will be even when it comes to new deals with some of our closest allies, and that is irrespective of who occupies the White House. The prospect of new free trade agreements might give the International Trade Secretary a purpose, but they would be good for little else.
Mark Garnier
I want to go back to the comments that the hon. Gentleman made about Sir Martin Donnelly, whom I worked with for a number of months; he is a civil servant of extreme ability and wisdom. When he made the banquet versus the packet of crisps analogy, I think he was looking to a certain extent at some of those simple gravity models used by the Treasury—the simple mathematical trade-off between tariffs with the EU and tariffs elsewhere.
What is missed in all this debate is the ability of the UK to find itself at the centre of a network of trade deals. For example, a US manufacturer might see the advantage in moving its manufacturing operations to the UK to take advantage of a UK-India trade deal, for example, if the trade relationship between the UK and India was greater and better than that between America and India directly. That is the unknown that we are struggling to analyse, to get the true comparison between one type of relationship and the other.
Matthew Pennycook
I simply do not think that that stacks up. I listened to Sir Martin’s comments very carefully, and I am not sure that he was referring to that. However, if the hon. Gentleman makes a speech, I will be personally interested in hearing his points.
Matthew Pennycook
I am going to make progress, as lots of people want to speak.
A sensible, pragmatic Government focused on the economic interests of the country would adjust their policy accordingly and consider the option of a new, comprehensive customs union along the lines that Labour has suggested. Importantly, so would any Government committed, as this Government are under the terms of the phase 1 agreement, to the avoidance of a hard border on the island of Ireland, including any physical infrastructure or related checks and controls—a border that is frictionless, not as frictionless as possible. Let us be clear: a border that has checks, even “very, very minimal” checks, as the Foreign Secretary suggested to a business audience last week, is still a border that would require some kind of infrastructure and patrols.
A version of the Canada-US border, which the Prime Minister suggested was being explored, is simply not good enough. The threat that such an outcome would pose to the politics, security and economy of the island of Ireland, as well as to the daily lives of citizens on both sides of the border, are obvious to most hon. Members.
We recognise that a new, comprehensive customs union, in itself, is not a complete solution to the Irish border issue. To obviate the need for physical infrastructure on and checks at that border and to uphold the Good Friday agreement in its entirety, in all three strands, full regulatory alignment in relation to all goods production and trade would be required. That alignment would, of course, have to be maintained over time as EU legislation evolved.
That is one of the reasons why we need to secure a new agreement that gives us the closest possible relationship with the single market: full access to European markets; no new impediments to trade; no drop in the rights, standards and protections built up over our 43 years as an EU member state; and no prospect of falling behind them in the future. We must recognise that our future economic relationship depends on maintaining a level playing field and the same standards that business wants.
But when it comes to goods, a conversation with the EU27 about full regulatory alignment, and the institutional mechanisms that might be required to facilitate such alignment, is not even possible when the Government have ruled out membership of a customs union. The idea that
“a comprehensive system of mutual recognition”
is an alternative solution—something that EU member states do not even expect of each other—is mistaken. There is no solution to the Irish border issue that does not involve some form of customs union. That is why the Government must reconsider their red line in this area. If they do not, it will be difficult to see what their solution to the Irish border issue—or, indeed, the issue of a customs border at Dover—might be. That matters because, although the Government may be able to fudge some of the difficult decisions for now, the issue of the Irish border issue can no longer be fudged.
Matthew Pennycook
I am just coming to a close.
The draft withdrawal agreement merely needs to include a political declaration on the future relationship—that is, its broad outlines—with the details to be hammered out after the UK has left the EU.
Matthew Pennycook
I will not give way.
But the Irish border issue is an integral part of the withdrawal agreement. Without a solution to it, it is very difficult to imagine how the Government secure an orderly exit deal or a transition period, let alone a post-Brexit trade deal.
Several hon. Members rose—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. We now have a time limit of eight minutes.
Paul Masterton (East Renfrewshire) (Con)
I am pleased to speak in today’s general debate and talk a little about my views as we move towards phase 3, with a specific focus on the pensions, asset management and long-term savings industries and our future trade in those services.
Some 24% of people employed in the UK in the general insurance, life assurance and pensions sector work in Scotland—many in my constituency of East Renfrewshire, due to its access to the Glasgow financial district and the central belt as a whole, as well as the easy links down to London. These industries want a deal. Why? It is because no deal means that banks, insurance companies and fund managers could not provide services across the UK from the EU. Contracts, particularly for derivatives, which run over exit day could simply become unenforceable. Business liability insurance contracts often stretch decades ahead. Insurers could, as a result of a no-deal Brexit, lose their licence to do insurance in the customer’s jurisdiction. Cross-border pension payments from the UK into the EU and vice versa simply could not be paid. It would defy common sense not to have a Brexit deal on financial services, given that the insurance and long-term savings sectors are so largely aligned and integrated, and our trade in services is vital to both parties.
The UK’s asset management industry is the second largest in the world, managing nearly £7 trillion-worth of assets, serving a global client base. Similarly, numerous investment funds used by pension providers are set up under Irish law or other EU-based jurisdictions. More than 150 UK managers are managing Irish funds right now, with more than 2,000 Irish-domiciled funds sold in the UK. That is more than €600 billion in fund assets managed by UK managers in Ireland on behalf of UK investors.
The Association of British Insurers said last summer that a no-deal Brexit is “unacceptable”. The Pensions and Lifetime Savings Association was even more blunt when it said:
“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.”
That was why the industry welcomed the Mansion House speech. Clarification and honesty of the reality of what we are confronting allows people to move forward. If we leave the single market, passporting, which is a central pillar of the EU financial services regime, will end. Currently, there are 336,421 passports held by UK firms, and many firms hold multiple passports for multiple member states. The London Market Group recently published figures suggesting that the UK insurance sector takes in £14 billion a year of business connected with the EU.
That clarity was needed. Now we need to start talking about successor arrangements, with the transitional period being a time for firms to adapt to changes in the marketplace and regulatory structures. A primary risk for institutions that access EU markets from the UK is the post-Brexit loss of that access on a short-term or longer-term basis, because no equivalence decision has been issued in time. A lack of agreement on equivalence would also affect elements of financial services infrastructure, such as access to clearing houses or payment services, or the provision of custody services to certain clients.
Bottoming out that equivalence process for the UK as a third country must be a priority. If we want to maintain and enhance this country’s position as the leading global financial centre, we will need to be regulated in accordance with the highest global standards. That is important for not just UK firms, but third-country institutions, such as those based in the US or Hong Kong, which cannot make use of the passport system and must establish an authorised presence in an EU member state. For this reason, many third-country institutions have chosen to base themselves in London through a UK subsidiary as their primary point of access to EU markets through passporting, and we want them to be able to continue to do so.
We also need to agree successor arrangements for passporting of deposit taking and lending business under the capital requirements directive and the alternative investment fund managers directive. Third-country recognition is absolutely vital, and the process for that needs to have been sorted out long before we have left. UCITS—undertakings for the collective investment of transferable securities—are required to have their management companies established in an EU member state, so a bespoke mutual recognition agreement that would allow UK entities to continue fulfil their UCITS roles will be necessary.
Pension schemes are subject to EU legislation, both as institutional investors affected by EU financial market regulation, such as MiFID II—the markets in financial instruments directive—and the European market infrastructure regulation on the derivatives market, and, significantly, directly under the directive on institutions for occupational retirement provision, on workplace pension schemes. IORP II is due to be implemented in the UK by January 2019.
During the negotiation of IORP II, the UK was successful in warding off the threat of an EU solvency regime for pensions, which could have resulted in a bill for British business of up to €650 billion. This remains on the agenda of EIOPA—the European Insurance and Occupational Pensions Authority—which is the EU-level pensions regulatory body. Everyone knows I would like the maximum possible access to the single market, but it is essential that any future moves by the EU to propose a new EU solvency regime should not apply to defined- benefit schemes in the UK. The absolute worst case scenario for UK pension schemes would be to find themselves more vulnerable outside the EU to the damaging regulation that was successfully blocked when the UK was inside the EU.
More broadly, a good trade deal is vital to the pensions industry because of the significance to employers that sponsor pension schemes across the manufacturing sector. A bad Brexit will have huge detrimental economic impacts on those sectors, which would put huge pressure on those employers’ ability to fund their schemes. Pension schemes need full access to the global financial markets, both for investments that will give them the resources to meet their pension commitments and for de-risking and hedging purposes so that they can manage their risks. We need the UK financial services industry to remain as strong and vibrant as it is today.
I have spoken in two Westminster Hall debates recently: one on the European Free Trade Association and one on alternatives to a no-deal Brexit. I shall not repeat what I said there, but I remain of the view that EFTA-EEA membership finds a neat balance by reflecting that the EU referendum result, although decisive, was not overwhelming. Is it a perfect option? No. I want that bespoke deal and believe and trust in the Prime Minister to bring back the best terms possible, but if we need a plan B, for whatever reason, it cannot be to crash out on World Trade Organisation rules. The Prime Minister should have the maximum flexibility she needs to do the right deal and should not being hemmed in by individuals and groups from either side of the Chamber.
Back in East Renfrewshire, are people dancing down the streets of Barrhead and Clarkston at the thought of Britain leaving the EU? No. But they are not drawing down the blinds and taking to their beds, either. What they want, and what they need, are practical, workable solutions to be put forward in the national interest, pragmatism over ideology, and optimism that is merited but grounded in reality. That is why the Prime Minister’s Mansion House speech was so welcome. This is a negotiation, but I hope that the EU will engage with the suggestions constructively and that we will be able, at long last, to move forward at pace.
Several hon. Members rose—
Madam Deputy Speaker (Mrs Eleanor Laing)
I am glad that the House is much better behaved today than it was yesterday, because we are being observed this afternoon by our colleagues and friends from the Parliament of Afghanistan, whom I am delighted to welcome to Westminster. I hope that they will find our deliberations on Europe enlightening.
Stephen Gethins (North East Fife) (SNP)
I add the Scottish National party’s welcome to our colleagues and friends from Afghanistan.
Here we are with yet another European Union debate. I was elected almost three years ago. After I was appointed Europe spokesperson, the European Union Referendum Bill was introduced. Europe has dominated my time here, but that is because it is important. Almost three years on, I think it is fairly safe to say that things are not going terribly well for the Government.
The EU has brought us a huge number of benefits. I am somebody who has enjoyed some of those benefits through education, which we can access regardless of our backgrounds and our financial means, and through freedom of movement, from which not only do we benefit, because we can work and live throughout the EU, but our economy benefits, because of the people coming to the United Kingdom to live and work.
The hon. Member for East Renfrewshire (Paul Masterton) was right in the preceding speech to highlight some of the difficulties faced by financial services in his constituency. In my constituency, I am regularly approached about issues on which we still do not have an answer, such as seasonal workers and the food and drink industry, which relies so heavily on seasonal workers and freedom of movement. We have had no clear answers from the Government.
All that is important right now, because some farmers have told me about a decline in the numbers of seasonal workers. What does that mean for crops that are planted in advance for the following years, many of which need to be taken in by hand? Business decisions for after we have left the EU need to be made now. There is precious little certainty and precious little decision making going on about what is going to happen after 29 March next year and, crucially, in the harvest period after that. The tourist sector also relies heavily on seasonal workers and freedom of movement.
I have just mentioned some of the benefits that EU membership brings to students. We must also reflect on the fact that our centres of education and research rely on the excellence that comes from their being able to tap into a pool of talent and the benefits of freedom of movement, as well as the benefits that are brought by Horizon 2020 and the other programmes that are so important.
The biggest employer in my constituency is the University of St Andrews, and a great deal of people who live locally work at the University of Dundee and Abertay University, and even at the University of Aberdeen and the University of Edinburgh. Education and research is a big industry and a big employer. Not only are those jobs important and not only are these learning establishments at which our young people and mature people can grow and increase their skills, thereby improving our economy, but the industry will benefit us in the years to come as we get those breakthroughs on things like dementia, dyslexia and helping kids to have a better educational experience through some of the research that has been done by EU nationals and through Horizon 2020.
Caroline Lucas
The hon. Gentleman is making a compelling speech. Does he agree that it is extraordinary to see a Government so proudly leading the country into a situation in which we will all be so much poorer, not just economically but in the terms he describes—the richness of our relationships with other EU countries in our research establishments and elsewhere, which are so important? It is young people whose futures are being closed down in a most unforgivable way.
Stephen Gethins
As usual, the hon. Lady makes an excellent and powerful point, and Government Members would do well to listen to her—in fact, the hon. Members beside her might do well to do so too sometimes. I will come on to the finances that she rightly raises, but before I do I want to talk about the broader impact on public services in areas such as access to the single market, which is so important in decreasing red tape. We often hear about red tape, but access to the single market has reduced red tape, not least for our SMEs. I have mentioned seasonal workers, but we must also think about the impact on services and on our doctors, nurses and dentists who enjoy freedom of movement and come from throughout the European Union. It can be difficult to get a dentist and my hon. Friend the Member for Glenrothes (Peter Grant) often mentions the practice in his constituency that is made up of several EU nationals.
The single market makes us more competitive. I just mentioned the benefits of Horizon 2020, and the European Medicines Agency is also important—it is based in London, but it is due to be taken away, taking jobs with it.
Another issue is cash for public services, as the hon. Lady just mentioned. The UK Government talk about finding common ground between themselves and the Scottish Government. There is one area of common ground between them—the Minister is right to look up at that point. They agree in their analysis that leaving the EU will be devastating for the economies of both Scotland and the United Kingdom. The Scottish Government’s figures—we were told that they were not right until the UK Government’s figures suddenly came out and agreed with them—showed that the hit on our GDP will be devastating in every single scenario set out. Every 1% reduction in GDP could hit tax by £8 billion, but that does not even start to address the amount of money that we will have to shell out just to leave the European Union, reported to be £40 billion. The Chancellor is preparing to leave with initial costs—initial—of £3 billion. The Financial Times estimates that Brexit has already cost the UK economy £18 billion, or about £350 million a week. I am not sure where we have heard that figure before.
If we have lower GDP and less money from the tax take, we will have less money to spend on public services—that is a basic fact. In Scotland, the Scottish Government have made changes in tax so that the majority are no worse off or better off, but that will raise an additional £164 million. That is welcome, but it is only a drop in the ocean of the money that we will need to try to save our public services from the hits that will come their way. If anyone could tell me how they will plug the gap in public services that will be caused, I would be delighted to hear from them. Would anybody like to make an intervention? I did not think so. Nobody has a clue—
Ross Thomson (Aberdeen South) (Con)
The whole premise of what the hon. Gentleman is saying is based on figures that do not take into account at all of what the Prime Minister has set out to achieve, which is a special and deep partnership with the European Union. The figures that he quotes are the same figures that Scottish National party Members campaigned on during the referendum, when they predicted that there would be a recession and that the economy would fall off a cliff. They were false prophets then and they are false prophets now.
Stephen Gethins
I salute the hon. Gentleman’s courage in bringing that up, but I am actually using his own Government’s figures.
Stephen Gethins
I would like to make a little bit of progress, but I will come to the hon. Members in just a moment.
I am using this Government’s figures. We need to have a real and proper debate about how we plug the gaps in tax and in GDP.
Christian Matheson
The hon. Gentleman has obviously gone through a methodical process of working out the effect of Brexit on GDP. Has he worked out the effect on GDP of an empty Tory slogan?
Stephen Gethins
Well, we have worked out the impact on the NHS and on education, and that will be devastating to our public services because of the empty promises that each and every one of us will pay for.
Stephen Gethins
I will just make a little bit of progress.
I say gently to Government Members that there are serious issues around tax raised and GDP that we must all wrestle with in a serious manner, offering some suggestions, but right now the Government are not handling some of the big issues of the day. Time that is being taken up with this issue is strangling political debate. The strikes in our universities right now are crucial for all parties and we should all take them seriously; yet, as we look to a fair solution, this matter cannot be a priority because this Government are so consumed by Brexit and what is going on with leaving the European Union that other issues simply get ignored. Brexit strangles that proper and serious debate.
Antoinette Sandbach
I do not want the impression to be given to this House that the recent figures published by the Exiting the European Union Committee were the same as the figures that were used pre-referendum. Two totally different economic models were used. It would be wrong for the record of this House to suggest that the figures used before the referendum were the same as the ones after.
Stephen Gethins
I thank the hon. Lady for her intervention. I note the differences that I sometimes have with her, but she makes an honest point. I note the correction to those Members on her Benches who have been avoiding the figures from their own Government.
I welcome the remarks of the hon. Member for Greenwich and Woolwich (Matthew Pennycook) on the customs union, and I hope that he will go to the next step on the single market. I particularly note and am grateful for his remarks on Northern Ireland, because Northern Ireland is one area that has been overlooked. The danger to the peace process is not something that any of us should take lightly, regardless of the views of different Members across this House. We have to take it seriously.
I know that my hon. Friends will talk about the continuity Bill in Holyrood, where we find the Conservatives utterly isolated in their latest power grab. When challenged, they say that we have to choose between the UK and the EU. That is nonsense and highlights the utter isolationism that sits at the hearts of many—not all—Government Members who reach out for this “ourselves alone” approach.
We need to start looking at where we can make progress. I have seen one silver lining in this House, for which I pay credit to Members from across the parties. I am seeing—from my short experience, I will admit—Members from across the House seeking to work together better than they have done before. It is not always easy, but Members are trying to put their differences aside and to find a way through. I salute a number of Members who have been able to do this.
Let me offer my own suggestion. Scotland voted to remain part of the European Union, as has been noted by Members in this House and by Members of Parliament from across the European Union. I suggest that bridges need to be built with our European partners economically. Whether we like it or not, this has been a shock to the system. It is really important. We need to build our economic ties. We would like to see support for immigration. If we can keep the Environment Secretary to his promises on immigration, that will be a good start. Scotland stands ready to try to rebuild those ties. Our economic ties with the rest of the United Kingdom are obviously important, but those with the single market and the rest of the European Union are crucial as well. I appeal to Members: look at your own statistics, look at the damage that is being done, and reach out to the devolved Administrations and to other Governments. This will hit our public services. We see people switching off with regard to this debate, but they will not switch off when it comes to a hit to the NHS in terms of personnel and cash, and a hit to education and other services. We have asymmetrical devolution in the United Kingdom; we should use it.
As my hon. Friend the Member for Glasgow Central (Alison Thewliss) pointed out, it is International Ask a Question Day. My question to Government Members is: do you know what you are doing and are you aware of the devastating damage you are doing?
David Duguid (Banff and Buchan) (Con)
I welcome the opportunity to speak in this debate. I start by responding to the hon. Member for North East Fife (Stephen Gethins), who said that 62% of the people in Scotland voted to remain in the EU. What they actually voted for was for the UK to remain in the EU, which is a totally different question. They did not vote for an independent Scotland to be in the EU.
In fact, as I have said in this House before, a majority in my constituency voted for the UK to leave the European Union. This information is based on research conducted by the University of East Anglia that broke down the Scottish vote in the EU referendum by Westminster constituency boundaries and found that 54% of voters in my constituency voted leave. Of course, this should come as no surprise when one considers that my constituency is home to several large fishing communities and active ports. About 35% of the UK’s white fish landings come in through the towns of Peterhead, Fraserburgh and Macduff in my constituency.
A University of Aberdeen study conducted ahead of the EU referendum found that 92% of British fishermen planned to vote leave. The study was of fishermen across the UK, but 68% of the sample was made up of Scottish fishermen. Fishing communities around the whole UK have suffered for decades under the common fisheries policy, and this is a historic wrong that must be put right. We owe it to all our fishing communities to make a success of our post-Brexit fisheries management. When we leave the EU, we leave the common fisheries policy and become an independent coastal state. We must not weaken our hand in future annual coastal state negotiations by bargaining away access to our exclusive economic zone as part of a longer-term trade deal with the EU. With regard to reciprocal access, it is worth noting that compared with the 100,000 tonnes of fish caught in EU waters by UK vessels, the amount caught by EU vessels in UK waters is 700,000 tonnes. British fishermen catch only 40% of fish in UK waters, compared with 84% by Norwegian vessels in their waters and 95% by Icelandic vessels in theirs.
It is not just the fishermen who want us to leave the EU. A survey in The Scottish Farmer found that two thirds of Scottish farmers said they had voted to leave the EU. The National Farmers Union of Scotland believes the result to have been closer to 50:50, but it cannot be denied that a great many Scottish farmers will be glad to see the back of the EU and the common agricultural policy. A single common agricultural policy that was designed to work in a common way from the Arctic circle in the north all the way down to the Mediterranean led to an over-complicated, bureaucratic,“one size fits none” system. Scotland’s food and drink industry is too important to neglect. Globally renowned Scotch salmon and whisky are not just important to the Scottish economy but among the UK’s top exports.
I am very encouraged by the UK Government’s commitment to deliver the same level of farm support until the end of this Parliament. I know that many members of the seafood processing community would like to know whether something similar can be done to match the funding that currently comes from the European maritime and fisheries fund.
As other hon. Members have said, one impact of Brexit where there is concern from farmers and fishermen, particularly those in the food processing business, is the ability to supplement their workforce with labour from inside and outside the European Union on a level playing field. In the long term, these industries must be made sustainable with local labour, but that is not going to happen overnight, and in the interim period we will need a stopgap to ensure that the industry can continue to function. This was already an issue before Brexit, as there is not an infinite supply of EU labour for these industries. What is crucial, though, is that after we leave the EU we will take back control of our borders, our laws, our money and our waters.
Hilary Benn (Leeds Central) (Lab)
I apologise for not being able to be present for the conclusion of the debate tomorrow.
We should be very grateful that we have the opportunity over two days to discuss European affairs, but it is a reminder that there is one thing Ministers do not want us to be doing, which is voting on any amendments to keep us in a customs union. This is definitely going to be remembered as the Brexit Parliament. It is undoubtedly the Back Benchers’ Parliament. At the moment, it is running the risk of becoming the voteless Parliament, because business managers are scrambling around to fill the time with anything other than votes on important matters. Ministers are not going to be able to put those votes off permanently.
One of the reasons that there is so much support for the idea of remaining in a customs union was alluded to by my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook) in his excellent opening speech, and that is that it would provide part of the solution to the problem of the border between Northern Ireland and the Republic, which continues to rumble unresolved under the surface of the Brexit negotiations.
The truth is that the House divides into two camps on the subject of the border. There is one view that says, “It’s all right,” because there will be a technological solution that will get around the incompatibility between the policy the Government have adopted, with the very high bar they have rightly set of no checks, no infrastructure and an open border, and their determination to leave the single market and the customs union at the same time. The second view, which I share, is that we cannot currently see how those two contradictions can be resolved.
We have been taking evidence in the Select Committee on Exiting the European Union and looking at free trade agreements all over the world. Every single one of them—every single one—involves some checks on some goods. It does not matter whether it is Norway and Sweden or Canada and the United States of America. Even the much quoted but clearly little read by its proponents European Parliament report “Smart Border 2.0” acknowledges that, even with the most up-to-date technology, there would still need to be physical infrastructure, which is not compatible with maintaining an open border. Of course, the Government published their two documents last summer and we should explore all the options. I recognise that the suspension of belief is essential to the magician’s art, but it is not a very sound foundation for Government policy.
Although we are none the wiser about what is going to happen in Northern Ireland, we did learn, in fairness, a bit more about the Prime Minister’s approach in her Mansion House speech. Despite all the advance briefing about ambitious managed divergence, which I hope has now disappeared into the dustbin of history, the Prime Minister did speak a great deal about maintaining regulatory alignment. I welcome that.
The other thing that was striking about that speech was the frankness with which the Prime Minister acknowledged that we will inevitably have less access to our most important market, compared with what we have at the moment. It has taken a long time to get to this point of realism. Who remembers “We’re going to get the exact same benefits,” which was the Secretary of State’s cry for many months?
The truth—that we are going to have less access—is the reason why the pound fell after the referendum. It is why the UK has gone from being one of the fastest growing of the world’s advanced economies to the slowest, which has just been confirmed. The question remains for the House: what is the right approach to manage the risks of damage to the British economy as the process unfolds?
I think we all agree that continuing tariff-free trade is essential, and I simply say that the most effective way of achieving that would be to remain in a customs union with the European Union. We have heard from the Minister that 43% or 44% of our exports go to this market, and a further 17% go to countries with which we have trade agreements. It would be great if, in responding today, the Minister could confirm how the Government are getting on with ensuring that those agreements will roll over during the transitional period, so that businesses know the terms on which they will trade.
Mr Jim Cunningham (Coventry South) (Lab)
My right hon. Friend has touched on the issue of businesses. Companies such as Jaguar Land Rover in my constituency do not know where they are in relation to regulation of research and development, and there is nothing forthcoming from the Government on that.
Hilary Benn
My hon. Friend is absolutely right, and that is one of a whole host of examples that Members on both sides of the House are aware of. Businesses in our constituencies are asking how it is going to work, because at the moment we do not know.
Staying in a customs union is what the CBI wants, and I am afraid that the Government’s policy on international trade is one of Micawberism. Given the fondness of the President of the United States for punitive tariffs and the clear desire of the American Administration to open up our agricultural market, which is not what the Environment Secretary said he wants, do we really think that concluding a trade agreement with the US is going to happen any time soon? Do we really think we are going to get a trade deal with India before we have agreed to give more visas to its citizens?
The Minister for Trade Policy who opened the debate is no longer in his place, but the idea that being in the European Union has somehow stopped us trading with the rest of the world is nonsense. If that were the case, how is it that our largest single trading partner in the world is a country with which we do not have a trade agreement—the United States? If that is the case, why is it that our trade with China has increased by 64% since 2010 and China is now our fifth largest trading partner?
Having said all that, there are areas in which the European Union needs to show greater flexibility in the negotiations. It has done particular, different or special deals with its external partners—Canada, Norway, Ukraine, Switzerland and Turkey. Let us take the example of our continued participation in EU agencies, which are very important to business and therefore to trade. When the Prime Minister mentioned the European Aviation Safety Agency, the European Medicines Agency and the European Chemicals Agency, the European Union’s response—basically, “No. You can’t take part. They’re the rules. Forget it!”—was spectacularly ill-judged.
We should say to all those we speak to in Europe, “Now, come on. You could have said, ‘Let’s sit down and talk about how we can do this, but you’ll have to pay, you’ll have to abide by the rules and you’ll have to accept judgments of the European Court of Justice.’” Such an approach should not be a problem for the Government because, in the Prime Minister’s speech on security in Munich, she said that to maintain co-operation on security, we would accept the remit of the ECJ. That is another example of reality beginning to dawn on the red lines of the Government’s policy.
Caroline Lucas
On the gulf between what was promised and what is now being delivered, both economically and on the issue of Northern Ireland, would the right hon. Gentleman at least be willing to keep an open mind on the merits and wisdom of the people having a say on the Brexit deal?
Hilary Benn
Although I am tempted by the hon. Lady’s intervention to get into my views, which I think are well known, about a second referendum, I hope she will forgive me if I do not do so, in view of the pressure of time.
The other issue I want to mention is timing. Although we are two thirds of the way through the withdrawal process, we have not even started negotiating our future relationship with a deal that is meant to stand us in good stead for decades to come, and it is not something that can be done in a hurry. I therefore make a plea for flexibility both during the remainder of the article 50 period and during the transition period, when the bulk of the negotiations will be done.
Since this is a debate about European affairs, I want to talk about some of the broader challenges we face in Europe and about Britain’s contribution to addressing them at a time when so much of our effort, energy and time is being spent dealing with the consequences of Brexit. Let us take the nerve agent attack in Salisbury. This is exactly the circumstance in which we need a multilateral response—the Prime Minister spoke about that today—and, in the case of Europe, we need the closest possible co-operation. Yet this is also the moment when we are undermining such co-operation through Brexit, and pulling apart that relationship in the hope, which I accept is what the Prime Minister has said she wants, of then rebuilding it. In truth, the use of that nerve agent is exactly the reason we need to conclude swiftly an agreement for co-operation with the other 27 members on defence, security, foreign policy and the fight against terrorism.
There are so many other things to which we should be turning our attention. How are we going to sustain strong economies in Europe? How are we going to respond to what is a wave of nostalgia for an age gone by—people are trying to come to terms with change—that informs much of the support for some political parties and movements right across Europe? When we look at the Mediterranean, we can see the extent of youth unemployment in north African countries and the challenges they face in meeting the needs of their populations. When we look at climate change, we should think of the people who will flee if droughts or downpours force them to do so, never mind the fact that people will in the end kill each other not because of their different political views, but because they are fighting over natural resources, including water. We should also think about threats to peace and security and about the onward march of technology, with the challenges and the fantastic opportunities that it will create.
While we wrestle with the desire for greater self-determination and control, we must not lose faith in the multilateral institutions—the European Union, the UN and others—that we created to give ourselves a better chance of dealing with those challenges. If we have learned one thing from the past 100 years, never mind the past 1,000 years, it is that, to be able to look after ourselves, we must look after others, and to do that successfully we have to learn to work together.
Antoinette Sandbach (Eddisbury) (Con)
It is always a pleasure to follow the right hon. Member for Leeds Central (Hilary Benn), who, as ever, was very eloquent. I heartily endorse his point about using multilateral institutions, but I fear that the failure of Europe to act in an appropriately tough way after the murder of Litvinenko may well have led the Russian state to think that it could have another go here. I would have argued for sanctions to be applied, particularly against Russia’s gas exports, as I think that that would have had a big impact. I support the right hon. Gentleman’s calls and the solidarity shown by Europe, but I ask it to go further and to consider strict measures against the Russian state.
I want to address the importance of not so much our trade in goods, but our trade in services, which has been under-represented in many of our debates on Europe. I do so particularly in the light of the rather aggressive statements by President Trump in the past few days. Services are vital for our prosperity. They constitute almost 80% of UK GDP and 80% of UK jobs, as well as 45% of our exports. A large proportion of our service exports go to Europe. In fact, this trade is worth £90 billion annually, which is more than the Government spend on transport, housing, the environment, industry, employment and agriculture combined. When we see it in those terms, we understand the importance of a deal for the service sector. That is not just about financial services, because it also includes sectors such as insurance, legal, cultural and digital services.
I welcome the Prime Minister’s commitment to an ambitious and comprehensive deal, which will be essential, as it will have to cover a range of sectors, including the service sectors, with their various requirements and needs. I therefore encourage Ministers to be bold. The exit analysis produced by a number of Departments, using the most up-to-date economic model, shows that the real threat to UK plc comes from non-tariff barriers. We can have a debate about the customs union, but I argue that it is non-tariff barriers that create the biggest threat to the UK economy.
Mark Garnier
My hon. Friend is right to raise the issue of non-tariff barriers. The World Trade Organisation itself identified that there were 300 non-tariff barriers in 2010, and the figure rose to 1,200 by 2015. Does she agree that Great Britain can be a strong advocate of free trade in the WTO and can try to drive a reduction in not only tariffs, but non-tariff barriers?
Antoinette Sandbach
Of course there is nothing to prevent us from doing that at the moment. In fact, the number of non-tariff barriers has increased during our membership of the WTO, even though we are also a member of the EU. That is a real and significant danger to the UK economy.
I hope that we will look in detail at sectors such as the three that I want to address: digital, insurance and legal. The digital sector covers a huge range of industries. They are not just new tech businesses; they cover a wide range of services for many companies. They are exposed to the same risks as many other service industries, but they also have to contend with data protection rules that will impact on data flows after Brexit.
TechUK says that digital makes up 16% of UK output and 10% of UK employment. It is a significant export sector, and about 96% of output and 81% of exports are in services. That is key. It is vital that we look at an agreement that deals with cross-border data flows with not only Europe, although 75% of our data flows are with Europe. We are one of the most advanced countries for trading online. Our consumers are extremely educated in and knowledgeable about buying goods and services online. It is important that we look at how we address these issues in a future deal.
Even if we maintain identical regulation with the EU, there are questions regarding the legal basis on which companies can transfer data between the UK and the EU27. It would be for the European Commission to assess whether we had achieved adequacy. Failure to achieve adequacy could force localisation or the redirection of an EU citizen’s data. That fragmentation could create significant costs for UK businesses, which would have to implement alternative legal structures. According to one study, cross-EU data localisation could cost between 0.4% and 1.1% of GDP, and lead to significant drops in private investment and a drop in service exports. The uncertainty over whether a deal will be struck could see companies restrict the amount of data they store and process in the UK in the short term. Clearly, we welcome the Prime Minister’s recognition that we will seek more than just an adequacy arrangement and that we want an appropriate ongoing role for the UK’s Information Commissioner’s Office, but it is vital that we actually deliver on that and do so quickly.
The second area I want to address is UK legal services. The UK legal services industry has made it absolutely clear that the CETA model does not provide a comprehensive framework for professional services. I would argue that the Government need to be looking at Norway-minus, not Canada-plus-plus-plus. It is clear that the impact of no deal on services in the legal industry would be more dramatic than it would be on the insurance industry. That is because a widely established series of EU directives has created a really well functioning market in legal services in the EU. The sector is worth £26 billion to the UK, which is the equivalent of 1.5% of GDP, and employs more than 3,800 people, often in highly paid and high-skilled jobs. In 2016, there was a net export of £4 billion from the legal services sector into Europe.
It is vital that, when we look at the customs union, the EEA should be the plan B. I agree very much with what my hon. Friend the Member for East Renfrewshire (Paul Masterton) said. We absolutely support the Prime Minister in going out and getting that deep and special partnership and deal, but if for any reason we cannot achieve that deal, the plan B should be an EEA/EFTA-style deal. That should be the fall-back, not WTO arrangements. If any of my constituents wonder how I have reached that conclusion, they should look online—it is on the parliamentary website—at the analysis that has been produced across Departments indicating that an EEA-style departure or agreement would be the least damaging option for the UK economy. That would still allow us to go out and strike trade deals—there are trade deals with 57 other countries—and to go into a potential market of 900 million people. We could still do fantastic trade with the Chinese, because when the Prime Minister returned from her recent China visit, she had signed £9 billion-worth of trade deals. I would argue that that option needs to be very seriously considered by the Government as a plan B.
Sir Mark Hendrick (Preston) (Lab/Co-op)
It is a pleasure to follow the hon. Member for Eddisbury (Antoinette Sandbach), whose thinking in some respects is very similar to mine.
Unfortunately, we are in a situation in which a Conservative Government find themselves in the unenviable position of not having a majority in Parliament while there are big divisions among their Back Benchers. They have an arrogant disregard for the practical realities they face, particularly with regard to their negotiation stance with the EU27 on Brexit. From “Brexit means Brexit” to “deep and special relationship”, and now “managed divergence”, it is clear that the Prime Minister is trying to find forms of words that will hold her party together, rather than producing a firm negotiating stance that is clearly understood by the EU and has a reasonable chance of success.
The marriage of convenience between the Conservative party and the Democratic Unionist party can be sustained only by the additional payment of £1 billion to Northern Ireland and an agreement over not having a hard border between Northern Ireland and the Republic of Ireland. This marriage is predicated, obviously, not only on a payment from the Exchequer to Belfast, but on the understanding that the free movement of goods, services and people across the border between the north and south of Ireland can be negotiated successfully with the EU27 without the UK having access to the single market or being in the customs union. Currently, that seems highly unlikely at best, and impossible at worst.
Without an agreement on access to the single market, as well as some agreement on a customs union, it is difficult to see how the Democratic Unionists can avoid a hard border. Current indications from Brussels give the impression that the EU27 will not be willing to agree on an open border unless there is some agreement in those two areas. All in all, the Government have a huge mountain to climb, are badly equipped to do so, and seem to think that the solution is to placate their own Back Benchers, rather than carrying out serious negotiations with our European neighbours.
It is now 21 months since the referendum and there is still little agreement between the EU and the UK on many key issues. The leave campaign promised that an extra £350 million a week could be spent on the NHS if we left the European Union. We now find a Government with a Foreign Secretary who was one of the leaders of the leave campaign and who said that the EU could “go whistle” when it became clear that the UK had to pay to leave the European Union to meet obligations that had already been agreed with the EU. On the contrary, the Government have now agreed to pay £40 billion to £50 billion to exit the EU. That is in sharp contrast to the £350 million a week that was going to come back into the NHS.
The so-called “sufficient progress” that was claimed to have been made in the first phase of Brexit still overlooks the details of what would be required to deal with a hard border with Ireland and to guarantee citizens’ rights in a manner acceptable to the UK and the EU. Within the phase 2 negotiations that should focus on the framework of a future relationship, we find that the EU is focusing on a “framework” while the UK talks about a “future relationship”. Little seems to be agreed about whether the transitional deal can be extended beyond two years, and a date of October this year to formalise talks on a transition is far too late to give businesses throughout the UK any sort of certainty about how they can continue to conduct business with companies in the EU27 states.
My view is similar to that of the hon. Member for Eddisbury: the UK should have adopted a negotiating stance of realising an outcome similar to the position of Norway, which has access to the single market despite the fact that it is not a member of the EU. On top of that, I would have liked to have seen a discussion about a customs union that would be far better than Turkey’s, which we could have negotiated with the EU27 in good faith. However, we have a Prime Minister who says that we do not want to be in the single market or the customs union. She wants a bespoke trade deal just for the UK, but she seems oblivious to the fact that such a proposal would seriously undermine the European single market and is therefore totally unacceptable to the EU.
The introduction of the concept of “managed divergence” seems to be more about managing the diverse range of views among Conservative Back Benchers than managing emerging differences between EU and UK regulations. The Chequers Brexit awayday, which was held to achieve a truce between the warring factions of the Conservative party, resulted in a negotiating stance of “ambitious managed divergence”. That form of words satisfied both the Brexiteers and the remainers, but it will find no support in the EU27 when these hard-headed negotiations finally get going.
The EU wants the Prime Minister to come forward with her vision of a future relationship between the EU and the UK. The managed divergence she talks about is known as the “three basket” approach, because it has three tiers: a core tier, where the UK would agree to align fully with EU regulations and adopt new rules automatically; a middle tier, where there would be a form of managed mutual recognition of rules, such as for environmental protection; and an outer tier, where the UK would be free to diverge from EU rules with no consequences for market access, whether or not those areas are in the single market’s acquis. The notion that the EU will be willing to accept three baskets of regulations in its trading arrangements with the UK is delusional and makes the British Government themselves look like a basket case.
This whole Brexit catastrophe is like watching a car crash in slow motion, except that the driver, the Prime Minister, is holding her hands over her eyes and trying to convince the passengers—her own party and the public—that everything will turn out fine. It can only result in humiliation for the Prime Minister when it is made clear that managed divergence is not acceptable and that this inflexible attitude towards the single market, the customs union and, for that matter, the European Court of Justice cannot continue. One can envisage the outcome being a hard Brexit. That hard Brexit is the favoured option of some of the Brexiteers in her party, but it could destroy any hope of a soft border between the north and the south of Ireland.
The Prime Minster should stiffen her resolve and tell her recalcitrant Back Benchers that our trading relationship with the EU is still important, even though we are leaving the EU. She should get down to serious negotiations that will preserve jobs and businesses up and down this country, instead of leading us off a cliff edge that will result in a WTO-style agreement.
John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)
I would like to focus on the ongoing negotiations between Scotland’s two Governments on the powers set to be transferred from Brussels to the Scottish Parliament, which will have an impact on Scotland’s ability to do business and trade, especially if we get it wrong.
While those negotiations are ongoing, and in the light of the fact that the UK Government have now published their amendment to clause 11 of the EU withdrawal Bill, the SNP Scottish Government are rushing another Brexit Bill through the Scottish Parliament. The EU withdrawal Bill may have its faults, but it is at least legal; the same cannot be said of the SNP Government’s so-called continuity Bill, which is currently being considered by Holyrood. It has been ruled unlawful by the Scottish Parliament’s Presiding Officer and strongly criticised as inconsistent by a range of experts, yet it is still being rushed through in a few days with minimal scrutiny by MSPs.
Stewart Hosie
I hope that the hon. Gentleman will be very clear in his words. The continuity Bill has not been declared illegal by anyone. The Presiding Officer has raised a question over its competency, but as the hon. Gentleman well knows, the Lord Advocate has said that it has been carefully drafted so that it is not incompatible with EU law and does nothing to alter EU law until after Brexit, and he made the rather serious point that it is simply preparing for Brexit in exactly the same way as the UK’s withdrawal Bill. I hope, therefore, for the sake of clarity and accuracy, that the “illegal” word will be withdrawn.
John Lamont
I am grateful for the hon. Gentleman’s point, although I suggest he read very carefully what the Presiding Officer of the Scottish Parliament has said, and I remind him that the Lord Advocate is a Scottish Government Minister and so of course supports the Scottish Government’s proposal. The Presiding Officer is the ultimate determiner of which Bills are competent to come through the Scottish Government.
Paul Masterton
Does my hon. Friend share my concern that the narrative appears to be being perpetuated that the Presiding Officer sat in his office one evening, read the draft Bill and reached the conclusion on competency on his own, as opposed to having received a range of extensive and incredibly high-quality legal advice from a range of Scotland’s leading law firms?
John Lamont
My hon. Friend makes an excellent point. The Presiding Officer has done this not in a vacuum but with the advice of the Scottish Parliament’s lawyers and others, and it is misjudged by the Scottish Government to think they can push ahead regardless of his view.
Just 11 MSPs are currently considering and voting on more than 230 amendments to the Bill in what was originally planned to be a single sitting that started at a quarter to six last night. Late nights may not be unusual here, but it is unprecedented in the Scottish Parliament for so many amendments to be given so little time to be considered. I remind Members that the Chamber of the Scottish Parliament is given only one opportunity to consider a Bill in detail, and that it has no revising Chamber to make improvements at a later stage. To force through so many amendments in so little time is not the way to legislate. The fact that Opposition MSPs were able to identify hundreds of problems with the Bill with only a handful of days in which to consider it should be a wake-up call for the Scottish Government.
Anna McMorrin (Cardiff North) (Lab)
The hon. Gentleman referred to the lawfulness of the continuity Bill. Does he agree that in Wales the Presiding Officer has deemed it lawful?
John Lamont
The legislation that created the Scottish Parliament is very different from that which created the Welsh Assembly. I do not know whether the powers are similar, but, having served in the Scottish Parliament for 10 years, I do know that it is for the Presiding Officer to determine whether Bills are competent to be considered by the Scottish Parliament, and the Scottish Parliament’s Presiding Officer was very clear about the fact that this Bill was not competent.
If passed, the Bill would give Scottish Ministers a raft of powers, including the power to decide which bits of EU law they wanted to adopt in domestic law. Those decisions should rest with the Scottish Parliament, and that, I suggest, is the real power grab. It will do nothing to help Scotland to trade, or to protect businesses in Scotland that trade with the rest of the EU or, indeed, with countries around the world. The fact that the SNP Government are pushing the Bill through Holyrood, ignoring the views of the Presiding Officer and avoiding any meaningful scrutiny by MSPs, shows what the SNP really thinks of the Scottish Parliament and democratic accountability.
David Linden (Glasgow East) (SNP)
I have a huge amount of respect for the hon. Gentleman, but I hope he will put on the record that the only party in the Scottish Parliament that opposes the Bill is the Conservative party. Otherwise, on a cross-party basis, the democratically elected Scottish Parliament supports it. As for the hon. Gentleman’s point about the Committee system, he is a former Member of that Parliament, and he knows fine well that the legislation is scrutinised in Committee.
John Lamont
I also understand the huge inadequacies of the Committee system in the Scottish Parliament. The other place here is not perfect, but at least it has the ability to amend and genuinely scrutinise. Yesterday, there were more than four and a half hours of debate on the continuity Bill. How many hours, how many minutes, did Back-Bench SNP MSPs contribute to that? Just over two minutes. That shows the level of accountability to which SNP MSPs subject their Government in the Scottish Parliament.
Ever since the introduction of the European Union (Withdrawal) Bill—in fact, ever since the result of EU referendum was known—the SNP has been desperately trying to make Brexit into an excuse to have another go at independence, but I am pleased to say that Scots are not buying it. As Professor Curtice has just pointed out,
“rather than creating a bandwagon in favour of independence, Brexit served to expose a fissure in the nationalist movement that Nicola Sturgeon has struggled to straddle.”
The introduction of the SNP’s continuity Bill is just the latest attempt at that. The Bill is damaging because it makes a deal on these powers—a deal that the SNP claims it wants to make—less rather than more likely. It is also damaging because it adds yet more constitutional uncertainty at an already difficult time, and it will do nothing to increase Scotland’s ability to trade with the rest of the EU and, just as important, with other countries.
Moreover, the Bill is unnecessary, because we now have an amendment to the European Union (Withdrawal) Bill that essentially flips clause 11 around and that is accompanied by a list from the UK Government of the areas where a UK common framework is necessary. No such list, I note, has been produced by the Scottish Government. Those frameworks are critical to our ability to trade throughout the United Kingdom and in those other countries.
But let us take a step back from the rhetoric and grandstanding of the nationalists on the Benches opposite and, indeed, in the Scottish Government. If we take that step back, we see that this is really a minor disagreement. The list of powers that the SNP claims are being taken away from the Scottish Parliament relate to, for instance, late payment of commercial debts and the labelling of honey. These might well be important powers, but is aviation noise management really being discussed around the dinner tables of Scotland, or is the talk of the pub really who is going to control good laboratory practice? I think not. More importantly, despite the rhetoric of a power grab the reality is that not a single one of these powers is being taken away from the Scottish Parliament, for the simple fact is that the Scottish Parliament does not control these powers currently; Brussels does. And the majority of these powers are going to be coming to the Scottish Parliament; the so-called power-grabbers in Westminster are going to be sending new powers Holyrood’s way, and that is after passing a Scotland Act in 2016, which has already made Holyrood one of the most powerful devolved Parliaments in the world.
Despite talk of a crisis, the UK and Scottish Governments agreed on the way forward; the vast majority of these powers which have been built up in Brussels will be coming back to the Scottish Parliament. Some will, however require UK-wide frameworks and both the UK and Scottish Governments agree on this approach.
Pete Wishart (Perth and North Perthshire) (SNP)
If we were playing a little game here that for every time the hon. Gentleman mentioned the SNP we would have a drink, we would be drunk by now. I remember the days not so long ago when he believed that the consent of the Scottish Parliament would be required before these frameworks were agreed and put forward. What has happened?
John Lamont
We accept that the consent of the Scottish Parliament is required, but the hon. Gentleman’s party leader, Nicola Sturgeon, in Holyrood is deliberately creating the politics of grievance. She is creating division and deliberately not reaching that agreement, to stoke up what the Scottish nationalists think is going to get them to their ultimate goal: a second referendum on independence. We are having none of it; we are having absolutely none of it.
It makes sense to ensure that businesses do not face the risk of new barriers to trade with other parts of the UK. The Scottish Government accept that, for example, different labelling requirements or different regulations on pesticides across the UK would stifle trade and are not in the interests of Scottish businesses. So the only disagreement is over how this approach is implemented, which is hardly the making of a constitutional crisis and is hardly an excuse to push through unlawful and rushed legislation, as the SNP is currently doing in the Scottish Parliament.
Karin Smyth
It is always fascinating for the rest of us to listen to the debate going on among Scottish colleagues on this issue, but, talking about the Union, is the hon. Gentleman not remotely concerned that his Government are being propped up by the 10 votes of the Democratic Unionist party in this Chamber? Does he not think that perhaps the demands that austerity and Brexit are forcing on our constituencies are having a greater effect of undermining the Union than what he is currently talking about?
John Lamont
I totally reject that suggestion. The Prime Minister has been clear that her objective through Brexit is to achieve the best deal for all parts of the United Kingdom, including Scotland.
Chuka Umunna (Streatham) (Lab)
I welcome this debate, but I do not welcome the fact that the Government continually duck having votes in this House on these matters, or that they continue to do everything they can to withhold appropriate information so that we can come to an informed view on behalf of our constituents. My view is that when we are asked to vote on the withdrawal agreement that the Prime Minister is supposed to return to this House with in the autumn, we should be granted a free vote given the magnitude of the agreement and what we are dealing with and its importance for future generations in this country.
As we can see every single day, it is clear that the Brexit process has been a total and utter mess. Article 50 should never have been invoked at the time that it was invoked; we should have had the debate we are having now before it was invoked. It is extraordinary that we have only been given serious detail by the Prime Minister this month, more than a year and a half after she took office and when we are halfway through these Brexit negotiations. Only now do we seem to have more clarity from the Government on the direction in which they wish to take this country in these Brexit negotiations.
I give the Prime Minister this: her speech was significant because for the first time it officially acknowledged what we know to be true, which is that the Government are voluntarily choosing to pursue a policy that they have admitted is going to make this country poorer. She made it clear in her speech that we were going to get less access and that we would not have a frictionless border. She talked about achieving as frictionless a border as possible—[Interruption.] It is no use Ministers shaking their heads. We know from the impact assessments that they commissioned from their own civil servants that the options they are choosing to pursue will make this country poorer. Let us be clear about this. We hear all this talk about our EU friends seeking to bully our country and to punish us, but they are not doing that. At the outset, they put a range of options on the table, including remaining a member of the single market and the customs union, and it was this Prime Minister who took those options off the table.
Ian Murray (Edinburgh South) (Lab)
My hon. Friend is right. Our European partners have said clearly that the red lines that this Government have set themselves mean that the goals they wish to achieve are impossible. We cannot blame our EU partners for that, because they are the Government’s own red lines.
Chuka Umunna
My hon. Friend is absolutely right. It is the Prime Minister who is dictating the kind of agreement that we will reach with the European Union.
Let us be clear about what has happened since 2016. In March 2016, the Office for Budget Responsibility was forecasting that our economy would grow by 2.1% this year, next year and the year after. However, because of the judgments and decisions that this Government have made, the OBR is now forecasting that our economy will grow by a paltry 1.5% this year, 1.3% next year and 1.3% the year after. The Under-Secretary of State for Exiting the European Union, the hon. Member for Worcester (Mr Walker) is chuntering in his place, but I say to him that I cannot remember a time since the war when a GDP forecast was coming in at under 2% for every year. This forecast is a result of the policy decisions that he is making.
Mr Jim Cunningham
The Government’s strategy on these negotiations is a shambles, as my hon. Friend has indicated. More importantly, however, they are banking on the Trump Administration bailing them out. They think they are going to get great deals from the Trump Administration, but if we look at agriculture, for example, we can see that they are not going to get any great deals at all.
Chuka Umunna
I completely agree with my hon. Friend, and I will say more about that shortly.
One of the most extraordinary things about the Prime Minister’s speech was that she did not explain how the future relationship that she set out was going to help the NHS, particularly given that so many of her Cabinet Ministers went around telling us that voting to leave the European Union would lead to a bounty for the NHS. The number of EU nurse applications is down 96%, and we lost 10,000 health workers from our NHS in the year after the referendum vote. We now have 100,000 vacancies in the NHS that need to be filled. There was no mention at all of this in her speech. I think it was the director of the Vote Leave campaign, Dominic Cummings, who said that if people such as the Foreign Secretary, the Environment Secretary and the Trade Secretary had not gone round saying what they said about the NHS, we would not be in this situation today.
Let me return to the point that my hon. Friend the Member for Coventry South (Mr Cunningham) has just made about new trade deals. I agree with the Minister for Trade Policy that there is not an either/or choice about whether we pursue trade with the EU or with the rest of the world, even though that argument is often made from the Government Dispatch Box. Let us get real about this. This is not a question about whether this country is going to be able to do trade deals after we have left the European Union. We will be able to do trade deals after we have left the EU—if we leave the EU—but the question is: on what terms? When we negotiate with China with its 1.2 billion people, we are not going to get the same terms we now enjoy as we negotiate alongside 500 million people on our side of the table. We, a country of 65 million people, are not going to get the same terms, because we are a much smaller economy relative to the big economies that we want to trade with. That is the reality. My hon. Friend the Member for Coventry South is absolutely right to refer to President Trump. He is not going to ride to our rescue. We need only look at what he is doing to our steel industry with his 25% tariffs.
My final observation about the Prime Minister’s speech is that I have not spoken to any diplomat, EU ambassador or EU Foreign Minister who thinks that this Government’s technological solution to the hard border between Northern Ireland and Ireland will resolve the issue. Nobody I have spoken to believes that that will happen.
What does that lead me to conclude? The form of Brexit that was sold to the British people is simply not deliverable. I will give this to the Government: it is not necessarily simply a matter of competence; it is the reality that so many of the promises that were made to people, whether they voted leave or remain, simply cannot be delivered. That is one reason why I think that—the hon. Member for Eddisbury (Antoinette Sandbach) and my right hon. Friend the Member for Leeds Central (Hilary Benn) made this point—if we are to leave the European Union, we should at the very least seek to keep this country’s full participation in the customs union and, to my mind, in the single market. As far as I am concerned, if someone wants to end austerity and to promote social justice, they have to support that position. Being part of the framework of the single market and the customs union would be no impediment to the implementation of the Labour manifesto, to our pursuing the nationalisations that we want or to other matters.
One of the things that I am most struck by as I go around my constituency at the moment is that many members of the public are just fed up with the Brexit process. They just want it to be gone. They want us to get on with it. But there is a recognition that the process is far more complex than anybody had thought and that it is throwing up all kinds of issues that nobody thought would be connected to Brexit. Who on earth would have thought that Brexit would be connected to the transport of isotopes used for medical research and cancer treatment?
However, the group of people in my constituency who have the most visceral and strong views about what is going on are the young people. They believe that what is going on is robbing them of the opportunities that older generations have taken for granted. They cannot understand why we would want to be doing this to them. That is why I think this House should have a free vote on the matter. The issue transcends party politics and politics more broadly. It is an issue of national interest, and I do not believe that the younger generation will ever forgive us, the generation of politicians sitting in this House of Commons, if we do not do the right thing by them and secure their futures, ensuring that they have the same opportunities that all of us enjoy now in the European Union.
Ross Thomson (Aberdeen South) (Con)
As someone who actually represents, I hope, the young people of the next generation, I do not share the pessimism of the hon. Member for Streatham (Chuka Umunna), because the great Brexit prize will be regaining our ability to strike new free trade deals across the world. Not only will Britain rejoin the rest of the world, but we will have the opportunity to lead the rest of the world as a global free-trading nation, championing trade liberalisation and taking on the voices of protectionism. Let me be clear that we are not leaving Europe or turning our backs on our European neighbours and partners. Rather, the Prime Minister has been explicit that the Government are seeking a deep and comprehensive trade deal with the EU that covers goods and services.
By leaving the customs union, the UK will regain its ability to set its own independent trade policy. Our trade with the EU is in deficit and declining. As the Minister stated in his opening remarks, it was 56% in 2006 and is now down to 43%. However, our trade with the rest of the world is in surplus and rising. We should not play down the importance of Europe as a trading market and partner, but we must orient ourselves towards the thriving economies in the rest of the world, such as in south and east Asia, and their growing demand for goods and services. Fifty-seven per cent. of Britain’s exports are now to outside the EU compared with only 46% in 2006. Furthermore, the International Monetary Fund estimates that 90% of global economic growth in the next 10 to 15 years will originate from outside the EU.
International demands for British goods is growing, and Aberdeen, which I represent, is well placed to take advantage of that as 90% of the city’s manufacturing, which is mainly in oil and gas and environmental engineering, gets exported. The oil and gas industry is truly global, and anchored right here in the UK. Current industry exports accounted for 43% of the UK supply chain turnover in 2017, up from 41% in 2016. Oil & Gas UK’s “Vision 2035” has the ambitious aim of doubling the supply chain share of the global market from 3.7% to 7.4% in 2035.
The Balmoral Group, based in my constituency, provides an example. It was established back in 1980 and specialises in sub-sea buoyancy, renewable energy and engineering solutions. It employs about 500 people in Aberdeen. It is highly dependent on the export market: it is currently focusing on west Africa, South America and the gulf of Mexico. Its representatives have been clear with me that their only opportunity for growth is in the export market. They have already been working closely with the Department for International Trade on trying to exploit those opportunities.
Thanks to the investment from the UK Government, the Oil & Gas Technology Centre in my constituency was set up. It is working with the oil industry in developing solutions, new technology and innovation to maximise the full potential of the UK North sea—from asset integrity to maximising recovery from small pools, from drilling to decommissioning. The technology, developed in my constituency, is exportable and the opportunities are massive.
As my hon. Friend the Member for Banff and Buchan (David Duguid) highlighted, the north-east is home to a thriving food and drink industry. It is also known for its whisky exports. The story of whisky is well known; perhaps a less told story is that about our other domestic exports. Here are just a few examples. In fishing, there are companies such as Macduff Shellfish, Denholm Seafoods and Lunar Freezing, which export to countries such as Nigeria, China, Vietnam, Uruguay and Ukraine.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
During the EU referendum campaign, the hon. Gentleman was pictured outside the Scottish Parliament with a placard saying, “Vote leave to bring control of our fishing back to the democratically elected Scottish Parliament”. Will he be recirculating that image?
Ross Thomson
I am grateful to the hon. Gentleman for raising that. As is so clear, we are leaving the European Union and taking back control of the more than 200 nautical miles of our waters, giving us the opportunity to rejuvenate our coastal communities. We are supporting Scottish fishermen. The party that wants to sell them down the river back to Brussels, handing all the powers right back and keeping people trapped within the confines of the common fisheries policy, is every single Member from the SNP. I will take no lectures from those on the SNP Benches about the benefits of Brexit for fishermen.
Ross Thomson
I would like to make some progress, given that I have only three minutes left.
Companies in Aberdeen such as Saltire Seed and Alan Twatt are exporting seed potatoes to Thailand, Egypt, Israel, Saudi Arabia and Brazil. Those are just some examples of what is happening in my region.
Stephen Gethins
The hon. Gentleman is talking about the economy. Does he believe the figures that the UK Government have produced about the hit to GDP from leaving the EU?
Ross Thomson
No. The figures that have been produced are not based on what the Prime Minister has said herself she wants to achieve: a deep and special relationship with Europe. None of the figures is based on that assumption.
There are huge opportunities for Aberdeen and the wider north-east to use our competitive advantage to seize the benefits of Brexit. We must set our sights on the future—a new global future. It would not be in our or the EU’s interests for there to be any unnecessary restrictions on trade. I am confident that the Prime Minister will deliver a new, bespoke partnership that will support our mutual interests. The UK is the world’s fifth largest economy, the fifth largest exporter and the second greatest soft power. Our worldwide presence is reinforced by our global brands, our creative industries and the reputation of our universities. Britain is truly global and we must be ambitious in order to maximise the golden Brexit trade opportunities that lie ahead of us.
Anna McMorrin (Cardiff North) (Lab)
I want to start by talking about the approaching constitutional crisis that this Government are threatening to bring about. This Tory Government continue to put the established constitutional order and devolution settlements at risk with their blatant grab of devolved powers. After months of debating and meetings, they are still struggling to grasp the concept of the consent of our devolved Administrations. We must not see powers that are devolved under the current devolution settlement going from Brussels to Westminster without consent from Cardiff and Edinburgh. During the last meeting of the JMC, the Welsh Government were told that the UK Government would not be pressing amendments on this to a vote before further discussions, and today it is down to the Prime Minister and the First Ministers of both Wales and Scotland to try to end this stalemate. However, I do not see any new offer coming forward and time is running out. It is very troubling that, even though the Welsh Government compromised by accepting that several rules and regulations currently decided in Brussels will need to be operated on a UK-wide basis, this UK Government cannot bring themselves to reassure the devolved Administrations that their consent and agreement will be sought. This is just not good enough.
In Wales, we are being expected to accept that decisions on up to 24 policy areas, including agriculture, pesticides, animal welfare, organic farming and the environment, are to be taken in Westminster, without any consultation and without consent from Cardiff.
Paul Masterton
Will the hon. Lady tell us how much influence the Welsh Government currently have in the setting of those frameworks within the EU and whether the EU obtains the consent of the Welsh Government when setting them?
Anna McMorrin
I thank the hon. Gentleman for his question, but he is completely missing the point. We are looking at those powers coming back to Westminster, and they should be going back to Cardiff and Edinburgh where those powers are devolved. Both Cardiff and Edinburgh—Wales and Scotland—play a part in those discussions at EU level all the time.
David Linden
I am sure the hon. Lady will agree that the devolution settlement is clear that, if something is not reserved when it returns to us, it is then devolved. That is why this is a power grab in respect of the devolved settlement.
Anna McMorrin
I agree that this constitutes an absolute power grab by this UK Government. Until we see substantive changes to the European Union (Withdrawal) Bill, there is the need for the continuity Bill. It would be preferable to continue to protect devolution via the European Union (Withdrawal) Bill—that is what I want to see—but should agreement not be reached, the continuity Bill becomes one of the most important pieces of legislation ever to be scrutinised by the Welsh Assembly.
May I pay tribute to my colleague Mark Drakeford, a Cabinet Secretary in Wales, and the Welsh Government for pursuing that important piece of legislation, in the absence of an agreement being forthcoming from this Tory UK Government? The Bill is complex, but very clear in its aims. It is intended to deal with the inevitable consequences in domestic law of withdrawal from the EU by preserving EU law covering subjects already devolved to Wales; and it will enable Welsh Ministers to make necessary changes to ensure that legislation works at the point of withdrawal. That is what we need to see.
The Tory Government have questions to answer, not just for Cardiff and Edinburgh but for people everywhere—people in my constituency of Cardiff North, in Wales, in the UK, and our friends and allies throughout Europe. After months of the Government’s trying to cover up the Brexit impact assessments, MPs were finally allowed to see them, as I did. I made the appointment, handed over my phone, which was locked up in a cupboard, and was allowed the hour given to look at them. A week later, they were distributed everywhere. I was concerned to read that the Government’s own assessment is that this country’s economic growth will suffer under any of the existing models for a future relationship with the EU. Under the worst-case scenario, a WTO-type agreement, which has often been hailed by Conservative Members as a perfectly acceptable option, GDP could decline by up to 7.7% cumulatively over 15 years. There was certainly no good news anywhere in those impact analyses.
In the past couple of months, I have had my own meetings with representatives from UK and EU businesses, including Airbus, L’Oréal and companies from the pharmaceutical industry. The concerns are always the same: we need more clarity and a solid plan. If we are leaving the single market and the customs union, how will the Government ensure that the “Mad Max” dystopia that the Secretary of State for Exiting the European Union himself described will not become a reality? If it is not “Mad Max”, why is it that any time that representatives from British industry—such as the Confederation of British Industry—or politics interact with our European counterparts in Germany, France and elsewhere, we are treated as if we live in la-la land?
When will the Government face the challenges of the unrealistic standards of their own internal party politics, which they have set to serve their own infatuation with an isolated Britain that has long gone? When will the Government tell us the truth about the effects of leaving the customs union and single market and offer a plan that, at the very least, does not feel like a suicide mission? When will they offer a plan that safeguards the future of our businesses and protects environmental and workers’ rights, our services, our people and our communities?
Vicky Ford (Chelmsford) (Con)
This is an extremely important debate. The 27 other countries in the EU make up our largest trading partner, which accounts for almost half our trade. Many thousands of jobs on both sides of the channel rely on that trade. This is a sensitive time for the most complex negotiations for a generation. Businesses need clarity, especially about what will happen at our borders. They need to know what our long-term trade will look like, especially in key 21st-century sectors such as pharmaceuticals, advanced manufacturing and the service sector. They also need clarity on what transition or implementation will look like.
Honesty and transparency are needed, but let us look at the Opposition’s offer. They say that they want to negotiate a customs union with the EU, but the Leader of the Opposition stood up in Coventry and said that he wanted to negotiate exemptions in relation to privatisation, competition and state aid rules. The week after that, I was in Brussels. Not a single country that has a customs union with the EU has an exemption for state aid rules. Even Turkey has to comply with all state aid and competition rules, in accordance with the EU treaties and/or EU laws. When I was in Brussels, time and again I asked politicians from other EU countries whether they would give the UK preferred access to the single market and a customs union with the EU but also allow us an exemption from state aid rules. Time and again, those politicians looked at me and rolled their eyes. The Opposition’s position is not honest or achievable, and I believe it is deeply misleading.
In trade negotiations, the devil is in the detail. The Prime Minister’s speech was very welcome. It moved us on with a huge amount of detail, and I especially welcomed the detail about the aviation sector, the tech sector, the science and innovation pact—boy, do we need to continue co-operation on science and innovation—and security.
I want to focus on three areas. On services, UK sales to the EU in services are 40% of our trade. The sector has grown as a percentage of our trade in nearly every year. In today’s modern economy, we cannot separate goods and services. My mobile phone, for example, feels like a good, but its contents are all services. If a cancer scanner is sold in Europe, it is sold with a maintenance contract—a service. I am about to buy a new car, and it will come with a financial lease arrangement—a financial service. Walking away with no deal on services is not a good deal. It is especially not good for financial services. Some 2,000 people in my constituency work in insurance, but many hundreds of thousands of German savers have bought life insurance products from British companies. Both sides need a deal that covers services.
On borders and the customs union, while we need an agreement about what happens at our borders, there is much more to the customs union and negotiations than just tariffs. In particular, we need to resolve the country of origin rules for complex manufactured products. The British car sector employs about 169,000 people directly and nearly 1 million indirectly. Many of the cars it produces contain components from all over the EU. Under WTO rules, those cars are not European enough to be European cars or British enough to be British cars. They would become orphan cars, if I may put it like that, and not eligible under any of our trade agreements with the EU or elsewhere. That is why it is particularly helpful that the Prime Minister has left open the negotiations on not just a customs agreement, but a customs partnership, which is an offer for us to mirror EU customs codes at our borders.
My third point, which is really important, is about transition. The transition period needs to be agreed now, because otherwise real issues will arise for people who work in the City and with goods. On the back of my mobile phone is a CE mark. Every product put on the market in Europe has one, and anything that is imported to the UK needs a CE mark. The mark is offered with a 12-month certificate. If a mobile phone is imported into the UK from elsewhere in the world, it will need a certificate that is valid past not just the end of this March, but the end of next March. Unless we resolve transition this month, what happens to CE marks on goods placed on the market here and elsewhere in Europe will not be resolved. There are not enough notified bodies elsewhere in Europe to take the place of the British notified bodies today.
I am grateful to the Government for getting us to the negotiating point to date, for achieving the deal in December and for the great moves forward and detail in the Prime Minister’s speech a couple of weeks ago. Let us resolve the transition period by the end of the month—that is crucial—and let us not lose sight of the devil in the detail of the negotiations ahead. The Leader of the Opposition’s position is not achievable, and we need to focus on finding deals that are.
Christian Matheson (City of Chester) (Lab)
Nothing I have seen since the referendum has convinced me that the plan for the UK to leave to EU is anything short of an act of national lunacy. The chaos that we are seeing now—whether over the intractable problems with the Irish border, or over the Government’s unwillingness to put anything on trade and customs issues to a vote in the House—just adds further to that impression.
Part of the problem is the Prime Minister’s inability to stand up to her Brexit extremists. Their letter demanding a hard Brexit had the added effect of reminding her that they have enough names to force a Tory leadership election. For me, that is what this business has been all about right from the start. David Cameron agreed to a referendum because he had failed to stand up to UKIP, so he dumped the Tory party’s Euro-divisions on the rest of the country. Then, as now, it was party before country. But I do not include all Conservative Members in that assessment, as I know that many share my concerns about the crazy rush to a hard Brexit because they know the catastrophic financial and economic effects that it would bring. They must make a stand and not allow their side of the House to be dominated by the minority of European Research Group fanatics who currently make all the running, and I pay tribute to those who have had the courage to do so. My hon. Friend the Member for Streatham (Chuka Umunna) floated the interesting suggestion that there should be a free vote on the final deal—that is quite an intriguing proposition.
Just as I do not believe that there is a majority in the House for a hard Brexit—a nasty Brexit—nor do I believe that such a majority exists in the country. We know that 48.5% of those who voted did not want any Brexit, and I cannot believe that every one of the 51.5% who voted leave did so to make the country worse off as a result of a harsh and nasty Brexit—and make us worse off it will, as every single one of the Government’s own sectoral and regional analyses demonstrates. The very least we must be aiming for is a customs union, as my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook), who has led the debate for the Opposition with methodical thoughtfulness and a case based on evidence, has long argued.
On the other side we have no evidence, only vague promises that everything will be just fine post Brexit and that we will simply be able to trade freely with the rest of the world. It is like promising a five-year-old rainbows and unicorns. In his speech just two weeks ago, the Secretary of State for International Trade talked vaguely about exploiting “opportunities of the future”, without really laying out what that meant. At the same time, the Government pin all their hopes on a free trade deal with Trump’s America—the same regime that has sought trade conflict with us in the automotive and aerospace sectors, and now in the steel sector.
There is abundant evidence from industry to contradict the Government’s position. We heard from Ralf Speth of Jaguar Land Rover, who said that without a customs union, JLR would be hit with additional annual costs of £1.1 billion from profits of £1.4 billion. We see PSA raising the spectre of doubt about the future of the Vauxhall plant in Ellesmere Port, which is next door to my constituency. Although I welcome the new investment by Toyota, including in the Deeside engine plant that is also next door to my constituency, the basic fact is that such investment decisions are made two to three years in advance. That decision was already made before the Brexit negotiations. I am more concerned about the words of warning from the Japanese ambassador, after his meeting with the Prime Minister, about Japanese companies having to reassess their investment in a UK without easy access to Europe.
Similarly in aerospace, Airbus needs certainty over a customs union. Flights come in and out of Chester airport several times a day, carrying parts to and from Hamburg and Toulouse. Without sensible customs arrangements, the company’s brilliant, efficient, multinational manufacturing process would be impossible. Aerospace and aviation companies also need regulatory certainty—and quickly. Again, we are already approaching the cliff edge because of long lead times. I have heard Conservative Members making the absurd suggestion that we should simply align ourselves for regulatory purposes with the United States Federal Aviation Administration, which demonstrates that, for those hard-line Brexiteers, this is all about ideology and lining up with a right-wing, Trumpist America, rather than doing what is right and best for British industry, jobs and skills.
I finish with a point that was touched on by my right hon. Friend the Member for Leeds Central (Hilary Benn) regarding our relations with Russia. I am clear that I welcome the Prime Minister’s strong words today on Russia. We must be tough in standing up to Putin’s bullying, but we have to ask why Putin is attacking the UK at this time. There might be some domestic reasons, but he does seem focused on the situation here. He has already meddled in the EU referendum, and I expect more details of that to emerge in the coming months, but he knows that by isolating ourselves from the EU—from our allies who share our values and oppose his—we are weaker than we were.
I strongly support NATO and Britain’s active membership of that great alliance, but the EU is also an alliance of security. When it comes to economic as opposed to—God forbid—military conflict against an aggressor, we should be seeking the support of our allies in the EU. Now is not the time to be walking away and going it alone when we are faced with Russia’s threats. I hope that hon. Members might, in quieter moments, take the time to consider whether, in the light of Putin’s latest aggression and his meddling in our democracy, we need to reassess this whole Brexit mess as something that is not currently in the UK’s national interests. Putin’s tactics are to sow chaos through doubt, discord, confusion and disharmony. Surely even from the point of view of Brexit extremists, all of a sudden there is a greater threat to the UK and the west than the European Union—I hope that they wake up to it.
Stewart Hosie (Dundee East) (SNP)
My hon. Friend the Member for North East Fife (Stephen Gethins) made a very considered speech in which he laid out in some detail the damage that Brexit will do. I do not intend to go over that ground. Rather, I want to talk specifically about the Scottish Government’s continuity Bill. It is important that the House understands precisely what the Scottish Government are doing in relation to Brexit and why they are doing it.
Before I do so, I want to comment on two things that were said earlier. First, the hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont), who is no longer in his place, spoke about the continuity Bill in Scotland being subject to many amendments. Indeed it is—147 or so wrecking amendments from the Tories. I simply say gently to the Tories from Scotland that it would have been better if they had signed up to amendments to the UK’s EU withdrawal Bill as a bloc rather than tabling all those wrecking amendments to the Scottish legislation.
Secondly, the hon. Member for Aberdeen South (Ross Thomson) spoke about trade liberalisation—and I agree with him. At the moment, however, an American company, the Harley-Davidson motorcycle company, is telling us that Donald Trump’s tariff regime will add $30 million to its cost base. If his Administration are prepared to damage all-American businesses, it is naive in the extreme to assume that some kind of good deal will be cut for the UK.
Ross Thomson
I am glad that the hon. Gentleman agrees about trade liberalisation. Does he not agree, therefore, that as the EU is the most protectionist organisation there is, with high tariffs on imports coming into it, we will be better off out of it, so that we can help lead the world in liberalising trade?
Stewart Hosie
I know the Scottish branch of the Tory party does not like expert opinion, but the pre-Brexit Treasury leak estimates a loss of up to 10% of GDP, the post-Brexit analysis estimates an almost similar amount, and the Scottish assessment estimates a comparable amount. We are faced with a catastrophe in every circumstance, not only if we go to WTO rules. Better, I think, to fix the problem, to maximise trade, to try to stay within the customs union, and to accept the free movement of people, than to talk about unicorns and rainbows—the Brexiteers favourite slogan.
The Scottish Government’s continuity Bill prepares Scottish devolved laws for the UK’s withdrawal from the European Union. It means that the EU laws currently in force will be retained after withdrawal and that the Scottish Government will be given the tools needed to make sure that our laws keep working after withdrawal. It is a devolved version of the UK Government’s EU withdrawal Bill. I want the House to understand that the Scottish Government have not rejected out of hand the UK Government’s proposals. Their preference is to rely on the UK’s EU withdrawal Bill. But the Scottish and Welsh Governments continue to seek an agreement with the UK that would allow the necessary consent to be given. In this scenario, the Scottish Government would seek to withdraw the continuity Bill. However, the continuity Bill has to be introduced now, and it is going through the Scottish Parliament now, so that if legislative consent is not given, Scotland’s laws will still continue to work properly. That explanation is rather different from the uber-Unionist “wrecking” version that we heard from the hon. Member for Berwickshire, Roxburgh and Selkirk.
This is important because under the UK Government’s proposed way of preparing for the EU withdrawal Bill, they acknowledge that it requires the consent of the Scottish Parliament to become law. Right now, though, neither the Scottish Government, the Welsh Government, nor, on a unanimous cross-party basis, the Scottish Parliament’s Finance and Constitution Committee agree that consent should be given. That is extremely important because, as they say, the Bill allows the UK Government to take control of devolved powers without the agreement of the Scottish Parliament. That is why both the Scottish and Welsh Governments have called it a power grab. The all-party Finance and Constitution Committee has said that it is “incompatible” with the devolution settlement in Scotland. The UK Government’s proposed changes to the EU withdrawal Bill do not yet address that. They would retain the UK Government’s ability to change the limits of devolution without the agreement of the Scottish Parliament. That is important.
In that way, the Scottish Government’s measures differ greatly from the UK Government Bill. The main difference is that the Scottish continuity Bill gives the Scottish Parliament its full role in the preparation of Scotland’s devolved laws for EU withdrawal. It gives the Scottish Parliament an enhanced role in scrutinising proposals for changes to laws as a result of withdrawal and makes some different policy choices, including retaining in law the EU charter of fundamental rights. It also contains a power to keep pace with EU law, for good reason, where appropriate, after the UK chooses to leave the EU.
Paul Masterton
The Opposition amendments to the Scottish Government’s Bill significantly water down the massive power grab attempt by Scottish Ministers in relation to continuing alignment with the EU, which I think the Scottish Government want for five years, then five years, then five years. Does the hon. Gentleman agree that those amendments to the Bill are a welcome defeat of the Scottish Government?
Stewart Hosie
When Conservatives talk about a power grab in Holyrood, it is code for defending all powers coming to London. I suspect that lots of Tories would settle for direct rule of Scotland and the abolition or dismantling of devolution completely. I am not going to fall into the trap of the hon. Gentleman’s trick question.
The question is: why are the Scottish Government introducing this legislation now? The truth is that Scotland’s laws must simply be prepared for the day the UK leaves the EU. If we did nothing, laws about matters such as agricultural support or food standards may fall away entirely. Many others would stop working in the way they were intended. That is important.
Bill Grant (Ayr, Carrick and Cumnock) (Con)
Will the hon. Gentleman give way?
Stewart Hosie
No, I have given way twice, and there are no extra minutes left.
As my hon. Friends said earlier, we accept in principle that there may be a need for UK-wide frameworks on some matters. It is true that the Scottish and Welsh Governments have been working with the UK to investigate those issues and explore how those frameworks would work. However, it is vital to recognise and respect the way that devolution works. If it is not reserved, it is devolved. If it would normally fall under the remit of the Scottish Parliament and is currently in Europe, it must be put into the devolved institutions now. Should a UK-wide framework and joint working be required, let the UK, the Scottish, the Welsh and indeed the Northern Ireland Governments negotiate that framework.
What we simply cannot have is a power grab where the powers that the UK Government are not certain about are taken back to London, and they then decide in a very patronising way what, if anything, might be devolved in the future. It is completely unacceptable for the UK Government to rip up the devolved settlement. That, in a sense, is the consequence of the power grab.
On Thursday 8 March, the UK Government said that they had drawn up a new list of powers, including ones they say are reserved, that had not previously been shared or discussed with the Scottish or Welsh Governments. A year down the line of these negotiations, a new list is drawn up. We have agreed that the list should be published for the sake of transparency, but we certainly do not agree to the list.
Stewart Hosie
No, I am not going to give way again.
The Scottish Government are being asked to sign away the Scottish Parliament’s powers with no idea how UK-wide frameworks will work, how they will be governed and how we will go from them being temporary restrictions the UK Government want to agreeing longer-term solutions.
Despite the UK Government’s promise, they failed to bring forward an amendment in the House of Commons to the flawed clause 11 of the withdrawal Bill. Those measures are going through the Lords, but of course, that does not allow proper debate in this place. However, a new amendment—the one that has been proposed—would still allow the UK Government to restrict the Scottish Parliament’s powers unilaterally through an order made in this place, and it could be done without requiring the consent of either the Scottish Parliament or the Scottish Government.
If Brexit is itself, as I believe, an unmitigated disaster, its implementation—because it has not been thought through, and there is no plan—is threatening devolution entirely. There is a lack of understanding and respect for the idea that if a power is not reserved, it is devolved. I therefore ask the Minister to return to the respect agenda: if a power is not reserved, devolve it now. The Government should stop the power grab and get on with negotiating properly with the devolved Administrations, so that the UK withdrawal Bill can actually work without threatening the powers of the other nations within the UK.
Stephen Kinnock (Aberavon) (Lab)
On 23 June 2016, the people of this country voted to leave, as did a majority of my constituents. The result was won on a narrow margin, but the result was clear, which is why I voted to trigger article 50. However, when we triggered article 50, I argued that we needed a Brexit deal that reflected the narrow margin and would bring leave and remain voters together. That is why I argued then, as I am arguing now, for an EEA-based Brexit. I will say a little more about that later.
Barely a year after that referendum, the Prime Minister called an election in which she hoped to secure a mandate for a hard Brexit, but the British people said no, so the Prime Minister saw her majority disappear. Any sensible Government would at that point have accepted and committed themselves to a sensible Brexit—one that could bridge the divide—recognising that compromises must be made if we are to secure a mutually beneficial deal from this process.
As Michel Barnier’s famous escalator slide makes clear, the Prime Minister’s red lines leave us with little choice but a Canada-based free trade arrangement. However, a Canada-based deal is about as much use as a chocolate teapot: it fails to cover services, which account for 80% of the British economy; it does nothing to resolve the issues regarding our relationship with EU agencies, just under half of which have no provision whatsoever for third-party country participation; and it leads inexorably to a hard border in Ireland.
I am sure that the Government toadies and Brextremists on the Back Benches are going to repeat ad nauseam the Prime Minister’s line about a bespoke deal, saying that all deals involve cherry-picking and so on. To do so, fundamentally misunderstands not only this process, but that of all trade negotiations, because the fact is that all trade deals are a blend of off-the-shelf and bespoke elements. The Brexit negotiations are, first, about deciding on the foundations, and the foundations have to be based on a basic template, whether an EEA, FTA or association model. Once we have agreement on the foundations, we can then move on to an argument about the doors, windows and roof of the house.
It is clear that the fundamental problem with the Government’s approach to these negotiations has been an inability to accept that we must agree such a foundational model or template as the basis for the negotiations. It is absolutely unforgivable that, just over a week from the EU agreeing the guidelines for the future relationship phase of our negotiations, the Government are still talking about all the things that they might do—rather blue sky, vague and sufficiently inoffensive things so as not to alienate any wing of the Conservative party. That is a profound abdication of duty and responsibility on the part of the Government, because it has left a vacuum and allowed the EU to define our destiny for us.
Ever since the referendum, we have been on the back foot because the Government have utterly failed to define the terms of the debate. That leads us, inexorably and ultimately—I hope—towards the conclusion that we need an exit on the basis of an EEA-EFTA deal. A Brexit on an EEA-EFTA basis—with a customs union provision building on the protocol 10 precedent, or seeking something deeper—could provide the overarching framework for a deal that is not only achievable, but desirable for both leave and remain voters.
Moreover, an EEA-based Brexit could navigate a path around the Government’s red lines, because the EEA is not the same as the single market and must not be conflated with it. The EEA is an internal market covering much, but not all, of the single market and three of the four EFTA states. The EEA excludes fisheries and agriculture, but the key point is that the EEA is predicated on a fundamentally different legal and political purpose to that of the single market. While the EU single market is predicated on the treaty of the European Union, with its aim of “ever closer union”, the EEA internal market is based on the EEA agreement, the purpose of which is
“to promote a continuous and balanced strengthening of trade and economic relations between the contracting parties”.
The fact is that the EEA is, in essence, a reversion to the European Community, based on the terms of the Single European Act 1986.
Moreover, articles 112 and 113 of the EEA agreement allow for the reform of any of the four freedoms, including the free movement of people. That has, in fact, already been done: the protocol 15 precedent enshrines a quota-based system in Lichtenstein, and it would have been available to the Swiss had they voted to join the EEA back in 1992. It would, therefore, be a lever at our disposal should we wish to join the EEA.
The EEA meets another red line, namely that of ending the jurisdiction of the ECJ. The EEA is overseen by the EFTA arbitration court, which, with UK membership, would have a plurality of UK judges. The EFTA court regularly rules in a different manner from the ECJ and frequently sets precedents that are later followed by the ECJ.
In the EEA, this House would be wholly sovereign. We would see an end to direct effect, and through the right of reservation we would possess a veto on EEA rules. What is more, EEA members have considerable rule-shaping powers through the various committees of the EU, and retain an influence on the EU position at the WTO, at which the UK possesses our own seat at the table.
Vicky Ford
The hon. Gentleman is making a powerful case about the EEA and EFTA, although it is unfortunate that he described the Canada deal as a chocolate teapot, because it did give free trade in chocolate.
Mr Deputy Speaker (Sir Lindsay Hoyle)
Order. This is meant to be a quick intervention—
Mr Deputy Speaker (Sir Lindsay Hoyle)
Order. There is no “quickly” about it, because you will need to explain to the Front Benchers when I cut their contributions down to eight minutes each. It is an intervention, not a speech. I call Stephen Kinnock.
Stephen Kinnock
In short, if we are looking for a common-sense Brexit that strikes a pragmatic balance between prosperity and sovereignty, the EEA is the only game in town. It will allow maximum access to the single market, with the ability to reform free movement, resolve the Northern Ireland issue, end the jurisdiction of the ECJ and, above all, reunite our deeply divided country.
Vicky Ford
The problem with the EEA is that we would have to cut and paste all EU rules, especially on key sectors such as financial services. Would it not be better to fight for a bespoke deal?
Stephen Kinnock
As I have said, it has to be a blend of a template and a bespoke deal. The Government have fundamentally failed to understand that, first of all, these negotiations must create common ground—a territory based on models and templates that are familiar to both sides at the negotiating table. Of course, things can then be tweaked and finessed, but the basic model of the EEA gives us the architecture and certainty for which the country is so desperately crying out. That approach would also have put the British Government on the front foot, rather than leaving a vacuum into which the EU has been obliged to step.
The referendum exposed many of the deep divisions that have existed in our country for many years—divisions between young and old, town and city, graduate and non-graduate. Those divisions came together as we coalesced behind “tribe remain” or “tribe leave”. We must not allow the tribalism of the referendum to define our destiny. We must come together. We must find a way to reunite this country, find compromise between remain and leave, and place that compromise at the heart of our negotiating strategy. In the EEA-EFTA model, we have the answer to protecting market access, jobs and opportunities; to a frictionless border in Northern Ireland; and to the call to take back control on immigration, in our courts and in this place. Let us come together, reunite Britain and build an EEA-based Brexit.
Phil Wilson (Sedgefield) (Lab)
I want to raise two areas of European affairs this afternoon.
The first is the potential impact of Brexit on the north-east of England. Some 60% of north-east trade is with the EU and 50% of the cars manufactured in the north-east are exported to the EU. Nissan employs about 7,000 people and more than 30,000 jobs through the supply chain. I have never been one to say that, for example, after Brexit the Nissan plant will close, but I am concerned about future investment in the plant. As the Business, Energy and Industrial Strategy Committee said in its report on the impact of Brexit on the automotive sector:
“It is difficult to see how it would make economic sense for multinational volume manufacturers—the bulk of the UK automotive sector—to base production in the UK in a no deal or WTO tariff scenario. The shift of manufacturing to countries within the customs union and single market will be inevitable.”
The cost to UK jobs could be in the hundreds of thousands and to inward investment in the hundreds of millions of pounds. That is another example of why many of us on the Labour Benches call on the UK to remain a member of the single market and the customs union. The same report made it explicit that the UK cannot expect an expansion of trade overseas to outweigh the loss of trade to Europe arising from a hard Brexit. It seems senseless to me to walk away from one half of the north-east’s trade without a strategic means of replacing it other than through wishful thinking.
The impact assessments the Government tried to keep to themselves reveal the potential impact on the north-east. They identify that three of the major sectors to be hit by Brexit will be the automotive, chemical and pharmaceutical sectors—all major industries in the north-east of England. The impact assessments determine that of all the regions and nations of the UK, the north-east of England will be the worst hit. This is due to the region’s strong manufacturing and industrial base, which would be exposed most to the changes and trade barriers, and because we have the greatest dependence on exports as a proportion of the regional economy.
The impact assessments say that the north-east would see a decline in its GDP by as much as 16% over 15 years. We can talk about a new customs arrangement, frictionless borders and non-divergence as much as we like, but all we will end up doing is reinventing the wheel only to discover it will not be as round as the original. It is no surprise that the north-east of England chamber of commerce issued a statement following the spring statement. Ross Smith, director of policy for the chamber, said:
“the success or otherwise of negotiations and planning for Brexit could yet render these forecasts largely irrelevant and business still have little detail to base their planning on”.
The second issue, of great strategic importance not only to the UK but Europe, is our response to Russia’s flouting of basic international law and the international rules-based systems by which the community of nations should abide. I do not think we should doubt that Russia’s intent with the continent of Europe is to divide and rule. Putin wants a weak Europe. Brexit, I believe, plays straight into his hands. Russia wants to see Europe divided, introspective and prepared, ultimately, to play the international game by his and Russia’s rule.
Bully-boy tactics are always the result of the weak. The Russian state is weak, economically no larger than Italy. Its population is ageing. Its military strength may be perceived to be great, but it lacks depth.
Jenny Chapman (Darlington) (Lab)
I thank my hon. Friend and colleague from the north-east for giving way. I just wanted to point out that, although the north-east voted substantially to leave, it shares his concerns about manufacturing, jobs and security.
Phil Wilson
I thank my hon. Friend and constituency neighbour. She is right. I think there is a shift in opinion now—that Brexit could damage job prospects for tens of thousands of people in the north-east of England.
Putin does not want kinetic action with NATO, but he does want us weakened, distracted and inward looking. That is why the warfare that Russia wants to adopt is hybrid. It can be social, anti-democratic and economic warfare—trying, for example, to influence democratic elections. From funding populist movements, such as Marine Le Pen’s Front National, now called National Rally, is it any wonder Nigel Farage sees Putin as one of his favourite leaders? I endorse the Prime Minister’s actions today, but the Salisbury incident is about more than just spies.
The use of a chemical weapon on the streets of a city of the UK is also an attack on the principles by which we stand and they must be defended. Members of all parties in the House must declare on which side they stand. This is about defending our way of life, which is internationally protected by a rules-based order that we need to preserve and that Russia seeks to undermine—from its indiscriminate military action in Syria, to the Ukraine and Crimea, to the boosting of its enhanced nuclear capabilities, to a failing economy run by oligarchs who use London as their plaything and to the troll farms of St Petersburg, which spread news of a dubious nature throughout Europe and the US. Russia is trying to shake our confidence in our way of life. Engage and beware, yes, but to give it the benefit of the doubt is ridiculous. It is trying to undermine liberal democracy in the west—the special relationship with the US, NATO, the UN and, dare I say it, with the EU. Those bilateral or multilateral institutions have served us well for decades.
I say to the Minister that our leaving the EU helps Putin. Putin has always resented what he sees as the belittling of Russia after the collapse of the Soviet Union. He wants to return to a world where Russia helped to call the shots. It cannot do that now, so the next best thing is to weaken those who are sitting at the table. It interfered in the US election. It welcomes the Catalonian independence movement. It supports the Front National in France. It welcomes the extreme stance of Hungary’s Prime Minister and the AFD in Germany. Then, of course, there is Brexit.
Putin believes that the east has disintegrated since the Berlin wall came down. Now it is the turn of the west and he will play any game, hold any card and roll any dice to ensure that happens. Eventually, the UK, one of the most principled critics of Russia in Europe, will not have a seat at the table in the EU. That is good for Putin. Of course, we will continue to engage with the EU, but it is better to have a seat at the table than not.
Let us not forget that NATO is a military alliance, and the EU, not NATO, has the ability to impose sanctions against Russia. I agree with the findings of the Foreign Affairs Committee’s “Global Britain” report: the Prime Minister needs to come to the House to lay out what a “global Britain” actually means. Now is the time to defend ourselves as a country proportionately and offer a rallying cry for what we believe in as a country. We may have created difficulties for ourselves, but our stance today is the right one on Russia, because the whole argument comes down to values. I see myself as a real Labour man who, in the mould of Clem Attlee and Ernie Bevin, is prepared to make the difficult decisions. I think today is the time to make them.
I believe in Britain as a force for good in the world. We on both sides of the House need to stand up for the principles that underpin our way of life—democracy, human rights and the rule of law. These have been the foundations of the west for decades. We need now to stand against the forces, at home and abroad, that seek to undermine those principles.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
My hon. Friend the Member for North East Fife (Stephen Gethins) gave a compelling exposition of what we have and the benefits that we enjoy within the single market and the customs union, and what we stand to lose from being outside them. I again urge the UK Government to have genuine, not token, engagement with the devolved Administrations.
My hon. Friend the Member for Dundee East (Stewart Hosie) pointed out why it is absolutely vital for the Scottish Parliament to bring through a continuity Bill to protect the laws of Scotland. He also highlighted the naivety over trade with the US—the hope, and the “rainbows and unicorns” that the hon. Member for City of Chester (Christian Matheson) spoke about—and again urged the UK Government, as I will, to engage meaningfully with the devolved Administrations. It can still be done, even at this late date.
Everybody is getting a bit frustrated by the idea that a bespoke agreement is going to be magically produced here. There is a “hit it and hope” attitude from Government Front Benchers, completely ignoring the realities of the modern world. The UK Government tell us that all will be well, and we are supposed to take it on trust that that is the case, yet through this entire process to date, they have sought to exclude Parliament. They have had to be forced to share impact assessments. They have not listened to or respected the position of the devolved Governments. In this place, we still do not have answers even about the process, never mind what the impacts will be.
As the hon. Member for Greenwich and Woolwich (Matthew Pennycook) mentioned, there will be a vote, but that vote in itself is a bit like Brexit: it is shrouded in confusion. How much time will there be between the publication of the final agreements and a vote in this place? Nobody knows. Will Committees be able to take evidence and publish reports on the final agreements? Nobody knows. How long will there be between the vote and exit day? Nobody knows. What additional documentation will the Government publish to accompany the agreement and declaration? Nobody knows. There are lines and lines and lines of things that to date nobody knows about this process. It is yet another Brexit boorach.
We do not have answers to these questions on the parliamentary process, never mind answers to the key questions being asked by business and constituents. That is why the Scottish Government have introduced the continuity Bill and why everyone in the Scottish Parliament, apart from the Tories, understands the need for it. It retains in domestic law the EU law currently operating in devolved areas. [Interruption.] Scottish Conservatives can chunter from their Benches, but it is clear that they are not standing up for Scotland. The Bill gives Scottish Ministers the powers needed to ensure that devolved law continues to operate effectively after the UK withdrawal, and that is a very important point, given the range of powers that so far have not been agreed to be devolved directly. These powers should go straight back to the Scottish Parliament. Just today, an Ipsos MORI poll showed that the Scottish people are unconvinced by the UK Government’s position. One in eight people in Scotland think it will damage the economy. Only one in seven think there will be any benefit.
What do we know about the economy and trade? The analysis by the Financial Times that my hon. Friend the Member for North East Fife mentioned suggested that Brexit was already costing the economy £18 billion a year, or £350 million per week, as he pointed out. That is not money on the side of a bus; it is money thrown under a bus—lost to us completely. The London School of Economics estimates that Brexit has already cost the average household £404 a year as a result of the fall in sterling and the higher inflation since the vote. The UK Government’s own leaked impact assessment confirms that under all scenarios the UK will be worse off after leaving the EU and that the UK could be forced to borrow £120 billion more after Brexit between 2019 and 2033.
Leaving the EU customs union and single market would be disastrous for Scotland’s trading position. It will create barriers to trade, such as EU tariffs, customs checks, rules of origin and divergent regulatory regimes, and could impede Scottish trade with the rest of the world, as we stand to lose the benefit of 36 EU free trade agreements covering 53 markets. When the UK Government talk about trading with nations outside the EU, they should remember that those very agreements have been facilitated by our being in the EU. So there are many benefits to lose. For the food and drink sector in Scotland, we know that a hard Brexit risks access to Scotland’s biggest overseas regional food and drink export market; it risks Scottish competitiveness and increased costs for business; it risks the value and reputation of Scottish produce; and it substantially risks food production through the loss of our workforce.
We know that there is no trade without transport and that maintaining and improving physical access to European countries and allowing transport operators and service providers registered in the UK to operate across the EU, and vice versa, remains a vital component of trade. Minimising administrative arrangements for crossing borders for international freight and logistics is vital, as is access to labour. They are crucial for our transport network.
If I had more time, I would talk about what will happen to rural Scotland or the energy market if we do not get a meaningful deal, but I will finish by saying that so far we do not know what will happen about Parliament’s role. We know that the continuity Bill is a much-needed piece of legislation to protect the interests of the Scottish people and their devolution settlement. We know that the protections businesses seek and the questions they still have remain unanswered by the UK Government. We know the impacts and concerns for our economy and trade. Similarly, we know the impacts and concerns for the food and drink sector, health and social care, transport, rural Scotland and our energy market and tourism, among much more. We do not need more rhetoric from the Government about “scaremongering”. These are genuine, real concerns, and we need answers.
Will the Minister answer the questions about the parliamentary process, so that we can do our job of representing our constituents and ensure that there is a transparent and open process? Will he recognise that the Scottish Government are being asked to sign away the Scottish Parliament’s powers with no idea how UK-wide frameworks will work, how they will be governed and how we will proceed from the temporary restrictions that the UK want to agreeing longer-term solutions? In doing so, will he accept that this is not a constructive way in which to engage with the devolved Governments?
Karin Smyth (Bristol South) (Lab)
Saturday is St Patrick’s day. Although we do not know where St Patrick was actually from, we know that he was not Irish. Captured as a slave by the pirates who roamed the Irish sea at the time, he was not entirely welcome when he returned as a free man, although he might find himself quite popular at Twickenham on Saturday.
The Bristol Post recently published an article about the Bristol merchants who, under Henry II, went to Dublin in 1171 to defend Dublin castle against the insurgency in Ireland. As a reward from Henry, they were able to establish trading posts. There is still some debate about whether the merchants still have citizenship in Dublin, or whether the arrangement has been overridden by the 1937 Irish constitution. That is something that I still intend to discuss with the Irish Government.
Because time is short, I will skip through the centuries that lie between then and now, during which people have flowed across these islands, mostly in times of conflict and often in times of great poverty and desperation, looking for work and trying to settle in various areas. A hundred years ago, we were the same country. My grandparents were born under the auspices of this Parliament in Mayo and Cavan, joining John Redmond’s followers in the British Army during the first world war.
Upstairs in the House this week, there has been an exhibition of pictures by Bernard Canavan depicting the flow of migrant labour after the second world war. Last week, in one of the Committee Rooms, there was the most amazing discussion and presentation by the former Taoiseach John Bruton and the historian Dermot Meleady about John Redmond and the battles that were waged in the House. That was at the invitation of the right hon. Member for Lagan Valley (Sir Jeffrey M. Donaldson) and my hon. Friend the Member for St Helens North (Conor McGinn), and it was a truly magnificent evening.
This weekend London will have three days of celebration for St Patrick’s day, which is a far cry from my experience as a child growing up in London. We had very small parades, which were hidden away on a Sunday morning, viewed with great suspicion, and heavily policed. There was no welcome parade on the streets of London. My first experience of crossing the Irish border was in 1985, when I was only 21. It was a shocking, horrendous experience, which I will not go into now, but over the intervening 30 years I have witnessed a phenomenal transformation of that experience.
I urge the Secretary of State for Exiting the European Union and the Prime Minister to visit parts of the border now, to understand exactly what is at stake. The Good Friday Belfast agreement was not just about Northern Ireland, and it was not just about Ireland. It was not about a border. It is about the freedom of movement of people across these islands and the deep roots that we have. It is also incredibly important to the Irish community who are settled here, and have seen the experience of being Irish in this country transformed over the last 30 years. The normalisation of relations was hard fought for, and we need to preserve it. For the first time, we have an international treaty between our countries based on mutual respect and shared interest after those centuries of conflict. It is an exemplar across the world.
The verdict of the House of Lords on the border was that there was
“a distinction between identifying solutions that are theoretically possible and applying them to a 300-mile border with hundreds of formal and informal crossings, and the existence of which is politically divisive. Any physical infrastructure at the border would be politically contentious and, in the view of the PSNI, a security risk.”
Paragraph 47 of the December agreement talked about a “mapping exercise”. I have asked before in this place and in writing to the Prime Minister for that mapping exercise to be published.
We need to end the façade that there can be any kind of different customs and alignment regimes across these islands, or any unilateral change to the current provisions. From St Patrick and the Bristol merchants’ wanderings to the billions of pounds traded and movements made across these islands now, the great people of these islands expect to be able to move and trade freely, and any dilution of that will not be acceptable to any of us.
Jenny Chapman (Darlington) (Lab)
It is a pleasure to follow the outstanding and thought-provoking speech made by my hon. Friend the Member for Bristol South (Karin Smyth); I am very glad that I was in the Chamber to hear it. At the start of my speech, may I send our best wishes to the Minister, the hon. Member for Worcester (Mr Walker), who is about to embark upon the most challenging and rewarding experience of his life? It is not Brexit; he is due to have a baby—on Friday, I believe—and the thoughts of us all are with him.
This has been an interesting afternoon of speeches—not so much a debate as a collection of MPs’ thoughts on all matters Brexit-related. Excellent though the contributions have been, it seems to me that we have just taken part in what is known as displacement activity—the parliamentary equivalent of scratching one’s head when confused. Why is there no opportunity for the House to express its view in a vote? Because the Government are afraid of this Parliament and their own party.
I have now served in Parliament opposite three Governments. While none of them has been any good, obviously, none has lacked confidence like this one. As my hon. Friend the Member for City of Chester (Christian Matheson) said, the Tory party is utterly riven in government by the task that will define it. How we leave the European Union is the single most important question this generation of MPs is ever likely to face, yet the Government have to be forced to give us a meaningful vote on it.
There is one issue that exposes the miserable inadequacy of the Government’s leadership more than anything else: the Irish border. The Government have no clue about how to ensure that we have a frictionless open border in Ireland, and it is an outrage that our Prime Minister says that she is looking at the example of the border between the United States and Canada. That is one of the worst examples I can think of, so will the Minister confirm that the Prime Minister has finished looking at that particular example and ruled it out? I do hope so.
When will the Secretary of State for Exiting the European Union visit the Irish border? I understand he has never been, but that is unacceptable. I am sure that my hon. Friend the Member for Bristol South, with her excellent knowledge of all things Irish, and I would be happy take him. The hard Brexiteers have no suggestions about how to resolve this issue; they only have red lines and outrage of epic proportions directed at anyone who dares to suggest a sensible way forward. Where is the Government’s legal text of the phase 1 agreement? The EU published its on 28 February; where is ours? The Labour party thinks we should remain in a customs union with the European Union, and there is wide support for that in industry, particularly among manufacturers. That would safeguard jobs, help to resolve the Irish border and give certainty, but the Government have rejected this option because they are buffeted by hot air from their own Back Benchers, not because they are putting the national interest first.
The Government should listen to the hon. Member for Eddisbury (Antoinette Sandbach) when she talks of the importance of services and non-tariff barriers. They should listen, too, when the former top civil servant at the Department for International Trade says that we are rejecting a three-course meal for a packet of crisps. He has a point, but rather than engaging in debate, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) goes around telling him to try a couple of multipacks.
We are just over a year from exit and the Government have so little to say on important issues. Precisely which areas do the Government want to diverge on and deregulate? What do the Government’s intend that the transitional period will look like? Will the European Court of Justice have jurisdiction, and on what? How will the Government ensure that there is an open border in Ireland without a customs union? Where is the immigration Bill; why is it delayed? When will the trade and customs Bills return to the House? As my hon. Friend the Member for Preston (Sir Mark Hendrick) said, the Government are afraid of the House because they know that there is a majority in it for a customs union.
Labour’s approach would be much clearer. We respect the referendum result and accept that Britain is leaving the European Union. My constituency, like that of my hon. Friend the Member for Sedgefield (Phil Wilson), voted to leave, but we understand that our constituents did note vote to be poorer or less safe. Remaining in a customs union makes people safe, and they know that we are putting their jobs first. They understand why the Labour party takes its position.
Unlike some others, we want a close relationship with the EU based on our values of internationalism, solidarity and equality, and on maintaining rights, standards and protections. We would seek a deal that gives full access to European markets and maintains the benefits of the single market and the customs union, holding the Government to what the Brexit Secretary promised in the House of Commons, with no new impediments to trade. We would negotiate a new UK-EU customs union, so that there would be no tariffs with Europe and no hard border in Northern Ireland. We would seek to negotiate having a say on the terms of any new EU trade deal.
Labour does not believe that deals with the USA or China, both of which have weaker standards and regulations, would compensate for a significant loss of trade with our trading neighbours in the EU. Nor do we believe that being part of a customs union with the EU would prevent us from trading extensively with non-EU countries. Germany’s largest trading partner is China. As my right hon. Friend the Member for Leeds Central (Hilary Benn) said, the idea that being in a customs union prevents us from trading globally is nonsense. We will never accept our NHS or any other public services being part of any trade deal with Trump’s America. As my hon. Friend the Member for Streatham (Chuka Umunna) said, just look at what he intends for our steel industry. As my hon. Friend the Member for Cardiff North (Anna McMorrin) said, Labour believes that powers over devolved policy areas currently exercised by the EU should go directly to the relevant devolved body unless the UK Government can make a compelling case for that power to be held at Westminster.
In all these areas, the Labour party has set out an approach to the negotiations that is pragmatic, that respects the referendum result and that puts the national interest first. How long will it be before the Government do the same? As my hon. Friend the Member for Aberavon (Stephen Kinnock) said, how long will it be until the Government start to work to reunite our country? How many days of general debate do they think we need before they dare to present Parliament with an actual decision? The Government have limped along for long enough, and it is time they stopped listening to noisy bluster and pulled themselves together to secure a good deal for Britain.
The Parliamentary Under-Secretary of State for Exiting the European Union (Mr Robin Walker)
I thank the hon. Member for Darlington (Jenny Chapman) for her kind words at the start of her speech. As my right hon. Friend the Minister for Trade Policy said in his opening remarks, this is a timely debate. We are approaching a crucial moment, and we must negotiate our exit from the EU while building a new and lasting relationship with it. We are ambitious about what can be achieved, as the Prime Minister set out in her Mansion House speech, and the UK is seeking the broadest and deepest possible agreement. We are making real progress. At the end of last year, we agreed key elements of our withdrawal, and we are in the process of turning that agreement into a draft legal text. This work has gone well in recent weeks, and in many areas, such as the financial settlement and codifying the chapter of the joint report on citizens’ rights, negotiations are progressing positively.
On Northern Ireland, on which the hon. Member for Bristol South (Karin Smyth) spoke so well, the UK Government remain steadfast in their commitment to the Belfast agreement, to avoiding a hard border between Northern Ireland and Ireland and to avoiding any borders within our United Kingdom. We are working intensively to achieve our immediate goal of agreeing a strictly time-limited implementation period by the March European Council. Both the UK and the EU have published texts on the approach to the implementation period in the withdrawal agreement, and there is significant common ground between the two sides. Some issues remain to be discussed further, however.
We have put forward practical solutions that will help to deliver a smooth exit and protect both UK and EU interests during the implementation period. An example would be the use of a joint committee to resolve any issues that arise during that period, including in relation to any new EU laws. We look forward to continuing discussions with the EU and remain confident that we will reach an agreement by the March European Council next week. As my hon. Friend the Member for Chelmsford (Vicky Ford) pointed out, that is absolutely vital. Over the coming weeks and months, the UK and the EU will continue to push ahead with negotiations in all areas, with the aim of reaching a complete withdrawal agreement in October.
The Prime Minister has set out an ambitious vision for the future economic partnership that the UK is seeking with the EU. We want the broadest and deepest agreement that covers more sectors and establishes greater co-operation than any pre-existing free trade agreement. I noted the comments of right hon. Member for Leeds Central (Hilary Benn), the Chair of the Exiting the European Union Committee, that the EU has a long track record of such bespoke agreements with key partners. We have specific proposals across our economy, including in goods, services, agri-food and fisheries, and I assure my hon. Friends the Members for Banff and Buchan (David Duguid) and for Aberdeen South (Ross Thomson) that we will be leaving the common fisheries policy when we leave the EU.
Five foundations must underpin our future trading relationship: reciprocal commitments to ensure fair and open competition that is built on trust in one another’s institutions; an independent arbitration mechanism; an ongoing dialogue with the EU, especially between regulators; an arrangement for data protection that goes beyond an adequacy agreement—my hon. Friend the Member for Eddisbury (Antoinette Sandbach) made that point well—and, finally and importantly, the maintenance of links between our people. A fundamental principle in our negotiating strategy for goods is that trade at the EU-UK border should be as frictionless as possible, so we are seeking a comprehensive system of mutual recognition to ensure that, as now, products need to undergo only one series of approvals in one country. That can be achieved via a commitment to ensure that the relevant UK regulatory standards remain as high as the EU’s, which will mean in practice that UK and EU standards remain substantially similar in future.
Our default position is that UK law may not necessarily be identical to EU law, but it should achieve the same outcomes. In some cases, the Parliament of the day could choose to pass an identical law. It could also decide not to achieve the same outcomes as EU law, but it would do so knowing that there would be consequences for market access. As I set out at Which? today, at the launch of its consumer charter, the UK has always played a key role in setting high standards for consumer rights, and we will continue to do so as we leave the EU.
My hon. Friends the Members for Eddisbury and for Chelmsford made powerful cases about the importance of trade in services, and we want an agreement that is broader than any agreed before. We do not want to discriminate against EU service providers in the UK and would not want the EU to discriminate against UK providers. That will mean, for example, limiting any new barriers to prevent firms from establishing and agreeing an appropriate labour mobility framework that enables firms and self-employed professionals to provide cross-border services, either face to face, on the phone or through the internet. We will of course also want to continue to recognise the qualifications of each other’s professionals. As my hon. Friend the Member for East Renfrewshire (Paul Masterton) spoke so passionately about the importance of financial services to his constituency, I can assure him that the Prime Minister and the Chancellor spoke in their recent speeches of the importance of reaching an arrangement for that sector, and I fully agree.
After we have left the EU, the UK will push for the greater liberalisation of global services markets. Trade in services represents around 20% of the value of world trade, but it accounts for 45% of the value of UK exports in 2016. Services are an important and growing component of supply chains, and digital technology is continuing to make more services tradeable.
In the Prime Minister’s Mansion House speech, which the hon. Member for Greenwich and Woolwich (Matthew Pennycook) described as serious and detailed and the Chair of the Exiting the European Union Committee described as frank, she accepted that access to each other’s markets will in certain ways be less than it is now. We understand that we cannot have all the benefits of membership of the single market without all its obligations, but we seek a new balance between those benefits and obligations.
As the Prime Minister has made clear, we will be leaving the customs union. A customs union has a single external border that sets out identical tariffs for trade with the rest of the world. As international trade policy is an exclusive competence of the EU, remaining in the customs union would restrict our ability to set our own independent trade policy, and the hon. Member for Brent North (Barry Gardiner) described such a scenario as “deeply unattractive” and explained that a situation in which the EU could make us subject to third-country trade deals would be a disaster. By leaving the EU customs union and establishing a new and ambitious customs arrangement with the EU, we will be able to set our own independent tariff arrangements and forge new trade relationships with our partners around the world.
On security, which the Chair of the Exiting the European Union Committee and many other Opposition Members raised, we seek a deep and comprehensive security partnership with the EU. Our commitment to Europe’s security should be absolutely non-negotiable. As the Prime Minister said in her Mansion House speech, the job now is to get on with delivering the best outcome for the UK’s exit from the European Union, and that is what we are determined to do.
Ordered, That the debate be now adjourned.—(Mike Freer.)
Debate to be resumed tomorrow.