(6 years, 7 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
I beg to move,
That this House notes that the EU is the UK’s largest export market for goods, accounting for a total of £145bn of exports and £241bn of imports in 2016; further notes the Government’s expressed aim to secure the freest and most frictionless possible trade in goods between the UK and the EU after 29 March 2019; notes the importance of frictionless trade without tariffs, customs or border checks for manufacturers and businesses across the country who trade with the EU; further notes that the free circulation of goods on the island of Ireland is a consequence of the UK’s and Republic of Ireland’s membership of the EU Customs Union; in addition notes the Government’s commitment to (i), in the UK-EU joint report on progress during phase 1 of the Article 50 negotiations, the maintenance of North-South cooperation and the all-island economy on the island of Ireland, (ii) the Belfast Agreement implemented in the Northern Ireland Act 1998 remaining a fundamental principle of public policy and (iii) the continuation of unfettered access for Northern Ireland's businesses to the whole of the UK internal market; and therefore calls on the Government to include as an objective in negotiations on the future relationship between the UK and the EU the establishment of an effective customs union between the two territories.
This is the first of the debates chosen by the Liaison Committee, and it is on one of the most important issues on which Parliament must decide in the next six months. We did not choose this topic because we all agree—the Liaison Committee includes the hon. Member for Stone (Sir William Cash), and hon. Members can imagine the extent of the disagreement that he and I have on many of these issues. We chose this topic because we think it is an incredibly important issue and we are running out of time. The motion is tabled on behalf of 12 Committee Chairs, and it proposes an effective customs union in the interests of our manufacturing industry and of continuing to support peace in Northern Ireland.
We are running out of time. We are running out of time for Parliament to help shape negotiations, based on evidence heard by our Select Committees and discussions between Back Benchers. We are running out of time to hear from the Government about what they are going to do. The Government rightly say that they want frictionless borders and no extra burdens on business; they want to improve trade and to have no hard border in Northern Ireland, including no infrastructure at the border. However, there is still no clarity about what that means for our borders. Many of our Committees have looked in detail at some of the practical challenges, and the Home Affairs Committee has warned about the problems and challenges of bringing in huge border changes at speed, and with a lack of staff in place.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
I sit on the Committee chaired by my right hon. Friend, and I wholeheartedly endorse the conclusions we came to regarding our serious worries about Government preparedness. Does she agree that not only is the border between Northern Ireland and the Republic of Ireland a serious issue that is yet to be resolved, but there is also a question whether there will be a maritime border between Wales and Scotland and the Republic of Ireland? The Home Secretary seemed to suggest that there would be customs officials at Welsh ports, but that is a completely unacceptable situation.
Yvette Cooper
My hon. Friend is right: there are so many unanswered questions and the clock really is ticking. We secured this debate to try to tease out those questions and get some answers, and to put forward some proposals for this debate. I also put on record apologies from the Chair of the Exiting the European Union Committee, my right hon. Friend the Member for Leeds Central (Hilary Benn), but that Committee is taking evidence in Berlin today.
Why put forward an effective customs union as part of the proposals? It means no tariffs on the goods we buy and sell with the European Union. It means no customs checks at the border. It is a crucial part of delivering the frictionless border for trade that the Government have rightly promised. It clearly does not solve all the problems and meet all the challenges that we face, but it is an important part—
Kevin Hollinrake (Thirsk and Malton) (Con)
Does the right hon. Lady accept, though, that even with a customs union there would still be a need for checks at the border for things like product standards?
Yvette Cooper
The hon. Gentleman is exactly right. There are wider regulatory issues that need to be addressed. There is a wider debate about regulatory alignment. That is obviously particularly important as it affects Northern Ireland, but it will affect ports across the country as well. The focus of today’s debate is specifically around a customs union. There are a lot of other aspects to Brexit that we will need to continue to debate in this place.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
The Society of Motor Manufacturers and Traders announced today that there has been a 14% drop in the output of cars manufactured in this country over the past year, and emphasised that certainty over our negotiations and access to the EU market is essential for the future prosperity of that industry and our economy.
Yvette Cooper
My hon. Friend is exactly right, because the lack of certainty makes it extremely difficult for any employer to plan. I have discussed the subject with employers in my constituency, particularly manufacturers, and frankly any business that is involved in cross-border trade in any way is desperately concerned about the lack of certainty. The idea that new arrangements could have to be in place in less than 12 months’ time has an impact on investment; it has an impact on the decisions that employers—businesses—are making right now.
At Dover, 400 lorries an hour rumble on and off the ferries to France. In Ireland, 6,000 lorries and 8,000 vans whizz to and fro across the border, without even braking. From apples to aerospace, from Yorkshire woollens to Scottish salmon, Britain does more than £230 billion of export trade with European countries every year. Those businesses do not get stopped at the border, do not pay tariffs or submit extra forms. They can just sail on through. That is the frictionless trade that so many of our manufacturing jobs depend on.
Tom Brake (Carshalton and Wallington) (LD)
In the right hon. Lady’s contacts with business, has she come across any businesses that are currently exporting, or intending to export, to the EU that are looking forward to filling in all the customs forms that will be required once we have left?
Yvette Cooper
Funnily enough, I have not, and I doubt that many of us have either, because for those employers—those businesses—this goes much wider than simply what happens at the border. It extends to all the bureaucracy, all the paperwork, and all those additional burdens and costs that they could face outside a customs union.
Thelma Walker (Colne Valley) (Lab)
Businesses in my constituency of Colne Valley, like others across the country, are deeply concerned about the UK’s walking away from our largest export market. Does my right hon. Friend agree that a customs union with the European Union would offer the best protection to businesses in each of our constituencies?
Yvette Cooper
I do agree with that and it is, interestingly, the view of both the CBI and the TUC that a customs union is particularly important for the future of our economy and the future of trade. Hon. Members can see why it would matter at the border. James Hookham, the deputy chief executive of Britain’s Freight Transport Association, has warned that an average delay of two minutes as a result of new Brexit spot checks at Dover would create a tailback of 17 miles. In a world of just-in-time production and retailing, when companies hold less stock, when supply chains run across borders and back again, it makes even small delays costly.
John Redwood (Wokingham) (Con)
Can the right hon. Lady explain how it is that we have such a smooth-running, fast-growing and very large trade with the rest of the world, on World Trade Organisation terms, where we have to pay EU tariffs, and we are not allowed to negotiate them down all the time we are a member of the customs union?
Yvette Cooper
I think the right hon. Gentleman is simply making the point that our trade was growing, within the current arrangements, with the rest of the world. That seems to be a good thing, and suggests that perhaps, therefore, we can carry on increasing our international trade and our global trade, even within customs union arrangements.
Anna Soubry (Broxtowe) (Con)
Would it not also be the case that, as a country that champions free trade, we have seen the reduction of barriers with those other non-EU members, which may explain the growth? Does the right hon. Lady agree that it seems rather perverse that, at a time when we want to increase free trade, we are going to put up a whole load of barriers to stop access, in the best existing free trade area in the world?
Yvette Cooper
The right hon. Lady is exactly right. Where we currently have good free trading arrangements we should cherish them, because the truth is that it is getting harder to negotiate new trade deals. The politics of trade deals has become more complex, as communities across different countries become more worried about the losers and winners of big changes to trade arrangements. At a time when it could take very many years to negotiate new trade arrangements, if we pursue the idea of ripping up our existing ones before the conclusion of such negotiations it will be deeply damaging to many of our jobs and communities.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
In answer to the right hon. Member for Wokingham (John Redwood), I am struggling to think of a country that we have a ro-ro ferry arrangement with that is not in the single market—which we are going to have very soon, if we follow his direction.
Yvette Cooper
Unfortunately, I did not catch the beginning of the hon. Gentleman’s intervention. May I ask him to repeat it?
Angus Brendan MacNeil
In answer to the right hon. Gentleman, I am struggling to think of a trading partner that we have, outside of the single market and customs union, that we have a ro-ro arrangement with, and I think that would be the answer to his question.
Yvette Cooper
The hon. Gentleman is exactly right. Not only that, but those other countries that we might seek to get alternative trade arrangements with are further away, and when it comes to manufacturing industry in particular, geography matters—gravity matters. The best opportunities and the greatest markets will be those that are closest, especially in a world of just-in-time production where you might need to get supplies very rapidly into your factories or into your retailers.
Sir Desmond Swayne (New Forest West) (Con)
The European Union is a customs union. The right hon. Lady has spoken of preserving our existing arrangements, but the motion speaks of the establishment of a customs union. Can she explain what the difference might be between “the customs union” and the customs union that she envisages?
Yvette Cooper
Obviously, the customs union is a part of the European Union; that is the arrangement that is in place at the moment. I think we need a customs union because once outside the European Union you cannot have “the customs union”; but we are in danger of getting ourselves tangled up on the definite and indefinite article. We chose the words “an effective customs union” in the motion to avoid disputes about grammar, and to get to the substance. We want an arrangement that includes no tariffs, but has frictionless borders and, crucially, a common external tariff. That is the immensely important point that I want to cover now.
Albert Owen (Ynys Môn) (Lab)
My right hon. Friend mentioned trade through ports. She is aware that my constituency is on the frontline of Brexit, and is the busiest port with the Republic of Ireland—400,000 lorries a year pass through it. This is not scaremongering: already, Irish companies are making contingency plans to trade directly with mainland Europe, bypassing Britain altogether, on a business case.
Yvette Cooper
They are, and it is perhaps unsurprising that they should do so, because businesses will make investments, they will take a precautionary approach, and they will look for the best way to protect their trade at a time of such huge uncertainty about what might happen to trade that we want to pass through the UK. We will see more and more of those consequences, therefore, particularly if we do not get answers and decisions soon.
Rachael Maskell (York Central) (Lab/Co-op)
Does my right hon. Friend agree that the biggest threat of all is the threat to jobs, as businesses are making their investments elsewhere in mainland Europe as opposed to the UK now, let alone in the future?
Yvette Cooper
I do, and I think this is also particularly about our manufacturing communities, and many of our towns across the country, where those jobs are so important.
Yvette Cooper
I will give way to the hon. Gentleman, and then I want to make progress, as a lot of Members want to speak.
Kevin Hollinrake
I am grateful. The right hon. Lady has been very generous in taking interventions. Earlier, she referred to the potential for tailbacks as a result of checks. What I was trying to get across in my earlier question was that if we were still in the customs union but not the single market, checks would still be needed for product standards, so is she actually proposing membership of both the single market and the customs union, and if she is, is there any point in leaving the European Union at all?
Yvette Cooper
Look, there will be some for whom this debate is partly about what happened in the referendum. Others will want to have nothing to do with anything that is linked to the European Union in any way. I am looking to see where the consensus can be in this House, and I think there is a possibility of a consensus around a customs union. We can have a separate debate another time on the wider regulatory alignment—on which the hon. Gentleman and I have particular views—and on what other aspects of regulatory alignment, or of a single market, we may each care about. For now, the focus should be on a customs union, which does not prejudge the conclusions of some of the wider questions.
I want to say something about the common external tariff, because I think this bit gets lost too often. If we are in a customs union, we have the common external tariff, the consequence of which is that not only all those products, but all the components and agreements of the products can spin back and forth across different borders within the EU and not have to face rules of origin checks. Many businesses are particularly concerned about the rules of origin checks, because that means that they have to account for where the different ingredients come from. If they suddenly change the mix of ingredients in a product or if they suddenly change the source of their supply, they might also suddenly have to change their evaluation of the rules of origin and fill in different forms. That is a huge ongoing burden for businesses, employers and particularly for manufacturers. It is not just a one-off cost or an easy thing about ticking an online box.
Kirsty Blackman (Aberdeen North) (SNP)
I am really pleased that the right hon. Lady secured this debate. The point she is making about the importance of the shared external tariff is absolutely vital, because of the rules of origin. Does she share my concern that some Members in this House seem to be wilfully misunderstanding what a customs union really means and cannot cope with the idea that this will result in a huge amount of extra paperwork?
Yvette Cooper
That is right. If a manufacturer’s components come in from China but then, as part of the manufacturing process, the product moves to France for further manufacturing, and the components come back again and are then sent somewhere else, at every stage those calculations would have to be done. At the moment, because we all have the common external tariff, when the components come in from China or elsewhere in the world, those rules of origin checks do not need to be done after the manufacturing process and before it is sold on. It does not matter where the widgets come from or where the gadgets go; we have the common external tariff, which makes that process much, much smoother than it would otherwise be.
Geraint Davies (Swansea West) (Lab/Co-op)
My right hon. Friend will be aware that third countries represent some 12% of our exports via the EU. Already, South Korea, Australia and Chile have said that they want to renegotiate the trade agreements, including tariffs, if we are not in the customs union, and many more may. Is she fearful that we will end up with higher tariffs, worse terms of trade and fewer jobs?
Yvette Cooper
That is right. I think there is common agreement that we want no tariffs with the EU as part of this—I think that is shared across the House—but we also want to ensure that we do not end up with worse terms of trade with the rest of the world, rather than having the promises we have had that somehow things will magically be better.
Ruth George (High Peak) (Lab)
My right hon. Friend has mentioned that businesses are very concerned about this issue. I met over 20 businesses in my constituency that provide nearly 2,000 incredibly valuable jobs in my rural area. They are very concerned that they are already seeing European competitors coming in and taking contracts from under their noses. They cannot compete because they do not have the certainty that the UK will be in a customs union this time next year.
Yvette Cooper
That goes to the heart of the situation. It is partly about certainty and partly about knowing that businesses can smoothly trade in the way that they have been doing, and that we can build on that trade and not end up with new barriers in place. It is manufacturing where this matters most—manufacturing is still the spine of our economy and so much else depends on it. For so many of our towns, such as those in my constituency and across the north and midlands, manufacturing is still at the heart of the local economy, and it could be hugely jeopardised if we end up with a damaging change to the terms of trade.
Stephen Doughty
My hon. Friend is being very generous in giving way. Unite––the union shop stewards who came to visit me from Rolls-Royce––made exactly that point. They explained the real damage that could be done by this to the aerospace industry in particular and the long and detailed supply chains that stretch across not just the whole of the UK, but the whole of the European Union.
Yvette Cooper
That is right. Many of these manufacturing towns and areas may well have voted to leave the European Union, but they will also argue strongly for support for manufacturing jobs within their communities. We should be listening to their voices.
Kate Hoey (Vauxhall) (Lab)
I thank my right hon. Friend for giving way; she has been very generous. If she wants to unite the House on staying in “the” customs union, or “a” customs union, would it not be much better to show the European Union that we are united in wanting a free trade deal, instead of giving the EU the opportunity to play us off against one another?
Yvette Cooper
A customs union should be at the heart of that free trade agreement. Whatever the trading or future partnership agreement should be with Europe ––and we clearly need a close, continuous trading arrangement––my argument is that, for the sake of manufacturing and of Northern Ireland, a customs union should be the central part of it. That is what is in our interests.
Nic Dakin (Scunthorpe) (Lab)
My right hon. Friend is right when she says that small towns such as the ones that I represent—Bottesford, Kirton and Scunthorpe—voted to come out of Europe, but they did not vote to lose out when that happened, and they will be looking for an arrangement that makes sure they do not.
Yvette Cooper
That is exactly right. They want a Brexit deal that is good for manufacturing, and to be honest, any deal that rejects a customs union is going to hit manufacturing across Britain.
Mr Dominic Grieve (Beaconsfield) (Con)
To go back to the question that the hon. Member for Vauxhall (Kate Hoey) asked, any free trade agreement inevitably comes with strings attached. If one is going to do a free trade agreement with 27 member states that co-ordinate their own trade, I simply do not see how we will escape the strings that are obligatory if such an agreement is going to work. The trouble is that it then starts to look very much like a customs union, because that is what, in reality, it has to be if it is to work at all.
Yvette Cooper
The right hon. and learned Gentleman is right: in the end, any agreement has obligations attached to it, as well as enforcement mechanisms.
Yvette Cooper
I will make this one of the final interventions. I want to deal with the objections that people have raised to a customs union, because it is important to respond to those.
Angus Brendan MacNeil
I am very grateful. To build on the point that the right hon. and learned Member for Beaconsfield (Mr Grieve) made, a free trade agreement in this context is highly misleading. The UK would not have a free trade agreement, but a “less trade” agreement, and when we talk about free trade agreements with the rest of the world, we mean bits of trade agreements. Trade will not be as free as it currently is in the European Union.
Yvette Cooper
There is no doubt about that. If we have no customs union, there will be less free trade than we currently have, and that is where the manufacturing industry is at risk.
Manufacturing is very important in my constituency, and we are very proud of having Haribo there. I have been to visit, and I particularly enjoyed doing the quality-control checks on the Starmix—we made sure that they were particularly rigorous and tried many times to make sure that the Starmix was very top quality that day. The chief executive of Haribo said clearly to me:
“If a truck loaded with materials that we desperately need to make a product is held up or not released at border control for a day or two, the worst case scenario would be production grinding to a halt”.
That is the reality.
We know, too, that this issue is particularly important for the Northern Ireland border. Ministers have rightly said that there should be no hard border between Northern Ireland and the Irish Republic or between Northern Ireland and Britain. Parliament has a responsibility to make sure that that happens.
Lady Hermon (North Down) (Ind)
Will the right hon. Lady take a moment to reflect on the statement that the Prime Minister made yesterday at Prime Minister questions when she was happy to endorse the idea, peddled by the Government again, that no deal would be better than a bad deal? That is a very dangerous strategy, and I say that as someone who represents a Northern Ireland constituency. If we have no deal, we will inevitably have a hard border in Northern Ireland, and we will see the return of violence in Northern Ireland.
Yvette Cooper
I have huge respect for the hon. Lady’s views on this, and I agree. We have to show some responsibility. This is not something on which we can simply trade political slogans or vote for an abstract. We have to be very honest and real about the consequences. The removal of the security and economic checks at that border and the growing economic integration between Northern Ireland and the Republic, as well as with the rest of the United Kingdom, are an important part of ending a conflict in which so many people have died. We have a huge responsibility to future generations who will not forgive us if we just rip all that up and throw it away because we did not face the facts.
Yvette Cooper
May I make some progress first?
Three specific objections to a customs union tend to be presented. First, people say that we do not need a customs union because there are alternatives, usually based on new technology. Secondly, they argue that we will be better off outside the customs union, and that being outside is a price worth paying for the benefits that we will enjoy as a result. Thirdly, they make an emotional appeal, claiming that it is somehow at the heart of our sovereignty or the Brexit vote. I disagree with all three counter-arguments, and I will deal with each of them briefly.
Let me deal first with the claim that a customs union is not needed and we can solve everything with new technology instead. So far the Government have put forward two alternatives: a customs partnership and “max fac”, which seems to be the latest name for a streamlined arrangement described as “maximum facilitation”. The customs partnership—to be honest, I had to struggle to get my head around it—seems to involve our collecting EU tariffs at the border, tracking products, and then paying some of the money to the EU. I understand that both the Secretary of State for Exiting the European Union and Brussels have agreed that it is unworkable. It is quite a triumph for the Government to have come up with a proposal whose unworkability has managed to unite Brussels and the Brexit Secretary and those whom he defends.
The alternative is speeded-up customs arrangements at the border. The idea is that all the customs forms would be filled in online, customs checks would be carried out at the trader’s own premises rather than at the border, and there would be cameras and automated number plate recognition. An extreme version of that was proposed by the Financial Secretary, who compared it with the congestion charge between the Islington and Camden borders.
Let me be clear: I think we could do a great deal more with new technology at our borders. In the interests of trade, we should be improving the technology, and the use of technology, at our borders and at borders throughout Europe and the world. However, there is still a limit to how far we can go. First, it will take a long time and a lot of investment to roll out many elements of the technology. Secondly, in the case of the congestion charge, the cameras identify only the cars, not what was in them, so cameras do not solve all the problems involving checks. Thirdly, we would have to rely on the willingness of France, Belgium, Ireland and other countries to provide the same level of investment in the technology at the same pace.
The proposal also assumes a higher level of tolerance of smuggling and evasion of tariffs. The Prime Minister, for example, has suggested that in Northern Ireland 80% of trade—the micro, small and medium-sized businesses—could be exempt from all checks. That level of exemption would require agreement with other countries. There is also the question of how enforcement would take place to ensure that there was no systematic evasion of tariffs.
Antoinette Sandbach (Eddisbury) (Con)
Would that not also be in breach of World Trade Organisation rules? It would require exemption in all the most favoured nation states, effectively creating a massive inability to monitor huge amounts of goods coming into this country.
Yvette Cooper
The hon. Lady is right. It raises huge questions about the rule of law, about how the system would be enforced, and about how it could operate in a sensible and fair way without being opened up to challenge from other areas.
Crucially, the technology approach relies on cameras. I have no doubt that part of the response at Dover will be the introduction of new automated number plate recognition and other such mechanisms. As I said to the Prime Minister before Christmas, cameras are infrastructure. If we add a whole load of cameras to the Northern Ireland border, we will still be creating the infrastructure and—crucially—the targets that the police fear will become a focus for dissident groups who want to disrupt the peace process. That, I understand, is why everyone, including the Government, has concluded that cameras at the Northern Ireland border are not a sensible solution and should not be part of our approach.
Sir Hugo Swire (East Devon) (Con)
I am listening closely to what the right hon. Lady is saying, but there are already cameras for number plate recognition at all the ports on the UK mainland, recording traffic to and from the island of Ireland.
Yvette Cooper
The right hon. Gentleman will be aware that the concern relates to what happens around the border between Northern Ireland and the Irish Republic, and the introduction of new infrastructure at that border, especially such symbolic infrastructure, and especially anything that would increase the sense of there being targets for dissident organisations. We do not want them to become more active and have more to focus on.
Hywel Williams
When the Exiting the European Union Committee visited South Armagh a couple of months ago, everyone we met, from Sinn Féin councillors to the deputy chief constable, agreed that there should be no infrastructure on the border, for the very reason that the right hon. Lady outlined.
Yvette Cooper
It is significant that the Northern Ireland Affairs Committee concluded last month that there were no technical solutions anywhere in the world “beyond the aspirational” that would remove the need for physical infrastructure at the border.
Tonia Antoniazzi (Gower) (Lab)
The Northern Ireland shadow team, of which I am a member, paid a visit to Stormont. We met the leaders of all the parties, and they all expressed their concerns about the barrier. There must be no barrier at any price.
Yvette Cooper
I completely agree; I think that that is immensely important. It brings me back to what I said about our sense of responsibility. It is no good our pretending to be in a parallel universe when all the things that we might want to be true simply are not. We must face up to the world as it is, and to our responsibility and the consequences of any decisions that we make in the House for a process to build peace that has been going on for so many years. We are only the custodians of that process, and we must not be the ones who put it in jeopardy.
Another crucial point is that even if all that technology were possible—even if it were possible to solve all those problems at the border—it would not remove the need for rules of origin checks if we were not party to the common external tariff. It would not remove the bureaucratic burdens that would be imposed on manufacturing businesses every time they changed ingredients or components, because those ingredients and components will be subject to different external tariffs if we are outside a customs union, and the businesses will then have to account for their origins. That is why even new technology, however fabulous and whizzy it becomes in the years ahead, cannot solve the wider problem of what will happen if we have no customs union.
The second argument advanced by those who object to the customs union is that being outside will be worth it, because the benefits of not having a common external tariff and being able to have our own new trade agreements are somehow better than the benefits of being in the customs union. The problem is that the evidence—the Government’s own EU exit analysis, and the findings of the National Institute of Economic and Social Research—shows that the potential benefits of new trade treaties with far-flung countries, even if they could be created quickly, will still be outweighed by the losses resulting from the rules of origin checks and the friction at the border.
Stewart Hosie (Dundee East) (SNP)
When members of the Treasury Committee were in the United States, we were told one thing consistently by almost everyone we spoke to, namely that when it came to negotiating the new, alternative free trade agreements in which those in favour of Brexit put all their stock, the UK would have to put everything on the table and the US would have to put nothing on the table. Does that not lie at the heart of this issue? Our position will be substantially weakened, and nothing that the United Kingdom can negotiate will compensate for the losses that it is likely to suffer.
Yvette Cooper
The hon. Gentleman is right. Other Members will have more evidence and experience than I when it comes to all the detailed arguments, but if we are a smaller market offering to trade, we will be in a weaker position to get a good deal than if we are part of a larger argument in that trade negotiation. Trade deals can take a long time, regardless of the best intentions. There can also be winners and losers, which means that even in this country it may take us a long time to agree on whether new trade agreements are right or wrong.
For example, consumers might want to enjoy more and cheaper New Zealand lamb, but Welsh farmers might take a different view. Industry might be able to get cheaper Chinese steel, but what about the consequences for the British steel industry? If the price of a US trade deal is lower environmental standards or giving US private healthcare companies access to, and the right to aggressively compete for, contracts in our NHS, many of us will want nothing at all to do with that. The truth is that any trade agreement will be complicated to agree in this place, never mind with countries across the world.
Moreover, as the CBI has pointed out, we can increase our international trade—and our EU trade—while still in a customs union with the EU and without having to spend years negotiating complex new treaties. As the CBI points out, Germany currently sells four times as much as we do to China. We should be trying to make the most of those opportunities.
Research by the National Institute of Economic and Social Research shows that the overall trade increase from possible future agreements with the USA, Canada, Australia and New Zealand would amount to less than 3% of our current trade. Are we really going to rip up all the benefits of what we have in a customs union for the sake of a 3% increase that will not be sufficient to balance what we will lose?
Anna McMorrin (Cardiff North) (Lab)
I thank my right hon. Friend for giving way; she is being very generous. Analysis by the Cardiff Business School and supported by the Welsh Labour Government states that our economy is best protected by membership of the customs union. Wales is currently attracting record inward investment, but businesses in my constituency are very worried due to the lack of certainty from the Government.
Yvette Cooper
My hon. Friend is exactly right. This is affecting businesses all over the country.
I want to make one final point. I have taken a lot of interventions because I know that many Members will not get the chance to speak later and they want to give their views. I am conscious, however, of the time. Time is running out in the negotiations and the clock is even sharper today.
The final reason given by those who object to a customs union is that it is a point of principle. They say that it is about our sovereignty and that that was at the heart of the Brexit vote. Even if it is bad for us, it is a point of principle that we should be able to set our own tariffs and sign our own trade deals, and that is somehow at the heart of the taking back control that Britain voted for.
I find that argument illogical as well as inaccurate because, as the right hon. and learned Member for Beaconsfield (Mr Grieve) said, any trade treaty involves signing away some sovereignty. Any kind of trade agreement involves legally binding conclusions and an independent dispute resolution procedure, and once the state has signed up to such an agreement, it might not be able to stop, for example, a US company taking contracts with the NHS or whatever we might have signed away as part of it.
Nobody wants to defend a principle of sovereignty whereby we never do any trade agreements with anybody or sign anything away. We should not do that because it would prevent us from getting a good deal with Europe that would help our manufacturing industry.
Yvette Cooper
I will not, because I am conscious of time.
We did not do this simply to create a new Department for trade and give certain hon. Members a sign on the door. We did not have the debate so that the only thing we would gain was a label of sovereignty or trade. This has to be about what really happens in communities across the country. I have not heard anyone who voted to leave say that they wanted to hit our manufacturing industry at any cost. I have heard from leave voters, as well as remain voters, who support getting a good manufacturing deal, the Northern Ireland peace process and a customs deal.
This is about the kind of country we want to be. Not for me the kind of country where the only thing that matters is a sign on the door that says, “We do our own trade deals.” Instead, I want a country that supports our manufacturing industry and communities and our historic obligations for peace on the island of Ireland. That is why I support a customs union.
Several hon. Members rose—
Mr Speaker
Order. Neither the right hon. and learned Member for Rushcliffe (Mr Clarke) nor the hon. Member for Vauxhall (Kate Hoey) will be subject to what I will call the common external tariff, otherwise known as a time limit. Such time limit as they are subject to will be self-imposed. I am sure that they will want to bear it in mind that, while we wish to enjoy the fruits of their intellect and eloquence, colleagues will wish to do so only if it is not at their personal expense.
Mr Kenneth Clarke (Rushcliffe) (Con)
I will strive to do my best, Mr Speaker.
May I begin by congratulating the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), the other Chairmen of the Select Committees and the Liaison Committee on obtaining this debate and on tabling the motion? It is remarkable how little attention Parliament has been allowed to pay to the momentous events that are taking place at the moment and that will certainly take place over the next few months, which have a profound importance for the future health of our economy and the standing of this country in the world.
At the moment, Cabinet members are trying to agree among themselves their negotiating position, and those in the shadow Cabinet are trying to reach an agreement among themselves on their response. Meanwhile, events are moving on, and I think the House of Commons should have more opportunities to give its views, exercise influence and debate a substantive motion every now and again, not just a motion that has already been dismissed, in the curious way we do in this Parliament, as somehow not legally binding and therefore one that need not be regarded as important.
I have often agreed with the right hon. Lady in the past, but I do not think I have ever heard her make a speech in which I agreed with just about every sentence she uttered. That will enable me to respond to your request, Mr Speaker, because she said it all with great eloquence and there is absolutely no point in my simply trying to repeat all of it or anything like all of it. The only thing I disagreed with is that she revised—no doubt for party reasons—the strange conspiracy theory that trade deals with America might involve privatising the NHS. I have no doubt that someone will try to explain the logic of that argument in the course of this debate. However, I totally agreed with everything else she said.
That is rather surprising, because everything the right hon. Lady said was in line with what has always been the official, mainstream policy of the Conservative party throughout the first 50 years of my membership of it. Some of my colleagues seemed to have a strange conversion—like St Paul on the way to Damascus— about two years ago, but I am afraid that the light did not strike me.
This debate bodes well for what needs to emerge. Many of us in this House have argued for some time for a cross-party convergence, in the national interest, so that this House can make sure that no damage is inflicted by the consequences of our leaving the European Union, or—to be more precise, I am afraid—so that we can limit that damage so far as possible.
The underlying point is clear: the economy of this country and, to an extent, those of other European countries, will be damaged if a sudden decision is taken to erect new barriers at the border between the UK and our major trading partners.
Mr Clarke
I will give way in just a second. There are no advantages in introducing tariffs to European trade, which I do not think anybody wants to do, or new customs procedures and processes, and there are no advantages in producing regulatory differences between our market and the European market. If people insist on having a new free trade agreement, it should include, and as far as possible replicate, the arrangements that the customs union and the single market give us now. If any hard-line Eurosceptic wishes to get up and say why it is positively in the British interest to have new customs procedures, and that we want more lorry parks at Dover and wish to delay the lorries carrying goods one way and the other, I would be interested to hear it. I shall turn in a moment to the main argument—indeed, as far as I am aware, it is the only argument—that most of them ever give for leaving the customs union. First, I give way to the hon. Gentleman.
Chuka Umunna
I am grateful to the Father of the House for giving way. He has served in this House for 48 years, if I am not mistaken, and served in a number of Governments. He will know that this Government have been advised by their own officials that leaving the single market and the customs union will make this country poorer. In all his time in this House, can he think of any Government who have knowingly taken a decision of this gravity that would make the country poorer? Can he think of any example of any Government he has seen do that?
Mr Clarke
Not deliberately—but accidentally, several times. [Laughter.] The hon. Gentleman makes reference to my great longevity, which is the one non-controversial feature of my presence in this House. Practically all my old friends from several Governments are now ennobled and in the House of Lords, where they are debating these very matters. Actually, all my colleagues who have served in Governments during my time—particularly under Margaret Thatcher and John Major—who are still with us and in the House of Lords are voting in line with this motion. They are of the same opinion, because is it is utterly unprecedented for us to get into a position of this kind.
The only argument—certainly the only one the Prime Minister ever uses—for leaving the customs union is that we can have trade agreements with the rest of the world. We also refer to “a customs union”, for reasons that have been explained; it would be a replica of the present customs union. It is quite right to say that, in the customs union, we do not have total freedom to negotiate. We have a common tariff barrier around the customs union, and no member can punch holes through it and start letting in goods from various markets under different arrangements. Once anyone started to do that, it would be necessary to stop the goods seeping through. A great deal of work is being done at the moment, as I understand it from following the leaks in the newspapers and talking to my contacts among those involved, to try to find a way to achieve something similar that would be acceptable. We will have to see how that goes.
It has already been said that, for over 40 years, Governments of both parties in this country who essentially believed in free trade, and who found that Britain gained ever more advantages from developing a free trade climate, have been extending free trade through our membership of the European Union. First, we had the common market—the customs union—and then we added the single market to it, removing all the regulatory barriers. Then we encouraged EU agreements with an ever-increasing number of countries, which reduced the barriers yet further in all those markets around the world. Indeed, my right hon. Friend the Member for Wokingham (John Redwood) has said that this helped us to make progress in the rest of the world as well. Not only have we participated in that but, in my opinion, British Governments have been the most influential and leading advocates of that approach inside the European Union.
It is not true to say that we have been an isolated, powerless member, ignored and penalised by the others. I believe that on issues of the economy, on liberal economic policy and on trading policy, the United Kingdom has been the leading influential member in Europe, and I think that was probably as true under the Blair Government as it was under the Thatcher and Major Governments. We were responsible for the single market. All the way up to the Cameron coalition Government, we were in the lead in Europe in pressing for the EU agreements to be extended to other countries.
I do not remember even Eurosceptics bothering to raise much objection to that policy. Even during the referendum, I did not hear any Brexiteer, including the ones I debated with, saying that they wanted more protectionism or that they wanted to withdraw from all that. Dan Hannan is one of the most articulate advocates of the Eurosceptic cause, and I debated with him twice in town hall settings during the referendum. I always got the impression that he was in favour of the single market. Again it is important to stress that it is possible to leave the European Union and to stay in the single market and the customs union. There is no constitutional or legal barrier to that happening, and the Commission has made it plain that it could be on offer. However, if we are not going to do that—for reasons that I do not understand—we will have to replicate it pretty well.
Peter Kyle (Hove) (Lab)
Will the right hon. and learned Gentleman give way?
Peter Kyle
On a recent visit to Norway with the Business, Energy and Industrial Strategy Committee, we heard Norway’s lead negotiator with the EU explain that, being outside the customs union, Norway is in a permanent state of negotiation with the EU regarding trade and customs. He said that Norway would sometimes win a concession, only to lose it in a negotiation a couple of years later. Is not this precisely the status that businesses come to Britain to avoid?
Mr Clarke
I quite agree. The Norwegians have a second-best solution by a good long way. When I was Chancellor, we were engaged in negotiating with the Norwegian Government and with other would-be new members over full membership of the European Union, which on the whole the entire Norwegian political class, left and right, supported. The same thing happened here during the referendum, when every significant political party in this country was in favour of remaining, with the exception of UKIP and the Democratic Unionist party. The Norwegians came out with not a bad compromise, but it was far less satisfactory than the one we are starting from as we negotiate now.
Mr Clarke
With great respect to my close ally and friend, I must make a little progress and finish making this point. I might already have had my 10 minutes.
The theory is propounded to the British people that we somehow have nothing to do with these EU trading arrangements and that somehow, when trade deals are done, grey men in the European Commission secretly impose upon us all sorts of restrictive terms. Indeed, the right-wing press give the impression to all their readers that that is what we are facing now. They suggest that Jean-Claude Juncker and Michel Barnier are somehow plotting against us, that the whole thing is being done by unaccountable Eurocrats who are trying to take revenge on us, and that the trouble with our EU trade deals is that we have no say in them and they happen mechanically. That is complete rubbish, and it is rubbish that has been propounded for the last 30 or 40 years.
The Commission does have some roles that our civil service does not have, but basically it can negotiate only if it has the approval of each and every member state’s Government. It negotiates only within a mandate that the states have agreed. In my own ministerial experience of EU trade and economic affairs, the bigger countries —particularly Britain—have a huge influence on what is being negotiated. In my last job in the Cameron Government, when I was in the Cabinet Office without portfolio, I was asked by David Cameron to lead for us on the EU-US Transatlantic Trade and Investment Partnership deal. I spent time in Brussels and Washington doing that. I cannot say that I played a key role, but the whole point was that the British were keen advocates of that, along with the Germans, the Italians and the French. We were all close to what was going on, and seeking to find out where things were going and whether we could push it. No deal has ever been done by the EU with any other country that anbody has ever objected to in the United Kingdom. For example, no British Government ever protested about the EU deal with South Korea, which is one of the better ones that we have achieved recently. No one ever told me they were against it.
Norman Lamb (North Norfolk) (LD)
Will the right hon. and learned Gentleman give way?
Mr Clarke
I really should not, because the Speaker will get extremely annoyed. I must come to a quick conclusion and I wanted to touch on Ireland. I apologise to the right hon. Gentleman, but other people must get in.
It is an utterly ludicrous idea that it would somehow be better if we do things on our own. The countries always cited are the United States, Australia and New Zealand, and they will do deals with us because they all want to sell us foodstuffs. There is not a great deal of trade that we can add between us and New Zealand and Australia, and the Americans are desperately keen to sell us their beef and their chicken. As someone has already said, all trade deals are not done by a sovereign country saying, “Of course we are not binding ourselves to do anything.” They involve the agreeing of market regulations and of the trading rules that will apply. We would not say, “It’s all going to be decided by the British courts.” There would be an international arbitration agreement to which businesses and countries could look if one side started breaking its treaty obligations. The Americans will say, “Give up these European food safety and environmental regulations, and we will trade with you on ours.” If we let in chlorinated chicken, hormone-treated beef and genetically modified crops— personally I am not convinced that they are the health hazards that most people in the country seem to believe they are—that means new barriers with Europe, which will not let those products go straight through, and we will probably lose a large part of our biggest market, for food and agricultural products, which is in Europe.
I have one final point to make on international trade and about where the debate is unrealistic. WTO rules have suddenly been elevated to some mystic world order that means that our new trade agreements will somehow be much better. I wish that were true. This country does abide by WTO rules, but they are nothing like as comprehensive as they ought to be because the Doha round failed. The Americans take no notice of the WTO. The Americans and the Chinese are about to start a trade war, and everything that they are doing is in total breach of WTO rules. We will not get a deal with Donald Trump subject to WTO rules. He will not even appoint judges to the WTO court, because otherwise it might do what is usually its major duty, which is settling disputes between states.
Going back to what the right hon. Member for Normanton, Pontefract and Castleford said, we want trade with Europe that has no barriers between ourselves and Europe. It will require some ingenuity to find some basis on which we might still be able to do trade deals with other people, but the idea that some marvellous new global future with fantastic new trade deals is about to open up is hopeless. If someone can get the Americans to open up their public procurement to international competition and give up the “Buy America” policy or to open the regulatory barriers that they have put in the way of professional and financial services, they will be a miraculous negotiator, because we could get nowhere when Obama was in power. I do not think that the present Administration are offering us anything; they just want their beef to come here.
Finally, on Ireland—I will be much shorter on this because it is a big question that has been touched on already—it is absolutely critical that we do not break the Good Friday agreement. It is quite obvious that most people on this side of the Irish sea had never thought about Ireland when we were debating during the referendum and when they were propounding their policies. The problem of the Good Friday agreement has been addressed by most Brexiteers by them saying, “Surely that’s all over now? Isn’t it a nuisance? What an irrelevance. Let us break it now, because it no longer matters. It is far more important that we get the kind of hard Brexit that we want.” That is very dangerous.
The Good Friday agreement is one of the major achievements of the British Governments of my time. It was negotiated with the Americans, with the Government of the Republic of Ireland and with every section of opinion in Northern Ireland. It brought an end—almost; it is the end, I hope—to 200 years of the troubles in Ireland after they erupted into violence. When the troubles were under way in the ’70s and ’80s we lost more policemen and soldiers in Ulster than we did in Iraq and Afghanistan put together. The agreement was a splendid achievement for John Major and Tony Blair, so to say, “What an inconvenience. It is getting in the way of our leaving the customs union,” is very dangerous.
I thought that the Government had accepted that. Indeed, I think they have done so formally on two occasions. First, we had the Prime Minister’s Florence speech, which addressed the matter. Talking about the discussions she had had with Europe about Northern Ireland, she said that
“we have both stated explicitly that we will not accept any physical infrastructure at the border.”
That was solemnly agreed. It was the agreed Cabinet policy. The Foreign Secretary made a strange speech before the Florence speech and a statement shortly afterwards that gave the impression that he was trying to undermine the speech, but I am sure he was not. That statement is already agreed Government policy.
Secondly, we finally managed to make progress by finishing the withdrawal agreement, and we published the texts of what had been agreed. As people have said, there are all these other possible solutions involving using congestion charge cameras and things to avoid issues at the border, but I do not think that they will get very far. We have already committed ourselves to the following:
“In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation”,
which I think means pretty well full regulatory convergence. As someone has already said, the chief constable of Ulster has said that we cannot have infrastructure at a new hard border. It would outrage nationalist and republican opinion across the whole island and take us right back to all the problems we had. Symbolism is huge in the politics of Ireland and always has been, and it would be grossly irresponsible to put a hard border in the middle of the island of Ireland again. We have never been on such good terms with the Government of the Republic of Ireland since the Republic was founded.
If we have those arrangements at the Irish border, the same arrangements will of course apply to Holyhead and to Dover. That is what I want to see. We want no new barriers and no customs processes. We want the necessary level of regulatory convergence. Obviously, the easy way to do that is to stay in the customs union and stay in the single market. If not, we will need what I think the Prime Minister described as a “customs procedure”, which will be something that looks remarkably like the single market and the customs union.
The customs union is what today’s business is about, and it would do terrible damage to this country if, for strange ideological reasons in the confused aftermath of a misguided referendum, we were to take such a foolish step as not to replicate the customs union in any future arrangements.
Stephen Doughty
On a point of order, Mr Speaker. I apologise for interrupting this important debate on a topic on which I have strong views, but something has come to my attention in the last few moments. As you will be aware, the Home Secretary endured some strong questioning both this morning and at yesterday’s sittings of the Home Affairs Committee about removal targets. The BBC’s political editor is now reporting that the Home Office in fact intends to scrap the internal removal targets, so I wondered whether you had received notice that the Home Secretary plans to come back to clarify the statement that she made earlier, which was of course a clarification of statements made by her and her officials yesterday and, indeed, by the Prime Minister, who is responsible for this mess starting in the first place.
Mr Speaker
I am very grateful to the hon. Gentleman for his point of order. The short answer is no. I have been attending to my duties in the Chair since 9.30 am without interruption. It would have been perfectly possible for somebody to beetle into the Chamber to advise me of a Minister’s intention to make a statement on this matter but, as a matter of fact, that has not happened.
I know the hon. Gentleman is always looking onward and upward—he is an optimistic fellow—and, although there is no great likelihood of a statement on the matter today, as he contemplates the joys of his weekend ahead in Cardiff South and Penarth, he can always look forward to Monday.
Kate Hoey (Vauxhall) (Lab)
Mr Speaker, I very much think that I will not need to take cognisance of your allowing me longer than Members who will speak later.
I see the right hon. and learned Member for Rushcliffe (Mr Clarke)—my constituent—regularly and I congratulate him on his speech. He said that he agreed with every single word of the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), who moved the motion, and I can say—very carefully—that he will probably not agree with a single word that I say. I feel a little alone today. We will have an important debate about this issue in a few weeks’ time, when there will be a very different tone in the Chamber, and I hope that saying my few words today will not stop my being called when it comes to our real debate on this issue.
The right hon. and learned Member for Rushcliffe said in the final sentence of his speech that we should stay in the customs union and the single market, but there is no doubt that he was really saying that we should stay in the EU. I am afraid that a lot of Members in the Chamber are using the issue of the customs union as a way of restarting the process of trying to stay in the EU. They will not achieve that, but they are sending a message that the European Union will love. The EU will love seeing such division in this Parliament and that we cannot unite in telling it that we want a proper agreement in which we do not need tariffs and under which we can work with the EU as we would want to work with the rest of the world.
Mr Clarke
The hon. Lady does not normally use a European debate to make the allegation that this is just a subtle way of staying in the EU and defying the referendum. She will recall that during our eight days in Committee on the European Union (Withdrawal) Bill, no amendment was tabled as an attempt to stay in the European Union. Nobody has cast a vote in this House to stay in the European Union. Although there have been only two speeches so far, there have been many interventions, and nobody has stood up to demand that we stay in the European Union. Of course, the private opinion of many Members—the majority, I think—is that it would be better if we stayed in the European Union, but we are working on the premise that, if we do leave, we must minimise the damage.
Kate Hoey
My point, of course, is that if we were to stay in the customs union, that would be seen as a transition before going back in again. For a start, staying in a customs union is not taking back control of our trade, and I will come back to that in a moment.
Members who want to stay in the single market have lost that argument because the previous Prime Minister was very clear in public, on television and in the House that a vote to leave the European Union would be a vote to leave the single market. The public who voted to leave, and even those who voted to remain, understood that a vote to leave was a vote to give up the treaties of the European Union. Within those treaties, of course, is where we find the customs union.
I have been in this place long enough to remember the great and wonderful MP for Eton and Slough, Joan Lestor. She was a principled and doughty champion of the developing world. I remember, and have since looked up, one of the speeches she made back in 1971 opposing the UK joining the European Economic Community. I cannot remember whether the right hon. and learned Member for Rushcliffe was here in 1971—I know he was here a very long time ago—but he knew Joan Lestor well. Sadly, she is no longer with us. It is worth reading part of that speech:
“The political significance of British entry into Europe will have far-reaching effects upon the third world, the developing world.
Because of the protectionist policies of E.E.C. we shall not close the narrow channels between the rich and poor nations but rather widen them. Much has been said about the ability of E.E.C. to increase assistance to the developing world and to guarantee that the Community will continue to be outward looking in the future.
I cannot understand—and nobody has explained this to me from either side of the House—how an organisation like E.E.C., which everybody agrees is based on a protective tariff wall to which this country must agree as part of the price of entry and which will mean erecting a fresh tariff barrier against helping other parts of the world, can be said to be outward-looking. I do not believe the interests of the E.E.C. are identical with the interests of the smaller, developing and weak nations of the world.”—[Official Report, 21 October 1971; Vol. 823, c. 954.]
I will take Members back a little further to 1962—I genuinely do not think the right hon. and learned Gentleman was here then—and the words of Clement Attlee:
“I think that integration with Europe is a step backward. By all means let us get the greatest possible agreement between the various continents, but I am afraid that if we join the Common Market we shall be joining not an outward-looking organisation, but an inward-looking organisation.”—[Official Report, House of Lords, 8 November 1962; Vol. 244, c. 428.]
All these years later, some things have changed, but the European Union is still an inward-looking organisation. Do we really want our future arrangements to be tied to that?
The EU customs union is not a progressive policy, and it is certainly not one that anyone who vaguely calls themselves of the left should desire to retain. That is probably why there are so few customs unions in the world. The protectionist external tariff around the entire European Union prevents poor developing countries from accessing our markets on equal terms, as many of us saw when we met members of the Commonwealth who were here last week. They are desperate for the changes that would come about if we were no longer in the customs union. For months if not years, we have heard the people behind the motion proclaiming that the EU market is singularly valuable, yet this policy denies the poorest people in the world the ability to freely trade with us or with the rest of the EU market. To make matters worse, the tax paid is largely siphoned off to Brussels, with UK consumers seeing little or no return.
In 2018, surely we want the development and growth of the poorest nations so that they are successful through trade, not reliant on aid. The customs union is a deliberate and persistent barrier to realising that. Outside the customs union, the UK could immediately reduce or remove these tariffs, becoming a great friend to the world’s poor.
Alex Chalk (Cheltenham) (Con)
I am listening carefully to the hon. Lady but, with respect, she is rehearsing familiar arguments. What is her answer to the point on Northern Ireland that has been expressed?
Kevin Hollinrake
We spend a lot of time in this Chamber developing new regulations and rules that put costs on business. They might be environmental regulations, workplace regulations or animal welfare regulations. If the hon. Lady is talking about doing a free trade deal with nations that do not have such high standards, would she not be putting UK businesses at a significant disadvantage?
Kate Hoey
There is an issue there, but it is something that we can solve through negotiation and discussion. We do not solve it by putting up an immediate barrier to countries that desperately want to benefit from trading with us but are currently prevented from doing so.
The public’s expectation when they voted to leave, or even when they voted to remain, was that if we chose to leave, we would regain our trade policy. I do not think that we can do that other than outside the regressive customs union.
I will move on to Northern Ireland in a moment, but let me respond to a number of points that have been made in various ways. Why should we not want to trade with the rest of the world? Why are we being weak? Why can we not get our own trade deals? The EU takes so long to get a trade deal. We have seen how long it has taken, and we can do so much better.
Ruth George
Businesses in my constituency have expressed huge concern that, when we leave the EU, we will cease to receive the preferential tariffs that we currently enjoy with 188 countries outside the EU. Those businesses will cease to have the same competitive level playing field with EU countries that they have now, and by the time we have these free trade agreements, they will have lost their trade.
Kate Hoey
The problem with our staying inside a customs union is that we would then be subject to the decisions of a European Union of which we are not a member. Let us not forget that many businesses in this country do not trade with the EU at all, but are bound by all the rules, regulations and paraphernalia that go with EU membership. In any kind of customs union, I cannot see that the EU would allow the kind of things for which some of my colleagues are pushing.
While the EU accounts for 40% of our trade, that is because the arrangements imposed on us by our EU membership concentrate trade within this protectionist block. Although the proportion of our trade with the rest of the world is rising, I believe that the customs union holds us back and we could be doing so much better. We do not seem to have much confidence in our own country and our own businesses. Despite what the EU has insisted on, those businesses have still managed to export, trade and do very well. We could do so much better if we were outside the customs union.
Mr Clarke
I will not intervene again, I promise. It is very courteous of the hon. Lady to give way.
Let us look at China as an important market. Germany exports four or five times as much—I am probably understating it—to China as the United Kingdom does. It is not held back in some curious way by being in the EU, and nor is the growth of all our trade with the wider world held back in the slightest by the customs union or the single market.
Kate Hoey
The right hon. and learned Member and other Members have said that, and we have to make a lot of changes in this country to ensure that we can do much better than has been the case inside the European Union, but being outside the EU and the customs union will be almost a catalyst by ensuring that our businesses have that opportunity and freedom to do better than they are doing at the moment.
Those people who pushed for the Norway option during the referendum campaign and even since seem to forget that Norway is outside the customs union and is doing well. In fact, when I went to a conference in Norway recently, the feeling among people there was that they wanted to get out of the European economic area as well. They are looking to us to make a successful transition from the EU and they will probably follow us.
Kate Hoey
No, I will not give way to my hon. Friend.
I should like to move on to the issue of the border and Northern Ireland. Under the Tony Blair Government, I was one of those who went over and campaigned for a yes vote. I was very keen to see what happened happen, and I pay tribute to all those who made that happen. There is no doubt that there is an issue relating to Northern Ireland and the Republic of Ireland, but the European Union is seizing on divisions to pursue certain demands that are just not necessary. It is certainly using the Irish border as an issue with regard to the customs union. EU officials recently said that they had systematically and forensically annihilated the Prime Minister’s proposals for a loose customs arrangement, but in fact they did not do that—they simply refused to discuss any creative compromise. They talk down every British proposal, and they are being helped by some in this Parliament who talk down everything positive that is said about what might be done. Proposals are talked down and talked down.
People need to remember that there is already a legal border in Northern Ireland for excise, alcohol, tobacco, fuel duty, VAT, immigration, visas, vehicles, dangerous goods and security. Indeed, the primary function of the hard border of the past was to be a security border, not a customs border. People forget that because they want to forget what happened during those long years of troubles. Today all those border functions are enforced without any physical infrastructure, so adding customs declarations and marginally divergent product standards to the long list of functions that the border already implements invisibly does not require a huge, drastic change to the nature of the border.
Even in the most complicated area—agriculture —the director of animal health and welfare at the Department for Environment, Food and Rural Affairs has already given evidence to Parliament that sanitary and phytosanitary-related risks would not be altered by Brexit from what the authorities are already managing across the border pre-Brexit, and that additional infra- structure at the border would not be needed. There are already cameras—not at the border itself, but further away—and checks are going on all the time. There is intelligence all the time. There is no reason why businesses on both sides of the border that need to move back and forth every day will have any problem.
Lady Hermon
I am grateful to the hon. Lady for allowing me to intervene. I can assure her that I do not forget the appalling years before the signing of the Good Friday agreement.
Will the hon. Lady please address the worrying issue that, if there is in any shape or form a harder border than what we have at the moment, Sinn Féin will exploit that and agitate for a border poll, which would jeopardise Northern Ireland’s constitutional status as part of the United Kingdom? I, as a Unionist, will not tolerate that, and we need to be careful that we address that issue.
Kate Hoey
Of course Sinn Féin would love a border poll, but as the hon. Lady knows, there are regulations about when a border poll can be held, and there has to be a certain ratio of contentment before that can happen. It is almost as if we are being blackmailed by Sinn Féin and those who have been responsible for violence in the past. It is as if we have to shape our whole economic policy and future according to whether some dissidents will start to do dreadful things again. That is not how we should tackle it. We should take those people on and put them in jail, and we should make sure that decent, ordinary people can go about their lives without being attacked and threatened by the idea that if we do not do Brexit in a particular way, terrorism will start again.
Hywel Williams
At the recent meeting of the Brexit Committee in Northern Ireland, the Deputy Chief Constable said that he was absolutely against a physical border post. Was he blackmailing us?
Kate Hoey
No, he was not at all. The problem is that people think of a hard border as big cameras, lights, structures and so on. I remember those, as does my hon. Friend the Member for North Down (Lady Hermon); we all remember what that looked like. No one is talking about having that again, but some people are using it as a way to change the fact that the people of this country voted to leave the EU, the single market and the customs union.
Kate Hoey
No.
I believe that the EU is using the border to try to change our policy. It is obviously unhappy that we are leaving and is doing everything possible. It is being helped by the Irish Government, but the Irish Government should be terribly worried that we will end up with no deal, which is not what anyone wants, because that would really hammer the Republic of Ireland. Varadkar and the Irish Government should get in there and use their position to get the European Union to see some common sense. Such a small proportion of total European Union trade relates to the Republic of Ireland, yet the Irish Government have got into a position where it is their country that the European Union is listening to.
There is a whole dishonesty about the debate in this Parliament, and I hope we do not see that. I mean that not in the sense of people being dishonourable, but in the sense that we are not really saying what we want to say. I hope that I am saying what I want to say: we should leave the customs union and the single market—that was what people voted for. The country will recognise the way in which the debate is now being pushed by those who fought so hard to remain, and people will see though that. We have to go ahead with getting out of the EU, getting our trade deals, getting our laws, and not being subject to the European Court of Justice, which we would have to be if we stayed in the customs union. I hope that today will be the preparation for what will be a very big and serious debate in a few weeks’ time.
Several hon. Members rose—
Mr Speaker
Order. A five-minute limit on each Back-Bench speech will now apply.
Nicky Morgan (Loughborough) (Con)
It is a pleasure to follow three such excellent speeches, two of which I agreed with and one that, as I think the hon. Member for Vauxhall (Kate Hoey) will not be surprised to hear, I did not. However, I do agree with one point that she made. Right at the end, she mentioned a dishonesty in debate, and I take the tenor in which she made that point. Actually, Parliament is doing today exactly what it should do and teasing out the issues in these complex and important negotiations, as my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) said.
The Select Committees are bringing before Parliament the hours and hours of evidence that we have gathered from expert witnesses. I know there is a suspicion of experts, but there are many people who want to share their thoughts, their expertise and the points that they had to get on the record before the Select Committees. It is right that those Committees should have called today’s debate via the Liaison Committee, because this is a very important issue. When the hon. Member for Vauxhall talks about dishonesty, let me say to her that the dishonesty is not fronting up to the issues that we face. We must be able to discuss them, and part of the reason for today’s debate is that we are not having it in the heat of amendments to legislation, when we know there is enormous pressure on Members on both sides to vote one way or another. I hope that today’s debate can remain calm and rational, so that we can get the evidence out there. If there is any doubt about the amount of evidence, Members have only to look at the number of reports on the Table here in the Chamber or the number of reports tagged on today’s Order Paper.
Time is very limited and I do not want to repeat all the points that have already been made, but I want to say a few things, in particular to my party colleagues and party members out in the country, some of whom seem to think that it is an affront for Members such as myself and others with my views to be making these points today. First, the Prime Minister was very clear in both our manifesto and the Lancaster House speech when she talked about wanting a customs agreement. The manifesto talks about a
“free trade and customs agreement”,
and the Prime Minister said in the Lancaster House speech:
“I do want us to have a customs agreement with the EU. Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position.”
Much has been said about free trade agreements and the fact that they will take some time to negotiate, but it is not just the new free trade agreements to be negotiated; it is the ones that we are currently party to that have to be renegotiated. That is a complex project. It will take a long time to make that pulling apart happen, and I do not think that the time necessary for it has been allocated by the Government.
Robert Neill (Bromley and Chislehurst) (Con)
I utterly agree with everything that my right hon. Friend has just said. I joined a free-trading Conservative party that was pro-business. Does she agree that inevitable delays and complexities, the additional form filling that is required and dead-weight costs on businesses can do nothing but reduce the competitiveness of British business, unless we have the kind of effective customs union that she is talking about?
Nicky Morgan
My hon. Friend is absolutely right. The cost to business, as identified already by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), must not be forgotten. This is not just about costs for the Government; it is about costs for business.
Mark Garnier
Just on a small technical point, my right hon. Friend is absolutely right that a trade deal takes a long time to complete and negotiate, but the plan is to transfer across the existing trade deals that we enjoy within the European Union at the early stage and then renegotiate at our leisure where we can improve them, so we will ensure continued business afterwards without deviation.
Nicky Morgan
I understand the point my hon. Friend has made; he is a former Minister and everything else. I will talk about this in a moment if I have time, but the trouble with it is that we have been saying, “The plan is—” for some time now. We had a speech last month from the Prime Minister and we had position papers last summer: “The plan is—”. Time is running out, as we heard from the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), the Chair of the Home Affairs Committee. The hon. Member for Dundee East (Stewart Hosie) is not in his place, but as he said, when we travelled to the United States with the Treasury Committee, the US was very clear: “Yes, you can have a free trade agreement. It’ll be on our terms.”
Let me talk about logistics. As I have said, part of today’s debate is about getting the evidence, and we took evidence in the Treasury Committee from Jim Harra, a senior official at Her Majesty’s Revenue and Customs, who said:
“The key challenge, for example, in ro-ro ports, in contrast with container ports, is that in a lot of them there are no port inventory systems in place.”
We have less than 12 months to go to March 2019 and not that much longer to December 2020, and no port inventory systems are in place. He also talked about ensuring that declarations can be linked
“to the vehicle that is carrying the goods,”
so that they can
“flow off the ferry and we know what…lorry we need to check.”
The British Irish Chamber of Commerce has come up with a proposal for a new customs arrangement. Have the Government been exploring it? Much mention has been made of Northern Ireland, and for me this is a critical issue. I had the pleasure in the 2010 to 2015 Parliament of being a Treasury Minister. I was the Duties Minister, and I visited the Northern Ireland border. Other hon. Members will know far more about it than I do, but it is over 300 miles long and incredibly porous. Had it not been for the policemen I was with, I would not have known which side of the border I was on. It was impossible to tell. Realistically, how on earth is such a border going to be policed? This is not just about the economy; it is about the political and cultural sensitivities of the border. We have already heard about the Northern Ireland Affairs Committee’s conclusion about the aspirational aspects of the technology that might be needed.
This is a debate of the Government’s own making, because as we have heard, time is running out and silence on these important issues is no longer an option. It is completely right that Members of Parliament and Select Committees should ask questions about these issues. What are the Government’s plans? How are things going to work? We have to listen not just to those in the country, but to individuals and business in our constituencies. The Treasury Committee and the Select Committee on International Trade had a joint evidence session this week. When asked about the free trade agreements and the free trade policy that we are apparently going to pursue, Professor Patrick Minford, who many Members on my side of the House will say is somebody we should listen to, said:
“We don’t have any precedents for this.”
This country is being asked to experiment, at other people’s pleasure, with a free trade policy when we do not know what the costs will be for constituents and businesses in this country. I say to my party: if we undermine and ignore the evidence, the peace in Northern Ireland and the business and financial security of people in this country, we will not be forgiven for a generation.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I am glad to be able to speak in this debate, which was secured by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the right hon. Member for Loughborough (Nicky Morgan) and other Chairs of Select Committees.
A number of issues have been raised. In the interests of time, I do not propose to go over them, but they include the issue of no new barriers, the wider issues of regulatory convergence, the need to continue the ease of our trade and the dream of independent free trade agreements closing the gap created by what we will lose as a result of leaving the European Union, the single market and the customs union.
I want to raise a few of the wider economic issues that have not so far been addressed in this debate. The predecessor to the EU customs union first came into being about 65 years ago with a treaty establishing the European Steel and Coal Community. Some people seem to think that that makes it an anachronism. There is also an argument that the UK is now mainly a services economy, so an agreement that eases trade in goods is no longer as relevant as one that eases trade in services.
Putting aside the fact that goods remain around half of UK exports and so are still important and essential in their own right, the argument fails to grapple with the complexity of the modern economy that any stark dividing line between goods and services is false. Being in the customs union has relevance for services as well as for goods.
The UK economy is bound up in a complex network of EU supply chains for producing intricate products such as cars and pharmaceuticals. A substantial share of the value of these goods, ranging from 20% to 40% across most regions, according to estimates from the UK Trade Policy Observatory, is the services that go into them. Therefore, when a car rolls off the production line in Sunderland, Ellesmere Port or Luton, the value of that car includes the cost of accountants, administrators and auditors who the car company employs in making it. These services are then exported indirectly when we sell these cars abroad. Therefore, it is not only the goods but indirect services exports that rely on a near seamless passage that the customs union provides.
Robert Neill
The hon. Lady makes a very important point about the linkage between goods and services. A customs union does not deal with the issue of services, but does she agree that services do benefit indirectly, because many goods are exported with a financial service product attached—an insurance policy attached to a car and other forms of warranty, for example? The two are inter-linked.
Seema Malhotra
The hon. Gentleman makes an extremely important point and, indeed, takes my argument further. I thank him for his contribution.
The risk to these exports, both of goods and services, is not distributed evenly across the UK. The implications for regions in the UK, particularly the most affected regions, are stark. In Wales, the north-east and Yorkshire and the Humber—areas that can least afford an economic shock to their manufacturing bases—an estimated 55% to 60% of their indirect service exports goes to the EU, and they are therefore reliant on the customs union for efficiency and speed.
It would be a dereliction of our duty if we exposed regions, families and businesses to greater risk in a world that is already rife with uncertainty without a proper debate on the implications for their prosperity, especially as the most affected regions are also those least well positioned to respond to any shocks arising from leaving the customs union. As the City Region Economic and Development Institute at the University of Birmingham found, Brexit will aggravate, not reduce, inter-regional imbalances. Its research also found that the regions most exposed to Brexit are not remain-voting London and Scotland. For this risk of further damage, what do we have to look forward to in order to mitigate those effects? By the Government’s own analysis, whatever model for leaving the European Union that we take, there will be, at best, between 2% and 5% less growth over the next 15 years. That means lower wages than would otherwise have been the case, and lower tax receipts and therefore less in our public purse to redistribute resources to the very areas that expressed discontent in the referendum and, indeed, to go into our public services.
This issue is not just about economic divides. Perhaps I can come to my closing remarks with a few comments about Northern Ireland. It is clear to most—and I suspect even to the Government now—that there is no technological solution to achieving no hard border without infrastructure. The “Smart Border 2.0” report, which is often cited as an option, has rightly been acknowledged as insufficient by the Government. Perhaps I could quote from the report from the Exiting the European Union Committee. It says that
“we remain of the view that we cannot see how it will be possible to maintain an open border with no checks and no infrastructure if the UK leaves the Customs Union and the Single Market.”
I support the motion before the House today, because the customs union is vital to ensure that the complex supply chains within our economy continue to function effectively. This is also an argument based not just on politics and ideology, but on academic research and evidence. Anyone with a genuine interest in greater equity in the distribution of economic gains in our country cannot take these warnings lightly. For Ireland, supporting membership of the customs union is also about accepting the reality that, without it, a border in Northern Ireland is eventually inevitable. I cannot vote in any way in this House other than the one that makes a border in Northern Ireland less likely to happen.
Anna Soubry (Broxtowe) (Con)
I join all those who have spoken today, other than the hon. Member for Vauxhall (Kate Hoey), and endorse and embrace pretty much everything that has been so ably said. As my right hon. Friend the Member for Loughborough (Nicky Morgan) said, this is not just a simple case of our having a debate, which of course we should have had some time ago in order to assist the Government in this extremely difficult process, but of having the debate that we should have had in the run-up to the EU referendum.
I do not know whether the good people of Vauxhall actually did sit and discuss the intricacies of the customs union and the single market. Perhaps they did. That might explain why, of course, they voted to remain in the European Union. What we are seeing—I am sorry that I am repeating myself here—is the dawning of a Brexit reality. In that reality, businesses the length and breadth of our country are worried. They are extremely worried, especially those in the manufacturing sector.
On Tuesday, a real-life business in my constituency, which employs 750 people, came to see me. Such is the atmosphere in this country that it has not allowed me to tell Members its name, because it is frightened of the sort of abuse that many Members on these Benches have received and to which we have become accustomed. We will not give up, and we will speak out, because it is not about us, but about the generations to come and indeed the people in our constituencies who now, in the real world, face the real possibility of losing their jobs.
What did this company tell me? It makes a world-leading medicine. I am enormously proud to have it in the borough of Broxtowe. The reality is that, as it uses specialised medicinal ingredients, it imports them into our country. In Broxtowe and Nottingham, it puts them altogether and makes a world-leading medicine. Some 60% of its exports go directly to the European Union. Tariffs do not concern it so much. They concern the car industry where margins are so tight that any imposition of a tariff simply will see those great car manufacturers, which employ 425,000 people—people, whom I am afraid, the hon. Member for Vauxhall, casts to one side—move their production and new lines to their existing facilities in countries such as France, Germany and other places.
Returning to the pharmaceutical company that came to see me, any delay at all of those basic ingredients will have a considerable effect on its ability to produce, and time costs money. Any delay also means that it has to look for warehouse spaces—and it is doing this now—so that it can stockpile. I am talking about the sort of expanse that we can barely begin to imagine. It is looking for warehouses so that it can store and stockpile both the ingredients and the finished products. It fears that any delay will affect its business of exporting into the European Union.
Albert Owen
As a member of the Business, Energy and Industrial Strategy Committee, I met some pharmaceutical companies. One thing they told us, which was quite stark, was that research and development is done in this country, and manufacturing in the Republic of Ireland, and the product is then transferred back to the UK to go to mainland Europe. They will be paying tariffs perhaps half a dozen times, adding costs to our NHS.
Anna Soubry
The hon. Gentleman speaks with authority because he knows the reality. He will also know that pharmaceutical batches must be checked to ensure that the quality and ingredients are right. That work has to be done in a European Union country in order for those products to be sold within the European Union, so this pharmaceutical company it is going to replicate exactly the same brilliant labs that it has in Broxtowe and in Nottingham over in Amsterdam. This is the stuff of madness. The company is looking at flying qualified, high-skilled technicians out to Amsterdam on a weekly, if not daily basis, to do the work there. Replication adds to costs, and I have no doubt that it will not be long before the senior managers simply say, “Why on earth are we doing it in the UK, facing the end of the customs union and the single markets, when we could simply go into another country in the European Union and replicate our manufacturing process there?”
Kevin Hollinrake
Is my right hon. Friend therefore proposing that we stay members not just of the customs union, but also of the single market?
Anna Soubry
I absolutely am. I made it very clear to my constituents when I stood for re-election in Broxtowe last June that I would continue to make the case for the single market and the customs union—oh, and by the way, for the positive benefits of immigration—and they were good enough to give me and our party their vote. As my right hon. Friend the Member for Loughborough said, each and every one of us must look deep into our hearts when deciding the future relationship that we will have with the European Union. It is imperative that we put our country and the best interests of our constituents first and foremost—and, in particular, over and above any ideological drive that too many people have—in this most critical of debates.
The final thing I want to say is this: I get rather agitated at the notion that we are about to be global Britain. Why? Because we are already global Britain. I had the great pleasure of going to the far east with David Cameron, and I went to China with George Osborne. Why did we go to these countries? To do trade. In fact, to do more trade; we already trade all around the world. That ability to trade should not be diminished in any way, and it will not be by our membership of the customs union. We have struck up well over 40 deals, and at the heart of those deals we made the case for free trade in a way in which no other European Union member state has done. We are recognised for our strong belief in free trade and we have achieved that by virtue of our membership of the customs union.
I am old enough to remember when we were described as the sick man of Europe, and we were. The reasons that we became such a hugely successful economy was because of our membership of the single market and the customs union. Other Members—especially my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), who was undoubtedly around at the time— have referred to Margaret Thatcher’s great speech, when she not only described the single market, but was the finest exponent of it. She believed in the single market. As many of us now know, she promised the Prime Minister of Japan that our country would never leave the single market, and that is why the Japanese invested in our country on the scale that they did.
I hope that the House does not have to divide tonight; nobody wants that. But we all want the best deal for our country, and that is in the customs union—and, by the way, the single market.
Rachel Reeves (Leeds West) (Lab)
I will focus my remarks on the work of the Business, Energy and Industrial Strategy Committee regarding our relationship with the European Union and the customs union, and on the impact that leaving them will have on British businesses.
A couple of weeks ago the Select Committee visited Norway, where we were looking at electric vehicles. Of course, while we were there, we discussed with the people we met the border between Norway and Sweden. Norway is not in the customs union, but Sweden is in the European Union and therefore part of the customs union. Trade is not frictionless along that border. There is physical infrastructure and there are sometimes queues. The goods trade between Norway and Sweden is worth £13 billion a year. Goods going through the port of Dover alone are worth about £120 billion a year, and trade between Northern Ireland and the Republic of Ireland is worth more than £5 billion a year. This is not straightforward. There are huge risks and costs of us coming out of the customs union.
My Committee has produced five specific reports about the effects of leaving the European Union, on the civil nuclear sector, aerospace, the automotive industry, pharmaceuticals, and the food and drink sector. We received almost 100 pieces of written evidence during our inquiry and took oral evidence from more than 30 witnesses. Pretty much every witness, apart from the chief executive of JD Wetherspoon, spoke of their fears and worries about leaving the European Union and specifically about leaving the customs union, which is why I am so pleased that we are having this debate.
The Committee heard time and again that any border delays would undermine just-in-time delivery systems; force companies to expand warehousing facilities massively, at a significant cost, as the right hon. Member for Broxtowe (Anna Soubry) said so eloquently; and put at risk time-sensitive imports and exports, particularly of food, medical radioisotopes and many pharmaceutical products.
Catherine West (Hornsey and Wood Green) (Lab)
Is my hon. Friend aware that the members of the International Trade Committee made a similar finding when we visited the border between Canada and the United States? We saw very long delays there, and that was between friendly countries. Transposing such a situation to Northern Ireland would be a nightmare, especially with all the rifles on the shoulders of border guards and so on.
Rachel Reeves
Yes. Of course, this is most keenly felt and apparent along the border between Northern Ireland and the Republic of Ireland, as other Members have pointed out. But this is an issue not just in Northern Ireland, but at every port in the country. As an island and a trading nation, leaving the customs union will have a huge and devastating impact on us.
Robert Neill
To reinforce the hon. Lady’s point that her findings apply everywhere, is she aware that the report of the Select Committee on Justice about the Crown dependencies identified precisely the same issues? For example, avionics parts—a key part of the Isle of Man’s economy—are in international supply chains. Specsavers exports internationally from Guernsey into the EU, and fishermen in Jersey and Alderney need to land their fish in France because that is the way that it fits in with the real-time supply chain. All that is assisted only by being in the customs union.
Rachel Reeves
The hon. Gentleman and I have a long history, as we fought the Bromley and Chislehurst by-election against each other in 2006. Today, however, I cannot find a word on which I disagree with him; he is absolutely right. The work of his Select Committee and so many others mean that we can bring this evidence to the fore, and raise the concerns of businesses, the people who work in them and the trade unions in all our constituencies. That is why the work of Select Committees is so important, and it is also why this debate, which was called by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), is so important.
I will now touch on a few pieces of evidence given to the Business, Energy and Industrial Strategy Committee that really bring home what we are talking about, especially regarding the effects of which we are fearful. Honda, which produces cars in Swindon, said that just a 15-minute delay at the border would cost it £850,000 a year. If hon. Members multiply that by the number of minutes or hours for which goods and components might be delayed, and multiply that across the number of car and component manufacturers in the country, they will get a feel for the sort of impact that we are talking about. It is estimated that Ford would have to fill in 115,000 import declarations at a cost of £35 per declaration for imports from the European Union, resulting in a total cost of £4 million, as well as the additional administrative costs.
Rachel Reeves
I will just make a little bit of progress.
Diageo uses 11% of Ireland’s cream output every year in the production of Baileys. That is quite a staggering statistic. Some 18,000 trucks cross the border between the Republic of Ireland and Northern Ireland every year in the production of Baileys. Diageo estimates that delays at the border would cost it £1.3 million a year, and even greater costs in the supporting supply chains. It went on to say that even small hold-ups to the process would be a huge problem.
Both Nestlé and Honda said in evidence to us that companies produce for the market that they are supplying to. Therefore, even if we did secure free trade agreements with Asian and American countries, and others, we would not see a huge increase in jobs and investment here, at least in the sectors that we looked at. Ferrero Rocher told us that 5,000 trucks a year go between the UK and the rest of the European Union. It talked about costly delays and the effect on the freshness of its goods. Businesses said that border delays would be very expensive. Leaving the customs union, they told us, was about damage limitation rather than seeing and forging new opportunities ahead.
My own view is based on the evidence that the Committee has taken, which leads me to a very simple conclusion: we need to remain in a customs union to retain the benefits of frictionless trade that we enjoy today for the good of jobs and investment in our country.
Matt Warman (Boston and Skegness) (Con)
I am delighted that this debate has been extended to 5 o’clock, but I am afraid that my duties as Parliamentary Private Secretary in the Northern Ireland Office mean that I will not be here for the wind-ups. I apologise to the House for that.
My constituency, as I have said many times in this place, voted more strongly than anywhere else in the country to leave the European Union, and I, as an individual, voted to remain. I suppose that I am therefore one of those whom the Father of the House teasingly described as someone who has undergone a damascene conversion. One of my constituents suggested that I had undergone a damascene conversion from kamikaze to life support when I voted to trigger article 50.
My starting point is the same as the point that I made when we were fighting the referendum campaign—we have to respect the result. That means that we have to define what we discussed during that campaign. In my constituency, as in many others up and down the country, the two defining points that we discussed were ending freedom of movement and being able to strike our own trade deals around the world. Those two things—although we may not have expressed it in these terms at the time—require us to leave the single market and to leave the customs union.
If we are to respect the way that people voted, it is impossible to get away from those positions, for two very simple reasons. First, freedom of movement is absolutely bound up with our membership of the single market. That point is probably more accepted by those who have called this debate than the second point. On the customs union, no one on any sensible side of the debate—certainly no one in my constituency—is arguing for a compromise in which we are unable to control our own trade policy but have to take the rules that the European Union makes. No one is suggesting that there is a compromise that both upholds the result of the referendum in allowing us to go and strike our own trade deals around the world and allows us to remain in the customs union. I simply do not see how today’s proposal would allow us to respect that.
Antoinette Sandbach
Many of my constituents say to me that they voted to join a common market. If there were a compromise that delivered a common market but took them out of the political institutions of the EU, they would accept that as an acceptable compromise, and it would bring together remainers and leavers.
Matt Warman
I would like to agree with my hon. Friend, in the sense that if the European Union were to offer an option that said, “Remain in the customs union and remain in the single market, but you don’t have to have freedom of movement and you do have the ability to go and strike your own trade deals”, then a lot of us would think that that was a very attractive move. However, that would make it a better deal to be outside the EU than to be in it.
I simply do not see how it is a sustainable, coherent position to think that the European Union would offer us that sort of compromise, so we have to live, as Opposition Members have so often said, in the real world. That requires us to say that people did not vote for the European Court of Justice to continue to have its rulings being valid in this country when we play no part in that organisation, and people did not vote for us to have no remedies on our trade policy. What people voted for, whether some in this place like it or not, is a clean break, because that is what allows us to have the control that they wanted. Many Conservative Members accuse the Opposition of trying by subterfuge to force us to remain in the European Union. However, the more we pursue the line that we can remain in the customs union but also do our own trade deals, the more we not only undermine faith in the referendum result overall but undermine faith in democracy as a whole, and we have to preserve that above all else.
Matt Warman
My right hon. Friend proclaims, “Rubbish!”, from a sedentary position. I think he knows me well enough to know that I am not an ideological hard Brexiteer, by any means. However, surely we all have to accept that we should be ideological about preserving the primacy of democracy. If we in this place are not all democrats, then we have a real problem.
Mr Speaker
Order. Before the right hon. Lady intervenes, can I make this point? People are perfectly entitled to intervene, but if they keep doing so, particularly those who have already spoken, they do so knowing that they are stopping other colleagues speaking. Let us be clear about that. Does the right hon. Lady still wish to intervene?
Matt Warman
I was about to say that my right hon. Friend is talked of frequently in my constituency. I say that because I know that she does not seek to undermine democracy. I know that she, of all people, is a democrat. However, the impression that is too often given outside this place is that people here do not trust the result and that they do not trust people out there in this country to have made a decision.
Matt Warman
No, because I will upset Mr Speaker, who has already been very kind.
If we are to respect the result of the referendum and are not to become a silent partner in EU trade deals, we have to ensure that we do not become simply a rule-taker. We have to ensure that all the debates that were gone through in the referendum campaign are upheld and defended. I say gently to my own colleagues that democracy must come first.
Hywel Williams (Arfon) (PC)
Two great problems have plagued Governments in this place for over 200 years —the Irish question and the European question. It takes a Government of some genius to bring those two questions down on their head simultaneously. I have been waiting a long time to say that.
I welcome this opportunity to confirm that my party’s policy is, and always has been, to stay in the customs union. We are a pro-European party—not blindly so, because we have long-standing criticisms of the European Union, but we have always been in favour of co-operating with people who share our views and our values. But that is all for a wider debate. Today I want to concentrate my remarks on the relationship with Ireland.
Caroline Lucas (Brighton, Pavilion) (Green)
Will the hon. Gentleman give way?
Caroline Lucas
I am very grateful. Does the hon. Gentleman agree that generations to come may well look back at this moment and find it utterly incomprehensible that we could even have been considering sacrificing the Good Friday agreement on the altar of this ideologically driven Brexit? Five former Northern Ireland Secretaries have said a hard border threatens the very existence of the Good Friday agreement. Does he agree that that would be unforgivably reckless and careless?
Hywel Williams
As I said in an intervention, I have recently been to South Armagh with the Select Committee. I could scarcely spot the difference between the north and the south. The only difference was that the tarmac was slightly different, with the better tarmac being on the southern side. That is a light remark, but it does make the point that the Good Friday agreement has brought peace almost entirely to the island of Ireland. We gamble with that at our peril, and we will not be forgiven if it is lost. That is certainly the point made by my Irish friends. I should declare an interest: if I want to visit an easy-going and entertaining European capital, Dublin is a good deal closer to me than Cardiff or London, for that matter. My Irish friends tell me how much they value that link, and that is what I want to talk about.
I have been cautioned by Democratic Unionist party colleagues not to embroil myself in their domestic matters, but this is particularly relevant to north Wales and my Arfon constituency. There is an east-west element to the question of the border, as well as the north-south element between Northern Ireland and the Republic, as the Brexit Secretary acknowledged yesterday when he appeared before the Exiting the European Union Committee. The north-south element gets the attention, but the trade between the UK and Ireland, and specifically for me the relationship between Wales and Ireland, is hugely important and larger.
The east-west trade between Irish and Welsh ports is much more significant than the north-south trade, though it does not have the same political significance, because of the historical and tragic troubles they have had in the north of Ireland. The Secretary of State noted that the east-west trade is not only between the Republic and the UK, as there is also significant trade between Northern Ireland and the United Kingdom via the Republic. It is a complex relationship.
We have heard a great deal about the potential problems in Dover, should there be border checks, of potential tailbacks all the way to London, with perishable goods spoiling and costs to business. The same could be said for Holyhead, though possibly at a slightly less intense level. I know that the hon. Member for Ynys Môn (Albert Owen) has pushed that matter very hard indeed and is always ready to make the point. I am glad to support him this afternoon. The same point could also be made about the link with Fishguard in south-west Wales.
The lack of attention to the Wales-Ireland link is significant for not only our local economies in the north-west but the Welsh economy in general. The problems are quite obvious. In Holyhead, there is absolutely no room at the port for the expansion required to deal with any sort of customs checks. That is a practical problem. The A55, which crosses north Wales, is not a good road in many ways. It has no hard shoulder and no crash barriers in many places. It is a designated Euroroute between Dublin and Moscow, and on to the Urals. There are only two roundabouts on that route between Dublin and Moscow, both of which are in north Wales: one in Llanfairfechan and one in Penmaenmawr. Indeed, we also have two very bad bridges over the Menai strait. Those sorts of practical problems really worry me when time is so short.
The Government and the European Union have provided us with A, B and C options, with A being a comprehensive deal, B being a particular deal for Northern Ireland and C being the rejected backstop of Northern Ireland staying within the customs union. The UK rejects the C option, and the A option of a comprehensive deal is very much favoured. The Secretary of State said yesterday that he reckoned there was a 90% chance of achieving a comprehensive deal—option A—with the European Union, but that leaves us with a 10% chance of option B. I worry that if we have a particular fix for the Northern Ireland problem, we will then need a particular fix for customs between the north and the south. As one former Taoiseach said, that might entail turning a blind eye.
I cannot see how we can have two competing customs regimes between two countries or two economic blocs. I asked the Secretary of State yesterday if he could name a pair of countries that have competing customs arrangements between them. He did not answer, and neither could Pascal Lamy when he was before us some time ago. For all those reasons, I think the customs union is the option to choose.
Sir Hugo Swire (East Devon) (Con)
As we head towards our departure from the European Union in just under a year, I believe that our future trading arrangements are more important than ever. As deputy chairman of the Commonwealth Enterprise and Investment Council, I was involved in last week’s Commonwealth business forum, before the Commonwealth Heads of Government meeting, which was an important event for discussing trade, especially in the light of Brexit. Last year, my right hon. Friend the Secretary of State for International Trade hosted the first ever Commonwealth Trade Ministers’ meeting, and last week the Prime Minister and Secretary of State announced £1.5 billion worth of commercial deals.
According to World Economics, the Commonwealth economy is bigger than that of the current eurozone, while intra-Commonwealth trade has grown faster than the global average over the past 10 years. I fundamentally believe that the diversity of the Commonwealth is a strength in itself, with half of the top 20 global emerging cities within the group. There are 2.4 billion people in the Commonwealth, of which more than 60% are under the age of 29. It is worth remembering, in terms of opportunity for British business, that the middle class of India alone is bigger than that of Europe.
Even the European Commission has conceded that 90% of global economic growth in the next 10 to 15 years is expected to be generated outside of Europe. The Commonwealth’s largest members account for a quarter of the G20 and a fifth of all global trade, meaning that millions of jobs are directly affected through trade between these countries. Since the EU referendum, the Foreign and Commonwealth Office and the Department for International Trade have been building links with the rest of the world, which is a positive step towards higher levels of economic growth. That leadership will place the UK in as strong a position as possible when we eventually leave the EU.
So why should we avoid remaining in a customs union with the EU? The answer is very simple and it is borne out by the facts. The Government have set out to ensure that we are a truly global Britain. As we have heard, remaining inside a customs union with the EU would prevent the UK from committing to that agenda and striking lucrative free trade agreements with countries across the world. Recent data from the World Bank show that the EU27’s share of world GDP has fallen from 25% to 18% in the last 10 years alone. I simply cannot understand why some colleagues would prefer to remain within a customs union with a bloc that is declining in its share of global trade.
It is in the EU’s interests not to impose tariffs and barriers to trade, especially as EU members continue to sell more goods to the UK than we do to them. That point is particularly pertinent when stood next to the fact that the proportion of our exports going to the EU27 has fallen from 54% to 43% in the last decade alone, at a time when our trade with the Commonwealth has increased.
Membership of a customs union restricts a country’s right to trade freely with third countries. Free trade agreements are not, I concede, easy to negotiate, as we saw with the comprehensive economic trade agreement between the EU and Canada. Many of us remember the Belgian region of Wallonia almost unilaterally collapsing that painstakingly negotiated free trade agreement. I for one am not prepared to allow future growth in the UK to be hobbled by a regional Government in another EU country. The possibility of being forced to wait for regional Parliaments in 27 other EU countries to ratify a free trade agreement is wholly unacceptable in today’s world.
I would like for a moment, as a former Northern Ireland Minister, to pause and think about Northern Ireland, which was one of the reasons I voted to remain. I agree with the hon. Member for Vauxhall (Kate Hoey) that we cannot allow the tail to wag the dog, and I very much hope that the Minister for Foreign Affairs in Dublin will in future work collaboratively with both the UK Government and the EU to resolve this. We do not want a hard border, and I am pleased that the Prime Minister has been clear that it would be unacceptable to break up the UK’s common market by having a customs and regulatory border down the Irish sea. We share the same policy goals even if they are achieved by different means.
The British people voted to leave the European Union on 23 June 2016. As someone who campaigned and voted to remain, I was naturally disappointed with the result. However, it is up to us, as representatives, to respect and implement the wishes of the public. I do not believe it is feasible or credible that, when the British people voted to leave the European Union, they did so in the hope that we would remain within the customs union, and I simply do not buy into the idea that people did not know what they were voting for. I find that argument incredibly condescending.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I fully associate myself with the remarks of my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) when she opened the debate and the right hon. and learned Member for Rushcliffe (Mr Clarke), so I will not repeat their arguments now. I will, however, pick up on what my hon. Friend the Member for Leeds West (Rachel Reeves) and the right hon. Member for Loughborough (Nicky Morgan) said: we should be having a reasonable and evidence-based debate. Four of us who have spoken so far have the privilege of chairing Select Committees and seeing and hearing from witnesses directly about what is happening out there on the ground, and it is right that we have this opportunity to pass this information on to the Government and make sure that we have a serious discussion.
The right hon. Member for East Devon (Sir Hugo Swire) spoke about what the public voted for. Had there been a very clear exposition of the either/or position, we could say that, but it was not clear at all, and now is the time for clarity. I want to focus on the practical issues facing this country if we leave the customs union. The Public Accounts Committee, which I have the privilege of chairing, is a cross-party Committee made up of Members from four parties in this House—Members who voted both Brexit and remain and whose constituents voted similarly differently. Yet as a Committee we have produced a series of reports, two of which I want to talk about today, that highlight the practical challenges facing this country.
The first report was on the customs declaration service. Testing of that system, which is to replace the outdated customs handling of import and export freight—CHIEF—system to ensure we have a customs declaration system fit for purpose, is only now just under way. Her Majesty’s Revenue and Customs estimates that the volume of customs declarations per year could rise by 200 million, from 55 million in 2015 to 255 million, and that the number of traders making declarations could increase from 141,000 to 273,000. We will need border checks for people and goods—we heard a lot from the Department for Environment, Food and Rural Affairs on this; we will see increased costs for businesses and Governments, as others have touched on; and we will see enormous delays at the border.
Mr Jim Cunningham (Coventry South) (Lab)
Has my hon. Friend’s Committee looked at the cost and number of officials we will need at the border after Brexit?
Meg Hillier
My hon. Friend raises an important point. In another report, published last December, we looked at Brexit and the border—I say “looked at”, but the situation is not static; we are working closely with sister Committees, particularly the Treasury Committee, with which we are doing some joint work on the cost of Brexit. We need to look at the wider cost and what Departments are having to do to implement these new systems and employ new staff.
HMRC has told us very candidly that it does not expect, as the right hon. Member for Loughborough highlighted, to have any additional border infrastructure in place by next March, yet other countries are planning for this already. In the Netherlands and Ireland, they are buying up land and planning to build facilities to do those necessary checks. Pieter Omtzigt, the Dutch Parliament’s Brexit rapporteur, has said that his country is
“preparing for the stated policy of the UK government”
and that it needs
“hundreds of new customs and agricultural inspectors”.
He says: “if we need” that,
“the British are going to need thousands”.
Already this week, we have seen Border Force advertising to recruit 550 staff—in addition to staff it has already had to recruit and will have to recruit again in the future.
Extraordinarily, a response to our work from the border planning group, which comprises a number of Departments, told our Committee there was no evidence to suggest that the risk profile of goods would change on day one. It went on:
“The Government is reviewing the specific areas where the risk posed by these imports could change, both immediately following EU exit and over time, and the measures that should be put in place to address this”—
should be put in place! We are one year away from Brexit. Even with a transition period, it will be enormously challenging—in fact impossible—to deliver the infrastructure needed to make sure that our country is safe.
We need full clarity on the costs. The Treasury Committee and the Public Accounts Committee are pressing the Treasury and other bits of Government about what the total cost will be. Let us be clear: there will be additional costs to the financial settlement, which will be only a small portion of the overall costs. That is the cost we will have to pay for the political exit, but there are the on-costs—the lost opportunity costs. We need to see the full bill and to have it analysed by the National Audit Office. We need to have that before any meaningful vote in the autumn. We are still woefully short on such information, but the right hon. Member for Loughborough and I are on the march, so I warn the Government: they had better be prepared.
As with the emperor’s new clothes, we need to call it out. Wishful thinking is not enough. It is not about ideology or romance, though many of us hold ideological positions. We need clarity. We need a decision so that business, and indeed the Government, can prepare. We need a customs union—we need the customs union. The alternative is chaos, cost, confusion and huge damage to the UK economy.
Mr Edward Vaizey (Wantage) (Con)
I see that a Treasury Minister is responding to this debate, not a Trade Minister. This is a new phenomenon: when the Government are in trouble, they no longer uncork the Gauke; they un-shell the Mel.
I do not know about the emperor’s new clothes, but I feel I am living in an Alice in Wonderland world. I am learning more and more about Brexit every day. I have learned that we can be out of the EU but in the single market; that we can be out of the EU but in the customs union; that we can be in the EU and have a blue passport made by a British company; that we can be out of the EU and have a blue passport made by a French company; that the Windrush scandal is the Europeans’ fault because they are in favour of people presenting papers, and that Brexiteers are very pro-immigration; that there will no longer be a bonfire of EU regulations—but it’s all right because we are going to adopt them all; that we are not trading enough with the EU so we are going to make it more difficult to trade with the EU; and that the Good Friday agreement is a waste of time and we are to have a hard border with Northern Ireland because of Brexit; and I have heard that anything I do to contradict anyone who supports Brexit is undermining the will of the people, even though during the referendum, as far as I am aware, there was a clear question—“Do you want to leave the EU?”—but no clear proposition about what that meant, which has left it to Parliament to decide what leaving means, or at least to guide and engage with the Government.
George Freeman (Mid Norfolk) (Con)
In Mid Norfolk, where my constituents voted to leave, the majority opinion on the doorstep was: “Mr Freeman, I wanted to be in the single market, not in a political union. It was Mrs Thatcher who took us into the single market. I want to be in the single market, not in the political union.” Does my right hon. Friend agree with my constituents?
Mr Vaizey
That is absolutely right. My right hon. Friend the Member for West Dorset (Sir Oliver Letwin), in his excellent memoirs, says he parted company with the Brexiteers, having been a Eurosceptic, because he supported a free trade arrangement with the EU but did not want to leave the EU in order to cause damage to our economy—I have not put that very well, but the key point is that, if we are to leave the EU, which we are, and we are a free and sovereign nation, we can then make decisions in the interests of our economy; and if it is in the interests of our economy to be a member of a customs union, it should be possible for Parliament to debate that and make that decision without being accused of betraying the will of the British people. The people who are passionate about Brexit have tipped over into an ideological fervour where anything that involves Europe in any shape or form is wrong.
I have come here to ask un-shelled Mel some questions to educate myself, because I want to make the decision that is best for my country. I am one of the Prime Minister’s trade envoys to Vietnam, so I know a tiny bit about trade. If it is best to leave the customs union and make up for the economic impact of doing so by means of free trade deals, can my right hon. Friend the Financial Secretary to the Treasury tell me when we are planning to sign these new trade deals, who we are planning to sign them with, what their value to our economy will be and what the related issues will be? For example, I have read in the newspapers that one aspect of trade deals with countries such as India and Australia—they are both countries that I love—will be more relaxed immigration and visa rules. I do not have a particular problem with that, but is my right hon. Friend aware of that issue, and how does he think it will go down with the public?
When it comes to regulatory standards, I agree with my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), although I do not have a problem with food standards in America or Australia; we do not see a lot of Australians or Americans dropping down with food poisoning. Given that food standards in those countries are different from ours, are the Government content to sign up to them? Let us face it; one of the reasons we have tariffs is that there is an element of protectionism in every economy. What will be the reaction of sectors of our economy, such as agriculture, when we sign these trade deals?
I would like to know the Government’s view on the cost of leaving the customs union, and the impact of doing so on sectors that are important to our economy, such as cars, agriculture, pharmaceuticals and chemicals. The hon. Member for Leeds West (Rachel Reeves)—the excellent Chair of the Business, Energy and Industrial Strategy Committee—has done a lot of this work for the Government. Perhaps the Minister could help me, as a bear of little brain, with something else. As far as I am aware, staying in the customs union will allow us to export goods to the European Union without tariffs, but it should leave us free to negotiate free trade deals outside of those goods. It should, indeed—this is particularly important given that services now account for 80% of our economy—allow global Britain to negotiate service agreements with the US, as my right hon. and learned Friend the Member for Rushcliffe pointed out.
The Minister could perhaps help to explain the paradox of how Germany, which is a member of the customs union, has managed to increase its exports to China so significantly while it has been anchored and shackled to this protectionist racket. Why is Germany exporting five times as much to China as Britain is doing? Is it simply that Germany makes a hell of a lot of effort to export goods? If we made a hell of a lot of effort while we were still in the customs union, perhaps we could continue to increase our exports to China.
Ruth George (High Peak) (Lab)
I have sat and listened to some expert speakers this afternoon. As a Member who was elected only last summer, I do not pretend to be an expert on Brexit or its implications, but the right hon. Member for Wantage (Mr Vaizey) has just said it all; we have all learned an awful lot over the last 12 months or more. We have to be very good listeners, and that is what I have tried to do since my election.
I have heard from many hon. Members on Select Committees who have listened to businesses. Every single Member who has spoken and quoted what businesses are telling them has supported our remaining in the customs union. Less than two weeks ago, I held a Brexit seminar with local businesses in my constituency, rural High Peak in Derbyshire. I heard their huge concerns not only about leaving the customs union in a year’s time, but about the impact of the uncertainty that is being caused by Brexit and the possibility that we will not be able to continue in the customs union.
Leaving the customs union will slow up the supply chains of these companies. They have just-in-time procurement, and if they cannot manage that, it will slow the whole manufacturing process and increase their costs. If we have hard borders, their costs will increase further not only because of tariffs, but because of paperwork and bureaucracy. That does not just apply to their trade with European Union countries; much of their trade goes through EU countries, even if it ends up elsewhere in the world. Any impact on our borders with the EU will affect our trade elsewhere.
Such costs will put us at a serious competitive disadvantage to companies in other European countries, and those companies are not slow to take that advantage over British companies and approach their customers. My companies tell me that they are already losing contracts because, when they go to bid, they are asked, “Can you guarantee that you will remain a member of the customs union, and that you will be able to maintain frictionless trade and supply chains?” Less than 12 months from our departure from the EU, my companies cannot give that guarantee.
At least four companies in my constituency have already had to set up branches in European Union countries; the right hon. Member for Broxtowe (Anna Soubry) mentioned that issue. Ireland has a significant backlog of companies seeking to register for VAT in the Republic of Ireland, because so many companies are having to do so. Given the barriers to trade that may come with us leaving the customs union, we will end up with more and more jobs having to go from the UK to EU countries because it makes sense for companies to trade from there.
Helen Goodman
My hon. Friend is making excellent points. Is she also worried about the impact on inward investment? When the Japanese ambassador who represents companies as large as Nissan and Hitachi says that the customs union is important for Japanese trade, does that spell out a bad long-term future for us?
Ruth George
Absolutely. My hon. Friend makes an excellent point, and global companies in my constituency say that their head offices have put a kibosh on any inward investment into companies at UK sites until they know the outcome of the Brexit negotiations. That is holding them back compared with other sites in the rest of the world, and it is having a long-term impact on valuable manufacturing jobs and other high-skilled jobs in my constituency.
Whatever my constituents voted for when they voted—by a very small majority—to leave the European Union, they did not vote to give British companies a competitive disadvantage compared with those in Europe, or for jobs to be transferred from the UK to overseas, as is already happening at companies in my constituency. As the negotiations proceed, and as we vote in this place on the Brexit deal, I intend to keep listening, particularly to those businesses that will be most affected and feel that they have the least voice in this process. We must ensure that whatever deal we get will work for my constituents and the businesses that employ them.
Mrs Sheryll Murray (South East Cornwall) (Con)
On Monday, Michel Barnier laid bare for all to see what staying in the customs union would mean for the UK: effectively staying in the EU. In his speech he mentioned the need for state aid rules, and that would probably mean no bailing out of the steel industry or any other industry that needs it in future. I remind hon. Members of the situation of a Shetland leasing and processing company that was run by Shetland Islands Council. More than a decade ago it fell foul of the European Commission when a Labour MEP reported it for operating outside state aid rules.
Mr Barnier also mentioned the need for tax rules. All those who hoped for the end of taxation on women’s sanitary products, and thought that Brexit could finally make that happen, might be very disappointed. He also talked about the need for shared social and environmental standards, which would mean that although people had thought that live animal exports could be banned, that would not be likely to happen. He spoke of the need to clarify the role of the European Court of Justice, and, yes, that probably means that he wants the EU Court of Justice to continue to rule over our laws. If hon. Members want an example of that, I refer them to the Factortame case.
When I knocked on the doors of my constituents, I found that people were absolutely sick of an EU over which they have virtually no say making the laws that govern them. Last month, the Prime Minister clearly said that
“the jurisdiction of the ECJ in the UK must end.”
I wholeheartedly agree; let us make it so.
Mrs Murray
I will not give way because other Members wish to speak. I am really sorry.
The worst of all possible scenarios would be one in which we had to abide by and be ruled by the European Union, but without any say. I wonder how long it will be before we start hearing suggestions about EU access to our fishing grounds—my fishermen—to pay for trade. How long will it be before we hear what the cost of staying in such a customs union will be? No doubt we will still have to pay a divorce bill, but on top of that, if people voted for a customs union, we might face an annual bill for effectively staying in.
The Prime Minister has always maintained that no deal is better than a bad deal. I can think of no worse deal than effectively staying in the EU with all the costs, but no say over it. That would also be a massive betrayal of the British people, who voted to leave. South East Cornwall voted to leave for the reasons I have outlined, and Cornwall voted to leave. Most importantly, the whole country voted to leave, and to do anything else would be a massive betrayal of the people we are supposed to represent. Brexit means Brexit; leave means leave. We just need to get on with it.
Albert Owen (Ynys Môn) (Lab)
To me, this debate means more than just customs and borders; it means jobs and investment in my constituency.
I live on the frontline of Brexit—my constituency is on the frontline. I am closer to the great city of Dublin than the hon. Member for Arfon (Hywel Williams), and over the years, European Union and Irish politics has meant a lot to people in north-west Wales, because we are linked to the people of Ireland and the people of the European Union.
Of course, the Republic of Ireland joined the European Union at the same time as the United Kingdom. We had, and still have, a common area of trade between the two countries, but if we were to leave without the protection that a customs union could give us, we would have a completely separate entity for the first time in our recent history.
The amount of European trade that comes through the port of Holyhead in my constituency is second only to the amount that goes through Dover. Some 400,000 lorries enter and exit the port annually. It is the gateway to the United Kingdom from the Republic of Ireland, and 11,000 jobs are directly or indirectly supported by the Welsh ports that handle goods from the European Union.
I hear talk about “Project Fear”, as we did with other referendums, but the reality is that many Irish shipping companies, hauliers and agencies are preparing contingency plans as we speak to reroute trade directly from the ports of Cork and Dublin straight to mainland Europe, bypassing the Welsh ports, the English ports and the Scottish ports. That trade would take with it the job opportunities and investment that make the United Kingdom a strong trading nation.
The relationship is very special, and people I speak to in the Republic of Ireland care about what withdrawal and exit from the European Union would mean for us, because it will have a severe impact on us and on them. The customs union would provide a lifeboat for the United Kingdom come Brexit. I think that the Prime Minister really believes that, but has been forced by forces within the Conservative party to take a different route. That route would be disastrous for the port communities, the regional economy in my area, and the entire United Kingdom.
I want to deal head on with the issue of the will of the people. My constituency was split down the middle in the 2016 EU referendum, with a small majority—just over 700—in favour of leaving the EU. I spoke to a lot of people during that period, and many of them told me that one reason why they wanted to leave the European Union—these were older constituents—was that it had become too big and cumbersome, and was not the Common Market that they voted for in the 1970s. Well, a customs union is very similar to the Common Market—
Robert Neill
I am very glad that the hon. Gentleman makes that point. My constituency voted to remain by 521 votes, and my experience in London was exactly the same: people voted to leave the political institution. They actually believed in the market—that was what we signed up for, and it is what they will be content to remain in. It is actually misleading for any person, either in this House or elsewhere, to hijack what was a vote on a simple yes/no issue otherwise.
Albert Owen
I am grateful for that intervention. I am making the point that the customs union replicates the Common Market, and I feel that continuing in a customs union will give my constituents the job security that they need.
To return to the will of the people, the Prime Minister called the 2017 general election—the hard Brexit general election—so that she could boost her majority in the House of Commons. She failed to do that—in fact, she lost her majority—and she now relies on a party that represents a part of the United Kingdom that voted to remain in the European Union. That is significant. In the previous general election, I had a very small majority, and I told people that I would come to this House to fight for their jobs and investment, and for what I feel is best for the people of Ynys Môn. My majority, unlike the parliamentary majority of the Prime Minister and the Conservative party, went up.
I believe that the customs union is right for this country. I also believe that we should go further, but I am a realist. I want to unite the people of this divided United Kingdom and I believe that the customs union could be the symbol to do that, because while we could leave certain aspects of the European Union, we could remain in the customs union, trading freely with our European neighbours. That would also not deter us from trading with other countries. We heard from the Father of the House, the right hon. and learned Member for Rushcliffe (Mr Clarke), that Germany is increasing its trade with India, for example, and we can do the same. An outward-looking United Kingdom in the customs union could be of benefit to us. There could be a positive double whammy of our remaining within the customs union and trading freely with my friends in the Republic of Ireland, thereby benefiting my constituents, and that, I believe, is in the national interest of the whole United Kingdom.
Antoinette Sandbach (Eddisbury) (Con)
I have a confession to make: when I voted in the 2016 referendum, I did not spend a great deal of time thinking about the customs union, rules of origin or other such matters. In that regard, I suspect that I am not alone in the House or in the country. I do not believe that many people gave a lot of thought to our place in the customs union, because very few leave campaigners mentioned leaving it. Indeed, one of the few direct references that I could find was in an article from 2012 in The Mail on Sunday, in the name of the now Secretary of State for International Trade. A copy of the article is still on his website as I make my remarks. He wrote:
“I believe that the best way forward is for Britain to renegotiate a new relationship with the European Union—one based on an economic partnership involving a customs union and a single market in goods and services.”
That sounds like a good way forward for my constituents, and I want to make a similar case today.
The last two years have been a crash course in customs and borders policy. At the centre of my education has been the Business, Energy and Industrial Strategy Committee, of which I am a Member. My view is that in this House we should make policy based on evidence. I urge my hon. Friend for South East Somerset to read some of the reports. I understand the importance of the fishing industry to her constituents, and she needs to understand the importance of the chemical, pharmaceutical and car industries to the north-west. The reality is that if we do not negotiate some form of agreement that leads to a European economic area-style—
Antoinette Sandbach
I apologise to my hon. Friend the Member for South East Cornwall (Mrs Murray)—I am corrected.
Pharmaceuticals, car manufacturing, agriculture, food manufacturing, the energy sector and the nuclear sector are absolutely key to the north-west. The Government’s own analysis shows that if we do not have an EEA-style agreement, there will be a 12% reduction in GDP growth in the north-west. If I am to represent my constituents, I have to vote in a way that supports their interests—that is what I am elected to do. A decision was taken to leave, but the question of how we leave was delegated to the House. I am not a delegate; I am a representative for the interests of my constituents.
Anna Soubry
Does my hon. Friend share my concern that so many Members do not even know what the customs union is? For example, while we have heard today that there are no other customs unions in the world, there are 12. As for state aid rules, we now know that the Government said on Monday that they would adopt all the state aid rules that we currently have as a member of the European Union.
Antoinette Sandbach
I am grateful for my right hon. Friend’s intervention.
Let me explain why the customs union is so important. There is evidence that the crankshaft of a Mini crosses the English Channel three times on a 2,000-mile journey before the car is even finished. It is first cast in France, before being sent to Warwickshire to be milled into shape. Once it is complete, it is sent to Munich to be added to the engine. Finally, it is sent back to Oxford, where the engine is installed in the car.
The Chair of the Business, Energy and Industrial Strategy Committee, the hon. Member for Leeds West (Rachel Reeves), spoke eloquently about the additional costs to the motor manufacturing sector of not being party to a customs agreement. We may call it a partnership or a union, but I am not bothered about what it is called. It is the outcome that I want to achieve, and that outcome is what leave campaigners promised to my constituents: free and frictionless trade. That must be delivered, and if the way to deliver it involves leaving the political institutions of the EU while remaining in the single market and the customs union, I will support that.
As for all this guff about being a rule taker, if we want to export to any other country in the world, we must export according to that country’s rules. If other countries want to export to us, they must accept our rules. It is in our interests to have aligned rules. In fact, much of the body of our rules is global regulation, as is made clear in the BEIS Committee’s report on the aerospace sector. In many cases, we are talking about not EU standards but international standards.
Most of the countries involved in the free trade deals that have been held up by leave campaigners are covered by our membership of the European Union. If we are part of the single market and a customs union, we may be able to gain access to the 32 Commonwealth countries that already have free trade deals with the EU. It will be much easier for us to roll over our existing free trade deals, which is the Government’s aim—I support it. Only 12% of countries do not have current free trade agreements with the EU or agreements that are being negotiated with the EU. It makes absolute sense for us to consider an EEA or EFTA-style agreement that would allow us to take back control of fisheries and agriculture, provide a brake on immigration and take us out of the jurisdiction of the European Court, but would be a recognised and acknowledged partnership.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
I am delighted to follow the hon. Member for Eddisbury (Antoinette Sandbach).
I agree with much of what has been said today, but I want to talk specifically about my own region, because nowhere in Britain will be harder hit by Brexit than the north-east. It is projected that as a result of the Government’s preferred outcome of a comprehensive free trade agreement, growth in the north-east could take a 11% hit, whereas if we ended up with the alarmingly possible no-deal scenario, there could be a staggering 16% hit.
We are significantly more exposed to the risks of a bad deal—or, indeed, no deal—than other parts of the country. The north-east is the only region in England with a consistent surplus in goods and services trade with the EU. We export 60% of our goods and services to European markets, which is a larger proportion than any other region. Many thousands of valuable local jobs rely on a good Brexit deal that would secure frictionless, two-way access between Britain and the EU. Without that access, those jobs will be at risk, and given that we have one of the highest unemployment rates in the country, that is something that our local economy simply cannot afford.
Helen Goodman
I agree wholeheartedly with my hon. Friend. Is she as alarmed as I am that those projections would result in unemployment in our region rising to 20%, meaning 200,000 people without work?
Catherine McKinnell
It does not bear thinking about. I and my hon. Friend are not alone in our concerns. Last July, when the North East chamber of commerce, which represents more than 3,000 businesses of all sizes across the region, conducted a survey of its members, 88% of respondents said that they wished to remain in some kind of single market and customs union. Unsurprisingly, the proportion is even higher among those who export solely to the EU.
The confusion and uncertainty is particularly felt by small and medium-sized enterprises in the north-east, especially those that currently export only to the EU and have no idea what the future holds. The situation has certainly not been improved by rumours that the Department for International Trade will in future provide support only to firms with a turnover of more than £4 million. I hope that the Minister will disabuse people of that concern.
The chief executive of the North East chamber of commerce, James Ramsbotham, wrote to the Secretary of State for Business, Energy and Industrial Strategy in February to express his concerns about the forecasted harmful effects of Brexit on the north-east and the Government’s strategy to mitigate them. More than two months after he wrote that letter, he is still waiting for a reply. It is worth quoting from his letter at length:
“I was not surprised that the biggest potential impact is on North East England. As you know, we are the region with the best record at trading with the rest of the EU: an achievement delivered by many Chamber members. It is to be expected that anything which makes doing business with Europe harder will have a greater impact here. I am, however, very disturbed that Government has so far failed to adequately allay the obvious concerns this has created among our members, even before these assessments became public.
You will recall the Government was elected last June on a manifesto that said closing the gap between London and other parts of the UK is ‘the biggest prize in Britain today’, a ‘great endeavour’, and that the Conservative Party was ‘determined to lead the way in the next Parliament’. These forecasts suggest the gap will not reduce but grow significantly wider. If there are figures being shared around Whitehall that suggest your Government’s stated top priority could be seriously undermined, I would expect to see some concerted action to tackle it.
I assume that Government must expect a better outcome from Brexit than that indicated by these forecasts, otherwise you would not be going through with this plan. Given the manifesto commitments mentioned above, I also assume that you expect it to be at least as good for North East England, if not better, than for London. I therefore assume you must have some evidence to support this. It is beyond time for some more frank communication from Government so we can understand the basis of this confidence.
In light of these forecasts, Government should re-think its position on leaving the Customs Union. It seems clear that to do so will exacerbate the risks to the economy, particularly in our region. The freedom to pursue independent trade deals with other countries will present opportunities—but it will also present significant risks, involve great complexity and require huge capacity building. We have not yet seen any evidence to suggest that the opportunities can genuinely be greater than the negative impact of disrupting trade with our nearest markets.
If there is sufficient evidence to show there will be benefits from leaving the Customs Union, then there should be consideration of extending the implementation period. The time to put in place the capacity to deliver such trade deals, and the time for businesses to adjust to new terms of trade and respond to a signal that they should prioritise different markets, is perilously short.
In the meantime, we should be seeing significant investments going in to the support structures to help businesses make these adjustments, and in to the agencies that must manage major new processes—not least HMRC. At present we do not see this and businesses have very limited sources of expert advice available.”
It is difficult to imagine a more damning assessment of the Government’s approach. It is shocking that these calls for clarity, from a body that speaks on behalf of the north-east’s business community, have so far been ignored. I fear that that confirms that the Government do not have our region’s best interests at heart, or that they simply have their head in the sand.
I want to end by asking the Minister a fundamental question: how do the Government intend to close the gap between London and the north-east when all the evidence suggests that their Brexit policy—
Luke Graham (Ochil and South Perthshire) (Con)
As a remainer and a democrat, I must respect the result of the referendum. Membership of the customs union is possible only for member states of the EU. This was not in any doubt at the time of the referendum; David Cameron said as much on “The Andrew Marr Show” during the penultimate weekend of the campaign. He said:
“We cannot leave the EU and remain in the customs union”.
However, that does not mean that we cannot negotiate a deal with the EU to keep trade as frictionless as possible, and the UK Government have put forward proposals to that end. Whether it is called a customs arrangement or a customs union, I do not really mind the label as long as it achieves the shared goals of frictionless trade and as few barriers as possible.
I want to talk about some of the concerns raised by the Chair of the Public Accounts Committee, the hon. Member for Hackney South and Shoreditch (Meg Hillier), and me as a member of that Committee when we looked into the details and practicalities that will face us if we do not have a firm and solid customs agreement with the European Union. In 2015, roughly 55 million customs declarations were made by 141,000 traders. It is predicted in the reports that we have received, however, that we could see a fivefold increase in the number of declarations needing to be processed after Brexit. That would involve up to 255 million declarations, which would put a great deal of additional pressure and strain on HMRC and on its new customs declaration service’s systems.
Even allowing for a transitional period to be agreed and in place, we are still working to a tight timetable for putting in place an operational system that traders here in the United Kingdom and abroad will be able to use. The planning for the introduction of the customs declaration service—CDS—system was put into action in 2013-14, before Brexit became a reality, although the planning to account for the increased numbers is obviously a direct consequence of the Brexit decision. There is also uncertainty over the investment in the current customs handling of import and export freight—CHIEF—system, which requires around £7 million if it is to serve as a back-up, just in case the CDS system is not ready when we hit the Brexit date and agreements are not in place.
HMRC has acknowledged in the Public Accounts Committee that there are four main areas of risk. They involve the integration of all the CDS components, testing to ensure that the system can handle 255 million declarations a year, migrating registered users to the new system and ensuring that users are ready to make declarations on the new system. HMRC will not know until July this year whether the system will work as intended. That is barely a year before the first traders will begin to use it.
I therefore reiterate to the House the recommendations agreed by the Public Accounts Committee that we believe will help to rectify the situation. First, the Treasury must provide sufficient funding for the back-up CHIEF system and ensure that the CDS is properly funded. Secondly, we need to ensure that there is a fully fleshed-out contingency plan to match the funding for the CHIEF system. Finally, we need to ensure that HMRC has everything it needs to ensure that the affected businesses can be informed off how all this will affect them. That includes businesses here in the United Kingdom and our trading partners around the world.
We have already touched on the effect of Brexit on our borders, especially in Northern Ireland, so I will not labour that point. I will simply reiterate the point made by others that we are committed to maintaining the integrity of the United Kingdom and that we must have an agreement that respects the Good Friday agreement in Ireland.
I want to comment briefly on the tone of our past debates. Today’s debate has been a lot more constructive than some of our past debates on the European Union, but we should not forget some of the pessimism that was rife just before Christmas, when the hon. Member for Cardiff North (Anna McMorrin)—who is not in her place—intervened on me multiple times to say that the Brexit negotiations were a mess and that we were in a constitutional crisis. I have to remind the House that only a day later the Prime Minister reached an agreement establishing the financial settlement with the EU and ensuring that EU and UK citizens’ rights would be respected, that the UK would have territorial integrity and that the Good Friday agreement would be respected.
None of our constituents voted to be poorer, and none of them wanted there to be more barriers between ourselves and our international trading partners. We do not mind the labels or the mechanisms, but I know that my constituents want a customs system that they can rely on, that respects the United Kingdom’s integrity and that will allow them to prosper and be better off than they are today.
Owen Smith (Pontypridd) (Lab)
I begin by thanking my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) for securing today’s debate, which has been incredibly important, and my right hon. Friend the Member for Islington North (Jeremy Corbyn) for liberating me to speak. It was extremely generous of him, and I intend to make full use of it.
I want to do something unusual in my new free-speaking, freewheeling role and agree with one of the things said by my hon. Friend the Member for Vauxhall (Kate Hoey). She said that there has been a great deal of dishonesty in this debate, and she is completely right. It is pretty much the only thing that I agree with her on, but dishonesty has been the hallmark of the Brexiteers’ arguments before, during and after the referendum. I am sorry to break with the more consensual, collegiate tone that many Members have struck, but we need a bit of truth telling in this debate. We need to be clear about the risks that we face as a country and clear about some of the fibs that were told to the country during the process.
As a former shadow Secretary of State for Northern Ireland and as someone in the Labour party who feels a huge degree of pride about all we did to bring about an end to 30 years of civil war in a part of our country, we cannot countenance any return to any hard border in Northern Ireland. It would be utterly unconscionable for this place to allow that to happen. When the Chief Constable of the Police Service in Northern Ireland is warning us all publicly—a pretty remarkable thing for him to do—that we risk the return of a hard border that would jeopardise the safety and security of his officers and of the people of Northern Ireland and when that view is shared across the political divide in Northern Ireland, this place must listen.
The situation was not discussed prior to the referendum, when it was not clear that we were going to jeopardise peace in Ireland. If there is to be any sort of harder border in Northern Ireland, it is now clear that we run the risk of jeopardising that peace. That is the first and most important thing that I have to say, and that alone should cause us to pause and say, “We must stay in the customs union and the single market.” The truth is that staying in the customs union is insufficient to guarantee that we will not, over time, have a return to a hard border on the island of Ireland. Regulatory divergence unfolding over a longer period will be the one thing—more than the short-term effect of customs tariffs at the border—that will guarantee the return of the hard border, which cannot be countenanced by this place. If we allow it to happen, we would be betraying the people of the Northern Ireland and the national interests of this country
Let me turn briefly to the economic effects of Brexit, because we need some truth telling there, too. Brexit is already damaging the economic this country’s wellbeing. The International Monetary Fund said just this week that the only G7 country that will not grow at anything like the almost 4% that the world is predicted to grow at over the next period is the UK, and its view is that that is due to Brexit. The Office for Budget Responsibility, the OECD and the Government hold the same view. The Government’s own projections clearly show that with the very best outcome, which is staying in the single market and the customs union, we will still see a reduction in GDP of around 2%, which is equivalent to the change we saw after the 2008 crash.
Norman Lamb
Does the hon. Gentleman agree that the Brexiteers’ claim that we have to leave the customs union to grow our trade with the rest of the world is just grossly misleading? Germany exports £77 billion to China against our £22 billion, so we have every opportunity within the customs union to grow our trade wherever we want. It is down to us, not the rules of the customs union.
Owen Smith
It is frankly arrant nonsense to suggest that staying within the EU or being in the customs union or the single market is in any way, shape or form an impediment to growing our trade outside the EU. The truth is that we have succeeded in doing that over the past 30 years from within the EU, and other countries are doing it even as we speak. It is utter nonsense, and we need to call it out as such and not accept the set of lies that continues to be propagated by those who are ideologically determined to drive Brexit through.
Finally, all I have just described as truth is completely contested. I fully accept our country is still very much divided, and it is not sufficient for the Government or for the Labour party in opposition to acquiesce, in respecting the will of the people, to allowing our country to become poorer, less secure and more isolated, but nor is it sufficient for us simply to overrule the will of people. The only way we can sort this out, the only way we can act in the national interest and secure the agreement of the British people, is to give them the opportunity, once we know the final terms of the deal—what is really on offer, not the lies that have been told but the truth that is then exposed—of a final ratifying referendum, a final say, a people’s vote, or whatever we want to call it. That would bring this country together. Frankly, it would save this country from a lesser future—a less secure, less prosperous and more isolated future. That is the right thing to do, and it is what we should—
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
I am a firm supporter of the Prime Minister’s position on this question, and I will set out why.
I am clear that continued membership of the customs union would represent a breach of faith with the referendum result and with the wishes of millions of Labour voters up and down our country. It would also be a serious misjudgement, given the way it would leave our country bound by EU rules on trade but with no say on them, which would represent the worst of all possible worlds.
The only large country that has a customs union with the EU but that is not an EU member state is Turkey, but Turkey’s customs union is almost unbelievably asymmetric. The EU does not need Turkey’s consent to enter free trade agreements with any other country, and Turkey is obliged to reduce its tariffs with such countries. However, the third country with which the EU enters an FTA is under no reciprocal obligation to open its markets to Turkish exporters. In other words, Turkey has to open her markets but might reap none of the benefits. This is not an academic issue. Turkey finds herself in that situation in her trade with countries like Mexico and South Africa.
In a frank interview last summer with the BBC, the shadow Secretary of State for International Trade, the hon. Member for Brent North (Barry Gardiner), warned it would be a “disaster” for Britain to find itself in that situation. I agree with him, and I wish the Labour party were not now attempting to U-turn on that logic.
In a customs union, Britain would be reduced to taking whatever deal we are handed by Brussels, with no say on the outcome.
Antoinette Sandbach
My intention would not be to enter a Turkish-style agreement, and the EU has already conceded that the UK would be able to have a say, but not a veto, on future trade agreements.
Mr Clarke
In essence, not having a veto is not having control on the outcome. An agreement would be negotiated for us that we would either have to live with or reject. There is no sensible outcome we could live with over which we have no control.
It gets worse. Turkey can sign free trade agreements with other non-European Union countries only if she has the EU’s permission—we would have to get clarity on whether that would apply in this instance. I suspect Turkey only subjects herself to such a humiliating state of affairs because she continues to hold out the hope of becoming a full member of the European Union.
The state of affairs for Britain would be far worse, infinitely worse, than remaining a member state of the European Union, where we at least have a seat at the table when it comes to our trade deals.
Angus Brendan MacNeil
Has the hon. Gentleman considered that Turkey might be staying in the customs union for economic advantage? Has he thought about the economics of the situation?
Mr Clarke
I do not believe that it is to our economic advantage. Turkey has long prized EU membership as a status symbol, but I do not believe the economics add up.
Those lobbying for a customs union know that staying in the customs union without a voice at the table would be worse than being a fully signed-up member, as was made more or less explicit by the hon. Member for Pontypridd (Owen Smith) when he said that we would need to stay in the single market as well as the customs union, which goes a long way towards revealing the true motivation of many who make this argument—they see it as a stepping-stone to undoing the people’s vote to leave.
We need to remind ourselves of why the leave campaign lobbied to leave the customs union in the first place. The EU has been slow at negotiating trade deals on our behalf, not least because there are 28 members states on one side of the negotiating table. The EU’s trade talks with Japan have taken 61 months and are still awaiting ratification. By contrast, it took Switzerland 28 months to settle its deal with Japan. EU trade talks with the US have been ongoing for 64 months now, with no sign of progress, whereas the US managed to negotiate trade deals with Canada in 20 months, Australia in 14 months and South Korea in 13 months. At the time of the referendum, the EU had managed to negotiate trade agreements with only two of the UK’s 10 largest non-EU trading partners.
Not leaving the customs union would also fatally damage the prospects for the idea that, more than any other, has captured the imagination of the Teesside public since our vote to leave. A free port at Teesport, which is a project championed by Tees Valley Mayor Ben Houchen and me, would be an enormous boost to local industry and provide a great incentive to reshore jobs to the South Tees mayoral development corporation site. That goes directly to the point that the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) made about north-east jobs. There has been enormous buy-in from local people and businesses to this idea, and people are genuinely excited about what it would mean. However, a free port will not be possible if we do not leave the customs union.
Some people try to maintain the argument that free ports are possible within the EU. The reality is that those zones that exist are glorified bonded warehouses—places where people can defer tax, duty and VAT. What Ben and I are saying is that within the Tees free port there will be the potential for significant tax and regulatory divergences, but that will be stymied if we remain in a customs union.
Outside a customs union there are other significant advantages.
Mr Grieve
How does my hon. Friend imagine that he can engage in this regulatory divergence without incurring tariffs with those countries with which we do our principal trade or the economic consequences that flow from that? I can understand the fantasy behind the picture he paints, but it simply is not the reality of what will happen if we cut ourselves off from our principal trading partners.
Mr Clarke
It is certainly not dreamland. If my hon. Friend reads the compelling paper written by my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) for the Centre for Policy Studies, he will see why it is not dreamland, why there is such ministerial buy-in and why there is so much enthusiasm from the business community in the north-east.
The additional advantages are that we can cut tariffs on products such as food, clothing and footwear. These goods happen to be where the highest tariffs are concentrated and are those on which the poorest in society spend the greatest proportion of their income.
Others have made points about Northern Ireland on which I shall not dwell at length given the shortage of time, but the chief executive of HMRC Jon Thompson told the Exiting the European Union Committee:
“We do not believe, and this has been our consistent advice to ministers, we require any infrastructure at the border between Northern Ireland and Ireland under any circumstances.”
I will leave that point there.
Britain remaining inside the customs union with the EU would be unwise, unnecessary and unacceptable to me and millions of people who voted for Brexit in good faith.
Geraint Davies (Swansea West) (Lab/Co-op)
Resisting a customs union and the single market without a mandate from the voters, which we have not, would be an act of grotesque economic irresponsibility. Being in the customs union means that we are part of team Europe when we negotiate with big blocs such as the United States, China and Japan. If we leave, we will be one player against a whole team. The idea that we can negotiate better terms is farcical. The idea that we can get more trade to compensate for the trade lost as a result of turning our backs on the EU in terms of the single market, tariffs, product standards and barriers, is absurd.
People may be aware of the economic model of trade called the gravity model, which says that the closer and bigger a market is, the more there is trade. Empirically, over the past 140 years, it has been found that the relationship is: halve the distance and you double the trade. That basically accounts for the fact that 50% of the UK’s trade is with the EU, while for Wales, the north-east and Yorkshire the figure is 60%.
In Britain, some of the poorer areas that voted for Brexit will suffer much more if we end up out of the single market and the customs union. Some people still believe, because of Government spokespeople, that we can boldly go and trade where others have not been before, when in fact we are already trading there. The former permanent secretary at the Department for International Trade likened leaving the single market and the customs union to swapping a three-course meal for the promise of a pack of crisps. He was right, and why did he say that? Because if we look at the big markets, where the opportunities are, are they there? In the United States, Donald Trump said in his inaugural address that he would stop foreign countries ravaging his economy and taking jobs, and would stop the country importing more than it exports. We have seen with Bombardier, EU steel and tariffs on China that the US will act against anyone who thinks they can gain an advantage, and the US is much bigger than us alone, as opposed to us as part of the EU. What is more, the US will try to export its standards, be they in chemicals, food, the environment or workers’ rights, which will prevent us from exporting to the EU.
We have already heard that the Germans export four times more to China than we do. We can do that on our own. Again, China will be much more powerful. The Chinese have demanded that they build Hinkley Point, even though the cost of energy is sky high, and have already negotiated to build HS2. They will be coming in, taking our jobs—exporting our jobs—and we will be like putty in their hands, without any ability to negotiate on human rights, carbon and so on.
On Japan, the EU is doing a trade deal that will embrace a third of the economy of the world. If that trade deal is secured after March next year, we will not be part of it. Forty per cent of Japanese investment in the EU is in the UK. We will lose that, and it is not just cars. I am talking about financial services, and 80% of our exports are in services. The EU-Japanese deal will include financial services and we will be out of it. Therefore, a centre of gravity for financial services will grow in Europe, with the axis of yen and euro, and that will hurt the City of London.
As for third countries, 14% of our trade is with them. Chile, South Korea and Australia have already said that they want to change the terms of trade, and so will the others. When it comes to the timing, we will end without any trade deals in the transition period. We will basically close the door behind us and it will be a complete nightmare. After March we will have left, and Wallonia can just vote down whatever we agree and we will end up with no deal.
So why are the Government doing this? Why are they like a doctor prescribing cigarettes to someone with anxiety, knowing that ultimately it will kill them? The answer is that the Government know that the only hope for Brexit voters is believing that there will be these trade deals, and the Government know that there will not be. That is why Lord Patten, Lord Heseltine, Lord Lansley and Lord Willetts have all put country before party, and the people out there know this is too complex, and too costly, and too much time—
Mr Dominic Grieve (Beaconsfield) (Con)
It is a pleasure to participate in this debate, but I do not want to repeat what was said by the proposing Member, the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), or my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke). I agreed with every sentiment they expressed.
My desire to participate stems, first, from my continuing frustration that every time, as a Member of Parliament, I want to come and participate in such a debate, I get told by roundabout means that I should not, because it might somehow put the right hon. Member for Islington North (Jeremy Corbyn) into Downing Street. My experience in politics is that when it comes to fantasticals, wherever they may come on the political spectrum, the greatest chance of getting them into Downing Street is if people of a moderate and sensible disposition stop debating important issues, and I am absolutely determined that they will be debated.
Today’s debate offers us an opportunity to look at the possible merits of staying in a customs union. Of course a customs union is not perfect, particularly, I might add, a customs union when we are outside the EU. I agree with some of the comments that have been made that, by being outside the EU, we lose some of the influence that we have in creating and managing the customs union. That, I am afraid, is the price that we are paying for the folly of the decision in the referendum of 2016. Just because one has imposed one calamity on oneself does not mean that one then goes to inflict greater calamities simply on the basis that one has to do it in order to prove the theory—the mistaken theory—that one has espoused.
I am also a lawyer. I cannot deny the fact that it is noteworthy that we appear to be a gaggle of lawyers on these Benches who find an irrationality in the approach that some of our Conservative friends adopt and in which the Government sometimes appear to be mired.
Free trade agreements are wonderful things to have—I am a great believer in free trade agreements. I can see that, by being members of the EU, we have lost something in terms of being able to do our own free trade agreements, but not one single Government analysis suggests that they outweigh the advantages of participating in the best free trade arrangement that we have with our EU partners.
What is the point of having a free port in Middlesbrough —forgive me—if it is only going to be used to trade with the United Kingdom? Assuredly, it will not be to trade with our EU partners because they will not allow any of the goods in between Middlesbrough and the European continent. Why is it that pharmaceutically related businesses in my constituency tell me that they will be going if there is not frictionless trade with the European Union, which implies participation in the customs union? Why is it that the deputy ambassador of Japan has us all in and says, “You do realise that every Japanese company will be gone in 10 years’ time if they cannot have frictionless trade into the European Union.”
We are behaving in the most extraordinary and blinded fashion as we blunder around, ignoring the realities. In any case, free trade agreements come with strings attached, as I said earlier. If we have multiple free trade agreements, they will very quickly start to look like customs unions. That is what happens when people get together. This idea of “customs union bad” and, somehow, “free trade agreement good” simply does not stack up, and it is time for a reality check.
In fact, we need more than a customs union, because it is also obvious that we will not be able to trade without regulatory alignment. I was over in Dublin for a very interesting conference called by the Institute of International and European Affairs. The Irish border is just a microcosm of the bigger problem. It just so happens that, on the Irish border, people are trading constantly on a very intimate scale. A person sends their milk to the dairy over the border. If we do not have regulatory equivalence, we will not be able to do that. People will buy products, going backwards and forwards all the time. It absolutely highlights at that level the problem that we will have at a wider level if we persist with this idea that we can somehow get out and still enjoy the benefits of the frictionless trade that we say we want.
The extraordinary thing is that the Government know that, otherwise my right hon. Friend the Prime Minister would not be slaving away and being denounced as “cretinous” by my hon. Friend the Member for North East Somerset (Mr Rees-Mogg) for trying to square the circle. She is entitled to be commended for trying to do something really difficult. The trouble is that, unless we start injecting a note of realism into what we are doing, she will fail, this House will fail and our country will be failed.
Helen Hayes (Dulwich and West Norwood) (Lab)
It is a pleasure to follow the right hon. and learned Member for Beaconsfield (Mr Grieve). I commend him for his clarity and bravery on Brexit.
The referendum on 23 June 2016 set out one high-level question: should the United Kingdom remain in the European Union, or should the United Kingdom leave the European Union? The referendum campaign covered many issues, but the EU customs union was not a mainstream issue for debate. It was not articulated as a defining, essential feature of Brexit and it was not a motivating reason for people to vote leave. The customs union was a phrase that comparatively few people knew until after the referendum.
Following the referendum result, it was the responsibility of the Prime Minister to lead and to articulate how the Government would respond to the result of the EU referendum and how they would seek to negotiate Brexit in the best interests of the UK economy. Instead, the Prime Minister’s only articulation of the shape and content of Brexit for several months after the referendum was “Brexit means Brexit.” In the utter vacuum of content that this left, hard-line Brexiteers and their supporters in the press peddled the myth that leaving the customs union was a talismanic and essential feature of the Brexit that the British public had narrowly voted in favour of. This was never the case. Membership of the customs union was barely debated during the referendum campaign and it was certainly not on the ballot paper. Membership of the customs union is not the same as membership of the EU. It has been misrepresented as such by the hard Brexiteer ideologues, whose hatred of the EU runs so deep that they cannot bear the thought of any formal association with our friends and neighbours in the EU.
The UK’s current annual goods trade with the customs union is valued at £466 billion. Leaving the customs union could cost the UK an estimated £25 billion every year until 2030. The cost of new tariffs alone could be at least £4.5 billion a year for UK exporters. Analysis by HMRC suggests that new customs checks could increase the cost of imported goods to UK customers by up to 24%. Supporters of a hard Brexit claim that leaving the customs union will open up opportunities for the UK to negotiate trade agreements with many other countries. This is like promising to replace two birds in the hand with one in the bush. The Government’s own analysis shows that they believe that new free trade deals will add between 0.2% and 0.7% to UK GDP, compared to a 5% hit from leaving the single market.
Membership of the customs union delivers for the UK now. Future trade deals will take a minimum of three to five years to negotiate, and their terms are by no means guaranteed. Their impact on the UK economy will be much smaller than the current benefits of the customs union, and negotiations cannot even begin until we have left the EU. This is what a cliff-edge Brexit looks like.
There is no time for me to consider the impact on the Northern Irish border, to which many Members have already referred, so I will bring my remarks to a close. My constituents in Dulwich and West Norwood did not vote for Brexit. But even in the areas of the UK that voted to leave, nobody voted explicitly to leave the customs union. Leaving the customs union was not a Vote Leave pledge, and damaging the UK economy was not a Vote Leave pledge. Some 57% of the British public—a bigger majority than voted to leave the EU in the first place—support staying in the customs union. The Prime Minister’s intransigent commitment to leaving the customs union is therefore unfathomable.
The Prime Minister is not negotiating in the national interest; she is simply losing a negotiation with her own Back Benchers. In doing so, she is putting our jobs, and businesses and peace in Northern Ireland at risk. This is nothing short of reckless. I call on Conservative Members to show the leadership in the national interest that the Prime Minister seems to lack, and to vote today to remain in the customs union with the EU.
Dr Sarah Wollaston (Totnes) (Con)
Outside an effective customs union there is no such thing as a frictionless border. There is no escape from border checks, rules of origin and expensive infrastructure, and that means costs, delays and red tape. There will be implications for future investment, for people’s jobs and livelihoods, and for the stability of peace in Northern Ireland. But there is one area that has not been touched on: the implications for patient safety.
I am privileged to chair the Health and Social Care Committee, and we have been hearing detailed evidence about the implications of leaving the customs union on patient safety. These consequences go far beyond the economic consequences for individual pharmaceutical companies, about which my right hon. and learned Friend the Member for Beaconsfield (Mr Grieve) and my right hon. Friend the Member for Broxtowe (Anna Soubry) have spoken compellingly. In fact, these are consequences that directly affect patient safety.
The Committee heard clear and compelling evidence about the extent to which NHS care is dependent on a network of highly integrated, complex and time-sensitive supply chains for the delivery of medicines. For years, we have taken it for granted that when a prescription is issued, it will be available on the pharmacy shelf. I am afraid that we will not be able to take that for granted in the future, because the complex supply chain—from the research lab right through to the pharmacy shelf—will be disrupted by delays at the border, and that will affect costs.
Delays at the border will also directly affect the delivery of patient care. For example, every year in this country, about 700,000 diagnostic tests take place that rely on the availability of medical radioisotopes, which are very time-sensitive. Very many other products would be affected, such as blood plasma derivatives. There are products and devices that are not manufactured in the UK but which we know from past experience have very fragile supply chains, such as dialysis equipment. We have had problems with this before and it could happen again.
Mr Ben Bradshaw (Exeter) (Lab)
Speaking as a member of the hon. Lady’s Committee, can I ask her to confirm that every single witness who provided written and oral evidence to our recent inquiry said that their preference was for us to stay in the customs union and the single market?
Dr Wollaston
I thank the right hon. Gentleman; I can confirm that.
There are other very worrying examples. After the Manchester Arena attack, a very rapid supply of 500 highly specialised trauma-related items was flown in at very short notice from a Belgian-based company. There are very many serious patient safety issues.
There is also an issue of cost. A report today from the King’s Fund highlights the increasing cost of drugs to the NHS. The cost of medicines has grown from £13 billion in 2010-11 to £17.4 billion in 2016-17. However, that cost has been held down by the impact of the supply of generics and the way that primary care has actively switched to these products. Generics are pharmacologically equivalent products that become available when a medicine comes off patent. The British Generic Manufacturers Association told us in evidence that once a medicine comes off patent, a dozen to 20 companies will pick it up. The risk is that as costs and other non-tariff barriers go up, some companies will relinquish their licences and their marketing authorisations. Why would they bother with all the red tape and extra costs? That immediately means that the number of manufacturers goes down, and the likelihood of the cost of generics to the NHS increasing goes up.
I am afraid that the fast and unhindered free movement of medical equipment, medicines, devices, organs and blood products between the UK and the EU that has evolved over decades is at risk if we leave the single market and the customs union. I think there will be a huge crunch moment of reality. The public will never forgive us if, after we leave the European Union, people’s drugs and life-saving equipment are not available. This is where we are starting to run into Brexit reality, as opposed to the overly optimistic, unrealistic prospectus that has until now been sold to the British public. It is time for the Government to respond to our request in the Committee to hear when the Ernst and Young-commissioned report on the supply chain will be available. We need far greater contingency planning and a great dose of reality.
Mr Speaker
Order. I am sorry—I should have formally announced a four-minute limit. It is in effect but I should have announced it formally. The right hon. Gentleman has four minutes from now.
Tom Brake
Thank you, Mr Speaker.
It is a pleasure to follow the hon. Member for Totnes (Dr Wollaston). I agree that we need a dose of Brexit reality. In fact, I agree with everything she said. I am sure she will share my concern about the recent figures on the number of EU nurses who have gone off the register, and indeed the number who have left the country, just at a time when we have significant vacancies.
Just as I agree with everything the hon. Lady said, I disagree with everything said by the hon. Member for Vauxhall (Kate Hoey), who is no longer in her place. However, at least she had the courage to be here to present that hard Brexit line. Where are the hard Brexiteers on the Conservative Benches? Where is the Foreign Secretary? Where is the Secretary of State for International Development? Where is the Leader of the House? [Interruption.] Oh, there is one. They should be here to hear what they are inflicting on the country. Perhaps the reason they are not here is that they did not want to hear some very well-judged, measured contributions from Members on their own Benches explaining precisely the damage that they are causing.
Norman Lamb
I agree with everything my right hon. Friend is saying. Does he share my complete confusion that many of those hard Brexiteers have spent their political lives fighting to cut red tape, yet here they are gratuitously proposing to massively increase red tape? What sense does that have?
Tom Brake
Absolutely, and I will come on to that very strong point shortly. The chaos those people have caused is being added to on a daily basis. Today, for instance, we have the Home Secretary refusing to confirm that the UK will come out of the customs union, and on the same day, we have the Foreign Secretary threatening to resign if we do. Well, there you are—what a well-run Cabinet delivering Brexit for us in this chaotic manner.
Why does the customs union matter? Before I touch on that, I should point out that, if people look at the literature circulated during the campaign, they will see that it was about spending Britain’s cash in Britain, it was often about immigration, it was about posters such as Nigel Farage’s poster scaring people with that picture of all those refugees. He did not have a massive poster saying, “What do we want? To come out of the customs union. When do we want it? Now.” Of course that was not a major feature of the campaign. Anyone who suggests otherwise is speaking somewhat remote from the truth.
Why does the customs union matter? Many Members have referred to the Irish border; it is a real pity that the Secretary of State only went to the border for the first time a couple of days ago. It also matters for the Dover border. I understand that “BBC South East Today” has confirmed that, so far, not a single Minister from DExEU has been to the port of Dover. I find it incredible that they have not managed to visit the port of Dover. If they had, they would have been able to see directly the impact of the customs union on our largest port.
I could touch on the impact on BMW and its ability to manufacture cars in Oxford, or indeed the issue of red tape for small businesses. There is also the cost of roughly £30 for every small business that exports to the EU to process electronic paperwork that it does not have to process at the moment.
What have the Government offered in return? What is their solution? Under a customs partnership, the UK would collect duties “on the EU’s behalf” for goods destined for the European Union. Think about what would happen if the EU put the reverse offer to us, whereby the EU collected duties on the UK’s behalf for goods destined for the UK. Would the Brexiteers on the Conservative Benches say, “That’s a brilliant idea. That’s exactly what I want the EU to do for us”? Of course they would not, because it is absolute nonsense to suggest that and they would not possibly support that if the EU suggested it.
The UK has recently been threatened with a nearly £2 billion fine for failing to handle imports at its ports effectively, leading to significant VAT losses in other EU countries. I cannot see the EU queuing up to give us responsibilities for something that we are not handling very well at the moment. As for the highly streamlined customs arrangement, no one has been able to identify the technology for it, and that technology needs to be in place, I suggest, by the end of 2019 to be properly run in and tested.
On the position of the Labour Front-Bench team, I do not know whether seeking a final deal that gives “full access” to European markets and “maintains the benefits” of the single market and the customs union is anything other than having your cake and eating it, but the Liberal Democrats still think we are better off in the European Union, in the single market and in the customs union, and we want to secure a final say on the deal for everyone in the country, to do this democratically.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
It is quite daunting to speak in a debate in which there have been so many knowledgeable and learned speeches, not least from my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), who has been fighting this fight since I was a child. Indeed, I think he was the Paymaster General when I was born. I, like him and like the majority of my constituents, voted to remain in the European Union, so I must admit that, if someone had told me a couple of years ago that I would be standing here setting out why I think it is in Britain’s best interests to leave the customs union, I simply would not have believed them.
However, when we make decisions as a nation, we should stick to them. As the then Prime Minister said in 2016, the vote on 23 June was to be a referendum, not a neverendum—something that the hon. Member for Pontypridd (Owen Smith) would do well to remember. Both campaigns in the referendum were very clear that leaving the European Union would mean leaving both the single market and the customs union. Like my right hon. Friend the Member for East Devon (Sir Hugo Swire), I find the argument that people did not know what they were voting for on 23 June deeply condescending.
Staying in the customs union would prevent us from negotiating trade deals with third countries, which would mean missing out on one of the biggest benefits of Brexit. It is a well-rehearsed argument that 90% of growth is set to take place outside the EU in the near future. The trajectory is clear: in 1980, the EU accounted for 30% of world GDP; by 2023, according to the IMF, that will have fallen to 15%. It would be madness to tie the hands of our country by locking ourselves into a customs union that would mean, in effect, becoming a silent partner in trade deals, such as that with Turkey.
Christine Jardine (Edinburgh West) (LD)
Does the hon. Gentleman not accept that outside the customs unions we are a small market, but that inside the customs union we are a large market, and that his constituents benefit from being inside that large market?
Andrew Bowie
I disagree. We are the fifth-largest economy in the world and, unlike the hon. Lady, I passionately believe in a global Britain. And we will not be cutting ourselves off from the EU either. It will remain a vital trading partner for the UK, and vice versa, which is why the Government are working so hard to maintain tariff-free and frictionless trade across borders. That is in all our interests—those of the remaining 27 members and those of the UK. Clearly, unlike many Members here today and many Members of the other place, I am an optimist. As a Scottish Conservative of many years, I have had to be.
One cannot speak about this issue, however, without touching on the Irish border. I am sure I speak for many in this House and beyond when I express my frustration at the intransigence of some on the EU side of the table when it comes to finding solutions to this issue. If solutions can be found for the border between Sweden and Norway and along the Swiss border, surely it is not beyond the wit of us and the EU to find a solution to the border in Ireland while respecting the vital Good Friday agreement.
As I said, I am an optimist, and I am confident of our future outside the EU and the customs union, for I truly believe that this country really does have its best days ahead of it. It is incumbent on all of us in the House—it would be really good if we could do this—to get behind the Government and say with one voice, yes to an unbreakable relationship deeply rooted in bonds of friendship and respect, yes to untrammelled free trade between partners, but no, I am afraid, to a customs union.
Stella Creasy (Walthamstow) (Lab/Co-op)
My mother, who reaches a milestone birthday today, has taught me many things in life, including what she calls the “eat the frog” rule, which is that, if we have something difficult to do in life, there is no sense in prevaricating. I am here today to plead with Ministers to eat the frog and admit that there is no better alternative for this country than remaining in the customs union. After two years, it has become patently apparent that there is no better alternative.
In the short time available to me, I want to speak up for our remaining in the customs union. I reject the argument that those who challenge our leaving it are traitors. The only traitor is the person who does not speak up for the country’s best interests and who believes that democracy stopped the day after the referendum. We know that being able to trade in the way the customs union allows—making it as easy to buy and sell goods in Berlin and Budapest as in Birmingham and Belfast—is the best outcome for our communities. When the Government said they were taking the red tape challenge, I did not realise they meant creating more of it, yet that is exactly what leaving the customs union will do.
I am a fan of technology—I am a geek, I love it—but even I recognise that we do not have the hovercrafts with scanners to make frictionless trade and a lack of infrastructure at our borders a reality. We hear from those in Dover—people who work every day on our borders—that just a two-minute delay would mean a 17-mile queue to Ashford; a four-minute delay a queue to Maidstone; six minutes and it goes to the M25; and eight minutes and it goes to the Dartford crossing, I know what that would do to businesses in my constituency and around the country. Whatever new technology has been created, it cannot make up for the delay and the impact on just-in-times.
Then there is the extra paperwork involved. At the moment, we have 55 million customs declarations a year, but if we leave the customs union, that could increase to 255 million, which means British businesses large and small having a lot more paperwork. We might have a free trade agreement, but we will not have a paper-free trade agreement, and that matters to them. It matters because it is not within our gift. It is not just about the rules we create—when we trade, we are only 50% of the partnership; it is about the rules that those we trade with create.
That is why the customs union is so important. We learned that lesson not least from a time in Irish history when there was a trade deal between Ireland and Britain. After 1965, the tariffs that had applied to trade since 1923 did not disappear, which is why the Irish delegation demanded that goods be labelled “Made in Britain”. That caused Denis Healey to inquire whether we should stamp that phrase on the balls of the bullocks that were being shipped to Ireland, to which Paddy Hillery replied that bullocks do not have balls, but they still need paperwork. Such paperwork will be damaging to all our constituents and will result in massive costs to manufacturing. That is before we even get on to the impact of the World Trade Organisation.
Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)
In my constituency, 4,000 jobs—16% of the total employment—are in manufacturing. Does my hon. Friend agree that for the Government not to consider a bespoke customs union is both reckless and a huge risk?
Mr Speaker
I emphasise that if there are further interventions, which are legitimate in parliamentary terms, the time limit will have to be cut for remaining speakers.
Stella Creasy
I completely agree with my hon. Friend. Our car industry imports 60% of its components, so a British-made car probably has a German exhaust, Spanish-designed seats and French windows.
We have talked a lot about trade, but I also want to talk about people. It is clear that leaving the customs union will damage the lives of thousands of people in Northern Ireland and Ireland. We know that to be clear because we have no alternative. Ireland has 208 border crossings—more than the EU has with the rest of Europe. There will clearly be change. The consumers who may get cheaper goods are the same workers who will face the race to the bottom that will result from leaving the customs union and entering into the mythical free trade deals that we are being offered. We have heard that £25 billion annually will be lost to GDP.
Please, Minister, on this day of all days, listen to Ma Creasy and eat the frog—admit that the customs union is the best option, not just for our economy and British business, but for all our futures.
Robert Courts (Witney) (Con)
It is a pleasure to speak in this important debate. Our trading arrangements are of great importance to constituencies and country alike. It is critical that we approach the matter in the spirit of the kind of country that we want to be, and the opportunities that we want to seize. I want this country to have the freedom to seize opportunities, rather than being tied as closely as possible to the EU simply because we are afraid of the future.
When we discuss this matter—it has been raised by others, from all parts of the House—it is critical to understand exactly what a customs union is. As has happened during the debate and, indeed, in the motion, it is often conflated with a free trade area. The two things are often lumped together, but they operate differently. A free trade area achieves reduced or zero tariffs on trade between its members. It is possible to have free trade with the EU from outside the customs union, as Norway and Switzerland do. The motion suggests that being in the, or a, customs union would automatically include frictionless trade between the UK and the EU, and that it would solve the Irish border issue, but that would not automatically be the case. The key to enabling frictionless trade and solving the Irish border issue is a comprehensive free trade agreement that eliminates tariffs, with mutual recognition of standards and the use of new technologies. That is exactly what the Government’s policy is intended to achieve.
To leave the European Union but to remain in the customs union would be the worst of all worlds. It would mean surrendering, subject to whatever agreement is subsequently reached, 100% of our trade policy to Brussels and having zero say on that policy. We would have less say than we do now. I do not see how that is compatible with the referendum, however one voted, and I do not see how it is compatible with this country’s best interests. When we look at the effect of the customs union, I suggest that we can do much better outside it than we can in it.
Britain, which is by nature and instinct a globally trading nation, has always been disproportionately penalised by membership of the customs union. For most of our membership we were the only state—or one of only two—to export more outside the EU than to it. That phased application of the common external tariff in the 1970s hit British consumers and Commonwealth exporters badly, and although there have been improvements, our trade remains distorted. The EU currently has no free trade agreement with the world’s largest economy, the USA, or with rising giants such as India, or with long-standing British allies such as Australia. Where free trade agreements are in place, they are often limited in scope.
In my last 30 seconds or so, I will briefly consider Turkey. I know there is an issue as to what agreement is involved, but Turkey is required to apply EU product standards to its domestic economy, accept the ECJ in those areas, but have no say in the EU’s trade negotiations with third countries. When the EU signs free trade agreements with third countries, Turkey must allow full access to its internal market with no reciprocal guarantee. I do not see how we should seek to emulate that model in this country.
Several hon. Members rose—
Mr Speaker
Order. After the next speaker the time limit will have to be reduced to three minutes.
Ruth Cadbury (Brentford and Isleworth) (Lab)
I welcome this debate and I support all the excellent points raised by those who, like me, support the motion—I will try hard not to repeat them. I am not alone in being somewhat bemused that the party in government is the party that generally prides itself on being pro-business and anti-bureaucracy. Nevertheless, the Government appear to be ignoring the pleading of businesses large and small, and they are leading this country towards a tsunami of additional paperwork as we move towards leaving the customs union and the EU, given the implications of all that paperwork for trade deals that we will now have to put in place for our trade with the EU. Leaving the customs union means the introduction of tariffs and non-tariff barriers to trade in goods with our largest trading partner. That involves 40% of our trade, and it means, as businesses tell us again and again, added delay and costs for manufacturers.
Before the recess I had the pleasure of visiting Honda in Swindon with the Industry and Parliament Trust. It said that
“outside a customs union, there is no such thing as a frictionless border.”
Motor manufacturers will be subject to 10% tariffs on cars, and 4.5% on components and parts, plus additional delay. Currently, if someone takes their car to the dealer because they need a new exhaust pipe, the order goes in today, and tomorrow the dealer will have that part and be able to fit it. I understand that once we are outside the customs union there will be a wait of up to five days for that new exhaust pipe. That is not just inconvenient for the car owner—it has an economic cost for the owner of a van who uses that van for business.
It was also good to see how Honda’s presence in Swindon has transformed that town since I was last there many years ago. There is no doubt that Swindon’s low unemployment rate and well-paid jobs—not just at Honda but at all its suppliers—are directly based on Honda being there, which is probably linked to the message that, as we have heard, Margaret Thatcher gave to the Japanese Government many years ago when she said that Britain would never leave the customs union. Now all that is at risk.
We will not see big-bang announcements by big manufacturers in those key sectors—not just the automotive industry, but pharmaceuticals and many others. Instead, we will see incremental decisions and loss of capacity, and incremental elements of production going to Europe where the biggest market will be. That will be a long-term cost for our economy. We cannot afford that.
Briefly, on borders and Northern Ireland, many of us will have seen in our Twitter feed the map of Switzerland and the hundreds of customs points. I remember County Fermanagh in the old days, before the Good Friday agreement, and we cannot go back to that.
I support the motion, calling on the Government to establish an effective customs union with the EU, and like other Members I believe we should stay in the single market as well, because 80% of our economy is in services.
Kevin Hollinrake (Thirsk and Malton) (Con)
I voted remain and campaigned heavily to remain. I held eight debates during that campaign, alongside a gentleman from the UK Independence party, to help voters to decide what was the right or wrong thing to do. I said repeatedly that if we left, the negotiations would be difficult, and for two reasons.
First, given that we had been members of the European Union for 44 years, the complexity of the relationship was almost inconceivable. Today, hon. Members on both sides of the House have spoken about the complexity of supply chains, and that is obviously why people support remaining in a customs union. My second reason for saying that the negotiations would be difficult was that the UK and the EU had different priorities and imperatives.
For starters, our exports to the EU account for 12% of our economy—to anyone listening to today’s debate, it would almost sound as though we were talking about the whole economy—but that represents only 3% or 4% of the EU economy, so there is clearly a disparity there. Then there is the fact that the EU’s principal priority would be to ensure that the EU did not fall apart as a result of other people walking out that door. For that reason, it is very difficult for the EU to give us a good deal, despite the fact that the Prime Minister has been very reasonable on exit terms and on proposals for a future relationship regarding things such as the highly streamlined customs border, which seems the preferable option of the two on the table. Such a border arrangement works in north America, and in Norway and Sweden, so it makes sense.
Nevertheless, the negotiations will be difficult. That is why people on both sides of the House are concerned, and it is why people are talking about a customs union. I think that that is the wrong thing. Yes, being in a customs union would remove the need for checks on tariffs, but unless we were also going to stay in the single market, we would still need checks to ensure regulatory alignment, so the queues at Dover would continue.
In addition, if we were in the single market and customs union, we might as well be in the European Union. In fact, that would be much worse than being in the European Union, because we would have no say whatever over the rules—no say in the trade agreements and no say in the new rules. The worst of all options would be to be in those two without being a member of the European Union.
Another option would be to stay in the single market only. That is my preference; if I had to choose the single market or a customs union, I would stay in the single market, through the European Free Trade Association and the European economic area. That has benefits. For example, there would be no need for checks on product standards. Other than that, however, I support the Prime Minister in her negotiations and wish her well.
Peter Grant (Glenrothes) (SNP)
I have previously severely criticised Parliament’s inaction as seen in its failure to properly scrutinise the Government’s approach, for example through the European Scrutiny Committee, but today we see Parliament doing what it should be doing. It is just a pity that we knew before we started that the Government will not listen. The hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) called for everybody to get together behind the Government. How about the Government just once getting themselves together behind the overwhelming will of Parliament and behind what they know as well as we do is the overwhelming will of the people?
Let us stop this nonsense about a referendum vote to leave the customs union and the single market—no, there was no such vote. There was a vote to leave the European Union, and we have been told that that became a vote to leave the single market because that was what the losers said would happen. I am fascinated by the idea that, after an election, the winners are expected not to implement their own manifesto but to bring about what the other side said would happen if the eventual winners got in. Tory Members might want to look at what the Tories said would happen if the SNP ever won an election in Scotland, as we did in 2017, 2016 and 2015, and on many other occasions.
It is dangerous to give the people a binary choice but then to claim a democratic mandate to interpret the infinite number of variations of what that binary choice might mean. I do not have the right to say that the people who voted leave wanted to stay in the single market and the customs union, and nobody has a right to say that those people wanted to leave, but what I do have the right to say is that 62% of people in my country voted to stay in the European Union. Those who insist that we should be working for the best Brexit for the people of Scotland have to accept that the sovereign people of Scotland have said that the only good Brexit is no Brexit. If we must have Brexit, we want Brexit to hold us as close as possible to the European Union.
Peter Grant
The hon. Gentleman knows perfectly well that I do not have time to take interventions.
A lot has been said about the Irish border. Let us remember that it is now 15 months since the Prime Minister promised, as a matter of priority and as soon as possible, to bring forward her practical solution for the Irish border that was consistent with leaving the customs union. We have seen nothing. None of us has any idea what that practical solution will be. None of us even has any idea of when the Government will have any idea of what that solution will be. It is deeply offensive to a great many people of good faith on all sides and in all communities in Northern Ireland to accuse them of blackmail when all that they are saying to us is, “For heaven’s sake, please do not destroy the great work that has been done,” which I think was perhaps the greatest act of reconciliation and peace-building that certainly these nations—these islands—have seen, and that perhaps has been seen in the whole of Europe.
We talk about taking back control of our trade, but we cannot take back control of our trade. Every trade deal has to be bilateral. We are not in the empire anymore; we are in the Commonwealth. We are a community of nations and we have to treat other nations with respect. We are in the best trading partnership in the world; why would we want to leave?
Mr Marcus Fysh (Yeovil) (Con)
In her Mansion House speech, the Prime Minister set out five tests for the EU negotiations and the agreement that we will reach through them. The first test was the need to respect the referendum result and the desire of the people expressed through that referendum to take back control. The customs union plan entirely gives up control to the EU, and the free circulation of goods would also need regulatory harmonisation in the single market, as we just heard. The second test was that the agreement must endure. The customs union plan, which would go against the outcome of the referendum and the election, would divide the country and not settle the issue.
The third test was that the arrangement should protect jobs and security through our continuing to work together with the EU. The customs union plan would give our commercial policy, our trade defences, our tariff levels and our relationships with third countries to the EU, and I do not see how that is consistent with that test. The fourth test was that we would be a confident, modern, outward-looking country that is proud to stand up for its values, but the customs union plan would mean that we would be unable to make our way independently in the world, and to spread our belief in free trade and the opportunities that come from it. The fifth and final test was that the arrangements should strengthen our Union and our union of people, but the customs union plan would take their sovereignty and powers and give them to the EU. It would weaken them, and weaken and discredit their representative institutions.
If the proponents of the customs union succeeded in getting it adopted, and if the Transatlantic Trade and Investment Partnership were revived as a trade agreement between the US and the EU, the EU could commit the UK to that without Britons having any practical say at all. The Cabinet resolved recently—the Prime Minister expressed its settled view—that it wants the freedom to negotiate trade deals with other countries and to take back control of our laws. The customs union plan goes directly against that.
In the final seconds of my contribution, I want to say that the customs partnership idea, which is one of the options, has serious problems. Full traceability is a long way off and would impose costs on every transaction throughout the economy. The full circulation of goods would require full regulatory harmonisation, and full ECJ oversight and submission to it. The need to make rules of origin declarations would not go away because importers would still have to cope with that—they would just be EU rules of origin.
Kirsty Blackman (Aberdeen North) (SNP)
Mr Speaker, I would like to take this opportunity to be the first person in this place to congratulate Ruth Davidson, who has just announced her pregnancy. I send huge congratulations from those of us on the Scottish National party Benches.
I feel very sorry for the Financial Secretary to the Treasury, because when we went through the initial stages of consideration of the customs Bill—the Taxation (Cross-border Trade) Bill—his Government had not announced that they were against being in a customs union. In fact, a couple of days after we finished the Bill’s consideration in Committee, the Government randomly—on a Saturday morning—announced that they were not going to pursue a customs union. The Committee stage would have been an awful lot easier had we been aware of the Government’s position.
It was almost as if the Government took that position without really thinking it through. They said, “Of course we are not going to be in a customs union.” Then everyone said, “What about Ireland?”, and the Government said, “Oh, right. We’d better do something about that.” Then we said, “What about rules of origin checks?”, and the Government said, “Oh, yes.” It was almost as if they were being held to account by some Brexiteer Back Benchers and, without thinking, announced this crazy policy that they now cannot row back from.
A customs union means a shared external tariff. It generally means that countries lower the tariff barriers between them. It is not anything else. It is not anything that anyone else says it is. Half our trade in goods is with the EU, and the other half is with the rest of the world.
I want to debunk some of the myths that have been put out in recent days. Every single lorry is stopped at the Norway-Sweden border—not every one is checked, but every one is stopped. We will lose free trade agreements. The Government say, “All these countries have decided that we will continue to be party to the free trade agreements,” but I am not sure that that is the case. We do not have it in writing from anyone. The Government have talked about how great it is that our trade with South Korea has increased, but that is since the EU signed a free trade agreement with South Korea—that is the only reason why it has happened. Then there is the question of scrutiny. I am sure that some of the Brexiteers do not understand what they have signed up to. The Trade Bill does not give us any more scrutiny; in fact, it gives us less scrutiny. The Commission needs authority from the European Council, and then it needs consent from the European Parliament, but we will not have those mechanisms. The Government will be able to do what they like because there is no mechanism for parliamentary scrutiny under the Bill.
The Brexiteers talk about trade with Africa. I look forward to their tabling amendments to the customs Bill to increase the number of “least developed countries” from 49, to increase the number of “generalised scheme of preferences” countries from 19, and to increase the number of GSP+ countries from nine. They do not know what will actually happen, and they need to table amendments if they want to fulfil their bright idea of the future.
Matt Western (Warwick and Leamington) (Lab)
I thank my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) for securing the debate. This is clearly not an abstract debate; it is extremely serious, given the impact that this policy will have on us.
The question of the customs union is important because it strikes at the heart of our trade policy, our business exports and imports, and the strength of the UK economy. The prospect of our not being part of a customs union poses, I believe, an existential threat to the UK car industry, and therefore to the wider UK economy. What businesses in that industry and those more generally are calling for is certainty, clarity and, of course, urgency. Their representatives—the CBI, the Institute of Directors and the Federation of Small Businesses—are doing the same.
We know that many businesses have complex supply chains and production processes that are integrated across Europe, with parts and assembly travelling back and forth across the continent. Frictionless trade is essential to those operations, and a customs union helps to facilitate that. We also know that increased customs checks could lead to delays. We have heard about—we saw them for ourselves—the eight-minute delays on the US-Canada border. We have heard about delays of up to 15 minutes at the Norway-Sweden border and the additional costs that are incurred. We know about the infrastructure—the huge X-ray machines that check every few vehicles to confirm their contents—and, of course, we know that Northern Ireland relies on a frictionless border for the continuation of peace. The symbolism of a manned or marked border between Northern Ireland and the Republic puts at risk the peace secured by the Good Friday agreement. For all those reasons, it is vital that we remain in the customs union.
As the Member of Parliament for Warwick and Leamington, which is at the heart of the car industry, I cannot stress enough how critical this issue of the customs union is, and how costly our departure from it will be for the sector. Some 79% of all components used in the UK car industry come from Europe or other countries abroad. If WTO rules are applied, there will be an incremental cost of £1.8 billion for our exports and £2.7 billion for our imports. It is no wonder that the Japanese invested in the UK in the 1980s. That happened because we were part of the customs union, and we very much welcome their investment here.
I believe that we can remain part of the customs union at the same time as increasing our trade with and exports to markets outside Europe. That is what we should plan to do, and that is why I support the motion.
Mr Speaker
Order. The winding-up speeches of up to eight minutes each will begin now.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I congratulate the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) on securing the debate. I was one of the original signatories to the motion, but I had to leave that behind when I was asked to do this job of speaking for my party—I was wearing many hats at one stage.
I am sure that a lot of us have learned many things during this important debate, and that underlines what has been happening during the Brexit process. In the beginning, people did not know about or pay attention to the ins and outs. It was like a motorist who gets in a car and drives down the road happy and oblivious to the difference between a camshaft, a crankshaft and a tappet, or whatever components are in the engine, because the car works and is fine.
We now have to drill down and understand what happens at borders, which essentially do three things: tariffs, VAT checks and regulatory alignment. A customs union helps only the first of those, but it also goes some way towards helping with paperwork and rules of origin. For those who knock the idea of a customs union, I point out that there are 12 of them in the world, comprising 103 of the 193 United Nations countries. Customs unions are therefore more the norm than the abnorm.
If the UK insists on being out of the customs union and the single market, it will inevitably face barriers to trade. For those who do not believe that, a cursory glance at Google Earth will show them the barrier between Norway and Sweden, both of which are in the single market but only one of which is in the customs union. If they look at the south-east corner of the European Union between Turkey and Bulgaria, or between Turkey and Greece, they will see further barriers, because Turkey is in the customs union but not in the single market. We need to be in both.
Why are we trying to do this? We have seen analysis by the Scottish Government, which was dismissed as politicking; by the Treasury, which was dismissed as mere forecasts; and by the Irish Government, which was met with silence. Analysis shows that the damage to GDP will be 2%, 6% or 8%. To give an idea of what that means, the crash of 2008 was a 2% event for GDP. The right hon. and learned Member for Rushcliffe (Mr Clarke) said that such things had not happened deliberately in the past. He was, I think, hinting that this is being done very deliberately—damage is being done to the UK economy in the full knowledge of what will happen.
The Prime Minister has not chosen the option of membership of the customs union and the single market outside the European Union, which would result in 2% damage. She has gone for the middle option of 6% damage, or three times the economic crash of 2008 over 12 years. We have to be absolutely certain that that is fully understood and communicated more widely among the public, because there will be much wailing and gnashing of teeth when it happens. As someone who was once poor said, “I have tried poverty and it is not very good.”
The Brexiteer line that I heard from the hon. Member for Vauxhall (Kate Hoey) was that we are not in control of our trade, but nobody, by definition, is in control of their trade, because they have to deal with another partner. We certainly will not be in control when 27 other countries put up barriers to our goods, and we will have a lot less control over our trade at that point.
The right hon. Member for Broxtowe (Anna Soubry) made a number of excellent points. She talked about the idea of global Britain. May I let the House in on a secret? There is a thing called global Ireland, global Germany, global France, global Australia, global Argentina —everywhere, ladies and gentlemen, is global. On global Japan in particular, diplomats are going into offices explaining that they have put 40% of their investment into one basket in the EU, namely the UK, and they are very nervous indeed about what will happen to that investment. Outside the UK, global Japan has the biggest worry of all about exactly which direction the UK is taking.
In an intervention, the hon. Member for Bromley and Chislehurst (Robert Neill) gave the example of avionics and Specsavers. Who knew about these things? I knew about shellfish. People say that they want fantastic trade agreements with many other countries across the world, but lorries currently take shellfish from my constituency in the Hebrides to France or Spain on a journey that is uninterrupted by borders. If borders are put at the ro-ro facilities, the lorries’ journeys out and back will be delayed. We might get free trade with Paraguay, but there is no way that anyone could drive a heavy goods vehicle from the Outer Hebrides to Paraguay and back in a week. People sometimes lose sight of exactly what they are talking about. Trade does not happen on bits of paper. Trade happens because a person on my island, Donald Maclean, phones somebody in Spain and they make a deal between themselves. That is how trade works, but the Government are now putting themselves right in the middle of the trade that is happening between the Outer Hebrides and the continent of Europe, and that is going to be very damaging.
I get frustrated when I hear the Prime Minister, who has led the charge on this, saying that the European Court of Justice is not our court, but an external court. The ECJ is our court, your court and everybody else’s court. It is every European’s court, in fact. The idea that the UK and the EU are two separate entities is wrong as well. The UK is one of 28 members, and we have full access to the ECJ, just as everywhere else does.
We should also be mindful of the words of Simon Coveney, the Tánaiste and Irish Foreign Minister, because the moment might be approaching faster than we think. He said last week that if there was no agreement on the Irish border by June, everything could be off the table. The UK could crash out of the European Union a lot sooner than it thinks, because if the border issue is not sorted, no other issue will be sorted and there will be no deal. We know that the hard Brexiteers have abandoned the WTO idea because they have accepted a transition, but they might not get that transition. That could be a problem for them, but they have not yet woken up to it. Indeed, they might wake up to it too late, because the cliff edge is closer than we think. It has not been delayed as a result of the Prime Minister begging the European Union for two extra years but walking away with only 21 months.
It is absolutely incredible that the United Kingdom is taking the steps that it is taking. The right hon. and learned Member for Beaconsfield (Mr Grieve) has tried to shout to warn people and wake them up to the economic damage that is being done to the people who live in our islands. It will be worse for those in the north of England and in Scotland than it will be for those in London, but there is still going to be bad news for London. But I fear that people are not listening. They are on their ideological high horses, ignoring the facts that are staring them in the face. They are grabbing platitudes in the great hope that something will come up. The reality is that nothing is going to come up unless we climb down from a position of trying to square unsquareable circles. The UK is in a very difficult position of its own making. From my point of view as a Scottish National party member and a Scottish nationalist, we have to be referendum-ready in Scotland, because that is the only lifeboat I can see that could take us out of the economic calamity that the UK is about to force on itself.
Peter Dowd (Bootle) (Lab)
The debate has been enlightening and I have welcomed the chance to listen to all the Members across the Chamber. I should like to thank the 12 cross-party Chairs of the Committees and the Liaison Committee for enabling us to explore this motion today, particularly my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), who set the scene. I would also like to thank the right hon. and learned Member for Rushcliffe (Mr Clarke), who said that we needed a proper debate. To some extent, we have had that debate today. The motion and the debate have set out in stark terms the overwhelming case for the UK to negotiate a new customs union with the European Union on our exit.
I would like to share a quote with the House. Forty years ago, almost to the day, a former Leader of the Opposition wrote this in a German newspaper:
“It is no small thing to have completed and preserved a customs union covering a market of nearly 300 million people.”
That was Mrs Thatcher, then the Leader of the Opposition. The current Leader of the Opposition takes the same view—that a customs union involving Britain and the European Union is a project worth preserving. However, bound by the whims of the misguided or the ideologues in her party, the Prime Minister is unable to serve the national interest and commit the Government to negotiate a customs union with the EU beyond the transition period. As the right hon. Member for Loughborough (Nicky Morgan) asked, what are the plans? There do not appear to be any at all.
We are calling for an outcome that will protect the UK economy—a “jobs first” Brexit in the context of the six tests set by the shadow Brexit Secretary, my right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer). So, while the Prime Minister talked about leaving under no deal, we have tried to work with the manufacturing industry and other business sectors to examine how we might best protect the interests of both producers and consumers, as have other Members across the Chamber. The Prime Minister explicitly ruled out a customs union with the EU in her Mansion House speech in January, yet at the Press Gallery lunch today the Home Secretary apparently cast some doubt over that, but she has since tweeted to say that we are now back on track and that there will not be a customs union. It is the lack of continuity and the confusion that creates problems.
By direct contrast, my right hon. Friend the Leader of the Opposition made it clear that Labour is committed to such an arrangement, saying that
“Labour would seek to negotiate a new comprehensive UK-EU customs union to ensure that there are no tariffs with Europe and to help avoid any need for a hard border in Northern Ireland.”
As on many other issues, a cursory glance at Labour’s position shows that that is the line that we have been taking for a considerable period. Whether we like it or not, the Prime Minister has caused confusion. As far as we are concerned, we are campaigning for a customs union, and we are determined to follow that. We are not in the business of keeping Britain in the EU through the backdoor, nor would we countenance a deal that left Britain as a passive recipient of rules decided by others elsewhere. However, many in the Chamber have acknowledged the huge risks and uncertainties that leaving the customs union presents for jobs, manufacturing, business supply chains and, importantly, continued peace in Northern Ireland. A comprehensive and effective UK-EU customs union is possible and would ensure that there are no tariffs with Europe and avoid the need for a hard border in Northern Ireland.
In entering a new customs arrangement with the EU, we would ensure that our hard-won workers’ rights, standards and protections are maintained and protected, blocking attempts by the more ardent Brexiteers to create a bonfire of such rights and the weakening of environmental protections. The new customs arrangement needs to ensure that Britain can have a say in future trade deals. A new customs union would ensure that the UK maintains close and progressive co-operation with the whole of Europe after Brexit, rather than creating the risk of growing isolation, which would see us further apart from our European neighbours on regulation, rights and standards. As has been identified today, even the Government’s leaked impact assessment, among other reports, shows that their highly streamed customs proposal will lead to non-tariff barriers and some tariffs, and it reaches the same conclusion as we have: a customs union is the only way to guarantee frictionless trade between the UK and the EU.
Peter Dowd
I would like to, but I do not have the time.
Clause 31 of the Taxation (Cross-border Trade) Bill, which gives the Government the power to enter into a customs union, was published in November 2017, as was mentioned by the hon. Member for Aberdeen North (Kirsty Blackman). However, within weeks, the PM was ruling out a customs union, but it remained in the Bill on First and Second Readings and in Committee. Has anyone bothered to mention that clause to the Prime Minister? Is she even aware of it? Should she not commit to clause 31?
Today’s debate will send a clear warning to this Government that they cannot simply steamroll over the wishes of Members. It is time for the Prime Minister to act like one and to challenge those in her party and her Cabinet who continue to hold the country and the negotiations hostage. The road ahead is clear, and Labour’s position has been consistent, as many have said today. It is time for the Government to listen to the consensus and adopt a position that seeks to negotiate a new UK-EU customs union. It is the only practical way to ensure frictionless trade and to protect jobs and the hard-won peace in Northern Ireland. As many Members have said, we owe that to our constituents and to our country.
The Financial Secretary to the Treasury (Mel Stride)
I congratulate the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) on securing today’s extremely important debate. I thank all Members for their passionate, heartfelt and informed contributions. I do not intend to go through all the contributions, given their volume and the fact I would like to make sure I leave time for any Member who wishes to intervene on me to ask any questions or to make any points. If I have time, I will leave a minute for the right hon. Lady at the end.
A number of important points have been made in this debate. First and foremost is the matter of Northern Ireland and its Irish border. Some Members have suggested that, in fact, we are prepared to jettison the Good Friday agreement, to undermine it in some way or not to stand up for it, which is certainly not the case. We remain entirely committed to the Good Friday agreement, as we do to having no hard border between the Irish Republic and Northern Ireland and, indeed, no effective customs border down the Irish sea.
Lady Hermon
Thank you. It is nice that the Minister regards me as an hon. Friend.
I gently say to the Minister that it would be very helpful in a sensitive situation if the Prime Minister would stop repeating the mantra that no deal is better than a bad deal, because it directly contradicts her pledge, sincerely meant, to uphold the principles of the Good Friday agreement, which I believe she does and intends to do. However, there is a contradiction there, and I am sure the Minister agrees that we do not want to see any risk of a hard border with Ireland. That would lead to violence along the border.
Mel Stride
The position of the Prime Minister and the Government is that we are confident of a deal. In that context, this issue of no deal is not particularly pertinent.
Other important points have been raised. I think everybody recognises the importance of having as frictionless a border as possible. Of course, it is recognised that we would achieve that if we stayed within the customs union or a customs union, which is de facto the same thing, but that is not the same as suggesting that there are not alternative arrangements—I will discuss those alternative arrangements in a moment—that would achieve as good as the same thing as a frictionless border.
Many Members today have raised the importance of being free as a nation to go out and negotiate our own free trade arrangements, which of course means that we need to leave the customs union.
Kirsty Blackman
Does the Financial Secretary believe the trade agreements we negotiate could possibly be better than the trade agreements we currently have and would continue to have as a member of the EU?
Mel Stride
As the hon. Lady knows, we are currently working on transferring the EU’s agreements with third-world countries. Of course, in future we will be free to strike our own FTAs with other countries, which we are currently prohibited from doing.
It is good to hear the hon. Member for Bootle (Peter Dowd) agree with Margaret Thatcher at long last. She stood for free markets, free trade and fiscal responsibility, and I look forward to hearing more of that from him in the years to come.
I have just been informed that I must leave two minutes for the right hon. Member for Normanton, Pontefract and Castleford, which I will endeavour to do—[Interruption]— although she is generously saying that one minute will be enough.
The hon. Member for Bootle suggested that the Government’s position is confused, although I am not sure whether he was thinking of his own position when he said that. The reality is that the Labour party has a classic fudge on the customs union. It wants to tell everybody that we can somehow be in the customs union while not being a rule taker—that we can somehow negotiate to be in the room when FTAs between the EU and other countries are negotiated. The Labour party accuses us of seeking to cherry-pick, but by its own logic, it is quite clear that this is just not a realistic possibility.
The hon. Gentleman specifically mentioned clause 31 of the Taxation (Cross-border Trade) Bill, which will indeed permit the UK to enter into a customs union with another customs union or territory. That is something we will almost certainly wish to do with our Crown dependencies. The clause will therefore not be relevant to the European Union after our departure. The Government are therefore clear that when we leave the European Union we will leave its customs union. That is a matter of fact. The Government have also been clear that forming a new customs union with the EU is not compatible with a meaningful independent trade policy, so we will not be doing that. Outside the EU and a customs union, the UK will be able to sign its own trade deals with our partners around the world.
Mel Stride
An ingenious question; I would expect no less. As my right hon. Friend will know, we are not able to enter into and sign such deals until we have left the EU and, indeed, we are beyond the implementation period. Of course we are working actively on these deals, but saying that does not mean that we will no longer need a deep and special partnership with our nearest trading partner. The EU is still and will remain a significant marketplace for us. Our markets are deeply interconnected, and that will remain the case for the future. That is why the Prime Minister set out the Government’s intention to negotiate the broadest and deepest possible economic partnership covering more sectors and co-operating more fully than any free trade agreement anywhere in the world and recognising the point of deep convergence from which both sides begin.
In leaving the EU customs union, we will be guided by what delivers the greatest economic advantage to the UK, framed by three strategic objectives. The first is continued UK-EU trade that is as frictionless as possible. The second is avoiding a hard border on the island of Ireland. The third is establishing an independent international trade policy.
The Government have already set out two options for our future customs arrangements with the EU that most closely meet these objectives. One is a new customs partnership. In this model, the UK would mirror the EU’s requirements at our border for imports from the rest of the world with a final destination in the EU. This would mean applying the same tariffs and rules of origin as the EU for those goods. By following this approach, we would know that all goods entering the EU via the UK pay the right EU duties, removing the need for customs processes at the UK-EU border.
The other option is a highly streamlined customs arrangement. This approach would involve the introduction of formal customs processes between the UK and the EU, driven by technology, to streamline and enable this model. However, the UK would look to implement a range of measures—both negotiated and unilateral—to minimise friction, together with specific provisions for Northern Ireland. The precise form of any new customs arrangements will of course be subject to negotiation, and we are pursuing both approaches vigorously with our European friends. I look forward to further progress in these talks.
For the reasons I have given, the Government cannot support the motion before us today. As we prepare to leave the European Union, a significant opportunity awaits us—the opportunity to promote our national interest above all else and the opportunity to shape our future trading policy—because when the people of this country voted to leave the European Union, they voted for democratic self-government and to take control of our future trading arrangements. Moving forward, we will seek to maximise our trade, across all countries and markets as we prepare for the challenges and the exciting opportunities ahead, confident as an independent trading nation and proud of our long history as a global champion of free trade.
Yvette Cooper
This has been an excellent debate. We have had substantial speeches drawing on huge evidence and experience from across the country and from so many Select Committees, but what the Minister—he did the best he could—delivered in response was not up to the debate. He had lines to take, the words on the page, but in the end there is no meaning behind them, no evidence that underpins them and no future that we can build on them. In the end, I think in his heart he knows that. That is why I urge the Government to bring forward a proper debate on legislation, on amendments. Give the House the opportunity to steer the objectives of the negotiations before it is too late. This is about the future of our whole country, the future of our prosperity, the future of our manufacturing industry and whether we have peace within our borders and across our borders. It is immensely important for our entire future, and too important to be simply left to a massive row and crisis afterwards, when it is too late. The Minister knows, and the Government know, that time is running out. It is time for the Government to stop running away. Let us have this debate; let us support a customs union.
Question put and agreed to.
Resolved,
That this House notes that the EU is the UK’s largest export market for goods, accounting for a total of £145bn of exports and £241bn of imports in 2016; further notes the Government’s expressed aim to secure the freest and most frictionless possible trade in goods between the UK and the EU after 29 March 2019; notes the importance of frictionless trade without tariffs, customs or border checks for manufacturers and businesses across the country who trade with the EU; further notes that the free circulation of goods on the island of Ireland is a consequence of the UK’s and Republic of Ireland’s membership of the EU Customs Union; in addition notes the Government’s commitment to (i), in the UK-EU joint report on progress during phase 1 of the Article 50 negotiations, the maintenance of North-South cooperation and the all-island economy on the island of Ireland, (ii) the Belfast Agreement implemented in the Northern Ireland Act 1998 remaining a fundamental principle of public policy and (iii) the continuation of unfettered access for Northern Ireland’s businesses to the whole of the UK internal market; and therefore calls on the Government to include as an objective in negotiations on the future relationship between the UK and the EU the establishment of an effective customs union between the two territories.
Mr Chris Leslie (Nottingham East) (Lab/Co-op)
On a point of order, Mr Speaker. Now that the House has resolved to call on the Government to include as part of their negotiating objectives that the United Kingdom should remain in an effective customs union with the European Union, can you clarify whether the convention set out by the Leader of the House in respect of Opposition day motions that are passed without a Division and become resolutions of the House, whereby the Government have committed to report and reply after three months, will apply in respect of the resolution that the House has just passed?
I say that because this is the first example of a Liaison Committee motion passed in this form. We have no guarantee that legislation will be forthcoming before the summer recess, but that three-month period, as I understand the convention, would put a requirement on the Government. Now that the House has resolved the matter of the customs union—it is the default, consensus view of this House—will you confirm that the Government’s convention should apply to such resolutions? This talk about the non-binding nature of resolutions is very dangerous. If the House has come to a resolution, it means something. The Government are surely under an obligation to come and explain how they intend to acquit themselves in response to that resolution.
Mr Speaker
I am not certain that I am in a position to confirm anything today. What I would say to the hon. Gentleman, having just heard his point of order, is this. There is a compelling logic in such an arrangement and an equivalence of treatment between this, the first debate under this parliamentary architecture involving the Liaison Committee and co-operation between it and the Backbench Business Committee, and the arrangement that has come to apply in respect of motions passed after Opposition day debates. I repeat: there is a compelling logic in such an arrangement, and it might be thought—I say this with my beady eye on the Financial Secretary to the Treasury, who is an unfailingly courteous individual—that it would also be a courtesy for the Government to oblige the House with such an explanation. I think we will have to leave matters for today, but I use the word “compelling”—one might also use the word “inexorable” or “irresistible”—for the logic of which I speak. I hope that is helpful to the House.