Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Brougham and Vaux) (Con)
My Lords, Members are encouraged to leave some distance between themselves and others and to wear a face covering when not speaking. If there is a Division in the Chamber, the Committee will adjourn and resume after 10 minutes.
Beyond Brexit: Institutional Framework (EUC Report)
(3 years ago)
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The Earl of Kinnoull
That the Grand Committee takes note of the Report from the European Union Committee Beyond Brexit: the institutional framework (21st Report, Session 2019–21, HL Paper 246).
The Earl of Kinnoull (CB)
My Lords, on 24 December last year the EU–UK trade and co-operation agreement was concluded between the UK and the EU. Few of the 500 million people directly affected would not have been grateful for the clearing of this first great hurdle in establishing the new relationship between the UK and the European Union. The European Union Committee and the other members of our committee family set about analysing what had been agreed that day, which comprised not just the trade and co-operation agreement but two other agreements and 15 declarations. These were the final reports of the family of European Union committees of this House. Those committees—there were seven when I succeeded as chair the outstanding noble Lord, Lord Boswell of Aynho—have sought for almost five decades to scrutinise all matters and to inform the House and people more widely of every relevant issue through report, correspondence or debate.
The suite of five Beyond Brexit reports, three of which we are debating today, were the final reports of the European Union Committee after nearly 50 years of service to the House and just over 50 Brexit-related reports to the House. I hope that the committee today and, through it, the House will warmly thank the staff who have enabled matters. In the Brexit period of almost five years, these 25 or so officials were led by Chris Johnson. I know that all will want to recognise his outstanding service and to thank him. The clerk of the European Union Committee throughout the period was Stuart Stoner, and equal recognition and thanks are due to him and to all the staff concerned. I especially want to cite those who are in less frontline roles. The contributions of all were essential to our efforts in this long period of sustained activity. It is fitting that the noble Lord, Lord True, is today standing in for the noble Lord, Lord Frost. He has also been most helpful and generous with his time in public and privately, and I place on the record my thanks to him and to the noble Lord, Lord Frost, for his similar support.
I turn now to our report, Beyond Brexit: the institutional framework. Some 11 months or so on from the announcement of the trade and co-operation agreement, we have two associated agreements on nuclear matters and classified information, and 15 declarations, which I shall call the TCA package. This debate represents the first opportunity for the House to take general stock of the position and how it matches up to the various words and aspirations of the TCA package. In the interests of time, I will restrict myself to four areas, knowing that the speakers’ list for this afternoon’s debate will enable us to cover many others in this huge, varied and complex arena.
In particular, I will leave all mention of the Ireland/Northern Ireland protocol to my noble friend Lord Jay of Ewelme, the chair of the Protocol on Ireland/Northern Ireland Sub-Committee. I very much look forward to his contribution, as I do those of the noble Baroness, Lady Donaghy, the redoubtable chair of the EU Services Sub-Committee, and the noble Baroness, Lady Armstrong, an outstanding veteran of the European committee family, who is stepping in for the noble Baroness, Lady Verma, the equally strong chair of the EU Goods Sub-Committee.
The first of the four areas I want to consider is governance. The TCA governance apparatus comprises 24 committees and working groups of various types. I remind all that this is in addition to the eight set up under the withdrawal agreement. At the top of the tree is the Partnership Council, a very powerful entity that can itself agree changes to the TCA, in much the same way that the Joint Committee, at the top of the withdrawal agreement tree, can.
The speed with which the TCA was created inevitably and rightly left much detail to be agreed at a later stage. The logical fora for discussions on this quantitative detail were the committees, particularly the 18 specialist committees and four working groups of the TCA. These bodies are staffed by officials, not politicians, but I regret that they do not seem to be operating in a meaningful way. Recent Answers to Questions in the House have suggested that they have not even all yet met; and other disclosure has suggested that often, the ones that have met have not had agendas which would suggest that substantive discussions are going on. I therefore ask the Minister to update us on the position of these bodies. Have they now all met? Are they now operational as bodies that will tweak the TCA to the mutual benefit of the signatories?
The second area that I want to touch on is the 15 declarations. The first declaration is a joint one concerning financial services regulatory co-operation between the UK and the EU. The second paragraph states:
“Both Parties will, by March 2021, agree a Memorandum of Understanding establishing the framework for this cooperation.”
No such MoU has been signed, although technical negotiations were concluded back in March. This failure to sign the MoU means, in turn, that the EU will not assess the UK for equivalence, which was originally promised for the end of July. The curious result is that the People’s Republic of China has 14 financial services equivalence decisions with the EU, Mexico has 13 and the UK has just one, which relates to clearing and is time-limited.
A later joint declaration concerns the UK’s participation in EU programmes. This includes Horizon Europe. That declaration’s fourth paragraph states:
“It is the Parties’ firm intention that the Specialised Committee on Participation in Union Programmes will adopt the Protocols at the earliest opportunity to allow their implementation as soon as possible, in particular with the ambition that United Kingdom entities would be able to participate from the beginning of the programmes”.
As yet, however, the UK’s vast higher education and research community has no access to Horizon Europe, which is now nearly a year into its seven-year cycle. Could the Minister comment on the above examples and commit to providing the Committee with a full picture of the declarations a year on?
The third area concerns the dispute resolution provisions under the TCA. Chapter 4 of our report is devoted to explaining these complex arrangements. The conclusions set out in paragraphs 129 to 135 note, among other things, that the provisions are “novel”. We have seen in the disputes over fishing with France outstanding matters that need to be resolved. The two remaining disputes, one over UK waters and one over Jersey waters, have been rumbling on for some considerable time, with much work both being done on the megaphone by politicians and in offices by patient officials in the UK, the EU and France. These disputes represent in the TCA the first public test of a dispute, yet the resolution machinery is not being used. This is an active choice by both parties to the TCA, for either is able to engage the process.
I firmly believe that the parties need to use the dispute resolution procedures as part of the confidence-building process in the whole of the new TCA apparatus. Whatever the seemingly attractive reasons for dealing with these problems outwith the TCA apparatus, that reasoning is wrong when looked at in this wider view. Will the Minister explain why the current fishing disputes with France are not being dealt with using the TCA dispute resolution provisions within Part 2 of the TCA?
The fourth and final area concerns the scrutiny of the TCA, in particular parliamentary scrutiny. We dealt with this in paragraphs 76 to 91 of our report. I begin by thanking the Government for their part in the substantial efforts to bring into being the parliamentary partnership assembly. Indeed, I understand that the relevant Motion will be brought to this House later this week. I hope that it will allow the parliamentary partnership assembly to meet later, in the first quarter of 2022. The vital interparliamentary dimension of the new relationship between the UK and EU will then be immeasurably strengthened.
However, the scrutiny committees of both Houses have yet to conclude an agreement with the Government as to how to scrutinise the TCA and the withdrawal agreement. The European Union Committee and its sister committee in the House of Commons had the benefit of the scrutiny reserve resolution in a four decades old agreed process. The current interim and ad hoc arrangements for the TCA and withdrawal agreement serve no one well and are inconsistently applied, as they have not been set out in a clear and precise way.
The winning formula will include agreement on which documents—with, of course, appropriate Explanatory Memoranda—will be deposited with the scrutiny committees; how and when the contemplated textual changes to the TCA and withdrawal agreement will be scrutinised; how often and for how long Ministers will commit to appearing before the committees; and the way briefings will be given on meetings of the Partnership Council and the joint committee. Will the Minister comment on the necessity for proportionate scrutiny and on the wisdom of having these matters agreed in writing in advance?
In closing, I note once more what rare beasts liberal democracies are. We live in a world replete with far less attractive authoritarian regimes where basic freedoms such as free speech are withheld. The things that divide the UK and the EU currently are of a small nature compared with those that unite us. The DNA of the proud European Union Committee, and its torch, have been passed to the European Affairs Committee and several of the other new and vibrant committees of this House. Our work will continue. I therefore look forward very much to this afternoon’s debate. I beg to move.
Baroness Donaghy (Lab)
I congratulate the noble Earl, Lord Kinnoull, on securing this collective debate on reports which were published more than eight months ago. The EU Services Sub-Committee did at least have an opportunity to touch on the report before us in a debate on 22 July on our earlier report, seven months after leaving the EU. It was difficult to draw conclusions then because of the impact of the pandemic and the souring of the atmosphere around the Northern Ireland protocol. Members of the sub-committee had very different views on the wisdom of leaving the EU, and I pay tribute to them for focusing on issues on which we could agree. I also thank Dee Goddard, who was an outstanding clerk to the committee.
The report emphasises how central to the UK economy services are. The UK exported 317 billion of services to the EU and imported 217 billion from the EU in 2019. The UK has consistently run a trade surplus in services. The committee and the services sector welcomed the trade and co-operation agreement on 24 December as being preferable to no agreement, but recognised that significant challenges remained and that negotiations on the shape of UK-EU trade and services relationships would continue in the years to come. We felt that it was in both sides’ mutual interest to ensure that there was a positive and co-operative relationship.
On financial services, our concerns were on equivalences, the need for a deep level of regulatory co-operation between the EU and the UK to help manage future divergence, and the need for Parliament to consider how best to scrutinise the new powers of the regulators. It is clear that we have made little progress on equivalences or on a deep level of regulatory co-operation. It is possible that the larger companies are finding ways around this. However, I have one anxiety and one deep concern.
The financial sector is made up of small companies, mainly outside London. My anxiety is that they will need strong support from government, and I am asking the Minister for assurances on the level of support available to them. My deep concern is about the lack of scrutiny in Parliament of the regulators’ new powers. This, of course, is not necessarily a matter for the Minister. The Treasury Select Committee in the other place has decided not to undertake detailed scrutiny of any changes, and the House of Lords is not giving priority to this either. A separate committee is required to deal with what could be a full-time job.
The Government and regulators now hold significant power in setting financial services regulations. The services committee said that the Financial Services Bill was a missed opportunity and recommended setting up a committee dedicated to scrutiny of the financial services sector. I believe that Parliament at present is not providing proper scrutiny of the changes in the financial sector. There are many other areas of uncertainty that cannot all be covered in time available. On research and education, how much good will would be lost by leaving Erasmus, and would the Turing scheme be an adequate replacement—or, if not a replacement, would there be proper funding? On legal services, there is the question of whether smaller firms would receive sufficient help and advice from the Government, the impact of no agreement on mutual recognition of professional qualifications, and the general issue of mobility of labour.
I want to focus on the creative industries for a minute. They are a hugely important and influential sector, worth £100 billion in 2019 but already hard-hit by the pandemic. The committee expressed deep concern about the potential impact of mobility provisions in the TCA on the more than 2 million people employed in the creative industries, which would make touring prohibitively bureaucratic and expensive. Recent reports show that, apart from a few minor concessions by individual countries, the cost and uncertainty around cabotage, carnets, visas and work permit charges are causing major difficulties.
The European Commission stated in 2019 that, in the music business,
“UK acts … dominate the European panorama”.
There is a restriction of 90 days in 180 days over all member states on visa-free touring. In practice, some countries, such as Austria, Poland and Sweden, have applied additional restrictions on those 90 days or a requirement to be employed by a registered venue, such as in France. The opera singer Jennifer Johnston has said that the standard rehearsal period for performances is 84 days, which means that she can do only one opera every half a year in the EU. Although the Government have granted a cabotage easement, suspending the inbound rules on cabotage for EU-flagged trucks, this creates an imbalance as it is not reciprocated. The fear is that specialist hauliers will move from the UK, which currently has the vast majority of these trucks, to EU countries, with a consequent loss of UK jobs.
The music industry is looking for a transitional support package and a permanent music export office—ultimately, a cultural touring agreement covering the geographic area of Europe. The costs of carnets and permits, as well as restrictions on merchandise, are already affecting the industry; despite the Prime Minister’s promise that he would work flat out to find solutions, there may have been a lot of effort but there is very little to show for it. If the Minister is unable to update us on this, perhaps he will write to the noble Earl, Lord Kinnoull, with the exact position.
In its report of 17 November this year, the International Agreements Committee outlined its views on the negotiating objectives that the Government should adopt on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. If we are to ensure that the UK’s standards are safeguarded in a number of areas—including intellectual property and the protection of personal data, which I have not had time to deal with today—the Government need to be clear whether they are seeking carve-outs or embarking on a whole new philosophy involving lower standards and protections.
Finally, our UK services sector is a major success story; so far, the Government have succeeded in only minor acts of mitigation. As the noble Earl, Lord Kinnoull, indicated, it is a matter of some urgency that the infrastructure for mutual co-operation and consultation is up and running as soon as possible.
Lord Jay of Ewelme (CB)
My Lords, I speak today as a member of your Lordships’ European Affairs Committee and chair of the Sub-Committee on the Protocol on Ireland/Northern Ireland.
I want to focus my remarks today—it is of course the centenary of the signing of the Anglo-Irish agreement on 6 December 1921—on Northern Ireland. Although the reports before us on services and the institutional framework are extremely important, they are of less relevance to Northern Ireland than the report on the trade of goods, so most of my remarks will relate to that report. However, I must say, the focus is rather different for Northern Ireland and Great Britain than for the United Kingdom and the European Union. How do we ensure that there is no physical border between the Irish Republic and Northern Ireland without leading to an unacceptable border between Great Britain and Northern Ireland?
The sub-committee on the Northern Ireland protocol was established in the spring of this year as a sub-committee of the European Affairs Committee, chaired by my noble friend Lord Kinnoull, so we are comparatively new. The members of the committee are, however, immensely experienced. A number of them are very active in today’s politics in Northern Ireland, and they span a wide range of political views. The committee published its initial report in July; it was debated here in the Moses Room in September. It was agreed by unanimity. That unanimity did not, of course, in any way disguise the different political views in the committee, but it did show that all members of the committee, whatever their political views, believe that the Government’s focus in negotiations on the protocol must be on the effects on all communities in Northern Ireland.
Since last summer, the committee has continued its scrutiny of the different provisions of the protocol and its operation. It is worth stressing that the protocol is indeed in operation, even if the implementation of certain provisions of it have been deferred. We looked first at Article 2 of the protocol, on individual rights. This is an important part of the protocol, even if it is often neglected through the focus on trade provisions. It is less relevant, however, to today’s debate, although I am glad that the Government have just replied to the committee’s letter on the subject, which the committee will consider later this month.
We have also considered the provision of medicines to Northern Ireland. This is an issue that affects everyone in Northern Ireland, regardless of their views on Brexit, the protocol or the constitutional status of Northern Ireland. No matter what your political view, if you cannot get the medicines you need, you are vulnerable. The committee took evidence from representatives of the pharmaceutical industry in October and wrote to the noble Lord, Lord Frost, last month. In its letter, the committee highlighted industry concerns over the cost and operational impact of the protocol; the scale and very real risk of product withdrawal; the limited scope for the cross-border supply of medicines on the island of Ireland; the analysis of the impact of the extension of the grace period for medicines; the EU’s non-paper on medicines; and the proposals in the Government’s Command Paper. The committee noted industry’s views that, ideally, medicines should be removed from the scope of the protocol, but with the important proviso that this or any other solution must be on the basis of agreement between the United Kingdom and the European Union.
I note recent comments by Vice-President Šefčovič expressing confidence that a solution on medicines can be reached, possibly before Christmas. This is a crucial issue for the people of Northern Ireland. It would be helpful to have the Minister’s views on the position now in the talks between the United Kingdom and the European Union, and on the Government’s response to Vice-President Šefčovič’s statement that the EU is ready to take unilateral steps to address the issue if necessary.
Two other issues have been at the front of the committee’s minds this autumn: Article 16 and the democratic deficit in Northern Ireland. The committee’s work this autumn has been against the background of the Government’s stated willingness to invoke Article 16 if necessary and their assessment that the circumstances exist to justify doing so. Last week, the committee held an evidence session with a panel of distinguished legal experts on the mechanics of triggering Article 16, the legal consequences of doing so and relevant precedents in other international agreements. The committee also explored other legal powers open to the UK and the EU to address the problems to which the protocol has given rise, the legal status of the grace periods now in operation, the implications of Article 10 on state aid and the role of the European Court of Justice. The committee will be looking at these issues further in the coming weeks.
Meanwhile, does the Minister agree that there is a marked gap between the likely consequence of Article 16—more negotiations between the UK and the EU, if in a rather different context—and the widespread assumption that invoking it will somehow amount to an abrogation of the protocol as a whole?
Finally, the democratic deficit under the protocol, by which EU legislation applies to Northern Ireland without its explicit consent, and various proposals to enhance Northern Ireland’s voice and influence both within the United Kingdom and the European Union, were key themes of the committee’s July report. In October, the Commission published a non-paper on engagement with Northern Ireland stakeholders and authorities. The committee subsequently held a virtual seminar on the democratic deficit with politicians representing all viewpoints, from Westminster, Stormont, Dublin and the European Parliament, as well as academic experts and business representatives. The committee is continuing its interparliamentary engagement through meetings with the chairs and members of equivalent committees in the Northern Ireland Assembly and the Parliament in Dublin.
A less visible but extremely important part of the committee’s work in the context of the democratic deficit is the scrutiny of EU legislation applying to Northern Ireland under the protocol. I was much involved in scrutiny work while we were a member of the European Union, but nothing then was as important as looking hard now at the Explanatory Memoranda provided by the Government on directives, regulations and delegating implementing regulations that apply to Northern Ireland across a wide range of policy areas and to which, as I have said, the Northern Ireland authorities have not explicitly consented.
Our correspondence with Ministers and their replies are published on the committee’s website and copied to the chairs of the relevant committees in the Northern Ireland Assembly. We are grateful for the valuable feedback that we have received from them and from others such as the Ulster Farmers Union.
The quality of Explanatory Memoranda from government departments has improved since I drew the attention of the noble Lord, Lord Frost, to this issue in a debate here a few weeks ago. It is, however—and let me be polite—still variable. This is not an academic exercise. I know that departments are busy, but this issue is of serious concern to members of the committee, particularly those from Northern Ireland. The Government surely have a duty to provide a full account to Parliament through our committee of the implications of each new or amended law that applies to Northern Ireland. Can the Minister give an assurance that the Government will redouble their efforts to ensure that?
Baroness Armstrong of Hill Top (Lab)
My Lords, I left the EU Committee in July 2019. I am speaking today largely because the noble Baroness, Lady Verma, who is chair the EU Goods Sub-Committee, asked me to. I think she did so largely for continuity, because the reports that you see today are built on work that has been going on for many years, in this House and in the EU Committee. A lot has happened since 2019. However, much that was done then needs to inform how we assess the work we are looking at today. In some senses, I feel that the loss of the EU Committee may well end up being a little premature. Listening to the noble Lord, Lord Jay, has reinforced that view.
The committees have been a significant means of scrutiny, initially of EU legislation and activity, which included the UK’s role in the EU. As we have heard today, there is still not that settled body of institutions and processes that enable effective scrutiny and accountability. I know there is widespread concern about that among Members of this House.
I put on record my thanks to everyone concerned with the committee. They treated me enormously well and kindly when I was on it, even when I was not participating that much because I was ill. I learned an enormous amount from them and from what was going on in the committee and in the EU, which I hope has served me well in my activities in this House.
The report before us on trade in goods recognises that its conclusions are inevitably “preliminary” and that
“the nature, causes and longevity”
of the issues
“are likely to become clearer over the coming months and years.”
That is another reason why I say that scrutiny and accountability in future will be exceptionally important.
The issues in this report reflect much of the evidence we heard some two and a half years ago and form the basis of the concerns of the business community and others today. As the noble Baroness, Lady Verma, has said to me, complex processes and the consequential paperwork have remained significant issues for many businesses, particularly small businesses. It is therefore very important that the Government seek to ensure that, in working with the EU on the implementation of what they are agreeing, they try to reduce the complexity and paperwork for the trade of goods.
The recent crisis in the ability to move goods was a salutary lesson to us all. It demonstrated that the haulage industry faces incredible challenges—not just shortages of labour and drivers but the shortage and poor quality of facilities for those moving goods. I do not know about others here, but I was severely embarrassed to hear the stories of what those workers have to put up with when they transport goods and are stuck on motorways or in car parks, unable properly to use services to look after themselves, let alone the goods they are seeking to move. The problems of the haulage industry also demonstrated to us just how reliant we are on the ability to move goods just in time, as they say in modern manufacturing, where the intricate co-ordination of the supply chain really has to come together.
We have been incredibly unfortunate to have a global pandemic at the same time as leaving the EU. However, the EU remains our largest and nearest partner for trade in goods, and we have to be able to come out of the pandemic in the best possible position to develop trade in goods and services.
I am sorry to keep going on about it but, as many will know, I come from the north-east—the region of England that has the highest proportion of its economy per head of population based on manufacturing. Therefore, it trades with the EU more per head of population than any other region. I have a particular interest in ensuring that all that is talked about in this report works. Unfortunately, in this year, the latest figures for the north-east show an 11% decline in trade with the EU. Unless that is halted, it will have a medium to long-term effect on not only wages but the whole economy—on levels of poverty, levels of disadvantage and so on. I am sure that is not what the Government want. If they want levelling-up, they must address this issue with urgency and have in mind the longer-term effects of decisions that they take today.
Much that the noble Earl, Lord Kinnoull, my noble friend Lady Donaghy and the noble Lord, Lord Jay, have said about institutions and how we develop our relationship with the EU is extremely relevant to this debate. We spent a lot of time and energy on the nature of that relationship before the final outcome, with the agreement signed in December 2019. I remain of the view that we will be far more successful in negotiations if we act as grown-ups, treating each other with respect and as we would wish to be treated ourselves, while keeping our word and acting with integrity. However, there is sometimes a view that if we work in that way we will be seen to be rolling over in negotiations. That is absolute nonsense; if I was being really difficult, I would say it reflects old-time male attitudes.
Let us grow up and treat our partners as real partners who are able to contribute to the development and success of our country as well. We can contribute to countries across Europe being successful and they can contribute to our success. If we think that in today’s world, we can do it all without them or that sort of relationship, then we are living in cloud-cuckoo-land. The people of this country have the right to demand that we deal honestly and fairly with them, which also means dealing with the EU in that manner.
Lord Hannay of Chiswick (CB)
My Lords, this triple debate surely falls into the “better late than never” category, being nearly a year after the reports were published and with none of the committees and sub-committees who authored them still in existence. However, I am delighted that we have today been addressed by some of those former chairs. Fortunately, their successor committee, the European Affairs Committee, on which I have the privilege to sit, is still chaired by my noble friend Lord Kinnoull, who led off our debate so admirably.
Looking first at the matter of trade in goods, about which our European Affairs Committee is on the point of publishing a further report, the issue that stands out, to me at least, is SPS—sanitary and phytosanitary controls. This is resulting in much lost or delayed trade and substantial increased costs on business, in the absence of an agreement between the UK and the EU. These controls are also an important element in the problems which have arisen over implementing the Northern Ireland protocol, about which my noble friend Lord Jay spoke so powerfully. Such agreements between the EU and a third country on SPS do exist. They exist between the EU and Switzerland and the EU and New Zealand. The Commission has indicated, so I understand, that it could contemplate a time-limited duration for an agreement with the United Kingdom, which would meet the eventuality of that agreement conflicting with any free trade agreement that the UK might want to enter into.
Why do the Government not use the trade and co-operation agreement machinery to explore the possibility of an SPS accord, given that several options are available? It is simply not a convincing answer to say that this was considered during the pre-Brexit negotiations and discarded. That was then and this is now, as the noble Lord, Lord Frost, is fond of saying in a different context. Nor can it reasonably be answered that the absence of a SPS agreement was endorsed by the result of the 2019 election. I doubt whether many people down at the Dog and Duck would be aware of what the acronym “SPS” means or entails, let alone that they were voting to do without it without an agreement with the EU.
On the report on trade in services, there seem to be two issues that stand out, both of which have been referred to by previous speakers: performing artists and Erasmus. The committee on which I serve now is already in correspondence with the Minister over performing artists, but so far this feels more like a dialogue of the deaf than a constructive and concerned response to the dire situation into which one of the most vibrant and profitable sources of our invisible exports has been cast following Brexit. The Government’s reliance on bilateral contacts with individual member states to seek remedies to the sector’s problems has so far borne absolutely no fruit and is unlikely to resolve the cat’s cradle of problems over visas, cabotage, carnets and activities involving several member states at a time.
The evidence we took revealed the sector’s impression of the Government’s complacency and obfuscation at the damage caused by Brexit, not simply that due to Covid, as it became daily more evident. Here too I suggest that it is not enough simply to say that the EU rejected our preferred solution in the pre-Brexit negotiations and we rejected theirs. Sure, but it is surely time now to go back to the negotiating table, bilaterally and with the EU as such, and through the TCA’s machinery to explore alternatives to those two failed attempts. I hope the Minister will now say that the Government are prepared to do that.
The decision to drop the UK’s involvement in Erasmus+ has never been properly explained, let alone justified. It looks like an act of vandalism that has brought to an end a process of co-operation that benefited hugely generations of students on both sides, and, of course, generations who have yet to get to university. The Turing Scheme is no substitute since it provides for no reciprocal access to our universities. It would surely make sense now to explore whether some basis for co-operation between Turing and Erasmus+ can be worked out. Again, I hope the Minister will undertake to explore the potential for that.
The final recommendation of the report on the UK-EU institutional framework reads as follows:
“What is vital … is that both sides approach the new relationship constructively, in good faith, with the aim of rebuilding the trust that has been so undermined in recent times. Liberal democracies are precious, and they should work together, not pull apart.”
One can say only ditto to that, and deplore how far short of fulfilling those worthy objectives the actual conduct of the relationship has fallen in the intervening period.
Lord Inglewood (Non-Afl)
My Lords, I am very glad that we are debating these three important reports this afternoon, because it seems to me that their subject matter is still as topical as it was when they were written.
I joined the goods committee during its deliberations. I believe I was asked to do so because I chair the Cumbria local enterprise partnership, an organisation close to the front line. I drew on my experiences and connections in whatever I may have been able to contribute to the committee’s work. In a previous incarnation as a Member of the European Parliament, I was also a spear-carrier during the reigns of the noble Lords, Lord Hannay and Lord Kerr, in charge of UKRep during the establishment of the single market, and perhaps had something to bring to the process of reverse-engineering what we put in place then.
From my perspective, the Brexit referendum and the 2019 general election were exercises in democracy that led to political outcomes, which in turn led to changes in economic and commercial life here in this country that may or may not turn out to be economically or commercially optimum or sensible. Such considerations were of a second order to the political ones.
I see Brexit as a political process propelled by a national wish to change our constitutional relationship with the European Union. It seems to be common ground between all involved that this would bring about real short-term damage to business, commerce and the economy. The longer-term disagreements relate to whether there will be consequential benefits. The detail depended on whether we had a hard or soft Brexit and whether there would be a deal. In my view, it seems we have a hard Brexit with a deal—and these reports are about that. This is the bed we have made, and we are now all lying on it.
As has already been said, the impact of Brexit is intimately tied up with the impact of Covid. I believe it is impossible fully to disentangle them now. However, work commissioned by the Cumbria local enterprise partnership and carried out by Nicol Economics, applying Treasury metrics, and the Cumbria Intelligence Observatory suggests that, bearing in mind regional variations, our experience is very similar to that elsewhere in the United Kingdom, and that the economic impact of Brexit appears to be roughly double that of Covid, if such a simple way of looking at it has any validity.
Some 4% of the Cumbrian economy relied on direct exports to the EU, supporting 7,000 jobs—with all the implications that the noble Baroness, Lady Armstrong, talked about. The Cumbrian labour market, especially because of the county’s economy’s reliance on the visitor economy, has been badly hit—in particular, obviously, the tourism and leisure sector. For example, earlier this year it was possible to take a self-catering holiday but impossible to get an evening meal if you wished to eat out, because they could not find staff for the restaurants and pubs.
The logistics industry has been very hard hit by both the availability of drivers and the associated rules and regulations, as has already been pointed out. As has also been mentioned, supply chain issues make obtaining inputs to manufacturing and dispatching products extremely problematic. This is true not least in the construction sector, where there is significant double-digit inflation, up to and beyond 20% or 30%. Small businesses are simply giving up on exporting to the EU.
Interestingly, when I was in Germany in the autumn, staying with an old MEP friend, I discovered from talking to him and his wife over the dining room table that it is exactly the same for small businesses on the continent. It is not worth their while bothering to try to export to this country. As the noble Lord, Lord Hannay, touched on, there are all kinds of concerns in the agricultural industry, many of which are outside the remit of this debate.
Two things stand out in particular. First, young people appear to have been disproportionately affected, first in respect of jobs themselves and secondly by the long-term impact of problems relating to training and skills. Secondly—this has been exacerbated by Covid—large amounts of working capital have been destroyed. This is likely to make trading out of the problems and navigating the way to a future commercial environment more difficult.
The third of these reports relates to the mechanisms for future relationships between us and the EU, and, while no doubt recognising that much might be done to recalibrate the detail as far as Great Britain is concerned—I have no expertise or wish to comment in detail on Northern Ireland—I doubt there is much political appetite on either side to drill down into it. As far as domestic policy is concerned, I very much hope that the levelling-up agenda—which seems to take as long to gestate as this afternoon’s debate—can take positive steps to deal with the immediate collateral damage to the economy that has been brought about.
The north of England expects the Government will do their duty, and we are watching. For me, however, the big imponderable is the rest of the world, where it seems that substantive change has yet to emerge—although, of course, whatever the particular trading arrangements, there are always commercial opportunities. Setting aside wider political considerations, which may well play quite a big part in this, it seems that the fly in the ointment is that, in the words of a friend of mine, “regulation is the new tariff”. Increasingly, access to a market is not synonymous with being able to put goods for sale on to that market. This concept appears to be anathema to many traditionalists, but one has only to look at the debate around fair trade, COP 26 and the environment to see how this approach is gaining traction in all kinds of places. Of course, that was the basis of the EU single market, which we have rejected.
It will be interesting to see how this will evolve, but in the meantime, we have no idea whether we are waiting for the boat to come home or whether we are “Waiting for Godot”.
Lord Kerr of Kinlochard (CB)
The pleasure of debating these excellent reports has been perhaps too long deferred, but every cloud has a silver lining, and the accident of timing means that our views will be responded to by the noble Lord, Lord True—a genial, subtle debater, and not at all frosty.
I intend to talk only about the institutional framework report and its description of the array of committees set up to manage the relationship. They have been described by my noble friend Lord Kinnoull; I will not repeat that. To me, the most striking thing about this huge construct is that nowhere in any of these committees is anyone from the 27 EU member states. We are on one side of the table, the Commission is on the other side, the members states are nowhere. That is because it is a framework for managing separation and divergence in areas of Commission competence. It is a framework for managing inevitable problems arising from separation.
It seems that the UK side did not want any similar structure for co-operating on common problems—problems that we and the 27 face in common and where we might share a common interest, such as Covid, global warming, refugees, or an ever more assertive China. The EU side did want a structure for regular meetings to handle such issues; all its association agreements with other third countries contain one. It particularly wanted one with us on foreign and security issues, but we said no. The noble Lord, Lord Frost, giving evidence to the Select Committee, is quoted at paragraph 57 of the report as explaining that there was “no need” for the treaties to provide for regular high-level meetings because
“they will happen naturally and organically”.
Really? How many have there been? I cannot recall any. Perhaps the Minister can tell us whether we have proposed any. Should we not?
I do not want to criticise the framework; I think I understand the role of the various committees and I hope that in due course they will all get around to meeting, but the structure needs to be supplemented. Quite seriously, I think we need to overcome the temptation to celebrate difference and to recognise that splendid isolation is not always all that splendid. In tackling global problems, our closest neighbours will often be our natural allies and co-operation can make sense, but it needs a framework—ad hoc arrangements can be difficult with 28 diaries—and most countries find the discipline of an ordered schedule, agreed agendas and prepared meetings rather helpful. Regular contacts also diminish distrust, whereas meetings missed mean more misunderstandings, and mutual trust seems to be in rather short supply right now. My point is quite a big one, and I do not expect the Minister to buy it today—but I ask him seriously not to reject it and to agree to think about an additional framework for handling issues common to us all but not problematical between us.
I want to make three smaller points. First, the TCA records agreement to set up a civil society forum to meet at least once a year. Mr Gove told the committee that he welcomed the idea. I like the idea—dialogue diminishes distrust—but we do not seem to be rushing to set up the forum. Can the Minister say why? Are the Government now consulting civil society on how our contingent will be constituted? If not, when will they?
Secondly—and closer to home, because it directly concerns your Lordships—whatever happened to the parliamentary partnership assembly set out in the treaty, to consist of Members of this Parliament and of the European Parliament? Mr Gove welcomed that too, and so do I. I am not party to whatever discussions there may have been between the two Houses, but it seems that the hold-up in setting up the assembly lies on this side of the channel. The European Parliament’s team is out on the pitch warming up, but we still seem to be having a selectors’ meeting. I presume that the discussions between the two Houses are ongoing. Can the Minister tell us what Mr Rees-Mogg’s position is? Is it recumbent? Is it laid back? Is it supine? Is our Leader actively seeking to rouse Mr Rees-Mogg? Does she accept the recommendation of the Select Committee in this report that the Government table the necessary constituting Motions in both Houses?
I think the partnership assembly could be rather useful in a number of practical ways, not least—and here I touch on the area of the noble Lord, Lord Jay—in allowing Northern Irish voices to convey, directly to European Union legislators, Northern Irish views on single market laws that would apply in Northern Ireland. More generally, the assembly could help to bridge the trust gap. We should talk to the 27 quite a lot, and talking to MEPs would not be a bad way to start as a supplement to, and not a substitute for, proper intergovernmental contacts.
Finally, can the Minister tell us who is now responsible for bilateral relations with our 27 neighbours? Is it the Foreign Secretary or is it the noble Lord, Lord Frost—as I think I recall we were told when he was appointed? If it is the noble Lord, can he and does he draw directly on FCO expertise? I ask because the episode of the unfortunate letter to President Macron worries me. It could have been better drafted had an expert eye looked at it. Releasing it in a tweet before the Élysée had seen it could have been avoided had experts been involved. It is easy to say that we have had enough of experts, but these things matter, and it is a fool who mocks the custom and practice of diplomacy. That is why I am delighted that my queries will be answered by the Minister, a true diplomat.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a great pleasure to follow the noble Lord, Lord Kerr of Kinlochard, and to reassure him, or perhaps apologise to him, that this time I am not intending to tweet a video of his speech. That does not reflect a lack of importance in today’s debate. As the noble Baroness, Lady Armstrong of Hill Top, said, this is crucial to the well-being of all Britons, and perhaps particularly to those in some of the poorer areas of the country often subjected to the Government’s “levelling-up” rhetoric.
It is worth while going back a year to the ratification of the TCA by Parliament. The Institute for Government criticised the measly one day allocated to scrutinising the agreement. It also noted how the short time between ratification and implementation made it difficult for firms, particularly small firms. The Institute of Directors said:
“On the guidance … there were reams of it coming quite late in the day”.
A year on, it is worth asking: how much better off are we? We are now in this rather small Room, with an extremely distinguished panel participating. It is perhaps not the centre of the House’s attention, let alone the country’s, yet scrutinising what is happening is absolutely crucial.
There is an enormous amount of detail here. I will just pick out some points from each of these three reports. The Government’s responses to them all, which I will focus on, often stray towards the perfunctory, with phrases such as “world leading”, which sadly we are all too familiar with. I pick out the same point as the noble Lord, Lord Kerr, in the response to the report on the institutional framework, which was so formidably introduced by the noble Earl, Lord Kinnoull. The Government say:
“We are confident there will be the necessary regular political level engagement both with the EU institutions and bilaterally with the Member States at all levels.”
I have a direct question for the Minister: is he pleased? What adjective would he use to describe the contents, volume and results of contact with EU institutions and, bilaterally, with Ministers and officials in EU states?
I move on to the trade in services report. The noble Baroness, Lady Donaghy, talked about minor acts of mitigation on many of the issues that it covers. I will pick up on just two such areas of particular interest, which I have pursued very much over the past year, one about creative industries and the other about the loss of Erasmus+ and the inadequacy of the replacement, the Turing scheme. In the Government’s response on the crucial issues around haulage, cabotage and carnets, they say that
“the Department for Transport is looking at possible steps to support UK specialist hauliers”.
As many noble Lords have noted, Covid has been an additional, massive barrier, and has somewhat frozen the whole situation. We hope, at least, that we are coming to the point of this being unfrozen. What steps are the Government planning to support hauliers and the creative industries generally? I note again that the government response says:
“It is important that businesses and individuals confirm the processes in advance of their journey.”
That sentence stresses the difficulties faced by the creative sector, both artists and businesses that work to support them.
On the Turing scheme, the Government’s response talks about how Turing is only for outward mobility, and about relationships with individual institutions. Heidelberg University in Germany, the Sorbonne in France and many institutions across the Commonwealth are mentioned. Does the Minister acknowledge that the universities, which have also had so many pressures in the age of Covid, are facing enormous pressures if they have to build up one-to-one relationships? Are the Government working to make that easier?
Finally, I come on to the trade in goods. Here, the Government response again talked about the difficulties, as the committee did, for small and medium-sized enterprises. I want to point the Minister to the report from the Federation of Small Businesses, which came out just a few days ago and noted that only a quarter of small companies believe that they are ready for the new border checks that will come in in January. These include import customs declarations for EU goods; the companies will have to make those declarations and pay those relevant tariffs at the point of import. As a number of noble Lords have pointed out, when it comes to food, drinks and products of animal origin, they will have to give notice in advance. Can the Minister tell me whether he is confident that we will be ready for this yet further change?
I want to conclude with some brief reflections on the position of trade in general. I come to this debate with a different position from that of most other noble Lords, because I do not go “Yay—trade! More trade!” What I am interested in is the well-being of the people of the UK and of the planet, and the well-being of the planet. The Government often seem to be trying to push trade with other parts of the world while supporting free trade agreements—which are of great concern, particularly to our farmers—at great cost to the environment and to existing businesses. New Zealand is looking to operate through the living standards framework in all the decisions made by its Treasury and its other bodies. In the other place last week, the Green MP Caroline Lucas had a debate in which she talked about a well-being economy. I wonder if the Minister has given thought to the idea of well-being trade: trade that is not a win for us at the cost of someone else, but a benefit to people operating within the physical limits of this one fragile planet.
Lord Thomas of Cwmgiedd (CB)
My Lords, I thank the noble Earl for securing this debate. I also want to say a word on the noble Baroness, Lady Donaghy, who managed to steer so many disparate views together to produce a report which is so comprehensive on the subject. Others have spoken today about SMEs, the Erasmus programme and, equally importantly, the creative industries, which have suffered so greatly from what has happened. However, I want to take a very narrow perspective.
In most respects, it is too early to tell whether the TCA works but there is one area where we can see a problem ahead. It is illustrative of a major problem with which we have to deal, and it is the Lugano Convention. I am not interested in its details but why there is the refusal to allow us to accede. It is really for one reason alone: competition. How are we going to deal with that and make our services competitive? I regret to say that I want to do this through the microcosm of the law. I hope the Committee will forgive me, as it is not that technical a subject in this respect.
The key to the success of our system has been English law, and I say that as a Welshman. It is important to appreciate that we have huge advantages in this country. We have good leadership and our judiciary is outstanding; we have huge support from the City of London and the professions; and to be fair to it, the Ministry of Justice has done a bit, particularly since the noble Lord, Lord Wolfson of Tredegar, was appointed a Minister. However, the real issue is: how do we deal with competition? First, we must not be complacent. I am sure we are not, but what is the key to this? The law is developing at an immense pace at the moment. I had thought of saying something about climate change, but thought that it might be a little tricky.
I think it is safer for me to stick to an area where the change has been accelerated massively by the pandemic: the importance of digital infrastructure and the trade in data. This is a very fast-moving area. Certainly in Europe at the moment, much less attention is given to the GDPR, which seems to have been our focus, than to the industrial value of data. Therefore, we have to look to the future of English law, which is the basis of the success of our legal profession, and ensure that it is taken cognizance of and fitted into the fast-developing changes.
We ought to reflect on the fact that our system is flexible, innovative and has a long tradition of leadership, but rhetoric sometimes forgets that we share a common European legal heritage. To pick up what the noble Baroness, Lady Armstrong, said, should we look at competition in this area by subtle co-operation, or do we indulge in a stand-off or rhetoric that does not help? I have no doubt that if we are effectively to deal with competition in this area in law—it applies equally to regulation—our job is to participate on a co-operative basis to show that we have the skills to lead, which we do. However, we will not get anywhere in deploying those skills unless we act with an openness that enables us to put forward ideas and solutions that allow the basis of our law to be recognised as the way forward.
Therefore, I want to ask the Minister whether we can stop using a rhetoric that discourages co-operation. My whole experience in Europe, particularly over the last couple of years—I mean not just the European Union but Europe as a whole, working closely on the development of European Union law and transnationally—is that the only way we will succeed in competition is by friendly co-operation, with a keen eye on our long-term goals. This is a long game, and we must not lose it by rhetoric that does not foster co-operation and the subtlety with which we have managed our legal system. The common law has always been a magpie: it takes good ideas from everywhere. It is not nasty to other people or disrespectful of them, but acknowledges everything with gratitude. I hope we can go forward on that basis.
Lord Desai (Non-Afl)
My Lords, I am deservedly the last Back-Bench speaker in this debate. I am not on any of the committees, but I have engaged with Europe for practically all the 31 years I have been in your Lordships’ House.
This is a car crash that is causing enormous damage. The noble Baroness, Lady Armstrong, said that this is bad, masculine behaviour. It is much worse than that: it is like the man who is trying to get a divorce and who does not care about the children who will have to be taken care of. He has just walked out and, having promised himself that he will be free, he really does think he is free. But he is not: he has to stay and talk about detailed arrangements—what they are going to do with the children, the property and so on.
In a sense, I do not think the Minister can do much about any of the things the committee raised, because the political attitude in which Brexit was conducted—especially by the winning section of the Conservative Party—and all the things that went before it were so hostile to Europe and so committed to getting out without any thought of what would take its place. There were Ministers saying, “We will conduct free trade agreements with 100 countries in no time whatsoever, because that is the new logic”. It was as if they had not held a responsible job in their lives.
All that said, the real question these reports raise is: what can be done to save the situation, especially for people who, without having had any political role in the matter, are suffering extremely? That is partly because negotiations to sort out these problems were not conducted properly and partly because there is still a hostile atmosphere, especially around Northern Ireland, which is very damaging.
The creative industries have been mentioned. The poor musicians and people who do plays, who need to go and reach audiences on the continent, are flummoxed by the fact that simple travel arrangements have become very difficult. An incredible number of new regulations have arisen. The noble Lord, Lord Inglewood, said that regulations are the new tariffs. They are the non-tariff barrier to exceed all other non-tariff barriers.
I say this to the Minister: whatever happened in the past, let the past be gone. Yes, we got Brexit done, but Brexit has not been done yet. Doing Brexit was a matter not just of getting something passed through the House of Commons—I say the House of Commons because it was the more reluctant Chamber—but of looking after the people affected by this major decision to just go out without having thought about it, ignoring all the complaints and difficulties that have been mentioned. People are seen as remoaners or effete—it is nonsense. Get realistic and look after the people suffering from the consequences of the decision. The decision has been made and cannot be reversed—we know all that—but can we please have some sense in which people know what they face in the new situation? They may be heavy vehicle drivers, artists or people in financial or legal services. Is there a single place they can go to find out the situation? Can we have some map, for the next six to nine months or for the future as it develops, of how the situation will be resolved to some kind of post-Brexit normality? It is badly needed by people.
These reports are very helpful and competent. I used to be on one of the European committees in the Boswell era, not the Kinnoull era. We looked at the financial services problem. We knew how much the competitiveness of the City would depend on how clearly we defined the relationship between us and the EU. It is no good saying, “The City is so powerful, it doesn’t need any other people”. That is not the situation any more.
I am making a plea on behalf of all the people suffering from this great dash to so-called freedom. Yes, we won, but can we please now have some nurses to heal and patch up the wounds that people are suffering from? There is a great wreckage. We need to clear the wreckage and clear the road for the future.
It is not a matter of our pride against Europe. Yes, agreed, we won against Europe outright, but can we now please have some sense and helpfulness from the Government, not this constant warlike atmosphere about what we will not do at any cost to make life easier for our citizens as far as trade with Europe is concerned? Europe will take care of itself; we have to take care of our citizens, trade and economy, which are suffering. If noble Lords do not believe me, they could read the report from the Office for Budget Responsibility which talks about “scarring” due to Brexit. It is costing us 4% to 5% of GDP. This is a serious matter, and the Government ought to let go of their pride and get some business done.
Baroness Chapman of Darlington (Lab)
My Lords, having listened to the excellent speeches this afternoon, I am aware that I am a complete newcomer to this House and to this debate, but I am not a complete newcomer to having arguments about Brexit.
I would like to make noble Lords aware, if they were not already, of how grateful Members in the other place have been, particularly since the referendum but before that too I am sure, to the European Union Committee and its sub-committees for their work. They were invaluable in supporting work while I was an MP. It has also been very refreshing to take part in a debate on our relationship with the EU that has been relatively easy to follow. We have not talked about humble Addresses or taking control of Order Papers or any of that. By and large, the discussion has been forward facing and not backward looking, which I very much welcome.
I pay tribute to all the noble Lords involved over what I now understand is five decades-worth of work. It is older than me, so I have the utmost respect for the work that has taken place. I find it strange, as a newcomer, that we debate these reports on quite fast-moving issues so long after they are published. I wonder whether that is normal here, or whether the Government might try to assist in enabling us to do this in a more timely way.
I welcome the noble Lord, Lord True, although it is interesting that he has been assigned to this debate, given the ministerial responsibilities of the noble Lord, Lord Frost, his evidence during the course of the inquiries we are debating and the many references to him in the Government’s response. I hope the Minister passes on our best wishes to him; it would have been good to see him here as well. I do not know whether this decision is part of a wider pattern, but I note that he has taken to making Statements on the last day of term, or when the Commons is not sitting, and issuing Written Statements rather than Oral Statements. I hope that will not become a habit.
The noble Lord, Lord Frost, has been meeting regularly with Mr Šefčovič, and I hope that Members’ comments and concerns can be relayed to him. They are real and immediate problems that urgently need to be resolved, such as that of ensuring the supply of medicines to Northern Ireland. Triggering Article 16 would be a failure of negotiation and lead us nowhere. Can the Minister please share the Government’s latest thinking on this issue?
Many of the trade issues raised in the reports are just as important today as they were when the documents were published in the early part of the year. Although figures have stabilised for some sectors, disruptions or other barriers to trade remain for others, and deals are still lacking in areas such as financial services. The Government need to think much more about the practicalities for businesses—red tape, bureaucracy and fragility of supply chains. The Government cannot pretend that these are not problems; it is their responsibility to solve them. This has to work. As my noble friend Lady Armstrong said so well, failure to address these issues will hold back regions such as the north-east.
We are all familiar with issues around the supply of labour, whether it is HGV drivers, fruit pickers or abattoir workers. They have left UK businesses urgently making contingency plans. In the case of the agri-food sector, some farmers are exporting animal carcasses for processing before re-importing them, which adds to delays and costs. As we have heard, an SPS agreement of some sort is urgently needed on some basis—through equivalence or some other mechanism—to smooth trade, especially with Northern Ireland. These issues are not going to go away. Our food and drink industry, which is our biggest manufacturing sector, is something we are all proud of; it needs an active, engaged Government working alongside, not against, it.
On trade flows, last week, we saw figures that highlighted the volume of goods that used to flow through the UK while transiting between the Republic of Ireland and the rest of the EU but which now bypass our ports and businesses entirely. Brexit has happened, but I do not agree with everyone who argues that our economy can never thrive again; we have to make our new status work and the Government do not need to relitigate the arguments of 2016 and 2019. We have, sadly, heard that happening, particularly from the noble Lord, Lord Frost, I have to say, in recent months. Even though the Government are possibly addicted to, or just habitually used to, those debates, we have to move on; this means working together to tackle shared problems such as climate change and refugees with our nearest international neighbours.
On the institutional side, some of the various joint bodies have only recently been established and have been slow to meet. Despite controlling parliamentary business prior to the summer, the Government insisted that it was not their responsibility to bring forward the necessary Motions in both Houses to enable the appointment of UK representatives to the UK-EU Parliamentary Partnership Assembly. Having glanced at the Order Paper in the other place this morning, I gather that this may have moved on, but can the Minister confirm what is happening with that? Many of the specialist committees have met for the first time only in the past month or two, with the specialised committee on customs co-operation and rules of origin meeting on 7 October and the equivalent body covering road transport on 24 November. If we are going to have these committees, we should treat them seriously, so can the Minister explain what Her Majesty’s Government are going to do to ensure that these structures work effectively and that the UK gets the best from them?
We have heard concerns about lack of parliamentary scrutiny, particularly when such issues as cabotage, the creative industries and financial services are not resolved. The Government, as well as assuring us that these issues are in hand, need to resolve them fully; scrutiny and challenge will be part of that process for the long term. We have seen too many short-term commitments and statements. What have been lacking are behaviours that indicate to the country that the Government have long-term stability for business at the forefront of their mind. We desperately need stability and predictability. Although the final text of the TCA has been published and ratified since the reports were published, side agreements are still lacking. The Treasury has seemingly abandoned financial services equivalence, it seems to me, while the long-term status of Gibraltar still has not been confirmed in a legal text. Can the Minister update us on that?
We need normality. My worry is that constant wrangling becomes the new normality. The Government really must ensure that that is not the case. Dispute resolution seems to be a necessary part of the landscape at the moment. It is inevitable, I suppose, that there will be disputes; it is vital that the Government and the EU together show that they are able to navigate issues in a timely and effective way. This has not been the case so far, and both sides need to do better on fish and—tragically, I think—on Northern Ireland. There must be a calm, mature approach. It is in nobody’s interest to fail to get on with its neighbours. The approach we have seen harms our international reputation. This matters if we are to secure first-class trade deals; it also matters that we are reliable partners, especially given our role in peace and security around the world. Even allowing for Covid, the Government’s handling of Brexit and our future relationship with the EU is not being managed well. If the Government do not change their approach, I am afraid that our regions, our communities and the people of this country will be worse off.
The Minister of State, Cabinet Office (Lord True) (Con)
My Lords, perhaps I may say in preamble that it is never, and certainly is not, the intention of this Government to be triumphalist, aggressive or divisive on these questions. That has always been the position of Her Majesty’s Government. We see the European Union as a close friend and partner, as the Prime Minister repeatedly states, and we wish for nothing other than good relations with our partners. I hope that I can disabuse the noble Lord, Lord Desai, of his fears on that count.
I thank all noble Lords who have spoken for the contributions made today. As noble Lords will know, parliamentary scrutiny is invaluable and essential in my judgment. The Government remain fully committed to ensuring that this House can play a full role in making this new relationship with our European partners a success.
These reports were published in March and have all been responded to in writing by the Government, but it is welcome that the Committee has had this opportunity to debate them. I have found it a fascinating debate. Progress has been made since the reports were published, even in the face of a global pandemic and the resulting international economic downturn that has affected our partners and ourselves in different ways.
First and foremost, the trade and co-operation agreement has been fully ratified, both in the EU institutions and in the UK by this House and the other place. This landmark moment fulfilled our promise to take back control of our laws, borders, money, trade and fisheries. The importance of this crucial first step was rightly highlighted in the reports debated today. I therefore thank noble Lords on all sides of the argument for their efforts, which ensured that ratification occurred as swiftly as possible in what were challenging and unprecedented conditions.
I also place on record my thanks to the then European Union Committee of this House, along with its sub-committees, which duly scrutinised the trade and co-operation agreement in its series of Beyond Brexit reports. I am grateful to the committee for its valuable work on each of these. Equally, I thank the successor committees—the European Affairs Committee and the Sub-Committee on the Protocol on Ireland/Northern Ireland—for continuing the work of scrutinising our new relationship with the European Union. I hope that it will not be invidious or embarrassing if I express what I think is the sense of all noble Lords who have spoken: that is, the affection, respect and gratitude that we all feel for the noble Earl who initiated this debate for his leading role in all these fora.
On trade in goods, the trade and co-operation agreement was the first free trade agreement that the EU has ever reached based on zero tariffs and zero quotas. This is in line with our aim to provide liberalised market access for goods. I remind noble Lords that the intention on our side was not to seek fully frictionless trade, as the EU was clear that this would require regulatory alignment with its rules. Instead, a balance was struck that safeguarded the UK’s regulatory autonomy and sovereignty as an independent trading nation.
The report notes the importance of establishing the governance—I will return to this—that underpins the TCA as a route to improving UK-EU trade. I am therefore pleased to confirm that, immediately following ratification of the TCA, the Government have established the committees that support the agreement. With one exception, all those committees have already met, including the Partnership Council chaired by my noble friend Lord Frost. As I say, I will return to this point, but the UK and EU have already begun to discuss shared objectives and address the agreed commitments made in the TCA that will help to promote trade in goods between us.
The report also reflects on how important support and good communication between government and industry is; I agree with what many noble Lords said on that. The Government have committed significant funds and resources to supporting and listening to industry and others, and will continue to do so. We are also ensuring that they have a formal voice in the implementation of the TCA, through the civil society forum and the domestic advisory group. The noble Lord, Lord Kerr, asked about them; I will return to them later.
On trade in services, the Government welcome the report’s recognition of the unprecedented and highly liberalised provisions in the TCA for digital services and professional and business services, which will help to ensure that these important UK sectors continue to thrive. The Government also agree that UK businesses need our support to maximise the opportunities of our new relationship with the EU as they recover from the impacts of this pandemic. That is why we have provided extensive guidance for those exporting services to the EU and introduced the new Professional Qualifications Bill, which will provide certainty to business and help to maintain the incoming flow of professionals by giving more autonomy to UK regulators to tailor recognition according to the needs of their profession.
The noble and learned Lord, Lord Thomas of Cwmgiedd, made important points about the law. The Government recognise the importance of the legal services industry in the UK and the role that it plays in facilitating professional services generally. That is why we fought hard for this sector in last year’s negotiations to secure unprecedented provisions regarding the right of UK solicitors, barristers and advocates to practise in the EU using their UK title in both UK and international law. This will be key in ensuring that the UK remains an attractive and competitive trading partner in professional services with the EU, and that, as the noble and learned Lord hopes, UK law remains popular as the governing law of choice for commercial contracts worldwide.
The Government recognise the major contribution that the financial services sector makes to the UK economy. We took swift action to ensure a smooth end to the transition period and have since set out the forward path for the UK’s regulatory landscape in financial services. The UK remains committed to world-leading regulatory standards and has been clear that it stands ready to work with the EU to promote important emerging sectors such as green finance and fintech.
I turn to the report on institutional frameworks. As it helpfully sets out, there is a wide range of supporting governance that underpins the agreement. The breadth of this institutional structure and the mechanisms that it contains are designed to reflect the significant breadth of the agreement, the wide range of areas of co-operation that it covers and the unique nature of the agreement itself. This is only right. As I set out a few moments ago, the UK and the EU are now using these channels to implement the agreement and improve the trade between us. I assure noble Lords that the reports being debated today have contributed significantly to the helpful discussions being had in these fora.
The noble Baroness, Lady Armstrong of Hill Top, made an interesting and penetrating speech about UK-EU trade in goods. She referred to a number of factors, most notably Covid lockdowns across Europe and businesses adjusting to our new trading relationship, which made it inevitable that exports to the EU would be lower at the start of this year than they were at the start of last year. Indeed, the Office for National Statistics cautions that it is difficult to disaggregate the various factors and identify the underlying causes at this point, so we cannot yet draw any clear conclusions. Despite this, overall freight volumes between the UK and the EU were back to their normal levels by February 2021, and we are seeing food and drink exports grow. Exports increased in seven out of 10 of the UK’s leading export markets during the first half of 2021.
As I said, the deal maintains zero tariffs and zero quotas on trade in goods between the UK and the EU. This is the first time that the EU has ever agreed to complete tariff-free, quota-free access in an FTA. It provides for streamlined customs arrangements, including recognising our respective trusted trader schemes, to support the smooth flow of goods at the border and reduce administrative costs for traders. I agree with the noble Baroness on the need to improve, for example, conditions for road hauliers.
The noble Lord, Lord Hannay, and others said that sanitary and phytosanitary checks were creating difficulties for some sectors exporting to the EU. We proposed equivalence commitments in line with the WTO SPS agreement and the EU’s past FTA practice during the TCA negotiations. Given this, the EU’s refusal to include equivalence mechanisms was, to us, surprising. Nevertheless, the TCA contains provisions to co-operate with each other to review our respective SPS measures to avoid unnecessary barriers to trade.
The EU is applying a number of trade restrictions on UK exports. Some of these are due to blanket bans in EU legislation, such as the prohibition on the import of live bivalve molluscs from class B waters from third countries. Others are due to the EU not granting the UK full listed status, such as the ban on the import of seed potatoes and the granting of Part 2 rather than Part 1 listing for the movement of pets. I put in a plea for Dilyn the dog.
We remain unconvinced of the risk basis for these restrictions given our high biosecurity standards, and have consistently raised these trade barriers with the European Commission, including through the specialised committees. Any solution will need to safeguard UK sovereignty and autonomy and cannot involve aligning with EU law. However, I assure noble Lords that we stand ready to discuss such an equivalence-based agreement with the EU, and have raised it through the partnership council and the specialised committees that noble Lords referred to. In general terms, EU member states can, and do, attend specialised committees.
The noble Baroness, Lady Donaghy, the noble Earl and others raised financial services. In his Mansion House speech in July, the Chancellor set out the Government’s vision for an open, green and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across the United Kingdom.
The UK and the EU’s financial markets are closely linked, and the EU remains a key international partner for us. We hope that the EU will continue to be a champion for international trade and openness. I disagree with the noble Baroness, Lady Bennett of Manor Castle: international free trade has been one of the greatest boons to poor people and raising people out of poverty across the world in the history of mankind. We look forward to collaborating with the EU on a range of issues, such as green finance, in the next year.
The Chancellor was clear in his Mansion House speech that the EU will never have cause to deny the UK access because of poor regulatory standards. We welcome the European Commission’s recent announcement regarding the extension of an equivalence decision for the UK’s central counterparty clearing houses. The Government have made sure that the EU has all the information it requires to make a positive decision for the UK for all equivalence regimes, and we remain open to answering any further questions that the Commission may have. On the MoU, raised by the noble Earl in his opening speech, technical discussions have been concluded; the MoU can be signed once the EU has completed its formal processes that are required under its rules.
Many noble Lords referred to the UK’s participation in Union programmes. The Government are committed to the UK being a science and research superpower, and we value the strong collaborative partnerships that we have globally in the areas of science, research and innovation. Through the TCA, the EU and the UK agreed terms for participation in Horizon Europe, Copernicus and Euratom research and training. As the underpinning EU regulations were in draft at the time, a joint declaration was agreed, setting out the parties’ intentions to formalise the UK’s participation at the earliest opportunity and with the view that the UK would participate from the beginning of the programmes.
Although the UK stands ready to uphold the agreement reached last year, we continue to see delays from the EU in formalising UK participation. That is disappointing. The EU is obligated to finalise our participation under the TCA; it would in fact be a breach of the treaty if this were not delivered in a timely manner. Our priority is supporting the UK’s scientists and researchers. That is why the Government announced on 29 November a financial safety net, in the form of guaranteed funding for the first wave of eligible and successful applicants to Horizon Europe who have been unable to sign grant agreements with the EU as a result of these delays. We will support our science and research community, no matter the scenario. We had a set of alternative plans developed in 2020 and are revisiting these. We will certainly keep the House informed.
As to Erasmus, I know that is a matter of regret to some noble Lords. We considered carefully which programmes were in our interests to join. The UK would have made a large net contribution to the Erasmus+ programme. We have chosen instead to pursue a global exchange programme under the new Turing Scheme, providing opportunities in Europe as well as around the world for young people to experience international education.
The noble Baroness, Lady Donaghy, raised the important question of touring musicians. She was echoed by a number of noble Lords in their rightful concern about creative industries. The UK has a creative heritage of which we are rightly proud. It was perhaps inevitable that, following the UK’s departure from the EU, there would be changes in how creative professionals toured. I know that this, exacerbated by the pandemic, has led to uncertainty in the sector, since working and touring in Europe is such an important part of their professional lives. In the negotiations for the TCA, we sought to ensure that touring artists and their support staff would not need work permits to perform in the EU. Our proposals were rejected by the EU, although we have been able to agree similar measures with other like-minded partners, for example Norway and Iceland.
I am aware that there have been calls for the Government to negotiate a visa waiver. It is not government policy to seek such agreements and neither did the EU propose a visa waiver for paid activities during the TCA negotiations. What was proposed by the EU was a reciprocal visa waiver for short stays, for example as a tourist. However, nothing in this proposal would have compelled member states to change their visa regimes for paid engagements such as performing at a concert.
Our focus now is on working directly with member states, which are principally responsible for deciding the rules governing what work UK visitors can undertake. Having engaged with EU member states, we have established that UK musicians and performers do not need visas or work permits for some short-term tours in at least 21 EU countries. This includes Spain, a key touring market for the UK, which changed its rules on visas last month. This change is testament to the efforts of the sector as well as the Government.
I was asked about the governance framework. The first partnership council meeting took place on 9 June 2021. The meeting marked an important milestone in the relationship between the UK and the EU as friendly trading partners and sovereign equals.
Lord Hannay of Chiswick (CB)
The Minister unfortunately did exactly as I predicted, which is to describe in great detail why nothing was done for the performing artists in the negotiations pre Brexit. He explained carefully why our proposal was rejected by the EU and its was rejected by us, but he has not said anything about what we propose to do to remedy the damage being done, other than to refer to the bilateral contacts that we have had with member states. I am sure that the Minister knows perfectly well that many aspects in that sector cannot be dealt with successfully bilaterally. There is a need for both bilateral and collective discussion as things such as cabotage, carnets and so on cannot be dealt with bilaterally. Can the Minister not simply say that the Government will pursue, bilaterally and through the TCA, all avenues possible to get a better deal than we have at the moment, and not go back to Tweedledee and Tweedledum saying, “They said this and you said that in the negotiations”, but to see whether we cannot move forward on this bilaterally and collectively?
Lord True (Con)
My Lords, the noble Lord repeats the points that he made earlier. I have repeated and set on record the efforts made by the United Kingdom Government on behalf of these important industries and drawn your Lordships’ attention to progress that has been made. Without going over this ground again, I reassert the Government’s concern for the well-being of these industries. It is time to move on. I have already pursued, without an intervention, a good deal of time.
I was asked about the number of meetings of the specialised committees that have taken place. I say to the noble Baroness, Lady Chapman, that the Government take these seriously. As of Monday 6 December, almost all the TCA specialised committees have met. Nine of the 10 trade specialised committees have met. The SC on VAT is due to meet on 15 December. The delay is due to internal EU processes to prepare for decisions to be taken jointly by the UK and EU at the initial meeting. The Specialised Committee on Participation in Union Programmes is the only outstanding SC yet to convene. I understand that it will convene later this month. If I am incorrect, I will come back to noble Lords.
On the civil society forum, about which the noble Lord, Lord Kerr of Kinlochard, asked, the Government sought public views on how to engage with business and civil society groups on TCA implementation. We published the official response on 19 October. An expression of interest campaign was launched to determine membership. We received 83 expressions of interest. Individual businesses are not included in the scope of the domestic advisory group and the civil society forum, but they can engage departments through existing channels outside these fora. After careful consideration of possible dates, the first meeting of the domestic advisory group is planned for early 2022. The Government are in discussions with the European Commission to finalise the exact date for the first civil society forum, which is also planned for early 2022.
As for the parliamentary partnership assembly, noble Lords will be aware—I know I invite another intervention, but it is the reality—that this is a matter for Parliament rather than the Government. I pay tribute to the noble Earl, Lord Kinnoull, and to the Member of Parliament for North East Hertfordshire in the other place for their continued work on this important matter. The noble Lord, Lord Kerr, asked whether my noble friend Lord Frost was responsible for relations with individual member states. That is true, but he works hand in glove with the Foreign Office, with the active involvement of the Foreign Secretary and the Prime Minister.
I was asked about parliamentary scrutiny of the TCA. My noble friend Lord Frost of Allenton has been discussing these matters with the chairs of committees tasked with scrutinising the Government. These discussions are approaching their final phase and will, I trust, be agreed shortly. While I listened carefully to the noble Earl’s requests and will pass them on, I do not wish to cut across these discussions. The scrutiny of individual departments on matters relating to their individual policy remits, through EU committees and the normal committee processes, is included. In the interim, the Government are working diligently to ensure that committees can properly scrutinise government policy.
In answer to the point made by the noble Lord, Lord Jay of Ewelme, my noble friend Lord Frost has reminded colleagues of the importance of scrutiny and of Explanatory Memoranda being timely and of the highest quality. It is an important point, and I assure him that it has been taken on board.
The noble Lord also asked about the Northern Ireland protocol. In referring to this, I apologise—I know that he would wish me to do so—that my noble friend Lord Frost is unable to be here. Noble Lords will understand the current activity on this front. The Government are in intensive discussions with the EU with the aim of delivering significant changes to the Northern Ireland protocol. Most recently, my noble friend Lord Frost spoke with the European Commission vice-president, Maroš Šefčovič, last Friday via a videoconference. They covered the full range of outstanding issues; my noble friend welcomed the Commission’s professed readiness to make progress on them. The UK Government still want to find a negotiated solution if possible; we are ready to keep working constructively and intensively to that end. I must tell noble Lords that the gap between our positions is still significant, and progress on many issues has been limited. The UK Government’s position remains as before: the threshold has been met to use the Article 16 safeguards to protect the Belfast/Good Friday agreement if solutions cannot be found. However, my noble friend Lord Frost will speak to Vice-President Šefčovič again this week, and the UK and EU teams will have intensified talks in the coming days.
There has been some potential convergence on the medicines issue, which the noble Lord, Lord Jay, asked me about, but agreement has not yet been reached. So far, we have been unable to consider all the details of the EU’s proposals in the way we need to in this sensitive, critical and highly technical area, where solutions must work in practice and genuinely solve the problems. We continue to believe that more progress is needed on customs and SPS arrangements if we are to deal with the fundamental issue of improving the flow of goods between Great Britain and Northern Ireland. There have been some constructive talks on subsidy control, but the issue remains unresolved, as does the wider issue of governance.
I have a detailed response on Gibraltar that I should give to the noble Baroness, but I am looking at the clock. I can give it to your Lordships now; perhaps I should. In 2020, the EU insisted on a two-phase process for negotiations which required a separate UK-Spain agreement—the framework—prior to formal UK-EU negotiations on a legally binding treaty. On 31 December 2020, the UK Government, the Government of Gibraltar and the Spanish Government reached agreement on a political framework to form the basis of a separate treaty between the UK and the EU regarding Gibraltar. The negotiations between the UK and the EU on that treaty began in October, and three rounds have taken place so far; the FCDO is leading on these negotiations. In the discussions to date, the UK has made clear the need for an agreement that reflects the delicate balance in the political framework and Gibraltar’s unique circumstances and is proportionate to Gibraltar’s size and the small volume of trade at stake. The UK remains steadfast in its support for Gibraltar, its people and its economy in any scenario and will not compromise UK sovereignty.
I have spoken at great length—I apologise to your Lordships for that—but the reports were of fundamental interest and importance. I have sought to answer many of the questions asked in the debate, though perhaps not to everyone’s satisfaction. I conclude by thanking noble Lords not only for their valuable contributions this evening but for their extraordinary hard work, intelligence and thought that have gone into producing these reports. I have no doubt that they will help us going forward as we seek to cement our new relationship with the EU alongside other international partners. That is our wish, and I hope it is a wish that all of us, whatever our past feuds and differences, now share.
The Earl of Kinnoull (CB)
My Lords, I thank everyone who has taken part in this utterly absorbing debate on three reports that remain very current despite being quite old. I thank the Minister for being on his feet for half an hour and batting back many of the balls in his typically agreeable way.
One of the most notable comments, to me, was made by the noble Baroness, Lady Chapman. She said how pleasant it was that this was a forward-looking debate. From here, as we look at European Union things, it will be important to be forward-looking. It is for historians to deal with the past; it is for us, I am afraid, to deal with the future. There are many issues to be addressed.
That takes me to something that I had forgotten today but that I think we should note: the centenary of the Anglo-Irish treaty. It is an incredibly important document and my relatives had something to do with it; I feel it is worth marking. In his excellent speech, the noble Lord, Lord Jay of Ewelme, listed the many issues that his committee is dealing with in Northern Ireland, in what is a very complicated and difficult environment all round. I am glad that his committee is able to shine its light on things and explain to people what is going on in a way that I feel is very clear. He gave a wonderful speech, which I am looking forward to reading. It showed just how many hard yards there are to go on that.
Outwith Northern Ireland, I felt that four themes came through this afternoon. The first was scrutiny. I am the person dealing with the noble Lord, Lord Frost, on scrutiny. We have not as yet been able to get to a satisfactory position on that. It is heartening to hear that so many others worry about it. I hope that message will be taken back by the noble Lord, Lord True, to say how much we care about finishing this off and getting to a settlement on it.
The other three issues have a common theme. The first was SPS and the wisdom of reaching some sort of agreement on it. I declare my interest as a small-scale farmer. We do not export anything, but the idea of being in the export business with the current SPS things is very frightening indeed. It stretches through to many other bits of our industry.
The second issue was performing artists. The noble Lord, Lord Hannay, was the first person to talk about this. I will back up a bit of what he said. Three different types of action need to take place. There is a certain amount of unilateral action that the Government can take to at least ease some of the issues. The Government have started to deal with the bilateral actions, although the bilateral deals done with the various European countries are wildly different and not done on a common basis, so it is very complicated for ordinary mortals to understand the situation in a given country. Then there are the things that need to be dealt with by the trade and co-operation agreement machinery. That is a very complicated task, and it needs a lot of co-ordination to get it right. We have started what I think will be a long line of correspondence on this, but I hope the Government will feel it well worth putting in the effort for this vast industry of more than £100 billion of turnover per year.
The last thing was the machinery of the trade and co-operation agreement, and it is not heartening to hear that one of the specialised committees has not met yet and many of the others have met only to agree their rules of procedure. I am afraid that is an indication of the common theme among those last three issues: the state of the relationship between the UK and the EU. I very much regret it. In culture, history and blood, these are our neighbours and friends—and we have fallen out with them.
We need to rebuild that trust and respect. A little bit of that will be in the parliamentary partnership assembly; a little bit will be everywhere. I know that people in this Room who have taken time to speak in this debate will all feel that very strongly. I do not think there is anything to ask the Government because I think they agree, but in the rebuilding of those it is important to realise that everything communicates—every newspaper article in the Daily Mail; everything. We need to rebuild them because, as I observed in the last bit of my speech, the real issue in life is the authoritarian regimes and the nasty way in which they deal with their populations. We are very lucky to live where we do.
Beyond Brexit: Trade in Services (EUC Report)
Baroness Donaghy
That the Grand Committee takes note of the Report from the European Union Committee Beyond Brexit: trade in services (23rd Report, Session 2019–21, HL Paper 248).
Beyond Brexit: Trade in Goods (EUC Report)
Baroness Armstrong of Hill Top
That the Grand Committee takes note of the Report from the European Union Committee Beyond Brexit: trade in goods (24th Report, Session 2019–21, HL Paper 249).