EU: Trade in Goods (European Affairs Committee Report)
(1 year, 9 months ago)
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The Earl of Kinnoull
That this House takes note of the Report from the European Affairs Committee One year on—Trade in goods between Great Britain and the European Union (4th Report, Session 2021-22, HL Paper 124).
The Earl of Kinnoull (CB)
My Lords, before I address the substance of the Motion, there are some important things to say. First, on behalf of the whole committee, I thank and congratulate our staff, Nick Boorer, Dom Walsh, Tim Mitchell, Louise Shewey and Sam Lomas. Their hard work, professionalism and good humour stood us in good stead and were evident throughout.
Secondly, I formally record our warm memories of Baroness Couttie, who was a strong and highly respected colleague, Member and contributor to our report. Finally, I would like to say how much I am looking forward to the valedictory speech from the noble Baroness, Lady Chalker, marking her stepping back from such an exceptional career in service.
In September 2021 we launched our inquiry into trade in goods between the EU and Great Britain, recognising that trade matters relating to Northern Ireland are for our sister committee, that on the Ireland/Northern Ireland protocol. We published our report on 16 December 2021, just under a year after the conclusion of the trade and co-operation agreement. The Government responded on 16 February 2022. It is now just over two years since the TCA was concluded and came into force.
The report sets out the then economic context using official trade statistics. At the time, there was evidence that there had been a sharp drop in UK-EU trade immediately after the end of the transition period, with a partial recovery thereafter. The committee concluded that, at a macroeconomic level, it was difficult to disentangle the impact of Brexit on trade in goods from that of Covid. However, we observed that this should not obscure the new administrative burdens that business faced; for example, the requirement to fill in customs paperwork when exporting goods to the EU—something that was clearly not a consequence of the pandemic.
In the year since the publication of our report, the gradual trade recovery that we observed seems to have continued. In 2022 the value of both goods imports from and exports to the EU recovered to their highest level since 2019, even after taking inflation into account. However, overall UK trade volumes have performed below those of most advanced economies, with the UK currently experiencing the lowest trade growth in the G20. It is not clear whether this underperformance can be attributed to Brexit. For my first question, I ask the Minister to comment on the current state of UK trade with the EU and its impact on the UK’s wider trade performance in the light of the recent statistics.
The start of the committee’s inquiry followed just after the Government’s decision in September 2021 to delay the introduction of certain import controls on EU goods. It was the third time that the Government had announced such a delay. The report therefore assessed the causes and consequences of that delay, including the impact of asymmetry in the import controls applied by the EU and the UK, it being the case that GB exporters faced more stringent checks than their EU counterparts. We noted concerns among some businesses that this could create a competitive disadvantage.
At that time, full customs declarations were due to be implemented in January 2022, with sanitary and phytosanitary, or SPS, controls and safety and security declarations due to follow in July 2022. The customs controls were indeed implemented as planned, in January 2022. In their response to the committee’s report in February 2022, the Government said that they would introduce the remaining controls on time. However, the remaining controls were delayed yet again in April 2022 and are now not due to be implemented until the end of 2023 at the earliest. Our committee engaged in correspondence with the then Minister for Brexit Opportunities, Jacob Rees-Mogg MP, in the wake of that delay. He confirmed that the latest decision reflected a more fundamental change in approach, with the nature of the border regime as well as the timetable under review. He was also dismissive of concerns about the impact of asymmetry at the GB-EU border, saying that the Government rejected
“the premise that increasing burdens for importers and increasing costs for British consumers will help our exporters”.
However, there is still uncertainty about the future border regime. We were told that the Government would publish a target operating model in autumn 2022 that would set out in detail how and when the new border regime would be implemented. We still await that document. According to the Department for Environment, Food and Rural Affairs, it is now due to be published in early 2023. Can the Minister provide an update on the UK’s future border control regime and the publication of the target operating model?
Questions have also been asked about the UK’s biosecurity, given the absence of the remaining SPS controls on imported plants and animals from the EU. Last summer the Food Standards Agency said that
“the continued absence of a fully implemented UK import control regime for EU food and feed reduces our ability to prevent foods that do not meet the UK’s high standards being placed on our market.”
What steps are the Government taking to safeguard the UK’s biosecurity in the absence of the remaining SPS controls?
On the overall impact of the end of the transition period, the committee’s report concluded:
“Although the worst-case scenario of widespread disruption did not come to pass, GB-EU trade in goods is now more complicated and expensive than it was before January 2021.”
We noted that SMEs and the agri-food sector were particularly hard hit. In their response, the Government said that the new relationship
“will contain many benefits for individual businesses; but … this involves some change”.
Our committee wrote back to the Government asking them to explain what these many benefits were. In his reply, the then Minister for Europe, Graham Stuart MP, highlighted the TCA’s provisions for zero tariffs. I found his answer somewhat perplexing and disappointing.
The committee’s report identified some more specific problems that traders have faced and proposed several solutions. However, the Government’s engagement with those recommendations, both in their response and in the subsequent correspondence, was mixed. On SPS requirements, the committee highlighted that these had been a major challenge for exporters and called on the Government to seek an SPS agreement with the EU. The government response did not engage with that recommendation. In a subsequent letter, the Minister clarified that the Government were “open to discussions” on SPS, but not on the basis of “alignment with EU rules”.
On customs, the committee called for increased EU-UK co-operation, including exploring a so-called single customs office model. The Government dismissed this recommendation, arguing that the TCA did not provide the legal basis for co-operation of this kind.
On VAT, a major concern for small businesses, the committee welcomed the Government’s efforts to persuade the EU to list the UK for VAT purposes, which would eliminate the need for businesses to engage an expensive fiscal representative when exporting to the EU. The Government have since said that they will continue actively to pursue facilitation in this area.
These and other matters could all be addressed within the plethora of trade specialised committees set up under the trade and co-operation agreement—committees that are operational but not really operating due to the Northern Ireland protocol impasse.
There may be further challenges on the horizon. Businesses that the committee spoke to in the inquiry were not opposed to regulatory divergence, provided that it was carefully considered. However, the Retained EU Law (Revocation and Reform) Bill could produce further divergence between the UK and the EU in an unplanned way and in ways that might interact with the trade and co-operation agreement. What assessment have the Government made of the compatibility of the retained EU law Bill with the UK’s commitments under the trade and co-operation agreement, in particular regarding the level playing field provisions on employment and environmental standards?
There was a lot in our report and, I feel, many clues as to how to improve matters. Trade is always mutually beneficial; I fervently hope that the many trade-specialised committees can be unleashed soon to unlock that benefit. In the meantime, I very much look forward to the debate ahead. I beg to move.
Baroness Chalker of Wallasey (Con) (Valedictory Speech)
My Lords, it is a very strange feeling to be making this speech in this House after so many happy years. Some will recall that I made my maiden speech in the Palace of Westminster in early 1974; 18 years later, my maiden speech in this House was on the Maastricht Bill. I hope I shall not disappoint the noble Earl, Lord Kinnoull, who spoke so kindly in anticipation of this speech, but I think he can deal with all the detail. I should just say my grateful thanks.
There is a very large list of thanks to the many people who have helped me in my formal political years. There are private secretaries and their deputies in four government departments—as we then worked in—our advisers and Permanent Secretaries. I add my sincere thanks to colleagues in this House, friends in all parties, all the staff in the clerk’s department, the Library, Hansard, the refreshment department and the staff who keep us warm and safe, but especially to the doorkeepers of this House. Above all, I must thank the Foreign, Commonwealth and Development Office teams who guided me from 1986 to 1997. They were always faithful, helpful and thoughtful.
My thanks go too to my family and friends, my drivers and personal secretaries. Each has played a significant part in my ability to deliver my role. They often altered their plans to accommodate my timetable, missed many meals and had family time shortened or cancelled with little complaint.
The close of my days as an active Peer really began about two years ago during the second Covid lockdown. I found it a very stressful personal time. Once a person no longer feels able to research and produce good work on time, it is time to decide how to plan ahead and possibly not to continue in a previously much-loved role, but to move on to other tasks and a less strenuous working style.
So I am retiring before my colleagues feel that I am past the role that I have so valued since 1992: that of an active life Peer. By this action, I may allow a space in this House for younger, able future Peers. Perhaps there could be more spaces created, for there are many able persons outside who could play valuable roles in this House, but we are a very full complement at present.
With more time to utilise my enjoyments, I shall take up new voluntary tasks, not only in the UK but also in South Africa. I will begin by voluntarily teaching eight year-old township children to read and speak English. I am starting to paint and draw again, and I am now able to be more involved in animal and Fijnbosch conservation in the Gondwana game reserve in the southern Cape. I will protect my family time in all countries to the hilt.
The many trials and travails of political life are evident in the public discomfort of too many Members in both Houses. My first political hero was the late Iain Macleod, followed by a number of noble Lords in this House. Iain encouraged me to listen well, even to those with whom I disagreed. In EU politics, this has been more than a tall order, for the instances of facts being twisted by some politicians and the press are too numerous to list. However, as my colleagues on the various EU Select Committees have identified, we need to remain fully involved with the EU to get the best that remains after our losses from our exit from the union. I have already asked Ministers to take greater action to improve the passage of goods and people at border crossings, for instance. This Select Committee’s work is critically important to ensure that all aspects of the changes are fully understood and well implemented.
Whatever the future of this House, coming generations face a major challenge in contributing as much to reform in British society as has been achieved by those in the Lords today, in their wide range of careers; I have learned so much from them. Politics of any shade need doers who contribute sound examples of improvement, especially for local societies and national charitable work and particularly in the health and social care field, as in all aspects of our public life. My sincere wish is that we can stimulate much more involvement in local communities, which will improve our society. Without that, we are not a really active nation in the way we should be.
I wish all colleagues and staff good health, sound debate and sufficient time away from debates to regain a happy balance between work in your Lordships’ House and recreation time, especially in their later years. I thank all noble Lords for these fascinating years and a really enjoyable career, although sometimes it was a bit tiring.
Lord Lamont of Lerwick (Con)
My Lords, I got a great shock when I arrived at the House today because I had not realised that my noble friend was going to make her valedictory speech. It is a moment of great sadness for me to be standing here, following her wonderful speech. She and I were personal friends for many years before we both joined the House of Commons. Outside this House, we have also worked together in the private sector.
She has had an outstanding and very noteworthy political career, serving in four departments, as she said. She is particularly well known for her work in the Department of Health and Social Security and, perhaps most of all, her work for overseas development. She served with such energy and distinction that some of us at the time were deeply puzzled why Mrs Thatcher did not make her a member of the Cabinet. Although she often attended Cabinet, she was never given a Cabinet post. Most of us thought she richly deserved one because of her work.
No one could possibly doubt my noble friend’s commitment to development and to improving the lot of the poor of the world. She is a very familiar figure in Africa because she has spent so much time there in recent years; she is known, I think, in almost every country of the continent. She will be very much missed there, as she will be in this House. Her speech of enormous warmth, humility and modesty showed the very great qualities which will be deeply missed by us all. I thank her for all her service.
Lord Lamont of Lerwick (Con)
I speak today as a member of the Select Committee, and I pay tribute to our chairman, the noble Earl, Lord Kinnoull, who, with his calm, precise and diplomatic chairmanship, managed to get us to reach a report which is—more or less, give or take a few commas—unanimous. It was quite difficult because there were different views within the Select Committee. I join him in thanking our staff.
I was one of the few supporters of Brexit on the Select Committee, and I think that in today’s debate I am its only supporter. I supported Brexit on the grounds of sovereignty, independence and identity, rather than on economics—although I would not have supported it if I had thought that the long-term economic effects would be detrimental. This debate coincides with the third anniversary of Brexit. I am not quite sure what the significance is of the third anniversary, but it gives people a chance to pull the plant up by its roots, examine it, and put forward various theories.
Our report, through no fault of anyone other than the system, is massively out of date; as the noble Earl, Lord Kinnoull, said, it was addressing particular points at that particular time. The report was merely a snapshot of the problems that companies were facing immediately after the end of the transition period, so a lot of those problems—but not all—were teething problems with new systems coming into existence. Our report refers only fleetingly to the infrastructure problems that were forecast to occur at the ports. As noble Lords may remember, we were told at the time that there would be vast queues in Kent, resulting in the whole county being turned into a car park, and that Dover would be impossible to move in. We had Operation Yellowhammer and all those other very alarmist ideas. The most reverend Primate the Archbishop of Canterbury initiated a debate on the situation. However, none of it came to pass, and our report possibly rather underplays that.
Many of the recommendations in the report are about clarifying the administrative arrangements at the time, including changes in deadlines that were uncomfortable for business, and the effects on SMEs. One of the interesting points in our report is what it says about the absence of import controls; it is something of a curiosity. We came to the conclusion that the failure of the Government to meet their target date for imposing import controls was causing uncertainty. Perhaps it was, but one of the oddities was that, despite the absence of import controls when there were controls on the other side of the channel on British exports, British exports were doing much better than continental exports from the EU into this country. I think that that underlines the point that not all the problems that occurred were entirely due to Brexit or the Brexit regulations.
Three years on, our economy is undoubtedly facing very considerable problems. Sometimes I feel that almost everything is being blamed on Brexit. The day before yesterday, Mr Verhofstadt said that Ukraine would not have been invaded had it not been for Brexit—that seemed to be a rather extreme statement. Then there was the statement by a distinguished former Governor of the Bank of England, who claimed that in 2016 the UK’s GDP was
“90 per cent the size of Germany’s. Now it is less than 70 per cent.”
That is, as a leading economist in one of the remainer think tanks said, something of a “zombie” statistic. In fact, since 2016, the GDPs of Germany and the UK have grown by almost exactly the same amount. The report emphasises, as the noble Earl, Lord Kinnoull, did, that it is almost impossible to separate the effects of Covid and Brexit—and it was published before the invasion of Ukraine, which has added another complicating factor, making it very difficult to separate that as well.
For example, to take the shortages of labour, which are common to a number of countries, including the United States, but a very severe problem here, if during Covid a restaurant is closed and an Italian waiter decides to return to his own country, Italy, is that because of Covid or because the restaurant was teetering under the hammer from Brexit? Was it Covid or Brexit? It is very difficult to say.
Some people are determined to torture the statistics until they confess up the right answer. One example of that is the so-called doppelganger analysis used by certain think tanks. This is the system that takes a number of countries, which in the past were growing at the same rate in a particular period, and extrapolates that forward to today. It then comes up with the conclusion that, if we had grown at the same rate as these countries, our economy would be 5% greater. This has been recycled repeatedly in a lot of the media. But of course it depends, first, on the period that you choose and, secondly, on the countries that you are comparing yourself with. In the analyses that have been used, the countries that Britain has been compared with in some of the think tanks’ findings have been countries such as Australia, New Zealand and Norway—hardly a very persuasive comparison.
Rather than looking in the crystal ball, one should read it in the book. As the noble Earl, Lord Kinnoull, pointed out, the ONS figures now published give a more encouraging picture for exports. As he said, exports in 2022 in currency terms are at a record level and, adjusted for inflation, at a level not seen since 2019. If you look at the graph, it looks as though exports are broadly back on trend. Of course, we have had recently a much-publicised and gloomy report from the IMF forecasting that the UK economy will shrink this year; it does not actually mention Brexit. Today the Bank of England has said that it expects the economy to shrink this year, but by less than it had previously thought. Sometimes these reports in the recent past have been over-pessimistic for the British economy. But as I said earlier, since 2016 the British economy has grown at much the same rate as that of Germany.
One subject on which there was a lot of debate in our committee was divergence—to what extent regulation should be allowed to diverge from the previous model in the European Union. Some members of the committee were particularly apprehensive about that, clinging to the idea that we should remain aligned in regulation. My view is that we certainly should not make a fetish of divergence—we should not diverge for the sake of divergence—but it is important to have the parliamentary power and freedom to diverge. But those decisions should be driven by industry and commerce. Divergence is very important for new technology. As the noble Earl, Lord Kinnoull, said, we had the arguments around SPS and agricultural products, and our report urges that there should be an agreement with the EU on SPS. Yes, there should be an agreement—but that should not necessarily mean alignment.
The report refers to the review of the TCA due in 2024-25, and rightly urges that the UK Government use the 32 specialised committees, the partnership council and the joint committee to build on the trade arrangement that we have and build on the TCA to get arrangements that are more flexible and comprehensive, to develop a relationship that is mutually beneficial. I remain a supporter of Brexit but that is the past. It is important now to improve our relationship. We can be a third country to Europe, but a good friend, a strong ally and a partner. We should put the past behind us and, as the noble Lord, Lord Hague, said to our committee, we should adjust to the future, rather than attempt to adjust Brexit. I commend the report to the House.
Lord Liddle (Lab)
My Lords, from this side of the House, I join in the tributes to the noble Baroness, Lady Chalker. She was one of the Conservative Ministers in the Thatcher and Major Governments whom I most admired, particularly for her work on overseas development. We are going to miss her a great deal and I thank her for what she had to say.
I also join in the tributes to our committee. I am a member of the committee; I regard it as one of the privileges of being a Member of this House to be able to be a member of its European committee, and I certainly think the chairman has done extremely well since I became a member. He chairs the committee with consistent charm and grace; he can occasionally be tough but is always intelligent and wise in his judgments and I think we would lose a lot from his absence. I also pay tribute to the staff who have managed the adjustment from the grand European Union Committee that we once had to the lesser European Affairs Committee that we are now members of. They have been very helpful, worked very hard and put an enormous amount of effort in: we owe a great deal to them.
I feared that this debate might be something of an unproductive battle of statistics, and I do not intend to go there: I am not going to get involved in doppelgangers, the noble Lord, Lord Lamont, will be pleased to know. I think there are two facts that come out of the analysis of our trade position since Brexit. One is that, although UK trade has recovered in the last year, it has not recovered as fast as other countries’ trade has from 2019. Trade intensity, a measure of trade in GDP, has declined somewhat. We are suffering a bit on trade, but one fact that the noble Lord did not mention, which is one of the most worrying things about the trade position, is that small companies have been particularly hard hit. I regard small companies as the entrepreneurial future of Britain. From those small companies should grow big companies, but one-third of small companies, I think, have dropped out of trading with the European Union. That is an extremely serious problem. I do not quite know, and I would like to ask the Minister, whether the Government recognise that to be a major issue and what they are trying to do to help small companies compete more effectively in the EU. In that regard, I think the fact that European companies can come here without any control, while small companies in Britain face all these controls at the borders, is bound to put them at a competitive disadvantage.
Also, the SPS issue is very important for small companies. We have heard of all the problems with Scottish seafood, plant growers and all that stuff: some of the eminent Members of this House own companies in the plant-growing area. They have faced very considerable problems, yet the Government are taking what I regard as a dogmatic position on SPS. Again, it would be good to hear whether there is any shift from the view taken by the noble Lord, Lord Frost, in the negotiations, which was that, in any circumstances, dynamic alignment with the EU was completely unacceptable. I am not suggesting dynamic alignment in all areas, but it seems to me that to say it could never be acceptable, you have to look at the price you are paying, and I think quite a lot of small businesses are paying a very high price for a bit of Tory dogmatism, to be quite honest. Are the Government going to reconsider that position in the future?
The debate on Brexit is moving on. I was passionately opposed to it, but I regard my position now as asking how we make the best of where we are. I do not see any prospect of an early return to the European Union; for that to happen there would have to be a settled political consensus in the UK—in other words, a very significant shift of opinion in the Conservative Party about its attitude to the European Union. I do not think that our partners would be in the slightest bit interested in a British reapplication while the political debate in Britain is so heated and divided. We had better accept that and try to make the best of it we can. I have detected a sense in which the debate is moving on. For instance, we have moved away from the position where a lot of people who were in favour of Brexit claimed that we would not suffer any problems in trade as a result of leaving. There are undoubtedly bureaucratic barriers that have been erected, and the TCA is the result, and that is now more admitted than it was two years ago.
It is six years since the referendum; it is three years since we left. The Government have been presumably working very hard on trying to define a policy of divergence which would demonstrably improve our competitive position. In my view, they have not as yet produced much of a positive result; this is a very significant failure on the part of those who were the strongest supporters of Brexit. I am unimpressed by the trade deals that we have managed to deliver, in terms of their economic benefits. I am convinced that there are areas where regulatory freedom would be beneficial, particularly, as the noble Lord, Lord Lamont, said, in the new high-tech industries, digital trade and all that. However, we do not see much coming out of the Government, and what I fear about the Bill we are going to debate next week is that there is again a sort of ideological presumption that if we abolish all EU law, somehow this is going to result in a great revival of the British economy. If you are serious about this, you have to do detailed sectoral analysis of where divergence might be beneficial. I see very little evidence of that on the Government’s part, with the possible exception of financial services, and most experts on financial services think that the Government are exaggerating the extent of the divergence that they are recommending. We have to make the best of it, and I hope the Government recognise that this is what they are trying to do.
I would be interested to hear what the Government feel their policy will be for the future of regulation; what their policy will be for the revision of the TCA in two years’ time—we have to start thinking about that—and where they see the possibility of what I would call sovereign alignment. If it is in our interests to align with EU rules, that is a sovereign decision of ours, not the EU imposing anything on us. It is up to us, so we should allow for that possibility. At present, it is just ruled out. I think that is a very big problem.
There we are: we must do our best to improve things. I will always remain a passionate pro-European. I believe that events since 2016, particularly in Ukraine, have underlined the importance of close engagement and friendship with our European friends and partners. While we cannot be members of the European Union in the foreseeable future, I will certainly never give up campaigning for a united Europe.
Baroness Brinton (LD)
My Lords, I also start by paying tribute to the noble Baroness, Lady Chalker, and thank her for her wonderful valedictory speech. I know that my father admired her greatly; he came in as a new MP in 1979, when she was beginning her ministerial career, and I continue in that admiration as well. I am fascinated by her reason for departing at this particular moment. My noble kinsman Lady Stocks, Mary Stocks, said of this House in her autobiography—they did not have valedictory speeches in those days—“I do not want this place to become my eventide home”, and I suspect that the noble Baroness, Lady Chalker, would have some sympathy with that. My father and I both came from a showbusiness background, so I think the other way we would put it is to leave the stage while people are still applauding. If there is one thing that the noble Baroness, Lady Chalker, should hear from across this House today, it is that we continue to applaud her for her contribution.
The report from the noble Earl, Lord Kinnoull, and his committee is a significant contribution, providing evidence of the difficulties we have faced in trade in goods since we left the EU three years ago this week. It is a particular pleasure to follow the noble Lord, Lord Liddle, whose attitude that we must make the best of where we are is echoed by myself and my colleagues—but with a fervent hope that we will rejoin one day. I realise that there are those for whom that would not be the desire, but I also believe that there is now evidence showing that some of the concerns we had prior to the referendum are unfortunately there. The question is whether this country will be able to deal with them, and I am perhaps less convinced than the noble Lord, Lord Lamont, that that is true. It was interesting that he quoted Guy Verhofstadt, but the actual quote is slightly longer and helps to understand why he said it. He said of the Ukraine war:
“It’s really an attempt by Putin to restore the old Soviet Union … I think without Brexit maybe there was no invasion. I don’t know, I guess that he would see a far stronger and united Europe on the other side”.
That is the issue for us: the role of Britain, and the UK. I echo his comments and those of the noble Lord, Lord Liddle, that the UK’s involvement across Europe in the context of Putin’s invasion of Ukraine has started to build those ties and relationships again. That is important after Brexit.
There are three statistics that stand out to me about the UK-EU trade figures and statistics over the last couple of years. First, the UK’s exports to the EU fell by 13% in 2021. Secondly, EU-UK trade is currently 20% lower than if Brexit had not happened. Thirdly, the value of customs duties for UK businesses went up by 64% in 2021. For my brief contribution, I want to look at one area: chemicals. As at September 2022, the UK exported 2.8 billion goods from the chemical sector into the EU, and imported 4 billion—so we are already seeing a continued difference between exports and imports.
I want to focus not on customs duties and other delays and barriers, as others noble Lords have already done, but on the so-called freedoms that this Government have referred to—our ability to create our own rules and regulations and not, to quote many Ministers, blindly follow the EU. The consequences of this policy in relation to chemicals are evident, particularly in how the UK manages the retained EU law and the proposed sunset of all EU laws by the end of this year.
On 21 November, in Grand Committee, we considered the Biocidal Products (Health and Safety) (Amendment) Regulations 2022 and the changes to the certification process following our departure from the EU. It is the first time I have seen, up close, the practical problems that businesses, government and government agencies have faced with having to manage things. The Secondary Legislation Scrutiny Committee noted in advance:
“These Regulations propose to extend the transitional period by five years because HSE has been unable to process the large number of applications for re-authorisation, in particular because much of the data … is stored on databases to which Great Britain no longer has access.”
The committee was concerned about the progress that was being made by the HSE more recently.
I raised this issue with the very helpful Minister at that time, the noble Baroness, Lady Stedman-Scott, in Grand Committee, and I asked her two questions. The first was how the department and the agencies that report to her—specifically, in this case, the Health and Safety Executive—could be protected from the proposed cuts to the Civil Service and other public bodies in order to deliver the extended timescale for an agency that is clearly struggling to manage the new arrangements, where there has to be dual certification, once for the UK under our own system and again for any company exporting to the EU. I also asked her about how much this extra certification was going to cost the Health and Safety Executive, and eventually businesses, because everything is done on a cost recovery system.
The Minister’s responded, on the first issue, that there were some commitments
“to ensuring that health and safety legislation continues to be fit for purpose”,
but she could not give me any more details about the cost more generally. However, on resources specifically for the chemicals division, she told me—and I have to say I was astonished:
“The total budget for the HSE’s chemical regulation division has grown by 39%, from £22.4 million to £31.2 million between 2018-19 and 2022-23, reflecting the HSE’s need for increased resources for its post-EU exit responsibilities.”—[Official Report, 21/11/22; col. GC 239.]
That is an extreme increase in a budget, at a time when the Chancellor of the Exchequer is saying we must cut all public services.
I have three questions for the Minister. He will be relieved, I think, to know that I am not going to ask him about biocidal regulation. First, are government conducting a formal review of capacity relating to all bodies—whether government bodies or arm’s-length bodies—in charge of any retained law being changed that has already diverged, such as this particular biocidal product? We should now have some idea of what extra costs there are likely to be. Secondly, is an assessment being made for all future retained law that is going to diverge in the future and how much it will cost? Thirdly, what prospect remains for cuts to the Civil Service and the arm’s-length bodies in light of this information? It seems to me that the one message we can take from this excellent committee report is that, if this Government want to make the new arrangements work, it is clear that current arrangements are not working in the Health and Safety Executive in an absolutely vital safety area both for biocidal products in the UK and for any we may export to the EU.
I appreciate that some of that might be quite technical, and if the Minister cannot reply today, I hope he will be able to write to me. However, it raises a more general issue about whether this country is prepared to understand the realistic cost of Brexit and how doing things our own way will not be just a wonderful theory. In practice, it will cost money, which means costing our businesses money.
Lord Hannay of Chiswick (CB)
My Lords, like other speakers, I begin by paying tribute to the noble Baroness, Lady Chalker, whose valedictory speech we took such pleasure in hearing, although with such regret on the occasion of it. I worked for her in a number of capacities, first when I was Permanent Representative to the European Community. She had put her name to an Act that set up the single market: the Single European Act, of which I believe she can be proud. It was not only her name but Britain’s too. It is one of the answers to those who say, “Did we contribute anything positive to the European Community when we were a member?” That is one of the conclusive answers.
I also worked for the noble Baroness when she was Minister for Overseas Aid and I was ambassador to the United Nations. Although our contribution in GNP terms was a figure I will not embarrass her or anyone else by giving now—it was lower than what we have now—she put in a great deal of effort to get it on an upward trend. For both those reasons and in both those capacities, she has made a notable contribution to the public life of this country.
It has become a feature of debates in this House on Select Committee reports to criticise the extreme—indeed, sometimes pretty well farcical—delays in bringing them forward for debate. I am afraid this is one of the farcical ones. Trade statistics are always lagging, so if you take as long as this to debate a report, the statistical basis for which was necessarily quite some time before the report itself was written, you ensure that all the figures are out of date.
Since the report was written, those figures have tended to move further and more consistently in a negative direction. I point out that the figures the Government and other speakers have used are of a devalued currency; that also casts some light on their validity. If noble Lords doubt that things have moved, and are still moving, in an adverse direction, just read reports by the OBR, the Centre for European Reform, on whose advisory board I sit—I am sorry that it was responsible for the doppelganger approach, which I think was of somewhat greater validity than the noble Lord, Lord Lamont, would allow—or the King’s College group, UK in a Changing Europe.
My first question to the Minister is: does he stand by the Government’s extraordinarily complacent assertion in its ministerial correspondence with the committee, on which I also serve, that our trade with the rest of Europe is “generally proceeding well”? If he does, I recommend he say that to any of the trade associations or groups that assert the contrary. He would be likely to get what the great PG Wodehouse called “the bird”.
None of this deprives our debate of its validity and topicality. Many of its main themes have been extremely cogently set out by our chair, my noble friend Lord Kinnoull, who has brought such skill to the management of our committee. I will concentrate on two of them: sanitary and phytosanitary rules, and the predicament of small and medium-sized enterprises, both of which have been referred to by previous speakers and make up important components of our trade with the EU. SPS sounds a pretty arcane subject but those rules, applied to us as a third country, contribute much of the friction which has been imposed on our exports of agri-food products since we left the EU. Trade in those products had grown steadily throughout our period of EU membership.
My first question is: should we not seek to conclude an SPS agreement with the EU, as some other third countries have done—Switzerland and New Zealand, for example? In this way, we would alleviate the burden placed on our agri-food exporters. The case is all the more compelling when you realise that such an agreement would remove some 80% of the problems which bedevil the Northern Ireland protocol. Your Lordship’s committee proposed that course of action several times, and every time the Government rejected it out of hand, as the noble Lord, Lord Liddle, has said. Why? Well, they did not really deign to explain that in any detail. So, my second question is this: can the Minister explain why that common-sense solution should not be adopted? In doing so, it might be relevant to recall that, when our committee took evidence last week for our current inquiry in Wales and Scotland, we were told that negotiating an SPS agreement was a top priority for both those nations. That was the view of all parties—all parties—in Wales and Scotland.
Then there is the case of small and medium-sized enterprises. Their trade association said publicly last week that 20% of the companies that used to trade with the rest of Europe had now ceased to do so altogether, and that many others were struggling with increased bureaucracy and costs. Again, your Lordships’ committee recommended that the Government extend the duration of the scheme they introduced when we left the EU to assist small and medium-sized enterprises, in order to help them overcome these problems. Again, this was rejected, without any serious arguments to justify that. So my third question is: does the Minister not think that decision should be reversed before any more damage is done?
It is not impossible that more bad news could be coming down the track so far as our trade with the rest of Europe is concerned—and we must remember, of course, that that is nearly half our trade. Most obviously, if the Government’s efforts to find a negotiated solution to the problems with implementing the Northern Ireland protocol were to fail, some kind of increase in trade barriers could ensue. That is a pretty obvious one. Also, if the EU’s developing policies of introducing cross-border adjustment mechanisms to take account of carbon content and climate change considerations were to result in more friction in our mutual trade, that would be damaging to us too. The application of the EU’s rules of origin could do the same, and they are due to move into a sharper focus and higher gear in the coming year.
I invite noble Lords to reflect that this is all taking place during a period when the sterling exchange rate’s loss of value, as I referred to before, should have been giving our exports a major boost—it clearly has not done so—and when our place as one of the main recipients of foreign direct investment both from outside Europe and within it has been slipping away. I would argue that there is no ground for complacency here—quite the contrary. Perhaps the Minister will tell us that the Government have shifted from their stated view that things are generally proceeding well. I really hope he will do that when he replies to the debate.
Lord Tugendhat (Con)
My Lords, like my noble friend Lord Lamont, I was shocked to learn that our noble friend Lady Chalker is to leave us. I had not realised that that was going to happen, and I am extremely glad that I should be here on the occasion of her valedictory speech. I remember her well as a radical and disruptive influence in the Young Conservatives back in the late 1960s and 70s. Since then, she has had a most distinguished career; she has combined idealism with energy and vision with practicality. This House, and particularly the Conservative Benches, will be sadly diminished by her departure.
For me, too, this is something of a valedictory speech because, to my great regret, I have been rotated off the European Affairs Committee; indeed, I think I ceased to be a member two days ago. I wish to say how much I have enjoyed serving on the committee; how very much I have appreciated the wisdom, fairness and deliberations of our chair, the noble Earl, Lord Kinnoull; and how much I have enjoyed the company of the other committee members. Although we have not all agreed on everything at all times, it has been a model of noble Lords of different parties working constructively together. I hope that my successors on the committee will find it as enjoyable as I have and will continue to produce reports of the quality that the noble Earl has made possible. I also wish to say how very well served we have been by the committee staff. They have had a considerable amount of work to cope with and have done so in a very efficient fashion.
Very often, the time that elapses between the publication of a report and its debate in this House is a disadvantage but, on this occasion, it is an advantage. As other noble Lords have said, when the report was published, it was still unclear what the effects of both Brexit and Covid were and it was difficult to disentangle them. However, now, after the effluxion of time, we can see how perceptive the committee was in disentangling those factors and identifying the problems that have been created by the terms under which we left the EU.
The Government’s response is a very singular document. It is basically a list of their efforts to overcome obstacles to Britain’s trade with its principal trading partner that the Government themselves are responsible for creating. It is a very unusual situation. In saying that, I am not trying to reopen the Brexit debate; as the noble Lord, Lord Liddle, said, that issue is settled. What I am doing is drawing attention to the consequences of the terms on which Mr Johnson and my noble friend Lord Frost negotiated our departure from the EU. It did not have to be this way. The country took the decision to leave the EU, which I personally regretted very much, but the manner in which we did so has created a range of problems that could well have been avoided had we adopted different negotiating tactics and objectives.
As we know, all countries have been hit by the effects of Covid and the consequences of the war in Ukraine. In explaining the problems facing the British economy, Ministers harp to a great degree on these matters but, in those respects, the United Kingdom is in the same position as everybody else. The reason why we are facing additional problems is, as I have just said, the terms under which Mr Johnson negotiated our departure.
Their manifestations are clear for all to see: the fact that the UK is the only major economy still at pre-pandemic levels; the hit to our exports, to which other noble Lords have referred; the fact that business investment has been growing by so much less than the G7 average; the shortage of workers, which all European countries are suffering from but our problems have been made worse than they need have been; and the IMF forecasts that suggest that we will be alone among the major economies in going into recession.
As my noble friend Lord Lamont pointed out, forecasts are not always right and the UK has defied pessimistic forecasts in the past. However, this accumulation of factors is significant. I agree with those who say that Brexit is not the only factor behind them but the terms on which it was negotiated are a very important factor. All these problems were foreshadowed in the committee’s detailed questioning of witnesses and the responses that they received. From the evidence we collected, it was clear that the totality of the individual issues that we identified would cause major problems to the economy.
My party devotes a great deal of time to debating growth and how best to achieve it. Growth is a difficult thing to achieve but one way in which we could certainly contribute to growth would be, as the noble Lord, Lord Liddle, has pointed out, making Brexit work. As this report and the government response shows, one of the best things we can do is set about resetting the relationship between this country and the European Union. It is not a question of returning to the EU. That is not something we should be thinking about at all at the present time. We should be thinking about how this country can deal with the EU on a constructive, equal and mutually beneficial basis. I very much hope that an agreement on the Northern Ireland protocol might prove to be the first step on that road.
Viscount Stansgate (Lab)
My Lords, I begin by paying tribute to the noble Baroness, Lady Chalker. We have never met but I have followed her career over many decades—admittedly not as far back as the 1960s nor in the Young Conservatives, but I have followed it nevertheless. I know what a distinguished career she has had in both this House and another place, especially as Minister of State for Overseas Development and Minister for that department’s successor, DfID. I once visited one of her successors in that post, the Member for Leeds Central, and saw the noble Baroness’s photograph on the wall of former Ministers. I can report that she was regarded with great affection by members of staff in that department, all those years later. That is not always true of every Minister. I wish her very well in the years ahead in everything that she has outlined.
In my experience and as has been pointed out, it takes all too long for a report, once published, to be debated in this House. Often, that delay is a disadvantage; I think that the noble Lord, Lord Hannay, takes that view. Sometimes the heat may have gone out of a subject—I am not sure that is the case here—or events may have overtaken it but, on this occasion, I agree with the noble Lord, Lord Tugendhat, that it is advantageous that we are debating this today because of the amount of time that has passed since December 2021. I hope that, when people read today’s debate, it turns out to be a somewhat more honest assessment of the position on GB-EU trade.
I congratulate the noble Earl, Lord Kinnoull, and his committee, on having produced this report. I am not a member of the committee and am in a minority of speakers in this debate for that reason, but I think that it is advantageous to consider this now. One advantage, to anticipate the speech of the Minister, is that, as a result, we are likely to hear somewhat less about the effects of Covid as a reason why trade with the EU is difficult and has suffered. We know, of course, that Covid made a big difference. As the noble Earl said, the committee itself stated that it was hard to disentangle the effects of Covid and Brexit at the time when the report was written. However, now it is a little clearer, which is why the Minister will probably not need to refer to the effects of Covid in quite the same way. After all, if it was simply Covid that affected our trade with the EU, we might as well pack up the debate and go home now. Where are we three years after we left and what do we know? I want to run through a few points as quickly as I can as a contribution to this debate.
First, leaving the EU single market and customs union has undoubtably been bad for the economy and bad for trade. British businesses exporting to the EU now have to contend with costs, paperwork and red tape that they did not face before. In addition, as the committee states,
“the inconsistent application of the new rules by different EU Member States”
has only made things worse.
Secondly, SMEs have been particularly affected. According to HMRC, the number of UK businesses exporting goods to the EU has fallen, unfortunately, by an astonishing third between 2020 and 2021, and in the main, it is thought that most of those are small businesses that simply gave up in the face of the Brexit red tape that exists.
Thirdly, proof of this is partly shown by the insolvencies that have been higher than average during the pre-Covid pandemic period. I will spare the House a range of statistics that I got on this basis about insolvencies, which have been greater in number than at any time since the end of the financial crisis in 2009 or thereabouts.
Fourthly, at a macro scale, we now know more than we did about independent projections for the UK economy. The House will know that the UK is now forecast by the IMF to be the only G7 country likely to move into recession this year, and we are certainly the only G7 country that has a smaller economy than we did before Covid. The noble Lord, Lord Lamont, said that the Bank of England said today that we are going to move into recession but it will not be as bad as it might otherwise have been. I accept that, but it is still not good. The Office for Budget Responsibility estimates that both exports and imports will be around 15% lower in the long run than if the UK had remained in the EU, and Brexit will reduce long-run productivity by about 4%. The OBR says that the UK has
“missed out on much of the recovery in global trade.”
Bloomberg Economics has said that Brexit is costing the UK economy £100 billion a year.
Fifthly, while all these costs have been imposed on British businesses trying to export to the EU, the Government have, as has been mentioned, so far delayed implementing the full checks on goods coming into the UK. The committee’s report explicitly referred to “disquiet” among GB businesses—what a wonderful word; it is an understated term—about the ongoing
“asymmetry in the border regimes, with GB exporters … facing a far more rigorous import regime than … EU business sending goods to GB.”
I will not go into the biosecurity issue, but it may come up later. Why do we not have these import controls? The answer is fairly clear: we do not have the capacity to undertake the checks, in terms of both the staffing and the infrastructure, as the committee noted, and probably because the Government are afraid of the consequences in the form of further shortages and delays if they are introduced. When I talk about capacity, I mean that in some obvious cases, people are understandably worried that there simply is not the physical room to implement proper checks on incoming EU goods.
The noble Lord, Lord Lamont, said, “When you look back, people predicted huge queues but they never happened.” I am tempted to say that he should have been with me in July last year on the first day of the holidays, when it took me seven and a half hours to get to the Folkestone Eurotunnel instead of one and half hours. The delay was considerable—it was all over the news.
Moreover, if we look ahead, as noble Lords may know, the EU is now planning not just to introduce a visa system for entering the EU but to fingerprint us. When that is introduced, and everyone has to get out of their car and be fingerprinted, the queues are going to be astronomical. That is not a prediction that I want to make, but nevertheless I fear that that is ahead of us. If the Minister wants to tell us that that is not the case, I ask him to do so when he winds up.
Sixthly, what about the trade deals? It is fair to say that almost all of them have replicated what we already had, while the two new ones, with Australia and New Zealand, are really quite small. I note that the former Environment Secretary, George Eustice, is on record as saying that the Australia agreement was
“not actually a very good deal”
because the UK
“gave away far too much for far too little in return.”
As for the promised trade deal with the United States, it is nowhere in sight and I should think it is quite a long way away, if it ever arises.
Seventhly, there is the issue of employment and skills shortages. The House knows that employers say how hard it is to find workers, especially in areas such as catering, hospitality, food and farming.
Eighthly, there are other effects too. I suppose these come under the heading of cultural trade, but they are none the less real. I shall mention two, and I hope the House will forgive me; this certainly was not in the committee report. Musicians and performers have found that the costs and visa red tape make touring in the EU not just more difficult but almost impossible. I am talking not just about professional orchestras, for whom it is bad enough, but about youth orchestras and young people, who used to go and tour around Europe in the summer—and the same was true in reverse—and got enormous cultural benefit as well as providing music across Europe. That has stopped completely, and I deeply regret that.
The next example is one that I came only across this week. The Minister has many responsibilities in his portfolio and it certainly does not cover this, but I read that there is a British zoo that is desperately worried that it can no longer move a rhinoceros, which is needed for breeding purposes to keep the species alive, because of the enormous amount of red tape involved. These things happen, and it is a terrible shame that they do.
Ninthly, we should not forget that in this debate there are things that the Government have tried to do which they claim will be a Brexit benefit but are actually counterproductive, if not practically impossible. As far as I know, they have twice delayed the introduction of a UK CA mark to replace the familiar CE mark, because businesses are asking what the point of it is.
Another, more serious example is the EU REACH programme. Noble Lords may not be familiar with this, but the REACH regulations governing the safety of chemicals are the bedrock for the way in which we deal with risk and hazard in a very important area. REACH was in fact the largest piece of legislation ever considered by the European Parliament when the regulations were passed some years ago. As I understand it, the Government have said they want to introduce a British version of the REACH regulations but that has now been delayed until 2025, while the UK chemicals industry says it would entail enormous costs for no benefit whatever. When the Minister winds up, I would be grateful if he could say a word about the Government’s plans for the UK REACH programme.
Tenthly, we have to face up to the huge and complex EU retained law Bill, which plans to put a sunset clause on all EU-derived legislation unless it is saved. We had a taste of that at Questions this week, when the Minister was asked for a guarantee that the Government intended to retain the TUPE regulations but failed to give it. What will be the effect of that Bill? I think it will produce a lot of confusion on the part of business and the public as to what the law and regulations are and will be, and I am not sure that that is very good for investment.
Of course, the UK’s relationship with the EU has been damaged by the Northern Ireland protocol Bill. I say only that we hope that the negotiations succeed and that some of the collateral damage, including our non-participation in Horizon Europe, can be solved in the end.
Eleventhly, in the face of all this evidence, it strikes me as interesting that people who particularly argued for Brexit are now rather more unsure, as they struggle to understand what has gone wrong. I found the speech of the noble Lord, Lord Lamont, quite interesting in that respect, and I shall read it in Hansard. I hope there will be some common ground that we can find in the years ahead, some working degree of consensus that the UK needs, for its own future—a better working relationship with Europe. Perhaps when the time comes to review the TCA, we can find areas that need fixing and fix them, as has been mentioned in the debate today.
What do the public make of it? Opinion is still divided—and for a lot of people Brexit was about sovereignty, not the economy—but this very week John Curtice, the distinguished professor of politics at Strathclyde University, reported that the latest polls show that 58% of people think that Brexit was a mistake. We must now start talking about a new and different relationship with the EU, and the European political community is a good way to start. Accepting this committee’s report and everything in it would be a good basis for approaching the task ahead.
Viscount Waverley (CB)
My Lords, it is a sad day to be contributing, during a debate that has included valedictory remarks from the noble Baroness, Lady Chalker. Her long and distinguished reign as the premier friend of Africa is the stuff of legend. She understands what makes Africa tick. She will be missed, and I wish her well.
The noble Earl, Lord Kinnoull, was spot on in his remarks, and in part drew attention to many observations that I wished to make—but I shall press on. I shall not comment on the whys and wherefores of the effects on the economy resulting from EU withdrawal and the current complexities of intra-European trade, other than to note that we have not risen to the challenge of Brexit. We are where we are, with the only relevant question being, “What are we going to do about it, moving forward?”
Nevertheless, notwithstanding the remarks from the noble Earl, Lord Kinnoull, and the noble Lord, Lord Lamont, I should put on record that, at the meeting I attended in Birmingham this week as the guest of Midlands Engine and Midlands Connect, it was underlined that the Midlands region now exports 40% fewer products than at the start of 2019, with the biggest impact being on SMEs. One in five of all England’s exports comes from the 800,000 Midlands SMEs that employ 4.4 million people. It was also stressed that the region’s total exports are £7 billion below those levels. Losing those exporters could break the pipeline for future export growth and significantly harm the UK’s frail productivity.
The APPG for Road Freight and Logistics has embarked on a year-long 2023 assessment to lay strategic preparedness to serve for 50 years hence, which, when combined with the parallel APPG for Trade and Investment conducting a review of the United Kingdom’s export promotions strategy, has been long overdue. The last endeavour in that regard was the 2012 review by the noble Lord, Lord Heseltine, entitled No Stone Unturned. I serve as co-chair of both APPGs and look forward in that capacity to sitting next to the Minister for Exports in order to understand the Government’s thinking on export promotion, in respect of which the essential galvanising of trade with countries on the continent must surely be one for mandatory consideration.
I am in no doubt that there is a desire in this United Kingdom of ours to work together in public and private sector partnership, but to be less reliant on central government interventions and spearheaded by focal points such as Midlands Engine in order to drive economic growth and achieve our shared goal of greater prosperity, unlocking the opportunities for investment and trade and maintaining our status as an economic player on a rapidly changing global stage. An underlying principle is that there should be a spirit of reciprocity with trading partners for trade to thrive. Trade with, rather than into, should be the mantra.
Additionally, a solution to trade is assisting our exporters, providing them with clear guidance and training on new regulations. They must be supported so that they do not feel that it is all too much hassle to bother. Those on the front line must be supported. I visited the Port of Dover, the UK’s busiest international roll-on roll-off ferry port, handling £144 billion of freight and one-third of the UK’s trade, whose biggest single trading partner is the EU. The key elements for success are ensuring that border fluidity is adequate in a post-Brexit world, along with road investment and a decarbonised supply chain, thus ensuring delivery of the resilience, time and cost benefits that supply chains rely on into the future.
A key message I wish to offer the Government, therefore, is for border procedures and management, allowing for the consequential training required, to be planned quicker and more in depth than currently is the case. A takeaway is that the Government should be doing more to inform those that are an engine room of trade: namely, those engaged on border management procedures on both sides of the channel. They need to be better informed. I can further vouch for that, having hosted a meeting of Nigerian Government agencies that were unaware of the UK import regulations that resulted in 60% of a particular product range being rejected by the UK authorities. So more needs to be done in that regard to explain what our regulations are, so that people around the world can comply, not least our own organisations.
While not wishing in any way to prejudge the review to which I have referred, the original guide on how the border with the EU works, entitled the Border Operating Model, originally published in July 2020, was subject to two complete revisions as most of the dates set in the original BOM for implementing new arrangements were not met and had to be delayed. The most recent change was made to reflect the Government’s decision to delay the implementation of sanitary and phytosanitary checks on agricultural goods and foodstuffs imported from the EU, which should have been introduced on 1 July 2022. This should have been published in autumn 2022, but still has not been so, leaving importers of such goods from the EU unable to plan for their introduction or train staff accordingly.
Additionally, in December 2022 the TCA published instructions setting out the rules of origin—touched on by the noble Lord, Lord Hannay—that goods had to meet to be considered as qualifying for the purposes of claiming preferential rates of duty. These have proven difficult for companies to follow, as has the process for issuing documentary evidence of the origin.
EU exporters making a statement of origin on their commercial invoices to allow the UK importer to claim the preferential rate of duty must have a registered exporter number if the goods are valued at more than €6,000. A large number of EU exporters still seem unaware of this requirement. A UK exporter has to provide only its economic operator registration and identification number to make an origin statement, which creates confusion. Many smaller traders, particularly those who had only ever traded with the EU and therefore had no customs experience prior to Brexit, have struggled with this legislation and do not feel supported in their efforts to understand it.
The policy paper for the 2025 UK border strategy, published in December 2020, referred to as the target operating model, described the border we are intending to create. Does HMRC intend to use trusted trader programmes when implementing both the single trade window and the 2025 UK border strategy? Will the simplifications offered to traders under the new strategy be available only to trusted traders, for example?
The UK already participates in the World Customs Organization’s authorised economic operator programme, with many companies undertaking a lengthy and onerous application process to prove their levels of compliancy and security to HMRC in order to achieve accreditation. In the lead up to Brexit, many companies thought that AEO would be beneficial post Brexit as it would offer accredited companies a green lane for their EU goods to enter the UK. This did not prove to be the case and many companies are now questioning the value of the scheme. The accreditation is meant to be subject to a reassessment by HMRC after three years, but many traders are now saying that they would rather let the accreditation lapse as it does not offer any benefits. This is disappointing. HMRC should be encouraging traders to apply for AEO as it focuses on compliance and ensures that traders have systems in place to self-audit their customs declarations, thus allowing HMRC not to do so and freeing up limited resource to focus on non-compliant businesses.
HMRC is possibly missing a way of improving customs clearance standards and potentially raising more revenue by ensuring that the correct duties and taxes are paid on import declarations. Why do customs clearance providers not have to be licensed or qualified, or to be members of a professional body in the UK? The customs declaration service, the replacement for CHIEF—the customs handling of import and export freight—was finally implemented for imports in October 2022. The CDS for exports was meant to be implemented in April this year. However, this has already been delayed by eight months, to December 2023. Why is that?
In summary, and to help in this process, it would be helpful for those tasked with border management if the Government replied to nine detailed technical questions. The Minister may be relieved to hear that I do not anticipate full responses due to ministerial time constraints, but I request that they be given full consideration. I will be placing them today as Parliamentary Questions for Written Answer, but for the record of the House, these are they. When will the target operating model be published? Can goods imported into the UK be repackaged, sold to the EU and referred to as being of UK origin? When will the 2025 UK border strategy be released? When will details of “ecosystems of trust” and how trusted traders will be identified be published? Is it intended that HMRC will continue promoting authorised economic operator status to businesses and will it commit to ensuring that successful applicants will receive the published benefits? Is it intended that HMRC will make authorised economic operator status mandatory for customs declarants? Will the customs declaration service for exports be implemented on time? Will the single trade window really start to deliver in 2023? Finally, have the Government sufficiently resourced HMRC to manage an anticipated 270 million additional customs declarations each year from UK companies for the import of EU goods, with a similar number expected on the EU side of the border?
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, I too am particularly pleased to be able to participate in this debate because it gives me an opportunity to say a few words about the noble Baroness, Lady Chalker. Unlike my noble friend Lord Stansgate, I have met the noble Baroness, Lady Chalker, on many occasions. Indeed, we crossed swords in the other place when I was one of the shadows in overseas development, so I know a great deal about her. Some of the statistics are remarkable. She is one of only five people who managed to survive the whole 18 years of the Conservative Government as a Minister. That was really remarkable. She was also a Minister for Overseas Development for about eight years—another remarkable stint. In spite of what the noble Lord, Lord Hannay, said about how much was spent on overseas development at the time, it would have been a great deal less if it had not been for the work of the noble Baroness, Lady Chalker. So I know a lot about her, and I have crossed swords with her on a number of occasions. That is why I bow to no one in this House to pay tribute to her for her wonderful work. We are all very proud of her.
I am a recently retired member—like the noble Lord, Lord Tugendhat, a somewhat reluctantly, but willingly in the end, rotated member—of this committee. I too welcome the report and most of its findings. As other members of the committee have done, I pay tribute to the chair, the noble Earl, Lord Kinnoull. Anyone who can get unanimous reports out of a committee that includes the noble Lord, Lord Lamont, and my noble friend Lord Liddle must be a real diplomat—not to mention having me on the committee as well. He has done a great job.
I endorse the analysis in the report that openly acknowledges Brexit’s negative effect on small businesses in particular. However, I remain slightly disappointed that many of our observations are still caveated with this warning about the supposed impossibility, again perpetrated by the noble Lord, Lord Lamont, of disentangling the economic effects of the pandemic from Brexit. It is easily done. This is deliberate obfuscation by the Brexiteers, and particularly by the current Government, who are unable to admit that Brexit was and is a disaster.
The report can also seem contradictory at times. For example, it states:
“It will take time before a proper comparison can be made.”
However, in the preceding line, we make an incredibly compelling comparison between our trade with Europe versus the rest of the world, noting that United Kingdom-EU trade has fallen far more precipitously. I urge the reconstituted committee, and the noble Earl, Lord Kinnoull, in particular, perhaps to recognise that the time for fence-sitting has passed. Notwithstanding the presence of the noble Lord, Lord Lamont, it should perhaps look at the current reality and take a stronger view.
Earlier this week, the IMF released figures that reveal that the United Kingdom is the only G7 country that has failed to rebuild its economy to pre-pandemic levels. Its report also predicted that, as my noble friend Lord Stansgate said, we will be the only G7 country that does not experience growth this year; instead, our economy is expected to shrink. Unfortunately, a hesitancy to fully accept the reality continues to permeate the Government’s attitude to Brexit. However, despite what the Chancellor says to the contrary, our economy is currently clearly in decline. We should expect no less: if we impose major barriers to trade and migration with our largest trading partner, the consequences must be decreasing trade volume and investment. That is obvious—it defies common sense to think otherwise. Even the Government’s own forecasting organisations—the OBR and the Bank of England—recognise that there will be a “long-running net loss” as a result of Brexit.
Rather than burying our heads in the sand, it is vital that we act swiftly to reverse this damage. As the committee report rightly states, small businesses in particular bear an undue burden under the new system of trade—this is inevitable because they lack the capacity and resources of larger businesses—and our labour market has taken a significant hit as a result.
I turn to the older workforce. Incidentally, I must say that the noble Baroness, Lady Chalker, is retiring at a relatively early age; she is younger than about half of the participants in this debate, if my statistics are correct. I should have wished her well in her retirement—the things she is about to do sound very exciting. I apologise; I am deviating. The older workforce will not be enticed back into work under this Administration when the Government seem unable to resolve simple wage demands from multiple key sectors. If you were mischievous, you might almost get the impression that they are trying to stoke up industrial dissent for political purposes.
Once again, blaming the pandemic for instigating a mass retirement is not a sufficient excuse. We are also the only G7 country where employment has failed to recover to pre-pandemic norms. The CBI pleaded with our Prime Minister to align with the European Union on this issue and create a temporary work visa scheme for European Union citizens. However, he refuses to budge on this issue, and his stubborn outlook is fuelling stagnation.
Incidentally, the issue raised by my noble friend Lord Stansgate about musicians travelling around Europe is one that the committee is dealing with and concerned about, and no doubt we may have an opportunity to discuss it again on another occasion.
Opinion poll after opinion poll indicates that the British public are regretting the decision on Brexit. Even a small majority of viewers of that bastion of Brexiteers, GB News, said that they would now be in favour of a Swiss-style deal. In our committee, we discussed the options of a Swiss-style, Canadian-style and Norwegian-style deal and seemed, before I was rotated off, to be moving to the conclusion that we should have a special kind of deal developed which was more appropriate for the United Kingdom. I shall come to that in a moment, but the Swiss-style deal is certainly a very good deal indeed for Switzerland.
With public sentiment edging on our side and a number of important deadlines, such as that for the GDPR agreement, rapidly approaching, it is time we began to forge a closer partnership with the European Union, as my noble friends Lord Liddle and Lord Stansgate rightly said. This begins by recognising the numerous benefits that membership brought, as it did, most of which we are missing at the moment. Although I reluctantly accept that rejoining in the immediate future is not in prospect, alignment on all important issues relating to trade and labour is vital if we want to grow our economy and ensure that Britain remains a global trading partner.
I am not pleading with the Minister today, I am not asking him 10 or 20 questions, I am pleading with the chair of the committee, its members who are continuing and the new members who have joined. I hope that the committee will produce a blueprint for achieving a closer alignment with the European Union which ensures that we work collaboratively on every possible area, and come up with some kind of deal that is tailor-made for the United Kingdom to have a closer relationship with Europe. Its countries are our closest partners, our biggest traders and our natural allies. It would be madness not to have a really great deal with them in future.
Lord Berkeley of Knighton (CB)
My Lords, I always enjoy listening to the noble Lord, Lord Foulkes, and I must say that I too would love to see that closer link. Unlike him, I did not have the pleasure of experiencing the flash of steel of the noble Baroness, Lady Chalker, or even of having a cup of tea with her, but as someone who was outside the Palace of Westminster—indeed, completely outside politics—I was in constant admiration of her work on international development, which was clearly second to none. It must sadden her slightly that the money going into international development has had to be cut. She knows only too well how difficult it is to keep that amount up and running.
I should possibly declare my interest as a professional musician, which will give your Lordships some idea of where I am about to go. I shall concentrate on only one area. The noble Viscount, Lord Stansgate, mentioned it, but I want to go into it in a little more detail.
The report is wonderful; it has great clarity and does not pull its punches, and I commend my noble friend Lord Kinnoull and his Select Committee on it. When I started reading it, I saw, as we have just heard, that the Select Committee is dealing with performing musicians on another occasion and at another stage, so I thought, “Perhaps, this is not the moment for me to open my mouth”. But when I read further and saw the item about cabotage, I thought, “I cannot avoid this”, because, as the noble Viscount, Lord Stansgate, mentioned, it is absolutely disastrous for the musicians of this country, for music touring and for the creative arts. I say to the noble Lord, Lord Lamont, whom I have always found extremely persuasive in his arguments—and I say the same to my noble friend Lord Hannay—that I suspect that he would agree with me that this is one issue that is not out of date, and that we can separate it from Covid. It has nothing to do with Covid; rather, it is to do with the free movement of musicians and the exchange of ideas.
The report says:
“UK lorries are limited to two laden journeys between different Member States (crosstrade) and one laden journey within a single Member State (cabotage).”
For the creative industries, musicians and dance companies, we should substitute “cabotage” with “sabotage”, because it is ruinous—it cannot be done. Furthermore, Logistics UK told the committee
“that these rules on market access ‘work reasonably well for general haulage companies’. However, they added that because of the limitations on cross-trade and cabotage, the TCA ‘[does not] offer any sustainable solution to UK touring companies carrying equipment on pan-European cultural tours’, such as performing musicians, where ‘the same load”—
this is crucial—
“needs to be moved to different successive locations across Europe.’ This, they said, ‘constitutes a gap in the TCA and requires a jointly agreed solution with the EU.’”
I will briefly explain why that is so. If you are touring a pop group, you have to take amplifiers and, probably, video equipment and you need roadies; you cannot do that without a huge truck. If you are touring the London Symphony Orchestra, you will have eight to 12 double basses, timpani, percussion and music stands, all of which must be moved. Dance companies will need a certain amount of staging to operate at all. No tour can be set up in Europe that does not go to multiple venues—I have checked this with the people who do it—as it would simply not be financially feasible. That is a fact of life.
The report continues:
“The Committee has previously highlighted the issue of haulage restrictions for touring as part of its separate work on the movement of creative professionals. In a letter to Lord Frost, dated 19 October 2021, the Committee warned that continued UK participation in the music haulage market is rendered ‘practically impossible’ by the restrictions in the TCA”—
both sides agree on that—
“and highlighted the UK’s previous dominance of the European music haulage market, meaning that this is ‘not a sector in which the shortfall could be picked up by EU operators’”
using other EU lorries, getting everything off one lorry and on to another lorry. The report goes on:
“Committee correspondence with the Government on this matter is ongoing.”
Although I found in meetings with the noble Lord, Lord Frost, that he was pretty unmovable on going back to the TCA, he had the good grace to say that the Government got it wrong on EU touring. That gives me a mandate to demand from the Minister—so expert on foreign affairs, but now having to deal with this—that he must put this right.
The Select Committee said:
“Although the TCA’s provisions on road transport work well for most hauliers, they are wholly inadequate for those whose business model relies on the temporary movement of goods to multiple locations in the EU, particularly to large sections of the performing arts sector. We retain a close interest in this matter and intend to continue pursuing this in correspondence with the Government.”
I am glad to hear that.
Let us think about the ramifications of this. Following Covid, many musicians and people in the performing arts suffered terribly financially. I have always acknowledged Rishi Sunak’s help for the sector, and I do so once again, but there were many freelancers who fell through the net. They have been doubly hit by the fact that, in getting back into work now, they simply cannot tour. Then we come to the issue of society as a whole; this slightly echoes what Sir Paul Nurse has said about science. Art, science and music all rely on the exchange of ideas to make society more aware of what is happening around the world. If we do not have that exchange, things ossify and die.
It was good news for the Treasury when we toured. The creative industries brought in billions to the Treasury. At a time when it needs every penny, why are we stopping our artists going abroad, giving the reputation of this country a boost and bringing money into the Treasury? It makes no sense whatever. I am sure the Minister will say, as the response to the report says, that the Government acknowledge that touring is a vital part of musicians’ and performers’ careers; the response even talks about the things I have just said and why they are important. Then it goes on to say:
“This is a complex issue for which there are no simple solutions.”
I say that where there is a will, there is a way. I hope that the Minister may be able to reassure us—as people have done in private—that this is a subject the Government take extremely seriously and wish to change.
Lord Rogan (UUP)
My Lords, I feel that the noble Baroness, Lady Chalker, may well not remember when we first met—it was a long time ago—but my wife and I certainly do. It was in Belfast in the late 1960s when we were keen young unionists and she and others were keen young Conservatives—not disruptive young Conservatives, I think. I would never have thought that we would be together here on these Benches so many years later. Lorna and I have been following the noble Baroness’s career with great interest; I am delighted to be here tonight to join with others, as she ends an extremely exemplary parliamentary career, in wishing her a fair wind. She will not be forgotten.
I thank the noble Earl, Lord Kinnoull, for securing this important and timely debate. I also pay tribute to him and his esteemed colleagues on the European Affairs Committee for doing such sterling work in producing the report we are discussing today. Of course, I have an obvious problem with the report in that it is titled, and focuses on, Trade In Goods Between Great Britain and the European Union. That is neither a criticism of the committee nor of the report—quite the opposite. Instead, my frustration stems from the fact that it underlines that, post Brexit, Great Britain is indeed being treated very differently from Northern Ireland. Put simply, in relation to trade and checks on goods with the EU, we are no longer one United Kingdom. As a unionist, that pains me greatly.
Wearing my other hat, as a businessman, I find it somewhat bemusing—tinged with an element of national embarrassment—that His Majesty’s Government have been forced to announce several delays to the introduction of import controls on goods entering Great Britain from the EU. In contrast, the EU was able to introduce full import controls from 1 January 2021, leading to an immediate imbalance between GB exports to the EU and GB imports from the EU. One might be forgiven for thinking that His Majesty’s Government were not fully prepared for the practical consequences of Brexit.
That brings me back to Northern Ireland. Your Lordships will have read media reports over recent days that a deal between the UK and the EU on the Northern Ireland protocol may be close. These reports seem to have been both confirmed and denied in equal measure by elements on both sides of the negotiations. As a veteran of successful and unsuccessful talks processes in Northern Ireland, this is a pattern with which I am all too familiar. Our debate today is about goods entering GB from the European Union but there should be no question of additional checks, beyond those that were already taking place before Brexit, on goods entering one part of the United Kingdom from another part of the United Kingdom—unless, of course, the goods are clearly destined for the EU. Without these internal checks being removed, we will continue to have a sea border separating one part of the United Kingdom from the rest; that will never be acceptable to unionists of all shades in Ulster.
Neither are the additional checks and controls on goods entering Northern Ireland from Great Britain acceptable to many businesses, which are facing increased costs, nor to large numbers of consumers, who face higher prices and a diminishing choice of goods because fewer suppliers are choosing to deliver to the Province. The noble Lord, Lord Lamont, mentioned that he felt there were few Brexiteers in this Chamber. As I have said many times, I was in favour of Brexit—I still am—but, in common with so many others in 2016, I heard the promises from leading figures in the Vote Leave campaign that Northern Ireland would not be treated differently to the rest of the United Kingdom should the country decide to leave the European Union. Fast forward to December 2019 when Vote Leave’s chief advocate, Prime Minister Boris Johnson, told Sky News:
“There’s no question of there being checks on goods going from Northern Ireland to Great Britain or Great Britain to Northern Ireland.”
Twelve months later, Mr Johnson himself signed the deal to introduce checks on goods going from Great Britain to Northern Ireland.
I wish the negotiators well. I hope that a deal is done, and I trust that that deal will remove the disastrous Irish Sea border, enabling our kingdom to be truly united again. I again congratulate the noble Earl, Lord Kinnoull, and his committee colleagues on their report.
Baroness Wheatcroft (CB)
My Lords, I begin by adding my congratulations to the noble Baroness, Lady Chalker, not just on what was a wonderfully warm and heartening valedictory speech but on an extraordinary career in business and, of course, in politics. We all owe her a lot, particularly the women who have come along in her shadow. I wish her well. I think it typical of the lady that her retirement will see her teaching in the townships of South Africa; it does not sound like the sort of retirement that many people have in mind.
I thank the committee for producing such a detailed report and the noble Earl, Lord Kinnoull, for introducing it so thoroughly. It would be interesting—but not particularly heartening, I believe—to see a follow-up report. It is hard to believe that one could argue things have got better. One in four small businesses have stopped exporting altogether because of Brexit but this is not just a story about trade figures; this is about people who have really suffered and seen their businesses wrecked because of Brexit.
In his most eloquent speech, the noble Lord, Lord Berkeley, gave us a hint of just how bad things have been for people working in the music industries. It has hit freelancers, photographers and many others. Take John Hearn, whose business is wine importing and exporting. He rather surprised Jacob Rees-Mogg on “Question Time” in December last year when he said that his business and every business he knew in the wine sector was being suffocated by bureaucracy and paperwork.
Things got even worse for Simon Spurrell, who had set up the Cheshire Cheese Company and built a really successful business. In November last year he had to sell out because he faced a drop of £600,000 a year in his sales. He could not afford to keep the business he loved for himself. He is still working there, thank goodness, but under new ownership.
Last year the APPG on Fisheries produced a report that went into great detail about how that sector, which was promised so much from Brexit, was suffering. It contains heart-rending stories from the individuals interviewed, talking about how their businesses had been decimated.
The noble Lord, Lord Lamont, was a touch Pollyannaish when he wondered what the third anniversary could be. I can tell him: it is leather. To me this looks like old, unpliable leather, not the sort of Italian, soft nappa leather we might have wished for.
I declare an interest as chairman of the Association of Leading Visitor Attractions. We depend on tourism, which is this country’s fourth-largest earner. Tourism has been hit by Brexit. It will be hit harder when border controls come in that make life difficult for people coming into this country, but Brexit is already causing problems for my members and others in the tourism sector because of the lack of workers. They cannot get people in their kitchens. I heard yesterday of a hotel chain that has shut entire floors in some of its buildings because it cannot get cleaners. This is not benefiting our tourism industry.
Something that would benefit our tourism industry would be to bring back tax-free shopping, which, for reasons best known to themselves, the Government have done away with. This was the one good thing that the brief Truss Administration pledged to do. Instead, the Government have once again stuck to the idea of no tax-free shopping and just sending potential tourists elsewhere. Why would they come to the UK if they can do better in Europe? Yet again, I plead with the Government to revisit that and see whether it is a simple thing they could do to benefit the tourism industry and the whole UK economy.
Businesses crave certainty. At the moment they face more uncertainty over travel regulations and people being held up at ports. The noble Earl, Lord Kinnoull, went into detail about how the requirements are in theory coming in, first in November for ETIAS and then at that vague time “the end of the year” for fingerprinting. What will actually happen? Who will be ready to cope with it? We all know that the Port of Dover does not have the wherewithal to deal with backlogs of traffic. Five people in a car all needing to be photographed and fingerprinted will not make life easy for those who wish to use our ports.
Then let us add to the uncertainty and give business a bonfire of regulations. We will debate that next week. It is a crazy thing to do. When the Minister, the noble Lord, Lord Callanan, spoke about the Bill earlier this week, he said that there was certainty because the sunset clause would come in at the end of the year, but that does not give businesses any certainty at all. They need to know what the position will be at the end of the year and they need to know it now, because, as Tony Danker, the CBI’s director-general has said, the danger is that we are already shrinking our markets because our customers overseas do not know what we will produce and to what standards. We need certainty for our businesses if they are to survive and thrive.
At the moment the uncertainties are driving away inward investment. Only today, the Financial Times reported that Wolfspeed, a chip maker, has committed €3 billion to open a new plant in Germany. We could have done with having that plant here. Last year Intel committed €17 billion to open a chip-making plant in Germany, but we had Britishvolt, which was to be the battery maker that was essential to the UK’s motor industry. We know what has happened since: Britishvolt has collapsed. One former Minister commented that
“it’s a sad reflection probably on Brexit … So that’s part of the damage that’s been done by leaving the EU.”
That was not a rabid remainer; it was William Hague, the noble Lord, Lord Hague. He is absolutely right: we have done so much damage to this country.
I agree with others that we are not going to go straight back into the EU. There is not an appetite for it here, and neither is there yet one for it there. We must begin to rebuild relations with our nearest and largest trading partner. We need to get back into the Horizon programme immediately for the sake of our science and scientists. We then need to begin building single markets in sectors—not having one single market, but coming to arrangements with the EU, sector by sector, that will make trade easier for both sides. What could be more sensible than that?
I finish by asking a single question; I do not have a long list. I apologise to the Minister in advance, but can he tell me, in a single figure, what the direct trade benefit of Brexit has been?
The Earl of Clancarty (CB)
My Lords, I am grateful to speak in the gap. It is a pleasure to follow the noble Baroness, Lady Wheatcroft; I agreed with everything she said, including on tax-free shopping. I hope the Minister answers that point. I also congratulate the noble Baroness, Lady Chalker, and support all the tributes that have been made to her. As an artist myself, I am very glad to hear that she is going to spend some time painting and drawing.
I want to make a couple of remarks further to those of my noble friend Lord Berkeley of Knighton and the noble Viscount, Lord Stansgate. We think of the creative industries as part of the service industries. They have been and will be treated in detail in other reports, but trade in goods is a significant aspect of those industries. I have two examples of goods produced by the creative industries, one in one direction and one in the other, to show how complicated things have become. There are serious ongoing problems in the creative industries, as my noble friend has outlined. One example is that of merchandise, which is now hugely important to bands. They carry merchandise abroad, but the problems of costs, red tape and logistics in moving such goods have already been a contributory factor in the cancellation of tours.
My second example is the recent cancellation of two art fairs for 2023 in London: Masterpiece London and the summer edition of the Art & Antiques Fair Olympia, which should be celebrating its 50th anniversary. Brexit is doubtless a major factor in these cancellations, with a 58% decline in international participants since 2018 in the case of Masterpiece—so that trend occurred long before Covid. There is now a huge problem in moving artworks between the EU and the UK because of VAT costs, increased shipment costs since Brexit, and red tape. The effect of all this is to lower our standing in the world in terms of the arts—as well as having an effect on London itself, both culturally and economically.
As the excellent report shows, what was once simple and easy has now become complicated. As for solutions for the creative industries, this complexity means that we urgently need co-operation between the Department for Transport, DCMS, BEIS, the Home Office and the Foreign Office. This remains an urgent cross-departmental concern. I have one other point: it is important to note that obstacles to trade are not just a serious problem themselves but have a significant knock-on effect in many other areas.
Lord Purvis of Tweed (LD)
My Lords, as one of the flurry of former members of the committee who has contributed to this debate today, I also add my thanks and appreciation to the clerking staff and for the policy support that the committee has received. I also commend the canny diplomacy—as I think the noble Lord, Lord Lamont, put it—of our chair, the noble Earl, Lord Kinnoull: it is quite a task to bring across unanimity on issues such as trade and Brexit. I also commend him for the parent committee on the Northern Ireland protocol and unanimous reports on that. So I think that I might take him with me on my next visit to the Middle East—and leave the noble Lord, Lord Foulkes, at home, if that is all right.
The debate ended with three contributions showing the human element to this. I am not foreign to using statistics—in fact, I will be relaying some later on in my contribution—but reminding us of the human impact within goods and on non-financial services is very important. The debate also had a very human element at the start with the valedictory speech of the noble Baroness, Lady Chalker. One of the signs, I think, of good politicians that I have admired is that people who they do not recall having met have a very fond opinion of them. When I was David Steel’s bag carrier when he was an MP and a shadow of the former Minister, she was always very pleasant to me, a humble researcher. Then when I worked briefly in this place as a member of staff for my then noble friend Lord Steel of Aikwood, she was also very generous and kind towards me. I hope she forgives me for saying so, but she was elected a month after I was born—so I cannot compete with those who met her earlier on in her career.
I took the opportunity, having noticed, as others had, that she was going to be making her valedictory contribution today, of reading her maiden speech in the House of Commons on 15 March 1974. She was highly regarded and very well noted for development, with, as the noble Lord, Lord Foulkes, indicated, nearly nine years in that post, whereas her successors as Ministers for Africa have lasted an average of nine months. That shows the contribution that she made. I will never forget the emotional plea that she made in 2015 on the 0.7% Bill, when she appealed to her successors as Ministers to have predictability in overseas development assistance. Alas, her successors have not heeded that, at the cost to the poorest in the world and our standing in the world.
In her maiden speech, she called for something which so many of us now take for granted—I look at my noble friend Lady Brinton, who perhaps still has to struggle on this issue. But I will quote just one line from what she said in her maiden speech, if the House will forgive me. She said:
“I suggest that the Secretary of State for Industry should instruct his planners and those carrying out the work to ensure that, when they dig up roads, kerbstones and cornerstones, they replace them with sloping stones to enable wheelchairs and, indeed, mothers with prams, to get along more easily. Far too often we go back to doing the old thing the old way, because we have not thought about it anew. If the right hon. Gentleman could plan in that way, it would be better than creating a castle in the sky in the shape of a national enterprise board.”—[Official Report, Commons, 15/3/1974; cols. 571-72.]
Well, the contributions that she has made and what she called for then, which we take for granted now, have made a real difference to people’s lives, and that is also a testimony to her career.
Now to castles in the sky—except that this one has Brexit-shaped ramparts. I admire the defence of the lone noble Lord, Lord Lamont, on those ramparts in this debate, but nevertheless we are one year on, as the committee said. We are one year on from the committee report, and three from Brexit. The Financial Times editorial board yesterday put it like this:
“In the 1970s, the UK was known as the ‘sick man of Europe’. Today it seems to be the sick man of the developed world.”
Citing the forecast by the IMF, which has been raised in this debate, but also the actual ONS outturn data on GDP, we have heard that, uniquely among developed economies, we have not regained pre-pandemic GDP levels.
Our businesses are suffering the whiplash of three Conservative Prime Ministers since the 2019 election, each saying they are a new Government, each condemning the economic policies of their predecessors, while all the time keeping new burdens and barriers on business, leading to, as the FT put it,
“incoherence in economic policy and exacerbated business reluctance to invest.”
That is not just within pure trading barriers, as we have heard so well in this debate.
I respectfully disagree with the noble Lord, Lord Lamont. We did not just analyse the teething problems of Brexit; as we have heard, many of these issues that we thought were teething are now permanent, and they are hardwired into the relationship we now have, whether it is SPS or cabotage, to name just two of many. These barriers to trading have a cost, and the cost is enormous.
This is not often debated, but the Government have a current framework called the business impact target. That is the target for the economic impact of their regulatory activity on business. It is called the BIT. The Regulatory Policy Committee, independent but nevertheless official, is the independent verification body. In its report, it said:
“For the 2017-2019 Parliament, the relevant government set a BIT target of a £9 billion reduction in direct costs over the length of the Parliament, however the final position was an increase in costs of £7.8 billion. Similarly, the government has set a holding target of £0 for the current Parliament”—
that is the one we are in—
“but in the first year of the Parliament, there was an increase of £5.7 billion (excluding the very significant impacts of temporary COVID-related measures).”
So, I want to ask the Minister what the current position is. What is the Government’s own current estimate of the actual cost on business of the additional burdens they have put in place? The numbers on the side of the Brexit bus need to be updated, of course, because, while the savings were always fanciful—I think many of us knew that—the costs are already outweighing them multifold, and the barriers erected by this Government on trading with our biggest market are a weight on our many SMEs and exporters.
Of course, as the noble Baroness, Lady Wheatcroft, indicated, with the REUL Bill we will be debating, there is going to be uncertainty added on to these costs. But all of us know that uncertainty becomes costs, and that is going to be an added burden. It is well worth noting that the same Regulatory Policy Committee for the impact assessment of that Bill has rated it “red”—not fit for purpose. The Government simply are not learning lessons. No Government in the history of this nation—only perhaps the Conservative-led National Government who introduced protective tariffs, which led to the Liberals leaving—have set on businesses a heavier weight of bureaucracy and burden. It simply must be reduced or removed.
The Government think that giving preferential market access to modest trading friends on the other side of the world without anything in return will offset the massive barriers they are putting up on trading with the huge market on the other side of the channel. Trade agreements seemingly negotiated by Prince Potemkin are not offering the growth to fill this void. The trade in the Far East or Asia that, it was argued, would offset this is simply not coming to pass. We know we have already missed the manifesto target for 80% of all our trade through FTAs by 2022, so I want to ask the Minister: will we be meeting it in this Parliament? I do not see a trajectory that suggests that that is going to be the case. Now that we are seeing trade barriers erected with our biggest market, we have seen decline.
I was very struck by the point the noble Lord, Lord Lamont, raised with regards to comparing GDP growth with Germany over the last couple of years. Before the debate, I wanted to make sure I was very accurate with the OECD data—not forecast data but real data on what has happened. The noble Lord was right about the last couple of years.
Lord Purvis of Tweed (LD)
I will retract what I was going to say. The noble Lord is wrong about 2016, but he would be right if he was talking about the last couple of years. He did not highlight the most relevant factor, which I found when I accessed the OECD database this morning and looked at 2016 to the current position: in 2020, the UK’s economy collapsed far deeper than that of any other OECD country. Regaining average levels over the period since Covid has not offset the massive fall that happened in 2020.
Taking the average over 2016 to 2022, we are behind Germany. In quarter 2 of 2020, UK GDP fell 22.6% and Germany’s fell 10%. The following quarter, we fell 10.3% and Germany fell 2.5%. In the quarter after that, we fell 9.2% and Germany fell 2.1%. The 2020 collapse of the British economy because of Covid was far deeper, so any regrowth is coming from a deeper hole, and therefore the average over this period shows that we are considerably behind Germany. I do not think that simply stating that we show comparable growth figures over the last couple of years tells that full story.
We are also not going to have a level playing field, which was one of the highlighted freedoms of having the ability to innovate. The power to innovate is all very well if we assume that no one else is innovating—but of course they are. We may have said, “Stop the EU, we want to get off”, but the EU did not stop moving, and therefore we have to look at this on a comparable basis. That is why I will close by looking at the really important border issues.
The Government have stated that, in just over 18 months’ time, in 2025, we will have the best border in the world—that is the target. However, as the noble Earl, Lord Kinnoull, indicated, we are still operating on temporary measures; we still do not have the facilities in place. The National Audit Office stated that the border operating model uses “temporary” or interim measures,
“delaying the introduction of full import controls.”
That is simply not sustainable. It is compounded by the recent decision to pull money away from the levelling-up fund to give £45 million to Dover to fix problems created by this Government. They are even taking money away from the very communities that were promised benefits from Brexit.
We have a Potemkin trade policy, and, like many charades, it gradually wears thin, the paint flakes and we all see it for what it really is. The FT editorial yesterday finished with an appeal to the Chancellor for his March Budget. It said:
“If he cannot go beyond mere buzzwords, the latest bout of ‘British disease’ will become ever more chronic.”
We want to see practical policies from this Government that will realistically help our trade and economy.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, I first put on record my thanks to the noble Earl, Lord Kinnoull, and to the other members of the European Affairs Committee for producing this excellent report. We have had an excellent debate so far. I join the noble Earl and others in their comments about our much-missed colleague, the late Lady Couttie.
I congratulate the noble Baroness, Lady Chalker, on her wonderful valedictory speech. The noble Baroness has a truly wonderful record of public service, having served in this House and the other place for just under 49 years. I found out that she jointly holds the 20th-century record for continuous service in government, having been appointed a Minister following the election of the Conservative Government in 1979 and serving every single day until the Government left office in 1997. I first saw her on television, when she was the Minister for Overseas Development, visiting many countries on behalf of the UK. She has a proud record of achievement in the field of international development, both in and out of government. I wish her a long and happy retirement, which is well deserved.
I am pleased that several members of the committee which produced the report have taken part in the debate. The most disappointing thing that the committee found—sadly, I was not surprised—is that since the implementation of the trade and co-operation agreement with the European Union, trading with the EU has become more complex and burdensome for business. That means more red tape and more cost. That is not some abstract concept; it is affecting everybody.
I have my own example to give the House. It was my parents’ 60th wedding anniversary in November 2021. They lived in the UK for 50 years and then went back to Ireland, where they came from. I sent them some flowers and I wanted to send them some chocolates, so I logged on to the Hotel Chocolat website—I had used the site many times. When I put in where they lived, I got a message saying, “Sorry, we cannot send to anywhere outside the UK at the moment and nowhere in the European Union.” I thought, “This can’t be right. This is ridiculous.” I kept checking, but I could not send chocolates to them. So I found a very good chocolatier in Ireland, sent them the chocolates and it was great. But look at the loss of revenue because this great company could not send to anywhere in Europe. I checked today. It says that they can now do Ireland but they still cannot do the European Union. It is nonsense that we are in this situation. Money is lost to a great British company—lost profit, lost jobs and lost opportunity. It is an absolutely ridiculous situation to be in. That is one small example. If we multiply that by all the other people who want to do it, and other sectors and other businesses, it is a huge hit to our economy.
Generally, what I find most frustrating from the Government is their position that, with all the problems that businesses have with exporting, compliance, rules of origin, SPS rules, customs requirements and other regulations, it is always somebody else’s fault and always somebody else’s problem. It would be refreshing to hear the noble Lord, or any Minister, say to us, “Yes, it hasn’t gone as well as we thought it would. It is not as good—we accept that entirely.” We all accept that there have been issues with how the EU has sought to address problems, but we as the UK must take our share of the blame as well and acknowledge that we have not always acted as we should have done.
We should stop the nonsense and move ahead, engaging positively and in good faith, with no more threats about ripping up agreements that we entered into—agreements that we negotiated and then want to rip up a few months later. That is just not the way to operate. It would be lovely to hear from the noble Lord or any Minister that we will act in good faith. For me, that is the British way of operating: we act in good faith and our word is our bond. That is what we should be doing.
I am a pro-European, but as my noble friend Lord Liddle and other noble Lords have said, there is no possibility of us going back into the European Union any time soon—it is off the agenda; I accept that entirely. I also fully accept that the impact of the Covid pandemic has to be taken into account. However, the challenges identified in the report are little to do with the pandemic and are a result of the position we found ourselves in at the end of the transition period.
The SPS requirements have continued to be a major barrier to exports of agri-food products since the trade and co-operation agreement. As the report says,
“GB exports of agri-food to the EU have become slower, less competitive, and more costly”.
If this issue, among others, could be addressed, we could make more progress on the Northern Ireland protocol issues that the noble Lord, Lord Rogan, mentioned. I want to see the Assembly set up again and politicians in Northern Ireland making the decisions that they want in Northern Ireland—that is really important for everybody.
My noble friend Lord Liddle made an important point about small companies and trade. I lived for many years in the east Midlands, although I am a Londoner, and I found out recently that only 5% of companies in the east Midlands export any more—they just stopped exporting to the European Union. How is that good for anyone?
Like my noble friend Lord Liddle, I want to make the best of where we are and move forward, and we have to do that in good faith with our European partners and friends. The trade deals that have been negotiated so far have been very poor—look at the comments of George Eustice in the other place on that matter.
The noble Baroness, Lady Brinton, spoke specifically about the health and safety sector. She set out some of the worrying points and had some very pertinent questions for the Minister. I know that he cannot answer them today and that he will write to the noble Baroness and other Members of the House, but I thought that the noble Baroness’s questions on health and safety were very important.
The noble Lord, Lord Tugendhat, again identified issues where, if we had taken a different attitude, we could be in such a different place here today. It is all about attitude and acting in good faith.
The noble Lord, Lord Hannay of Chiswick, set out the context of the report. Although the figures are out of date—we all accept that—it has got worse, not better. Plain common sense, not ideology, is what we need here for British business and the British people to prosper. Sadly, over Brexit, ideology, not common sense, has been the driving force.
My noble friend Lord Stansgate set out a number of concerning points and statistics. I want to mention three points. The first is the problem that has been caused for artists and musicians; the noble Lord, Lord Berkeley of Knighton, and the noble Earl, Lord Clancarty, also mentioned that. We have a fantastic, wonderful, vibrant cultural sector in this country—it is one of our jewels—and all we have done is damage that. I have been quite shocked and surprised that question after question has come to the Government but nothing has happened; the way they have behaved over the last few years has been shocking. I do not understand how anyone would leave the sector as it is now; it is absolutely appalling.
Secondly, last September, on my way to the Labour Party conference, I went with my noble friend Lady Kennedy of Cradley to Chester Zoo, having been invited to visit it. It is a wonderful place; I had never been there but it is a fabulous zoo. We met a guy there called Gareth Siddorn, who showed us round the zoo, and what he told us about was the very point that my noble friend mentioned, about all the breeding programmes and the fact that you have to move all the animals around different countries so that you have proper breeding. There was a real threat that the zoo could not get animals moved around—it is a huge problem. I had never thought of that until it was mentioned to me when I was at the zoo, but it was worrying for the staff there, as their breeding programmes and conservation could be affected because of the red tape and the problems that Brexit had brought. I thought that was absolutely awful.
Thirdly, I also agreed with my noble friend’s comments about the Horizon programme and science. I was surprised this week when I sat here and listened to the answers from the noble Lord, Lord Callanan, who is not in his place today. I thought his comments on where we are with Horizon were most unsatisfactory. It is always somebody else’s problem—it is the EU’s problem. It is just not good enough. As I said before, I agree very much with the points the noble Lord, Lord Berkeley of Knighton, made on that, and the loss of revenue to the Treasury from the cultural stuff is absolutely immense.
I thank my noble friend Lord Foulkes of Cumnock for rotating off the European committee. I know that the rotations this time were quite difficult—I have had many delegations to my office about rotations over the last few weeks and months—but we got there in the end and I think we have all learned some lessons from that.
My noble friend also mentioned the barriers of red tape between the EU and the UK in their trading relationship. I do not understand why anyone who believes in free trade and understands that trade brings prosperity would want a situation where more red tape and barriers are put in place. My noble friend also mentioned the comments of Tony Danker from the CBI, who called for more temporary work visas for European citizens to come and work here. Again, that call appears to be falling on deaf ears, and I do not understand why that is the case.
The noble Baroness, Lady Wheatcroft, highlighted the huge problems that tourism is facing. It brings huge sums of money into the UK economy. Again, people come to this country because of our cultural offer; they want to go to our theatres, visit our museums and galleries and look at our wonderful arts scene.
I have mentioned before how, when I was a young councillor in Southwark in the 1980s, I got involved in the campaign to build Shakespeare’s Globe on Bankside. My first vote as a Labour councillor was to end that ridiculous dispute with the council and get it built. I am very proud of that having been my first vote. I go to that theatre regularly, and it is packed with people, with tourists looking at these wonderful plays, right next door to Tate Modern. The whole area has been transformed by tourism and the arts. I knew the place as a child, when there was nothing there except a road sweepers’ depot. It is so frustrating that while our cultural offerings are so good, we make it so hard for our artists and musicians to flourish.
The noble Lord, Lord Purvis, mentioned the border strategy and the Government’s claim of having “the most effective” border in the world. I looked at the report and thought, “I just want a border that works.” I am quite irritated by the Government. We have all these comments—always “transformational”, always “world-beating”, always “the most effective”—but getting the job done properly would be quite nice. Stop all the rhetoric and the rubbish and just get the job done. It is very distressing. Often these things that we get from the Government do not amount to a row of beans at the end of the day. I wish they would stop. We need a little less talk, a little less pen and a bit more shovel.
The noble Lord also reminded us of the Brexit bus figure of £350 million a week for the NHS. I have not worked it out yet, but it has been three years, so that is a lot of money. We all know the situation that our NHS is in at the moment, do we not?
I thank the noble Earl, Lord Kinnoull, and the committee, for the report. I hope that the Government look at it carefully, listen to this debate, and take some action. I know that the Minister will listen very carefully. I like him very much and I am sorry that he has to be here for the Government. Perhaps another Member should have been here, but I am sure that we will get some response. I hope he takes away that there are huge issues here that we are all passionate about, and that the Government need to act.
The Minister of State, Foreign, Commonwealth and Development Office (Lord Ahmad of Wimbledon) (Con)
My Lords, I thank all noble Lords for their contributions to this important debate. I say to the noble Lord, Lord Kennedy, that it is always good to finish on a high, if nothing else than just in giving superficial flattery to the Minister who is responding. I am truly grateful.
I assure all noble Lords that I have listened very carefully to the debate. It reflects, as I often say from this Dispatch Box, the wise insights and detailed knowledge within your Lordships’ House. We may not always agree, and this is perhaps one of those occasions where there is a difference between the Government’s perspective and many of the contributions from noble Lords. I was therefore heartened to hear the contribution of my noble friend Lord Lamont. Nevertheless, this has been an insightful, detailed debate which reflects where the Government and our country are in facing up to the challenges. I hope that many noble Lords recognise that we believe passionately in important, constructive relationships with our partners—and, I add, friends—within the European Union.
I join the noble Earl, Lord Kinnoull, the noble Lord, Lord Kennedy, and others, in reflecting on the valuable contributions of my noble friend Lady Couttie. She challenged me regularly on the wide brief that I have but, equally, she is missed.
I begin, as other noble Lords have, by paying tribute to my noble friend Lady Chalker. It is an honour for me to be here on this occasion to respond to her final speech. She has been an inspiring individual to me as a Minister and has demonstrated that as changes occur at the top, it is good to have consistency and continuity in a ministerial role. I regard her as one of my inspirational heroes in this respect. Seeing her in her very distinguished career as a Minister, and subsequently, as a Minister myself, there have been occasions when she has been in different parts of Africa and I have received a call saying, “Tariq, tell me what I can do, what you need? I am here to help.” That has been reflective of her contribution. I align myself totally with the tribute of my noble friend Lord Lamont. Her wise insights and in-depth experience we will all sorely miss.
However, I feel it is not the last we have heard of my noble friend Lady Chalker. Indeed, my noble friend reminded me of a conversation shared with me by Kofi Annan’s daughter. She said to me, “Lord Ahmad, Nelson Mandela, when hearing of Kofi Annan’s retirement, smiled and laughed as only Nelson Mandela would, in his usual style, and said, “Kofi, you are retiring. When will you retire from retirement?” I think that applies very much to my noble friend, for she has listed what she is seeking to do. As she departs and draws the curtain on this particular stage in the House of Lords, I know she will continue to assist with great insight, experience, passion and affection the cause of international development and the many people across the world who perhaps are not as fortunate as many in our country, and, as we have heard today, the cause of children. I look forward to hearing from her about that, and I am sure that as I continue in my role, she will also remind me of my responsibilities. My noble friend, I know I speak for the whole House when I say we wish you well, and you depart this House with our best wishes and prayers.
I am grateful to all those who have participated in this debate, and I assure the noble Lord, Lord Kennedy, that I speak for many, and that although I had only one noble friend here, others have joined me on the Front Bench. We always speak with good faith, and that has to be our intention. I also assure him that it is with exactly that principle in mind that we are engaging positively with our partners in the European Union.
I am also grateful to the noble Earl, Lord Kinnoull. He has always discharged his duties with great aplomb, and we see that in this report. Many noble lords spoke about his diplomatic capability. This report follows one on a similar issue, from the noble Lord, Lord Jay, and it shows the wisdom of your Lordships in being able to align fully across the spectrum and present a report which is constructive. I assure him that the Government have engaged constructively. I thank the committee for the way in which it reviewed our responses to the 55 conclusions and recommendations in the report and our subsequent correspondence. Of course, I will reflect on this debate in detail and write where I have not been able to answer questions in the time available. I shall write to the noble Viscount, Lord Waverley, on his nine questions, rather than detain the House.
Important issues have been raised in this debate. As my noble friend Lord Lamont said, it should be forward-looking. I want to say at this juncture that notwithstanding our departure from the European Union, our relationship with the EU remains strong. It has been demonstrated at its finest through our unity of response to Russia’s illegal war in Ukraine, and that continues to be the case. I have experienced many meetings and engagements with European colleagues where we are fully aligned on the important issues and challenges that we face.
The noble Lord, Lord Hannay, reminded me not to be overly bullish in presenting a picture of the economy, and indeed our country, in terms of trade. I have reflected on his comments, and I totally accept that, as my noble friend Lord Tugendhat pointed out, collectively the EU is our largest trading partner and it is important that we have a very strong relationship. Indeed, it should not be forgotten that we are the EU’s second-largest trading partner, and a strong commercial relationship based on free trade is firmly in the interest of both sides. The noble Lords, Lord Liddle, Lord Hannay and Lord Purvis, the noble Earl, Lord Kinnoull, my noble friend Lord Lamont and others talked about various issues, from different perspectives at times, and what has been achieved since our departure from the European Union.
While trade in goods with the EU was worth £381.9 billion at current prices in 2016, according to the most recent ONS statistics it was worth £480.7 billion in the 12 months to September 2022. This represents an overall increase of 26%, and an increase of 9% when compared to pre-Covid levels, but I accept that there is more to be done. During this debate we have heard about the barriers and challenges that continue to be faced, which I will come on to, and it is important that we as a Government address those issues.
As my noble friend Lord Lamont reminded us, not everything that needs to be done is about Brexit. However, if I may offer a personal anecdote, I was reminded that during the 2019 election campaign, I asked my then five year-old, “What does Daddy do?” After naming various professions, he said, “Make a point and get Brexit done.” There are some personal reflections of a five year-old in the Ahmad household, which shows that general election slogans and campaign slogans work.
Our trade with the EU remains important, as I have said. Our low-tax, high-skilled economy has helped to ensure that the UK remains an attractive place to invest and grow a business. The UK has moved up the foreign direct investment global ranking since 2020 to become the highest recipient of foreign investment in Europe and the second highest in the world, second only to the US.
The Government recognise that, as the report indicated, the UK’s trading relationship with the EU has changed since our departure from the single market and the customs union. Of course, some businesses and their supply chains have been directly impacted and affected by this new operating environment, but the trade and co-operation agreement, which several noble Lords have mentioned, has played a critical role in securing UK-EU trade and encouraging inward investment. By the standards of free trade agreements, the TCA is very much cutting-edge. It is the world’s biggest zero-tariff, zero-quota free trade agreement and the first of its kind signed by the EU. For example, it includes provisions and sectors of UK comparative advantage such as services and digital trade. It also safeguards the regulatory freedoms that are now enabling the UK to benefit from Brexit.
On the issue of implementation, which the noble Lord, Lord Liddle, and others pointed to, the overall agreement is functioning well. All specialised committees responsible for monitoring implementation have met at least twice. The agreement’s wider network of oversight functions, including the UK-EU Parliamentary Partnership Assembly and the Civil Society Forum, have been established.
However, I accept that there remain a number of important issues that need to be fully worked through, particularly the current discussions between the EU and the UK about EU programmes such as Horizon Europe. I take on board the importance of reaching a satisfactory conclusion through these discussions, for both sides. I assure noble Lords that through direct engagement via the FCDO—as noble Lords will know, my right honourable friend the Foreign Secretary is leading on engagement concerning the Northern Ireland protocol—Ministers are routinely raising other issues of UK interest. Again, I will take back the many detailed and specific issues that have been raised by noble Lords today.
I shall share some of the other formal structures that have operated within the implementation of the TCA. We have seen exchange updates on major legislative developments, such as the discussion at the goods and trade specialised committee on the EU’s Chips Act and the carbon border adjustment mechanism. We have seen accelerated delivery of the TCA provisions, such as our exchanges with the Commission at the specialised committee on energy regarding electricity trading arrangements and co-operation in the North Sea on renewables. There are additional points but if I may, in the interests of time, I will respond in more detail to the noble Earl, Lord Kinnoull, in writing and put a copy in the Library.
We are exploiting the huge renewable potential of the region, which we also believe will boost European energy production and enhance our energy security, and of course that of Europe. Recent events have demonstrated the importance of that.
I will now address some of the points made in the report, and by noble Lords in this debate, about the implementation of the trade and co-operation agreement. First, on the impact of red tape on UK traders, particularly SMEs, which several noble Lords talked about, I share the view expressed by the noble Viscount about the importance of SMEs in being part and parcel—the real backbone—of the British economy. Various other noble Lords raised this issue, including the noble Lords, Lord Liddle and Lord Hannay.
I will list what the Government are doing specifically to support SMEs. The Government have provided £20 million via the SME Brexit support fund to help SMEs adjust to new customs, rules of origin and VAT rules when trading with the EU. HMRC has also produced a useful step-by-step guide to help customers understand the process for importing goods into the UK; this can be found on the Government’s website. HMRC’s customs grant scheme paid out more than £69 million to support businesses with recruitment, employee training and IT to help with customs declarations. All the other work that we have done around business readiness is also available to SMEs.
The refreshed export strategy will focus on the range of barriers to exporting reported by SMEs directly, from costs and lack of knowledge to constraints in capacity and lack of contacts. It will target interventions across the exporter journey, as part of a new single integrated ecosystem of export support, built around the new export support service that was launched in October.
The SME Brexit support fund, which was mentioned, was intended to be closed and has now closed as scheduled. The fund was offered by the Government and granted up to £2,000 per organisation between March and June 2021 to support SMEs to adjust to new customs, rules of origin and VAT rules when trading with the EU. To date, approximately £8.4 million has been offered to businesses, enabling more than 4,100 businesses to pay for practical support, including professional advice. This is important, and I assure noble Lords that I welcome insights, experience and practical examples, as were provided in this debate, about where noble Lords feel the Government should continue to focus.
SPS was raised by many noble Lords, including the noble Lords, Lord Liddle, Lord Kennedy, Lord Hannay and Lord Purvis. There are of course legitimate concerns around the EU’s application of SPS rules, and the Government very much share them. It is clear that the UK continues to maintain among the highest standards of biosecurity and food safety in the world. I assure noble Lords, including the noble Earl—I note the report and the issues he highlighted—that we will continue to work through the SPS specialised committee to challenge the disproportionate restrictions on high-quality UK exports, such as seed potatoes and certain shellfish.
Noble Lords also raised the steps that the Government are taking to safeguard the UK’s biosecurity in the absence of the remaining SPS controls. Goods from the EU are of course currently subject to full customs requirements. However, due to the staged introduction of controls, which several noble Lords pointed to, some controls are yet to be brought in for EU products. These are safety and security declarations for standard goods, as well as certification and check requirements for non-high risk SPS products. High-risk SPS goods are subject to certification, pre-notification and checks. As the target operating model is prepared for publication, so too will be the dates for bringing in the remaining controls on EU goods.
The noble Lords, Lord Liddle and Lord Hannay, talked about dynamic alignment. As we proposed during the TCA negotiations, we remain open to an SPS agreement with the EU based on regulatory equivalence, given both sides’ records and commitment to high SPS standards. As highlighted in the committee’s report, the EU has agreements of this kind with other third countries, such as New Zealand. But we are clear that we cannot accept an SPS agreement based on dynamic alignment to EU rules, like the EU-Swiss model, which several noble Lords pointed to.
Lord Purvis of Tweed (LD)
Does that clear position apply to all parts of the United Kingdom, including Northern Ireland?
Lord Ahmad of Wimbledon (Con)
My Lords, we are in ongoing discussions with EU partners on Northern Ireland issues. I will not answer specifically but, as I have said repeatedly, the important thing is that our discussions on the Northern Ireland protocol ensure the workings and efficiencies of both single markets, considering the impact not just on the European Union single market but on the UK single market, which clearly is not working under the current agreements.
Another issue outstanding is the continuing absence of a number of envisaged technical working groups. The trade and co-operation agreement provides for regulatory co-operation in a number of sectors that the EU has not yet established, including organics, motor vehicles and medicines.
I have already covered the update on the UK’s future border control regime and the targeted operating model in my answers to previous comments. As I said, I will provide a more detailed assessment of the questions raised by the noble Earl in a letter.
Turning to the Northern Ireland protocol, on which the noble Lord, Lord Purvis, just interjected, I can assure the noble Lords, Lord Rogan and Lord Hannay, that talks are ongoing with the European Commission to solve the real problems arising from the implementation of the protocol. Having been part of some of the conversations, I can assure noble Lords that conversations currently taking place with the European Union and the Commission, and specifically the talks between my right honourable friend and Commissioner Šefčovič, are taking place in a very constructive and collaborative spirit, and it remains our hope and preference that the talks conclude with tangible progress that ultimately addresses the concerns of all communities within Northern Ireland.
On the issue of retained law—I will come on to the creative industries and tourism in a moment—the noble Baroness, Lady Brinton, was of course correct. I will write to her specifically. There are wonderful briefs available, and one seeks to have a working knowledge when responding to debates, but on some of her specific questions I will write to her. However, His Majesty’s Government have processes in place to monitor the economic and business impacts of regulatory divergence between the UK and the EU and whether that divergence is UK or EU-led. Analytical frameworks and guidance have been issued to departments when making assessments of regulatory changes to help us understand any potential impacts. The Government have also published a comprehensive list of retained EU law, which will be available at the retained EU law dashboard. I know this will be the subject of various discussions but, as I said to the noble Baroness, I will write specifically on the questions she raised.
A point was raised about tourism by the noble Baroness, Lady Wheatcroft. I accept that challenges are posed on free movement, et cetera, but it is interesting to look at some of the specific figures. In 2015 tourism numbers into the UK were 35.1 million. In 2022 it was 29.7 million. However, the forecast from VisitBritain for 2023 looks at a return to around the 35 million mark. Of course, there could be improvements—I totally accept the point that the noble Baroness raised—and there are issues that need to be addressed because of the changes that many companies within the tourism industry now face, including on issues of workers and ensuring that sufficient services can be provided, but I certainly take encouragement from VisitBritain’s figures, which present a positive picture.
In conclusion, I once again thank all noble Lords for their detailed insights; some specific questions have been raised. Turning very quickly to the creative industries, as I promised—they have not been forgotten—I was asked quite specifically about what has been done. I heard the valuable contributions made by the noble Viscount, Lord Stansgate, the noble Lord, Lord Berkeley, and the noble Earl, Lord Clancarty. We of course recognise that it has changed for workers in the creative sector in the EU, who have had to adapt to new requirements. I have heard very clearly the specific challenges raised by noble Lords in this respect.
Since the end of the transition period, the Government have worked closely with industry to help UK artists adapt to this new regulatory environment, including by engaging with EU member states on their entry requirements for touring artists. I am informed that the vast majority of member states have confirmed that UK musicians and performers do not need visas or work permits for some short-term touring. I know that the Government looked specifically at providing support; some work was done over the summer looking at hauliers and what could be achieved for their processes. I will look at the specific issues that noble Lords have highlighted and talk to my colleagues across government to see what other specific issues and areas we can address directly. I assure noble Lords that the Government are seized of and recognise the challenges that noble Lords have highlighted in that sector. I also take on board the issues of transition in zoo visits and how it has led to educational insights for both shadow Ministers and Ministers on some of the challenges that specific industries and companies are facing.
In welcoming the report and our continued co-operation with the committee, we look forward to seeing how we can continue to engage constructively with it by taking on its recommendations and reporting, as has been demonstrated today. I end where I started: stressing the importance of our co-operation, partnership and friendship with the European Union. Sometimes it is immensely challenging to demonstrate the importance of that but the war in Ukraine has done just that. The European Union is, and will remain, a major geostrategic ally, partner and friend of the United Kingdom. The UK’s departure from the European Union was always going to present challenges that would take time to work through. However, it is important that we address those challenges collectively, collaboratively and pragmatically. I assure noble Lords that His Majesty’s Government are committed to addressing those issues through dialogue, wherever possible, and are committed to a respectful and mature partnership and friendship with the EU that benefits all the people of both Europe and the United Kingdom.
The Earl of Kinnoull (CB)
I shall be very brief. First, I congratulate the noble Baroness, Lady Chalker, on her valedictory speech. It showed that, after 49 years, she has lost none of her touch. I found it to be a heady mixture of wit, wisdom and style. It was a great privilege to be here for it; I thank her very much.
I also thank all noble Lords who have spoken in the debate; it is has been very long and very interesting. I particularly thank the members of my committee, who presented noble Lords with a window on to the vibrancy, expertise and strong views that sit around our table, which make it so interesting, enjoyable and satisfying when we manage to produce a report such as this one. I thank the Minister; he is a multirole Minister because, while the report is about trade, he is from the Foreign Office. As ever, he responded very carefully; I thank him in advance for the letters that will arrive to answer some of the difficult questions posed to him.
Some common themes arose today. A cloud is developing around the REUL Bill. Many of us will be back in this Chamber on Monday to discuss that developing cloud; it must be watched very carefully. There were also remarks on travelling creatives. I assure my noble friends Lord Berkeley and Lord Clancarty and the noble Viscount, Lord Stansgate, that the committee remains committed to following up on the work that we are doing on that difficult and distressing area for which we need to find solutions.
Two themes were most important, one of which was about SMEs. An important point was made early in the debate by the noble Lord, Lord Lamont, that, strangely, the damage to SMEs is bigger in the European Union than it is in the UK when expressed as an aggregate number of pounds. So it is in the interests of both sides to solve the issue with SMEs. It is in the British interest because we want growth and this is a quick way for growth to solve the issue. The mechanism for solving the issue is the series of specialised trade committees within the TCA; we must get those going.
The second incredibly important theme concerns the SPS requirements. It seems to me that finding a solution to that is in the realms of the possible. I am always disappointed to hear that someone remains open to something because it suggests that they are not going out to search for the solution. I hope that the language of the Government changes here from “remains open” to “going out to try to search for a solution”, because that, too, will unleash growth—and growth is something we really need.
As a committee, we will return to all these themes in due course.