EU: Future Relationship

Baroness D'Souza Excerpts

Wednesday 23rd September 2020 Grand Committee

[Baroness D’Souza (CB) [V]]

My Lords, despite ministerial denials, we appear to be marching inexorably towards a no-deal Brexit and a consequent reliance on WTO trading rules. There are two issues I wish to put to the Minister. One concerns the potential impact of a reversion to WTO terms of trade, and the other is about reaching a decision on continued participation in the EU Erasmus+ programme.

From the start of the legal process at the end of last year, there was a disconnect between the EU’s mandate to uphold common high standards in areas of state aid, social and employment standards, environmental standards, climate change, relevant tax matters and other regulatory measures and practices, set against the UK’s statement that its

“primary objective … is to ensure we restore our economic and political independence”.

No wonder the negotiations have run into trouble. Apart from the major issues taken up by your Lordships so far—the Irish border, fisheries and state aid—I would like to revisit some of the other consequences of a no-deal departure, which would kick in on 1 January 2021.

The expressed hope that the UK might achieve a Canada-type relationship would not go even half way to resolving the current negotiation sticking points. For a start, the CETA is not, as yet, fully implemented, despite being agreed in 2014 and provisionally in force from 2017. Tariffs on certain food items would remain, requiring lengthy examinations at ports. Furthermore, 53% of all UK imports are from the EU, and 45% of all UK exports go to the EU. Those figures do not compare well with the equivalent Canadian figures of 10.5% and 7.9% respectively.

The Australia-style deal—another “solution” championed by the Government—is essentially a WTO agreement, and would allow the EU to impose punishing tariffs on some goods, such as dairy produce, which in turn would impact badly on British farmers. There is no FTA between the EU and Australia, so it is difficult to understand why the UK Government ever thought this might be a useful model.

The recent removal of some existing EU tariffs by about 20% was, and is, welcome, until it emerges that these concessions refer to items such as pistachios in shells, sewing thread and vacuum flasks—not necessarily key trade items. Nor will WTO rules allow most favoured nation status: any UK trade concessions would have to apply to the rest of the world as well. The 20 or so additional agreements via the EU with countries around the world have not yet been rolled over, further restricting UK trade transactions. Most importantly, in the absence of a trade deal the non-tariff barriers will require all produce standards and safety regulations to be checked at borders.

An exit based on WTO rules would present a huge challenge for the service industries, in that there would be a loss of guaranteed access for bankers, lawyers, musicians and chefs, among other trades. The financial services sector is a huge contributor to national income, estimated at approximately 10% of all tax receipts. Preserving the integrity and reputation of the sector should be an absolute priority, yet there is still no agreement on the legal status of contractual relationships, which in turn affects a whole tranche of SMEs and the job security of up to 2.3 million people who work in the financial services industry. The City of London Corporation has said that even a deal with limited coverage of financial and professional services would be preferable to no deal.

Above all, the current acrimonious nature of negotiations will do nothing to generate a positive future relationship with the EU, which is surely in the interests of each and every household and business in the UK. It is difficult to understand why the Government have remained tranquil about a possible no deal, and are apparently satisfied to engage on WTO terms. The cost of achieving, by 31 December, political and economic freedom from the EU could be very high.

In the political declaration of October 2019, both sides agreed to establish general principles, terms and conditions for the UK’s future participation in EU programmes, including youth, culture and education, and further agreed that this would be subject to the conditions set out in the EU’s own legal instruments establishing such programmes. In February, the UK set out its overall approach, saying it was ready to consider third-country participation in certain EU programmes, and on Erasmus+—the most successful EU exchange programme—that it would consider options on elements of the programme on a time-limited basis. None of the papers or draft legal texts published so far refers to UK participation in Erasmus. As we have heard, the EU published a draft new partnership agreement on Erasmus with the UK in March. However, no detailed information on negotiations is available.

The Government are now apparently considering the option for a domestic alternative to Erasmus. This is despite widespread praise, both within and without the Government, for the programme and its investment in forging international friendships and co-operation. Universities UK calculates that leaving Erasmus could cost the UK up to £243 million a year.

In an Oral Question in June, the noble Baroness, Lady Coussins, questioned the Government’s plan for continued participation. The Minister repeated that while the matter was being discussed no further details would be given. Nor was any leeway allowed to the devolved nations to negotiate their own participation deals. In answer to the question about what possible advantage the UK would gain by leaving Erasmus, the Minister, rather lamely, stated that the Government wished to encourage mobility beyond the 27 EU member states. Continued participation in Erasmus would in no way impede this.

Overall, the lack of transparency and willingness to consult with the many sectors affected is a severe failure. The Government’s overriding priority of escaping any EU controls on any aspect of political, economic and cultural life is not based on sound economic impact assessment. Thus it does not serve the British public now, and it certainly will not serve them in future.

[The Deputy Chairman of Committees (Baroness Barker) (LD)]

Since the noble Lord, Lord Vaizey of Didcot, will not be contributing to our proceedings this afternoon, I now call the next speaker, the noble Lord, Lord Judd.