Brexit: Trade in Non-financial Services (EUC Report)

Baroness Hayter of Kentish Town Excerpts

Monday 18th December 2017 Lords Chamber

[Baroness Hayter of Kentish Town (Lab)]

I, too, thank my noble friend Lord Whitty and his colleagues for their excellent report, for his introduction and for getting this debate immediately following the EU’s decision that trade talks can now start. Like others, I pay tribute to the sector for its 4 million jobs, its £6 billion trade surplus with the EU, and its contribution to our economy, to many other industries and to the way that much of the world does business.

As we have heard, our economy depends on services, which are likely to comprise the majority of our exports by 2021. Those will mostly be non-financial ones such as information technology, telecoms, broadcasting, fashion—I am pleased to say—tourism, education, accountancy and law. Despite that, there is no response to the report. This is somewhat surprising given the Minister’s assertion in a Written Answer to me that the Government,

“are fully focused on making the UK’s exit from the EU, and our new trading relationship with the world, a success”,

by minimising,

“the regulatory barriers for … services between the UK and the EU”.

It is hard to think how the Government could achieve this, given the paucity of data and despite their claim to have been undertaking vigorous and extensive analysis to inform our understanding of how EU exit will affect the UK.

The truth is that those so-called sectoral analyses are neither evidence-based nor forward-looking, as my noble friend Lord Berkeley also found on his trip down to Parliament Street. I saw the one on postal services. I will not disclose what it says but I can tell the House that it had far less in it than what Royal Mail had already told me. As with many of the other reports, the interests of consumers in this sector were ignored. There appear to have been no meetings with consumer bodies, while on legal services the department met only the trade bodies and not the regulators that protect the public and consumer interests.

So the Government are aiming for new trade deals with no thought about the wider public or consumer interest and with scant attention to evidence. Indeed, when I heard that Mr Trump had banned the American public health agency from using various words including “evidence-based”, I wondered whether he was referring to our Government, whose whole approach is in stark contrast to that of the EU, where a 30-page European Parliament paper details the effect of Brexit on services. As my noble friend Lady Donaghy said, good data is vital if we want to know where we are going.

We now face a momentous decision about what sort of trading nation—indeed, what sort of society—we want after March 2019. Is it to be some freewheeling, buccaneering economy rewarding the richest and the devil take the hindmost, free of consumer, environmental, safety and worker protection? Some seem to think so. The Sun reported:

“Ministers want to scrap EU laws which limit the working week to 48 hours”,


and might even put at risk the paid holidays we all enjoy.

Following Mr Rees-Mogg’s call for regulatory divergence to be a red line, the Foreign Secretary now envisages a deal giving Britain the power to ditch EU laws—code for lower standards. It is unclear whether Mr Johnson recognises that, in order to trade with the US, we would have to abide by its rules, as the noble Lord, Lord Green, indicated, over which we would have no say—a true vassal state—or whether he is simply seeking to undermine the Prime Minister.

Do we want that deregulated economy or do we want a consensual, profit-sharing, more equitable nation, preserving the environment, ensuring protection for consumers and treating workers with respect? The EU 27 fear that it might be the former, with lower standards ending a level playing field. Apart from their suspicion that that is our vision, there is distrust of the Brexit Secretary. He was even named in a resolution in which the European Parliament, which has to endorse the withdrawal deal, noted that,

“comments ... like those by David Davis calling the outcome of phase one of the negotiations a mere ‘statement of intent’, risk to undermine the good faith that has been built during the negotiations”.

That is a serious criticism of our main negotiator.

Aside from the report before us today, there appears to be no analysis of the mechanism, let alone the cost, of leaving the internal market, despite the warnings from the sector of failure to protect its interests. Most urgently, the sector calls for a rapid agreement on transition on the same terms as now. We on this side are clear that the priority must be a transition within the single market and a customs union, abiding by the common rules of both. This is what industry wants and our economy needs while we negotiate a longer-term relationship. It is also what the EU expects. Its guidelines for moving forward focus on the transition period with the UK in the single market and customs union, maintaining the four freedoms and the jurisdiction of the ECJ. The sooner the Government accept that the better, and the happier our importers and exporters will be. And the sooner the Government accept that an ambitious trade policy and regulatory divergence are mutually incompatible, the easier it will be for them to start serious talks.

I turn to some specific sectors. The UK, as we know, is the largest legal services market in Europe. The market is worth £30 billion and employs more than a third of a million people. The Law Society and Bar Council have spelled out their worries about Brexit, while the Legal Services Consumer Panel, on behalf of clients, has raised the problem that, with no agreement, consumers would not be able to be represented by UK lawyers in EU courts and could lose the protection of confidentiality with their lawyers. Furthermore, civil, family and commercial judgments are currently enforced throughout the EU, allowing consumers to sue or defend themselves in their home courts. With family disputes, the mutual recognition of divorce, maintenance and adoption orders is vital in protecting children and family rights. So a rapid settlement is needed—or else, from April 2019, a child might be taken out of this country with existing court orders suddenly failing to be recognised elsewhere. For these reasons, and that of mutual recognition of lawyers’ qualifications, audience and practice rights, a no-deal scenario would be a major setback for legal services and for their clients.

A particular issue arises with insolvency. At the moment, the regime gives confidence to investors about their ability to recoup money, through the mutual recognition of appointments, so that liquidators can rapidly freeze or capture assets across the EU which are due to creditors here or in another EU country.

Then there are the creative industries. We heard about a much broader approach from the right reverend Prelate the Bishop of Leeds. I will not go through what he said or tackle that issue, but I welcome and endorse the importance of what he said. As we heard from the noble Lords, Lord Aberdare and Lord German, the music industry generated export revenues of £2.5 billion in 2016. In that industry, tours are vital for building fan bases and revenue. Loss of freedom of movement would be hugely detrimental to this sector. The Government must recognise the specific needs of musicians and seek an early answer to the threat of visas being required for EU performances, and must ensure that the EU’s high-level protection for copyright works is maintained post Brexit.

Architecture and its 80,000 people contribute £5 billion a year to the economy and £500 million-worth of exports. A bad Brexit could cut EU exports by a third. The industry relies on international talent, mutual recognition of qualifications and non-tariff barriers. What comfort can the Minister offer it?

The Government do not appear to have the faintest idea of what they want for the service sector. David Davis told Andrew Marr that he wanted a Canada-plus-plus-plus—CETA hardly touches on services—but then he also said that he would not be negotiating sectoral deals. It is hard to know what he means. Furthermore, given that many sectors are dependent on EU agencies, as we have heard, run by boards comprising only EU members, what are the Government trying to achieve regarding UK participation post Brexit?

The service sector depends on the EU regulatory framework, particularly mutual recognition of qualifications and intellectual property, and the free flow of data. Will the Government commit to retaining regulatory alignment and ensure mutual recognition of professional qualifications, which is so crucial to our architects, lawyers, engineers and accountants? These sectors, as we have heard, are highly dependent on talent and the freedom to recruit skilled practitioners. How do the Government propose to safeguard these?

In addition to the new EU Committee’s report, Deal or No Deal, my noble friend Lord Whitty’s report has warned of the crippling impact no deal could have on services. What is the Government’s assessment of the impact on services of no deal, which would restrict the movement of people and forbid trade with the EU on a preferential basis? Finally, will the Government undertake to refuse any agreement whereby Gibraltar’s inclusion in the transitional arrangements is subject to a veto by Spain? Indeed, will the Minister acknowledge the key role that services play in the economy of Gibraltar and undertake to uphold any regime that protects them?

It is shameful that the Government have not responded to the report. As my noble friend Lord Liddle noted, the Government have given least thought to this sector in even contemplating the way in which they want to move forward. So I hope that the Minister will now spell out the future that the Government envisage for our vital service sector post Brexit, suggest to his colleagues that we need a White Paper on their approach and commit the Government to do whatever it takes, even if unacceptable to Mr Rees-Mogg and Boris Johnson, to safeguard the future of these industries.