European Union (Future Relationship) Bill

Baroness Kramer Excerpts

3rd reading & 2nd reading & Committee negatived & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Wednesday 30th December 2020 Lords Chamber

[Baroness Kramer (LD) [V]]

My Lords, Martin Wolf writing in the FT last week accurately described the EU and the UK as “equally sovereign” but “not equally powerful”. This deal not only locks in that imbalance but leaves the UK in a position of dependency that I find quite shocking. As someone who opposed Brexit, I always regarded this deal as damage limitation, but I never expected any British Government to give up so much for so little.

Because of time, I will limit my remarks to financial services, a key pillar of the UK economy—perhaps its most important one—that provides nearly 2 million jobs and over £75 billion a year in tax revenue. With the signature on this deal, our negotiating leverage to protect key parts of this industry has disappeared. We have already seen more than £1.2 billion in assets shift to the EU. How could any responsible Government put the UK economy in this position?

Of course we keep domestic financial services, but our global role depends on our ability to be the overwhelmingly major player in the euro-denominated financial markets. The US has been repatriating dollar activity to New York; China has no intention of outsourcing any significant portion of its financial services; and India is equally committed to growing its own capacity. We are entering a period of regional blocs and rivalries. We are Europe’s hub or no one’s hub.

This is now entirely in the EU’s hands. It has the luxury of building capacity in the 27 at its own pace and then, like the python, gradually squeezing to require a shift out of the UK. In asset management, where, frankly, the Government always thought the sector would just “brass plate” in the EU, the industry has been adding jobs in the 27 at a pace unimaginable before Brexit. Now the EU is consulting on tightening its rules on outsourcing to push the trend further. In commercial insurance, the Herculean task of transferring contracts from the UK to the EU is close to complete, and Lloyds of London is now Lloyds of London and Brussels. Derivatives clearing, a global, trillion-dollar industry which underpins London’s global role and keeps a huge range of related activities in the UK, has been given temporary equivalence by the EU for 18 months with guidance to EU companies to use that time to shift their business to the 27. Even growth in fintech depends on an agreement on data exchange, which is not in this deal. An MoU by March will set a framework for regulatory co-operation—if we promise to be good.

We face a slow erosion, only because the EU is happy for it to be a slow erosion, but the pace and the proportion will be at the EU’s choice. That is the effect of this very botched deal.