Brexit: Preparations and Negotiations

Baroness Verma Excerpts

Monday 23rd July 2018 Lords Chamber

[Baroness Verma (Con)]

My Lords, I start by agreeing with most noble Lords who have said that we have a White Paper and need to be constructive about it and help the Prime Minister to get some order back into our Parliament.

I want to speak on the concerns of small and medium-sized businesses and the supply chain with regard to customs issues. The trusted trader scheme is often floated by noble Lords, but we have come to find that those schemes are very difficult to navigate for small businesses. They add cost and administration and often require small businesses to put up huge financial collateral. What will my noble friend the Minister do to ensure that we make the processes easier as a third country, when we leave the EU, for the supply chain and small and medium-sized businesses?

I listened very carefully to the right reverend Prelate the Bishop of Leeds and my noble friend Lord Heseltine. I was going to read the speech that I prepared over the weekend, but I decided to change course because so much has already been said of what I was going to say. I want to come back to something that my noble friend Lord Heseltine said about immigration. I am tired—actually, I am sick to death—of immigration and immigrants becoming the scapegoat for every single problem that any country has. I now feel as I did as a child in the 1960s, growing up with the “rivers of blood” speech, and I am really sick to death. If we have not learned anything, we have a lot more to learn.

I want to say to all noble Lords who think that Brexit will stop immigration and stop people from coming here because they want to have a better life that they really need a real reality check. I say to the noble Lord, Lord Green, that yes, we do talk immigration, but the noble Lord keeps bringing it up as a negative process. Immigrants have been great for wherever they have gone, and it is up to Governments and government policy to make sure that they do it in the interests of their country, through policy, and not blame people who just want to make a better life.

I have been in your Lordships’ House for 12 years, and in all that time I have listened very carefully to debates and I have tried to be very easy on the ear, because, as a Minister and in opposition on the Front Bench, I was bound by collective responsibility. I was absolutely ashamed that, after a collective decision at Chequers, people should come out and give the Prime Minister such a difficult time. The Prime Minister has more than enough to do to try to unite a country that was split almost down the middle by this decision. It is up to all of us—including Ministers who may not agree with our point of view—to come together and give the Prime Minister some space. If we cannot bring something constructive to the table, we should sit at the back, keep our opinions to ourselves and not self-indulge in what I can see only as self-promotion for a new job some time in the future.

I will end by saying that some noble Lords have said that maybe we should be part of the EEA for a short while during our transition, perhaps to work out some of the difficulties we will face, and that may be a useful idea. Maybe it is time we considered these things without dismissing them without any proper debate.

European Union (Withdrawal) Bill

Baroness Verma Excerpts

Report: 6th sitting (Hansard): House of Lords
Tuesday 8th May 2018 Lords Chamber

[Lord Alli]

I could not agree more with my noble friend. He is absolutely right. On 13 December, a similar amendment was moved in the other place, and the Labour Party put a three-line whip on it. I think we are in the right place here. Party policy is very clear on Europe, and a three-line whip on a similar vote justifies this. I agree with my noble friend. It is very clear that we on the Labour Benches are in line with our party policy and that the membership of our party is with us.

But this is bigger than party politics. It is about people’s jobs. It is about the future of our economy. That cannot be left to doing what is politically convenient at the time. These amendments have been drafted to give the other place the opportunity to think again. That is what I believe we should do this evening. We should pass these amendments and give the democratically elected House the opportunity to think again. I beg to move.

[Baroness Verma (Con)]

My Lords, I will also speak to Amendment 112. I have followed this debate closely in your Lordships’ House and the other place. This is the first time that I have spoken in this debate, and to find myself opposing the Government is a decision that I have not taken lightly. But, as other noble Lords have said, this is an argument based not on ideology but on the pragmatic reality of what faces our business community, our employers, our wealth generators, if we do not get the right outcomes. They all need certainty, they all need to plan, they all need to look at their current business models and they all need to look at what disruption they will face. I have spoken to many businesspeople, particularly those in the supply chains—the small and medium-sized businesses that are the backbone of our country. Whether it has been privately or in the many discussion forums that I have attended, the main concern of the business community is the Government’s rigid position on exiting the EU.

We all know that 52% of the voting public voted to leave the European Union. That debate has been had. What nobody voted for was for us to be poorer because we were unable to get our basic building blocks right. Indeed, my honourable friend Mr Stephen Hammond, in a Westminster Hall debate in the other place, recently articulated very eloquently that,

“we need an exit and a deal that allow us to trade freely with our former partners and to sign new free trade agreements, and that provide a level of economic certainty to businesses and economic and security certainty to our citizens”.—[Official Report, Commons, 7/2/18; col. 545WH.]

For the sake of clarity, as a member of the EU we are members of the EEA, along with the other 27 EU partners. A strong message was sent out last week to the other place to look very carefully at the need to remain in the customs union. Our concern is that 80% of our economy is service-led, which is not covered by the customs union, so while hugely important for our goods sector, what about the 4.3 million businesses in the services sector? As 79% of our employment is in services, that is 24 million people contributing to 33% of turnover last year. Issues such as non-tariff barriers will have an enormous impact on business, particularly SMEs and supply chains. As the noble Lord, Lord Alli, said, in 2016 trade in services with the EU had a surplus of £14 billion. Why would we want to put barriers in the way of our vital and successful services sector?

The EEA is not the same as the single market. It excludes, as the noble Lord, Lord Alli, said, the common agricultural policy and the common fisheries policy. It is not under the jurisdiction of the European Court of Justice. What we are asking, through this amendment, is to continue as a member of the EEA. The referendum had one question: whether to leave the EU. Remaining a member of the EEA offers business certainty and will enable us to influence through the many committee networks that exist for non-EU members in the EEA.

Leicestershire, the region of the east Midlands that I call my home, spans industries and sectors in both goods and services, from manufacturing to transport, with our rail, air and freight links transporting goods around the world, to top universities, pharma companies and creative services, to professional and business services and retail, to name a few. The Government’s own impact assessment set out the following Brexit scenarios for the east Midlands: remaining a member of the EEA would mean a 1.5% fall in GDP; a free trade agreement would mean a 5% fall in GDP; a no deal and reverting to WTO rules would result in an 8% fall in GDP.

We have to be pragmatic. In this region, the fallout from the 2008 economic crisis has been incredibly hard on people in the east Midlands. We are a fantastic region, where our confidence is emerging. Austerity has taken its toll, and while we all knew we had to really tighten our belts for the last few years, we must not now embark on a path of uncertainty on which businesses cannot make decisions. I have been in the SME sector and supply chains for 40 years, and my family since the 1950s, and I have taken UK businesses overseas to explore emerging markets on many occasions. I, like others, want the UK to remain at the top of investors’ minds as a place to do business, but the recent rhetoric is not helping. The PM, for whom I have great respect, has said her sense of duty is towards her country and its people. My commitment and my duty to my country is, I believe, just as strong.

For those who believe this House does not have the right to ask the other place to revisit legislation they want Parliament to put through, that is not how I see our role in your Lordships’ House. I have received lots of communications, spoken to lots of people and listened carefully to all sides of the debate. There is support for these amendments in your Lordships’ House and in the other place. There is an opportunity for the democratically elected other place to discuss and debate this properly in the interests of our country.

I genuinely believe that we must send a strong message to our EU partners, and to others with whom we want to pursue FTAs, that we take all our relationships seriously and are not in the habit of turning our backs on our friends old and new, and that we are trusted partners—a nation looking outward, and stronger for our relationship within the EEA. For business, good news is great and bad news is manageable, but it is the uncertainty that persists from the Government that is forcing UK businesses to look as if they are facing a cliff edge.

Brexit: Trade in Goods (EUC Report)

Baroness Verma Excerpts

Tuesday 18th July 2017 Lords Chamber

Moved by

[Baroness Verma]

That this House takes note of the Report from the European Union Committee Brexit: trade in goods (16th Report, Session 2016–17, HL Paper 129).

[Baroness Verma (Con)]

My Lords, I am grateful for the opportunity to debate this report this afternoon. As chair of the EU External Affairs Sub-Committee, I extend my thanks to the members of the committee for their important contribution to the report and take this opportunity to thank the secretariat to the committee, Eva George, Julia Ewert and Lauren Harvey, for their assistance with the inquiry and the preparation of the report. I also thank our specialist adviser, Holger Hestermeyer, for his contribution and insight.

It is usual in such debates for speakers to reflect on the Government’s response to the report in question, so I take this opportunity to express my deep disappointment and genuine concern that no response has yet been provided by the Government, four months after the report was published. While the past few months have certainly been eventful, and I know that my noble friend has not been in her current role for long, there is still no justification for such a long delay. Just as it is the role of Select Committees to scrutinise and hold the Government to account, it is the Government’s responsibility to reflect on and engage with committees on their findings. I look forward to hearing from my noble friend in her response. I know that she will take our concerns about a timely response very seriously, and will press for a timely response to reports of this House’s expert committees.

Goods make up the bulk of the UK’s trade. In 2015, they accounted for about 60% of all UK exports to the EU and almost 77% of our total imports from the EU. Trade in goods between the two is worth almost £357 billion each year, so minimising disruption resulting from Brexit will be crucial to the UK’s prosperity.

We should also keep in mind that the manufacturing and primary commodities sectors are significant employers across the UK, being particularly important to the Midlands, Wales, north-east Yorkshire and the Humber, and the north-west. The goods sector also supports jobs in the services industry—from retailing to maintenance and servicing. The Government must secure a trade arrangement with the EU which recognises this interlinkage and secures suitable terms for both goods and services. In this regard, I commend the findings of the EU Committee’s report Brexit: Trade in Non-financial Services, prepared by the Internal Market Sub-Committee in parallel to our report on goods.

Our inquiry considered six large and economically significant sectors—the pharmaceuticals and chemicals industries, capital goods and machinery, food and beverages, oil and petroleum, automotive, and aerospace and defence—and the potential impact of changes to the conditions under which the sectors trade with the EU.

We began from the starting point that the Government are seeking to agree a free trade agreement with the EU after Brexit, as set out in the Prime Minister’s speech at Lancaster House. If agreed and implemented by May 2019, a free trade agreement could avoid the much talked-of cliff edge of moving to trade under WTO rules. Looking at it initially, trade in goods appears to be quite straightforward as part of the negotiations. Tariffs that would be levied in the absence of a preferential trade arrangement were of concern to all sectors we considered. They would be particularly significant in certain sectors, such as food and beverages. As many businesses are part of complex EU supply chains, there is a risk that tariffs would be levied more than once as parts move between the UK and the EU 27, rendering even relatively low tariffs a significant new cost to firms. But that is the easiest part—tariffs could conceivably be addressed in a very comprehensive free trade agreement between the UK and the EU.

That brings us to one of the major concerns that the manufacturing sector has—that it does not need to be shielded only from new tariff barriers; we have found that non-tariff barriers, such as labelling requirements, rules of origin, sanitary measures and pre-shipment inspections, can pose significant or even greater barriers to trade. Rules of origin, which determine where a product and its components are produced, would apply under WTO rules or a free trade agreement, which could impose significant administrative burdens on companies. Some UK companies, often reliant on EU supply chains, may well be unable to comply with local content requirements. That is a particular concern for the important automotive industry. Can the Minister inform the House what actions the Government plan to take to protect UK-EU trade from the impact of the imposition of rules of origin? Maintaining common or closely aligned regulatory standards is also very important. Could the Minister comment on whether the Government are willing to make a legal commitment to maintain a high level of regulatory alignment with the EU 27 in the longer term, to safeguard our valuable trade relationship?

There is no doubt that the UK has benefited from participation in a number of EU agencies. We considered the European Medicines Agency and the European Aviation Safety Agency—participation highly valued by the pharmaceutical and aviation industries respectively. Could the Minister comment on how the Government intend to engage with those bodies after Brexit?

Exiting the EU’s customs union will also result in the introduction of a customs border between the UK and the EU 27. We were concerned that this would lead to significant administrative costs for businesses and the state. Just last week, the National Audit Office warned that the UK’s new customs declarations service, the CDS, may not be fully functional by the time we leave the EU. This was an issue that we highlighted in the report. I was very concerned to see from the NAO’s report that no changes have yet been made to the scope of the CDS programme in relation to our exit from the EU. Could the Minister comment on the resourcing of HMRC to manage the administration of customs processes between the UK and the EU and progress with CDS?

When we published this report, we were concerned that it would not be possible for the Government to resolve these many complex, thorny and critical issues in time for implementation in May 2019. We noted in March that uncertainty was already having a damaging effect on business confidence. At the start of this month, the manufacturers’ organisation, EEF, which gave evidence to our inquiry, warned that UK businesses would reach a tipping point next year over whether to continue to invest and manufacture in the UK.

That brings me to an essential conclusion of our report, and a common theme of the EU Committee’s many reports on Brexit—namely, the vital importance of putting in place a transitional arrangement. To date, the Government have maintained that agreeing and implementing a new trade arrangement with the EU will be possible within the period of Article 50. It has been said that an implementation period will therefore be needed, but transitional arrangements to bridge the gap between leaving and the implementation of a new trade arrangement will not. In his appearance before the EU Committee last week, the Secretary of State for Exiting the European Union again said that “transition arrangements” was shorthand for an implementation phase. Our concern is that it may not be possible to agree a new trade agreement before we leave, necessitating provisions to bridge the gap between membership of the EU and our new relationship. I invite the Minister to state, for the record, whether the Government are now willing to consider a separate transitional agreement, such as ongoing membership of the customs union or an EEA-type arrangement for the immediate period after Brexit.

Transitional arrangements are an issue for our trade not only with the EU. Through our membership, we also have trade agreements with countries from Switzerland and Norway to South Korea and Egypt which are of considerable value to the UK. It has just been agreed that the EU-Canada free trade agreement will provisionally be applied from 21 September, and negotiations with Japan are coming to a close. It is therefore critical that the Government make every effort to secure the UK’s access to existing preferential arrangements for a transitional period until such time as we can negotiate new bilateral arrangements.

I know that the Minister will say that the Government are already speaking informally to a number of countries, but this debate can hardly be more important or timely, as negotiations begin in earnest to determine our future relationship with significant trade partners. How is the Government’s engagement with businesses across the country going? In response to their concerns, will the Government seriously seek, as a matter of urgency, transitional arrangements to protect our vital trade with the EU 27 and beyond? Finally, can we be reassured that both resources and expertise are sufficiently available to support us all through what we know will be challenging and uncharted waters?

--- Later in debate ---

[Baroness Verma]

My Lords, I take this opportunity to thank all noble Lords for their fantastic contributions and I thank my noble friend the Minister for her response. I would like to pick up two or three points very quickly due to the time constraints.

My noble friend said that this has been a wide-ranging debate. I urge her to read Hansard tomorrow and to draw some conclusions. There were two or three key areas that noble Lords across the House concentrated on, and we hope that the Government will take them very seriously. We as a committee want to be sure that we are assisting the Government in posing the questions that need to be asked.

I understand that my noble friend has been in post for only a month. However, we had the referendum last year, and for a year there has been engagement between Ministers and businesses. I am pretty certain that Ministers and businesses have been saying exactly the same things to each other—that is, businesses have been asking for security and certainty in the transitional arrangements, and the Government have been saying very clearly that they do not want to show their hand for the purposes of the negotiation.

I put on the record my thanks to the members of my committee for their hard work on the report. I hope that the Government look at the recommendations and conclusions, which have been cited across the House today. We want to make sure that, if we are to have a Brexit, it is a successful Brexit.

Motion agreed.