Oral Answers to Questions
David Davis Excerpts(4 years, 12 months ago)
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Nic Dakin (Scunthorpe) (Lab)
Mr David Davis (Haltemprice and Howden) (Con)
Dr Matthew Offord (Hendon) (Con)
Jesse Norman
I am grateful for the question. Of course any injury to individuals from any act of Government or their agencies is to be deeply regretted. I recognise that, and if it has happened here, it is appropriate for the House to feel that way.
I have no powers to direct Sir Amyas Morse. I understand that he is taking evidence from external sources, including the loan charge all-party parliamentary group and the Loan Charge Action Group, which acts as its secretariat. I have met the APPG and the secretariat separately. So the matter is being fully addressed. The details of settlement have been set out on gov.uk.
Mr David Davis
On the issue that my hon. Friend the Member for Wellingborough (Mr Bone) raised with the Minister, the hard fact is that seven people facing challenge or investigation for the loan charge have taken their own lives. He can attribute cause as he wishes. The fact is also that the distress has been caused by the historical incompetence of HMRC and the subsequent willingness of Ministers to use retrospective taxation. Are the Government going to give up on the premise of using retrospective taxation, or does it fall to the House to pass laws that will stop them doing so in future?
Jesse Norman
The legislation is not retrospective. [Hon. Members: “It is.”] There are defined circumstances in which HMRC and the Government may seek to use retrospective taxation, and they do so with extreme care and attention. All that I am doing is referring my right hon. Friend to the facts as reported to the IOPC. As he will be aware, these are immensely difficult cases in which many circumstances and factors may be in play.
Oral Answers to Questions
David Davis Excerpts(5 years, 2 months ago)
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Jesse Norman
I can only admire the ingenuity of a man who can crowbar a question about the Ministry of Justice, unrelated to the loan charge, into this issue. Let me point out to the hon. Gentleman that regardless of what may be the case on that, HMRC is taking tens of billions of pounds, relating to avoidance and evasion matters, that are due. He should be very grateful and delighted about that.
Mr David Davis (Haltemprice and Howden) (Con)
The loan charge all-party group claims evidence for four suicides relating to the loan charge and HMRC has referred itself with respect to one. When I asked a parliamentary written question on the assessment the Treasury had made of the impact of the loan charge on the mental health of the people subject to pursuit, the answer was, to put it mildly, less than satisfactory. Will the Minister now tell us what effect the Treasury believes its policy has had on the mental health of all the people subject to pursuit in both the public and private sectors?
Jesse Norman
May I put on record my surprise that a former chairman of the Public Accounts Committee, with its concern for the public finances, should take that view? Some people may have been very adversely affected in mental health terms and we must protect them at all times using all proper measures. HMRC is attempting to do that. However, there is a much larger number of people who are simply seeking to avoid paying tax due.
Equitable Life
David Davis Excerpts(5 years, 7 months ago)
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Mr David Davis (Haltemprice and Howden) (Con)
I start by congratulating my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Member for Leeds North East (Fabian Hamilton). I hope they will take it in the right way when I say that their continued presence here after a decade gives me an overwhelming sense of déjà vu. Having spent a couple of years’ penance on the Front Bench, I come back to find that, despite their sterling efforts, the issue is still before us.
The Equitable Life scandal is one of the greatest failures, perhaps the greatest failure, of public oversight and regulation in modern times, so it was the right decision to act in 2010. But, sadly, to act only partially was a failure of moral leadership, as my right hon. Friend the Member for New Forest West (Sir Desmond Swayne) intimated.
The ombudsman’s report in 2008 was unambiguous, as the hon. Member for Leeds North East said, in calling for all those affected by injustice and maladministration from 1990 onwards to receive full compensation. The chairman of Equitable Life himself said that the report was inarguable. The report made no distinction between post-1992 and pre-1992 investors, and nor did anyone else—not the victims, not Equitable Life, not the ombudsman and not the Public Administration Committee. The Government’s rationale was that people who invested before 1992 were not affected by the scandal. Well, I am afraid that I completely disagree. These were long-term investments that were affected by ongoing and long-running maladministration. They were affected by the continuing failings of both Equitable Life and the regulators. Moreover, as we have heard, nearly all the pre-1992 cases involved some of the oldest and most vulnerable victims—they were also probably the poorest—who have so far received only a paltry sum of money. If the state fails to regulate properly, it inevitably forces that cost on to the consumer, and it is incumbent on the Government to make that right—and make it right in full.
The ombudsman was clear that there were fundamental failings by the then Department of Trade and Industry, the Government Actuary’s Department and the Financial Services Authority. The truth is that they knew, for most of the time, that this was a fraudulent Ponzi scheme. My hon. Friend the Member for Harrow East has described it as such and we should understand that Ponzi schemes are frauds—it is straightforward and simple. The Government failed to ensure that accurate returns were in the public domain; they failed to take ample opportunities to step in; and they failed to use their full range of powers. So, frankly, it seems to me that the Treasury plucked a cut-off date from thin air—there is no other way of describing it.
The ombudsman called on the Government to compensate the victims fully: to put them in the position they would have been in if the scandal had not occurred. That is the test: where would they have been if this scandal had not occurred? Leaving aside the pre’92 victims, that is a far cry from the 22p in the pound that has, in effect, been paid to many of those whom we have chosen to compensate. As has been said, this ultimately comes down to an issue of public trust. These victims were not wealthy investors. Typically, in my constituency at least, they were retired factory workers, teachers, nurses and small businessmen, who believed they were setting themselves up for at least a tolerable and reasonable retirement—I was tempted to say a comfortable one. That is a perfectly honourable, reasonable and laudable ambition for all our citizens.
As my hon. Friend made clear, the Conservative party promised in our 2010 manifesto to compensate the victims—not partially compensate them or compensate some, but compensate them. Like him, I was a signatory to that—indeed, I was heavily involved in getting it to happen. So I feel personally committed to it, too. It was right there in black and white, and it is there with my signature on it, just like everybody else’s. A failure to right this wrong will only serve to further undermine the public’s trust in politics and financial institutions
The Government say, or said then, that this comes down to an issue of “affordability”, but affordability is always a decision of priority: what comes first? The Government did not say that they did not have any money—they said they did not have enough money. What is more important than this: keeping our word, supporting the poor, upholding an institution that is important to people in the future, as well as these victims? All those things make this issue incredibly important. So in my view the affordability argument was flawed in the first place, but that was the position. Now, even that falls down, because we are supposedly, as the Prime Minister tells us, at the end of the era of austerity—good. That should be good for every citizen, but it should be good first and foremost for those who have done the right thing, for those who have looked after themselves and for those who reasonably could have expected the Government to protect them.
Tom Tugendhat (Tonbridge and Malling) (Con)
Will my right hon. Friend give way?
European Union (Withdrawal) Act
David Davis Excerpts(5 years, 9 months ago)
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John McDonnell
I recognise the valid intent of that intervention, and if the hon. Gentleman will stay the course with me a bit longer, I might be able to respond to it.
Mr David Davis (Haltemprice and Howden) (Con)
I, too, welcome the right hon. Gentleman’s approach and the tone and tenor of his opening remarks. I hope that during his speech—perhaps not immediately—he will lay out his criteria for acceptance of whatever the outcome should be, not in terms of his rather artificial six tests, but real criteria in the national interest.
John McDonnell
I believe that under a comprehensive customs union agreement, it is so much more unlikely that there would be any need for that fall-back position, and we would be able to offer permanency in an agreement rather than something that is a defective insurance policy.
Others may agree with the Chancellor on his initial assessment, and, in that case, I cannot see why this arrangement—
John McDonnell
Let me press on.
A variety of commentators have criticised the Prime Minister’s proposals, none more scathing than Mervyn King, the former Governor of the Bank of England. Leaving aside his description of the Government’s handling of this issue as
“incompetence of a high order”,
overall he says:
“It simply beggars belief that a government could be hell-bent on a deal that hands over £39 billion, while giving the EU both the right to impose laws on the U.K. indefinitely and a veto on ending this state of fiefdom.”
Many will share the view expressed by Nicole Sykes, the CBI’s head of EU negotiations, which were revealed in an email where she said that there is
“no need to give credit to negotiators I think, because it’s not a good deal.”
Let me move on to my third point, which is Labour’s alternative. I believe that the majority of hon. Members in this House agree that the Prime Minister’s deal is not a good deal. So over the next few days, and possibly—as was hinted at this morning—for even longer, Members will be searching for a way forward. I believe that Labour’s proposals for a new approach to our European relationship offer that way forward. Our European partners will have seen that the Prime Minister’s deal that they reluctantly endorsed has not proved to secure the support it requires in this House or in the country. I believe that they will see the need, now, for a constructive renegotiation if both their and our own economic interests are to be protected in the long term. Indeed, that is what has happened in the past.
Labour’s new deal will secure the economic interests both of ourselves and our European partners. It rests on three posts. Labour would prioritise a permanent and comprehensive customs union—yes, with a British say in future trade deals. We would deliver a strong, collaborative relationship with the single market—and yes, we would guarantee that the UK does not fall behind in rights for workers, consumers and the environment. Labour has always been clear: we respect the referendum result, but we have always said that we want a Brexit that puts jobs and the economy first—and that is exactly what Labour’s approach will do.
Stewart Hosie
This is actually the problem with this debate. There has been a series of almost universally identical assessments from dozens of different organisations, yet some people—I want to be careful about the tenor of this—have ignored all expert opinion. There has been the gut instinct reaction, “That’s what we’re going to deliver and”—by sheer force of will—“things will be better.”
Stewart Hosie
Hold on a moment.
I think it is important—this is why I have laid it out in this way today—to demonstrate that, from the start of the exercise, pre-referendum, between the referendum and the withdrawal agreement and since the withdrawal agreement, expert opinion tells us one thing. The hon. Lady is perfectly at liberty to disagree with that. She might come back in five, 10, 15 or 20 years and say, “I told you so. It wasn’t that bad.” But if we go in blindly to something as substantive and perhaps irrevocable as this and get it wrong, the public will never forgive us.
Mr Davis
The hon. Gentleman, quite rightly, makes the point that a number of expert economic opinions all say much the same thing, but of course that is exactly the same as was the case before the referendum. [Interruption.] Members may not like the facts, but I will repeat the facts to them. Exactly the same was true before the referendum. The Government’s forecast was in the middle of those expert opinions and the outcome was approximately £100 billion out in the first two years after the referendum. So there is a reason to say that the experts may be all talking within a hall of mirrors.
Stewart Hosie
I do not doubt that some of the assessments given for what might have happened to date, before we leave, were wrong. I was very clear from the outset of the referendum that nothing would happen. My personal view was that nothing would happen in the first couple of years. Indeed, even after we leave I do not think the impact will be immediate. But when we look at big foreign direct investment decisions on £1 billion investments to access a market of 500 million or access a market of 70 million, I suspect at that point we will begin to see some very substantial and negative consequences for the UK economy.
Mr David Davis (Haltemprice and Howden) (Con)
Before I attempt to pick up on the shadow Chancellor’s final views on where we are going, rather than on where we are, I draw the House’s attention to a wider issue, which I think goes to a quite important set of facts that the hon. Member for Dundee East (Stewart Hosie) was talking about in terms of Scotland’s export arrangements. When economic historians look back on this time in 100 years’ time, I suspect that they will view Brexit as small by comparison with what has happened with the entire global trade. In the last third of the century, we have seen a huge transformation in the wealth of the world off the back of free trade. About a quarter of the world’s population, or well over 1 billion people, have been raised out of absolute poverty—$2 a day or thereabouts—by free trade. It has been a magnificent story over about one third of a century.
In that time, this has had an impact on us, too. We have gone from having 60% of our trade with the European Union and 40% with the rest of the world 20 years ago to nearly the other way around—in a couple of years, 60% will be with the rest of the world and 40% will be with the European Union. I am loth to quote forecasts, given the bad name that they are being given at the minute, but the projection—not a forecast—is that that will continue.
To pick up on the point made by the hon. Member for Dundee East, if we take the top three markets for British goods, or UK goods, in the rest of the world versus Europe, the top European ones of Germany, France and the Netherlands are dwarfed by our sales to America, China or Australia—our top three in the rest of the world. I take his point that we have to look very carefully, as we did when I was in government, at the regional balance of some of these exports, but the aggregate picture is very clear. Our trading future is more in the rest of the world than it is in Europe. This has huge implications—massively underestimated by Treasury and Bank of England forecasts over and again—for the need to keep our freedom to do trade deals to maximise our ability to exploit that.
I am not going to spend very long on the actual proposal that the Government have put in front of us, because it seems to me very clear that it will not survive the end of this debate. Very quickly, the Attorney General’s advice tells us that the backstop would endure indefinitely and that it would tie us to the customs union with no escape. That has massive implications for what I just said. The deal would still leave us, whatever the Chancellor says, subject to the rule of the European Court of Justice, albeit by a back-door and concealed route. It would see Northern Ireland carved out of the United Kingdom and tied to the European Union single market and the customs union, and it gives away £39 billion in exchange for the vaguest of political promises on a future deal. Because of all that and because we would be locked in at the discretion of the European Union, it puts us in a formidably bad negotiating position for the future. In my view, other than the constitutional issues, that is the most serious practical aspect of what is proposed. I do not believe that it will survive, which means that the shadow Chancellor’s question, “What are the future options?” is the central question of the debate.
Peter Grant (Glenrothes) (SNP)
I am grateful to the former Secretary of State for giving way. I note his reluctance to believe in forecasts, but he has not always been reluctant to forecast. In fact, on 25 May 2016, a month before the referendum, he said:
“The first calling point of the UK’s negotiator immediately after Brexit will not be Brussels, it will be Berlin, to strike a deal”.
If my memory serves me right, he became that “UK’s negotiator immediately after Brexit”. Can he tell us how the striking of the deal in Berlin went and when will we see it? Is that what he has in his hand now, or has he lost it?
Mr Davis
People have to read more than one line of a speech. Perhaps the hon. Gentleman’s iPad is too small to carry more than one sentence. I also said that the critical part of the negotiation would not be the first two years, but the last three months, when France and Germany would determine the outcome. If the hon. Gentleman wants to quote me again, he should get it right next time.
Richard Graham
May I make one small point? My right hon. Friend has focused on the backstop on the Northern Irish border, and he has quoted the Attorney General as saying that we could be in that indefinitely, but surely the “if” is if we decide to go into the backstop in the first place. The other option is to extend the transition. Does he not agree?
Mr Davis
That is what is laid out in the proposal, but the transition will then come to an end, and at the end of that, we will still have to make a decision on where we are going, backstop or no. I am afraid that we are always in, and the point is that it is at the behest of the European Union, not at our behest. I have nothing against the European Union, but it is the negotiating partner that may gain an advantage from delay.
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
May I reassure my right hon. Friend on that point? It is clear from article 3 of the protocol that it is not necessarily a right for us to have that extended transition. We can only ask for it, and that is a different thing.
Mr Davis
Yes, that is also true, but the general point is that the overall timetable is not in our control; it is in the other side’s control. As we have seen throughout this entire negotiation, the moment we gave away sequencing at the beginning, we gave an advantage to the other side. My right hon. Friend the Member for Clwyd West (Mr Jones), the former Minister of State, is nodding: he remembers it.
There are essentially three emblematic conclusions to this. The first is the World Trade Organisation, which we have talked about already—I doubt whether it will be a deliberate conclusion, but it is a possible one—the second is Norway, which a number of Members on both sides of the House have suggested might be the best outcome, and the third is Canada plus, plus, plus. There are compromises between them; there are mixtures of them; but those three essentially capture the possible outcomes.
Let me start with the issue on which I disagree with pretty much everyone who has spoken so far: the World Trade Organisation deal, the so-called no deal. The Chancellor called it a strict no deal, because he knows full well all the preparations that have been made in the Government to create a basic no deal, or basic negotiated outcome. There is a whole stratum, a whole spectrum, of possible types of no deal. Some of them deal with the issues that my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston) raised earlier—aviation, data and so on. If this deal goes down, as I think it will in a few days, there will be a scramble in London and Brussels to start putting those one-on-one, unilateral negotiations together. So there is a range of possibilities.
Helen Goodman
I am slightly puzzled why the right hon. Gentleman is so critical of the backstop arrangement, given that he himself signed off the original draft in December last year.
Ms Dorries
Aviation and the WTO were mentioned earlier by my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston). The EU itself is looking for a deal on aviation, as we would be, so there is actually no difference. The EU still does not have a deal on aviation.
Jim Shannon (Strangford) (DUP)
It was said earlier that all the regions in the United Kingdom would support the backstop. Members of the Democratic Unionist party in the House do not support the withdrawal agreement. Does the right hon. Gentleman recognise—I suspect that he does—that Unionists feel alienated by proposals that will weaken our position in the United Kingdom of Great Britain and Northern Ireland, because the EU will have the final say on what happens in relation to the single market and the customs union over Northern Ireland?
Mr Davis
Let me reinforce the point that I made to the hon. Member for Bishop Auckland (Helen Goodman): I told the Prime Minister that last December, as everyone now knows.
I do not take a utopian or a dystopian view of the WTO option. There are Conservative Members who think that it will be the best option in the long run, because it is the freest in terms of outcomes, and there are those who fear it as a complete disaster. I think that it is neither. There has been an enormous amount of black propaganda about the outcome of the WTO proposal. A month or two ago, we heard that the supplies of insulin would dry up. No, they will not. We talked to pharmaceutical companies and to the NHS, and they did their checks. No drugs will dry up, full stop. My hon. Friend the Member for Mid Bedfordshire (Ms Dorries) mentioned aviation. We were told that planes would be grounded, but a European Commission briefing document showed in January 2018 that there would be EU-wide contingency measures ensuring no stoppage of aviation.
Antoinette Sandbach
I should be grateful if my right hon. Friend looked at the evidence that pharmaceutical companies have given to the Business, Energy and Industrial Strategy Committee about the catastrophic results of a no-deal Brexit. I recall him saying that we would not need an implementation period, because we would have had our deal by now. I am afraid that it is not as easy or as simple as he appears to wish to outline.
Mr Speaker
Order. It is in order for Members to intervene, and it is in the nature and tradition of parliamentary debate in this place. However, I hope that I can be forgiven for making the point that if Members intervene and are not subsequently called to speak, they will not complain—brackets: what are those pigs I see flying in front of my very eyes?
Mr Davis
What a pity, Mr Speaker. I enjoy interventions, as you well know.
My hon. Friend the Member for Eddisbury (Antoinette Sandbach) has misquoted me from somewhere. It was I who negotiated the implementation period element, precisely because it is not without hiccups. It is not without issues. There will be practical issues in the first year of a WTO outcome, but that does not overwhelm the big advantages—the massive advantages—of having the freedom to negotiate our trade deals in the future.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Will the right hon. Gentleman give way?
Mr Davis
I am afraid not, on this occasion. I hope that the right hon. Gentleman will forgive me. I have just almost been given instructions.
Let me now say a little about delays at Calais. The first thing to say is that the French do not intend them to happen. I know that, in our chauvinist way, we expect the French to misbehave, but that is not their intention. The prefect of the Calais region, the representative of Calais and the head of French customs have all said in terms that they will do everything in their power—through lower inspection rates, light-touch phytosanitary inspections and the rest—to ensure that the trade between Calais and Dover will work. If there is a hiccup—we have had them before, with driver strikes and so on—we shall be able to divert 20% to 40% of the trade to other ports. That is a good example of the wild assertions that are simply not right.
I am very sorry that the Chancellor is not here, because I wanted him to hear what I had to say about the projections to which the hon. Member for Dundee East referred and on which I think he relied rather too much. It was not “The Rees-Mogg Times”, or some other organisation on one side of the debate, that criticised the Bank of England. It was a Nobel prizewinner, Paul Krugman—hardly a Brexiteer—who castigated the Bank, as did Andrew Sentance, a former member of the Monetary Policy Committee, who, again, is not a Brexiteer. Those were simply disgraceful polemical projections. They were not forecasts in any way, and I think that the Bank will come to regret them, if it has not done so already. So that is the practical element.
There is another issue to bear in mind. The WTO option is a walk-away; that is the problem—it is a walk-away. It is an outcome that we do not want, but we need it to have a proper negotiation; that is a hard fact that we have to face. We all think that we will suffer most from a WTO outcome, but that is simply not the case. There is an asymmetric arrangement here. We have a floating pound, to cite the German chief economist of Deutsche Bank, and the movement of the pound is what has protected us so far in the past two years, and it will protect us again. We have unilateral capability that nobody else in Europe will have: the ability to change our taxes and regulations to make sure we get the FDI—foreign direct investment—that the hon. Member for Dundee East talked about.
Finally, of course, we have the upside of the other free trade agreements, and that is another reason why I am sorry that the Chancellor is not present, because one of the big differences between him and me is that he does not believe free trade agreements deliver a large economic bang for their buck. The past 30 years of world history, however, show that there are billions of people in the world who might just take a different view on that.
The second option I want to talk to briefly is the Norway option. I looked at that option very carefully; indeed, I got castigated from my own side for paying it too much attention, but I thought that it was very important to ensure every single possible option was explored well, and I was approached by, and talked at great length to, my hon. Friend the Member for Grantham and Stamford (Nick Boles).
Norway plus appears to its protagonists to have three virtues. First, they say that it is the easiest option to negotiate; it involves the smallest movement and therefore is the simplest negotiation. Secondly, they say it meets the conditions of the referendum. Thirdly, they say it is the softest of soft Brexits. All those are possibly good arguments, except that they are not true. The negotiation would not be simple; we cannot simply stay in the EEA, as that does not work. Jean-Claude Piris, ex-head of the EU legal service, said in terms that we will have to renegotiate every single clause of the EEA arrangement. It will require unanimity from 30 different members, and they will exact a price. One of the advantages of Norway, we would think, is that we could control our own fisheries policy, but would we get that with a vote from Denmark, from France and from Spain? No, we would not. That is one of the problems: the negotiation hurdles are very big. It is reported that Michel Barnier said this was a possible outcome, but only in conjunction with customs union membership. With the two together, we are locked in; we are basically in a worse position than the Government’s proposal. We are basically locked into the single market—no say and no control, but in every other respect, including the free movement of people and paying money, we will be locked in. Norway does not find it satisfactory politically, and, frankly, a country like ours certainly should not. So that does not work. Finally, it is said that this option delivers on the result of the referendum. No, it does not. Free movement, money, independent trade policy, jurisdiction of the supranational courts, rule taker—on all those criteria, we fail under Norway.
So what is left? The last option is the free trade agreement. I have long thought this was the best option. This is the one that has been called Canada plus, plus, plus and super-Canada and a variety of other names, and somewhere buried in the middle of my old Department of DExEU there is a pile of papers laying out how this can be done in detail, including some legal text. The concept is simple, and that is important in this context, because we will have very limited time in the last few months to negotiate this. I made the point a couple of years ago when making this argument that these are the three months that matter: the EU always takes the negotiation down to the wire—to the last day, the last hour, the last minute, the last second, and sometimes it stops the clock to allow the negotiations to conclude. And that is what is going to happen here; I suspect we are going to go deep into time on this.
Why was this option attractive? It was attractive because we could build it from precedents. Canada is an EU-negotiated precedent, and we could add to it—this is the plus, plus, plus bit—all the bits that are not good about the Canada option. There is no decent mutual recognition agreement; we can lift that out of South Korea or the Australian deal. There are no decent phytosanitary arrangements; we can lift that out of New Zealand. So we can go back to the EU and say, “Here we have a proposal constructed entirely of your own precedents. It can’t undermine the single market, because you negotiated it. It can’t undermine the four principles, because you negotiated it.” That is the attraction of the Canada plus, plus, plus option—it is based on that template. It is all based on precedents previously negotiated by the Commission. So it is perfectly possible for us to create a draft legal text on the basis of where we are now and put that back to the EU and say, “The £39 billion rides on this. You have to agree the substantive elements before we sign off and then you have to agree the detailed elements by the end of 2019.” There is plenty of time to do that on the basis of existing boilerplate text. That is what we should be doing. We should stop grovelling to Europe and start grasping our future.
Leaving the EU: Economic Analysis
David Davis Excerpts(5 years, 10 months ago)
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Mel Stride
I echo your congratulations, Mr Speaker, to the right hon. Gentleman on his very special day. In the case of the political declaration, the right hon. Gentleman will know that it does not give a specific outcome because that is to be negotiated as we go forward, as was always going to be the case. However, while the analysis that we are presenting today is anchored on the Chequers arrangements and the July White Paper, it of course provides a sensitivity analysis around that to reflect the fact that there is a spectrum of potential outcomes.
Mr David Davis (Haltemprice and Howden) (Con)
The Treasury, the OBR and the Bank of England between them produce numerous forecasts every year. When was the last time that any of them got one right?
Mel Stride
I suspect that in the history of highly detailed, complicated economic forecasts with myriad variables, there is probably not one in the entire history of the planet that has been entirely right in every respect. However, that is not an argument that my right hon. Friend can deploy not to go out and do an honest, sensible appraisal of what the likely outcomes are going to mean, both fiscally and in terms of GDP, as we go forward.
Taxation (Cross-border Trade) Bill
David Davis ExcerptsMonday 16th July 2018
(6 years, 2 months ago)
Commons ChamberRead Full debate Taxation (Cross-border Trade) Act 2018 View all Taxation (Cross-border Trade) Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 16 July 2018 - (16 Jul 2018)
Madam Deputy Speaker (Dame Eleanor Laing)
Order. It will be obvious to the House that a great many people want to speak. We have three hours of debate left, but we cannot continue with speeches of the length that we have had so far, although there is nothing wrong with what any hon. Members have done. We will therefore start with a time limit of 12 minutes.
Mr David Davis (Haltemprice and Howden) (Con)
For the convenience of members of the Gallery, I should start by saying that this is not a resignation statement—that was last week. This week is a return to my normal business, as an ordinary Back Bencher carrying out the scrutiny of business. I thought that it would be rather mundane until I walked into what appears to be this rhetorical firefight that we have had so far in the debate.
Before I come back to that, the Taxation (Cross-border Trade) Bill and its partner, the Trade Bill coming tomorrow, are vital pieces of legislation. In the newspapers at the weekend, I read that some people were so cross with the White Paper that they were proposing to vote against this. Well, I do not think that they can be much more cross than I am with the White Paper, but I urge them not to vote against it. These are vital pieces of legislation and they are necessary, whether we have the Government’s White Paper policy, my old White Paper policy, the FTA that some have talked about or indeed even the World Trade Organisation outcome. In every single case, we need these Bills and therefore I will be supporting them.
I want to speak directly to the new clause proposed by my right hon. Friend the Member for Broxtowe (Anna Soubry). I will do so without impugning anybody’s motives or questioning whether somebody is acting in the national interest or not and I will not be firing off any gibes. I am not quite sure who she was referring to when she talked about having an excessive attachment to public office, but I do not think it was me. The simple truth is that this is a vitally important argument. It is central to the whole question of the economic aspect of Brexit—Brexit is not just economic; it is democratic as well, but it is central to that—and I will put to one side in my arguments the fact that being out of the customs union was in the Conservative party’s manifesto and therefore, in theory at least, one we are committed to.
The arguments go right to the heart of the principal issues. The proponents of the new clauses have a clear belief in the national economic interest, but they clearly believe that being outside the customs union will lead to a precipitate loss of trade and that the loss of the ability to make trade deals matters less than that potential loss of trade. That is the core of the argument. It is pretty straightforward in that respect.
Let us look at some facts. Back in 1999, the United Kingdom—we are talking about the customs union, so this is about goods—was exporting 60% of its goods to the European Union and 40% to the rest of the world. Since then, that has gone down by approximately 1% per annum, so it is now about 45% to the European Union and the rest to the rest of the world. Pretty much by the end of this decade, it is likely to be 60:40 in favour of the rest of the world, so because it takes away the right to our own commercial policy, the prospect of staying inside the customs union favours the shrinking minority of our trade over the expanding, fast-growing majority of that trade. That is the very simple, fundamental, initial point that we should take on board. It also presumes that being outside the customs union will significantly damage trade because there will be friction at the border.
Mr Kenneth Clarke
One of the most remarkable features of the last 20 years has been the globalised economy and the very rapid growth and emergence of major new markets, so inevitably the balance of our trade was going to grow with them and decline with the European Union. We want to remain as attractive to investors from the new economies as to the old. It does us no advantage in our dealings with China, Brazil and India to damage the value of our access to the European market. Outside events have altered this balance; it is not a failing of our EU arrangements.
Mr Davis
My right hon. and learned Friend was being uncharacteristically inattentive, because that is exactly what I said: because of the growth in world trade, that is what is going on. He is exactly right that we should take a great interest in the fast growth in world trade because we are best placed, probably of most countries in the world, to take the most advantage of that. Also within his comment was the presumption, which I was about to address, that friction in our trade with the European Union—low friction, but friction—will cause enormous damage.
John Redwood
Will my right hon. Friend confirm that many successful manufacturing businesses in Britain today have these just-in-time supply chains bringing in large quantities of raw material and component from outside the EU through a system of authorised economic operators, electronic manifests and the settlement of any bills not at the port? There are not people sitting in boxes in the port taking the money.
Mr Davis
My right hon. Friend is exactly right. It is an issue that I will return to in a second, but before I do I want to make a point about friction. The presumption in all this is that we have a magical, frictionless system at the moment. Actually, we will have seen on our television screens that that is not true. This entire House will have watched Operation Stack in progress over various years. Operation Stack is what we do when one of the ports gets locked up for one reason or another—a strike in France or whatever. It has been operated 74 times in 20 years. In 2015, it took up 31 days of friction, and our businesses—the just-in-time businesses and the perishable goods businesses—all coped with it, so let us not frighten ourselves in doing this negotiation. Nobody wants it and nobody likes it, but they cope with it. My hon. Friend the Member for Dover (Charlie Elphicke) pointed out that with World Trade Organisation facilitation, we will actually minimise the friction on trade through these ports, as was reinforced by my right hon. Friend the Member for Wokingham (John Redwood).
Secondly, while people understandably focus on some of the pressure points—most particularly Dover, which we heard about a second ago—they forget that there is strong competition between the ports on the North sea and the ports on the channel. Zeebrugge, Antwerp and Rotterdam all want to increase their throughput at the cost of the Calais-Dover crossing. They are already preparing for increases in throughput in their own areas when we are outside the EU and preparing for the increase in work—because there will be some increase in work—but again, as my right hon. Friend said, it will not happen at the border. It will happen before they get there or after they pass through it, so our so-called dependency on French ports will turn out to be illusory.
Thirdly, in support of the arguments that any friction at the border is unacceptable we hear lots of talk about supply chains. We had it from my right hon. Friend the Member for Broxtowe who proposed this new clause. The simple truth is that this ignores the fact, as my hon. Friend the Member for Harwich and North Essex (Sir Bernard Jenkin) pointed out, that lots of international supply chain operations operate across borders where there are customs, tariff and currency arrangements. I happen to know one of them very well, because I operated a business across just such a border myself—between Canada and the USA. [Hon. Members: “Thirty years ago.”] I went back last year.
Mr Davis
No, I will not give way.
I went back last year to look at it again, and yes it was 15-year-old technology. It could be better now; it could be faster. What happens in Detroit, the centre of the American motor industry? In Ontario, across a very difficult and constrained border, tougher than Dover, there is an entire industry supplying parts, components and engines for that motor car industry. It operates across a border that has tariffs on it, too.
Kevin Hollinrake (Thirsk and Malton) (Con)
Will my right hon. Friend give way?
Mr Davis
No, if my right hon. Friend will forgive me.
The issues that remain at the border will depend on the customs policy we decide on, which very clearly will alter how that border operates. It will include rules of origin, as has already been pointed out; tariff-paid status, if we are in the future customs arrangement, which is more difficult than rules of origin; and regulatory compliance. None requires action at the border. All can be dealt with by electronic pre-notification or pre or post-audit at either origin or destination.
Without doubt, the most difficult issue in the negotiations as they relate to borders has been Northern Ireland. There is no way, however, that a UK Government are ever going to install a hard border in Northern Ireland—that is as plain as a pikestaff. No UK Government would risk the peace process, which has been going on for decades. Neither would the Irish Government. I cannot imagine in a century that an Irish Government would do that either. What many people forget, however, are that there is already a border there—there is a currency border, a VAT border, an excise border, and there are other tax borders. They are operated north and south of the border by the UK and the Irish tax and customs collection organisations, operating together using intelligence- led intervention.
Much is made of the 300 border crossings. One of the outstanding issues with being outside the customs union is, as somebody said, the issue of rules of origin, but in Northern Ireland, while there may be 300 border crossings, there are only six ports. Rest-of-world imports can actually be surveilled and controlled very straightforwardly. This issue, which has become much more difficult since it was politicised—it was actually working quite well in the negotiations before it was politicised—is eminently soluble, by technical means and co-operation between the two states.
Joanna Cherry (Edinburgh South West) (SNP)
If what the right hon. Gentleman says about the border is so, why was he part of a Government that agreed to the backstop last December?
Mr Davis
They did not agree to the backstop; they agreed to the joint report that talked about full alignment. [Interruption.] Does the hon. and learned Lady want to listen to the answer? She will remember me standing at the Dispatch Box saying that we interpreted full alignment as outcome alignment and relating directly to the issues in the north-south strands—principally, agriculture, transport, and environment as it applies to the single electricity market. Those are the primary strands, and they are eminently soluble, by arrangements that already exist in Northern Ireland—for example, the carve-out on environmental legislation. It is a very straightforward issue, but it has been blown up into something else by the other side of the negotiations.
The risk and costs of having a customs border are less than is being claimed, and what we would give up to join a customs union is much more than is imagined. The EU is a slow and not very effective negotiator of free trade agreements. We keep hearing about its size and negotiating power, but the fact that it represents 28 different countries means it comes up with sub-optimal outcomes all the time, and actually we are the country that does least well out of the EU’s free trade agreements. They almost never involve services, for example, which are our primary trade. The EU is a slow and not very effective negotiator of trade deals.
Yvette Cooper
That is really flipped logic. The hon. Gentleman is effectively saying, “They do not have to do the checks because they can all just pay the tariffs.” Why on earth are we going through this whole process in the first place if all we are going to get is a tiny reduction in tariffs that no one will take advantage of in order to get any benefits?
Mr David Davis
The logic is actually very simple. Empirical evidence shows that in international trade, companies seek to claim their rebates and do what is necessary to avoid tariffs when a tariff is lower than 3%, not when it is above. What that tells us is that the cost of rules of origin administration is less than 3%. Companies are rational operators. The numbers that the right hon. Lady cited from a supposed Government study were wrong.
Yvette Cooper
I would caution the right hon. Gentleman against dismissing the rules of origin checks. There is a huge worry about the burden that they will impose on small businesses in particular. There is a big difference between large and small businesses in this regard. It might be worth large businesses claiming the money back because they can set up systems to do so, but for small businesses the process can be devastating. I am thinking particularly of the huge number of small businesses that have not yet traded outside the EU and for which rules of origin will be a new burden.
Why on earth would we want to add these additional burdens and checks on businesses that have not faced them before? I find myself in a very strange position. I, as a Labour MP, am arguing far more strongly and passionately against these additional burdens on businesses than those on the hard right of the Conservative party, who ought to be arguing against such burdens.
Ian Murray (Edinburgh South) (Lab)
It is a great privilege to follow the right hon. Member for Witham (Priti Patel). We sit on the Select Committee on Foreign Affairs together and agree on much of its work. However, I am afraid that we agree on nothing when it comes to Brexit, and we have those battles in the Committee.
It is unfortunate that we have been left here this evening with a set of four amendments from the group of Conservative rebels who want to take us off a cliff edge. That is what the amendments are designed to do. We have unconfirmed reports that the Government may accept the amendments. I do not know whether the Financial Secretary to the Treasury will nod to indicate that he will accept them, but if he does, I hope he has a match or a lighter in his pocket, because he would do just as well to set the Chequers agreement alight, given the consequences.
On top of all that, the former Secretary of State for Exiting the European Union, the right hon. Member for Haltemprice and Howden (Mr Davis), must now regret leaving the Government, given that after threatening to resign five times, he finally went through with it by resigning following the Chequers agreement, which is just about to be ripped up by his own Front-Bench team and replaced with a much more hard-line position that will take us off the cliff with a hard Brexit. If he had only stayed on a few more days, he may have been able to see through the proposals that he started.
Ian Murray
I am happy to give way to the right hon. Gentleman, given that I mentioned him.
Ian Murray
I am delighted to hear that he would have resigned regardless, but he must surely have some regret. Perhaps we should be glad that he resigned, given that he stood up in this Chamber, as a former Secretary of State, and tried to persuade the House that Operation Stack and having trucks and lorries queued up at our ports was positive for the country. I have never known a former Secretary of State to look at something like Operation Stack, which would be a tragedy for our economy had it continued for much longer, and turn it into a positive. If that is the kind of argument he is offering to this House and to the country, we should ensure that we vote down most of these amendments.
I find it extraordinary that after going through this process—these debates give me déjà vu—we are still hearing arguments about the customs union and the single market. The Government managed to botch together what is now called the Chequers agreement and now, a week away from this Parliament adjourning for the summer recess, they have completely torn it apart by again pandering, as the right hon. and learned Member for Rushcliffe (Mr Clarke) said, to 30 or 40 people on the hard right of the Conservative party. Those people would be being much more honest if they just stood up and said that they want the cliff-edge hard Brexit, rather than tabling amendments that drive a coach and horses through the agreement that the Government managed to reach.