Brexit: Deal or No Deal (European Union Committee Report)

Lord Butler of Brockwell Excerpts

Tuesday 16th January 2018 Lords Chamber

[Lord Butler of Brockwell (CB)]

My Lords, one of the many virtues of committees of your Lordships’ House—I congratulate the European Union committee on this report—is that they examine issues in depth and bring out important points not hitherto recognised. I remember the surprise that I and other members of the Financial Affairs Sub-Committee under the noble Baroness, Lady Falkner, felt during our inquiry last year when we were advised that if the EU failed to reach an agreement with the UK, it had no enforceable means of extracting a divorce payment from us.

In my contribution I want to concentrate on not the merits or prospects of a deal versus no deal but on a procedural point in the Select Committee’s report, which, if I have understood it right, surprised me and seems to me important. It relates to what the Government have described as the implementation period following the UK’s departure from the EU in March 2019, and others have described as the transition period. I had assumed—I think this is common ground among those who have spoken this evening—that whether or not the EU and the UK reach a comprehensive agreement by March 2019, everything will continue as now during the transition period subject to the fact that the UK will have left the EU. In other words, there would be a standstill before any divergence began to take place. Those of us who were sceptical about whether a comprehensive agreement on the future relationship could be reached by March 2019 thought that further negotiations could take place during that transition period. That, again, seems to be widely accepted.

The point that has emerged from my reading of the committee’s report is that whatever we may pass into UK law, Article 50 may not by itself allow our partners to provide us with a standstill period after March 2019. If the House will allow me, I shall quote from paragraphs 131 and 132 of the committee’s report:

“it is not clear whether, in the absence of an agreement on future relations, Article 50 would provide a legal basis for an open-ended ‘standstill period’ … It also seems unlikely that Article 50 could provide a legal basis for the implementation of the agreement on future relations, which the Government has conceded will have a separate legal base in EU law, such as Article 218 … Any or all of these questions could fall to be determined by the CJEU, following references by the European Parliament or by a Member State, before withdrawal takes effect”.

The committee continues:

“We therefore recommend that, as a matter of urgency, the Government should set out its views on transition, including on the bases in EU law for the various elements that make up transition. If possible, the Government should secure agreement on these issues with the EU’s Chief Negotiator”.


The Select Committee goes on to suggest that, unless we can reach a comprehensive agreement on the terms of our future relationship before March 2019, the only reliable basis for a standstill transition period may be by seeking to postpone our departure from the EU. If that is correct, it explains why the Government have asserted that, to leave in March 2019, they will reach a comprehensive agreement on the basis of our future relationship before then, and why they describe the period after March 2019 as an implementation period. However, it is generally accepted that this requires the negotiations to be successfully completed by this autumn to allow time for approval by the UK and European Parliaments. That is widely regarded by commentators, including the Select Committee, as unrealistic. If it is unrealistic, it throws into doubt the repeated assertions by government spokesmen that the UK will leave the EU in March 2019 with a standstill period for implementation thereafter.

Can the Minister therefore address the following question in his reply? Is the Select Committee correct in saying that Article 50 is a doubtful legal basis for a standstill transition period after March 2019 and that, absent a comprehensive agreement on our future relationship, the only secure basis for such a transition period will be to seek a deferral of the UK’s departure from the EU? I noted that the noble Lord, Lord Kerr, was reassuring on the legal point, but it would be good to have the Government’s view.

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[Baroness Falkner of Margravine (LD)]

My Lords, in his absence, perhaps I may also refer to the sterling chairmanship of the noble Lord, Lord Jay, of the EU Select Committee while the noble Lord, Lord Boswell, was indisposed. I am grateful to him for having taken us through this report in the way he did. I should declare that I am married to an EU national and that, like the noble Lord, Lord True, I own a property in Italy. It has also belatedly struck me that I need to welcome the noble Lord, Lord Callanan, to the Dispatch Box. I know that he has been in his role for rather a long time, but this is the first opportunity I have had to interact with him. We had extremely positive interactions while he was a member of the committee, and we miss him. However, he has been nobly replaced by the noble Baroness, Lady Neville-Rolfe, who is in her place behind him, so as a committee we are all secure and well.

From different perspectives, the noble Lord, Lord Hamilton of Epsom, and my noble friend Lord Teverson criticised our evidence-taking sessions for not having spoken to enough people who were cheerleaders for the no deal faction. I know that this will not please the noble Lord, Lord Hamilton, but the remit of the EU Select Committee is to look at the impact of EU legislation on the interests of the United Kingdom, not those of German car makers, Italian prosecco producers or French fishermen; it is domestic. I therefore need to say to him that we did take evidence from people who are cheerleaders for Brexit and have come out very definitively in support of that cause. I cite Mr John Longworth, the co-chairman of the Leave Means Leave campaign, and Dr Ruth Lea, whom I have known for a good 25 years. She is an eminent economist and commentator on the financial services sector. Interestingly, although both are Brexiters, they took different positions. Dr Lea thought it would be disastrous if we had a no deal scenario, whereas Mr Longworth is frequently quoted in the press and made it clear to us that he really does mean that leave means leave, and that, frankly, if it happened tomorrow it would be all the better rather than bothering to negotiate anything with the EU.

In addition, the committee received more than 40 pieces of written evidence. Again for the interest of the noble Lord, Lord Hamilton, we put out a call for written evidence in order that anyone and everyone who wished to write to us was free to do so. Interestingly, not one item of the written evidence we received suggested that we ought to leave without a deal. So the evidence we received was fairly overwhelming.

We held nine oral evidence sessions. If we count the two from the Brexit camp, it means that roughly 20% of the evidence we took was from people who are in that camp. In the debate today, in which any number of noble Lords were able to sign up to speak—every Peer who wishes to be heard will be heard—by my reckoning we have had four people who believe that a no-deal scenario is perfectly fine. We have yet to hear from the noble Baroness, Lady Deech, so I will be generous with my figures, but I anticipate that by the time we finish the debate, we will have heard from 20% of speakers, just as we did in our evidence-taking sessions, who believe that no deal might be okay. However, we tend to go where the evidence takes us, so on the whole we were told that it would be pretty disastrous for the United Kingdom. I therefore tend to disagree with my noble friend Lord Teverson when he says that we did not take evidence from the other side, but perhaps he was not present for that session.

I also have to disagree with the noble Lord, Lord Kerr, who is not in his place, that we are in no danger of a no-deal scenario. I have mentioned that I am married to a German national. The House will be pleased to hear that, so concerned are we, on the basis of the analysis we have seen that a no-deal scenario might develop, two weeks ago my husband became a British citizen because he was not going to rely on the guarantees given on citizens’ rights or anything else. We accept that when the EU says, “Nothing is agreed until everything is agreed”, it means that, but I agree with the noble Lord, Lord Kerr, that the report has been overtaken by events. Of course, the December Council changed the mood music of “Nothing is agreed until everything is agreed”, but, alas, the noble Lord, Lord Kerr, is being rather sanguine when he thinks that citizens’ rights is a done deal, the budget is a done deal and all that. He mentioned today’s Financial Times: he only has to look at today’s Financial Times, or, indeed, the Times, to see that the Irish border question is still very far from agreed and the question of citizens’ rights is being reopened at the behest of the eastern European countries, which now want further rights to be given during the transition period, beyond what was agreed at the December Council or that the British Government have indicated they will give. So there is still a strong possibility that things will not go the way that the United Kingdom want or, indeed at the last moment will break down. The default position that the noble Lord, Lord Wigley, and others have commented on, where events lead us to an inevitable position where things go wrong, still very much exists.

I am sorry that the noble Lord, Lord Kerr, is not in his place, but I will also challenge him on what he referred to as the rash suggestion of the EU Financial Affairs Sub-Committee, which I have the privilege and honour to chair, when it published a report to say that the EU had no legal recourse to oblige the United Kingdom to make continuing payments to the EU after it had stopped being a member. We took evidence for that report from European Union legal advisers as well as people from within the European Union who are lawyers. That finding has never been challenged. Mr Barnier told me, on the delegation led by my noble friend Lord Teverson, that he had read the report. I know that the Chancellor of the Exchequer and the Foreign Secretary have read the report and numerous think tanks in Brussels have told me personally that they agree with our conclusions, CEPS being one of them, a very reputable economic think tank.

[Lord Butler of Brockwell]

I am very grateful to the chairman of my committee for giving way. If I may defend the noble Lord, Lord Kerr, I do not think he was challenging that conclusion of our committee. What he was saying was that, even if there was no enforceable means for the EU to extract a divorce payment, having made an agreement the UK would never walk away from it. That, I think, was the point he was making.

[Baroness Falkner of Margravine]

I am grateful to the noble Lord for saying that. I heard that, yes, and I agree with that part of it, but what I was saying was that, across the House today, we have heard people criticising us very selectively when they do not like the tone of the report. The noble Lord, Lord Kerr, said that there would be legal consequences of what he described as rash suggestions. The point is that you go where the evidence takes you. That is what the EU committees are known for doing, which is why EU Committee reports are so widely respected across the EU, not just in the United Kingdom. I thank the noble Lord, Lord Butler, for being slightly fairer, perhaps, than I was being to the comments of the noble Lord, Lord Kerr.

Beyond the no-deal scenario, there is another important scenario and that is the scenario of transition, which I shall now touch on. We took evidence from across the EU Committee and from the Financial Affairs Sub-Committee about the need for such a scenario. I will not pre-empt our report, which will be coming out shortly, but the importance of transition is, to us, not to be underestimated because it gives legal certainty to business, to sectors like financial services which the noble Viscount, Lord Trenchard, commented on. It gives legal certainty to businesses that there will be a period, whether you call it an implementation period or a transition period, a standstill period where businesses can plan for the end state. However, the importance of the transition period will be negated if we do not know what the end state is. Will the Minister, in summing up, tell us whether it is still the Government’s intention to try to negotiate a transition period by March, which is what the Secretary of State told us, and to enshrine the legal basis of that transition period in the withdrawal agreement?

My final comment on the transition period concerns what will happen if we are not able, for whatever reason, to negotiate a transition period along the lines that we want. Again, we have heard some negative comments coming from the EU, where that will be used as a negotiating position. I draw attention to paragraph 99 of the committee’s report where another option was put down by one of our expert witnesses, that of extending EU membership. Professor Catherine Barnard from Cambridge University—this will be my last substantive point, lest the Government are concerned that I am going to go on too long—told us that we could, by using Article 50(3), have any date in the withdrawal agreement that we wished, if we could negotiate it. According to paragraph 99,

“a withdrawal agreement could be post-dated—the UK would continue to be an EU Member State until the date specified”.

Alternatively, we could have a date that was further away than the date of leaving. In other words, we could embed the transition by using Article 50. Can the Minister tell us, in winding up, whether the Government will seek, if we come up against a stop-the-clocks scenario, to use that method to extend the period whereby we might get a deal?