Brexit: Preparations and Negotiations

Lord Kerr of Kinlochard Excerpts

Monday 23rd July 2018 Lords Chamber

[Lord Kerr of Kinlochard (CB)]

My Lords, the noble Lord has just talked about Boris Johnson, but I want to talk about a great Foreign Secretary. A fortnight ago we lost Peter Carrington, a great Foreign Secretary, a great Defence Secretary, a great Secretary-General, a great patriot and a great European. It is 46 years since I first worked with Peter Carrington. I knew him well and I know what he thought about Brexit. For that generation—that of Denis Healey on the beach at Anzio or Peter Carrington in the Guards Armoured Division liberating the Low Countries—“Never again” really meant something. For that generation, “Never again” meant ensuring no more war in Europe, ensuring the collective defence of Europe against external threat, rebuilding a broken Europe and working for its prosperity, and fostering and entrenching the values of Europe’s better nature. For all his endearingly laconic understatement, the commitment of Peter Carrington was very clear. Britain in Europe was a non-transactional relationship. It was about common values, a common effort to protect, and a commitment to advancement.

What would Peter Carrington have made of this White Paper? We do not know but, if he had written it, I do not think that it would have started with a “facilitated customs arrangement”. One can sense his shudder of patrician disdain. I think it would have started with something about values. It might have said something about the future rights of our fellow Europeans in our country and our citizens in continental Europe. The silence on legal immigration is very strange. As a great Defence Secretary, he might have wanted some restatement of the absolute nature of the British commitment to European defence. Whatever happens between the Brussels bean-counters, when the chips are down the Brits will be there. The Prime Minister fudged that a bit in her Lancaster House speech, but I thought she got it absolutely right in Munich in February. It is odd that the White Paper is totally silent on it. The reference on page 66 to a possible defence “enhanced Framework Participation Agreement” does not quite do the trick. The White Paper is a bit technical and bottom up. It is very transactional and it does not seem to have a lot of vision in it.

That is what Peter Carrington might have thought, but I do not know. He was a very skilled diplomat so he certainly would not have said, as the Prime Minister did on television and as Mrs Leadsom said in the other place, that the proposals in the White Paper are non-negotiable. Concrete on the feet is rarely wise. Of course, as the noble Lord, Lord Forsyth, pointed out at the outset, the proposals have already changed. The passage that the noble Lord, Lord Liddle, read out on the facilitated customs arrangement gave the foreigners the good news that we would not insist that third-country flows through their ports should be slowed down while they handled the segregated goods heading for us and operated two systems of taxation and checking. That was a relief for them, I am sure, except that the amendments made in the House of Commons mean that we do so insist that the ports of Rotterdam, Hamburg and Antwerp be clogged up operating two systems. So the proposals are negotiable after all, but only if you are British, Tory and a rebel. The 27 have to operate two systems where they now run one. They will not, of course. Why would they?

Actually, they would not have agreed with the White Paper’s proposal anyway, because the reciprocal regime at our ports is not one that they would be prepared to put up with. It is as inconceivable as it would be unprecedented that the EU should allow a third country, not a member state, to collect its taxes, which are important for its common budget, when no longer under the control of its court. As I mentioned to the House two weeks ago, the EU anti-fraud agency, OLAF, currently has two cases in the ECJ, each worth more than €3 billion, against the United Kingdom for undercharging customs duty and for allowing VAT fraud at our ports. I thought that Monsieur Barnier was spectacularly diplomatic when he said quizzically on Friday about the facilitated customs arrangement, “Would there not be a risk of fraud?”

Anyway, it does not work like that. If we leave the customs union we leave the customs territory and each check will take place at its frontier—unless, of course, we form a new customs union with the EU, as this House recommended when it accepted the amendment to the withdrawal Bill that I moved. We encouraged the Government to explore a customs union with the EU. I really think that they should. The facilitated customs arrangement will not run—it is dead already—and without a workable solution such as a genuine customs union I do not see how we can avoid the hard border in Ireland. The situation is now really very grave. We have accepted that a solution to the Irish question is integral to the withdrawal agreement. If we do not get one we do not get the other. We would kill off the transition period, so the no-deal cliff edge would be not December 2020 but next March.

Then there is the point from the noble Lord, Lord Bowness. The Minister appeared to put himself in the same camp as Mr Raab, who yesterday asserted that if what we have put in our White Paper is not agreed by the EU by October and if there is not an agreed framework text by October, we will resile on our financial commitments, refusing to pay the sum that we agreed in December that we owed. I have to say to the noble Lord, Lord Forsyth, that it is the cost not of the future but of the past. These are commitments. If we were to do a runner all bets would be off, with no deals doable, and not just with the EU. Third countries would be very chary of striking agreements with a UK that had no working relationships at all with its 27 neighbours—we would not have while they were dunning us in the courts for the money that we owe them.

I still hope that wiser counsels will prevail. I wish that we had a Carrington to provide them. I think that he would have been much less dismissive than Mr Johnson of the concerns of business on the no-deal scenario and of the importance of the Good Friday agreement. On the debt question, I think that he would have thought the idea of doing a runner a tiny bit dishonourable.

How do we get out of this mess? I have two suggestions. First, the Government should look again at the amendment proposed by the noble Duke, the Duke of Wellington, which the House also passed. No one knows—at least I do not—why the Prime Minister sent in the Article 50 notification on 29 March 2017. I have no idea. No one can assert that the country voted on 23 June 2016 to leave the EU on 29 March 2019. An extension is possible under Article 50 if all agree. Would they agree? I do not know. The noble Lord, Lord Birt, was doubtful. I think that it would depend on why we asked.

Let us bear in mind that if we go over the cliff in March, it is suicidal for us but it is bad for all 27 as well. Nobody wants that to happen. The EU has contingency plans for dealing with the European Parliament election should our departure date be pushed back. Mr Benn’s committee in the other place has recommended that it should be pushed back. The issue should be explored; it would be irresponsible not to. It would be irresponsible to crash out in eight months’ time if there is no done deal, doing huge damage to the economy, to jobs, to the stability of Northern Ireland and the well-being of our fellow citizens. Mr Rees-Mogg would be just fine—he has his money in Ireland—as would the Bullingdon boys, but as Sir John Major said at the weekend, the people who have the least would be hit the worst.

My final point is one that I have made before—I am afraid that I have made it tediously, but I must do it again. An Article 50 invocation is not an irrevocable act. Withdrawing the invocation would carry no price, political or financial. We would never have left. The terms of membership would not have, and could not be, changed without our agreement. If the Government cannot negotiate a Brexit which even remotely resembles what was promised in June 2016 and if the red lines which Mrs May wrote in September 2016 in the party conference speech turn out to preclude any workable solution to the Irish border, the country should certainly be asked whether—knowing what we now know—they would prefer that the notification be withdrawn. That might mean an election; it might mean a referendum; it might mean both. It would certainly mean an Article 50 extension, and this is the scenario in which we can be absolutely certain that we would get that extension. The 27 would unanimously agree straightaway to give us an extension if the purpose was to permit a people’s vote. The case for such a vote, before the people’s EU citizenship rights are extinguished and before the damage to their well-being really starts to bite, seems to me to grow stronger with every passing day and with every new lurch by the Government away from what a Carrington would have thought about Britain in Europe and about responsible leadership.

[Baroness Goldie (Con)]

My Lords, while the contributions are extremely interesting, the advisory time limit has been somewhat generously interpreted. In deference to the speakers further down the list, perhaps your Lordships could see what they can do to co-operate in rough adherence to the advisory time limit. Otherwise, we will be very unfair to some of the later contributors. We want to hear from them as well.

--- Later in debate ---

[Baroness Falkner of Margravine (LD)]

My Lords, I chair the EU Sub-Committee on Financial Affairs. The committee also has responsibility for the UK contribution into the EU budget, so the current discussion about cannot pay or will not pay is also pertinent to our role. I was also part of the EU Select Committee’s delegation to Brussels last week to Mr Barnier, under the distinguished chairmanship of the noble Lord, Lord Boswell. It was my fourth discussion with Mr Barnier. In the light of what I heard there, I will concentrate my remarks on three things: the budget contribution in the light of calls for a second referendum; the cost of the Norway option and the EEA; and the exit fee. In doing so, I remind the House that I speak in a personal capacity. I could hardly do otherwise, having heard the rather diverse speeches of other members of the committee, such as the noble Lords, Lord Butler of Brockwell and Lord Cavendish of Furness, excellent members as they all are.

Several noble Lords talked about the possibility of holding a second referendum or a people’s vote on the outcome of negotiations. A lot of people believe that if you put the facts to the people they will change their minds and remain, as if no facts were available last time around. We heard that in the Chamber today. If facts were distorted last time, people nevertheless thought that they would pay less to the EU if we left and more money would therefore be available for UK priorities. The next vote will also focus on money, so the question is what the offer of “remaining” in that future referendum would involve.

Noble Lords may not know that the negotiations for the EU’s next multiannual financial framework are currently under way. The Commission intends to conclude them in May 2019, just weeks after the UK’s projected leaving date. We are not present during those negotiations on the basis that they do not concern us, as they cover the period from 2021 till 2028. We are not there and are not fighting for our interests.

One issue under discussion is the phasing out of the rebates paid to member states over a period of five to seven years in that MFF. It is likely that net contributors will try to resist this, or at least to prolong the period, but the rebate is unlikely to last in its current form. Other aspects under discussion are an increase in the EU’s own resources through the EU raising direct taxation, which the UK fiercely resists on the basis that tax-raising powers belong to member states alone. It is envisaged that some €200 billion will be raised directly by the EU in the next period, through visitor taxes, environment taxes and a tax on plastic among others.

What will happen if the UK does not retain its rebate? The Office for Budget Responsibility shows that the net contribution to the EU budget paid by the UK in 2016 was £8.1 billion. This was equivalent to £123 per head. The UK rebate was worth £5 billion, or £76 per head, so the UK contribution to the EU budget if we did not have the rebate would be £200 per head. Several people to whom I speak in Brussels who are experts on the budget and have knowledge of the MFF negotiations confirm that it would be difficult for the UK to swan back in and keep its happy rebate.

If the figure on the side of arguments last time around was based on £123 per head, the new figure would be some 60% higher. Do those who want another people’s vote really think that they would win a referendum on the basis that the UK would pay more than it currently does? Several noble Lords believe, as the EU negotiators told us last week, that the only other option—

[Lord Kerr of Kinlochard]

The own-resources decision, in which the British rebate is embedded, can be amended only by unanimity. If we did not leave, we presumably would not vote the amendment that would kill our rebate. If we do not leave, we do not lose the rebate, unless we are accepting enough to vote to lose it, which I do not think we are likely to do.

[Baroness Falkner of Margravine]

The noble Lord was of course a member of that committee and he knows the system well. What he loses sight of is the timing. The discussions are happening now. As far as I know, and I am sure the noble Lord knows, we are not at the table—this is a point I made early on.