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

Lord Liddle Excerpts

Tuesday 16th January 2018 Lords Chamber

[Lord Liddle (Lab)]

My Lords, as a member of the EU Select Committee, I add my thanks to the noble Lord, Lord Jay, who very ably prepared and chaired this inquiry. I also thank the secretariat, who cut through a very complex issue and produced a very able and well-argued report—I disagree with the noble Lord, Lord Hamilton.

This speech will be a bit of a first for me. It is the first time I have disagreed with the noble Lord, Lord Kerr of Kinlochard, on a European matter. I believe there is still a horrible danger of a no-deal outcome to these negotiations. I wish I shared the noble Lord’s optimism that we are on course for some kind of beneficial outcome, but I fear not.

It is worth remembering that the soundbite, “No deal is better than a bad deal”, was one of Theresa May’s more politically misjudged lines in her Lancaster House speech last January. It was the Prime Minister who gave life to this soundbite and opened up in the Conservative Party the view that no deal might be a viable stratagem for this country. For the past 12 months, she has spent an awful lot of her time trying to soften the impact and reduce the significance of what she said then.

There are many in the Conservative Party who still appear to believe that this is a viable threat to make. The poor Chancellor of the Exchequer was attacked for awarding only £250 million to be spent on preparations for no deal. He had to up that to £3 billion in the Budget. Perhaps that was the price of him keeping his job in the reshuffle.

As we heard from the noble Lord, Lord Hamilton, the hard Brexit camp is united that Britain must talk up walking away from the negotiations as a realistic possibility. But how big is this threat to walk away? Of course, there is a lot of pub talk where you hear businesspeople say, “In any negotiation I go into, I always have to have the possibility of walking away from it”. That may be true if you are buying a house or a car: if you think the other side is asking far too much for it, you walk away. That is fine, but the reality is that you do not lose very much by walking away because you can always go out and find some other car or house that you want to buy.

However, if Britain were to walk away from the Brexit talks, the result would not be the status quo that we have now of membership of the biggest free trade area in the world. Our walking out would result in a breakdown of our main trading relationship and, on some accounts, would mean that planes flying to the continent would be disrupted, nuclear materials could not be transported across borders, pharmaceutical regulations would no longer be operative, many EU citizens would become illegal foreigners in this country and there would be massive legal uncertainties about all kinds of business and insurance contracts. That seems to me a pretty appalling prospect.

The committee analysed the possibility of walking away and concluded that it is a credible threat only if it is made well in advance of the leaving date. That point had not struck me until it was pointed out. The nearer you get to the deadline, the less credible the threat of walking away becomes because the resulting chaos would be so much greater that you would not be able to cope with it.

[Lord Forsyth of Drumlean (Con)]

I am most grateful to the noble Lord. I read the report over the weekend. He lists all the Armageddon consequences, as he sees it, that would accrue to this country if we left without a deal. Could he explain why his list of disastrous consequences does not mention any of the things that would be disastrous for European countries, and why the report did not look at that?

--- Later in debate ---

[Lord Liddle]

The evidence is overwhelming. I could point the noble Lord to many research reports which show that, in the event of no deal, the damage to British GDP would be far greater than to the GDP of the EU 27.

Why is no deal still a possibility in my view, despite what was agreed in December? It is basically because the Cabinet cannot make up its mind on its long-term vision for the economic relationship between Britain and the EU. The Prime Minister talks about a bespoke trade deal for Britain despite Mr Barnier having made clear many times that the choice is either a Norway-style deal, where we are close to the single market or in it, or a free trade deal on the Canada model. Those are the limits of the choice. The Cabinet seems unable to make that choice. It is fundamentally divided between those who want to keep as close to EU rules as possible and believe that can be negotiated, which might be difficult—such as the Chancellor, for example, who wants to do that—and those who want to break free.

We are in very perilous political circumstances that might come to a crisis as early as March this year, when the European guidelines for the trade talks emerge. Those who favour a hard Brexit may be close to resolving in their mind that Britain should choose a very different future from the one we now enjoy. They may decide that Britain should go it alone. Goodness knows what the politics of that would be. I think it would mean a split in the Cabinet and the Conservative Party to match that of 1846 and the dispute over tariff reform in 1903. I say to my own Front Bench that in those circumstances there would be a very heavy responsibility on the part of the Labour Party to act in the national interest.