Economic Update

Lord Lilley Excerpts

Tuesday 12th January 2021 Lords Chamber

[Lord Agnew of Oulton (Con) [V]]

The Government do not accept that the approach the noble Lord is suggesting is the right one. We have put in place the trader support scheme in Northern Ireland, which I had some responsibility for; some 28,000 businesses have registered for it, including more than 12,500 in Northern Ireland, and 23,000 of those are in a ready-to-trade state. Only last weekend, we managed to move 1,000 lorries across from GB into Northern Ireland; that was after the end of the in-flight concession, which was a big concession, essentially saying that goods were already in transit out of the EU at the point of delivery into Northern Ireland. That has worked smoothly. We will, of course, see problems over the next few weeks as people adjust to a very new system, but I am confident that we will be able to reduce the friction substantially over the weeks and months ahead.

[Lord Lilley (Con)]

My Lords, one lesson of the pandemic is that in a crisis, government bodies, from the MRHA authorising vaccines to local authorities authorising pavement cafes, can take decisions in a fraction of the time they used to. Given the importance of encouraging the growth of existing businesses and the creation of new ones, will my noble friend put pressure on all government bodies to accelerate decision-making, by requiring them to publish the times they take to make decisions and by setting times after which approval will automatically be deemed to be given?

[Lord Agnew of Oulton (Con) [V]]

I very strongly support my noble friend’s views on this. We have seen some remarkable decision-making across government over the last few months, at a much faster rate than normal, and I encourage my noble friend to keep up his campaign to remind people of what is possible. In my own oversight of HMRC border-readiness, I used a simple mantra, which is that it does not take any longer to make a decision than not to make a decision, and it was remarkable how quickly decisions were made. I hope very much that we can continue with that philosophy.

European Union (Future Relationship) Bill

Lord Lilley Excerpts

3rd reading & 2nd reading & Committee negatived & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Wednesday 30th December 2020 Lords Chamber

[Lord Lilley (Con)]

My Lords, I respect those who have devoted their lives to integrating Britain into the European project. Their evident sadness today is the one downside to the joy I feel but, as good parliamentarians, I hope that they—like the noble and learned Lord, Lord Judge, and the noble Baroness, Lady Morgan, at the beginning of this debate—will see some upside in the restoration of parliamentary sovereignty.

I served on the committee scrutinising the transfer of European law into British law. There were tens of thousands of pages of regulations, accumulated over four decades, few of which have ever been debated, and none voted on. Indeed, had every parliamentarian voted against them, they would still have become the law of the land. Tomorrow, that changes. We will be free to amend, repeal or enhance any of these measures, but it is a mistake to believe that the only choice is between high standards and lower ones. There are many ways in which rules and regulations can be improved without affecting the level of environmental, social or other protection, none of which anyone wishes to reduce, despite what the noble Baroness just implied.

When negotiating in the Council of Ministers, I—and, I gather, my Labour successors—brought a different regulatory philosophy to that of our European friends. We focus on outcomes; they focus on process. We set principles; they try to legislate for every conceivable eventuality. We allow everything that is not forbidden; they tend to forbid anything that is not specifically allowed. Our priority is to protect consumers; theirs is protecting producers. The result is that our approach encourages innovation, stimulates competition, facilitates new entrants to a market and minimises the burden of compliance without reducing standards. As a result, it creates a more dynamic and enterprising marketplace while maintaining high standards.

The clearest example of this different approach is the complete trust between British common law and continental Roman law. It is no coincidence that the world’s four leading financial centres—London, New York, Hong Kong and Singapore—are all based on common law, whereas the EU’s biggest financial centre, Frankfurt, ranks only 15th in the world. However, in the EU, detailed prescriptive laws such as MiFID, with its 2 million paragraphs, have steadily overwritten common law. That is why the Bank of England said that the overriding priority for the UK was to become a rule maker, not a rule taker.

We can make a success of Brexit if we bring that same spirit of rule-making, not just in financial services or common law but to the whole acquis communautaire, to make Britain’s economy more innovative, competitive, dynamic and prosperous. Your Lordships’ House will play a key part in this.

UK-EU Future Relationship Negotiations and Transition Period

Lord Lilley Excerpts

Tuesday 8th December 2020 Lords Chamber

[Lord True (Con)]

I repeat: we are seeking a deal. As the Prime Minister said a few minutes ago, hope springs eternal. There are significant differences. I do not agree that there would be a crisis that could not be surmounted by the British people.

[Lord Lilley (Con)]

Will my noble friend ignore the pleas of those who want us to cave in and accept every demand of the European Union? Does he recall that Canada is even closer to the United States than we are to Europe? It has a perfectly normal trade agreement with the United States that does not require it to accept American laws and rules or give America its fish. Why should we be any different vis-à-vis the European Union from Canada vis-à-vis the United States?

[Lord True (Con)]

My Lords, my noble friend makes a profound geographical point. I agree with him.

Great Britain and Northern Ireland: Access for Goods

Lord Lilley Excerpts

Thursday 12th November 2020 Lords Chamber

[Lord True (Con)]

My Lords, as I said earlier, the Government certainly take extremely seriously the need to ensure the security of this trade. I agree with the noble Lord that the protocol obliges both the UK and the EU to seek to streamline trade between GB and Northern Ireland.

[Lord Lilley (Con)]

Will my noble friend gently remind the European Union that any obstacles to trade between Northern Ireland and Great Britain would be contrary both to Article 6 of the withdrawal agreement and to the Act of Union, which is a fundamental part of our legal order which the European Union has pledged to uphold? I hope and expect that the EU will agree arrangements to prevent such obstacles, because to refuse such agreement would constitute bad faith, justifying the activation of those parts of the internal market Bill that I hope the other House will reinstall and this House will duly accept.

[Lord True (Con)]

My Lords, I very much agree with what my noble friend said. I underline his last remarks: it is astonishing that Keir Starmer required the Labour Party in this House to vote against a legitimate legal commitment to unfettered access.

EU Exit: Negotiations and the Joint Committee

Lord Lilley Excerpts

Wednesday 21st October 2020 Lords Chamber

[Lord True (Con)]

My Lords, the United Kingdom is a sovereign nation and has relations with every other country in the world. Of course, our relationship with our European neighbours is important and we will continue to negotiate with them, whether in this process or in whatever circumstances we find in the future.

[Lord Lilley (Con)]

Can my noble friend confirm that EU negotiators have been gently reminded that, if there is no free trade agreement and, regrettably, tariffs are applied to trade in both directions across the channel, the cost to EU exporters will be getting on for three times the cost to UK exporters, because they largely export highly protected goods to us, which we will be able to obtain far more cheaply elsewhere once we are outside the customs union?

[Lord True (Con)]

My Lords, we were told by the Front Bench opposite yesterday that the House was sending a signal to the European Union, so I infer that our proceedings are followed closely in Brussels, and I am sure my noble friend’s remarks will have been noted.

EU: Future Relationship

Lord Lilley Excerpts

Wednesday 23rd September 2020 Grand Committee

[Lord Lilley (Con)]

My Lords, ever since the referendum, my advice to businesses has been “prepare for no deal”. It has always been far more likely than is generally assumed. However, partly because of the controversial internal market Bill, I am inclined to think that the chances of a deal have now risen. I will explain why.

There are two unusual features about the negotiations between Britain and the EU. One makes them simpler than other free trade negotiations; the other makes them harder. They are simpler because we start where most free trade agreements and negotiations end up after years of haggling. We have zero tariffs and we want zero tariffs; it cannot take more than 10 minutes to negotiate. We have identical or equivalent rules and regulations, and we need to agree only a divergence mechanism: what happens when one side or the other changes their rules from the starting point. Such arrangements exist in most free trade deals and are comparatively straightforward to negotiate.

Why, then, are these negotiations harder than normal free trade agreements? Normal agreements and negotiations are win-win affairs: each side tries to offer concessions that cost it the least but will be of greatest value to the other side. Therefore, a mutually beneficial win-win outcome usually emerges. However, the European Union has an overriding political imperative, which is to discourage other member states from following our example. The EU believes that this means that Britain must be seen to get a bad outcome even if that means that the EU gets a less good result, economically, than was possible.

When one side is more interested in the other side losing than itself gaining, that creates a very unstable negotiating dynamic, which is why no deal has always been a significant possibility and even been used as a threat. However, as we have approached the endgame, it has become clearer to both sides that, although no deal would be a suboptimal outcome, it would not be as painful to the UK as the EU and many in the UK—and, indeed, in this debate—have supposed and that it would be more painful to the EU itself than they or others had initially assumed.

If there is no deal, each side will apply its tariffs to the other. That will cost British exporters to the EU about £5 billion a year. That is half the £10 billion saving from not making a net contribution to the EU any more. Therefore, UK plc will be a net £5 billion better off: small beer, but not negative. By contrast, losing tariff-free entry to the UK market would cost EU exporters £13 billion a year and, of course, the EU will also lose the £10 billion a year that we pay it. Therefore, the EU will be a net £23 billion worse off; again, that is not huge compared with the size of the European economy, but it is more difficult to cope with in these difficult times.

Why do EU exporters stand to lose nearly three times as much from tariffs as British exporters to the EU? It is partly because the EU exports far more to us than we do to it, but the main reason is that the goods that it exports to us are highly protected goods, which it can sell to us only because we are currently prevented by the EU external tariff from buying them more cheaply elsewhere. Therefore, it is the realisation on both sides that no deal, though not the best outcome, is not a disaster for the UK but would be a problem—or a cost—for the EU that has made the latter look to the Northern Ireland protocol for other negotiating levers.

The withdrawal agreement has even more loose ends and internal contradictions than most international agreements. That is not surprising, given that Boris was given only 100 days to renegotiate it, during which Parliament did its best to shackle his negotiating powers, but we signed it and accepted it because it has a mechanism to resolve those internal contradictions: the joint committee, within which both sides are treaty-bound to negotiate in good faith to resolve outstanding problems by the end of the transition period.

However, recently the EU has been pointing out—doubtless as a negotiating lever—that if it simply refuses to reach agreement in the Joint Committee then, arguably, all goods going from Great Britain to Northern Ireland will have to pay the EU tariff, and all goods coming from Northern Ireland to Britain will have to fill in EU export declarations, and if the EU refuses to list the UK as a third country from which it will accept food imports, not only will we be unable to export food to the continent, but it would be illegal, as the EU has threatened, to take a single kilo of butter from Great Britain to Northern Ireland. As far as I am aware, the EU has not seriously denied making those implicit threats.

Those outcomes would be economically damaging to Northern Ireland, flagrantly in conflict with the Belfast agreement and contrary to the Acts of Union with Ireland and Scotland. They would inflame unionist opinion, demonstrate manifest bad faith and breach the clear intention of the withdrawal agreement itself, so the UK Government had no option but to introduce legislation enabling them to override those potential interpretations of the withdrawal agreement, should they emerge.

In doing so, the UK Government adopted the EU’s own approach to international law, clearly set out by the Advocate-General in the European Court of Justice in the Kadi case. He said that

“it would be wrong to conclude that, once the Community is bound by a rule of international law, the Community Courts must bow to that rule with complete acquiescence and apply it unconditionally in the Community legal order. The relationship between international law and the Community legal order is governed by the Community legal order itself, and international law can permeate that legal order only under the conditions set by the constitutional principles of the Community.”

I cannot see that we are doing anything different from what the EU would, very sensibly, do if there were a conflict between international law and its internal legal order. I invite the noble Baroness, Lady Ludford, as the last remainer of note due to speak in this debate, to be as critical of the EU doctrine as I have no doubt she will be of the Government’s behaviour. However, because we have effectively called the EU’s bluff, there is every reason to suppose that it will in practice resume negotiating sensibly and help us to resolve those issues, and there will be an agreement at the end of the day.

[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

My understanding is that the noble Baroness, Lady Ludford, is not participating in the debate this afternoon, so I now call the Minister to reply.

Finance Bill

Lord Lilley Excerpts

2nd reading & Committee negatived & 3rd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Friday 17th July 2020 Lords Chamber

[Lord Lilley (Con)]

My Lords, it is unfortunate that because, during the worst recession in two centuries, we have not had a full debate on the economy, we have to use this debate on the Finance Bill, but so be it.

Most recessions are the result of a shortfall of demand. This, uniquely, is caused by suppression of supply. There is considerable pent-up demand. I agree with my noble friend Lord Lamont, who said we must end the lockdown and encourage people to return to work, and Parliament itself and this House should set an example in that.

If we do so, and if the economy is enabled to, many businesses will spring back—more rapidly, I suspect, than some suppose—to full activity, but some sectors will have permanently shrunk. Many viable businesses have spent the last few months devising ways to produce previous levels of output with fewer employees, so we face a vast potential increase in unemployment, and unemployed buildings and other resources. We need to make it easier and quicker for new businesses to set up and expand, and for existing firms to expand, grow and diversify.

During the crisis, we have learned that public regulatory bodies can, in an emergency and under public pressure, take in days and weeks decisions that previously took months or years. We need to ensure that they do so henceforth to enable businesses to increase their activities rapidly. In most areas, we cannot scrap regulations, so we should accelerate decision-making in planning, building controls, environmental measures, health and safety and so on by, for example, setting time limits. If those time limits are not met, consent will be deemed to have been given. Every department should be required to publish at six-monthly intervals the times that it takes to give approvals or refusals or to make decisions when requested by business. Every Select Committee should hold those departments to account. Past experience has shown that the British labour market is more dynamic than any other in Europe; if we do this, we will be able rapidly to bring people back into work in viable and productive employment.

House of Lords and Machinery of Government: Consultation on Changes

Lord Lilley Excerpts

Wednesday 15th July 2020 Lords Chamber

[Lord True]

My Lords, I must repeat that, obviously, the commission will be looking at a wide range of matters and the broader aspects of the constitution. The issue that the noble Lord mentioned is of great constitutional importance and certainly deserves examination.

[Lord Lilley (Con)]

My Lords, the problems of moving this House away from the Commons and Whitehall may be insuperable. However, should we not, perhaps by moving the Moses Room and Westminster Hall to York, try to bring Parliament closer to people from whose views and values it was so clearly estranged during the last Parliament? It would surely strengthen this House, first, if more people saw your Lordships’ excellent work as a revising Chamber and, secondly, if closer contact with people outside the metropolitan bubble made us more respectful of their views.

[Lord True]

My Lords, my noble friend makes a number of important and relevant points. As I said yesterday, in some respects the House already takes part of its work outside London. I do not believe this is something to which your Lordships should close your ears.

David Frost

Lord Lilley Excerpts

Tuesday 30th June 2020 Lords Chamber

[Lord True]

My Lords, again, I do not agree with the characterisation of the presumed danger. The Prime Minister is responsible for the integrated review, as chair of the National Security Council. Mr Frost will be involved, but there will be a cross-Whitehall process. Even as a humble special adviser, I felt it part of my duty often to give unwelcome advice to a Prime Minister, and I am sure that any decent public servant, political or otherwise, would always feel the same.

[Lord Lilley (Con) [V]]

Does my noble friend agree that David Frost will be a valuable Member of this House and welcomed by all noble Lords, even those who may be embarrassed by his presence, given that they firmly declared he would never succeed in reopening the withdrawal agreement, dropping the original Irish protocol or completing negotiations by the end of November, and who now object to the robust way in which he is negotiating to achieve the mandate of the British people, democratically asserted in the referendum and the last general election? We should sympathise with their embarrassment but not allow it to mute our welcome for his presence.

[Lord True]

I strongly agree with what my noble friend has said. Mr Frost has shown remarkable skill in negotiations so far, and I am sure will continue to do so. He will be a vital and important Member of this House for many years to come.

Covid-19: Economy

Lord Lilley Excerpts

Thursday 4th June 2020 Lords Chamber

[Lord Lilley (Con)]

My Lords, it is not clear how much lockdown has helped to control the pandemic, but it is absolutely certain that it has created the worst recession in 300 years. Unlike most previous recessions, this is the result of the suppression of output and not a collapse of demand. Indeed, there is substantial pent-up demand, so the remedy is not primarily Keynesian pump-priming. It is, first, to release the lockdown as speedily as possible to enable viable businesses to recover and resume production. Most important is the reduction of the social distancing rule from two metres to one metre and scrapping the absurd plans to quarantine all tourists, without which the hospitality and travel industries cannot survive.

However, not all businesses will be viable once the lockdown ends if the pattern of demand has changed permanently, so the second priority is to encourage and facilitate the growth of new businesses and expansion of existing firms. The most effective ways to do that are tax cuts designed to bring forward activity—for example, by increasing capital allowances so that instead of taxing companies when they invest, we do not tax them until their investments generate profits. There should also be time-limited cuts, so that companies have an incentive to invest and produce sooner rather than later.

Equally important is speeding up regulatory decision-making, without lowering standards, to enable businesses to go ahead with new projects. The key lesson of the pandemic has been that state regulatory bodies, which normally take months or years to reach decisions, can, under intense public and political pressure, take decisions in days or weeks instead of months and years. Wherever possible, regulators should be given tight deadlines to reach decisions and if they do not do so in time would be deemed to have given consent. Then businesses can get out and invest to bring an end to this recession.