European Union Referendum (Date of Referendum etc.) Regulations 2016

Debate between Lord Pearson of Rannoch and Lord Willetts

Wednesday 2nd March 2016 Lords Chamber

[Lord Willetts (Con)]

My Lords, it has been an extraordinarily lively debate. My noble friend Lady Anelay said at the beginning that we would be trying the patience of the voters if the referendum were held any later, but I feel that I might try the patience of this House if the debate concludes any later. I would like to briefly reflect on the debate, especially on the very lively and powerful interventions that we have had from the Privy Council Bench—many generals under whom I served as a foot soldier in battles in the past.

The interventions have often concerned our economic relationship with the EU. As we come towards the end of the debate, the options are becoming clearer. There is some kind of Swiss or Norwegian option, involving joining the European Economic Area. The exact terms of that would have to be negotiated, but it would very probably involve accepting all the major freedoms of the single market. Indeed, the former Swiss Prime Minister has put it as follows:

“It therefore seems very optimistic to me for Leave campaigners to suggest that EU member states would simply grant the UK full access to the Single Market while allowing you to opt out of free movement”.

There is, therefore, some kind of deal on offer, but it involves accepting the product regulations and the four freedoms that come with membership of the European Economic Area. We do not have to go down that route if we leave. There are alternatives—and in several powerful interventions we have been told that the alternative is to look at the US relationship with the EU. That would indeed be a different model, which would not involve our joining the European Economic Area. The US-EU relationship still involves tariffs on US goods coming into the EU and vice versa. It involves customs controls on goods moving back and forth. In many ways, it would involve an increase in the red tape facing British businesses as they went through the same kind of hassle that US businesses now face. You have to comply with EU product regulations. That is why Lincoln Continentals are not cruising up and down the streets of Mayfair: they do not comply with EU regulations.

When it comes to services, the EU is absolutely clear—even clearer after the financial crisis—that if you wish to offer financial services in the EU you have to be based and regulated in the EU. Iceland is a warning about people offering services in the EU without being properly regulated in the area. Many American banks are located in London because—one among many reasons—that is how they access the EU market. Clearly, in a negotiation that led to our having a similar kind of relationship with the US, the EU would expect that type of arrangement. That is not because the EU is an unusually protectionist power. Let us be frank: the US similarly has a very protectionist attitude to competition from European countries, including ourselves. It is clearly in the British interest that these barriers between the EU and the US be reduced, and there is currently a negotiation aiming to do exactly that—TTIP. I do not believe that there is any prospect of any improvement in trade relations that could do better than the mutual powers of negotiation now happening between Europe and America. If America is to make any concessions to anyone for access to its markets, it will be to the EU and vice versa, so the best thing we can do is play a constructive role in those negotiations.

Another aspect of the relationship is the eurozone, on which the British Government have taken a strategic decision. Our approach to Europe was once described as, “Britain should be in the fast lane, but driving very slowly with everyone else flashing their lights behind us”. What we have decided to do with the eurozone is pull over and allow them to accelerate. There is an argument that this was a mistake, but my view is that if the eurozone is to succeed—it is clearly in our interest for it to succeed if at all possible, although it is a very confused and risky economic experiment—the deal is, “You go ahead; if you need to integrate, do so, but preserve our full rights as a member of the single market”. That is what has been secured.

It is not just a matter of economic arguments, though. We have also heard about democracy and democratic deficits. Very few people have put that argument more powerfully than my right honourable friend in another place, Michael Gove, in an excellent article setting out his views. I pulled up short when he said:

“EU rules dictate … the distance houses have to be from heathland to prevent cats chasing birds”.

He said that there is an EU rule that they have to be five kilometres away—an example of the trivial interference that we have from the EU. I have looked into this. There is indeed an EU habitats directive. It does not specify any five-kilometre rule about the location of housing next to heathland. That comes from Natural England, as it decides how it will interpret this EU directive. The five-kilometre rule is planning guidance—not legally obligatory—proposed by a UK agency when it thinks about what this rule should mean. The lesson I conclude from this is that a lot more of what we do lies in our own hands than we sometimes admit. Speaking as a former Minister, maybe we sometimes use the European Union as an alibi when it is a matter of domestic responsibility for domestic policy and domestic legislation. Britain is indeed a proud and self-confident country and we often still have the capacity to make our own decisions. We should celebrate that power and I do not believe our membership of the European Union is a significant threat to it.

[Lord Pearson of Rannoch]

Would the noble Lord accept that only about 9% of our economy and 9% of our jobs come from sales and trade to clients in the European Union, and that that is declining in deficit? Would he agree that 11% of our economy goes to the rest of the world and that the remaining 80% stays in the British economy? Does he accept that the whole of that 100% is afflicted by EU regulation? Would he care to answer that?

[Lord Willetts]

I would not.