Brexit and the EU Budget (EUC Report)

Lord Tunnicliffe Excerpts

Thursday 6th April 2017 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I thank the noble Baroness, Lady Falkner, for opening this debate and for the work that she and other members of the committee have done to produce this report. The House has benefited enormously from the broad range of EU Committee reports produced over recent months, each highlighting the complex challenges that we face in dealing with Brexit. Last weekend, I was in the pub relaxing with my neighbour, who said, “How’s life?”. I said that my aspiration to die before understanding the structure of the EU budget had been somewhat frustrated by my nomination to this role today. So I thank the noble Baroness, Lady Falkner, and the committee for producing what is an excellent primer to anybody coming to the question for the first time. I have found the report very useful in setting out the structure of the budget and the different dilemmas.

I know that noble Lords on all sides of the House have taken great pleasure in and placed great importance on contributing to these debates. However, today I have been somewhat surprised by the balance of the discussion. The noble Baroness, Lady Falkner, set out the legal issues in a reasonably straightforward way. The best interpretation of that part of the report is that if one fails to agree, one does not need to pay. As most noble Lords who talked about the realities of the situation recognised that no agreement is pretty well unacceptable, I shall focus rather more on what might be reasonable, as I believe that an agreement is essential to the future of our nation and how it lives with Europe.

Of course, this is the first EU Committee report to be debated after invoking Article 50. This only serves to focus our minds on the importance of this issue, and on the need for the negotiations to be conducted in a positive spirit. As we have heard during this debate, the report focuses on the UK’s current role as a net contributor to the EU and outlines some of the potential financial implications of our upcoming withdrawal. As I say, it concludes that there is a technical possibility of our walking away without agreeing a financial settlement. However, as the report acknowledges, there are clearly other forces at play. I will return to this later.

We do not know what the EU 27 will ask of us. We have heard speculation of between €50 billion and €60 billion, but talks have not yet formally begun and there are, as the report outlines, many factors to be considered. What we know is this: both the draft guidelines published by the European Council and the resolution adopted by the European Parliament refer to some form of exit payment. The committee’s report notes three headings under which the EU may carry out its calculations. The multiannual financial framework runs to the end of 2020. As a nation, we signed up to contribute for the entire period. It is not yet clear whether we will be asked to pay until the end of this period and, if so, whether we will receive the same benefits. Clarifying these points must be a priority for our negotiation.

The second heading—the UK’s liability for RAL—is just as difficult to predict. We do not know at which rate the EU would have us contribute, nor for how long. As with the MFF, these are commitments that the UK has already made and we must show maturity in our discussions.

Member states guarantee the pension entitlements of EU staff. The EU has benefited from the expertise of thousands of officials from the UK. We are grateful to them, and to those of other nationalities, for their work during the period of our membership. While we should not pay more than is necessary, we have a duty to pay our way.

Clearly, demands under these headings will need to be subject to detailed scrutiny and appropriate challenge. Nevertheless, the Government and the EU seem to be in agreement on the need to establish the general principles on which the final sum will be calculated early on. In the light of this, could the Minister confirm that the Government expect a claim from the EU for an exit payment? If they do, could he confirm whether the Government accept the three headings identified in the report as the likely basis on which the EU will calculate the amount? Lastly, could the Minister shed any light on what consideration his department has given to how it will assess the accuracy of the final claim, and how it will develop arguments to contest and scrutinise it? Labour is clear that the UK is a responsible partner. We have made commitments to our European colleagues and, while we will need to look at the figures in detail, it is only right that this country recognises and meets its obligations.

I return to my earlier remarks on the other forces at play. Following the handing over of the Prime Minister’s letter, the country will now engage in the most serious political negotiations it has undertaken since the Second World War. Decisions taken in the next two years will have a profound impact on our country’s future. After some hesitation, the Prime Minister and Secretary of State have now acknowledged the point I made earlier—that the UK is a law-abiding nation that meets its obligations.

The Government have also accepted that we may continue to contribute to the EU budget on a case-by-case basis. There is a clear national interest in maintaining co-operation with the EU in some areas. As we all know, nothing in life is for free. However, we remain disappointed that the Government and some noble Lords who have spoken today would be prepared to walk away with no deal. I was very seized by the comments of noble Lords who, like me, feel that this would be very unwise, particularly the noble Lords, Lord Hannay, Lord Haskins and Lord Jay, who I think all came to the same conclusion from different directions. The description of the negotiations mentioned by the noble Lord, Lord Hannay, has particular resonance for me. I spent part of my career negotiating in fractions of billions rather than multiple billions, but I think the experience is very much the same. He brought out the importance of painfully going through the detail. To that I add the next step of painfully going through the detail to find areas of common interest, and building on that common interest for the future of the United Kingdom and of Europe. Failure to agree a relationship with the EU that supports our economy and protects vital social and environmental rights could be “very destructive”. That is not just my view but the view of the Commons Foreign Affairs Committee.

Labour has laid out six tests for the Government, and my noble friend Lady Smith of Basildon has added a seventh: honesty. This test is just as vital for this issue as for any other. While the report stresses the legal point, we will struggle to strike deals with new partners if the UK is viewed as unreliable and untrustworthy. In this sense, the legal reality is secondary to the political and economic reality.

I once again thank the committee for this report. I hope that the Minister has listened carefully to this debate and that the Government will continue to engage as negotiations progress.