European Economic Area: UK Membership

Debate between Stephen Kinnock and Stephen Timms

Monday 6th November 2017 Commons Chamber

[Robert Neill (Bromley and Chislehurst) (Con)]

rose—

[Stephen Timms (East Ham) (Lab)]

rose—

[Stephen Kinnock]

I will take one more intervention from my right hon. Friend, but I will take an intervention from the hon. Member for Bromley and Chislehurst (Robert Neill) later.

[Stephen Timms]

Has my hon. Friend seen the recent forecast that a WTO-based Brexit would cost the UK economy 75,000 jobs in the financial services sector alone? Is he not absolutely right to talk about the grave dangers that that would pose to the British economy?

[Stephen Kinnock]

I agree that the financial services sector is critical to this debate, because passporting is required. There would be no passporting arrangements in a WTO deal, so the impact would be catastrophic. We must remember that the financial services sector is not just about the City of London; it supports 1 million jobs across the entire United Kingdom—in Edinburgh, Leeds and so on.

--- Later in debate ---

[Stephen Kinnock]

I think my hon. Friend’s point touches on what sort of reforms to the free movement of labour we think we need. Opinion is divided. In terms of the upstream reform, the argument is in favour of a quota-based system; downstream reform would be based on registration, but perhaps that is for another debate. My point is that EEA membership enables a lot more flexibility over both an emergency brake and the use of industry-by-industry quotas.

I turn now to the vexed question of ECJ jurisdiction. Here the position is relatively simple, as EEA-EFTA members are not subject to ECJ jurisdiction. The EEA is administered by the EFTA arbitration court and the EEA joint committee, and disputes are managed by the EFTA surveillance authority. These bodies adjudicate only on matters relating to the EEA internal market and any violations of its principles and have far less clout than the ECJ. Moreover, while EU member states’ courts must refer legal issues to the ECJ, EEA states are not obliged to refer them to the EFTA court.

The EEA model is sometimes criticised because EEA members are cast as rule-takers as opposed to rule-makers, but that criticism does not stand up to scrutiny. EEA members have the right to participate in the drawing up of EU legislation by the EU Commission, and the EEA joint committee determines which EU laws and directives are deemed relevant for the EEA and whether any adaptation is necessary, so EEA membership would in fact provide the UK with a seat at the table when EU regulations and directives are being shaped.

Clearly EEA membership is one step removed from the heart of decision making in Brussels, but the reality of the referendum result is that our influence in Brussels and across the European capitals has, and will inevitably be, diminished. The only valid question now is how to maximise democratic control and influence while minimising economic damage. I contend that an EEA-EFTA-based transition deal would clearly achieve those ends. The stakes are high.

[Stephen Timms]

I am listening with great interest to my hon. Friend’s argument. Will he confirm whether I have understood him correctly? Would the way forward he is advocating require the UK to rejoin EFTA? Is that his proposition?

[Stephen Kinnock]

There are a variety of views on this. Carl Baudenbacher, the head of the EFTA arbitration court, has said that he would favour a docking system and an interim arrangement that puts British judges on the EFTA arbitration court in preparation for finalising a deal—in a sense, a bridging into EFTA. I would advocate joining EFTA as part of moving into the EEA.