EU: Trade in Goods (European Affairs Committee Report)

Viscount Stansgate Excerpts

Thursday 2nd February 2023 Lords Chamber

[Viscount Stansgate (Lab)]

My Lords, I begin by paying tribute to the noble Baroness, Lady Chalker. We have never met but I have followed her career over many decades—admittedly not as far back as the 1960s nor in the Young Conservatives, but I have followed it nevertheless. I know what a distinguished career she has had in both this House and another place, especially as Minister of State for Overseas Development and Minister for that department’s successor, DfID. I once visited one of her successors in that post, the Member for Leeds Central, and saw the noble Baroness’s photograph on the wall of former Ministers. I can report that she was regarded with great affection by members of staff in that department, all those years later. That is not always true of every Minister. I wish her very well in the years ahead in everything that she has outlined.

In my experience and as has been pointed out, it takes all too long for a report, once published, to be debated in this House. Often, that delay is a disadvantage; I think that the noble Lord, Lord Hannay, takes that view. Sometimes the heat may have gone out of a subject—I am not sure that is the case here—or events may have overtaken it but, on this occasion, I agree with the noble Lord, Lord Tugendhat, that it is advantageous that we are debating this today because of the amount of time that has passed since December 2021. I hope that, when people read today’s debate, it turns out to be a somewhat more honest assessment of the position on GB-EU trade.

I congratulate the noble Earl, Lord Kinnoull, and his committee, on having produced this report. I am not a member of the committee and am in a minority of speakers in this debate for that reason, but I think that it is advantageous to consider this now. One advantage, to anticipate the speech of the Minister, is that, as a result, we are likely to hear somewhat less about the effects of Covid as a reason why trade with the EU is difficult and has suffered. We know, of course, that Covid made a big difference. As the noble Earl said, the committee itself stated that it was hard to disentangle the effects of Covid and Brexit at the time when the report was written. However, now it is a little clearer, which is why the Minister will probably not need to refer to the effects of Covid in quite the same way. After all, if it was simply Covid that affected our trade with the EU, we might as well pack up the debate and go home now. Where are we three years after we left and what do we know? I want to run through a few points as quickly as I can as a contribution to this debate.

First, leaving the EU single market and customs union has undoubtably been bad for the economy and bad for trade. British businesses exporting to the EU now have to contend with costs, paperwork and red tape that they did not face before. In addition, as the committee states,

“the inconsistent application of the new rules by different EU Member States”

has only made things worse.

Secondly, SMEs have been particularly affected. According to HMRC, the number of UK businesses exporting goods to the EU has fallen, unfortunately, by an astonishing third between 2020 and 2021, and in the main, it is thought that most of those are small businesses that simply gave up in the face of the Brexit red tape that exists.

Thirdly, proof of this is partly shown by the insolvencies that have been higher than average during the pre-Covid pandemic period. I will spare the House a range of statistics that I got on this basis about insolvencies, which have been greater in number than at any time since the end of the financial crisis in 2009 or thereabouts.

Fourthly, at a macro scale, we now know more than we did about independent projections for the UK economy. The House will know that the UK is now forecast by the IMF to be the only G7 country likely to move into recession this year, and we are certainly the only G7 country that has a smaller economy than we did before Covid. The noble Lord, Lord Lamont, said that the Bank of England said today that we are going to move into recession but it will not be as bad as it might otherwise have been. I accept that, but it is still not good. The Office for Budget Responsibility estimates that both exports and imports will be around 15% lower in the long run than if the UK had remained in the EU, and Brexit will reduce long-run productivity by about 4%. The OBR says that the UK has

“missed out on much of the recovery in global trade.”

Bloomberg Economics has said that Brexit is costing the UK economy £100 billion a year.

Fifthly, while all these costs have been imposed on British businesses trying to export to the EU, the Government have, as has been mentioned, so far delayed implementing the full checks on goods coming into the UK. The committee’s report explicitly referred to “disquiet” among GB businesses—what a wonderful word; it is an understated term—about the ongoing

“asymmetry in the border regimes, with GB exporters … facing a far more rigorous import regime than … EU business sending goods to GB.”

I will not go into the biosecurity issue, but it may come up later. Why do we not have these import controls? The answer is fairly clear: we do not have the capacity to undertake the checks, in terms of both the staffing and the infrastructure, as the committee noted, and probably because the Government are afraid of the consequences in the form of further shortages and delays if they are introduced. When I talk about capacity, I mean that in some obvious cases, people are understandably worried that there simply is not the physical room to implement proper checks on incoming EU goods.

The noble Lord, Lord Lamont, said, “When you look back, people predicted huge queues but they never happened.” I am tempted to say that he should have been with me in July last year on the first day of the holidays, when it took me seven and a half hours to get to the Folkestone Eurotunnel instead of one and half hours. The delay was considerable—it was all over the news.

Moreover, if we look ahead, as noble Lords may know, the EU is now planning not just to introduce a visa system for entering the EU but to fingerprint us. When that is introduced, and everyone has to get out of their car and be fingerprinted, the queues are going to be astronomical. That is not a prediction that I want to make, but nevertheless I fear that that is ahead of us. If the Minister wants to tell us that that is not the case, I ask him to do so when he winds up.

Sixthly, what about the trade deals? It is fair to say that almost all of them have replicated what we already had, while the two new ones, with Australia and New Zealand, are really quite small. I note that the former Environment Secretary, George Eustice, is on record as saying that the Australia agreement was

“not actually a very good deal”

because the UK

“gave away far too much for far too little in return.”

As for the promised trade deal with the United States, it is nowhere in sight and I should think it is quite a long way away, if it ever arises.

Seventhly, there is the issue of employment and skills shortages. The House knows that employers say how hard it is to find workers, especially in areas such as catering, hospitality, food and farming.

Eighthly, there are other effects too. I suppose these come under the heading of cultural trade, but they are none the less real. I shall mention two, and I hope the House will forgive me; this certainly was not in the committee report. Musicians and performers have found that the costs and visa red tape make touring in the EU not just more difficult but almost impossible. I am talking not just about professional orchestras, for whom it is bad enough, but about youth orchestras and young people, who used to go and tour around Europe in the summer—and the same was true in reverse—and got enormous cultural benefit as well as providing music across Europe. That has stopped completely, and I deeply regret that.

The next example is one that I came only across this week. The Minister has many responsibilities in his portfolio and it certainly does not cover this, but I read that there is a British zoo that is desperately worried that it can no longer move a rhinoceros, which is needed for breeding purposes to keep the species alive, because of the enormous amount of red tape involved. These things happen, and it is a terrible shame that they do.

Ninthly, we should not forget that in this debate there are things that the Government have tried to do which they claim will be a Brexit benefit but are actually counterproductive, if not practically impossible. As far as I know, they have twice delayed the introduction of a UK CA mark to replace the familiar CE mark, because businesses are asking what the point of it is.

Another, more serious example is the EU REACH programme. Noble Lords may not be familiar with this, but the REACH regulations governing the safety of chemicals are the bedrock for the way in which we deal with risk and hazard in a very important area. REACH was in fact the largest piece of legislation ever considered by the European Parliament when the regulations were passed some years ago. As I understand it, the Government have said they want to introduce a British version of the REACH regulations but that has now been delayed until 2025, while the UK chemicals industry says it would entail enormous costs for no benefit whatever. When the Minister winds up, I would be grateful if he could say a word about the Government’s plans for the UK REACH programme.

Tenthly, we have to face up to the huge and complex EU retained law Bill, which plans to put a sunset clause on all EU-derived legislation unless it is saved. We had a taste of that at Questions this week, when the Minister was asked for a guarantee that the Government intended to retain the TUPE regulations but failed to give it. What will be the effect of that Bill? I think it will produce a lot of confusion on the part of business and the public as to what the law and regulations are and will be, and I am not sure that that is very good for investment.

Of course, the UK’s relationship with the EU has been damaged by the Northern Ireland protocol Bill. I say only that we hope that the negotiations succeed and that some of the collateral damage, including our non-participation in Horizon Europe, can be solved in the end.

Eleventhly, in the face of all this evidence, it strikes me as interesting that people who particularly argued for Brexit are now rather more unsure, as they struggle to understand what has gone wrong. I found the speech of the noble Lord, Lord Lamont, quite interesting in that respect, and I shall read it in Hansard. I hope there will be some common ground that we can find in the years ahead, some working degree of consensus that the UK needs, for its own future—a better working relationship with Europe. Perhaps when the time comes to review the TCA, we can find areas that need fixing and fix them, as has been mentioned in the debate today.

What do the public make of it? Opinion is still divided—and for a lot of people Brexit was about sovereignty, not the economy—but this very week John Curtice, the distinguished professor of politics at Strathclyde University, reported that the latest polls show that 58% of people think that Brexit was a mistake. We must now start talking about a new and different relationship with the EU, and the European political community is a good way to start. Accepting this committee’s report and everything in it would be a good basis for approaching the task ahead.