Beyond Brexit: Institutional Framework (EUC Report)

Baroness Donaghy Excerpts

Monday 6th December 2021 Grand Committee

[Baroness Donaghy (Lab)]

I congratulate the noble Earl, Lord Kinnoull, on securing this collective debate on reports which were published more than eight months ago. The EU Services Sub-Committee did at least have an opportunity to touch on the report before us in a debate on 22 July on our earlier report, seven months after leaving the EU. It was difficult to draw conclusions then because of the impact of the pandemic and the souring of the atmosphere around the Northern Ireland protocol. Members of the sub-committee had very different views on the wisdom of leaving the EU, and I pay tribute to them for focusing on issues on which we could agree. I also thank Dee Goddard, who was an outstanding clerk to the committee.

The report emphasises how central to the UK economy services are. The UK exported 317 billion of services to the EU and imported 217 billion from the EU in 2019. The UK has consistently run a trade surplus in services. The committee and the services sector welcomed the trade and co-operation agreement on 24 December as being preferable to no agreement, but recognised that significant challenges remained and that negotiations on the shape of UK-EU trade and services relationships would continue in the years to come. We felt that it was in both sides’ mutual interest to ensure that there was a positive and co-operative relationship.

On financial services, our concerns were on equivalences, the need for a deep level of regulatory co-operation between the EU and the UK to help manage future divergence, and the need for Parliament to consider how best to scrutinise the new powers of the regulators. It is clear that we have made little progress on equivalences or on a deep level of regulatory co-operation. It is possible that the larger companies are finding ways around this. However, I have one anxiety and one deep concern.

The financial sector is made up of small companies, mainly outside London. My anxiety is that they will need strong support from government, and I am asking the Minister for assurances on the level of support available to them. My deep concern is about the lack of scrutiny in Parliament of the regulators’ new powers. This, of course, is not necessarily a matter for the Minister. The Treasury Select Committee in the other place has decided not to undertake detailed scrutiny of any changes, and the House of Lords is not giving priority to this either. A separate committee is required to deal with what could be a full-time job.

The Government and regulators now hold significant power in setting financial services regulations. The services committee said that the Financial Services Bill was a missed opportunity and recommended setting up a committee dedicated to scrutiny of the financial services sector. I believe that Parliament at present is not providing proper scrutiny of the changes in the financial sector. There are many other areas of uncertainty that cannot all be covered in time available. On research and education, how much good will would be lost by leaving Erasmus, and would the Turing scheme be an adequate replacement—or, if not a replacement, would there be proper funding? On legal services, there is the question of whether smaller firms would receive sufficient help and advice from the Government, the impact of no agreement on mutual recognition of professional qualifications, and the general issue of mobility of labour.

I want to focus on the creative industries for a minute. They are a hugely important and influential sector, worth £100 billion in 2019 but already hard-hit by the pandemic. The committee expressed deep concern about the potential impact of mobility provisions in the TCA on the more than 2 million people employed in the creative industries, which would make touring prohibitively bureaucratic and expensive. Recent reports show that, apart from a few minor concessions by individual countries, the cost and uncertainty around cabotage, carnets, visas and work permit charges are causing major difficulties.

The European Commission stated in 2019 that, in the music business,

“UK acts … dominate the European panorama”.

There is a restriction of 90 days in 180 days over all member states on visa-free touring. In practice, some countries, such as Austria, Poland and Sweden, have applied additional restrictions on those 90 days or a requirement to be employed by a registered venue, such as in France. The opera singer Jennifer Johnston has said that the standard rehearsal period for performances is 84 days, which means that she can do only one opera every half a year in the EU. Although the Government have granted a cabotage easement, suspending the inbound rules on cabotage for EU-flagged trucks, this creates an imbalance as it is not reciprocated. The fear is that specialist hauliers will move from the UK, which currently has the vast majority of these trucks, to EU countries, with a consequent loss of UK jobs.

The music industry is looking for a transitional support package and a permanent music export office—ultimately, a cultural touring agreement covering the geographic area of Europe. The costs of carnets and permits, as well as restrictions on merchandise, are already affecting the industry; despite the Prime Minister’s promise that he would work flat out to find solutions, there may have been a lot of effort but there is very little to show for it. If the Minister is unable to update us on this, perhaps he will write to the noble Earl, Lord Kinnoull, with the exact position.

In its report of 17 November this year, the International Agreements Committee outlined its views on the negotiating objectives that the Government should adopt on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. If we are to ensure that the UK’s standards are safeguarded in a number of areas—including intellectual property and the protection of personal data, which I have not had time to deal with today—the Government need to be clear whether they are seeking carve-outs or embarking on a whole new philosophy involving lower standards and protections.

Finally, our UK services sector is a major success story; so far, the Government have succeeded in only minor acts of mitigation. As the noble Earl, Lord Kinnoull, indicated, it is a matter of some urgency that the infrastructure for mutual co-operation and consultation is up and running as soon as possible.