European Union Membership (Economic Implications) Bill [HL]

Baroness Falkner of Margravine Excerpts

Friday 25th November 2011 Lords Chamber

[Baroness Falkner of Margravine]

My Lords, I, too, start by paying tribute to the noble Lord, Lord Pearson of Rannoch. He is indefatigable in pursuit of making our country think again about its role in the European Union. It is right that we periodically debate the big picture of our relations with our neighbours, our allies in our relationships with the rest of the world and, of course, our largest trading partners, the European Union.

The Bill is a modest measure on the face of it, but of course has profound implications. The committee that it calls for is intended to merely state the economic facts so presumably, and despite the lessons of the last few years in terms of the global economic crisis, we are still to have a blind faith in economists and economic theory as the basis for decisions which will have the most significant impact on our country's welfare for both our and future generations. That is quite astonishing.

I will return to the broader case in a few minutes. Let me concentrate narrowly on the measures in the Bill right now. The composition of the committee is rather fanciful: two members for; two against; and three neutral. One wonders which planet we will find the three neutrals from. The idea that we might be able to find persons of exceptional calibre—potentially economists, businesspeople, academics or lawyers—presumably of considerable sagacity and professional experience, who will have no opinion on the biggest single issue of their generation is slightly cloud-cuckoo-land, is it not?

The question also arises of the representation of the views of people from other nations on this committee. I appreciate that the United Kingdom Independence Party obtains a rather limited mandate in elections in three of the four nations of the United Kingdom. In Scotland, it obtained under 1 per cent of the vote, in Wales 2.3 per cent and in Northern Ireland just 0.6 per cent. It should infer from this showing that the views of these nations do not chime with its sentiments for withdrawal from the EU. I wonder if the noble Lord might be able tell us in his concluding remarks how the committee might reflect the views of people in Scotland, Wales and Northern Ireland on his proposals.

My final point on the Bill relates to the need for it in the first place. If a narrow cost-benefit analysis is what the noble Lord believes should form the basis of big strategic decisions that states make, then I fear that his interpretation of statecraft is rather different from that of these Benches. A fundamental of international relations over centuries has been the recognition that the national interest changes over time. It needs to account for a country's security needs, its geographical position in relation to its neighbours and, above all, its understanding of the world around it, against a backdrop of history. If all we need is a quantification of costs and benefits, we can obtain that in numerous library papers, think-tank reports and business analyses. We would not need a committee to tell us the answers. The noble Lord himself is prodigious in obtaining information on these matters at considerable effort and cost.

The evidence already tells us that the economic case is persuasive. The UK is part of the world’s largest single market in GDP terms: some £10.5 trillion in 2009, with 500 million consumers interacting without tariffs. If the internal dynamics of so many people trading is not sufficient, it also attracts benefits in the form of investment flows into the UK. Half of the overall stock of foreign direct investments in the UK now comes from EU member states. This investment has been augmented through our membership by an increase in non-EU FDI as well. That has been growing since the implementation of the single market, probably as a consequence of our membership of the EU. If we look at the US share of inward investment stock—some 27 per cent of the total in 2007—it is estimated that a significant proportion of this has come here because we are a hub into EU markets.

The implications of withdrawal would immediately be felt in a drying up of external investment. Why would a large corporation wish to base itself in the UK, when Ireland offers a considerably lower corporate tax rate, where skills levels are at least equal if not superior, and where English is spoken as well? What of FDI from the EU itself? Those companies own £315 billion of stock in the UK, which is about 50 per cent of total UK inward stock. Would they still feel the climate was conducive to a presence in the UK if we were no longer part of a common standards and regulatory regime?

At the current time of such singular austerity, it is also surprising that UKIP appears unconcerned about the impact on employment. The House of Commons Library research papers estimate that 3.5 million jobs, 10 per cent of the UK's workforce, are linked to the export of goods or services to the EU. So UKIP’s message would be that we must have our splendid sovereignty, and if all it gives us is an unemployment rate of some 20 per cent, well, that is no matter.

However, the case for sovereignty is also mistaken. It is collaboration with partners that UK companies want. Ask BAE Systems what European collaboration means for research, development and jobs. Would we have played a part in Airbus or the Eurofighter from our splendid isolation? EU membership gives us greater clout through collective action. In the geopolitical sphere, this becomes all the more important. Does the noble Lord believe that our membership of the UN Security Council would be sustainable today if we were not, with France, speaking for the EU? Could we have mounted the action in Libya without support from all the EU countries which worked alongside us? Could we take part in the quartet on Israel/Palestine if we were outside? Could we be part of the E3+3 negotiations on Iran without EU membership? Would we be capable of effective action on the environment without working through the EU, or have the clout to negotiate beneficial trade agreements on our own with some of the most important emerging economies outside the EU?

I could go on and on, but we will have considerable time when the Bill comes to Committee, so I will stop here. I look forward to pointing out the manifold benefits of our membership of the EU as we go on.