Brexit: Withdrawal Agreement and Political Declaration

Baroness Noakes Excerpts

Thursday 6th December 2018 Lords Chamber

[Baroness Noakes (Con)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Kerr of Kinlochard. He knows that he and I differ considerably in our basic attitudes to Europe, but it may surprise him to find that until he got into the last couple of minutes of his speech, I agreed with practically every word of it.

I voted enthusiastically to leave the EU, which puts me with the majority in the country, although I recognise that in your Lordships’ House I am in the minority. Even if we have a vote at the end of our debate, which I hope we will not, it will have no legal significance. The important Divisions are being taken, quite rightly, in the other place. It was therefore tempting to sit out on the sidelines of this marathon debate. But it will form part of the recorded history of our exit from the EU and I very much want to ensure that the views of the 17.4 million who voted to leave are a full part of our proceedings.

I long to be out of the EU, but not on the terms of this withdrawal agreement. We hand over £39 billion and in return get the prospect of being locked into a relationship with the EU via the backstop, which we can neither influence nor escape from. If there had been any doubt about the legal effect of the agreement, the advice of the Attorney-General released yesterday was devastatingly clear. The Financial Times has reported that neutralising British leverage was one of the main reasons the EU insisted on the binding backstop, and that the Commission believed that it would locate the balance of power with the EU in all later negotiations. I believe that is the correct analysis. We will enter the backstop at the will of the EU and we will stay there until the EU consents to let us go. If we are allowed to go, we will undoubtedly pay a price—and it probably will not stop at fishing rights and Gibraltar. We will have taken back control of very little.

The CJEU creeps into every nook and cranny of the withdrawal agreement and the political declaration. We may have a theoretical ability to negotiate trade deals but a combination of the backstop and uncertainty about the nature of the ongoing trade relationship with the EU means that we have no effective bargaining power. I cannot support the withdrawal agreement, but neither can I support the Motion in the name of the noble Baroness, Lady Smith of Basildon. I agree that it will damage the UK, but I believe that exiting without an agreement is an outcome that should now be accepted and prepared for in earnest.

Last week, the Chancellor and the Governor of the Bank of England came out to scare us about how awful it would be if we left on no-deal terms. Ahead of the referendum, they told us how bad it would be if we dared to vote leave. They were wrong then and I have little doubt that they will be wrong again. The Treasury’s central estimate is that if there is no deal, after 15 years and compared with staying in the EU, GDP will be lower by 7.7%. We should be clear that the economy will continue to grow and that GDP per capita will continue to grow; we are talking about only a bit less growth each year. The underlying assumptions, several of which are questionable, would not have to change much to show better results, especially over a timescale as long as 15 years. If a bit of optimism and belief in our future outside the EU, which I certainly have, underpinned some of the assumptions, those forecasts would look very different indeed.

The Bank of England’s offering was intentionally scary. The governor’s language guaranteed that the media headlines were “Worst financial crisis since World War Two” and “economic catastrophe”. Behind the headlines, however, was the truth that the Bank was merely describing scenarios and not balanced appraisals of likely outcomes. The no-deal scenarios were designed to be an extreme test of the banks and the financial system. Those of us involved in financial institutions—I declare my interest as a director of RBS—are very used to the Bank’s regular stress tests. They typically involve stresses of one in 100 or worse and the no-deal ones are in that range. The Bank of England was clear that the banks would withstand the test and continue to support the economy.

The noble Lord, Lord King of Lothbury, as a former Governor of the Bank of England, has expressed his concerns this week. Paul Krugman has challenged the Bank’s methodology and assumptions and said that he was worried about what he called,

“motivated reasoning on the part of people who oppose Brexit for the best of reasons”,

which I think is code for bias. I worry about whether the reputation of a politicised Bank of England can be restored in the future.

I do not doubt that an exit without a deal will mean some short-term disruption, but how much will depend on the extent of co-operation with the EU. It ought to be in our mutual interest to minimise disruption. It is all doable—trains, planes, lorries, goods and people—if there is the will on both sides. Since both we and the EU want a free trade agreement, let us start that negotiation now. The outcome may not be perfect but life is rarely perfect and it will be infinitely preferable to the servitude envisaged in the withdrawal agreement. At least, if we exit on those terms, we can keep the lion’s share of the £39 billion to cushion any downside.