Baroness Vere of Norbiton
Main Page: Baroness Vere of Norbiton (Conservative - Life peer)
Baroness McIntosh of Pickering
To ask Her Majesty’s Government what assessment they have made of the impact on the economy of failure to agree a transition deal with the European Union.
Baroness Vere of Norbiton (Con)
My Lords, because there are so many wonderful speakers and so little time, I will start to look fierce when the clock says three.
Baroness McIntosh of Pickering (Con)
My Lords, I am delighted to have secured this timely debate, and I look forward to contributions from other noble Lords, especially the Minister. I refer to my interests in the register. I also worked as an EU lawyer in Brussels and advised MEPs before myself becoming an MEP. As an MP, I chaired the EFRA Committee, where some 80% of the work originated from EU directives and policies. I am also extremely proud to be half Danish, and I studied at the University of Aarhus.
Yorkshire and other parts of the UK have benefited hugely from our membership of the EU. Examples include current payments to farmers, both direct payments for producing farm products as well as stewardship schemes for environmental benefits, and financial services in Leeds, York and London have flourished within the single market. Leeds Bradford Airport and the Humber ports also provide a gateway to Europe for our goods, services and people to access the EU market.
Despite this, the electorate was split down the middle on the referendum, with only 37% voting for Brexit—52% of the 70% who voted. Many who voted remain stand prepared to change their minds once convinced that it really is in our interest to leave the European Union. Only 18 months are left to finalise the agreement. However, talks leading up to Brexit and the smooth transition afterwards appear to be stalling, which is why I have sought this debate today, to consider what the impact will be on the local and national economy in the event of there being no transition period or no deal being reached at all—and therefore no smooth transition and implementation period following our exit from the European Union.
As the UK applied to the EU Commission to set Article 50 in motion only in March, and negotiations started on 19 June, it would seem extremely precipitate to threaten to walk away after only four months of talks. The UK’s initial opening gambit was somewhat unfortunate in tone. However, the Florence speech which the Prime Minister gave last month represents an altogether more moderate and conciliatory approach. One way for the UK to capitalise on the new mood music and progress the talks would be for it to suggest hosting the talks, or one round of the talks, in London. That would be a positive idea and might be well received by our current partners.
The Prime Minister has said that on the day we leave the EU we will leave the single market and the customs union because we do not agree to the four pillars—the free movement of goods, services, capital and people—or the jurisdiction of the European Court of Justice. Yet she states that we want to carry on trading on the same terms. How can that happen? This smacks of having our cake and eating it, and we have been warned that that is specifically not on the table.
The Government have indicated that they are prepared to walk away from talks without a deal or a transition period, with the Treasury committed to spend £250 million on preparations for such a scenario. Yet transitional arrangements are essential to give businesses more time to plan and eventually to create a new relationship between the UK and the EU. When discussing transition, it is vital to consider the nature of this relationship and the effect it will have on industry.
In farming, there are three potential outcomes of a future trade relationship, none of which guarantees increased production levels or farm-gate prices, although each could threaten higher costs for consumers. Farming confidence, which is key to investment and productivity, has already fallen sharply in the last two years. Continued access to EU workers is essential for the agri-food and hospitality sectors, as it is for the care sector and the NHS. The pound’s fall in value has had a huge impact on the economy. Falling prices have boosted exports yet also increased the price of imported materials. Transitional arrangements would increase certainty for seasonal and other EU workers as well as for the value of the pound. Such arrangements would also allow the Government more time to implement a new domestic agricultural policy to support farming.
The Government, other than stating that the UK does not wish to remain subject to the jurisdiction of the European Court of Justice, have not explained what the dispute resolution mechanism will be for all those businesses that will still be buying and selling goods with our current EU partners. Such a scheme must be agreed by both sides in advance of any potential trade dispute.
There are many other outstanding issues. What will the customs and excise arrangements be? What will the costs be of putting those in place? How will we avoid the imposition of tariffs and quotas or, worse still, non-tariff barriers? Will financial services be allowed to passport their existing services within the EU? What is the status of the UK within the World Trade Organization? When will we become a member of that organisation in our own right as opposed to negotiating as part of the EU? How long will it take the UK to negotiate each free trade agreement with third countries, as they all lapse on the day that we leave? Is it the UK’s intention to apply under Article 127 to leave the European Economic Area? How costly will the physical checks and inspections at borders be for food, drink and other perishable goods and products?
To some, the US appears to be a preferred trading partner. However, the US rigorously adopts a protectionist approach. It does not, for example, allow foreign carriers to pick up and drop off on domestic air routes, and the aggressive approach that it recently demonstrated against Bombardier is an early indicator of future behaviour. The US and other non-EU countries such as New Zealand have objected to proposals agreed by the EU and the UK on how to split World Trade Organization tariffs on goods post Brexit. It is also a puzzle why the Department for International Trade has appointed a non-British person—a New Zealander—to lead negotiations for future trade deals when there are so many experienced British nationals to choose from in the EU Commission who are already negotiating at a very senior level and who would have seemed a far more appropriate appointment.
Another question is: what can we offer Commonwealth countries in a bilateral trade deal when they already enjoy preferential access to the European Union through ACP-EU membership, strongly encouraged by this country? One of its first achievements to be heralded was the setting of a fair and stable price for sugar.
Britain must demonstrate that it wants to make the best trade deals for Britain, not just any deal at any cost, which could have the potential to compromise our high animal health and welfare standards—for example, by accepting hormone-induced beef and chlorine-rinsed chicken from the United States. We should also be sensitive to the concerns of our near neighbours such as Ireland, where the common border is of concern. Effectively that becomes an external border, yet both sides of the border agree that they want no physical barriers. The EU has made this border issue, along with free movement and the rights of EU citizens, a top priority in these negotiations.
A particular sticking point has arisen over the third major EU priority—the budget: the amount that the UK will contribute to ongoing commitments. These include not just the salaries and pensions of British nationals—such as me—who are or have been officials of the EU institutions, but programmes such as Erasmus, which allows university students to study in other EU countries. There is also Horizon 2020, the EU research and innovation programme for companies, and EASA, the European air safety authority, which regulates licences for airlines.
The Government’s priority is to proceed rapidly to the next stage of negotiations, but what are the alternatives for our future relations? We are told that existing models, which are tried, tested and shown to work, are not suitable. Therefore, concluding a new arrangement by March 2019 is a tall order. It is important to recognise that there has never been a trade agreement for services anywhere in the world to date.
Britain is at a crossroads after taking the biggest single decision in over 40 years, with huge implications for the economy, and Parliament needs to have the best available information to hand. It is therefore appropriate and necessary that the impact assessments undertaken by the Government are published so that we can analyse the impact of Brexit on the economy.
Our European partners are bemused and confused. The messages coming from the Government are mixed, depending on the audience. The complexity of disentangling ourselves from administrative arrangements spanning 40 years is immense. Every sector is crying out for certainty. We owe to the people of Britain clarity, certainty and a smooth transition to future opportunities and challenges.