Trade Bill

Earl of Clancarty Excerpts

Report stage & Report: 2nd sitting (Hansard) & Report: 2nd sitting (Hansard): House of Lords
Tuesday 15th December 2020 Lords Chamber

[Lord Fox (LD)]

My Lords, the amendment is in my name and I thank other Peers who have put their names to it. It would insert a new clause that places an obligation on the Secretary of State

“to take all necessary steps to secure a mobility framework with the European Union”.

For some time, there was an assumption that any free trade agreement with the EU would include a chapter on mobility and mutual recognition of qualifications. It is clear that even if there is an FTA, no such provision would emerge by 31 December. Therefore, the amendment is a way in which to address the need for the Government to think again and focus on this issue, whether it is through the FTA or in some other way.

At Second Reading, the Minister—the noble Lord, Lord Grimstone—said that his aim was to maximise economic benefit. As I said in Committee, it is surprising, given the Secretary of State’s acknowledgement of the importance of services to trade, that Her Majesty’s Government are so blind to what they are doing by cutting off or making much more difficult the essential movement of people. In truth, the need for mobility has already been recognised in other deals. Indeed, other trade deals have mobility frameworks such as those agreed with Japan, which was presumably put there by the Japanese to facilitate the support of their manufacturing industry and financial sector, and with Switzerland, to allow the free movement of certain financial industry functions. However, in this context, movement between the UK and the EU is much more important in terms of meeting the Minister’s aims of maximising the economy.

As the noble Viscount, the Minister, knows, the UK services industry accounted for over 40% of the UK’s exports to the EU in 2018. As well as the acknowledged financial and banking industries, those exports include legal, accounting, advertising, research and development, architectural and other professional and technical services. Then there are all the creative, musical and artistic areas that involve people who have been moving seamlessly through Europe, adding not just to the cultural richness of our relationship with Europe but to the financial performance of the UK. From January, these sorts of movements will either not be possible or be extremely difficult.

In her speech in Committee to a similar amendment, the noble Baroness, Lady Bull, set out clearly the five modes of services traded across borders. I recommend that the Minister rereads her speech if he can. One of the modes that she raised was fly-in, fly-out. Every month, according to industry, around 10,000 people move between UK and EU manufacturing, more than the Government’s estimate of 53,000 per year. As the Minister will appreciate, they include engineers, technicians and the like, who are providing the services that keep manufacturing going. In return, EU people come the other way.

Let me give an example. I am using the Germany-to-the-UK version and I declare my interest as a vice- president of the German-British Forum. Let us say a German company sells machinery to British industry—as many of them have, to a great extent. That could include the transport, power supply or car industries. In many cases, both the installation of and ongoing technical support for that machinery comes from technicians who come from Germany. They are not necessarily German, but they come from Germany, sometimes at very short notice. If something goes wrong, as of today, a technical team of people who are specialists in particular pieces of equipment, which are often wide-ranging, will fly in. The number of people sent and the individuals in question depend on their availability and the other contracts that the company has.

As it stands, the current immigration policy for tier 5 temporary workers does not appear to cater for this sort of situation, which requires a reliable approach as individuals generally cannot be named in advance and the length and frequency of the stint that they perform when they are in this country are unknown. This is a real issue that has not been borne in mind. I understand that we are talking about the Trade Bill but trade involves the free movement of people to make things happen and make things flow.

Cross-border work is further hampered by the absence of mutual recognition of qualifications. In Committee in September, during the debate on a similar amendment, the Minister—the noble Viscount, Lord Younger of Leckie—said that negotiations with the EU were opening on this matter. That seemed late then, 90 days before the end of the transition period. It would be helpful if the Minister could update us on how those negotiations are going, what sort of mutual recognition regime we can expect on 1 January and, if there is no agreement, what the contingency plan is, so that we can make sure that the valuable skills of the people from the European Union working in this country are recognised and the valuable livelihoods of British people are still alive and kicking.

We are about to plunge into high unemployment; the figures show that unemployment is a very serious developing issue. However, the people being cut off are the sort of people who can to help to grow the UK out of this unprecedented situation. This sort of immigration policy and the lack of a mobility framework sends a message to would-be entrepreneurs from across Europe—people who tended to flock to the United Kingdom because they saw it as a great place, where they were welcome and could work to the advantage of everybody in the country. It is not just about them; it is also about the movement of the people who are not necessarily well paid but form their teams.

This amendment proposes a new clause that places an obligation on the Secretary of State to take all necessary steps to secure a mobility framework with the European Union. Trade is increasingly about people and this Trade Bill ignores this. This amendment requires the UK to negotiate that mobility framework. To fail to do this is to invite the law firms, architectural practices and many other service industries to set up offices that were in this country in the rest of Europe. To fail to do this is surrendering jobs and the considerable tax take they bring to other countries. It is cutting off cultural interchange and opting to make manufacturing in this country harder and less attractive. In short, the process we are entering is disrupting the human supply chain which keeps this country running and growing. I beg to move.

[The Earl of Clancarty (CB)]

My Lords, I am grateful to the noble Lord, Lord Fox, to be able to support this amendment. We do not yet know whether we will get a deal with the EU or what exactly the deal will look like if we do. What we can say is that a no-deal on services will be a no-deal for the country, irrespective of whether we get a deal. The Government and the media have consistently underestimated the importance of service industries, both to this country and as part of our trade with Europe. Service industries are 80% of our GDP, a statistic we have repeated many times in this House. Our services trade with Europe makes up 51% of our services exports. As it stands, Europe is a hugely important market for services—the most important. Due to the significance of geography to service industries, it is one that is frankly irreplaceable.

Services have not been ignored in all quarters. In an interview with the Observer on 1 November before stepping down as director-general of the CBI, Carolyn Fairbairn said that her “really big disappointment”—her exact words—was the lack of help for services in the potential deal. The recent report by the EU Services Sub-Committee, The Future UK-EU Relationship on Professional and Business Services, raises similar concerns —not least those shown by the creative industries. The amendment moved by the noble Lord, Lord Fox, does not specify what the precise nature of the mobility framework should look like. The so-called mobility arrangement that Liz Truss has just signed with Switzerland agrees 90 days’ visa-free work a year. If this a sign of what is to come for EU countries, it will still not be enough on its own for much of the sector—which demands longer stays and ease of movement between European countries. This will be—

[Baroness Scott of Bybrook (Con)]

I am very sorry, but we have a technical problem and nobody else can hear at all. I suggest we adjourn for 15 minutes.

--- Later in debate ---

[The Earl of Clancarty (CB)]

My Lords, in the Chamber at least: take two.

I am grateful to the noble Lord, Lord Fox, for tabling this amendment, which I support. We do not yet know whether we are going to get a deal with the EU or what exactly the deal will look like if we do. What we can say is that a no deal on services will be a no deal for the country, irrespective of whether or not we get a deal. The Government and the media have consistently underestimated the importance of service industries both to this country and as part of our trade with Europe. Services are 80% of our GDP, a statistic we have repeated many times in this House. Our services trade with Europe makes up 51% of our services exports. As it stands, Europe is a hugely important market for services—the most important. Because of the significance of geography to service industries, it is one that is frankly irreplaceable.

Services have not been ignored in all quarters. In an interview with the Observer on November 1 before stepping down as director-general of the CBI, Carolyn Fairbairn said that her “really big disappointment” was the lack of help for services in the potential deal. The recent report by the EU Services Sub-Committee, The Future UK-EU Relationship on Professional and Business Services, raises similar concerns—not least those shown by the creative industries. The amendment moved by the noble Lord, Lord Fox, does not specify precisely what the mobility framework should look like. The so-called mobility arrangement that Liz Truss has just signed with Switzerland agrees 90 days’ visa-free work a year. If this a sign of what is to come for EU countries, it will still not be enough on its own for much of the sector—which demands longer stays and ease of movement between European countries. This will be particularly so for the performing arts, IT and the holiday industry, for instance. Can the Minister supply more details of this arrangement and how it will affect those industries?

In the meantime, it is no wonder that potential clients across many sectors in Europe are now advertising for those who have European passports, while those with only British passports are expressly excluded in such advertisements. This is now the norm, as clients and so much of the sector see British workers as too much trouble and red tape if they are not to be allowed the necessary physical mobility these industries demand. If this is to be the case it will be a tragedy for our service industries. The bare fact is that without a meaningful mobility framework many will lose their livelihoods and others significant job opportunities.

There are allied concerns, some of which the noble Lord, Lord Fox, referred to. It is essential that there is a data adequacy agreement and mutual recognition of professional qualifications. For many, there are concerns about costs. According to the Incorporated Society of Musicians, in normal times over 20% of British musicians travel to Europe at least 11 times a year. The ISM has also calculated that in a worst-case scenario, musicians who carry instruments abroad may incur additional costs of £1,000 a year. Like many who work in services, most musicians are self-employed. Such costs would need to be borne personally, which for many may prove simply too prohibitive.

The creative industries are hugely important financially, and in terms of cultural exchange and soft power. Coming on top of the effect of Covid, all of this will be threatened without a mobility framework in Europe. Moreover, these industries, along with the rest of the services sector, are as much in the dark about a potential deal now, with 16 days to go, as they were four years ago. As I said in Committee, many in the sector are crying out that even now they lack real guidance.

The Government and the Opposition will note that the amendment from the noble Lord, Lord Fox, cuts to the heart of things and is a more focused version of the one he moved in Committee. Purely and simply, it asks for a mobility framework on services. At the same time, manufacturing will also be affected without such a framework because of the importance of servitisation —including maintenance and repair of goods—to those industries, and to which the noble Lord, Lord Fox, referred.

We know that deals that would have allowed better access to the single market will have been offered to the UK. We have also heard what the former Australian Prime Minister, Malcolm Turnbull, had to say on an Australian-style deal on WTO terms, with

“a lot of friction in the system in terms of services”—

surely an understatement. It is essential that a framework for services between the UK and the EU is put in place.

[Baroness Bull (CB)]

My Lords, it is a pleasure to follow the noble Earl, Lord Clancarty. I pay tribute to him for his tireless advocacy on behalf of the creative industries, particularly the music sector. As he pointed out, the amendment does not seek to recreate the past, as was suggested in response to a similar amendment in Committee. It seeks very specifically to secure the continued success of UK services, and in doing so to preserve the employment the sector provides, the economic contribution it generates and, as the noble Lord, Lord Fox, outlined, its potential to contribute to this country’s recovery from the pandemic.

The UK is predominantly a services economy, with services contributing around 80% of economic activity in 2019 and providing jobs for 85% of the UK workforce. It is not a coincidence that the primary destination for UK services exports is the EU’s single market. One of the best-established empirical results in international economics is that bilateral trade decreases with distance. The closer the country, the easier it is to get feet on the ground. Aside from services provided remotely, all modes of service require this physical presence. Thus, there is an inextricable link between mobility and service success.

British in Europe, an organisation representing the 1.2 million British people living in other European countries, gave extensive evidence in June to the Select Committee on the Future Relationship with the European Union on the extent of the problems British citizens will face if they are denied appropriate mobility in Europe. To date, these concerns have been largely ignored, but they are proving to be well founded, with anecdotal evidence emerging of UK passport holders already missing out in exactly the ways anticipated even before the end of the transition year, with employers reluctant to hire UK citizens, job offers withdrawn, and, in one recent widely publicised example, British passport holders excluded from the casting call for the role of a British prince in a new film due to “new Brexit rules”.

Contractors working across multiple European countries face even more complex issues in being obliged to comply with multiple different formalities to gain a temporary right to continue working as a provider of cross-border services. Without a framework in place, British service providers will face exactly this patchwork quilt of unilateral solutions and immigration rules in the different EU countries to which their work takes them. Big companies that have the resources to tailor and adapt will probably survive, but individuals, freelancers and owners of small businesses will once again be the ones to suffer.

These small businesses are also likely to be hit hardest by any failure to secure an adequacy decision with the EU. A recent report from the New Economics Foundation and UCL estimated that SMEs are each likely to have to find between £3,000 and £10,000 to cover additional costs of compliance if they want to continue to transfer data from the EU to the UK, with the aggregate cost to UK businesses in the region of £1.6 billion. This is money that could certainly be better spent, especially as UK business recovers from the pandemic.

Even before Covid, the impact of leaving the EU without a mobility framework to replace the current one threatened the sustainability and the success of UK services. We know that Covid has had a devastating effect on those parts of the sector that rely on human gatherings: hospitality; air travel; the creative industries; arts and entertainment. In the creative industries alone, Labour Force Survey data from the ONS reveals job losses of 55,000, a 30% decline since March and significantly higher-than-average numbers of people leaving creative employment. This is clear evidence of the scale of the crisis in a sector which has, over recent years, contributed over £111 billion annually in GVA.

The absence of a mobility framework will not just put at even greater risk these elements of UK services that are already on their knees but risk also those which have been better able to weather the Covid storm—IT, financial and legal services—because of the barriers that it will impose on the continuation of trade. The UK service sector is one which can claim to be world-leading, and I am still at a loss as to understand why it has received so little attention throughout the Brexit negotiations. That is why I support this amendment, and in doing so, once again ask the Government to do everything that they can to secure an appropriate mobility framework with the EU. This will protect not only the jobs of four in every five UK citizens but the crucial contributions that services make to our economy and, through that, to communities up and down the country.