The Government's Plan for Brexit

George Kerevan Excerpts

Wednesday 7th December 2016 Commons Chamber

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I come to this debate from two positions. First, I am a Scottish National party Member from Scotland, which voted to stay in the EU. We were told that this is a family of nations, and as such we would expect a member of that family to be respected—as, indeed, the EU respects its members. Secondly, I am the Chairman of the newly formed International Trade Committee, and it is to that that I shall direct most of my remarks.

The Prime Minister talks about Brexit meaning Brexit, but I have spoken to a number of economists about that. Indeed, I am indebted to a number of economists of various shades and political persuasions: Angus Armstrong of the National Institute of Economic and Social Research; Patrick Minford; Professor Ian Mitchell; Professor Ian Wooten of Strathclyde; Dr James Scott of King’s; and Dr Jim Rollo of Sussex University, as well as legal experts from Cambridge, University College London and the London School of Economics. Brexit actually means about seven options. It means: do we stay in the European economic area? We can still see the video of Nigel Farage and Daniel Hannan saying before the referendum that leaving the EU meant we would be like Norway. The question was: should the UK remain a member of the EU or leave the EU? The seven options include the EEA, EFTA and the currency union. We could not get an answer today at PMQs or from the Secretary of State either.

Another option is to trade at WTO levels. That would mean that we need to have our schedules accepted at the WTO. I see that the Secretary of State for International Trade was in Geneva last week, probably discussing that. If we do not get the schedules agreed, we will be at WTO-minus. That is a possibility because of the difficulties over agriculture. Some 98% of the schedules might well be agreed, but those in the agricultural sector should be very scared. Of course, some people will have voted for Brexit on the basis that they do not want to trade so much as a stone axe ever again with Europe, but they are probably the editors of the Mail, The Sun and the Express.

We find ourselves in great uncertainty. Investors are uncertain. If we go to WTO rules, what will that mean for them? What will it mean for employers, too? We have absolutely no idea where the Government are going. There is great uncertainty for the Irish, too. This morning I met the Irish Foreign Minister, Charles Flanagan. He did not know what the ask from the UK Government is. This is our next-door neighbour, but they do not know where we want to go.

[George Kerevan (East Lothian) (SNP)]

Does my hon. Friend agree that the Government could show good faith by agreeing to reveal their goals and negotiating strategy with the devolved Administrations under Privy Council rules, which would put aside the whole question that the Government cannot reveal their negotiating hand?

[Mr MacNeil]

My hon. Friend makes an excellent suggestion; perhaps the Government should explore that further.

We should think of our other neighbours, not just the Irish. What does this mean for the Isle of Man, for Jersey or for Guernsey—for people we have close links to? What, indeed, does it mean for Gibraltar and the Gibraltarians—people I respect greatly and have very close links to myself?

We find ourselves in a very difficult situation here in Parliament. The Government have created a problem of their own making because of the Prime Minister’s naivety in not taking this process forward by putting a simple measure before Parliament. That would have stopped us from needing to go to the courts in the first place. Now the devolved Administrations have woken up to the fact that they can be involved, and maybe—probably—the Supreme Court will rule that the process requires the consent of the Scottish Parliament, in which case Brexit is finished, Brexit is over and Brexit will be blocked.

We see also that Europe is dictating the pace. The Barnier declaration yesterday that the UK will have 18 months to negotiate after triggering article 50 shows that it is dictating the pace. Given the experience of their negotiators, Europe will probably be negotiating the terms, too. That is because I fear there are more experienced negotiators in the tiny Faroe Islands than in the United Kingdom, and the UK negotiators will probably be scalped very quickly.

We need to know where the UK plans to go. The question in June was: should the UK remain a member of the EU or leave the EU? Nobody voted to leave the European economic area. Nobody voted to leave EFTA. Nobody voted to leave the customs union. Arguments afterwards that that question gives a mandate for those subsequent steps are nonsense. There is no mandate to take these next steps. Leaving the European Union can mean being like Norway or like Iceland, as Daniel Hannan, Nigel Farage and a number of Conservative Members said before the referendum, before changing their tune quite markedly afterwards.

We need answers. We need to know what the destination is, because a lack of a strategy is not what people in the UK need for their jobs, investments, industries, employment, families and communities. No answers is not a black Brexit or a white Brexit—or a red, white and blue Brexit. No answers is a yellow Brexit—it is a cowardly Brexit. It is a Brexit that shows that this Government have absolutely no idea where they are going, and it is a Brexit to keep together our ragbag of Brexiteers who each want a different one of the seven options. When the Brexiteers see which of the options the Government choose, they are going to fight like cats in a sack.

That is the difficulty that the UK Government face. They cannot consult the devolved Administrations and they cannot consult their European friends because they cannot consult properly and meaningfully around the Cabinet table as each member of the Government supports something different. There is going to be mighty trouble in the UK Government when they do decide in March.

[Michael Gove (Surrey Heath) (Con)]

It is a privilege to follow the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) and a superb argument against secession from a Scottish nationalist. I thank the right hon. Members for Leeds Central (Hilary Benn) and for Doncaster North (Edward Miliband) because the challenge they put to the House is one to which we should all attempt to rise: how can we ensure not just that we respect the result that 52% of people voted for, but that we involve the 48% who voted remain for a variety of reasons? While I am grateful to them for their speeches, which I thought were for the most part very constructive, I was disappointed in the Front-Bench speech from the hon. and learned Member for Holborn and St Pancras (Keir Starmer). He spoke for nearly 40 minutes, longer than some Pinter plays and many Haydn symphonies, and he spoke on what he referred to as the “defining issue” facing the UK, but he did not reveal at any point what Labour’s position is on our future relationship with the EU. He did not reveal on behalf of the 48% for whom he professes to speak whether he wants to stay in the single market or the customs union. What we had was 40 minutes of pious vapouring—a hole in the air masquerading as an argument.

One of the reasons why it is so important that we hear from the 48% is that we know what the 52% voted for. Some in the course of this debate have tried to complicate and obfuscate, but it was made perfectly clear not just by the Vote Leave campaign, in which I was privileged to play a role, but by the then Prime Minister and Member for Witney; by my right hon. Friend the Member for Tatton (Mr Osborne), the then Chancellor of the Exchequer; and by Lord Mandelson. It was made clear by every single one of the leading representatives of the remain campaign that voting to leave the EU meant leaving the single market. There should be no ambiguity about that point. The public were fully informed and they took their decision in full knowledge.

That is one of the reasons why I am glad our Prime Minister and Chancellor of the Exchequer—both, it must be said, among the 48% who voted remain—are very clear that the result must be respected, and that means ensuring that the votes of 17.4 million people and their determination to leave the single market alongside leaving the EU should be acknowledged.

[George Kerevan]

Is the right hon. Gentleman telling us that leaving the single market is the Government’s position?

[Michael Gove]

I am telling the hon. Gentleman that that was the position taken by the British public, including more than 1 million people in Scotland and including many more people in his constituency than voted for the Scottish National party.

Not only do we need to respect the result and what the 52% wanted, but we need to acknowledge some of the concerns put forward by those who articulated the case for remain. There were two powerful concerns that weighed with me. The first was the prospect of an immediate economic shock, should we leave. That was a view put forward by the Governor of the Bank of England and a number of other distinguished economists, but we can now see that, while their concerns were expressed sincerely, they did not come to fruition. The point was made at the time—[Interruption.] I am grateful for the sedentary intervention from the hon. Member for Nottingham East (Chris Leslie), but the point was made at the time that there would be an immediate shock not just to Britain but to the world economy. That shock did not materialise. In fact, since we voted—

--- Later in debate ---

[Mr Lilley]

My right hon. Friend makes a good point, and I would add that we do not easily manufacture oranges at scale in this country.

There are two realistic options. The first is that we continue with roughly the status quo: tariff-free trade and no new barriers to service trade. The EU already has free trade agreements that do not require free movement with 50 countries. The second is that we trade with them on WTO terms and they might try to make trade in our service and financial services industries a bit more difficult. The important thing is that both options are actually very simple to negotiate. Going from zero tariffs to zero tariffs is much easier than negotiating a trade agreement between Canada and the European Union, where each side has 5,000 or 10,000 different tariff lines and must trade them off against each other. We also have exactly the same rules on products and so on as our partners in Europe. The status quo would therefore be simple to negotiate. The WTO option does not even require negotiation; it is what happens if the negotiations have no successful outcome. Both are simple and could be done quickly.

I also believe that both options are acceptable to the UK. In the view of most people, retaining the status quo would obviously be the superior option if we could get it immediately, but if we go to trading on WTO terms, the average tariff would be about 4%—much less than that on average on manufactured products, but the 4% includes agricultural products. We have just experienced a 15% devaluation against the euro, so our exporters will, on balance, be much better off even with those tariffs, whereas exporters to us will have to face a 15% hurdle plus that 4% average tariff, so they will be much worse off.

It is important that we emphasise to our negotiating partners that although we might prefer to continue with the status quo, if they do not want it, we are willing to walk away and trade on WTO terms. Quite a few Opposition Members have been trade unionists and are used to negotiating, but not many people in this House are. We cannot successfully negotiate unless we are prepared to walk away with no deal. Ultimately, however, it will be our partners in Europe—the EU 27—that will choose between whether we continue with roughly the status quo or whether we move to WTO terms and some obstacles.

[George Kerevan]

Will the right hon. Gentleman give way?

[Mr Lilley]

I am sorry, but I will not.

Our EU partners will choose. If their primary concern is the economic wellbeing of their people, they will choose to continue with free trade. If their overriding primary concern is political and if they want to punish us and be seen to punish us, they will go with WTO terms. In practice, they will punish themselves far more, and we should make that clear. We cannot negotiate our way into making them choose one option over the other. We can perhaps try to persuade them, their industries and their electorates that they will be much better off if they continue to trade with us on roughly the current basis than if they move to WTO terms, under which they will be the principal losers. We are their single biggest market. A fifth of all German cars come here, much French wine comes here, and so on. Let us go to them and say, “It is a simple choice, make that choice”—