The Government's Plan for Brexit

Iain Duncan Smith Excerpts

Wednesday 7th December 2016 Commons Chamber

[Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)]

I will, I hope, be brief. I support the Government’s amendment, and wish to make it clear that I believe that making great pace in getting ourselves through the process and into the negotiations is the key for whatever the Government do now.

Most people, including the Opposition, fail to define what leaving the European Union actually means. They keep saying that they will not and do not want to frustrate the will of the British people and that that means they do not want to delay the triggering of article 50. But in the same breath—with respect to the hon. and learned Member for Holborn and St Pancras (Keir Starmer)—they go on to qualify what leaving actually means. When listening to him, the definition I heard was that he wants to be a member of everything that we are in as members of the EU now, with one or two small changes—so he does not actually want to leave. In that sense, the purpose behind what the Opposition are doing speaks more of their own problems than of the negotiations that the Government will embark on once we activate article 50. I will say more on that in a moment.

I make no bones about the fact that I voted and campaigned for the UK to leave the European Union. I believe that it is necessary for us to understand what we mean by that—to define it, and then to act on that, as some of my colleagues have already said. Leaving the European Union at its most basic will mean that we will no longer be subject to European law. From that flow the other elements that were debated during the campaign. The public most clearly want to take back control of their borders with the European Union and to take back control of the money raised from them in taxation. Those things cannot happen if we are subject to European law. This, then, is the key element: leaving the European Union means that we are no longer subject to the jurisprudence of European law. That is really quite important. The failure of the Opposition to accept that means that they are not really in favour of leaving, and have not even accepted that we are leaving; they are debating how we stay in with modifications.

On that principle, I remind the House that the Centre for Social Justice published a report about why people voted to leave, called “48:52”. That report made it very clear—even many remainers have said the same—that the public wanted control of migration and they wanted sovereignty returned. I was quite surprised by their using and agreeing with the word “sovereignty”. We are always being told in this House that no one out there cares about sovereignty and that it is an esoteric issue debated only here by obsessed politicians who cannot get away from the fact that no one talks about it out in the country. In fact, sovereignty was the key element that the people spoken to for the report all agreed that they wanted—to take back control, the phrase that we use endlessly when debating this matter.

We are therefore clear about what people wanted. When people say we do not know what the public wanted, that is simply not true. They do a disservice to the general public if they cannot understand what they meant when they voted to leave the European Union. The public were very clear on that. I have heard the Liberals go on about how people voted to leave but did not vote for a destination. Leaving is a destination. It means we are in control of ourselves. This country is not moving. It is staying where it is, but we will no longer be subject to European law. Playing silly games does not help anyone to believe that, fundamentally, politicians understand what they are going through.

Given all that, there is no point during any of the negotiations in our trying to ask the European Union for something that it simply cannot and will not give us. This is the main point. There is no point going to the EU and saying, as a point of special pleading, “We want to be out of the European Union and are going to be free to make our own laws, but will you let us stay in the single market, and can we stay in the customs union?” I fully understand the position of those of my colleagues who want to stay in those elements. That is a wholly reasonable position, but if we are leaving the European Union, staying in those two things does not stand. More importantly, I would not want to, because that would again bring us under the control of the acquis communautaire, and not being so is one of the main reasons for leaving. The Opposition asked for enough detail. The strategic aim is on those points—that is enough detail.

On the customs union, I come back to this simple point. Why would the United Kingdom want to stay in the customs union when one of the key elements behind making the important decision to leave the European Union was getting back the opportunity to make our own trade arrangements with other countries? I would rather we stayed in than stay in the customs union. It seems completely pointless to embroil ourselves in the customs union—to go through all the rigmarole, arguments, debates and rows, only to find that at the end of the day we do not have the jewel in the crown of our making free trade arrangements.

On that point, I have something interesting to say to the House. I discovered the other day that there are now no fewer than five elements of legislation—three Bills, I think, and two amendments to Bills—going through both the House of Representatives and the Senate that pave the way for a free trade agreement between the US and the United Kingdom. So much for the current President’s view that we will be at the back of the queue. It appears that the legislators in Congress see us wholly at the front of it. They know the reason why: we are the great free trading nation of the world. We believe in free trade, and that is the direction in which we want to take ourselves, and, I hope, many others. For us, the rest of the debate, once we get through that and understand its relevance, is about process.

I listened very carefully to the hon. and learned Member for Holborn and St Pancras as he spoke for the Opposition, and I understand deeply the problem the Opposition have right now. The Conservatives were in opposition for a number of years and we were often divided. I was a Leader of the Opposition and I remember it very well. Leading the Opposition is like herding cats and there are a lot of cats sitting on the Benches behind him. They are divided about what they want. They are exposed in a simple position of not really wanting to leave, but recognising that 70% of them now sit in constituencies that voted overwhelmingly to leave. They are focusing on the fact that they run the risk, politically, of being in danger when the next election in called.

I understand fully Labour Members’ need to somehow try to confuse the issue with this particular agreement in relation to the amendment. However, the Government amendment is very clear. It sets a date by which article 50 has to be invoked. By not voting against the amendment, the Labour party will be giving the Government a blank cheque to go forward and invoke article 50 without any real caveats. I am wholly in favour of that, I have to say, because I support the Government, but I did not think Labour Members were supporting the Government. I welcome them to that position, although some of my hon. Friends absolutely deplore them for doing so. I see from the shaking of heads that many on their own Benches deplore the weakness they seem to have shown, but I congratulate them—

[Mr Speaker]

Order. I was momentarily distracted by another hon. Member speaking to me. The right hon. Gentleman was a beneficiary for a few seconds, but I am afraid his time has now elapsed.

--- Later in debate ---

[Mr Peter Lilley (Hitchin and Harpenden) (Con)]

I want to make two main points. The first is that the Government’s position is much clearer than many Opposition Members are willing to believe and that it narrows the range of outcomes very considerably. The second is that what matters as much as, if not more than, the Government’s position is the position of our partners in Europe, yet no one on the Opposition Benches has mentioned that—there seems to be a sort of arrogance in suggesting that we can say, “We want this and we’ll get it.” Or perhaps it is subservience in saying, “We want this and we’ll, give any concession in order to obtain it.”

The Government’s position has ruled out three options. First, we will not be part of the internal market of the European Union. I use the term “internal market” because that is what it is called in European law. There is no such thing in European law as the single market. To be a member of the internal market, we would have to be a member state subject to all the laws of the European Union, and the Prime Minister and the Secretary of State today have said that we will not be subject to the European Court of Justice.

Secondly, we will not be members of the European economic area, because all members of the European economic area have to accept free movement, and the Government have ruled that out. On top of that, we cannot negotiate service deals because we do not have control over the laws governing all our service industries. This was described during the referendum campaign by the current Chancellor of the Exchequer as the worst of all possible worlds, and many others on that side of the argument supported him. Now, however, they suddenly want to be part of that worst of all possible worlds.

Thirdly, we cannot be subject to the common external tariff of the EU because we are champions of free trade, according to the Prime Minister. We set up a Department for International Trade that has to be able to negotiate tariffs. We also want to cut the tariffs on products that we do not produce—including food and clothing products on which the EU imposes very high tariffs—because those tariffs are damaging to the just-about-managing people in this country. So those three options are ruled out, which leaves two realistic options.

[Mr Iain Duncan Smith]

May I give my right hon. Friend one good example of this? It relates to the import of oranges. Very recently, the customs union has slapped on a tariff increase from 3% to 16%, solely to protect some producers in Spain. That raises the cost of buying the products here in the United Kingdom, so food is now more expensive as a direct result of interventions in the customs union that Opposition Members want to be part of.

[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.

--- Later in debate ---

[Sir Oliver Letwin]

He did. He did not succeed in having his hands not bound, and I repeat that the result was a catastrophe.

[Mr Duncan Smith]

The Maastricht treaty and internal negotiations on being in the EU are wholly different from leaving the EU. The strategy for those was about remaining in the EU—all the rest was detail for debate. Here we are debating something strategically quite different: we are departing from the European Union, including the European Court of Justice and various other elements. Too much detail on that will delay the whole process and make it impossible to reach the agreement that my right hon. Friend is talking about.

[Sir Oliver Letwin]

I happen to agree with my right hon. Friend, but my point goes beyond that. It was never suggested, even during the Maastricht debates, that there should be a justiciable mandate. It has never been the case in the course of our island’s history that the prerogative power of making treaties was constrained by a justiciable mandate, still less in the case of a negotiation of this complexity, as my right hon. Friend has said.

--- Later in debate ---

[Mr Baker]

I do agree. It would be quite wrong for us to pay a market access fee. As my hon. Friend the Member for Wellingborough (Mr Bone) said, they sell us more than we buy from them, so perhaps they should be paying us a fee. Of course, the facetious nature of his remark, if I may say so, indicates the fallacy at work. It is one thing for us to cover the costs of programmes in which we participate but quite another simply to pay for the privilege of selling.

I offer some other things that the Government might consider saying, and that would not harm our position, when they set out their framework agreement. We could state our intentions on third-country passporting for deemed equivalence and mutual recognition, particularly in relation to the financial services industry. I recommend the Legatum Institute Special Trade Commission’s report on that subject. We could say that our withdrawal agreement will cover trade and non-trade aspects of our relationship, including, in particular, those covered in the magisterial 1,000-page document from Business for Britain. No one can say that there was not plenty of high-quality research available before the vote. We could say that we will have mutual recognition of products, standards, licences and qualifications. We could explain trade facilitation. We could talk about territorial waters and our intentions there. We could talk about our intentions for the aggregate measure of support in agriculture.

The Government could explain how the great repeal Bill will work, how transposition of EU law into UK law will work, what will happen when something needs to be amended or repealed and what exceptions there will be. I believe we can do much better on competition law—in particular, in driving out anti-competitive market distortions—than the EU currently does. We could explain our process for trade deal ratification. We need to say more about how WTO rectification will work. There has already been a written ministerial statement, but more can be said.

We need to explain to our trading partners all around the world our willingness to liberalise, to be more free-trading and to ensure that we are able to lift out of poverty people in some of the poorest agricultural regions of the world who are currently excluded from trading in a proper manner.

[Mr Duncan Smith]

Speak for decency.

[Mr Baker]

I am grateful to my right hon. Friend. We need to help those people to build their way out of poverty through trade.

I would like to give the Government an example of a form of words that could be used to reassure industry. If I make mistakes on this, they are my own, but this is derived from some advice from a trade negotiation lawyer. We could say: “The terms of our withdrawal agreement will ensure no UK-owned or UK-based manufacturer will be disadvantaged by our exit. Both EU and UK manufacturers seek tariff and barrier-free access to each other’s markets, and we will seek to deliver it with a broad, deep and permanent free trade agreement. We intend that manufacturers in the UK will either pay no tariffs or that they will have the opportunity to take advantage of a fully WTO-compliant tariff drawback system. UK manufacturing, after we leave the EU, will be more successful, more competitive, and lower-cost.” If the Government made that statement, everyone would begin to understand that our future will be far brighter once we have left the European Union, taken back control and made our own way.

I leave the House with this thought: the Legatum Institute Special Trade Commission proposes that, if we implement the very best in contemporary trade practice, we can add an extra 50% to gross world product in the next 15 years. That means unemployment at 2% in the UK, no deficit and billions of people lifted out of poverty.