Finance (No. 3) Bill

John Baron Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 8th January 2019 Commons Chamber

[Jonathan Reynolds]

This group of amendments relates to the tax and fiscal implications of the UK’s withdrawal from the EU.

Throughout the last year Parliament has been asked to approve a series of Bills giving the Government the power to deliver every type of Brexit deal conceivable, and this Finance Bill is no different. I said when closing the Second Reading debate on the Bill for the Opposition that this approach was one of “give us the powers now and we will make the decisions later,” and as it currently stands Brexit represents the biggest transfer of power to the Executive in modern constitutional history. That is disappointing for anyone who thought Brexit would see greater powers for this Parliament, but it is also a recipe for very bad decisions, and there is a classic culprit in this Finance Bill in the form of clause 89. Innocently named “Minor amendments in consequence of EU withdrawal”, it gives the Government power to amend tax legislation without any of the usual due process in the event that the UK leaves the EU without a deal.

The Government always tell us—I am sure they will do so again—that this is simply a safeguarding provision that we will never have to use, but all of us here today know that as it stands the Government have absolutely no chance of getting their deal through, because that deal does not deliver the basics of what this country needs. It does not deliver smooth, low-friction borders for manufacturing and supply chains, nor does it deliver market access for financial services. It also fails to resolve the big question: after we leave the EU, will we prioritise market access or trade autonomy? Because of that, we will almost certainly end up in the backstop arrangements, a halfway house without any say for the UK—the very worst of all worlds.

The new clauses and amendments are therefore of seminal importance, and I am extremely grateful to the Chair of the Home Affairs Committee, my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), for laying amendment 7 before the House today. It is clearly a cross-party amendment, supported by the Chairs of the Treasury, Exiting the European Union and Business, Energy and Industrial Strategy Committees, but it has the Opposition’s support because it offers Parliament a chance to make a clear statement rejecting a no-deal outcome—a statement that cannot come soon enough.

Anyone pretending that crashing out without a deal is simply about resorting to World Trade Organisation schedules is dangerously misinformed. As The Economist magazine said last month:

“A no-deal Brexit is about a lot more than trade—it would see many legal obligations and definitions lapse immediately, potentially putting at risk air travel, electricity interconnections and a raft of financial services”.

It would mean tariffs on trade with the EU, but it would also affect trade beyond the EU as all our current trade agreements negotiated as an EU member would immediately cease to apply. Agriculture, aerospace, the automotive sector—all these major sectors of our economy—would face potentially irreparable damage, and while tariffs may be reduced over time, excise duties and health checks on food, plants and livestock cannot be reduced so easily. Researchers at Imperial College London have calculated that just two minutes more transit time per lorry at Dover and the Channel tunnel translates into a 47 km traffic jam, and for perishable items like food, delays of that magnitude simply could not be sustained. When we add to that higher prices through tariffs and further inflationary pressure from another inevitable fall in the value of the pound, it is a recipe for significant pressure on living standards. That is why the Opposition say that no deal is not a real option.

There has been some suggestion that the Government might accept amendment 7.

[Mr John Baron (Basildon and Billericay) (Con)]

Does the hon. Gentleman not acknowledge that by ruling out preparations for no deal one is in effect tying the hands of one’s negotiating team, which in effect makes a trade deal—which we all, I think, would prefer to leaving on WTO terms—more difficult to achieve and therefore makes leaving on WTO terms more likely?

[Jonathan Reynolds]

The facts are as they are. It is far too late for that. Everyone knows the position that this country is in. The Government have run down the clock. They lost their majority through a general election that they did not need to call, and it is far too late to start applying the logic that might have applied several years ago. Because of that, our vulnerability is evident for everyone to see. No one should underestimate the likelihood of a no-deal outcome at this stage. No one should be pretending, through semantics or parliamentary chicanery, that we might be able to present no deal as a way of giving us greater leverage in negotiations. I am afraid that the Government have got us to the point of ruin if that is the strategy that Conservative Members wish to pursue.

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It is clear that Brexit can happen without this country, or this Government, having to undermine our economy, our constitution and our values as a country. Those who have signed amendment 7 represent different parties. We have different views on Brexit and the way forward. We have different views on the 2016 referendum and how we voted in it, but it is right that parliamentarians from all parts of the House should rule out the most damaging option that could happen on 29 March.

[Mr Baron]

My right hon. Friend is very gracious in giving way. Does she accept that the UK trades profitably with the majority of the world’s GDP on World Trade Organisation terms? Therefore, this is not the cliff edge or crashing out that many people paint.

[Nicky Morgan]

I have great respect for my hon. Friend, but I think that it would have been better to have had this debate in 2016 rather in 2019, because the honest truth is that the Brexit that some Members on these Benches and some people out in the country say that they want was not outlined in any way, shape or form in the 2016 referendum. I refer to one Member, who said at the time, “Only a madman would leave the single market.” Yet now, that is exactly what he is proposing should happen.

I do not agree with my hon. Friend the Member for Basildon and Billericay (Mr Baron) about the advantages of WTO, and I will tell him why: if it was so good, Members who are backing the WTO option—a no-deal option—would not be so keen to get into negotiating free trade agreements so quickly with countries around the world. I do not know whether it was my hon. Friend, but one Member just now talked about trading with America and China, yet free trade agreements with America and China are touted all the time by those in favour of Brexit as agreements that need to be negotiated as quickly as possible.

The honest truth is that to make trade work around the world, all countries will seek to enter into agreements with countries they want to trade with in order to lift or to lower tariffs and non-tariff barriers. That is what we have done, very successfully, in our relationship with the European Union since we joined over 40 years ago.

[Mr Baron]

May I intervene?

[Nicky Morgan]

Very briefly.

[Mr Baron]

My right hon. Friend is being very gracious and I very much appreciate that.

Many of us in this place—I would like to think the majority of us—would prefer a good trade deal to WTO. That is not inconsistent, but I think what my right hon. Friend misses is that on a bad deal versus WTO we have got to get the balance right, because the EU has had such a bad track record on negotiating trade deals. We trade with the rest of the world on WTO terms very profitably and very successfully, even though many of us would prefer a good trade deal.

[Nicky Morgan]

Trade deals are immensely complicated. While Members know how I voted in 2016, I accept that this country will be leaving the European Union on 29 March—with regret, I have to say, but I do accept it—but one of the debates that we have not even started to have is how the House is going to approach the approval of trade deals. I can tell my hon. Friend that this is a real worry to those who are going to be negotiating those agreements. We saw with the Transatlantic Trade and Investment Partnership just how politically contentious that agreement was, even though it did not even reach the House as an agreement. We are going to spend the next few decades in the House negotiating and approving trade deals, which everybody, for various constituency reasons, will have problems with.

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[Yvette Cooper]

My hon. Friend is exactly right. This is about dealing with risk, delays and increased costs. There is the risk that border delays will hit tight cross-border supply chains, but the CBI also estimates that the impact of WTO tariffs will mean a £4 billion to £6 billion increase in costs on our exports. The Environment Secretary—the leave campaigner himself—has said that WTO tariffs on beef and sheepmeat will increase by over 40%.

[Mr Baron]

The right hon. Lady is being very generous in giving way, but may I encourage her to temper her dire warnings about WTO terms? There were many forecasts and predictions from business organisations, the Bank of England and the International Monetary Fund about the disastrous consequences if we voted to leave the EU in 2016, including predictions of 500,000 extra unemployed by Christmas 2016. Those predictions did not materialise because investment is about comparative advantage such as low taxes and more flexible labour market practices. That is what determines investment at the end of the day.

[Yvette Cooper]

I am not drawing on macroeconomic predictions about the overall impact on the economy, although I note that there are predictions of a 9% reduction compared with the level at which we might otherwise be. I am actually focusing on the microeconomic impact on individual businesses across the country of simply seeing those costs go up. That is a real impact of the tariffs. It is not about confidence, levels of investment and so on; it is about the real impact of those costs on consumers, manufacturers, exporters and importers that is the real consequence of WTO tariffs.