UK Economy

Kevin Hollinrake Excerpts

Wednesday 29th June 2016 Commons Chamber

[Mr Osborne]

That dialogue is taking place and I assure the right hon. Gentleman that it will continue to take place. We were on different sides of the argument when it came to the referendum, but he shares my view that Britain needs to be open to the world and trading with the world. That means having sufficient airport capacity to fly to the world and to allow the world to fly to us. I am sure that that view is universally accepted across the House, but we will find out.

The key challenge, to which I think we can rise, is working out through collective discussion and decision making the new relationship that we should seek with the European Union. Until we have agreed on an approach, we should not trigger article 50 and begin the process of exiting the European Union. As the Prime Minister said, “triggering article 50” is rightly a decision for the new Prime Minister and the new Government, and it is a decision that we will take at the right time, when we are ready and not before.

The economic uncertainty will have an impact on our public finances that is likely to be both cyclical and structural. The Office for Budget Responsibility will make its assessment of the economy this autumn—let me tell the shadow Chancellor that, to get the best possible forecast from the OBR, we have to wait a little for the dust to settle—and it will be for the new Government under a new Prime Minister to take the decisions about the adjustments that will be required to meet the new fiscal realities, but we should never forget that fiscal stability is the absolute bedrock of economic security. We must be realistic, but I want to reassure the House that our economy remains competitive and open for business—we have the lowest corporate taxes in the G20, more people in work than ever before thanks to our welfare reforms, and our science and our universities are world class.

Let me pick up on a point that has been made throughout the debate in the country and in Parliament. We need to go on forging our links with key partners beyond Europe, such as with China and India. I never thought that we had to choose between Europe and forging new links with the rest of the world. Germany exports three times as much as we do to China, so it is clearly possible to do that within the European Union, but outside the European Union those links are more important than ever before.

I will travel to China next month as part of the G20 Finance Ministers meeting there. To pick up on a point that my hon. Friend the Member for Harrow East (Bob Blackman) made in an intervention, I have spoken to the US Treasury Secretary and the Speaker of Congress in the past couple of days about strengthening our ties with our great ally, America.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Does the Chancellor agree that it is about not just new trade deals but the supply chains that he mentioned earlier and building those customer relationships over many decades, as we have with the European Union? We simply cannot take our trade from Europe one day and move it to the US or China the next.

[Mr Osborne]

My hon. Friend is completely right, but we should not have to choose between the two. It is perfectly possible to do a lot more business with India, America and China while also doing a lot of business with Europe. That would be a key part of Britain’s economic strength in the future. As I have said, in respecting the decision of the British people to leave the EU, we should now be seeking the closest possible terms of trade with the EU not just in goods but in services, including financial services.

The third and final part of the plan that we need to pursue was touched on by the shadow Chancellor—we think of it as a social issue, but it has economic ramifications as well—and that is that we must unite across the political spectrum and offer a very loud and clear message to this country that we have no tolerance of intolerance, hatred and bigotry. We need to send a message of reassurance to all the communities in our very successful, multi-faith, multi-race democracy that we will not tolerate those who want to divide us.

The reports of the graffiti on the Polish community centre in Hammersmith, of the people who have lived in this country for decades being told, “We voted you out”; and of the figures that have shown a big increase in the report of hate crimes all point to incidences that are appalling and unacceptable. It is not the British way. We should unite in condemning it. The Prime Minister and the Under-Secretary of State for the Home Department, my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley), set out some of the additional steps that we are taking to combat this intolerance, but in this economic debate I say to business leaders that they should also play their part and make it clear that intimidating bullying of any kind in the workplace based on nationality or race should be identified and punished. Britain is an open, tolerant and diverse society where people of all faiths and none and of all nationalities and ways of life are welcome, as they have helped to build this successful country.

Therefore, there are three key things that we need to do now: go on ensuring financial stability; ensure that we resolve the economic uncertainty by working together to determine the model for our new relationship with the EU; and send out a strong message that we will not tolerate intolerance. If we deliver on those three parts of the plan, we will be doing the best we can to make this decision work for Britain and to fulfil the instructions of the British people. I must be straight with people in this country: the weeks and months ahead will not be easy, but, as has always been the case in our history, it is during the moments of greatest challenge that our country must demonstrate its greatest resolve, and it often does.

--- Later in debate ---

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to follow the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), who made some fine points. I particularly liked the phrase he coined about moving from free movement to fair movement.

There is a time and a place to take a risk. I started my business in 1992. Many in the House will remember that year and, in particular, 16 September 1992. Unemployment was at 3 million; repossessions were running at 72,000—three times the normal average; and, on that single day, interest rates went from 10% to 12% to 15%. As the House will remember, the day after, we pulled out of something called the exchange rate mechanism, and that was the right thing to do. Many economists said it was the wrong thing to do—they said it was a big risk—but things could hardly have got worse, so it was absolutely the right thing to do.

Look at where we are today: we have one of the fastest-growing economies in the developed world and virtually full employment, meaning that all our young people and our older people can get a job. We had a saying in our business: hope is not a strategy. There was so little strategy from the Vote Leave campaign going beyond our exit from the EU, which was why most business organisations—the Institute of Directors, the CBI, the manufacturers’ federations, TheCityUK—said it was the wrong thing to do. Every leading economist—and even some not-very-leading economists—said it was the wrong thing to do. But of course this was seen as some kind of conspiracy.

It was not just business talking like that but the music industry, the science industry, our research organisations, our technology industry and so on. A report by the House of Lords called leaving the EU a huge risk because of the complexity of withdrawal. It will take at least two years from our giving notice under article 50, but it will take many more years to unwind all the connected legislation. A report in The Times last week said it would take 10 Queen’s Speeches to unwind the legislation. That breeds the uncertainty that businesses do not like.

This is also about trade deals, and not just about trading today with Europe but about opening new trade markets around the world. As the Chancellor said, that is a great opportunity, but businesses cannot simply move their supply and customer bases from one location to another overnight—yet that is what they are being asked to do.

[James Cartlidge]

Is not much of our trade with the rest of the world done through large international companies that locate in the UK because we are in the single market?

[Kevin Hollinrake]

My hon. Friend is absolutely right. A good example are the Swiss banks. Despite Switzerland’s being part of the European economic area, it cannot trade directly with the EU, so it has to base subsidiaries within the EU. Happily, firms such as Credit Suisse and UBS put them in London, as do US banks such as Goldman Sachs, J.P. Morgan and the like. That is why the head of TheCityUK said that the move could cost up to 100,000 jobs in the City of London. Yet this was never dealt with or answered by the Vote Leave campaign. [Interruption.] My hon. Friend the Member for North West Hampshire (Kit Malthouse) shakes his head. The risks are huge, yet the issue has not been properly dealt with.

The impact on car manufacturers has not been properly dealt with either. This is not simply about our opening new trade markets around the world; it is about a supply chain that is deeply embedded throughout Europe. A typical drive shaft for a family saloon car is manufactured in six different countries across Europe. What are car manufacturers to do if tariffs are applied between us and the EU? Just last evening, I was talking to a multinational retailer who had 3,000 members of staff but was moving to new premises with 5,000 members of staff. These people move from London to Frankfurt to Paris just as we would move from north Yorkshire to London, but they face the prospect of not being able to do that. How have we made this decision without talking about these issues and answering these questions?

There is an even bigger issue. Looking at the European Union in such a sensitive stage, I view it as a house of cards, and if the UK pulls our card from the bottom, there is a significant risk that the whole house will implode. A domestic economic risk then moves towards becoming an international and global economic risk, along with a political risk and a security risk. This country’s economy and our prospects for national security could be hugely affected.

We should recall that only a few years ago many European member states were totalitarian states behind the iron curtain, yet they are today free and fair democracies with the rule of law and freedom of the press. The European Union has presided over those member states, making sure that they are focused on prosperity and trade, rather than looking backwards or, even worse, eastwards towards Russia.

All these issues are in play, and there are many positive reasons for remaining part of the European Union. It is about the opportunity to live, work and study right across the continent; it is about peace and prosperity; and it is about tackling some of our huge challenges and economic risks—issues such as climate change, air pollution, drug resistance and tax evasion.

Of course, free movement of people and immigration are the biggest issues that need to be dealt with. I quite understand the public concern about those issues, and I believe that this was not a referendum on the European Union, but on immigration. I understand that we need to deal with it and now we have an opportunity to do so. As the right hon. Member for Birmingham, Hodge Hill and my hon. Friend the Member for South Suffolk (James Cartlidge) said, we need to deal with it in a proportionate way, and to look at the many different solutions to the problem, working together with our European neighbours.

Above all, we must have free and unfettered access to the single market, because the economic consequences of not having it are impossible—too severe—to contemplate. All the way through the referendum campaign, I wanted to remain and reform, but that option is no longer available. What we must now do is to work together with our European counterparts to make sure that we get reform. We must work collaboratively with our European partners to make sure that we have a fair economic settlement that works for both the European Union and for the United Kingdom.