Brexit: UK-EU Relations (EUC Report)

Lord Callanan Excerpts

Monday 2nd July 2018 Lords Chamber

[The Minister of State, Department for Exiting the European Union (Lord Callanan) (Con)]

My Lords, it is my great pleasure to respond to tonight’s debate on the European Union Committee’s report. I am grateful for the opportunity and start by extending my thanks to the noble Lord, Lord Boswell, to all members of the committee for their contributions to the report and to everybody who has spoken in tonight’s debate.

I assure noble Lords that a response to the committee is in full preparation, and we expect to be able to publish it over the summer. As I expected, many of the points raised by noble Lords about our future partnership with the EU relate directly to the ongoing negotiations. As such, I hope noble Lords will understand that it will be difficult for me to go into great detail on some of the areas at this stage. Nevertheless, I will endeavour to respond to as many of the points as possible. Noble Lords have raised a wide range of issues this evening; let me start by going through some of those points in greater detail.

On our ambitions for the future relationship, as the Prime Minister has made clear, we want our future relationship with the EU to be a deep and special partnership, taking in both economic and security co-operation. The Prime Minister set out the Government’s vision for a future partnership in her Mansion House speech in February, which contained what she referred to as the five foundations that must underpin our trading relationship with the European Union.

First, our agreement should create a deep and broad economic partnership that supports trade and co-operation between the UK and the EU. That should be supported by reciprocal and binding commitments to ensure fair and open competition. The level of integration between the UK and EU markets mean that these reciprocal commitments will be particularly important in ensuring that UK business can compete fairly in EU markets and vice versa. Secondly, we will need a completely independent arbitration mechanism—again, something fairly common to free trade agreements. This will ensure that any disagreements about the purpose or scope of the agreement can be resolved fairly and promptly. Thirdly, given the close relationship that we envisage, we will need an ongoing dialogue with the EU and to ensure that we have the means to consult each other regularly. Fourthly, we will need an arrangement for data protection. The free flow of data is critical for both sides in any modern trading relationship. Fifthly, we must maintain the links between our people. EU citizens are an integral part of the economic, cultural and social fabric of the UK, and UK nationals are viewed in entirely the same way by communities across the EU.

The Prime Minister has also set out, in her Munich speech in March, her vision for a future security partnership with the EU. This would encompass both internal and external security cooperation. On internal security, the Prime Minister has proposed a new UK-EU treaty that would cover practical co-operation on law enforcement and criminal justice matters, including on extradition, co-operation with and through EU agencies and exchange of data. Furthermore, this treaty would need to respect our sovereign legal orders and be dynamic to respond to emerging and future threats to our common security interests. It would also, clearly, need to be supported by comprehensive data protection arrangements.

On external security, we are seeking a partnership that will enable the UK and the EU to combine our efforts where it is in our shared interests. Let me say in response to the noble Lord, Lord Jay, that that future relationship on foreign policy, defence and development is focused on three key areas: regular consultation on global challenges and sanctions; co-ordination on the ground, including through EU mechanisms for defence and development, where appropriate and mutually beneficial; and continuing to develop new capabilities to meet future threats. Underpinning arrangements for the exchange of information and expertise will support this partnership.

For more than half a century, the UK has worked with our European partners to forge our common security, based on the fundamental values we all share. Close co-operation has been, and will continue to be, the most effective response to the common threats that we face. As we leave the European Union, our commitment to the security of Europe is undiminished. We want to continue using our assets, capabilities and global influence in support of our common security interests. Our proposed future security partnership builds on the breadth and depth of our shared interests and values, and must be a partnership that underpins practical collaboration to tackle real-world challenges, both within Europe and beyond.

Let me turn to the negotiations so far. The Government have published a joint statement with the European Commission that sets out the significant progress that we have made in finalising the text of the withdrawal agreement on the majority of the remaining separation issues. While there are still some key questions that remain to be resolved, we have had constructive discussions and our negotiating teams are currently working hard and at pace to ensure these are finalised by October. We remain confident that a deal is in the interests of both sides, so we approach these negotiations anticipating success. We do not want or expect a no-deal outcome. However, as the Leader of the House said earlier today, a responsible Government should prepare for all potential outcomes, including the unlikely scenario in which no mutually satisfactory agreement can be reached, and we are doing that. But I stress that we do not want or expect a no-deal outcome. The most important issue for us now is focusing on negotiating the right future relationship.

Let me address the point made by the noble Baroness, Lady Quin, on the impact on the north-east of England. We are undertaking extensive work to consider the impact on all regions of the UK of all the potential outcomes, and the impact on particular regions will be at the forefront of our minds. We will continue to undertake that analysis and, where it is possible to share it without compromising our negotiating position, of course we will do so.

We have, jointly with the European Commission, published the topics for discussion on the future framework. This incorporates the economic and security partnerships outlined by the Prime Minister as well as the institutional framework that will underpin them and other cross-cutting issues. The joint publication reflects the determination of both sides to achieve a broad partnership that stands the test of time after the UK leaves the EU. It remains our view that it is pragmatic common sense that we should work together to deliver this outcome for both sides. So we are continuing to work hard to have all of this agreed by October. We have been having regular discussions with the EU on the future framework, outlining our positions on a wide range of topics covering the future security partnership and the future economic partnership. We have continued to publish key documents on these topics.

The noble Lord, Lord Boswell, and other noble Lords asked me about the White Paper. The Prime Minister announced that the Government will publish this the week beginning 9 July, and it will set out the UK’s position on a future relationship. In response to the noble Lord, Lord Monks, I am not sure exactly how cunning he will find the plan when we publish it, but the Secretary of State for Exiting the EU has said that it will offer,

“detailed, ambitious and precise explanations of our positions”,

and will set out what,

“will change and what will feel different outside the EU”.

This answers the first question asked by the noble Lord, Lord Jay. His second was: will the EU rubbish it? I leave him to reflect on what the reaction to it might be. Following the White Paper, we hope to see our negotiations accelerate and intensify and, as I said earlier, we remain confident of reaching agreement on the withdrawal agreement and future framework by October.

The noble Baroness, Lady Quin, the noble Lords, Lord Teverson, Lord Jay, Lord Soley, and Lord Whitty, raised the issue of association agreements. Guy Verhofstadt and a number of Members of the European Parliament have also raised this when I have met them. We are considering the merits and drawbacks of such an agreement. It has the merit that the EU understands it; it is an established legal procedure. However, it has some drawbacks: it is not possible to agree things outside it. We are not ruling it out; we are exploring it and looking at whether it might be the appropriate model. In response to the noble Lord, Lord Teverson, I know Guy Verhofstadt well. I used to sit next to him for many happy hours in the EU Parliament’s conference of group presidents. He has many virtues but being a trusted intermediary whom we should use is perhaps not one which we should explore on this occasion.

The noble Earl, Lord Kinnoull, and the noble Lord, Lord Whitty, asked me about the UK’s membership of different agencies. The Government have said on a number of occasions that we will want to explore membership of some agencies with our EU partners. The Prime Minister mentioned a few of them in her speech. Where there is a demonstrable national interest in pursuing a continued relationship with an agency or other EU body, the Government will carefully examine whether or not we should do so. No final decisions have yet been made on that future relationship with those EU agencies, but where there is one we will happily contribute to the costs. The Prime Minister has said that we accept that there will be a role for the EU’s Court of Justice in such circumstances. If noble Lords can contain themselves, there will be some more detail on this in the White Paper.

The noble Lord, Lord Monks, raised the issue of joining the EEA/EFTA and the customs union. Neither the EEA/EFTA countries—Norway, Iceland and Liechtenstein—nor Switzerland are currently, individually or through membership of EFTA, part of the customs union, though they are members of the single market. The customs union has a single external border which sets identical tariffs for trade with the rest of the world. International trade policy is consequently an exclusive competence of the EU, to avoid the creation of different customs rates in different parts of the EU’s customs union. To make a political point, we are criticised extensively by the Labour Party. Of course, the Labour Party is now in the somewhat bizarre position of being in favour of a customs union but then, in the House of Commons, voting against the trade agreements that the EU negotiates as part of that customs union, so I do not think that we will take its criticisms too seriously.

Turning to trade and our future customs arrangements with the EU, the Government are working towards a customs solution that will allow us to trade goods and services with the EU as frictionlessly as possible but also free us to strike trade deals around the world and, crucially, avoid a hard border between Northern Ireland and Ireland. As has been reported, the Prime Minister has set up working groups on the two options—the highly streamlined customs arrangement and the new customs partnership—but of course the exact nature and form of the final customs relationship will be subject to negotiation.

The noble Baroness, Lady Quin, raised the issue of free trade agreements, which, as she correctly said, concern tariffs, although it is equally important to discuss non-tariff barriers and regulatory standards. She was essentially correct in the points that she made, but of course these are valuable tools and we should still seek to agree them as far as possible.

The noble Earl, Lord Kinnoull, asked me about equivalence in financial services. The Government have been clear that they want a comprehensive and ambitious deal with the EU. We think that it should cover financial services and protect the role of the City of London as a top global financial centre. That point was also well made by my noble friend Lord Risby. Reaching an agreement will require detailed technical talks but, as an existing EU member state, we will begin those talks from a unique position, having the same regulatory frameworks and standards. As we move from our current relationship to our future partnership, people and businesses in both the UK and the EU will benefit from the implementation period that we have agreed. We want to establish access to each other’s markets, based on maintaining the same regulatory outcomes over time with a mechanism that determines proportionate consequences where those outcomes are not maintained. It is important that we take that forward into the future negotiations.

On the subject of Northern Ireland and Ireland, the UK has been clear that we are committed to turning all the commitments made under the joint report into legally binding text. I think that that answers the point made by the noble Lord, Lord Jay. Again, as I am sure noble Lords are aware, there are some aspects of the Commission’s proposals which we agree with—particularly the preservation of the common travel area—but the Prime Minister has made clear our position on the other elements of the draft text and has said that we should never accept a border in the Irish Sea. That remains our position, and that is why those parts are marked as not agreed in the withdrawal treaty text. However, we are taking discussions forward with the European Commission and the Government of Ireland to try to resolve this issue.

Turning to the vital subject of security, I welcome the report’s conclusions on both internal and external security. I reiterate our unconditional commitment to a close relationship with our European partners to keep all our citizens safe as the UK leaves the EU. I believe that the Government’s approach is in alignment with the principles in the report, in that it is practical and legally viable and would maintain and build on the areas of greatest value to our common security. There is now a need to agree with the EU structures to allow this to happen. The Prime Minister made clear in her Munich speech that we must do whatever is most practical and pragmatic to provide security for our citizens and not allow rigid institutional ideology to inhibit our co-operation and jeopardise their security.

My noble friend Lord Risby, in his excellent contribution, talked about the importance of energy security in this context. I agree that that, too, will be an important part of our security partnership. That is why, on internal security, the Prime Minister has proposed a stand-alone UK-EU treaty that would ensure that we continue to co-operate where it is of mutual benefit and would minimise any disruption as we move to the future relationship.

To be fully effective, this treaty should meet three requirements. First, it should be respectful of both UK and EU sovereign legal orders. Secondly, it should include comprehensive data protection arrangements. Thirdly, it should be adaptable in the face of future threats. This new relationship should of course be underpinned by shared rules and agreed safeguards that are strong enough to provide trust and legal certainty for all sides. We believe that our proposal is legally viable, and has precedent in the comprehensive strategic relationships that exist between the EU and other third countries. It would serve our common security interests, while respecting both of our sovereign legal orders. Of course, there will be challenges to be overcome, but it is in all our interests to get this right, and with the ambition and political will on both sides, we are confident that this can be achieved.

On external security, we have proposed a future partnership that offers us the means and choice to combine our efforts where it is in our mutual interests. Our proposals set out a framework of consultation and co-ordination, enabling co-operation on shared priorities, including the ability to scale up in a time of crisis— a point reiterated by the noble Lord, Lord Jay. The UK will pursue an independent foreign policy after leaving the EU, but we will continue to defend our shared security and project our shared values. The partnership that we have set out therefore respects both the decision-making autonomy of the EU and the sovereignty of the UK.

The noble Earl, Lord Kinnoull, also spoke about access to information. There is no legal barrier to the EU agreeing to establish an internal agreement giving a third country access to the Schengen information system. As I have noted, the UK is at a unique starting point, with a strong history of working closely with member states as partners and allies. We make a key contribution to security and justice both in Europe and globally and we will seek an agreement with the EU that recognises the unique position that we hold. The exchange of criminal records between the UK and the EU is key to effective law enforcement co-operation. The Government are exploring options for continued criminal records information exchange between the UK and the EU to ensure that appropriate mechanisms are in place to prevent criminals evading justice. This will be a key part of a future agreement with the EU on internal security. Following a vote in Parliament in December 2015, the UK has now rejoined the Prüm Council decisions. Prüm implementation continues and we expect to start exchanging data through Prüm in the near future.

Agriculture and fisheries were only lightly mentioned, so I will move on.

I agree with much of what my noble friend Lord Cormack said on the subject of the ongoing relationship. He made clear that he voted remain and I have been clear that I voted leave. I, too, have many friends across all European countries, including, incidentally, in Finland. The current Foreign Minister of Finland is a good friend of mine. In fact, he is a great football fan and he texts me regularly during Newcastle matches. He is a fan, bizarrely, of Millwall—the explanation for which would take too long to bother noble Lords with tonight. But my point is that we all have friends across Europe and in different European countries. Of course, many of them regret the democratic decision that we have taken to leave, but we will want to maintain those friendships into the future.

I also agree with my noble friend that it is important that we take on board all opinions—the 52% who voted to leave but also of course the 48% who voted to remain. I do not know whether he made that point to the committee during his evidence, but my friend Daniel Hannan MEP has said on a number of occasions that we need to construct a Brexit that can take all parts of the country with us and accommodate all the different points of view. That would include those who voted remain as well as those who voted to leave.

To conclude, the Government are committed to getting the best possible deal for the United Kingdom in the forthcoming negotiations. We will continue to update Parliament on the negotiations for our departure from the European Union. Again, I reassure noble Lords that we are working to publish our formal response to the committee’s report as soon as possible. I am grateful to all noble Lords who contributed to the debate tonight, which was fairly wide ranging and informative. I am sure that the House will continue to play a valuable role in the work of the Government and contribute towards securing a deal that works for everyone, however they voted in the referendum.