Brexit: Preparations and Negotiations

Lord Callanan Excerpts

Monday 23rd July 2018 Lords Chamber

Moved by

[Lord Callanan]

To move that this House takes note of the preparations and negotiations connected with the United Kingdom’s departure from the European Union.

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

My Lords, negotiations on the United Kingdom’s withdrawal from, and future relationship with, the European Union continue at pace. The publication last week of the Government’s White Paper on the future relationship—a detailed and credible proposal—has given impetus to these negotiations.

Last month we published a joint statement that set out the substantial progress that we have made on the draft withdrawal agreement since the March European Council. We have reached agreement across the majority of the remaining separation issues. Last week my right honourable friend the Secretary of State travelled to Brussels to meet his counterpart, Michel Barnier, where they had constructive discussions on the details of the White Paper and took stock of the negotiations. While there are still issues to agree, our negotiating teams are working to ensure that these are finalised by October and that we reach a positive settlement for both the UK and the EU.

Domestically, we continue to prepare the legislation needed to implement the withdrawal agreement in UK law. We will publish a White Paper tomorrow setting out more details on this. On the future relationship, we believe that the White Paper that we have published is a principled and pragmatic plan for the relationship that we wish to build—an ambitious and innovative proposal that respects the position, interests and concerns of the European Union. It delivers on the decision of the British people to take back control of our laws, our money and our borders, while preserving and building on the historic ties with our European friends and neighbours, in areas such as trade and security, which we both rightly prize.

[Lord Foulkes of Cumnock (Lab)]

My Lords, the Minister said a minute ago that the White Paper will be published tomorrow, the day the House rises, which seems rather strange. What time tomorrow will it be published?

[Lord Callanan]

My right honourable friend the Secretary of State will be making an Oral Statement in another place tomorrow. I do not know whether we have an exact time for that yet.

Leaving the EU offers us an opportunity to forge a new role for ourselves in the world, to negotiate our own trade agreements and to be a positive and powerful force for free trade. Central to our proposal is a free trade area for goods, supported by a common rulebook for those rules necessary to provide frictionless trade at the border and a new facilitated customs arrangement. This will help to secure the complex supply chains and just-in-time manufacturing processes that we have developed with the EU over the past 40 years. This will give businesses certainty and clarity and preserve those jobs that rely on frictionless trade at the border.

A key component of the free trade area will be our proposal for a facilitated customs arrangement, or FCA. This is a business-friendly model that removes the need for any new routine customs checks and controls between the UK and the EU while enabling the UK to control its own tariffs and boost trade with the rest of the world. Under this arrangement, the UK would apply the EU’s tariffs to goods intended for the EU and its own tariffs and policy to goods intended for consumption here in the UK.

In contrast to the earlier proposal for a new customs partnership, the FCA will be an up-front system. This means that most businesses would pay the right tariff to begin with, rather than receiving a rebate at the point of final consumption. Other businesses could claim a tariff repayment as soon as possible in the supply chain. We will agree the circumstances in which repayments can be granted with the EU and, as the White Paper makes clear, we will negotiate a reciprocal tariff revenue formula, taking account of goods destined for the UK entering via the EU and goods destined for the EU entering via the UK. This model has the specific advantage of protecting UK-EU supply and value chains and the businesses that rely on them. For example, Airbus manufactures wings for all its civil aircraft in north Wales. These are then transported to the continent for final assembly. In Dagenham, Ford manufactures diesel power trains for export to the EU. As well as supporting businesses, this approach would meet our shared commitment to Northern Ireland and Ireland in a way that respects the EU’s autonomy without harming the UK’s constitutional and economic integrity.

[Lord Forsyth of Drumlean (Con)]

On the reciprocal nature of the FCA, is it realistic to expect 27 other countries to put in place the bureaucracy and systems necessary to execute this in order to accommodate our wish for this compromise?

[Lord Callanan]

It probably would be unrealistic, which is why we are not asking them to do that. We will agree a reciprocal tariff formula, but we will not ask our EU partners to put in place specific arrangements at their borders.

Alongside these close arrangements for goods, we will negotiate a wide-ranging deal on services and digital.

[Lord Tomlinson (Lab)]

My Lords—

[Lord Callanan]

I am sure one or two noble Lords will have points to make about this, so I will have a bit more to say to it at the end of the debate.

Alongside these close arrangements for goods, we will negotiate a wide-ranging deal on services and digital. This would protect businesses from unjustified barriers or discrimination, cover mutual recognition of professional qualifications and, importantly, preserve our regulatory freedom. This balanced approach to services is based partly on the absence of any of the risks of border disruption that might affect trade in goods, coupled with the distinct advantages of regaining domestic regulatory control as well as the ability to forge new trade deals with fewer fetters so that we are well placed to grasp the opportunities of the future, including across growth sectors such as digital. It would allow the UK to trade with greater freedom with the rest of the world and seize the opportunities for more liberal and energetic free trade with the export markets of the future, from Mexico to Japan.

In leaving the EU, free movement will end. Our immigration policy will be set not in Brussels but by this Parliament, which is accountable to the British people. We will design a new immigration system that enables us to control the number of people coming to live in the UK and place stronger security checks at our border. However, the UK will be an outward-looking nation, attractive to investment and open to business. In line with the arrangements that we will negotiate with close trading partners around the world, we want provisions with the EU that will support businesses to provide services. We want tourists and business visitors to be able to travel without a visa and students to continue to have opportunities to study at universities across Europe. We can agree common-sense reciprocal arrangements while regaining control over our immigration policy. That is the balanced approach that we believe best serves the UK.

Next is our vision for a security partnership that covers the vital security interests that we share. Our proposals build on existing operational capabilities to protect our citizens. They will enable rapid and secure data exchange, practical cross-border operational co-operation and continued participation in important agencies, including Europol and Eurojust, which already have partnerships with third countries. We will also pursue arrangements for co-ordination on foreign policy, defence and development issues, joint capability development and wider co-operation.

When it comes to the return of democratic control of powers and authority to the UK, our laws will be decided by this Parliament and the devolved legislatures. The White Paper proposals will also end the jurisdiction of the Court of Justice of the European Union in the UK. UK courts will no longer refer cases to the CJEU, nor will the CJEU be able to arbitrate disputes between the UK and the EU. Instead, rights will be enforced in the UK by UK courts and in the EU by EU courts.

[Lord Campbell of Pittenweem (LD)]

Has the Minister read paragraphs 146, 147 and 148 of the document, which make it plain that questions of jurisdiction are not to be as exclusive as he has just described?

[Lord Callanan]

Yes, I have read them. We have made it clear that the jurisdiction of the CJEU will of course apply to European law and those areas of the common rulebook, but disputes will no longer be arbitrated by the CJEU.

[Lord Hannay of Chiswick (CB)]

Can the Minister explain how this exclusion of the European Court of Justice will apply to the operation of the European arrest warrant, which involves individuals and not Governments?

[Lord Callanan]

The European arrest warrant is of course part of the security partnership that we seek to agree. It has some challenges at the moment, given the constitutional bars that one or two member states have, but we continue to discuss with the EU how we can take that proposal forward.

In a limited number of areas, we would choose to adopt a common rulebook to ensure the free flow of goods. That body of law is relatively stable, and when there are any changes, Parliament would have to approve them.

We are taking a principled and practical approach. Yes, we have shown flexibility as we strive for a good deal for both the UK and EU. As we demonstrate our ambition for a close partnership through the White Paper, it is worth emphasising two key principles that we share. The first is that Article 50 dictates that a withdrawal agreement must come alongside a framework for the future agreement. The second, flowing from that, is that nothing is agreed until everything is agreed.

We will not sign away our negotiating leverage or spend taxpayers’ money without anything in return. In December we agreed that the financial settlement would sit alongside a framework for a deep and mutually beneficial future partnership, but if either side should fail to meet their commitments—and I should say that we certainly do not expect that to be the case—it would have consequences for the package as a whole that we agree.

[Lord Bowness (Con)]

I am most grateful to my noble friend for giving way, but he is touching on a matter that is particularly topical at the moment. In Florence, the Prime Minister was unequivocal in her statement that the United Kingdom will honour commitments we made during our period of membership. It was not conditional, and “honour” was the word. Are those in favour of Brexit now reneging on the Prime Minister’s word of honour?

[Lord Callanan]

Of course we are not reneging on the Prime Minister’s words, but my right honourable friend the Secretary of State for Exiting the EU made it clear yesterday that we expect a future partnership to be agreed at the same time; it will sit alongside the withdrawal agreement and no money will be paid unless the future partnership is delivered. In these circumstances, it is the duty of any responsible Government to prepare for every eventuality, including the unlikely scenario that we reach March 2019 without agreeing a deal. It is essential that plans are in place to mitigate the risks and ensure stability, whatever the outcome of these negotiations. The Government’s legislative programme in this Session provides for a range of negotiation outcomes, including that of no deal.

In the last few months we have passed the Nuclear Safeguards Act, the Sanctions and Anti-Money Laundering Act and the Haulage Permits and Trailer Registration Act, preparing the UK for a future outside the European Union. I am grateful to the House for the constructive way it has engaged on this legislation.

We have been taking other practical action to ensure that we have the infrastructure in place—for example, recruiting 300 extra Border Force staff, with a further drive to recruit another 1,000, launched earlier this year. The Government have been working on nearly 300 no-deal plans for almost two years. Some of these are already in the public domain. As we announced last week, over August and September the Government will release a series of technical notices to set out what UK businesses and citizens will need to do in a no-deal scenario. This due diligence is designed to provide reassurance that the Government are prepared.

I note the great number of speakers listed for today’s debate and I look forward to hearing all the contributions. Before I resume my place, let me make it clear that we strive to strike the very best deal with the EU, and whatever the outcome of our negotiations, we stand ready to make a success of Brexit.

[Lord Liddle (Lab)]

Before the Minister sits down, will he answer the question raised by the noble Lord, Lord Forsyth, about the facilitated customs arrangement? Paragraph 17 of chapter 1 of the White Paper states clearly that,

“the UK is not proposing that the EU applies the UK’s tariffs and trade policy at its border for goods intended for the UK”.

I understand that in the other place last Monday, an amendment was carried saying that this arrangement would not come into effect unless the other member states agreed to apply this dual tariff. What now is the Government’s policy on this critical point?

[Lord Callanan]

That paragraph confirms the answer I gave earlier. We will agree a tariff-sharing formula with the EU. That is part of the discussions we will have, but we are not asking other EU member states to change their arrangements at their borders. We do not believe that the amendment passed last week is incompatible with our White Paper proposals.

--- Later in debate ---

[Lord Callanan]

My Lords, I am profoundly grateful for the many contributions that we have had to this wide-ranging debate. I had almost forgotten how much I missed spending my Monday evenings debating our exit from the EU with fellow EU obsessives—the noble Lord, Lord Adonis, is still here, which is good—following the passage of the EU withdrawal Act. I shall try to address as many of the points raised this evening as possible. I apologise if it is not possible to respond to every point raised by noble Lords, but I am conscious of the late hour.

The White Paper sets out detailed proposals for a principled and pragmatic future relationship with the EU, delivering on the result of the referendum and taking back control over our money, laws and borders. We have made significant progress on the withdrawal agreement, including on citizens’ rights and the terms of an implementation period. As my noble friend Lord Bridges noted, both sides must now work at pace to deliver a mutually beneficial, sustainable deal later this year.

Our proposed free trade area for goods, including agri-foods, would be enabled by: a common rulebook covering only those rules necessary to provide for a frictionless border; participation in EU agencies that provide authorisations for goods in highly regulated sectors; and a new facilitated customs arrangement. In designing this model, the Government have responded to feedback on overcoming the shortcomings of both the new customs partnership and the highly streamlined customs arrangement. Unlike previous models, the FCA allows many businesses to pay the correct tariff at the start so that they will not need to interact with the repayment mechanism at all. For businesses that do not qualify, HMRC has committed to making the rebate process as simple and streamlined as possible. Even then, the rebate mechanism is voluntary. Businesses will be able to choose whether they wish to take advantage of any lower UK tariffs.

Noble Lords, including my noble friend Lord Forsyth and the noble Lord, Lord Liddle, raised the Government’s acceptance of new Clause 36 of the customs Bill in the other place. The clause would prevent the implementation of a new arrangement that would see HMRC collecting duty on behalf of the Government of another territory or country, unless it was reciprocal. The Government have been clear that under the FCA the UK and the EU would agree a mechanism for the remittance of relevant tariff revenue. We proposed a reciprocal tariff revenue formula, taking into account goods destined for the UK entering via the EU and goods destined for the EU entering via the UK. This clause is therefore consistent with the White Paper. To my noble friend Lord Forsyth, I reaffirm that we are not proposing that the EU applies the UK’s tariffs at its borders for goods destined for the UK.

In response to the noble Lord, Lord Hannay, yes, the FCA model is consistent with WTO law. The UK will be an independent member of the WTO and we will be able to set our own tariffs. We will be able to pursue trade agreements in line with the UK’s interests.

In response to my noble friend Lord Bowness, we want to be part of the network of the EMA but it has to be on the right terms and meet the objective set out in the White Paper of our being an active participant and making an appropriate financial contribution. That is why we decided to oppose the amendment. However, we will revisit it when it comes to this House.

In response to the argument made by the noble Lord, Lord Howarth, and my noble friend Lord Farmer, under the terms of the withdrawal agreement the UK will be free to negotiate, sign and ratify free trade agreements during the implementation period and to bring these into force from January 2021.

A number of noble Lords raised our proposals on services. As the White Paper sets out, we want an ambitious deal on services and digital that allows us to exercise greater regulatory freedom for the UK’s world-leading services-based economy. In response to the points on financial services raised by noble Lords, including the noble Baroness, Lady Hayter, my noble friend Lord Hunt, the noble Lord, Lord Mandelson, the noble Baroness, Lady Kramer, and my noble friend Lady Wheatcroft, we are proposing a new economic and regulatory partnership based on binding bilateral commitments.

We have listened carefully to the EU’s concerns and we agree that, particularly for reasons of financial stability, market access should be a decision that remains autonomous for each party. However, this could work only with improvements to the current EU system to reflect the fact that equivalence as it exists today is not, in our view, sufficient to support the close relationship that we seek. The UK will continue to be the most open financial services market in Europe, with the best environment for innovation, an unparalleled talent pool and a legal system that is respected around the world. Furthermore, we will have the flexibility to agree new global financial partnerships with other countries.

I say to the noble Lord, Lord Green, and others that the Government are clear that free movement will end and that we will take back control over the number of people who come to live in the United Kingdom. However, in reference to the points raised by my noble friend Lord Heseltine and the noble Baroness, Lady Smith, we are not closing our borders to the talent that an outward-looking global Britain needs to succeed. The UK will remain an open and tolerant nation, and we will want to continue to attract people from the EU and elsewhere to work here.

The noble Lords, Lord Boswell and Lord Hannay, also touched on the future immigration system. The UK will design an immigration system that works for all parts of the UK. To inform this, the Migration Advisory Committee report due in September will provide important evidence on patterns of EU migration and the role of migration in the wider economy.

On leaving the EU, we will end the jurisdiction of the Court of Justice of the European Union in the UK. The proposal set out in the White Paper delivers on that commitment. No longer will UK courts refer cases to the CJEU; nor will the CJEU arbitrate disputes between the UK and the EU. Additionally, the CJEU will no longer have the power to make laws for the UK, and the principles of direct effect and of the supremacy of EU law will no longer apply to the UK.

The noble and learned Lord, Lord Hope, raised the resolution of disputes. We have proposed a robust and appropriate mechanism, including through a joint committee and, in many areas, binding independent arbitration. In response to the remarks of the noble Lord, Lord Hannay, on the proposed framework, these arrangements are proportionate and necessary for the depth of the relationship with the EU that the UK envisages. They will ensure that the co-operation functions properly and that the relationship is transparent and accountable.

Where we have a common rulebook and there is a dispute between the UK and the EU, the joint committee, by mutual consent, or an independent arbitration panel will be able to ask the CJEU to give a binding interpretation of the rules in question. It will be for the joint committee or the arbitration panel to decide the dispute, consistent with the essential principle that the court of one party cannot resolve disputes between the two.

In areas where we have a common rulebook—a question raised by noble Lords including my noble friends Lord Bridges and Lord Cavendish—it will be important for the UK and for EU businesses and citizens that they are interpreted and applied consistently. This will be done in the UK by UK courts and in the EU by EU courts, because preliminary references from UK courts to the CJEU will have ended. Therefore, where the UK agrees to retain a common rulebook, our courts will pay due regard to the relevant CJEU case law when deciding a case. In practice this is what our courts would do anyway. But it will be for UK courts to decide the cases before them, applying UK law.

In response to the points raised by the noble Lords, Lord Adonis and Lord Bew, I should say that the Government’s proposal for a principled Brexit will deliver for our union—for England, Scotland, Wales and Northern Ireland—while protecting the economic and constitutional integrity of the United Kingdom. Our proposals mean that goods and agri-food will flow freely between Northern Ireland and Ireland, so the backstop would not have to be used. In response to the noble Lord, Lord Hannay, I should say that we remain committed to agreeing a legally operative backstop in the withdrawal agreement, and we are continuing to negotiate that with the EU over the coming weeks.

In response to the points made on the security partnership by the noble Lords, Lord Wallace and Lord Browne, I emphasise that. although there is no off-the-shelf model for third countries, the UK is indeed no ordinary third country. We have been intimately involved in the evolution of EU security architecture, we will continue to be a European neighbour, facing the same threats and sharing the same values and interests, and it is clearly in our mutual interest to stand united in our efforts to ensure the collective security of UK and EU citizens.

On foreign policy co-operation, the UK proposes continued consultation and combining efforts to the greatest effect where it is in the EU’s and the UK’s shared interest—for example, in the application of sanctions. The EU discusses foreign policy issues with a number of third countries, which can provide the basis for this new relationship. But the UK’s proposals are for a broader and deeper dialogue, underpinned by the exchange of information and expertise.

Noble Lords including the noble Lords, Lord Razzall and Lord Browne, raised the issue of Galileo. The UK is home to a world-leading space technology sector which has helped drive the EU space programmes. Our clear preference remains to participate in Galileo in a new balance of rights and obligations after we have left the EU. The programme must also, of course, offer value for money to justify an ongoing UK contribution. As a logical consequence of the exclusion and uncertainty surrounding future UK participation, the UK is exploring alternatives to fulfil its needs for secure and resilient position, navigation and timing information.

Many noble Lords, including the noble Lords, Lord Birt and Lord Liddle, and the noble Baroness, Lady Hayter, raised the prospect of leaving without a deal. The Government are confident that, with the good will of both sides, we will achieve a deal, but, as a responsible Government, we must prepare for all scenarios, whatever the outcome of the negotiations. As I said earlier, we have been working on nearly 300 no-deal plans for nearly two years, and to prepare businesses and citizens for a no-deal scenario we will make more of this planning public by issuing a series of technical notices over August and September. Rest assured that the Government are clear that a mutually beneficial deal is in the interests of both sides, and that our firm objective is for our negotiating teams to reach an agreement by October.

I will respond to the point made by the noble Baroness, Lady Falkner, by saying that both the UK and the EU have been clear that the withdrawal agreement and the future framework form a package. If either side should fail to meet its commitments—although we certainly do not expect that to be the case—this would have consequences for the package as a whole that we agree.

Many noble Lords have returned to their favourite topic. They include the noble Lord, Lord Newby, the noble Baronesses, Lady Ludford and Lady Kramer, my noble friend Lord Heseltine, the noble Lords, Lord Taverne, Lord Butler and Lord McNally, my noble friend Lady Wheatcroft, the noble Baroness, Lady Randerson, and the noble Lord, Lord Skidelsky. We are back on to the subject of a second referendum—or, as it has now been renamed, the people’s vote—which leads me to wonder who voted in the first referendum. Aliens, perhaps, or farm animals?

[Lord Skidelsky]

I should not be on that list.

[Lord Callanan]

I did not think I had mentioned the noble Lord, but I apologise.

--- Later in debate ---

[Lord Mandelson]

I should have been on that list.

[Lord Callanan]

I was going to mention the noble Lord as responsible for renaming it as the people’s vote in a worthy spin operation, but perhaps he was not involved. I apologise.

The Government’s position remains unchanged, noble Lords will not be surprised to hear, from the time of the first referendum. I agree with the noble Lord, Lord Skidelsky—to mention him—and others that it is essential for our democracy that we respect the result of the referendum. I am pleased to say that this appears to be a position that we share with the Labour Party. Last week the Huffington Post reported that the shadow Foreign Secretary categorically ruled out a second Brexit referendum. She said that,

“we went ahead and had a referendum and we lost it and overwhelmingly, above everything else, we are Democrats, so we have to do as instructed”.

On this one occasion, I agree with Emily.

Furthermore, in response to points made by the noble Lords, Lord Wigley and Lord Kerr, let me make it clear that we will not be seeking an extension of Article 50. We are leaving the EU on 29 March 2019 and we will deliver the necessary legal framework in time.

The Government are delivering a principled and practical Brexit. For our economy, we are developing a deep trading relationship with the EU; for our security, we are building on our close co-operation with the EU to keep all of our citizens safe; for our communities, we are ending free movement and responding to concerns raised during the referendum; for our union, we are meeting our commitments to Northern Ireland, and for our democracy, we are restoring sovereignty to this Parliament. For the UK’s place in the world as a champion of democracy and free trade, we are building on progress made so far in negotiations and the ambitious and credible proposals in our future relationship White Paper and must now redouble our efforts to achieve a sustainable and lasting settlement with our European partners.

[Lord Balfe]

Before the Minister sits down, the noble Baroness, Lady Young, and I raised a point on the European Aviation Safety Agency. We asked whether the Minister could write to us dealing with the points we made, and I repeat that request.

[Lord Callanan]

As the noble Lord knows, we have made a commitment to remaining part of the European Aviation Safety Agency if that can be negotiated. There are four or five paragraphs in the White Paper on future aviation agreements, but I would be very happy to write to both noble Lords with clarification.

House adjourned at 11.52 pm.