European Union (Withdrawal) Bill

Lord Davies of Stamford Excerpts

Committee: 1st sitting (Hansard): House of Lords
Wednesday 21st February 2018 Lords Chamber

[Lord Davies of Stamford (Lab)]

My Lords, I wish to address Amendments 152, 197 and 206, on the matter of the customs union. Before I do so, perhaps I might be permitted to say a word of admiration about and pay tribute to the people outside this building—many of them waving British as well as EU flags—who have been there for several months, hoping to impress on us the importance of the case. We in this House—from the comfort of these Benches—should not be tempted in any way to neglect or slight efforts made by our citizens to bring their concerns to our attention. I have been most impressed by them. I have often spoken with them; one young lady, on a very modest salary, told me that she paid quite a lot of money on a fare from Manchester and was sleeping on a friend’s floor in order to stand for 12 hours outside this House. Her account was very typical. I counted more than 140 people one evening, when the temperature was getting very close to zero. I believe that sort of dedication and selfless concern for the future of the country is most impressive.

I am well aware that many of my colleagues in the House have come to this debate in the belief that they are carrying out an instruction from a referendum. I reject entirely that concept, which clearly contradicts the idea of a sovereign Parliament. By definition, if a body is sovereign, it cannot receive instructions from anyone. That is a matter of definition; it is what philosophers call an analytic truth. Even more absurd would be the idea that we could take instruction from a referendum in a previous Parliament. Heaven knows what Parliament would be subject to after a certain period in which we adopted that proposal. One can easily see to what ridiculous results that would lead. It would also make a nonsense of the fundamental principle of our constitution that no Parliament can commit its successor, and if you abandon the concept of parliamentary sovereignty and the belief that goes with it that no Parliament can commit its successor and therefore every Parliament after a general election can open a new page, there will be very little left of our constitution that people who take that line will still believe in.

[Lord Cavendish of Furness (Con)]

Would it not be true to say that the sovereign Parliament gave the people the decision through the referendum?

[Lord Davies of Stamford]

My Lords, as I have explained, I do not accept that we are in any way under instruction from anybody. I have heard the word “instruction” and it deeply shocks me. As a matter of fact, I heard it from the then Leader of the House in the days following the referendum. For the reasons that I have already set out and I do not need to repeat, that is a pernicious doctrine that is extremely dangerous in its constitutional ramifications and should be rejected.

[Lord Hamilton of Epsom (Con)]

My Lords—

[Lord Davies of Stamford]

I will not give way for the moment; I would like to make a bit of progress.

I agree with the noble Lord, Lord Wigley, that even if you were to believe that we are under some kind of instruction relating to Brexit it certainly could not apply to the issue of our remaining in the customs union or the single market. I do not remember that issue being mentioned at all in the referendum, certainly on the customs union. As we all know, there was nothing on the ballot paper about it. The noble Lord, Lord Robathan, intervened to say that he remembered some mention of it by certain people during the campaign. I would be very interested if he could put on record the particular dates, times and places where those comments were made, because I reckon I was pretty alert to what was being said during that campaign, in which I took an active part. I never heard the issue of our remaining in the customs union being dealt with at all, let alone seriously analysed and considered. I do not think that the British people had any chance on that occasion to express a preference one way or the other on that matter. As the noble Lord, Lord Wigley, said, that is a matter of practical fact. Parliament must be sovereign and must take what will be a very important decision.

We all know the potential damage that this country will suffer from Brexit. A lot of it will be from our leaving the single market. Admittedly, some of that damage can be mitigated by our signing a free trade agreement with the EU, but that will not cover financial services, which is such an important part of the country’s economy. There will be great damage from our leaving the EU, even if we are able to sign such a free trade agreement.

On the issue of the customs union, an enormous range of businesses, sectors and companies see this as an existential threat to their continued survival in this country. That goes across all kinds of people, from automotive to aerospace, pharmaceuticals, the nuclear industry and the airline industry. Noble Lords are familiar with the arguments and the very depressing projections made by people from those industries about the costs that they would incur if we leave the customs union.

What is extraordinary is that we have not really heard any of the benefits. It is extraordinary that you can make a proposal for something involving undoubted costs—we can all disagree about the costs and what their extent might be, but we cannot possibly disagree with what sign is on the variable in the equation: it is a negative. The idea that we should incur costs and risks without really knowing what the potential countervailing benefit is seems extraordinarily perverse. No business would manage itself on that basis.

When you press the Government they say, “We need to leave the customs union because that enables us to sign customs agreements or free trade agreements with other countries outside the EU and outside those countries which have themselves free trade agreements with the EU at the present time”. When you actually look at the prospect of doing that you see that it is a mirage; it does not exist at all. Let us take the United States, which spent eight or nine years failing to negotiate the TTIP with the European Union, as the Committee knows very well. Those negotiations broke down partly because of disagreement about the investment guarantees that the Americans were demanding and partly because of the demands being made by the Americans about access for their agricultural products to the single market. Anybody who knows anything about America knows perfectly well that it is inconceivable that an American Administration, let alone a Republican Administration backed by so many Senators and Congressmen from the prairie states and farm states, would ever ratify a free trade agreement with anybody that did not include agricultural products. If it includes agricultural products, of course it includes hormone-impregnated and antibiotic-impregnated beef and chlorinated chicken. Are the British people any more likely than their continental partners and neighbours to accept such products on the market? Would they accept the very appalling animal welfare standards which the Americans have? They have virtually zero grazing for well over 90%, if not very close to 100%, of their cattle at the present time. The idea that you can go through Texas and see lots of longhorn being herded by cowboys as you could 100 years ago is wrong: you will not see a single Texas Longhorn now out in the open air. Those problems will remain and in practice I believe they will be insuperable for us, just as they have been for the rest of the European Union.

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[Lord Lamont of Lerwick]

Noble Lords jeer but are they really going to say that a piece of paper with a statistic somehow analyses the problem? I put it to the noble Baroness that if you have a free trade agreement you have access to the market. What is the disadvantage? The disadvantage, which I will come to, is that you have to trade against that the inconvenience of rules of origin. That is what it comes down to: balancing the advantages of free trade against the costs of rules of origin.

Nobody has said that there are any advantages to leaving the customs union and I would like to make a few points. First, obviously, the customs union that we are members of—on certain goods, not all—has quite high tariffs on goods that particularly affect the lower paid, especially food, clothing and footwear. That is not an inconsiderable factor. Despite what the noble Lord, Lord Davies, said, being inside the customs union would make it impossible for us to sign free trade agreements with other countries. He was pooh-poohing that and thinks we will not be able to do it. But I put it to him if he looks at the record of quite small countries such as Singapore or Chile or a medium-sized country such as Korea, he will find that when you add up the GDP of the countries they have signed free trade agreements with, it is very much in excess of the added-up GDP of the countries that the EU has signed free trade agreements with. That is to say: these small countries, precisely because they negotiate on their own and do not have to take into account the arguments of 27 other partners, have been very effective at signing free trade agreements. Switzerland, for example, has a free trade agreement with China but the noble Lord thinks it will be impossible for us to have one with it.

[Lord Davies of Stamford]

My Lords—

[Lord Lamont of Lerwick]

I assume this is not a point of order but a point of information.

[Lord Davies of Stamford]

I am grateful to the noble Lord and would like to give a point of information to him. We already have a free trade agreement with South Korea, as a result of our membership of the European Union. Our leaving the European Union would result in our losing our free trade agreement with South Korea.

[Lord Lamont of Lerwick]

I do not know whether the noble Lord misheard me, whether I misspoke or whether he misunderstood. I was not talking about having a free trade agreement with Korea but about the free trade agreements that Korea has signed with other countries across the globe.

Another point about a customs union is that it is not just a question of collecting tariffs. A lot of regulations go with it and there is a vast range of non-tariff controls on goods—you obviously have to have definitions. We would not be able to divert from these at all if we remain members of a customs union, or even to depart from them in our own domestic market. If we did that, the goods that were allowed in which had circulated in the other countries of the customs union would be in contravention of them. Again, I put it that there are some advantages which have to be put into the balance of the argument for leaving the customs union.

One mystery about this amendment is that if you are in the customs union, there is the collection of the tariff revenue where the individual countries are allowed to retain only 20% of the revenue. The rest of it goes to the EU, so would we be outside the EU and paying 80% of the revenue on the external tariff to the EU? That does not seem to make a lot of sense.

It is also possible to be outside the customs union and to have a free trade agreement with the EU. That is precisely what Norway, Iceland and Liechtenstein do but of course, to come to the noble Baroness’s point, if that is regarded as a cost you have to offset against it the fact that you have rules of origin. People have pooh-poohed the technology argument but is that really going to be such an insurmountable thing to do? Switzerland exports per capita five times as much to the EU as we do, and it has to operate rules of origin on many sectors when it sells goods to the EU. That does not seem to have had any inhibiting effect.

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[Lord Davies of Stamford]

My Lords, we have heard some excellent speeches on these amendments. I particularly commend the brilliant analysis of my noble friend Lord Hain and the very penetrating questions asked by him and my noble friend Lord Triesman. I hope that those questions receive a serious response from the Government at the end of the debate on this group of amendments, and that they receive the clear and authoritative answers which Parliament deserves.

I wish to speak briefly about the transition or implementation phase, however you want to describe it, which emerges very much from the issues addressed by these two amendments. I am deeply worried about the way these negotiations are going. The Government seem very muddled in their own mind and have a completely false appreciation of the situation they confront. I will explain why I think those two provisions apply in a moment. There are surely just three logical possibilities. One is that we do not have a transition phase at all and go straight from the present regime of full membership of the EU to some future but permanent post-Brexit arrangement. Another possibility is that we have a special so-called bespoke intermediate regime between full membership of the Union and whatever ensues on a long-term basis in our relations with the EU. The third possibility is what we have by way of a transition period—namely, that we continue with the present regime until after agreement has been reached on the future regime and continue with it for some time—I hope at least a year or two—to give businesses the maximum amount of time to adapt to what they will know at that point is the new regime that is coming.

The first of those possibilities—that we have no transition at all—is rightly regarded, I think on both sides of the House and certainly throughout commerce and industry, as a disastrous prospect which would involve immense risks and costs for our businesses, quite unnecessarily so if a suitable alternative is available. I think there is general agreement on that. I would hope there would be agreement that the sensible thing to do is to choose the third option and continue with the present regime for some years after full detailed agreement is reached on its successor, so there is time for adaptation by everybody concerned. That seems to me thoroughly sensible. Unfortunately, I am told that that has been vetoed by the Eurosceptics in the Tory party. We know that Mrs May is very much under the heel of Mr Johnson and Mr Gove and is terrified that someone is going to send 41, 47 or 48 letters to Sir Graham Brady, and does not know how many have already been written. In these circumstances, she cannot move on that. She cannot accept that because, apparently, the Eurosceptics think that is an extension of our membership of the EU and they do not like it on symbolic grounds. I may misunderstand the situation but I am told on good authority that that is the position, so what might seem the most rational and sensible answer to this problem, which would certainly get strong approval from both sides of this House, is excluded for party-political reasons.

Therefore, we confront what appears to be the Government’s preference at the moment, which is the second possibility: the bespoke regime. I say that the Government are in contradiction with themselves, which they certainly are, because while that arrangement is supposed to reduce risks for business and industry, it actually doubles them. It has already been pointed out by my noble friend Lord Hain that under those circumstances there would be two future regimes for business to go through. There would be two thresholds into that new regime rather than one or two cliff edges in that context, to use that cliché which everybody seems to be so fond of at present. That is a serious matter: a Government who are in contradiction with themselves.

The second problem I have is that the Government clearly seem to have misunderstood the position of their counterparties in these negotiations and, once again, to have been quite excessively euphoric about the impact of any proposals that they would make on their negotiating partners. In short, they are overreaching themselves. That is of course again a worrying situation when you go into any kind of negotiation. I say that because it is inconceivable that our continental partners would agree to have some bespoke intermediate regime; it would be quite extraordinary if they did. It would mean that any member of the European Union could issue notice under Article 50 and immediately negotiate some special bespoke arrangement, maximising, presumably, its own benefits and minimising its own costs at the expense of other members of the Union, quite contrary to the whole purposes of the Union. Therefore I cannot believe that very intelligent and competent people, which the European Commission and leaders of our partner nations certainly are, would go down that road for a moment. That leaves a strong possibility that the Government will find that they have a rough time ahead of them.

I suppose that you can go into a negotiation with a self-contradictory proposal, although that is rather a handicap and not a good augury for the success of the outcome, and you can go into a negotiation making a fundamental misjudgment about the objective situation in which you find yourself. However, to do both is clearly to be at a considerable handicap. I fear that these negotiations will not result at all in a favourable outcome in this country and that there will be a lot of gnashing of teeth, shedding of tears and, no doubt, shouting and imprecations of all kinds. The Government will no doubt say that it is all very unfair, everyone is being beastly to them and that it is not their fault, and there will be a mixture of paranoid self-pity and nationalist demagoguery, which the Tory party seems, sadly, very often to fall victim to. That will be a sad day if it happens to this country. I hope that it can be avoided, that my analysis is wrong and that the Minister will explain to me exactly why it is wrong.

[Lord True]

My Lords, the noble Lord opposite who just spoke constantly makes disparaging references to members of the Conservative Party. I suggest that he might have been better informed about what happens inside the Conservative Party if he had remained a member. I do not consider him a great authority on the subject.

I would also like to deal with a canard which I find offensive and which I hope will not colour the next 10 days of debate. This is this business about people who favour Brexit wanting to repudiate the Good Friday agreement. The noble Baroness, Lady Kennedy of The Shaws, spoke with great passion on the subject, and I agreed with a great deal of what she said, certainly in the emotional content. She referred also to the cases she had taken which involved people in the Brighton case. Some of us were at Brighton on that day and many of us have lived with the consequences of the terrible events that took place and are passionately attached to the peace process and what happened in Northern Ireland. I am very proud that I served under a Prime Minister who had the courage to start the process that led to the peace agreement, Mr John Major. This false syllogism—it is the worst kind—which says, “Somebody who favours Brexit said that we might move away from the Good Friday agreement; therefore, every Conservative who favours Brexit is against the Good Friday agreement” is one that I find evil and offensive, and I hope it will be dropped. Those who express that view can answer for it, but I do not share it and I do not think that many on this side do.

Those are general points; the noble Lord, Lord Davies, took the debate a little wider, but I thought that, admirably, this debate had focused on a precise subject, which was raised clearly and forensically by the noble Lord, Lord Adonis, and by the noble Lords, Lord Hain and Lord Triesman, which is how we deal with this question of a date. The problem of the date is that exit day for the purpose of the Bill—it is in the Bill, although I note that there are now amendments to these clauses—is mentioned in Clauses 2(1) and 3(2)(a), which define laws which are retained as those which are in effect “immediately before exit day”. If exit day were not on the same day as the Article 50 date, as my noble friend Lord Hamilton of Epsom said, there would potentially be confusion. You would have a position where the UK had left the European Union but it was not clear what would happen with regard to retained law. This would create the very kind of uncertainty that noble Lords opposite say they wish to avoid. Therefore those two things have to march in parallel.

Here we come to the crux of the real argument behind these amendments and suggestions, which is that we should not leave so quickly as 29 March 2019; we should delay the matter; we should delay the implementation and extend the Article 50 period. As the noble Lord, Lord Kerr, said in one of our recent debates, we might want to be members again and might come back to reapply. In the first place, as has been pointed out in this debate, those things would require unanimity on the other side, and in the second place it would require legislation in this House and an Act of Parliament, as the Gina Miller case suggested. The reality is that we would have an Act of Parliament if we were taking the thing further down; we are already having an Act of Parliament on the withdrawal agreement. The two things have to march in parallel. At the moment that date is set, accepted and understood in this Parliament and across Europe as 29 March 2019.

This is an Act of Parliament, so if Parliament wanted to define a date—we may not like the date of 29 March 2019, but it is the one in the process that has been set in motion—it would be legitimate. I do not particularly care for the amendment that was put in in the House of Commons—at the last minute in Committee, as someone pointed out—to give a power to the Secretary of State, but that is what the House of Commons has sent us. If that needs to be dealt with, deal with that question directly: ask the House of Lords. But do not decouple the date in the law from the date that is working in Article 50. That would create uncertainty and difficulty. It does not require a further Act of Parliament to set the exit day because this is an Act of Parliament; the Bill has already been approved by the other place and it is already there—we can just do it.

However, of course that is not the course that is being taken, because both these amendments seek to strike out the phrase “on exit day”. The noble Lord, Lord Adonis, has got out his dandelion clock—you used to blow on it when you wondered whether you would ever have a girlfriend, when you first came to be aware of those things. “This year, next year, sometime, never”, was it not? Many of the British people rather thought in 2016 that it might be this year. It has now been two years; many people in this House would agree that we have not got that far in two years, which is a bit disappointing, but it will not be this year. At least the Bill says that it will be next year: 29 March 2019. But along comes the noble Lord, Lord, Adonis, and—next year? No. It is now sometime. His amendment gives the impression that it will be on a date to be determined sometime, but we know that he means “never”. I know, the House knows, and the noble Lord, Lord Adonis, knows, that he would never vote for any exit day to be voted for by this Parliament.

Therefore we should not support a dandelion clock amendment. If we want to deal with the Secretary of State issue, that is a separate debate, but let us not create new and unnecessary uncertainty by removing the date and uncoupling the exit day and the Article 50 day.