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.

Brexit: Economic Analyses

Lord Davies of Stamford Excerpts

Wednesday 24th January 2018 Lords Chamber

[Lord Garel-Jones (Con)]

My Lords—

[Lord Davies of Stamford (Lab)]

My Lords—

[The Minister of State, Ministry of Defence (Earl Howe) (Con)]

My Lords, if we are quick, we have time for both noble Lords, but I think that it is the turn of the Conservative Benches.

[Lord Callanan]

My noble friend speaks great sense. It is a matter of common sense—but, apparently, it is not a common sense shared by the Liberal Democrats.

[Lord Davies of Stamford]

Did the Minister notice in this morning’s newspaper the report of a study produced by the Bank of England which estimated that 10,000 financial service professionals will leave this country between now and Brexit day? Goodness knows how many will leave after that. Are the Government entirely indifferent to news of that kind?

[Lord Callanan]

I have not seen that study. I shall go away and have a look at it, but I do not believe that it can be accurate. We have the best and most successful services industry in Europe, and we want that to continue. We will be negotiating with our European partners to bring that situation about.

Brexit: Deal or No Deal (European Union Committee Report)

Lord Davies of Stamford Excerpts

Tuesday 16th January 2018 Lords Chamber

[Lord Davies of Stamford (Lab)]

I am grateful to the noble Lord for giving way. Would he not agree that in trade negotiations, the leverage of one side or another is a function of the proportion of the GDP of that party which is exposed to trade with the other country in question? I am sure the noble Lord is very well informed on these matters and knows that, in the case of the British relationship with the other 27 members of the EU, we have 14% of our GDP exposed to the EU—that is the proportion exported to the EU—while in the other direction, with the exception of the Republic of Ireland, no single member of the EU sells to us more than 4% of its GDP. So in fact our dependence on them is much greater than their dependence on us.

[Lord Hamilton of Epsom]

That is one way of looking at the balance between the United Kingdom and the EU. But at the same time, I think the noble Lord, Lord Davies, would accept that if we are putting at risk 10,000 jobs in the United Kingdom, we are putting at risk 15,000 jobs in the EU; if we are putting at risk 100,000 jobs in the United Kingdom, we are putting at risk 150,000 in the EU. There are two ways of looking at this, and it would have been a good idea if the committee had also called some Commissioner—I am sure there is one—responsible for employment in the EU and asked how they would react to seeing very large numbers of their own citizens made unemployed by the fact that they cannot reach a deal with the United Kingdom. Would that not have been helpful? The noble Lord, Lord Davies, would be the first to accept that EU levels of unemployment are running at between 8% and 9% at the moment, compared with just over 4% in this country, so the EU has double the rate of unemployment that we do. You would have thought that in those circumstances they would think the jobs of people in the EU were quite important and would not want to sacrifice them by having no deal with the United Kingdom. It is important to ask that question.

Brexit: Trade in Non-financial Services (EUC Report)

Lord Davies of Stamford Excerpts

Monday 18th December 2017 Lords Chamber

[Lord Davies of Stamford (Lab)]

My Lords, I congratulate my noble friend Lord Whitty and his colleagues on an excellent report. I believe, or certainly hope, that it will be a foundational document in the weeks and months to come as the Government prepare their negotiating case and as business decides how best to present its own case to government and to the European Commission.

A message comes out quite clearly from this report, shining out brilliantly from just about every page. It is very simple: it would be an absolute disaster for this country to leave the European Union. That is a fact. I realise that the noble Baroness who spoke earlier on, who announced that she was a Eurosceptic—she has that reputation in this House—was anxious to discount that obvious message of the report. She hit upon the most extraordinary way of doing it, by arguing that the reason why the report reflected this fear about the results of Brexit and concern about the results of Brexit for this industry was that a lot of evidence was taken from trade associations, which always like the status quo and do not like change. The absolute opposite is the case. Trade associations love government-induced change. It gives them enormous importance and a double role: they have to explain to their membership how things work and what the change exactly is, and most of all they have to defend their membership vis-à-vis the Government. That gives them a prominence and an importance, both in their own sector and possibly even more widely outside the sector, which they would not otherwise have—and for once their members are delighted to pay their annual subscription. So the noble Baroness got that one completely the wrong way round.

This is an important sector of industry, not least because it is very labour-intensive; it creates an awful lot of employment. People think that services create employment which is not highly remunerated, which is the case in tourism. However, there are certainly a large number of areas—prominent in this country—in the non-financial services sector that pay their people extremely well by international standards. One thinks of technology, media, accountancy, legal services, and consultancies of different kinds, such as management consultancy, and so forth. These are really big payers, and the economic importance of having these firms in this country is very great. Because of the technology and know-how involved in these firms, they are a considerable national asset that we should be trying to preserve and nurture—whereas I fear we are doing exactly the opposite.

I want to take one example. I believe that the technology consulting services company Accenture currently employs more than 300,000 people. Ten years ago it employed fewer than 30,000. That shows how employment has been created in the sector. Lord knows there are sectors where employment is falling, so it is very important that we have sectors such as this one which generate considerable employment. There are also spin-offs from big, successful companies such as Accenture. A lot of new businesses and small boutiques have grown out of Accenture or have been set up by people who started their career there, so it is a very dynamic and positive process and we do not want to bring that to an end.

The most important thing in the success of these labour-intensive companies is the quality of the manpower and womanpower that they possess—the talents, abilities and experience of their employees. That is absolutely key. To prove that, you have only to look at the balance sheet of a successful consultancy company and compare it with its market value if it is a listed company or if it is the subject of an acquisition when someone is paying the market value for it. Noble Lords will find that almost invariably the market value is a very considerable multiple of the balance sheet net worth of the company. That is not to say that such companies do not have any assets; they do, although they are mostly intangibles such as licences or patents of some kind or, most importantly, capitalised intellectual property such as software. Nevertheless, the value of the company will vastly exceed its net worth, and that good will reflects the value of the people who work there and their accumulated expertise.

Therefore, we are dealing with extremely sophisticated people who generate a great deal of value and want to employ only the brightest and the best. If you try to prevent them from doing that, they will move somewhere else where they can employ the brightest and the best. This illustrates the importance of freedom of movement. The Government’s wish to destroy freedom of movement, the price for which is keeping us out of the single market, is extremely dangerous.

I am delighted that the Prime Minister has apparently negotiated a satisfactory deal for the residents from other EU countries who currently work here, but she has not filled in the details of the regime that will apply to them. Will they have a personal right to live here indefinitely, even if they change their job or have no job and become unemployed? Will they be able to take time off to work elsewhere? Will they be able to undertake contracts that require them to spend a majority of months in a year outside the country on various assignments?

All those questions need to be answered, but an even more important question that needs to be answered is: what will be the regime for potential new recruits to British-based technology or other consultancy companies? It is vital that that is answered because individuals will not come here unless they have a promising regime under which they can live and work. For example, they will not come to work in this country if they would not be allowed to change their job here. This is a sector in which people change their jobs very frequently. If a good opportunity arises in another company, they want to be able to move. They do not want to be in the classic position of someone with a work permit who cannot change their job. They do not want to be unemployed for a while and have to leave the country. If people are unemployed in that sector, it is not usually because they are actually unemployed—that is, they are looking for a job but cannot get one or, for example, they have been fired. It is usually because they have a non-compete clause in their contract and they change their job and are then put on gardening leave for three, six or 12 months. What will the regime be for such EU citizens in this country going forward? It is very important that we get all these details rights.

I must say that I was not at all reassured when I heard the other day from the noble Lord, Lord Callanan—who is summing up this evening—that the Home Office is in the middle of drafting regulations for registration of this kind. I have yet to meet anybody in the Home Office who has any understanding of, let alone experience of, business; nor have I met anybody there with an understanding of economics. So I shall hold my breath until I see the regulations that are currently being drafted. However, it is extremely important that they are drafted in such a way that they do not have provisions for and protections against some obscure potential difficulty, and lots of phrases that lawyers like and so forth. At the end of the day, real risks and obstacles are created for people coming here and for British-based firms recruiting the best people, whom they need to survive in the future.

Brexit Negotiations

Lord Davies of Stamford Excerpts

Tuesday 5th December 2017 Lords Chamber

[Lord Callanan]

The noble Lord makes some valuable points. These are issues of great sensitivity and complexity. It is very important that we consult all parties before we go further. We are determined to try to get a solution, but it cannot be at the expense of breaking up the United Kingdom.

[Lord Davies of Stamford (Lab)]

My Lords—

Brexit: Irish Border

Lord Davies of Stamford Excerpts

Tuesday 5th December 2017 Lords Chamber

[Lord Wallace of Saltaire (LD)]

My Lords—

[Lord Davies of Stamford (Lab)]

My Lords—

[The Lord Privy Seal (Baroness Evans of Bowes Park) (Con)]

My Lords, it is the turn of the Liberal Democrat Benches.

--- Later in debate ---

[Lord Kilclooney (CB)]

My Lords—

[Lord Davies of Stamford]

My Lords—

[Lord Tomlinson (Lab)]

My Lords—

--- Later in debate ---

[Lord Callanan]

The noble Lord speaks with great authority on this subject and I know he has contributed a lot to the peace process over the years, which is something we want to maintain. There is a lot of truth in what he has said.

[Lord Davies of Stamford]

My Lords—

[Lord Tomlinson]

My Lords—

UK and EU Relations

Lord Davies of Stamford Excerpts

Tuesday 12th September 2017 Lords Chamber

[Lord Davies of Stamford (Lab)]

My Lords, I always enjoy debating this matter with the noble Lord, as we have done on a number of occasions over the last year or two, but a tone crept into his speech this afternoon that rather worried me: the suggestion that those of us on our side of the argument are either politically irresponsible or maybe not entirely patriotic. I must tell the noble Lord very forcefully that those of us on this side of the argument regard ourselves as being every bit as patriotic as those who are on the Brexit side. We think of Brexit as a great threat to this country’s interests and are prepared to argue specifically why we believe that to be the case. That is why most of us are here this afternoon. We believe it is our patriotic duty not to go through with Brexit, and if we do have to go through with it, to go through with it as far as possible in a way which enables us to remain inside the single market and the common customs area.

I will direct my remarks this afternoon specifically to the common customs area. It is very important for two reasons, which I think the House recognises. First, it is a matter of existential importance to a number of industries that there should not be unpredictable customs delays at the frontier. That includes, obviously, anything to do with perishables—fresh food, cut flowers and so forth—some quite interesting parts of the pharmaceutical industry and nuclear materials, such as radioactive isotopes, many of which have half-lives of a few days or even a few hours, such that timing is absolutely vital. It also includes those manufacturing industries which depend on just-in-time inventory replacement. They have already expressed a lot of concern about the prospect of our leaving the common customs area.

Secondly, there is a whole political dimension to the threat involved in our leaving the common customs area, which is the Ireland issue. We debated that last week in great detail, so I am not going to go into it now, but I think the Government recognise that staying in the common customs area is the only way of reconciling our commitment not to have a hard border in Ireland with their determination to leave the European Union.

This is very important, and the great question is whether we can leave the common customs area in such a way that those businesses that I have just enumerated could continue to survive here. Many of them are making contingency plans at the moment to leave this country, which is a matter of very great concern. The implication of those who are happy to go ahead on that basis, including the Government, is that there is enough slack in the system to accommodate customs controls without causing undue delays. Representatives from the Port of Dover came here yesterday and kindly entertained a number of us at a reception in the House of Commons—I dare say Members of this House who are present in the Chamber at the moment went there—and I was able to have some interesting discussions with them. On an average day, 16,000 lorries go through Dover or the Channel Tunnel to the continent. Noble Lords can do their own maths, but that means about 700 an hour, or 11 or 12 every minute. That is a pretty tight schedule. if you hold up a lorry by two minutes by reading the driver’s certificates of origin or talking to him about that or something, that means you immediately have two dozen lorries held up. If you hold them up for half an hour, you have a backlog of 3 miles, I am told. If you have an hour’s delay, that means a backlog on the motorway of 6 miles. If you had a 24-hour hold-up for any reason, you would have trucks backed up the M20, around the M25 and out to Hemel Hempstead. It is a very serious matter; there is no slack in the system.

The Government have produced a paper, which of course I have read, which says, “Oh, there are all kinds of new technologies which mean there won’t be any delays at all”. But those new technologies, which are described I must say in a very vague fashion and not necessarily always very persuasively, are all based on leaving out three very important issues. One is the fact that there must always be spot checks in any system. It is no good having just an electronic system: if you never have spot checks, the whole thing will become a farce in no time at all. The second thing is that you always have to take account of human error and delays. For example, a truck may not work, so at the last minute the cargo is put on to another truck, which has a different number plate which is not recognised by the computer system, and there is a big hold-up. That sort of thing can happen the whole time. Thirdly, and very importantly, all those systems described in this new paper all involve prior clearing and a connection to a computer system and so forth—a lot of prior arrangement and registration. They are not suitable for, and do not accommodate, people who move across the Channel or the frontier at the last moment—which they should be entitled to do if their business drives them to do that—or small businesses that have not yet managed to get round to registering or are not regarded as being sufficiently large scale to be worth taking on. None of those issues are dealt with in the paper at all, so I am very much less than convinced by it.

I have very little time left. The great question arises of why we are taking these risks with these potentially enormous costs. The Government have a simple answer, which I think shows up the compete falsity of their logic. They say, “Well, we are going to be leaving the European Union, so we shall no longer be able to trade in that area on the present favourable terms”. That is 45% of our trade. When we leave we shall also leave preferential access to the other markets which have free trade agreements with the EU, which represents about 22% or 23% of our total exports. That leaves about 30%, and the Government say, “Well, that’s all right: with the 30% we are going to do so well, and so much more incremental business will come as to compensate us for the loss of business from the 70% where we shall be at a disadvantage”. That is completely implausible and unrealistic—not to mention the fact that it takes many years to negotiate a free trade agreement with anybody; it has taken seven and a half years already for the EU to negotiate with Japan, for example.

The whole of this potential threat to very important industries, to employment and to our relations with Ireland is all based on a very flimsy assumption, and it really is about time that the Government looked at these assumptions again. At present, I do not believe that those assumptions would get through the board of directors of any half-competent or half-viable business in this country. It would be very frightening indeed to think that this country is being managed on that sort of basis.

Update on the Progress of EU Exit Negotiations

Lord Davies of Stamford Excerpts

Tuesday 5th September 2017 Lords Chamber

[Baroness Anelay of St Johns]

My Lords, with regard to the first question about the Court of Justice of the European Union, we set out options without saying which we were going to come down firmly in favour of because we were putting forward options for discussion on the basis that, as I said earlier, in discussions you scope out where there can be some early agreement and build upon that. The noble Lord is of course right to raise the question about indirect jurisdiction. I would just add that there are areas where the Court of Justice of the European Union will continue to have some indirect jurisdiction after we leave the European Union if there is an agreement, as is currently developing, with regard to pending cases at the court itself. There is already built into the current structure of the withdrawal Bill and the negotiations some room where there would be indirect jurisdiction—but indirect jurisdiction is not something that would change the law in the United Kingdom or direct us how to change the law. Therein lies the difference.

With regard to a transitional period and the matter of budgetary issues, the multiannual financial framework of 2013 applies between 2014 and 2020. Therefore, what we are doing in challenging the paper which was put out by the European Union is to see whether there is a basis for saying that there are duties upon the UK to continue paying beyond 2019—whenever the date of leaving may be—and when there are not. Although I cannot at this stage answer the noble Lord directly, he raises the important issue that we are trying to flesh out in the way that we are not only challenging the basis on which the European Union has said that it has a legal basis for claiming contributions from this country to the EU but also saying that we need to look, during those negotiations, at the liabilities of the EU to the UK.

[Lord Davies of Stamford (Lab)]

David Davis was quoted earlier in the House, in the course of the Ireland debate this afternoon, as saying that the best practical outcome to which we could realistically aspire was hard Brexit. Did he say that, or something along those lines? If so, what did he mean by it and is that the position of the Government?

[Baroness Anelay of St Johns]

My Lords, I cannot say that I heard him say that, but I have heard him say time and again, as he did indeed on the Marr show on Sunday, quite simply that he does not go in for talking about “hard” Brexit or “soft” Brexit. Neither do I; we both want a successful one for this country and the EU.

Brexit: Trade in Goods (EUC Report)

Lord Davies of Stamford Excerpts

Tuesday 18th July 2017 Lords Chamber

[Lord Davies of Stamford (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Horam. He and I have taken part in more debates over more years in both Houses of Parliament than we probably choose to count. I particularly agree with what he said about control and sovereignty, and the problems we have brought on ourselves through this Brexit project that have reduced our capacity to control or influence our environment. They have reduced our sovereignty, not in any way increased it.

It is fairly clear now that the whole Brexit project is ploughing a trail of destruction through the British economy. We are in the very early days and most of our fellow citizens have not really noticed what is going on. Almost every day there is a sad and worrying indication of some strategic loss in the country’s interests and long-term economic assets. The other day we heard the announcement that the European Medicines Agency would be lost. That is 1,000 people, many of them highly paid and skilled pharmacologists and doctors, and more than 10,000 people who come over here to visit them, talk to them and take part in conferences arranged by them. Beyond that, there are people—I cannot calculate the number but it is quite significant—in this country as representatives of international pharmaceutical companies that made their European headquarters here precisely because the EMA is located here. You would think that was a major loss but I have not heard a word from the Government about it. There has not been a word of concern or regret, or any suggestion that they might try to mitigate the damage going on.

With the European Banking Authority there is exactly the same story. Again, a few days ago we heard the news that easyJet is setting up a headquarters in Austria and managing part of its airline from there. Future job creation will be in Vienna rather than in London. Are the Government worried about that? Not in the least, so far as I can see. Perhaps the Government’s attitude is, “It can go to blazes—it’s nothing to do with us”.

Significantly, there is more of a row in the press about the threat of our no longer being a member of Euratom, with real problems created for the NHS, in both diagnosis and the treatment of patients, and for our nuclear industry. For once, the Government responded. Mr Damian Green said that the accounts were scaremongering. He accused leading scientists—including my noble friend Lord Winston, who made a distinguished speech on the subject in this Chamber not long ago—of not knowing what they were talking about, and of saying there was something very troubling going on when there was nothing troubling going on at all. Apparently, the Royal College of Radiologists was scaremongering, according to the First Secretary of State. This is a Government who have not even bothered to respond to the report before us. Serious things are in the report and the Government have no answer to them. Of course, that can only further depress potential investors in this country, because not only do they see the problems, the issues and the anxieties that are expressed but on the Government’s side there is complete and utter silence—either silence or, frankly, comments that can hardly be expected of intelligent and responsible people.

Obviously, this is a deeply worrying situation for the whole country and it is against that background that I read the report. It is a very good report and I agree with what everybody has said—I think the noble Lord, Lord Horam, described it as a cornucopia of information on this matter. But I thought when I began to read it, “At least it won’t be as bad as some aspects of this story. This will not be quite as depressing because it is about goods. There is a better chance of us getting a reasonable deal on goods in the context of a free trade agreement with our European partners than there is with services”.

I think there is very little chance that we shall get passporting rights in financial services; I would be amazed if we did. I cannot see why we would for a moment. It seems to me that the continentals would be very ill-advised to do so, not least because we have learned from the Lehman Brothers crisis how vital regulation and supervision are in maintaining financial stability. You really do not want people practising financial services in your country or in your market who are not directly under your supervision, where you can decide that a director of a bank is not a suitable person and remove him; or where, in a crisis, you can give instructions to institutions as to how to behave and they do not have the opportunity to object or say, “I am sorry, we have to go to an arbitration tribunal. We cannot obey your instructions directly”. So I would be very surprised if the continentals allowed us to have banking passporting rights.

If we were allowed banking passporting rights, presumably the Swiss would have to be allowed them. The only reason the Swiss have located their wholesale banking operations in the City of London is because we are in the EU and they are not, and they get banking passporting rights by having those operations in London. It would be very odd indeed if, when we have left the EU, the Swiss could come to London and have passporting rights but could not enjoy them in Zurich or Geneva. That is not going to happen so clearly if the continentals gave those rights to us they would have to give them to the Swiss. I do not think they will give them to the Swiss so they will not give them to us. If they gave them to the Swiss, they would have to give them to the Japanese. If they gave them to the Japanese, they would have to give them to the Chinese.

We all know that any Chinese-owned company, whether a bank or a trading company of any kind, is ultimately taking orders from the Government in Beijing, whatever the theoretical allegiance of that business to the regulators in a particular country. Politically, it would be quite impossible to argue that there should be discrimination against China on those grounds, so the continentals would have to give those rights to China. I do not think they will do anything of the kind.

The position on services is really rather grim. I thought the position on goods might be a little better but then what did I read? I read on page 29 of this excellent report:

“All our witnesses said that the imposition of tariffs on trade with the EU would be deleterious to businesses in their sectors”.


There are few phrases more likely to make a parliamentarian stop in his or her tracks than “all our witnesses”. How often do we get all witnesses in any of our inquiries, or all participants in any debate, for that matter, or all people you happen to interrogate on a particular subject saying the same thing? But there it is. The Government have not responded to it. Presumably the Government are embarrassed by it and do not have an answer to it but there it is: “all our witnesses” feel that.

The report says on page 4:

“In the absence of a FTA with the EU after Brexit, tariffs would apply. These would incur additional costs for many UK businesses … Non-tariff barriers—such as rules of origin—would be more difficult to resolve. The Government’s stated intention to leave the Single Market and the EU customs union would mean that additional non-tariff barriers would apply to all the sectors considered in this report … We conclude that compliance with rules of origin requirements would introduce a significant additional administrative burden, with a particularly negative impact on sectors with a highly integrated EU supply chain”.


The report is absolutely unambiguous and clear. This debate has gone on for several hours. Of course, we have heard people trying to defend the Government in different ways but we have not heard any attempts to address those criticisms. Are we going to hear the Minister address those criticisms? Will she tell us that everything is actually all right? Will she say that these criticisms are misconceived? They are not misconceived; we are heading for a real crisis, with open eyes and doing absolutely nothing about it. I cannot think of a greater measure of irresponsibility. I also think it extraordinary that some of the people responsible for this like to talk about themselves as patriotic. I do not believe there is anybody in the world who wills us anything like as much harm as we are imposing on ourselves by the policies we are currently adopting.

It really is time Parliament did its job, which is to warn the public of perceived dangers before it is too late. It is enormously important that we do not allow ourselves, because of some misconceived party loyalty or a feeling that we do not want to depress people and have to make upbeat, complacent speeches—we heard an excellent example of an upbeat, complacent speech from the noble Lord who chairs the Commonwealth trade commission—to be seduced by these temptations to not speak the truth as we see it. To speak the truth as we see it requires us, I am afraid, to use some pretty blunt language. I have been using some pretty blunt language. I just hope that I have convinced the Minister that she really cannot avoid responding to these matters in this debate. We do not want just a bland summing-up at the end. Precisely because the Government have not given us a written response, we need an oral response to the very real concerns that have been raised by this excellent report.