EU Referendum and EU Reform (EUC Report)

Lord Faulks Excerpts

Wednesday 15th June 2016 Lords Chamber

[The Minister of State, Ministry of Justice (Lord Faulks) (Con)]

My Lords, this has been a fascinating debate. It has covered an enormous amount of ground and the House has displayed great expertise and, indeed, passion. I do not exclude from that observation, despite the fact that they were very much in the minority, the noble Lords, Lord Howarth and Lord Pearson.

I must say that I had no expectation of a reference in the debate to PG Wodehouse, which was provided by the noble Lord, Lord Hennessy, in his pertinent and witty speech. I am a little concerned that the great man might have supported Brexit, however. We even had an excursion into fairy tales. I got a little lost between the second bowl of porridge and the disadvantages of having a mistress, but, broadly speaking, I agreed with the noble Baroness.

I would particularly like to congratulate the noble Lord, Lord Boswell, chair of the EU Select Committee, and my noble friend Lord Selborne on their chairmanship of the committees which have produced the three reports before us today, and to record the Government’s appreciation of the work of the respective committees. Naturally, I understand that the committees wished to have their reports debated before the date of the referendum, notwithstanding the fact that the government response will not be available until after 23 June. I do not want to pre-empt the detailed response that will be provided. However, on this final day of business, I would like to take this opportunity to set out the Government’s position on the referendum.

First, I want to restate what my right honourable friend the Prime Minister achieved in his renegotiation. This is also set out in the government paper The Best of Both Worlds: the United Kingdom’s Special Status in a Reformed European Union. Last year, the Prime Minister set out to address four key areas in the EU where the UK wanted to see reform, and at February’s European Council he reached a deal that delivered on all those areas. The noble Lords, Lord Boswell and Lord Jay, and the noble Baroness, Lady Falkner, suggested that insufficient attention had been paid to the settlement. I think they were right. On economic governance, he obtained permanent protection for the pound and our right to keep it, as well as guarantees that UK taxpayers will never be required to bail out the eurozone. We have protected the UK’s rights as a country within the single market, but outside the eurozone, to keep our economy and financial systems secure and protect UK businesses from unfair discrimination.

On competitiveness, my right honourable friend secured from the EU and all member states commitments to reform the EU in line with the vision for a more globally competitive Europe which we and others share. The EU recognised the need to act to,

“promote a climate of entrepreneurship and job creation, invest and equip our economies for the future, facilitate international trade, and make the Union a more attractive partner”.

The Prime Minister also secured a clear commitment to,

“doing more to reduce the overall burden of EU regulation, especially on SMEs and micro enterprises”,

which account for 95% of all UK firms. There will be a new focus on further extending the single market to help bring down the remaining barriers to trade within the EU, particularly in key areas such as services, energy and digital.

Our new settlement has secured a clear commitment that the EU will pursue an active and ambitious trade policy with the world’s most dynamic economies, prioritising the US, Japan and other important partners in the Asia-Pacific region and Latin America to reduce or eliminate the tariff and regulatory barriers faced by UK companies in large and growing non-EU markets.

The UK benefits from the EU’s greater economic leverage, which has allowed it to negotiate advantageous free trade agreements with more than 50 other countries—agreements with terms that are far more favourable than any we could have negotiated on our own because of the combined negotiating muscle of a marketplace that is five times greater than our own. Concluding all the trade deals already under way could ultimately be worth in total more than £20 billion a year to the United Kingdom’s GDP. Once these deals are completed, around three-quarters of UK exports to non-EU countries will be covered by EU-negotiated free trade agreements.

On sovereignty, the Prime Minister secured formal agreement that the UK will not be part of ever-closer union, that it is not committed to further political integration, and that the treaties will be changed to that effect. We will also have new powers to block or remove unwanted European laws. Until now, there were insufficient means of stopping the EU from passing laws that should be left to individual countries. There was no way of introducing a “downward ratchet” to EU lawmaking, as the Foreign Secretary and others have long demanded. This has led to unnecessary regulation and interference. However, under the new settlement, the European Commission has committed to,

“establish a mechanism to review the body of existing EU legislation for its compliance with the principle of subsidiarity and proportionality”.

This mechanism will ensure that the EU acts only where it really needs to do so. The European Commission will report its findings to the Council of Ministers every year. If Ministers decide that the EU has gone further than necessary, they will be able to ask the European Commission to withdraw or amend the legislation in question.

Finally, on welfare and migration, the deal secured new powers to tackle the abuse of free movement and reduce the draw of our benefits system. This will help to meet our aim of reducing immigration, by making sure that new arrivals from the EU cannot claim full benefits for up to four years.

The decision of the Heads of State or Government agreed at the February European Council is legally binding and irreversible. It has been registered with the United Nations as an international treaty. The February European Council conclusions and the texts of the deal agreed at that Council clearly set out the legally binding nature of the deal. This was briefly an argument mounted by the supporters of Brexit, that it was not binding, but I think that their argument has largely evaporated. It was in any event supported by the legal opinions of both the Council Legal Service and Sir Alan Dashwood QC. The deal is irreversible because it can be amended or revoked only if all member states, including the United Kingdom, agree unanimously.

The Prime Minister has, however, made it clear that more reform is needed; Europe needs to improve. The task of reforming the European Union does not end with this agreement, a point made in his characteristically thoughtful way by my noble friend Lord Howell. But as I have set out, our new settlement will give the United Kingdom a special status within the EU that no arrangement outside the EU could match. As the Government have previously stated, the UK’s national interest will be best served by our country remaining part of a reformed EU. Membership of this reformed EU offers opportunity and security for jobs, investment and doing business, as well as for tackling crime and dealing with global issues such as climate change and terrorism. We also heard from the noble Lord, Lord Low, about the advantages to those who are disabled. It offers us certainty compared with years of disruption and the uncertainty of leaving for an unknown destination outside.

Ultimately it is of course for the British people to decide. The Government have a democratic duty to give effect to the electorate’s decision. Should the majority vote to leave the EU, we would start the Article 50 process. As set out in the Government’s own analysis, The Process for Withdrawing from the European Union, the EU treaties would continue to apply to the UK until the Article 50 agreement had entered into force, or for two years if no agreement had been reached and no extension to the two-year period had been granted. A request for an extension could be granted only with the unanimous agreement of the remaining member states, a point that is either ignored or not sufficiently understood by those who want us to leave. Perhaps I may refer noble Lords to Chapter 3 of the document, which makes this point:

“An extension request would provide opportunities for any Member State to try to extract a concession from the UK”,

which is hardly a strong negotiating position. Article 50 does not specify how much the withdrawal agreement itself should say about the future relationship between the EU and the departing member state. Any sort of detailed relationship would have to be negotiated separately from the withdrawal agreement using the detailed processes set out in the EU treaties. Article 50 does not specify whether these negotiations should be simultaneous or consecutive. This would be a matter for negotiation.

The use of Article 50 is unprecedented. Consequently, there is a great deal of uncertainty about how it would work. It would be a complex negotiation requiring the involvement of all 27 remaining EU member states and the European Commission. What is certain is that the UK’s withdrawal from the EU would mean unravelling all the rights and obligations that the UK has acquired since accession, a veritable cat’s cradle, as referred to by the noble Lord, Lord Hannay, ranging from free access to the single market, to structural funds for poorer regions of the United Kingdom, to joint action on sanctions. My noble friend Lord Caithness emphasised the complexity of the process and he was right to do so. Sir David Edward QC, a distinguished lawyer, said in evidence to the European Union Committee:

“The long-term ghastliness of the legal complications is almost unimaginable”.

The noble Lord, Lord Watson, also referred to that.

We would also need to negotiate a new relationship with Europe outside the EU. The Government have previously set out their view that leaving the EU would begin a process that could lead to a decade or more of uncertainty for Britain and for the economy. But what about the alternatives: what would this new relationship look like? The Government looked at a number of options in the paper entitled Alternatives to Membership: Possible Models for the UK. These included Norway, Canada, Turkey and a World Trade Organisation-only relationship. The paper summarises that:

“These models offer different balances in terms of advantages, obligations and influence … the precedents clearly indicate that we would need to make a number of trade-offs”.

In return for full access to the EU’s free trade single market in key UK industries, we would have to accept the free movement of people. Access to the single market would require us to implement its rules, but the UK would no longer have a vote on those rules. There is also no guarantee that we could fully replicate our existing co-operation in other areas such as cross-border action against criminals.

[Lord Pearson of Rannoch]

Before the noble Lord leaves the trade aspects, is he going to answer the points I put to him? For instance, they have two and a half million more jobs selling things to us than we do to them. Taking as I did the specific example of our motor trade, given that they send us 2.4 cars for every car we send them, and they have 64% of our market, are the noble Lord and the Government really saying that the eurocrats in Brussels would actually try to impose a tariff on that? Is it not perfectly obvious to anyone used to international trade that all this would continue as it does now?

[Lord Faulks]

The noble Lord is very confident about the future. I do not share his confidence. Of course trade will continue in one guise or another, but how can we be certain that the trade arrangements will be exactly as he would want them, given all the uncertainty that exists?

[Lord Pearson of Rannoch]

I am merely saying that they would continue as they are.

[Lord Faulks]

I do not think there is any guarantee of that. I will make some progress, if I may.

Full access to the single market would require us to continue to contribute to the EU’s programmes and budget. An approach based on a free trade agreement would not come with the same level of obligations, but would mean that UK companies had reduced access to the single market in key sectors such as services—almost 80% of the United Kingdom economy—and would face higher costs. We would lose our preferential access to 53 markets outside the EU with which the EU has free trade agreements. This would take years to renegotiate, with no guarantee that the UK would obtain terms as good as those we enjoy today. In order to maintain the rights of UK citizens living, working and travelling in other EU countries, we would almost certainly have to accept reciprocal arrangements for their citizens in the United Kingdom.

As the paper also sets out:

“Whatever alternative to membership the UK seeks following a decision to leave the EU, we will lose influence over EU decisions that will still directly affect us. We need to weigh the benefits of access to the EU and global markets against the obligations and costs incurred in return. It is the assessment of the UK Government that no existing model outside the EU comes close to providing the same balance of advantages and influence that we get from the UK’s current special status inside the EU”.

As to science and technology, we have seen both sides make their case for and against EU membership over the past few months. I am pleased that today, we have heard from members of the Science and Technology Committee, who bring another important angle to this debate, and to whose inquiry the Government have provided evidence. The UK plays a leading role in many aspects of EU research and science programmes. These provide access to opportunities of a different scale and scope from those that are possible nationally.

The UK received over £7 billion in EU funding for science and research between 2007 and 2013, second only to Germany. However, there is still scope for improvement, both in how the EU manages science funding and in simplifying the bureaucracy and transparency of funding instruments. The Government are keen to ensure that EU decision-making is based on the best scientific evidence. The UK has robust systems in place for providing science advice to government. Similar systems at EU level are currently being reformed.

Universities and science Minister Jo Johnson gave evidence to the inquiry earlier this year, saying:

“Britain's success as a science powerhouse hinges on our ability to collaborate with the best minds from across Europe and the world. This report is further evidence that the UK’s influential position would be diminished if we cut ourselves off from the rich sources of EU funding, the access to valuable shared research facilities and the flow of talented researchers that provide so many opportunities to our world-leading institutions”.

I will conclude by once again welcoming these reports. The noble Baroness, Lady Smith, rightly described them—perhaps rather rare in this debate—as showing objectivity. The Government will respond in due course, but I am grateful for all the contributions noble Lords have made to the debate today.

I have described the reforms that the Prime Minister secured in the UK’s settlement with the EU. There is of course more work to be done in reforming the EU, but the settlement shows the commitment of the European Commission and all 27 other countries in the EU to taking action. The Best of Both Worlds: the United Kingdom’s special status in a reformed European Union sets out the Government’s view that the UK’s national interest is best served by remaining in a reformed EU.

I have explained that the process of withdrawing from the EU is untested. The UK and the 27 other member states, along with EU institutions, would need to negotiate the UK’s new relationship with the EU. There would be difficult trade-offs, and this would lead to a considerable period of uncertainty, as we set out in the government paper.

On EU membership and its relationship to UK science, I have taken note of the committee’s report and restated the Government’s position that they believe the UK’s influential position in this field would be diminished if we cut ourselves off from EU funding, shared facilities and talented researchers.

As my right honourable friend the Prime Minister has said, this will be a once-in-a-generation vote. The Government’s position is clear. Our new settlement resets the balance in our relationship with the EU. It reinforces the clear economic and security benefits of EU membership, while making it clear that we cannot be required to take part in any further political integration. It creates a mechanism for reviewing existing EU laws and ensuring that decisions are taken at the national level whenever possible. It is in our national interest to remain in that reformed EU.

My noble friend Lord Cormack rightly referred to paragraph 258 of the committee’s report on the EU referendum and reform, with its emphasis on values as well as pragmatism. What unites the 28 member states is much greater than what divides them. I hope noble Lords will forgive me one personal observation, just as the noble Lord, Lord Browne, provided one. My grandfather fought at the Somme. My father fought in a number of theatres of war between 1939 and 1945. My generation has been spared that. We should not take peace for granted. For all its imperfection, the EU has helped to provide peace. It represents values that endure. Let us remain within it.