EU: Future Relationship

Lord Hain Excerpts

Wednesday 23rd September 2020 Grand Committee

[Lord Hain (Lab) [V]]

My Lords, just three months away from the end of the Brexit transition period, there is still no clear idea of a “landing zone” for the negotiations on the UK’s future relationship with the EU, with the UK Government’s latest threat to break international law destroying our negotiating trust and threatening a massively damaging hard or no-deal Brexit, compounding the economic recession resulting from Covid-19.

In March this year, your Lordships’ excellent EU Committee report contrasted the latest negotiating position of the EU as a “development” of the political declaration, which the British Government had solemnly agreed, with London’s new approach of turning its back on that. Within a couple of months, it had become clear that the EU was leaning towards an inclusive approach to the negotiations, with extensive consultations achieving consensus among member states, a willingness to engage in open and interest-based discussion aimed at problem-solving, and high levels of transparency. The UK approach, on the other hand, focused upon defending predetermined red lines, and decisions taken behind closed doors.

Now the Prime Minister has lurched into reneging on the treaty commitments for joint decision-making, in an agreement not yet a year old. This may be pure brinkmanship—upping the ante, either to prepare to blame the EU for no deal or to retreat into a “thin deal” under the guise of triumphal Boris Johnson tub-thumping, as happened last October. The EU, although shocked at this tactic—which calls into question whether any treaty signed by the UK is worth the paper it is written on any more—and despite declaring its intention to mount a legal challenge, is still negotiating, to its credit under the present German presidency. It appears that its real objective is to get a deal, although not at any price.

One of the main bones of contention is state aid, where the UK Government were warned by civil servants in January that provisions in the Northern Ireland protocol could potentially “reach back” into the rest of the UK. It is very strange, therefore, that according to the Financial Times on 14 September, the recent trade agreement with Japan commits the UK to tougher restrictions on state aid than the ones the Government are currently offering to the EU.

If a solution to the state aid issue can be found—the Institute for Government has recently proposed a possible solution—there is every likelihood that compromises on other outstanding issues, such as fisheries, can follow. However, we still have no clarity on what the Government’s aims are, apart from bombastic “sovereignty” slogans, which they continue, tragically, to confuse with UK power. No. 10 apparently wishes to see its discretion to subsidise “pet” projects unfettered by any agreement. Sir Ivan Rogers, the former UK ambassador to the EU, told the Irish Times on 16 September that he thought the Boris Johnson-Dominic Cummings view on state aid would prevail, with no deal the outcome. Perhaps we should hope that the Prime Minister, who was given six months to save his premiership in the Daily Telegraph last week, will decide there is a political premium from even a “thin deal” which, as the Centre for European Reform think tank argues, would at least provide a platform on which to build a more substantial EU-UK relationship going forward. Meanwhile, UK businesses are reduced to reading the tea leaves in trying to decipher what will be the trading environment for them after Christmas with the market which constitutes nearly half of the UK’s trade.

Britons make almost 60 million trips in a normal year into mainland Europe. Next year, will they still enjoy the protection of the European health insurance card, will pet passports still be valid, and will the current extension of UK mobile phone deals to EU countries, which means no roaming charges, still apply? Otherwise, UK citizens will need to take out costly health insurance, travelling with pets will be extremely onerous—with a new four-month process, including having cat or dog blood samples tested at an EU laboratory—and costly mobile phone charges will return. UK travellers will need at least six months’ validity on their passports, and drivers will need one or more of three different types of international driving permit.

The UK imports 50% of its food, with 30% coming from the EU, and the Food and Drink Federation anticipates tariffs of 23% on £35 billion-worth of imports of food. There will be higher prices, lower quality, and less choice.

A large percentage of medical supplies come from the EU, and the Government wrote to suppliers in August advising them to stockpile, as “significant disruption” to trade was likely for six months. Pharmaceutical firms have told the Government that disruption caused by Covid-19 has meant stockpiles have been “used up” and it may not be possible to replenish them in time.

Manufacturing is threatened with tariffs and disruption to Europe-wide supply-chains, with the more than half a million cars exported to the EU last year facing in future a duty of 10%. Road haulage will face a limit on the number of permits, and two-thirds of UK firms will not be able to operate in the EU at all. In finance, many firms either have or are planning to relocate to mainland Europe. Restrictions on EU migrants will make it more difficult for UK businesses to plug their gaps with European workers, and the UK will be unable to return migrants crossing the channel without negotiating new bilateral agreements. It will become illegal for EU servers to send personal data to the UK. Law and intelligence agencies will lose access to pan-European criminal databases, and shared arrest warrants would be limited. In addition to the ending of trade agreements with the EU 27, the UK will lose the benefit of deals that the EU has with up to another 70 countries, except where these have already been renegotiated.

The list of potentially catastrophic consequences of a no-deal Brexit is endless. In Hemingway’s 1926 novel The Sun Also Rises, a character is asked how he went bankrupt. The answer is: “Gradually, and then suddenly.”

Parliamentary Constituencies Bill

Lord Hain Excerpts

Committee stage & Committee: 3rd sitting (Hansard) & Committee: 3rd sitting (Hansard): House of Lords
Tuesday 15th September 2020 Grand Committee

[The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)]

Baroness Jolly. No? If the noble Baroness is not with us, we shall go on to the noble Lord, Lord Hain.

[Lord Hain (Lab) [V]]

My Lords, I shall speak to Amendment 22 standing in my name and that of the noble Lords, Lord Wigley and Lord Cormack, and the noble Baroness, Lady Finlay of Llandaff, to whom I am grateful.

Why this Bill? Is there a clamour from voters to change their constituencies? No. Do, for example, rural voters in Wales want even larger constituencies because they think that their MPs are too close to them? No. So what is the motivation?

Much is made by Ministers, as the noble Lord, Lord True, has already done, of the case for equalisation, but equalisation has been the principle behind our constituency system for generations—we all accept that principle. The point is that the Boundary Commissions have had the discretion to apply it fairly and sensibly, taking proper account of local views, of community identity and of geographic sparsity instead of being rigidly straitjacketed, as this Bill requires.

The Bill means that the uniqueness of Wales, in the past always having had special consideration by this Parliament, including in the 1944 Act, and by the Boundary Commissions, is ignored. In no other nation of Britain, proportionate to the population, are there such large and remote areas and vast geographical rural areas where there are thousands more sheep than people and constituencies are hundreds of square miles if not larger. Yet under this Bill, four existing geographically large seats in Wales could well become, and almost certainly will become, two monster ones. Instead of being hundreds of square miles in size, each will become thousands of square miles, in mid-Wales, north Wales and west Wales—none of them, by the way, Labour seats, so no party pleading is going on here.

Much has been made about the Bill creating constituencies that are more equal in size, but that has come at the expense of community ties, history and geography. We do not live in a world where populations grow in neat conurbations which fit an electoral quota dictated from on high. Nor does our geography in Wales lend itself to communities being switched dogmatically between constituencies to help achieve that quota. Our existing system already takes account of that by trading off strict electoral quotas in order to prioritise community identity, local ties and geography. Identifying with the constituency we live in and the close link between an MP and their constituents are fundamental to our parliamentary democracy and envied by democracies around the world.

The rigidity of the electoral quota and the 5% variance provided for in the Bill put that in jeopardy and give primacy to a rigid mathematical equation which is damaging for our democracy. That is why Amendment 22 proposes, in relation to Wales alone and to meet its specific needs, that the electorate of any constituency be no less than 85% of the United Kingdom electoral quota and no more than 115% of that quota. Why is this needed? Wales’s unique geography means that constituencies can vary drastically, from vast rural constituencies which are sparsely populated, such as the existing Brecon and Radnorshire, to densely populated, small urban constituencies in Cardiff and Swansea.

It is no surprise that two of the five largest geographical constituencies, Montgomeryshire and Dwyfor Meirionnydd, are also two of five smallest in electorate size, while two of the five largest electorates, Cardiff South and Penarth and Cardiff North, are also two of the five smallest geographical constituencies. There is a logic to that. There are seven constituencies in Wales which are more than 1,000 square kilometres in size—Brecon and Radnorshire is more than 3,000 square kilometres—but because of the rigid electoral quota used during the last review under the previous legislation, the Boundary Commission for Wales ended up proposing mega constituencies to achieve numerical parity and to cover the vast areas of sparsely populated rural Wales, as I described in great detail when moving Amendment 14. Much the same will happen under this Bill.

Mega constituencies like that will only alienate voters from those whom they elect to represent them, leaving them feeling more cut off and remote than before. It is a toxic combination which will lead to disengagement and undermine democracy. Equally, the strict quota is problematic for valley constituencies and makes the task of creating constituencies which make sense to valley communities extremely difficult.

It is not easy to move single communities from a valley and dump them in a different constituency. By their very nature, valley communities are linked and do not easily connect with neighbouring valleys. To reach a neighbouring valley you cannot just drive over a mountain of fields and forests. You have to drive to the top or the bottom, making communication take longer and not easy. Valley communities are also linked to specific towns in terms of transport, community links and historical ties. These community ties form the basis of many of the valley constituencies in the south Wales area, which I know well, still live in, and represented for a quarter of a century.

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[The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)]

I have received one request to speak after the Minister. I call the noble Lord, Lord Hain.

[Lord Hain (Lab) [V]]

My Lords, I thank the Minister for his moderate and reasoned response. However, I appeal to him again to look at Amendment 22. By the way, I have never favoured multi-member PR seats; I have always been in favour of the single member alternative vote system, which is fairer. I urge him to listen and read again the excellent contribution from the noble Baroness, Lady Finlay, and her point about fuelling separatist nationalism. We had a Secretary of State for Wales in the 1990s called John Redwood; he was a perfectly nice man personally but he behaved in an arrogant fashion. A lot of people in Wales, despite the moderation the Minister showed in his response, will see this as a punitive measure because Wales has been hit harder than anybody else.

We are not asking for the moon in Amendment 22. It is a moderate, constructive amendment. I and those who have backed it are not seeking to overturn this legislation, whatever our feelings about it or the motivation for it. We are asking the Government to give this to the Boundary Commission for Wales because of the unique circumstances of Wales which have historically always been recognised by Parliament. This is making a break with tradition and history, and the Minister should explain why the universal principle of equalisation, which has applied over the changes in boundary reviews for a long time, has been put on a rigid, straitjacketed altar that affects Wales so uniquely and badly.

There should be a 15% variation for Wales as opposed to 5%. Yes, there will be knock-on implications for England, but it has hundreds of seats—more than 500—whereas Wales has 40, so it will be a bit of impact for everybody as opposed to a massive impact for a few in Wales. I urge the Minister to reconsider this. Otherwise, his Government will reap a bitter harvest in Wales, as happened in 1997 when they lost every single MP because they were perceived as behaving in an arrogant way towards Wales. I do not accuse him of that personally, but I appeal to him to look again before Report at this moderate, constructive amendment proposing a 15% variation as opposed to a much more rigid 5% and see whether he can support it.

[Lord True (Con)]

My Lords, I cannot give the noble Lord enormous hope of a volte-face in the Government’s position. I can say to him and to all members of the Committee on this and other issues that I will read what has been said extremely carefully. It is my duty as a Minister to listen to what colleagues and other noble Lords say here and to reflect on it.

The Government’s position is that of course we want Wales, as all other parts of the United Kingdom, to be well represented. A sense of contact with democracy, which others have referred to in this Committee, is vital. Wales is fortunate in that it has a wonderful, solid tradition of local government out of which some of the greatest politicians in the history of our country have emerged. It has that system of local government and the Senedd with legislative powers over a range of policy areas. It has a strong voice in Westminster, including through the Welsh Affairs Committee, the Welsh Grand Committee and voices on the Benches of this House—we have heard them today—who persuasively make the case for Wales every day.

The Bill does not seek to change any of Wales’s democratic traditions—as if one ever could; we would never wish to do that. It would simply make sure that for UK general elections, wherever a vote is cast across the Union, it will carry the same power in helping to decide who governs our country. That is our position and the one I put to the Committee. Of course, I was not suggesting in any way that the noble Lord, Lord Hain, was guilty of arguing for multi-member constituencies outside this Committee and for micro-activity inside. I think he perhaps knows who I had in mind. I will, of course, reflect and carefully read the wise and heavy words of all those who have spoken. I have no doubt from what I have heard in this Committee that we may well be hearing further discussion of this later in the Bill and on the Floor of the House, where, I agree with the noble Lord, Lord Foulkes, many of us would like to be.

Parliamentary Constituencies Bill

Lord Hain Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Thursday 10th September 2020 Grand Committee

Moved by

[Lord Hain]

14: Clause 5, page 4, line 31, at end insert—
“(2) Rule 3 of Schedule 2 to the 1986 Act (allocation of constituencies to parts of the United Kingdom) is amended in accordance with subsections (3) and (4).(3) After rule 3(1) insert—“(1A) The number of constituencies in Wales shall not be less than 35.”(4) In rule 3(2), at the beginning insert “Subject to rule 3(1A),”.”

[Lord Hain (Lab) [V]]

My Lords I beg leave to move Amendment 14, in my name and those of my noble friend Lord Grocott and the noble Lords, Lord Wigley and Lord Rowe-Beddoe. I am especially grateful to my noble friend Lord Grocott for adding an English voice.

Since the Parliamentary Voting System and Constituencies Act was passed in 2011, the subsequent boundary reviews have disproportionately impacted Wales. The 2013 review slashed the number of seats by a quarter from 40 to 30—a huge loss of representation, had it been implemented. The 2018 review was even more savage, with Wales expected to lose 11 of its 40 seats. Even under current proposals, which maintain the total number of MPs, Wales is set to lose eight seats—fully a fifth. Whichever way you look at it, Wales will be the most punitively and uniquely impacted of the four nations.

Such a ruthless cut in the number of seats, coupled with the unique Welsh geography, which can see constituencies vary drastically from vast rural ones that are sparsely populated, such as Brecon and Radnorshire, to the densely populated small urban constituencies in Cardiff and Swansea, will have a brutal impact on parliamentary representation in Wales.

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[Baroness Scott of Bybrook (Con)]

I am sorry; I am very happy to withdraw that. He was supporting the cause of Scotland.

[Lord Hain (Lab) [V]]

My Lords, I thank all who have participated in the debate, beginning with my noble friend Lord Wigley, whose passion for Wales wins huge respect and affection not just in Wales but in your Lordships’ House.

My noble friend Lord Foulkes spoke eloquently about Scotland, but I think that he will nevertheless agree that Wales is impacted far more punitively and that this amendment is far more moderate than his.

I also applaud the noble Baroness, Lady Humphreys, for making the point that twice as many voters trust the Senedd as trust the UK Parliament. That is a pretty salutary figure. She also made the point that there has been a rise in support for independence from a frankly derisory figure that would disappoint my noble friend Lord Wigley up to nearly a third—a point also made by a self-adopted Welshman, my noble friend Lord Lipsey. This should worry the noble Baroness the Minister.

I express gratitude to my former MP neighbour, my noble and learned friend Lord Morris of Aberavon, who has served in public life with such distinction. I agree strongly with his phrase about the wholesale “wrecking” of representation in Wales, which this Bill represents. It is important, as he says, that people know who their MP is.

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[The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)]

Meanwhile, does the noble Lord beg leave to withdraw it?

[Lord Hain (Lab) [V]]

I beg leave to withdraw the amendment.

Amendment 14 withdrawn.

Parliamentary Constituencies Bill

Lord Hain Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Monday 27th July 2020 Lords Chamber

[Lord Hain (Lab) [V]]

My Lords, the noble Lord, Lord Kerr, made some powerful points. Until now, the principle of constituency equalisation has been applied by the Boundary Commissions in a fair and sensible way, taking proper account of local views, community identity and geographical sparsity, instead of being rigidly straitjacketed, as this Bill requires, and damaging Wales more than anywhere else, as my noble friend Lady Hayter has said.

In no other nation or region of Britain, proportionate to the population, are there such large and remote areas and vast rural areas with many thousands more sheep than people and constituencies of many hundreds of square miles. Yet under this Bill, four existing geographically large constituencies across mid, west and north Wales could well become two monster ones of thousands of square miles each. The Prime Minister can drive across his constituency in five to 10 minutes, but it takes a couple of hours or more to drive from one corner of the current Brecon and Radnorshire constituency to another.

Moreover, before 2010, every Parliament and Boundary Commission understood and accepted an elementary verity about former coal-mining Welsh valleys: that you cannot communicate with the next valley by the shortest route, because that is over the top of the mountain. You must travel to the top or bottom and go around. Communities in each of these valleys have different histories and identities, including, importantly, on the Welsh language. Parliament first decided in an Act in 1944 —well over 70 years ago—that because of Wales’s uniqueness, there should be no fewer than 35 seats. This Bill will result in an arbitrary cut of fully a fifth, from 40 to 32 seats in Wales.

Most offensive is the way that the Bill sweeps away local democracy. For generations, constituency boundaries have been reviewed and adjusted by local agreement not central diktat. Local people have had the opportunity to object if community identities were threatened or unsuitable mergers with nearby towns or villages were proposed, but the Bill has unilaterally dumped this for a rigid formula, with Wales most punitively hit.

The original, fairer, more transparent and consensual boundary review system should be restored. Equalisation should not be applied in such a dogmatic, rigid and politically discriminatory fashion; then we could have a fair and democratic boundaries Bill, not this unfair one, which rides roughshod over local community views, especially in Wales.

Finance Bill

Lord Hain Excerpts

2nd reading & Committee negatived & 3rd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Friday 17th July 2020 Lords Chamber

[Lord Hain (Lab) [V]]

My Lords, the OECD estimates that the fall in economic activity in 2020 in the UK will be the worst in any developed country. So we have both one of the worst Covid-19 death rates and the worst economic consequences.

In the United States, after the 1929 Wall Street crash, the economy sank into the great depression, with 25% unemployment. Recovery began only four years later, after President Roosevelt took office in March 1933 and launched his New Deal. In 2008, only bold Labour government action saved the UK financial system from complete collapse and stemmed the slide into slump. The British economy was growing again by the final quarter of 2009 and well on the way to recovery in 2010 when savage Tory austerity reversed it.

In both cases, it was the state, not the private sector, that got the economy moving again. Capitalism has no innate tendency to return to a full employment equilibrium state, as Keynes made clear. We must look to Government to stimulate recovery when a severe shock hits the economy hard. Waiting on the private sector to do the job would be like waiting for Godot.

The UK economy now faces its worst peacetime predicament for 300 years. British business is on life support. Industrial towns that used to brag about their bustling business centres now fear seeing them turned into shuttered trading estates or gone-out-of-business parks. Without massive state intervention, many of Britain’s businesses would already have gone bust, taking millions of families with them.

But 10 years of Tory austerity cast a long and bitter shadow. It took £150 billion of spending power out of the economy by 2020, 80% of it in public spending cuts. The Chancellor’s plan for jobs brings forward nearly £9 billion of public investment into 2020 and 2021. Alistair Darling—my noble friend Lord Darling—brought forward £29 billion of public investment into 2009 and 2010.

No one has accused the present Government of excessive spending. No one says that their budget deficit is too big or their debt dangerously high. No one has mentioned the Cameron-Osborne mantra of “maxing out the national credit card”. Today there is widespread acceptance that a national emergency warrants an extraordinary response, and that public finances must stand the strain. Even the Prime Minister concedes that, at a time of national crisis, big budget deficits and rising national debt are a sign of an effective corrective policy, not a mark of irresponsibility. In other words, all their attacks on the last Labour Government were false, and a decade of Tory austerity put Britain through years of pointless pain.

Northern Ireland Protocol

Lord Hain Excerpts

Thursday 21st May 2020 Lords Chamber

[Lord True]

I agree with what my noble friend has said about the place of Northern Ireland. Indeed, I have just affirmed that myself and I am pleased to repeat it. I think and hope that the European Commission recognises the importance of showing due sensitivity in the implementation of these matters in respect of each community in Northern Ireland, and this White Paper gives it an opportunity to display that sensitivity, which I very much hope it will do. As for an EU office in Belfast, I agree with my noble friend that it is entirely unnecessary and goes beyond what was agreed in the protocol. I have noted the strong views held by some people on this point.

[Lord Hain (Lab)]

My Lords, I appeal to Ministers to be more frank about this. In promising unfettered access, the Command Paper states that there will be

“no change to how Northern Ireland goods arrive in Great Britain ports compared to today. … These arrangements will not cover goods travelling from Ireland or the rest of the EU being exported to Great Britain.”

Without costly checks and barriers, how is this compatible with the legally binding Irish protocol, which must differentiate between goods explicitly from Northern Ireland and those transited through from elsewhere, for which customs rules and tariffs apply?

[Lord True]

My Lords, I believe that in practical terms it will be possible to address the issues that the noble Lord points to, in so far as those difficulties exist. There is a little tendency to accuse the Government of trying to gloss over problems. We gloss over no problem. We start with the intention to make the protocol work in a practical, beneficial and light-touch way. Given co-operation from every party—and there has been a positive welcome for these proposals from the Northern Ireland Executive—there is no reason why we should not be able to make the system work as the White Paper sets out.

Budget: Economic and Fiscal Outlook

Lord Hain Excerpts

Tuesday 5th May 2020 Lords Chamber

[Lord Hain (Lab)]

My Lords, I hope that government talk of getting the economy back to normal will cease, because that was not a good place to be—with business investment abysmal, retail sales the worst for 25 years, productivity falling and economic growth low and slowing every year since 2014 until it finally fell to zero. Record UK employment masked widespread job insecurity, with nearly 1 million people struggling to survive on zero-hours contracts, over 1 million in temporary work or doing second jobs, and the number feeling insecure at work doubling from 6.5 million in 2010 to 13 million in 2013.

Ten years ago, the Government used the overhang from the global financial crisis, of increasing national debt and high government borrowing, as an excuse for austerity to remove £150 billion of spending power from the economy, 80% of it in public spending cuts and 20% in tax rises. But that austerity was never about balancing the budget and bringing down debt to be better prepared for a future crisis, as George Osborne and Philip Hammond have since claimed. It was ideologically driven to reduce the role of the state, leaving us grossly unprepared for precisely this kind of pandemic crisis.

The Government never spent enough on the NHS; the pandemic began with more patients than ever on waiting lists for treatment and A&E waiting times the worst on record. Britain has fewer than three doctors per thousand of our population, compared to more than four in Germany and nearly five in Norway. We have only 2.5 hospital beds per thousand people, against six in France and eight in Germany. It is as if the Government had chosen as the patron saint of the NHS Ethelred the Unready.

After the Second World War, Britain grew her way out of debt. The national debt-to-GDP ratio fell from its wartime high of 259% to a post-war low of 26% in 1990. In the past 50 years, we have had a budget surplus only six times: three of those under the last Labour Government and two under Margaret Thatcher. What brought the debt-to-GDP ratio down in the post-war period was not austerity but economic growth, spurred by massive public investment in housing and a huge investment in infrastructure—it had twice the share of GDP it has today. The NHS would not have been in peril of being overwhelmed had it not been starved of funds for so long; nor, so shamefully, would adult social care, cut by £7.7 billion these past 10 years. The old normal delivered a massively unfair deal to millions of ordinary citizens and left the economy ill-equipped to face the future. We need a new normal.

[The Senior Deputy Speaker (Lord McFall of Alcluith)]

I understand that the noble Lord, Lord Campbell of Pittenweem, is absent, so I call the noble Baroness, Lady Deech.

Economy: Update

Lord Hain Excerpts

Tuesday 28th April 2020 Lords Chamber

[Lord Agnew of Oulton]

The noble Baroness is right; we face a very uncertain few months and we do not honestly know how businesses will react as we come out of furlough and lockdown. We are looking at the long-term implications. The early indications are that there is optimism. While I think that an inverted-V bounce is probably too optimistic, I think a lot restricted spending will be unleashed into the economy. It is worth remembering that under the furlough arrangement employees are receiving 80% of their normal earnings without the cost of commuting or eating out in cafes or whatever when they are working. I stress that we are looking at all future scenarios.

[Lord Hain (Lab)]

My Lords, I ask that, after the lockdown is lifted, the Chancellor not impose again the savage cuts in the public sector that we have seen over the last 10 years. These left England short of 10,000 doctors, 40,000 nurses and 110,000 adult social care workers, fatally damaging the battle against the coronavirus, especially in care homes, as we have seen so tragically. After World War II, with much higher levels of debt and borrowing than followed the 2008 banking crisis, both Labour and Conservative Governments built the National Health Service, millions of homes and a welfare state, and saw much higher growth than since 2010. Surely there must be no return to this past disastrous austerity decade.

Budget Statement

Lord Hain Excerpts

Wednesday 18th March 2020 Lords Chamber

[Lord Hain (Lab)]

My Lords, I agree with what the noble Lords, Lord O’Neill and Lord Lamont, said, but by spending an extra £350 billion to deal with the dire consequences of the coronavirus and promising even more, Britain’s new Chancellor has blown a hole in all the dogma of the last 10 years of Tory austerity. Boris Johnson has been hailing the recent Budget as a cheerleader for the common citizen, targeted on left-behind towns in the Midlands and the north and making a clean break with the Cameron-May years of harsh austerity. But in reality, the Budget fell well short of the great Tory turnaround that his fan club believed it to be.

First, the Budget failed to undo 90%—I stress, 90%—of the damage done nationwide by an unnecessary decade during which George Osborne and Philip Hammond squeezed over £150 billion of spending power out of the economy. On top of the measly £12 billion of measures announced last week to deal with the coronavirus emergency, this Budget gave the economy only an £18 billion boost over two years, with the brakes coming on again in 2022. As singer Melanie Safka told her Woodstock audience in 1969, they are

“only putting in a little

To get rid of a lot that is wrong.”

Secondly, the big increases in public sector capital spending that the Chancellor announced caused many people to miss what is happening to the current public spending that pays for our public services. George Osborne’s first Budget in 2010 set the pattern for the next 10 years. He cut Labour’s public investment capital plans by £10 billion over five years but he cut Labour’s plans for current spending by over £80 billion. That is why 20,000 police jobs disappeared, the NHS in England is 40,000 nurses short today, and today’s social care budget is £12 billion lower than is needed to bring service standards back up to their 2010 levels. The numbers of elderly people needing care have rocketed in the meantime as the Conservatives have created a countrywide calamity of social care misery for the elderly. The Institute for Fiscal Studies reckons that outside of health, day-to-day spending on other public services is now only three-quarters of what it was under Labour in 2007, and that current spending per person for most public services will still be well below the 2010 levels in 2024.

Thirdly, George Osborne chose an 80%/20% split between public spending cuts and tax rises, meaning that Tory austerity fell overwhelmingly on our most vulnerable citizens and on vital social infrastructure. The new Chancellor led a “Getting it done” chorus, blithely ignoring the fact that growth, which had been slowing in each of the past five years, had come to a complete halt in the final quarter of 2019. It did the same in January of this year; UK GDP did not grow at all for four months. That is why the IFS describes the forecast growth rates for the British economy for the next five years as feeble, why it denies that the UK is in a robust position to cope with shocks such as the coronavirus catastrophe, and why it says that a failure to agree an orderly move to a free trade agreement with the European Union would badly weaken an already weak economy.

The Budget speech, cheered by the Tory Hooray Henrys, included a long-overdue and desperately needed increase in public investment, which they have spent the past 10 years resisting; an expanding budget deficit, which they spent a decade promising to cut; a national debt today that is double what it was before the global financial crisis—80% of GDP in 2020 under the Tories, against 36% in 2007 under Labour—and some crumbs of comfort for the neediest, to whom they have shown only a cold shoulder and frozen or cut benefits for years.

Bailing out Britain’s banks to avert financial collapse and ruin after the global credit crunch cost UK taxpayers cash outlays which alone peaked at £133 billion, according to a June 2013 parliamentary banking report. Allowing for cash outlays, government guarantees and Bank of England support, the potential cost to UK taxpayers of saving Britain’s banks had reached £1,162 billion by July 2012, or 10 times the annual cost of the NHS, according to the National Audit Office.

In 2008, the Government had to act within hours to save the economy from a collapsing banking system. In 2020, the Government had to act within days to save the economy from the virus crisis. The small group of cheerleaders on the Benches behind the Prime Minister have been forced to concede that urgent action to stave off disaster demands big decisions that only government can take, because only the state can provide the resources required in a national emergency like this.

Yesterday, the Chancellor was right to reject 10 years of Osborne austerity and to throw the power of the state at the gravest crisis we have faced in 80 years. It has been an unexpected learning experience for him and his party, and 10 years overdue. But if the sudden extra £350 billion to beat the coronavirus pandemic can be produced like a rabbit out of a hat in the last few days of government panic, the question is why appropriate extra public spending was not found from the very start of Conservative rule in 2010 to deal with the aftermath of the financial crisis, instead of plunging the country into 10 years of savage cuts—driven by neoliberal dogma and not necessity—which have gravely damaged the country’s capacity, including to fight this terrifying pandemic.

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[Lord Agnew of Oulton]

I do not like debt at all, so I accept what the noble Baroness says. We have also not had a proper drains-up on the impact of the original QE 10 or 12 years ago. It seems to have enriched the rich—those with assets—but what did those at the bottom end of society get out of it? Also, the question no one has ever been able to answer is: what happened to all the money? Did it stay in the British economy? One figure I was given is that at least a third of it just disappeared completely. So I am certainly not in favour of another one of those kinds of QE.

Turning to the noble Lord, Lord Hain, I am afraid that there is not a lot I can agree with in his statements. He seems to think that there is a magic money tree, and seems to have forgotten that we inherited a budget deficit of 10% in 2010. As a huge Europhile, he seems to forget that the EU has a 3% ceiling on its budget deficit levels. We have had to bring that down, and it is one of the reasons why we have more flexibility in the current days to do some of the dramatic things that have been announced by the Chancellor.

[Lord Hain]

I do not believe in a magic money tree. I believe in Keynesian, investment-driven economics, which is what we should have been doing for the past 10 years instead of this needless, destructive austerity.

[Lord Agnew of Oulton]

I disagree that we have had needless, destructive austerity. For example, we have created some 3.5 million jobs over the past 10 years, and until this crisis hit us in the last few days we have seen steady growth in earnings over the last year to 18 months. We are probably never going to agree, I am afraid, but let us at least put our points of view on the record.

The noble Lord, Lord Leigh, asked for faster action. I think some of the points he made on liquidity and the relaxing of insolvency laws were well made. I will certainly take those back to the Treasury. If he has any more information on that, I would certainly be interested to learn about it.

In relation to entrepreneurs’ relief, the noble Lord, Lord Leigh, and the noble Baroness, Lady Finn, were disappointed that we had increased the tax rate. But it is worth pointing out that the capital gains rate is 20% and it was reduced from 28% in 2016. It is hardly a rapacious rate of tax. I would be surprised if that put entrepreneurs off. We all have to pay our share of tax.

The noble Baroness, Lady Jones, said we were tinkering around the edges. But to announce within four days 15% of GDP as a bailout to the economy—I just do not accept that that is tinkering around the edges. As I said when I quoted the Chancellor at the beginning, we will continue to do more. This is a very fast-moving story and we are not going to sit idly by.

It was a rare moment of sunshine to hear from the noble Lord, Lord Bates. I share some of his optimism. Perhaps I am foolish and your Lordships will be able to berate me in six months’ time, but I think we will come through this as a stronger society. I think that sometimes an event such as this gives people pause for consideration about how things work. I am not as gloomy as many noble Lords were in the debate today. Indeed, just as I sat down earlier, I had a text from someone who says that there is already a possible vaccine being tested in Japan. I have no idea, but I think we have a good chance of finding a vaccine sooner than in previous outbreaks because the science has moved on so quickly. I read two weeks ago that they had already decoded the DNA of this virus within a few weeks of it becoming known in China. Last time with SARS and so on, this took months. I am probably putting my credibility on the line here, but a little bit of sunshine cannot go amiss.

The noble Lords, Lord Bruce and Lord Adonis, were worried about the EU. I gently and quietly remind them that we had a general election which put this absolutely fair and square to the electorate and, against the wishes of the vast majority of this House, and indeed many in the Commons, they gave a resounding thumbs up to what we were trying to do. What is going to happen now, I have no idea. But I do not think it should be used as an excuse to try to get us back into the EU.

The noble Lord, Lord Adonis, also asked about international co-operation. Of course, this will be extremely important. I hope he is reassured by our changes to the emergency government structure, which were announced yesterday. We have created four strands: health and social care; public services; economic; and international. We are very aware that this needs international co-operation. We have to be realistic, though, that in the next few weeks countries are going to be looking out for themselves. That is the brutal reality when supply chains have been broken and we are not able to get the things we want because other countries will want to keep them. Likewise with the closing of borders—that is an extraordinary thing for the EU to have done. That goes against all its principles, but it has reacted in a perfectly rational way. We have to accept that that is going to be the case over the next few weeks, but I think there will be a mammoth effort to come up with a vaccine and that will be a worldwide endeavour so I remain optimistic that it will prevail.

The noble Baroness, Lady Falkner, worried about prudent levels of debt and—like the noble Lord, Lord Skidelsky—that there is no free lunch. The noble Baroness, Lady Kramer, raised this at the end when summing up. We will just have to see what happens. I am not trying to duck the question. As a person about half my age said to me a few years ago—

European Union: Negotiations (European Union Committee Report)

Lord Hain Excerpts

Monday 16th March 2020 Lords Chamber

[Lord Hain (Lab)]

My Lords, without any scrutiny apart from the excellent report from the European Union Committee, since the election the Government have been rushing to an extreme hard Brexit which will simply compound the profound economic damage already triggered by the coronavirus into quite unnecessary and reckless national self-harm. Incredibly, the Prime Minister has unilaterally committed—come what may and way before he needed to—to leaving the transition period at the end of December, meaning the spectre of no deal is once again on the horizon, with immensely damaging long-term consequences for the UK’s economy. With respect to the noble Baroness, Lady Noakes, it would also be an outcome that was not foreseen or supported by most people at the time of the 2016 referendum.

In recent weeks, the magnitude of the coronavirus crisis has vividly demonstrated the limits of national action and the challenges of an unregulated, globalised world. Contrary to the belligerently nationalist tone adopted by the Prime Minister, Britain alone cannot fight the virus. We need leadership like Gordon Brown’s as chair of the G20 at the time of the global financial crash. The need for internationally aligned standards on isolation, quarantine and contact tracing and for much more investment in public health systems has been demonstrated. For instance, the UK has no vaccine production capacity of its own. As we have exited the EU, this could make us vulnerable to a potential second wave of Covid-19 and future pandemics. The European Medicines Agency, which once ensured that London was the centre for scientific evaluation, supervision and safety monitoring of medicines in the EU, relocated to Amsterdam in March 2019. As David Meek, the CEO of Ipsen, a leading pharmaceutical company, has warned, when it comes to availability of new treatments, pharmaceutical companies will first of all target the far bigger markets of the EU, the US and China. The UK, as predicted by President Obama, will indeed be at the “back of the queue”.

The EU Committee has drawn attention to the extent to which the two sides have diverged since last October’s agreement, which has created a mismatch of expectations on virtually all aspects of the future relationship. This analysis shows that the EU Council’s decision adopts the same structure as the agreed political declaration. As the UK is no longer a member of the EU, it seeks not to maximise trade but to prevent the UK undercutting the single market by lowering standards. However, the UK’s position appears to have changed significantly following the December election. A precursor to this can be found in changes made to the draft in November 2019 by the new Prime Minister’s negotiator. In particular, the words in the protocols relating to alignment of the UK in the areas of taxation, environmental protection, labour standards, state aid and competition were moved from the binding withdrawal agreement into the aspirational political declaration. Then, on 3 February, the Prime Minister announced that there was

“no need for a free trade agreement to involve”

the UK

“accepting EU rules”.

The new approach by the UK’s negotiating draft is also therefore motivated by a desire not to maximise trade but to seek the fullest amount of regulatory independence for the UK, putting Brexiteer dogma ahead of jobs and prosperity. This was confirmed by the Prime Minister’s statement:

“The question is whether we agree a trading relationship with the EU comparable to Canada’s—or more like Australia’s.”


But no trade deal exists between Australia and the EU, and his comments have also been interpreted as “code for no deal” by Ireland’s EU Trade Commissioner Phil Hogan. Even the Canada deal to which the Prime Minister referred—which took seven years to negotiate—would be disastrous for the UK, which already has a sizeable trade deficit on goods with the EU, as competitive EU suppliers could take advantage of zero tariffs in many areas, while services, where the UK has a trade surplus with the EU, would lose access to their former EU markets.

It is now clear that the obsession of Brexiteers with the so-called “sovereignty” of the UK means that the Government now believe there must be no alignment with EU rules. Slashing European regulation has, of course, long been a right-wing article of faith for those promoting a “Singapore-upon-Thames” UK, but the truth is that divergence caused by Brexit will lead to more bureaucracy, not less. First, the UK will need to replicate the functions of the EU regulatory bodies. Secondly, UK exporters will then have to deal with two sets of rules, as they will still need to meet EU standards to trade into the biggest, richest market in the world.

The sectors affected do not want to lose the protection and market access provided by EU regulatory frameworks, which have been developed, with UK support and influence, over the last 40 years. A case in point is the recent announcement by the Transport Secretary that the UK will leave the European Aviation Safety Agency, which enforces safety standards in the airline industry. The trade body representing the British aerospace and defence industry immediately condemned this decision as “unnecessary and unwanted divergence” from EU norms and harmful to the UK aerospace sector. The automotive, food and drink and pharmaceutical industries, among others, have also warned the Government that moving away from key EU rules would be damaging. But there is no sign that their pleas have been heard.

The Government’s own analysis in 2018 concluded that under a no-deal scenario the UK economy might be 6% to 9% smaller. Yet Number 10’s “divergence for divergence’s sake” could be catastrophic for British manufacturing industry and its workers. The industrial heartlands of the north-east and the West Midlands face the greatest potential economic hit—down by 16% and 13% respectively, it was estimated. Their economies are heavily dependent on European-wide just-in-time production found in advanced manufacturing such as cars, aerospace and chemicals. No doubt the Prime Minister will blame the EU for making these regions poorer when his damaging hard Brexit cuts our manufacturers off from lucrative EU single market access. This malign threat now looms over all sectors of the UK economy.

Take fishing and financial services as two very different examples. A bizarre stand-off between the UK and the EU over fishing rights triggered alarm that the Government were thinking of sacrificing the UK financial service industry’s access to the EU market in order to “save” UK waters for the British fishing fleet. Financial services account for around 7% of GDP, 11% of UK tax take and more than 1 million jobs, over half of which are outside Greater London. Fishing, while deserving of full support as it is important, especially to coastal communities, employs fewer than 10,000 people and is worth a fraction of 1% to national GDP.

The Brexiteers do not understand how this industry works. After years of promises of “frictionless trade” by Brexiteers, on 10 February, Michael Gove was finally forced to admit that this will cease at the end of this year. As one person’s fish is another person’s poisson, the UK fishing industry relies completely on overnight frictionless UK/EU trade. Informed analysis has shown that the most likely outcome of closing the UK’s sea borders would be a lose-lose situation for both UK and EU consumers and for both fishing industries. It would therefore be yet another spectacular own goal if the UK refused a deal on finance, which is critical to the UK’s prosperity, as the price of not reaching one on fishing.

We now learn that the government team negotiating with Brussels has been ordered to find ways to “get around” the Northern Ireland protocol, which includes checks on goods moving from Great Britain to Northern Ireland, measures adopted to protect the balance of the Good Friday agreement and avoid a hard border on the island of Ireland. This would trigger dispute-resolution arrangements in the withdrawal agreement, which in turn jeopardises a future trade deal with not only the EU but the US, where support for the island of Ireland, north and south, in Congress is strong.

When the UK and the EU together ratified the withdrawal agreement last October, it became legally binding under international law, as noble Lords have already mentioned. This means that, regardless of the outcome of the current negotiations on the future relationship, the protocol on Ireland/Northern Ireland is legally in place, and the Good Friday agreement must therefore be fully protected. Implementation of the protocol will ensure that there is no hard border on the island of Ireland and that the common travel area is maintained, to the continued benefit of UK and Irish citizens, and that more practical things such as the single electricity market in Ireland are part of protecting north-south co-operation. The protocol also maintains commitments to ensure no diminution of rights and safeguards equality of opportunity, as set out in the Good Friday agreement. It confirms that people in Northern Ireland who exercise their right to Irish citizenship will continue to enjoy their rights as EU citizens and reaffirms the EU and UK commitment to the PEACE PLUS programme.

The protocol states that Northern Ireland will remain in the UK customs territory but continue to apply the rules of the EU customs code. This means that there will be a need for checks on goods entering Northern Ireland from Great Britain, some of which already exist—for example, on livestock. However, the Prime Minister has insisted there will be no checks on goods moving in either direction. Unless the UK honours its legal commitments in the protocol, we will damage our long-standing and deserved global reputation as a credible international actor and undermine our ability to conclude international agreements of any kind in the future, including free trade agreements and the negotiations on the future relationship with the EU.

The protocol effectively moved the UK/EU customs and regulatory border into the Irish Sea, so that Northern Ireland will be on the EU side of the barriers to UK/EU trade. At the very least, this means more paperwork and administration; it could also well mean regulatory divergence, duties and even quotas. It poses an existential challenge, not only to the UK exporting but to the model of intra-UK business itself. I spell this out bluntly, because the Prime Minister is sailing blithely on, denying that there will be any problem implementing what he has legally agreed to on Northern Ireland, and sooner rather than later he is going to hit a brick wall.

Finally, we must surely insist that, in the light of the coronavirus catastrophe, the Government will face down the hard-Brexit zealots and reconsider the decision to exit the transition period at the end of the year, come what may. Right in the thick of the coronavirus pandemic, the last thing the country will need by then is yet more disruption and instability triggered by the double whammy of a rushed Brexit driven by dogma to meet an arbitrary deadline, especially when so many questions about the Government’s agenda remain mired in confused contradiction.

--- Later in debate ---

[The Earl of Kinnoull]

My Lords, very briefly, I thank the staff of the committee. As I tried to explain in an obviously unsatisfactory answer to the noble Lord, Lord Hamilton, this was done in a tremendous rush, with lots of late-night oil being burned, because we got the Command Paper on 27 February and the staff and the whole committee had agreed to our report by 3 March. I hope the House feels that we performed our duty in trying to do that.

Secondly, I thank everyone who has spoken in our four and a half hours of debate, which I found fascinating. New points and new thoughts have been put to me—I live in this world 24/7 and enjoy everything—and it has been rich in content.

One gypsy’s warning was given. About half the membership mentioned Northern Ireland and I hope the Minister will reread the excellent speech of the noble Lord, Lord Kerr of Kinlochard, which summarised the issues and got to the nub of them. I should say, as a minor piece of advertising, that we worked together in Northern Ireland and have taken evidence both there and here. Our next work will focus in that direction, and I hope we will have the opportunity to consider what we have found out today on the Floor of the House. This is definitely something that needs attention. It is not an unwinnable position at all, but it needs attention; it is a gypsy’s warning.

I will comment finally on whether our report answers our own question on divergence. I am afraid it does not. There are two elements that one is asking for with divergence: an explanation as to what has diverged, and the justification for why it is right to diverge. In our report, through burning the midnight oil, we have been able to do a reasonable job of explaining what has diverged. We will ask Europeans why they are diverging—I tried to point out that there were divergences on both sides. As scrutineers, we will also need to ask the Government to explain and justify why the divergence is taking place, assuming that there will be future divergence. I am afraid that our question on that is still live. I hope that, when the Government respond to our report, we will get some clues.

[Lord Hain]

I very much welcome the committee’s intention to look at Northern Ireland. For some time, the Government said of the Irish border that it would all be all right on the night and we should not worry about it. They then conceded that there was something to worry about—and the agreement protects the open border, provided it is maintained. But there is still considerable denial about de facto checks and a virtual border in the Irish Sea. I very much welcome the committee’s intention to look at that.

[The Earl of Kinnoull]

I thank the noble Lord for that. Here, I point to the very important intervention on that issue by the noble Lord, Lord Lamont of Lerwick. He pointed out that the situation is quite dynamic. If a free trade agreement results, it will greatly reduce, although not eliminate, the list of problems.

This has been an excellent debate and I thank everyone again. I commend the report to the House.