EU Referendum and EU Reform (EUC Report)

Lord Hannay of Chiswick Excerpts

Wednesday 15th June 2016 Lords Chamber

[Lord Pearson of Rannoch (UKIP)]

My Lords, I cannot help mentioning that, of the 34 speakers in this debate, I can see perhaps only two who think that we should leave the European Union. I remind your Lordships, and anyone who may read this debate—and indeed the one that follows, where I cannot see a single Brexiteer on the Order Paper—that your Lordships’ House is a very Europhile place, well-stocked with former government Ministers, Members of Parliament and servants of the EU, who between them have been responsible over long, and what they no doubt regard as successful, lives for bringing this country to its present state of subservience to the corrupt octopus in Brussels. It must be disappointing for them to see so much ingratitude and anger boiling up among the British people against the project in which they have invested so much and in which they so fervently believe.

That is why, during this referendum campaign, we have seen Project Octopus turning into Project Fear—we are told to be fearful of leaving the clutch of its tentacles. This morning we have Project Panic as the Chancellor threatens us with all manner of taxes and pestilence if, as the world’s fifth-largest economy, we dare to take our own place outside the failing project of European integration and simply join the 160 other countries in the world that have not made the mistake of joining it.

At the heart of this threat of economic disaster if we vote to leave next Thursday lies a wholly improbable scare: that somehow we would lose our present free trade with the single market and have to pay job-destroying tariffs to export into it. I propose to spend the rest of these few minutes examining that central fallacy in the remain position.

Government figures suggest that around 10% of our GDP goes in trade with clients in the EU—supporting some 3 million British jobs; another 10% goes to the rest of the world; and 80% stays in our domestic economy. But EU overregulation strangles all 100% of our economy, so 90% of it would be set free from Brussels overkill if we leave the EU. Of course, we would have to meet single market requirements for the 10% that we export to it, just as we do for what we export to the foreign markets outside the EU.

[Lord Hannay of Chiswick (CB)]

The noble Lord says that EU regulation strangles our economy. Can he explain why the OECD found that we were the second-least regulated economy in the OECD—that is, we were less regulated than its non-EU members—and that the only country less regulated than us was another EU member, the Netherlands? Perhaps he could give a little thought to that before he makes foolish remarks such as the ones he has just made.

[Lord Pearson of Rannoch]

My Lords, I do not see that anything the noble Lord has said alters what I said. The Dutch Prime Minister recently went so far as to say that he thought a large proportion of the Dutch economy was afflicted by EU regulations. The noble Lord will simply have to wait until we are out of the European Union and then he will see how we set ourselves free.

As I was saying, we would go on exporting to the rest of the world as we do now. We would meet the conditions required by the rest of the world, just as it pays to put the steering wheel on the left if you are selling a car to the United States.

The Government’s ONS Pink Book reveals that our growing trade deficit with the single market reached £85 billion in 2015. This means that manufacturers in the EU sold us £85 billion-worth more in goods than we sell them. If we accept the Government’s suggestion that some 3 million jobs support the 10% of our GDP which exports to the single market, this means that there are around 5.5 million jobs in the EU which support exporting to us. So if the politicians in Brussels try to impose tariffs on our trade together, that would hit 2.5 million more jobs in the single market than it would here and would not be tolerated by EU manufacturers.

Let us take the specific example of our car trade, which the Prime Minister and other Europhiles pretend would suffer a 10% tariff on its exports to the single market if we leave the political construct of the EU, with consequent job losses here. That must be nonsense, because we import twice as many cars from the EU as we export to it—1.7 million cars in and 700,000 cars out—while EU manufacturers also enjoy having 64% of our domestic car market. So those powerful manufacturers, with their suppliers and employees, will simply not tolerate a tariff which would damage them so much more than us, however much Herr Juncker and Herr Schäuble and sundry other mischief in Brussels might wish to punish us for leaving the rest of the EU.

--- Later in debate ---

[Lord Hannay of Chiswick (CB)]

My Lords, every one of the three reports we are debating today is relevant to the event that will take place a week tomorrow and is given a great deal of added topicality by that event. Each one, as is invariably the case with such reports of our EU Select Committee and the Select Committee on Science and Technology, is a small part of the complicated jigsaw that makes up our EU membership—one which is so poorly understood, alas, by the electorate and one which, also alas, is so badly explained by politicians. There is plenty of blame to go around for that lamentable state of affairs, but none of it, I suggest, is attributable to your Lordships’ committees or to the admirable chair of the EU Select Committee, the noble Lord, Lord Boswell, who introduced this debate with such lucidity.

No one who has read Article 50 of the EU treaty even once—I fear that there may be some at least in this room who have not done that—can possibly doubt what a cat’s cradle we will enmesh ourselves in if next week we vote to leave. No one also can, or at least should, doubt that we will be at a negotiating disadvantage if we decide to go down that path of withdrawal—a negotiation in which we will inevitably be cast in an adversarial position from the outset.

Let me just make this point. Up to now, the other 27 member states have unanimously made clear—and they really mean it—that they want the 28-member European Union to continue. That is an entirely valid position, from their point of view and an admirable one from mine. But do not doubt: the day we vote to leave, that will change. Then, the 27 other member states will know that we are no longer to be a member of the European Union, and they will look after their national interests in that context. That will not take account of our national interest.

We would thus, under the Article 50 arrangements, lose control over the content and timing. That is all the more so, of course, given that the views expressed sometimes in this Chamber and by Vote Leave seem to indicate a desire not to trigger Article 50 too soon—that is, in plain speech, to prolong the agony and uncertainty, which is likely to have an extremely damaging effect on investment in this country for even longer than would be the case if it was triggered straightaway. Indeed, it looks to me as if most of the two years provided for in Article 50 could well be taken up with the supporters of leave working out which of the future trading options with the EU we want to aspire to, because they certainly are not making a great deal of sense out of it yet.

On what basis do the supporters of Brexit base their sunny optimism as to the outcome of those negotiations? It is certainly not on any contact with the leaders of the 27 other member states who will be on the opposite side of the table from us—as far as I can see, none of them has had any contact with them at all. Meanwhile, the leaders of the leave campaign miss no opportunity to insult the other member states, and proclaim that they want to destroy the European Union or even, with supreme arrogance, that they want to give them a lesson and a wake-up call. Is that likely to encourage them to give us a good deal? I rather doubt it, even if they are not likely to be heavily preoccupied with the risk of contagion to their own protest movements if they are too generous to us. It is honestly no good saying that the Germans will still want to sell us BMWs and the French will still want to sell us wine. That is the politics of the saloon bar, not of the negotiating table.

The second report, on EU membership and UK science, on which I welcomed the introduction from the noble Earl, is equally sobering, as is the virtually unanimous view of our universities and research establishments that withdrawal would be seriously damaging to them. We have heard plenty of evidence of that. It is not just a matter of EU funding, of which, of course, we get a disproportionately large share—although, given the steady reduction in the Government’s own contribution to our scientific budget in recent years, it is a little hard to believe that they will leap forward and substitute for it with great alacrity. But there is also the important issue of collaboration, to which many noble Lords, including the noble Lord, Lord Taverne, referred. The studies done by Universities UK showed, if I understood rightly, that every pound, dollar or euro put into research in this country was worth 1.4 times as much if done within a collaborative European programme as if it was done in a purely national programme. That is not to be discounted. The scientific effort being made here and elsewhere in Europe is a crucial part of our national capacity to compete effectively in the decades ahead. It should not be subjected to a game of Russian roulette by politicians who have devoted a good deal more of their time to the humanities than they have to the sciences. I confess that I am one of those.

The noble Lord, Lord Boswell, was quite right to say that the three reports are not partisan, but I am sorry if I offend him by saying that all three are basically building blocks in the remain argument. They all represent compelling arguments why remain is in the national interests. When we meet next in this House, the die will have been cast. If, as I hope, the majority vote to remain, it will be important for the Government to set out and implement an agenda that enables us to play a leading role in a reformed European Union, to which we are committed as a wholehearted and constructive member. If the result goes the other way, some of us may be accused—I expect I shall be—of being bad losers. I would not accept that deploring an outcome that will, irretrievably and in a lasting manner, damage our economy, weaken our security and diminish our role in the world, is worthy of that characterisation.