Brexit: The Customs Challenge (European Union Committee Report)

Lord Horam Excerpts

Monday 1st April 2019 Lords Chamber

[Lord Horam (Con)]

My Lords, I join other noble Lords in congratulating my noble friend Lady Verma on her excellent chairmanship of our committee. I thank my colleagues and our ever-diligent staff for their contributions to our long and sometimes exhausting —but sometimes rather exhilarating—meetings.

This is our third report on customs and trade. It is right that we concentrated so much attention on this, because whether we remain in a customs union or not, the issue is central to the binary choice that the Government are, I am afraid, not making at the moment, and which we will have at some stage to make. The noble Baroness, Lady Suttie, has just made the point that down the Corridor a very important debate on indicative votes is taking place. The most popular Motion so far, as we saw last week, was moved by my right honourable friend Ken Clarke in favour of remaining in the customs union.

On the point just made in an intervention, I make a distinction between remaining in the customs union and, like Turkey, having a customs union with the customs union. That is a different and separate point. As I understand it, Ken Clarke was arguing for us remaining in the existing customs union, which is the only way to maintain the entirely frictionless trade we have enjoyed with our colleagues in European Union countries for 45 years—and the only way to avoid a hard border in Ireland and keep the United Kingdom together. I fear that if there were a hard border in Ireland, the problem of Scottish independence would loom its hoary head. Therefore, this is a way of keeping the United Kingdom together.

We should not forget the value of inward investment into this country. As an economist, I am extremely aware of this. It exists simply because we are part of a huge market of 500 million people. It is the jewel in the United Kingdom’s crown. We have far more inward investment than Germany, and twice as much as both France and Italy. That would undoubtedly be threatened—indeed, is already being threatened—if we removed ourselves from these arrangements. Politically, this may well be the ultimate compromise we have to make. I voted remain; if the remainers can accept that we will leave the European Union, as we are targeted to do, perhaps the Brexiteers could accept a soft, sensible Brexit that we could support. The 52% to 48% split in public opinion suggests that that is one possible way forward, and I note that the Chief Whip is going to be revealed on television this evening as saying that it is something which the Prime Minister should have thought about when the results of the last general election became apparent.

However, it has to be acknowledged, and I do so now, that important arguments can be made against remaining in the customs union. We would not be able to have our own independent trade policy, and of course we would be a rule taker—the “vassal state”, as it is called: the “servile state” is another phrase that is used—but I would argue that these are overrated as disadvantages. The idea of no independent trade policy is too strong a point to make. In fact, having an independent trade policy from where we are now would be a disadvantage. That is because, if you have an independent trade policy, you are selling entry to a market of 65 million people, whereas at the moment we are selling entry to a market of 500 million people. That is a hugely easier sale than if we had our own independent trade deal. So that is not really an argument that can be sustained.

The other argument is about the vassal state and how we would have to accept regulations decided by the European Union. That is to misunderstand the way in which regulations are made inside the European Union. They are made in expert committees. On those expert committees sit not only Members of the European Union but Members of European countries that have an interest outside the European Union. Norway has been represented on 200 expert committees, even though it is not in the customs union. Britain, given its size, could expect to be on expert committees of that kind, making the rules as we go along—even though ultimately we would not have any say in the parliamentary committees.

However, as the House will fully appreciate, it is very rare for a parliamentary committee to get involved in the detail of what is put before it by experts. Such committees tend to accept the proposals, with only the occasional disagreement. The fact is that, as long as we were in the customs union, we would have a strong position inside the system of making regulations in Europe even if we were not actually in the European Union. Fundamentally, when the question of sovereignty and the right to rule ourselves is discussed, you have to make a trade-off in business between access and sovereignty. If you want access, you have to give up a bit of sovereignty. If you have no access, you can keep all your sovereignty but you will have no access. That is the trade-off you have to make, and we should recognise the reality of that.

A bigger objection to remaining inside the customs union is that others in the European Union may not agree to give us such a deal. They may argue that it is too good a deal for Britain, because once again we would be getting many of the advantages of being inside the European Union without actually being a member. That is something which would have to be explored in the negotiations which I hope would take place. The EU could say, for example, that the UK has to remain inside the single market, and it may want to retain control of our fisheries and agriculture. Once we go down that path, I agree that the issue of “Brexit in name only” is raised. At that point we would have to consider whether we wanted a clean break and a free trade area. Another factor is that the Cabinet is split on this and there is no sign of a resolution.

Finally, I bring good news to noble Lords. Agreement was reached before lunchtime today on the “Politics Live” programme on BBC television between a hard Brexiteer, a remainer who is willing to be a Brexiteer, and a remainer. The three people involved were Steve Baker—there is no harder Brexiteer—Margot James, the industry spokesman, and Jonathan Powell who was Tony Blair’s chief of staff when he was Prime Minister. They agreed—that is the good news. The bad news is that they agreed that there is bound to be a long extension—so I am afraid that, whether we like it or not, we are in for further debates on this subject.