Beyond Brexit: Institutional Framework (EUC Report)

Lord Inglewood Excerpts

Monday 6th December 2021 Grand Committee

[Lord Inglewood (Non-Afl)]

My Lords, I am very glad that we are debating these three important reports this afternoon, because it seems to me that their subject matter is still as topical as it was when they were written.

I joined the goods committee during its deliberations. I believe I was asked to do so because I chair the Cumbria local enterprise partnership, an organisation close to the front line. I drew on my experiences and connections in whatever I may have been able to contribute to the committee’s work. In a previous incarnation as a Member of the European Parliament, I was also a spear-carrier during the reigns of the noble Lords, Lord Hannay and Lord Kerr, in charge of UKRep during the establishment of the single market, and perhaps had something to bring to the process of reverse-engineering what we put in place then.

From my perspective, the Brexit referendum and the 2019 general election were exercises in democracy that led to political outcomes, which in turn led to changes in economic and commercial life here in this country that may or may not turn out to be economically or commercially optimum or sensible. Such considerations were of a second order to the political ones.

I see Brexit as a political process propelled by a national wish to change our constitutional relationship with the European Union. It seems to be common ground between all involved that this would bring about real short-term damage to business, commerce and the economy. The longer-term disagreements relate to whether there will be consequential benefits. The detail depended on whether we had a hard or soft Brexit and whether there would be a deal. In my view, it seems we have a hard Brexit with a deal—and these reports are about that. This is the bed we have made, and we are now all lying on it.

As has already been said, the impact of Brexit is intimately tied up with the impact of Covid. I believe it is impossible fully to disentangle them now. However, work commissioned by the Cumbria local enterprise partnership and carried out by Nicol Economics, applying Treasury metrics, and the Cumbria Intelligence Observatory suggests that, bearing in mind regional variations, our experience is very similar to that elsewhere in the United Kingdom, and that the economic impact of Brexit appears to be roughly double that of Covid, if such a simple way of looking at it has any validity.

Some 4% of the Cumbrian economy relied on direct exports to the EU, supporting 7,000 jobs—with all the implications that the noble Baroness, Lady Armstrong, talked about. The Cumbrian labour market, especially because of the county’s economy’s reliance on the visitor economy, has been badly hit—in particular, obviously, the tourism and leisure sector. For example, earlier this year it was possible to take a self-catering holiday but impossible to get an evening meal if you wished to eat out, because they could not find staff for the restaurants and pubs.

The logistics industry has been very hard hit by both the availability of drivers and the associated rules and regulations, as has already been pointed out. As has also been mentioned, supply chain issues make obtaining inputs to manufacturing and dispatching products extremely problematic. This is true not least in the construction sector, where there is significant double-digit inflation, up to and beyond 20% or 30%. Small businesses are simply giving up on exporting to the EU.

Interestingly, when I was in Germany in the autumn, staying with an old MEP friend, I discovered from talking to him and his wife over the dining room table that it is exactly the same for small businesses on the continent. It is not worth their while bothering to try to export to this country. As the noble Lord, Lord Hannay, touched on, there are all kinds of concerns in the agricultural industry, many of which are outside the remit of this debate.

Two things stand out in particular. First, young people appear to have been disproportionately affected, first in respect of jobs themselves and secondly by the long-term impact of problems relating to training and skills. Secondly—this has been exacerbated by Covid—large amounts of working capital have been destroyed. This is likely to make trading out of the problems and navigating the way to a future commercial environment more difficult.

The third of these reports relates to the mechanisms for future relationships between us and the EU, and, while no doubt recognising that much might be done to recalibrate the detail as far as Great Britain is concerned—I have no expertise or wish to comment in detail on Northern Ireland—I doubt there is much political appetite on either side to drill down into it. As far as domestic policy is concerned, I very much hope that the levelling-up agenda—which seems to take as long to gestate as this afternoon’s debate—can take positive steps to deal with the immediate collateral damage to the economy that has been brought about.

The north of England expects the Government will do their duty, and we are watching. For me, however, the big imponderable is the rest of the world, where it seems that substantive change has yet to emerge—although, of course, whatever the particular trading arrangements, there are always commercial opportunities. Setting aside wider political considerations, which may well play quite a big part in this, it seems that the fly in the ointment is that, in the words of a friend of mine, “regulation is the new tariff”. Increasingly, access to a market is not synonymous with being able to put goods for sale on to that market. This concept appears to be anathema to many traditionalists, but one has only to look at the debate around fair trade, COP 26 and the environment to see how this approach is gaining traction in all kinds of places. Of course, that was the basis of the EU single market, which we have rejected.

It will be interesting to see how this will evolve, but in the meantime, we have no idea whether we are waiting for the boat to come home or whether we are “Waiting for Godot”.