EU: Trade in Goods (European Affairs Committee Report)

Lord Lamont of Lerwick Excerpts

Thursday 2nd February 2023 Lords Chamber

[Lord Lamont of Lerwick (Con)]

My Lords, I got a great shock when I arrived at the House today because I had not realised that my noble friend was going to make her valedictory speech. It is a moment of great sadness for me to be standing here, following her wonderful speech. She and I were personal friends for many years before we both joined the House of Commons. Outside this House, we have also worked together in the private sector.

She has had an outstanding and very noteworthy political career, serving in four departments, as she said. She is particularly well known for her work in the Department of Health and Social Security and, perhaps most of all, her work for overseas development. She served with such energy and distinction that some of us at the time were deeply puzzled why Mrs Thatcher did not make her a member of the Cabinet. Although she often attended Cabinet, she was never given a Cabinet post. Most of us thought she richly deserved one because of her work.

No one could possibly doubt my noble friend’s commitment to development and to improving the lot of the poor of the world. She is a very familiar figure in Africa because she has spent so much time there in recent years; she is known, I think, in almost every country of the continent. She will be very much missed there, as she will be in this House. Her speech of enormous warmth, humility and modesty showed the very great qualities which will be deeply missed by us all. I thank her for all her service.

[Noble Lords]

Hear, hear!

[Lord Lamont of Lerwick (Con)]

I speak today as a member of the Select Committee, and I pay tribute to our chairman, the noble Earl, Lord Kinnoull, who, with his calm, precise and diplomatic chairmanship, managed to get us to reach a report which is—more or less, give or take a few commas—unanimous. It was quite difficult because there were different views within the Select Committee. I join him in thanking our staff.

I was one of the few supporters of Brexit on the Select Committee, and I think that in today’s debate I am its only supporter. I supported Brexit on the grounds of sovereignty, independence and identity, rather than on economics—although I would not have supported it if I had thought that the long-term economic effects would be detrimental. This debate coincides with the third anniversary of Brexit. I am not quite sure what the significance is of the third anniversary, but it gives people a chance to pull the plant up by its roots, examine it, and put forward various theories.

Our report, through no fault of anyone other than the system, is massively out of date; as the noble Earl, Lord Kinnoull, said, it was addressing particular points at that particular time. The report was merely a snapshot of the problems that companies were facing immediately after the end of the transition period, so a lot of those problems—but not all—were teething problems with new systems coming into existence. Our report refers only fleetingly to the infrastructure problems that were forecast to occur at the ports. As noble Lords may remember, we were told at the time that there would be vast queues in Kent, resulting in the whole county being turned into a car park, and that Dover would be impossible to move in. We had Operation Yellowhammer and all those other very alarmist ideas. The most reverend Primate the Archbishop of Canterbury initiated a debate on the situation. However, none of it came to pass, and our report possibly rather underplays that.

Many of the recommendations in the report are about clarifying the administrative arrangements at the time, including changes in deadlines that were uncomfortable for business, and the effects on SMEs. One of the interesting points in our report is what it says about the absence of import controls; it is something of a curiosity. We came to the conclusion that the failure of the Government to meet their target date for imposing import controls was causing uncertainty. Perhaps it was, but one of the oddities was that, despite the absence of import controls when there were controls on the other side of the channel on British exports, British exports were doing much better than continental exports from the EU into this country. I think that that underlines the point that not all the problems that occurred were entirely due to Brexit or the Brexit regulations.

Three years on, our economy is undoubtedly facing very considerable problems. Sometimes I feel that almost everything is being blamed on Brexit. The day before yesterday, Mr Verhofstadt said that Ukraine would not have been invaded had it not been for Brexit—that seemed to be a rather extreme statement. Then there was the statement by a distinguished former Governor of the Bank of England, who claimed that in 2016 the UK’s GDP was

“90 per cent the size of Germany’s. Now it is less than 70 per cent.”

That is, as a leading economist in one of the remainer think tanks said, something of a “zombie” statistic. In fact, since 2016, the GDPs of Germany and the UK have grown by almost exactly the same amount. The report emphasises, as the noble Earl, Lord Kinnoull, did, that it is almost impossible to separate the effects of Covid and Brexit—and it was published before the invasion of Ukraine, which has added another complicating factor, making it very difficult to separate that as well.

For example, to take the shortages of labour, which are common to a number of countries, including the United States, but a very severe problem here, if during Covid a restaurant is closed and an Italian waiter decides to return to his own country, Italy, is that because of Covid or because the restaurant was teetering under the hammer from Brexit? Was it Covid or Brexit? It is very difficult to say.

Some people are determined to torture the statistics until they confess up the right answer. One example of that is the so-called doppelganger analysis used by certain think tanks. This is the system that takes a number of countries, which in the past were growing at the same rate in a particular period, and extrapolates that forward to today. It then comes up with the conclusion that, if we had grown at the same rate as these countries, our economy would be 5% greater. This has been recycled repeatedly in a lot of the media. But of course it depends, first, on the period that you choose and, secondly, on the countries that you are comparing yourself with. In the analyses that have been used, the countries that Britain has been compared with in some of the think tanks’ findings have been countries such as Australia, New Zealand and Norway—hardly a very persuasive comparison.

Rather than looking in the crystal ball, one should read it in the book. As the noble Earl, Lord Kinnoull, pointed out, the ONS figures now published give a more encouraging picture for exports. As he said, exports in 2022 in currency terms are at a record level and, adjusted for inflation, at a level not seen since 2019. If you look at the graph, it looks as though exports are broadly back on trend. Of course, we have had recently a much-publicised and gloomy report from the IMF forecasting that the UK economy will shrink this year; it does not actually mention Brexit. Today the Bank of England has said that it expects the economy to shrink this year, but by less than it had previously thought. Sometimes these reports in the recent past have been over-pessimistic for the British economy. But as I said earlier, since 2016 the British economy has grown at much the same rate as that of Germany.

One subject on which there was a lot of debate in our committee was divergence—to what extent regulation should be allowed to diverge from the previous model in the European Union. Some members of the committee were particularly apprehensive about that, clinging to the idea that we should remain aligned in regulation. My view is that we certainly should not make a fetish of divergence—we should not diverge for the sake of divergence—but it is important to have the parliamentary power and freedom to diverge. But those decisions should be driven by industry and commerce. Divergence is very important for new technology. As the noble Earl, Lord Kinnoull, said, we had the arguments around SPS and agricultural products, and our report urges that there should be an agreement with the EU on SPS. Yes, there should be an agreement—but that should not necessarily mean alignment.

The report refers to the review of the TCA due in 2024-25, and rightly urges that the UK Government use the 32 specialised committees, the partnership council and the joint committee to build on the trade arrangement that we have and build on the TCA to get arrangements that are more flexible and comprehensive, to develop a relationship that is mutually beneficial. I remain a supporter of Brexit but that is the past. It is important now to improve our relationship. We can be a third country to Europe, but a good friend, a strong ally and a partner. We should put the past behind us and, as the noble Lord, Lord Hague, said to our committee, we should adjust to the future, rather than attempt to adjust Brexit. I commend the report to the House.

--- Later in debate ---

[Lord Purvis of Tweed (LD)]

My Lords, as one of the flurry of former members of the committee who has contributed to this debate today, I also add my thanks and appreciation to the clerking staff and for the policy support that the committee has received. I also commend the canny diplomacy—as I think the noble Lord, Lord Lamont, put it—of our chair, the noble Earl, Lord Kinnoull: it is quite a task to bring across unanimity on issues such as trade and Brexit. I also commend him for the parent committee on the Northern Ireland protocol and unanimous reports on that. So I think that I might take him with me on my next visit to the Middle East—and leave the noble Lord, Lord Foulkes, at home, if that is all right.

The debate ended with three contributions showing the human element to this. I am not foreign to using statistics—in fact, I will be relaying some later on in my contribution—but reminding us of the human impact within goods and on non-financial services is very important. The debate also had a very human element at the start with the valedictory speech of the noble Baroness, Lady Chalker. One of the signs, I think, of good politicians that I have admired is that people who they do not recall having met have a very fond opinion of them. When I was David Steel’s bag carrier when he was an MP and a shadow of the former Minister, she was always very pleasant to me, a humble researcher. Then when I worked briefly in this place as a member of staff for my then noble friend Lord Steel of Aikwood, she was also very generous and kind towards me. I hope she forgives me for saying so, but she was elected a month after I was born—so I cannot compete with those who met her earlier on in her career.

I took the opportunity, having noticed, as others had, that she was going to be making her valedictory contribution today, of reading her maiden speech in the House of Commons on 15 March 1974. She was highly regarded and very well noted for development, with, as the noble Lord, Lord Foulkes, indicated, nearly nine years in that post, whereas her successors as Ministers for Africa have lasted an average of nine months. That shows the contribution that she made. I will never forget the emotional plea that she made in 2015 on the 0.7% Bill, when she appealed to her successors as Ministers to have predictability in overseas development assistance. Alas, her successors have not heeded that, at the cost to the poorest in the world and our standing in the world.

In her maiden speech, she called for something which so many of us now take for granted—I look at my noble friend Lady Brinton, who perhaps still has to struggle on this issue. But I will quote just one line from what she said in her maiden speech, if the House will forgive me. She said:

“I suggest that the Secretary of State for Industry should instruct his planners and those carrying out the work to ensure that, when they dig up roads, kerbstones and cornerstones, they replace them with sloping stones to enable wheelchairs and, indeed, mothers with prams, to get along more easily. Far too often we go back to doing the old thing the old way, because we have not thought about it anew. If the right hon. Gentleman could plan in that way, it would be better than creating a castle in the sky in the shape of a national enterprise board.”—[Official Report, Commons, 15/3/1974; cols. 571-72.]


Well, the contributions that she has made and what she called for then, which we take for granted now, have made a real difference to people’s lives, and that is also a testimony to her career.

Now to castles in the sky—except that this one has Brexit-shaped ramparts. I admire the defence of the lone noble Lord, Lord Lamont, on those ramparts in this debate, but nevertheless we are one year on, as the committee said. We are one year on from the committee report, and three from Brexit. The Financial Times editorial board yesterday put it like this:

“In the 1970s, the UK was known as the ‘sick man of Europe’. Today it seems to be the sick man of the developed world.”


Citing the forecast by the IMF, which has been raised in this debate, but also the actual ONS outturn data on GDP, we have heard that, uniquely among developed economies, we have not regained pre-pandemic GDP levels.

Our businesses are suffering the whiplash of three Conservative Prime Ministers since the 2019 election, each saying they are a new Government, each condemning the economic policies of their predecessors, while all the time keeping new burdens and barriers on business, leading to, as the FT put it,

“incoherence in economic policy and exacerbated business reluctance to invest.”

That is not just within pure trading barriers, as we have heard so well in this debate.

I respectfully disagree with the noble Lord, Lord Lamont. We did not just analyse the teething problems of Brexit; as we have heard, many of these issues that we thought were teething are now permanent, and they are hardwired into the relationship we now have, whether it is SPS or cabotage, to name just two of many. These barriers to trading have a cost, and the cost is enormous.

This is not often debated, but the Government have a current framework called the business impact target. That is the target for the economic impact of their regulatory activity on business. It is called the BIT. The Regulatory Policy Committee, independent but nevertheless official, is the independent verification body. In its report, it said:

“For the 2017-2019 Parliament, the relevant government set a BIT target of a £9 billion reduction in direct costs over the length of the Parliament, however the final position was an increase in costs of £7.8 billion. Similarly, the government has set a holding target of £0 for the current Parliament”—


that is the one we are in—

“but in the first year of the Parliament, there was an increase of £5.7 billion (excluding the very significant impacts of temporary COVID-related measures).”

So, I want to ask the Minister what the current position is. What is the Government’s own current estimate of the actual cost on business of the additional burdens they have put in place? The numbers on the side of the Brexit bus need to be updated, of course, because, while the savings were always fanciful—I think many of us knew that—the costs are already outweighing them multifold, and the barriers erected by this Government on trading with our biggest market are a weight on our many SMEs and exporters.

Of course, as the noble Baroness, Lady Wheatcroft, indicated, with the REUL Bill we will be debating, there is going to be uncertainty added on to these costs. But all of us know that uncertainty becomes costs, and that is going to be an added burden. It is well worth noting that the same Regulatory Policy Committee for the impact assessment of that Bill has rated it “red”—not fit for purpose. The Government simply are not learning lessons. No Government in the history of this nation—only perhaps the Conservative-led National Government who introduced protective tariffs, which led to the Liberals leaving—have set on businesses a heavier weight of bureaucracy and burden. It simply must be reduced or removed.

The Government think that giving preferential market access to modest trading friends on the other side of the world without anything in return will offset the massive barriers they are putting up on trading with the huge market on the other side of the channel. Trade agreements seemingly negotiated by Prince Potemkin are not offering the growth to fill this void. The trade in the Far East or Asia that, it was argued, would offset this is simply not coming to pass. We know we have already missed the manifesto target for 80% of all our trade through FTAs by 2022, so I want to ask the Minister: will we be meeting it in this Parliament? I do not see a trajectory that suggests that that is going to be the case. Now that we are seeing trade barriers erected with our biggest market, we have seen decline.

I was very struck by the point the noble Lord, Lord Lamont, raised with regards to comparing GDP growth with Germany over the last couple of years. Before the debate, I wanted to make sure I was very accurate with the OECD data—not forecast data but real data on what has happened. The noble Lord was right about the last couple of years.

[Lord Lamont of Lerwick (Con)]

My figures were from 2016.

[Lord Purvis of Tweed (LD)]

I will retract what I was going to say. The noble Lord is wrong about 2016, but he would be right if he was talking about the last couple of years. He did not highlight the most relevant factor, which I found when I accessed the OECD database this morning and looked at 2016 to the current position: in 2020, the UK’s economy collapsed far deeper than that of any other OECD country. Regaining average levels over the period since Covid has not offset the massive fall that happened in 2020.

Taking the average over 2016 to 2022, we are behind Germany. In quarter 2 of 2020, UK GDP fell 22.6% and Germany’s fell 10%. The following quarter, we fell 10.3% and Germany fell 2.5%. In the quarter after that, we fell 9.2% and Germany fell 2.1%. The 2020 collapse of the British economy because of Covid was far deeper, so any regrowth is coming from a deeper hole, and therefore the average over this period shows that we are considerably behind Germany. I do not think that simply stating that we show comparable growth figures over the last couple of years tells that full story.

We are also not going to have a level playing field, which was one of the highlighted freedoms of having the ability to innovate. The power to innovate is all very well if we assume that no one else is innovating—but of course they are. We may have said, “Stop the EU, we want to get off”, but the EU did not stop moving, and therefore we have to look at this on a comparable basis. That is why I will close by looking at the really important border issues.

The Government have stated that, in just over 18 months’ time, in 2025, we will have the best border in the world—that is the target. However, as the noble Earl, Lord Kinnoull, indicated, we are still operating on temporary measures; we still do not have the facilities in place. The National Audit Office stated that the border operating model uses “temporary” or interim measures,

“delaying the introduction of full import controls.”

That is simply not sustainable. It is compounded by the recent decision to pull money away from the levelling-up fund to give £45 million to Dover to fix problems created by this Government. They are even taking money away from the very communities that were promised benefits from Brexit.

We have a Potemkin trade policy, and, like many charades, it gradually wears thin, the paint flakes and we all see it for what it really is. The FT editorial yesterday finished with an appeal to the Chancellor for his March Budget. It said:

“If he cannot go beyond mere buzzwords, the latest bout of ‘British disease’ will become ever more chronic.”


We want to see practical policies from this Government that will realistically help our trade and economy.