EU Referendum and EU Reform (EUC Report)

Lord Liddle Excerpts

Wednesday 15th June 2016 Lords Chamber

[Lord Liddle (Lab)]

My Lords, I declare an interest as a member of the EU Select Committee and say what a pleasure it is to serve on that committee under the wise chairmanship of the noble Lord, Lord Boswell. I should like to address my remarks to the shorter of our reports, which attempts to answer the question: a vote to leave is a vote to leave, but what happens then? I will express some personal views on this subject. The leave campaign tells us that it is all very simple, and it has launched something today to that effect. Parliament would legislate to do such things as end the jurisdiction of the European Court of Justice over the UK, end the free movement rights of European citizens, stop EU budget contributions and so on, and we would negotiate a free trade deal with our EU partners by 2020.

With respect, the campaigners have obviously not taken the trouble to read your Lordships’ report. Their plans would pitch Britain into a limbo, a state of ill-defined economic and legal uncertainty that would be the most serious self-inflicted damage to the UK economy since the three-day week, which I remember being imposed in December 1973. This economic and legal uncertainty runs a very significant risk of weakening private investment, particularly overseas investment, including overseas purchasing of UK assets, over the next few years. We have needed that overseas investment to continue funding our very substantial trade deficit, which has been in place for a generation. That would be put at risk. It would create an environment in which firms that are able to move their activities to the legal certainties of the single market would do so because otherwise their boards would be failing in their duty to their shareholders to minimise risk. The logic of a Brexit is that any British-based company whose business is mainly with the European single market would, in the event of a leave vote, substantially reduce its risks by relocating its activities within that market. That is what I believe companies will do.

Why do I talk about limbo rather than a quick and clean exit? In my judgment, this would be a painful and protracted state of limbo before—I am not sure I have the theology right—we reach the permanent purgatory of Brexit. It is clear to me how our EU partners would react to a leave vote and the Brexiteers’ plans. They do not want us to leave the EU and there will be a lot of real sadness at our parting, but I do not think there will be any special favours for Britain. Their granting Britain special favours would only encourage the populist forces in their own countries. Like our Brexiteers, they are wrongly and unscrupulously seeking to blame the European Union for difficulties in European societies, in the rest of Europe as well as in Britain, in finding an adequate economic and social response to the structural tensions and injustices of globalisation. That, essentially, is the problem.

Instead, the EU will decide that it will negotiate with Britain in a civilised way, but only within the terms of the treaties that we have signed and that this sovereign Parliament has agreed. The EU would say that Article 50 provides the path and that it will not talk to us unless we follow it. The EU 27 would instruct the Commission to draw up a negotiating mandate for British withdrawal that the European Council must then endorse, without of course Britain being present.

This mandate will make clear that there can be no continued access for Britain to the single market unless we meet existing obligations on free movement and contributions to the EU budget. On this point, the EU will never yield. I expect this mandate to be agreed relatively quickly later in 2016, but there will then be a pause for the French and German elections, so we will not get around to anything serious until the end of next year. After that I anticipate a lengthy stand-off, with a new British Government under a new Prime Minister, and probably after a general election in which the Brexiteers will have sought a mandate to pursue their demands.

However, the Brexiteers are fundamentally divided and inconsistent on one central point, which is their attitude to the single market. On one hand, they say that Britain will no longer be part of the single market and will be free to take back control. On the other, they say that a free-trade agreement will be dead easy to negotiate because we currently meet the regulatory requirements of the single market. Under their plan, they say that they will not accept free movement and contributions to the budget.

As for the regulatory obligations, they use these at one point to argue that we could easily have a free-trade agreement, while also saying that they want to scrap all these regulations because they think it will mean a huge boost to British enterprise. The truth is that the proposition that a free-trade deal will be easy to negotiate depends on an essential fallacy: that we will stick to the single-market rules that the Brexiteers have no intention of sticking to.

Is their aim a better deal, on the Norway model, or is it for Britain to pursue a wholly different economic course? They cannot agree among themselves and it is unlikely that they will get a majority in either House of Parliament for a credible leave option. Vote leave has no practical alternative to British membership of the EU. As Nye Bevan memorably said of unilateral nuclear disarmament, it is an emotional spasm. We should brace ourselves for a long period of limbo that could do incalculable damage to the British economy and Britain’s working people. I pray that it will not happen.