Brexit: UK-EU Relationship

Lord Liddle Excerpts

Thursday 1st December 2016 Lords Chamber

Moved by

[Lord Liddle]

That this House takes note of the best options for the United Kingdom’s future relationship with the European Union following the referendum vote to leave.

[Lord Liddle (Lab)]

My Lords, I declare my interests as co-chair of Policy Network, a member of Cumbria County Council and Pro Chancellor of Lancaster University, all of which stand to lose as a result of Brexit.

In opening this debate, I am aware that in your Lordships’ House I have somewhat predictable form on Europe. I do not resile from the judgment I made earlier that Brexit will be the worst disaster for the United Kingdom since appeasement. But my focus for today’s debate is forward looking: given where we are, what would be Britain’s best possible relationship with the EU in future?

It is a particular pleasure to have the benefit of the advice of the noble Lord, Lord Ricketts, today. When I was in No. 10, it was a great privilege to work with Foreign Office officials of Peter Ricketts’ calibre. He joins a long and distinguished line of former diplomats who in their candour make a remarkable contribution to the work of this House. I look forward to his maiden speech today.

On the substance, I hope the House will allow me to be specific, clear and at times blunt. For the economy, there is no better solution in the national interest than Britain’s continued full participation in the single market. With Brexit we can no longer be members with voting rights—but forget the vague waffle about access. What matters is: first, that we stick to the EU rules and standards and update them as new rules are made; secondly, that we continue to make payments to the EU budget—forget that £350 million a week for the NHS; if Brexit goes bad, we will be cutting the NHS—and thirdly, that we accept directly, or, if the Prime Minister insists, indirectly, the jurisdiction of the European Court of Justice as EFTA members largely do through their separate EFTA court.

Such a course is overwhelmingly in the interests of jobs and living standards in the UK. Remaining a member of the customs union would be very much second best. While the customs union secures tariff-free access for manufacturing and food exports and avoids the complex bureaucracy of rules of origin, it leaves out services. In other words, it secures free trade in goods, where we have the largest balance of payments deficit, and fails in that objective in services, where we have our largest surplus. The future of the services sector would then depend on negotiating a comprehensive free trade deal with the EU, which would have to be far broader in scope than either Canada or Switzerland have been able to achieve.

I say to my Labour friends: when talking about services, do not imagine that this is just about protecting the interests of bankers—and when you talk about bankers, remember that they produce a lot of tax revenues that go towards the NHS and the welfare state. Services, where we excel, are much bigger than the City. Brexit threatens our position as a centre of TV and film distribution, our lawyers’ rights to represent clients in European courts, and the commercial strength of a whole range of services where free movement and the mutual recognition of qualifications are huge benefits to Britain—especially the ability to send highly qualified people on client assignments anywhere in the EU.

Free movement may be politically poisonous within the UK but it is the rock on which the business models of many of our most successful and advanced companies in digital, creative and professional services are built. Ending up as a member of the customs union would therefore be very much second best. Yet even that is threatened by the vanities of Dr Liam Fox, because being members of the customs union would greatly restrict our ability to cut new trade deals with the rest of the world. Dr Fox has convinced himself of this strange logic: it is in the national interest to forgo membership of the single market, which secures free trade for nearly half our exports, in return for the highly uncertain prospect of negotiating new British trade deals with the rest of the world, with all the complexities and political constraints that come with them. In my view, the so-called opportunities of Brexit are largely delusional vistas.

Similarly, we must stop talking nonsense about becoming an offshore Singapore, or a haven of social dumping, as many on the continent believe that the Government plan. Full participation in the single market on fair rules should be the aim. Corporate tax policy will be the big test. There is no way the EU will agree to our full participation in the single market if Great Britain, the second-largest market presently in the EU, sees itself as a Cyprus, an Ireland or a Luxembourg. Rather, we should be offering full co-operation with the EU to fight corporate tax avoidance.

People did not vote for these outcomes on 23 June. There is no mandate for making these choices. The leavers say that in the referendum they always made clear that Britain would be leaving the single market. Yes, they did say that—but at the same time they assured voters that Britain could have its cake and eat it and enjoy unrestricted free trade with the rest of Europe. The reason leave won on 23 June was that not enough people were convinced that there would be a real economic downside to leaving the EU. Therefore, they voted to “take back control” because they believed that it would be largely cost free.

However, we can see the downsides emerging already: a sharp sterling devaluation that will cut living standards in every year of this Parliament; widespread investment uncertainty; and a grave loss of tax revenues forecast by the OBR. For all those reasons, full participation in the single market must be the top national priority, and it is the job of the Prime Minister to show leadership in the national interest and spell out the realities to the Redwoods and Foxes on her own side. That message would echo positively around Europe and completely change the atmosphere for the Brexit negotiations, which I fear on the continent is rapidly becoming poisonous.

Many people on our Benches, here and in the other place, will say, “What about free movement? What about immigration? Haven’t the British people given a clear instruction to the political class—most of all to the Labour Party, with its claim to represent working people—that something must be done?”. I take that point with two crucial qualifications. First, any new policy must be based on clear evidence, not simple prejudice. As Hugh Gaitskell once famously wrote of Evan Durbin, the nature of social democratic politics is,

“the pursuit of truth to the bitter end”.

Secondly, we must never ever stigmatise migrants in the way that some leavers did. The rise in hate crime and social media abuse and the fact that many people feel they are no longer welcome in our country since 23 June is appalling and offends our basic values of equality and humanity. This is the slippery slope that leads to the end of tolerance and the end of an open society. But, yes, migration, both internal and external in the EU, must be better managed.

Free movement is not a uniquely British problem. Several member states accept the need for reform, including eastern Europeans, as long as we are prepared to continue to assist them financially with their economic development. Britain should have taken a lead on these questions in 2012, but that would have involved as a quid pro quo a greater willingness than the present Government were prepared to show to share the burdens of the refugee crisis. Regrettably, we did not take that lead and it may now be too late. However, the UK should still put its weight behind arguing for a Europe-wide rethink, not just British exceptionalism—although the EU’s current negotiations with the Swiss on free movement may give us a peg on which to hang our coat.

Nationally, we could do much more to manage migration better. Our national approach to it has fallen victim to the besetting British preference for laissez-faire. So let us have a bigger migration impact fund that acts quickly, and let us bring in proper enforcement of minimum wages and labour standards. However, I believe that the core of the problem in Britain lies in our highly flexible labour market, with too many businesses locked into a dependence on low-skilled migrant labour. Let us explore how we might reregulate our labour market, particularly where the problems are worst—in agriculture, food processing, hospitality and social care. We should consider setting up statutory tripartite bodies, on the models of the wages councils and training boards, with responsibility for raising skills, productivity and wages in those sectors. And why not give such bodies a mandate to recruit young trainees from parts of our country where decent training places and job opportunities are in short supply? Employer reliance on migrant low-skilled labour needs to be cut—but, in my view, it will take a dose of market interventionism to achieve it.

Finally, we must present ourselves as sincere, committed partners of our friends and allies across the Channel. Britain has so much to give on security and defence. I accept that the Government stress their commitment to NATO, and NATO remains crucial—but NATO is not enough. In today’s circumstances, of all circumstances, we cannot give the impression that we will prioritise the United States over our allies and friends in Europe. I want to believe President Obama’s assurances about President-elect Trump, but I fear that, for once, Obama’s fundamental decency and respect for the office he holds are obscuring his real fears. I really want to be proved wrong—but to be seen to kow-tow to a maverick Trump will only isolate Britain further in Europe.

The common security challenges that Britain and Europe face are broader than defence in the classic NATO sense: failed states, religious extremism, terrorism, climate change, the social and economic consequences of desertification in Africa, and structural pressures from tens of millions of young unemployed people in the emerging world searching for a better life in Europe. We need a common partnership with our European friends to address these questions. Outside the EU, that will be far more difficult.

Does Brexit then require a fundamental rethinking of the European security architecture? Perhaps it does. How about a revival of a western European union, with decision-making executives consisting of Britain, the big EU member states and the highest-level representation of NATO and the EU institutions? I do not have a clear answer—but, my goodness, I wish we had an Ernie Bevin at the Foreign Office and not a Boris Johnson.

We have to ask ourselves where we want to end up as a result of Brexit. Today, Britain is a European power with some considerable global reach. By all means, let us be global, but let us not delude ourselves. This nation has never for long been able to cut itself off from the continent—and when it has tried, the results have been disastrous, as with the two world wars in the last century. The best option for Brexit Britain is that we remain a European nation with the closest possible economic and security ties with our European friends and neighbours. That is the reality of Britain’s position in the world. With Brexit—and despite Brexit—let it remain our patriotic destiny as well.

--- Later in debate ---

[Lord Liddle]

My Lords, I thank the Minister for her reply and for her characteristic graciousness in giving me the time to respond to the debate. I congratulate the noble Lord, Lord Ricketts, on his maiden speech. We are looking forward to many more of them as he educates us about our future security and foreign policy relationships with the European Union. As always in these debates, as the opening speaker one puts a lot of effort into one’s speech, thinks that one has a clear position that one is advocating and then hears all kinds of wonderful contributions that mean that one has to think again. There is a lot to ponder in what people have said here.

Perhaps I could say a couple of things briefly. On my side of the House, several of my noble friends have talked about the possibility of a second referendum. Personally, I do not rule that out, but it is far too early in the process to see whether it is a runner; if the Government achieve the success that they promise, it may well not be. I tabled this debate in an honest wish that the Brexit negotiations go well for Britain. I put a lot of emphasis on economic questions because whether or not we have a successful economy—the single market is vitally tied up with that—will be crucial to whether we are an outward-looking nation. My fear is that if we have the quick, hard Brexit which my noble friend Lord Desai appears to favour, we would suffer a major economic shock that would make the problems of populism and being inward-looking even more problematic in our country than they are now. If we want to be confident, we therefore have to get the economics right. That is a key facilitator in us playing the strong security, foreign policy and defence role in the world that I believe Britain should play.

I agree with my noble friend Lord Chandos that the continental partnership report is a very interesting proposition, which I would like to see taken seriously by government, here and on the continent. The problem—this is certainly not a reference to the noble Baroness, Lady Anelay—is the way in which the Government are presently charging around Europe, making statements about how we are going to have our cake and eat it, treating the whole process with disrespect and demonstrating a lack of sensitivity to the fact that we are the people walking away from our partners of 40 years and causing very big problems for them. Unless the Government show more sensitivity in their approach to these negotiations, we will end up in a very difficult situation and with a hard Brexit—and we will not end up with a happy Britain. On that note, I commend the Motion that I tabled.

Motion agreed.