The Government's Plan for Brexit

Lord Lilley Excerpts

Wednesday 7th December 2016 Commons Chamber

[Mr Peter Lilley (Hitchin and Harpenden) (Con)]

I want to make two main points. The first is that the Government’s position is much clearer than many Opposition Members are willing to believe and that it narrows the range of outcomes very considerably. The second is that what matters as much as, if not more than, the Government’s position is the position of our partners in Europe, yet no one on the Opposition Benches has mentioned that—there seems to be a sort of arrogance in suggesting that we can say, “We want this and we’ll get it.” Or perhaps it is subservience in saying, “We want this and we’ll, give any concession in order to obtain it.”

The Government’s position has ruled out three options. First, we will not be part of the internal market of the European Union. I use the term “internal market” because that is what it is called in European law. There is no such thing in European law as the single market. To be a member of the internal market, we would have to be a member state subject to all the laws of the European Union, and the Prime Minister and the Secretary of State today have said that we will not be subject to the European Court of Justice.

Secondly, we will not be members of the European economic area, because all members of the European economic area have to accept free movement, and the Government have ruled that out. On top of that, we cannot negotiate service deals because we do not have control over the laws governing all our service industries. This was described during the referendum campaign by the current Chancellor of the Exchequer as the worst of all possible worlds, and many others on that side of the argument supported him. Now, however, they suddenly want to be part of that worst of all possible worlds.

Thirdly, we cannot be subject to the common external tariff of the EU because we are champions of free trade, according to the Prime Minister. We set up a Department for International Trade that has to be able to negotiate tariffs. We also want to cut the tariffs on products that we do not produce—including food and clothing products on which the EU imposes very high tariffs—because those tariffs are damaging to the just-about-managing people in this country. So those three options are ruled out, which leaves two realistic options.

[Mr Iain Duncan Smith]

May I give my right hon. Friend one good example of this? It relates to the import of oranges. Very recently, the customs union has slapped on a tariff increase from 3% to 16%, solely to protect some producers in Spain. That raises the cost of buying the products here in the United Kingdom, so food is now more expensive as a direct result of interventions in the customs union that Opposition Members want to be part of.

[Mr Lilley]

My right hon. Friend makes a good point, and I would add that we do not easily manufacture oranges at scale in this country.

There are two realistic options. The first is that we continue with roughly the status quo: tariff-free trade and no new barriers to service trade. The EU already has free trade agreements that do not require free movement with 50 countries. The second is that we trade with them on WTO terms and they might try to make trade in our service and financial services industries a bit more difficult. The important thing is that both options are actually very simple to negotiate. Going from zero tariffs to zero tariffs is much easier than negotiating a trade agreement between Canada and the European Union, where each side has 5,000 or 10,000 different tariff lines and must trade them off against each other. We also have exactly the same rules on products and so on as our partners in Europe. The status quo would therefore be simple to negotiate. The WTO option does not even require negotiation; it is what happens if the negotiations have no successful outcome. Both are simple and could be done quickly.

I also believe that both options are acceptable to the UK. In the view of most people, retaining the status quo would obviously be the superior option if we could get it immediately, but if we go to trading on WTO terms, the average tariff would be about 4%—much less than that on average on manufactured products, but the 4% includes agricultural products. We have just experienced a 15% devaluation against the euro, so our exporters will, on balance, be much better off even with those tariffs, whereas exporters to us will have to face a 15% hurdle plus that 4% average tariff, so they will be much worse off.

It is important that we emphasise to our negotiating partners that although we might prefer to continue with the status quo, if they do not want it, we are willing to walk away and trade on WTO terms. Quite a few Opposition Members have been trade unionists and are used to negotiating, but not many people in this House are. We cannot successfully negotiate unless we are prepared to walk away with no deal. Ultimately, however, it will be our partners in Europe—the EU 27—that will choose between whether we continue with roughly the status quo or whether we move to WTO terms and some obstacles.

[George Kerevan]

Will the right hon. Gentleman give way?

[Mr Lilley]

I am sorry, but I will not.

Our EU partners will choose. If their primary concern is the economic wellbeing of their people, they will choose to continue with free trade. If their overriding primary concern is political and if they want to punish us and be seen to punish us, they will go with WTO terms. In practice, they will punish themselves far more, and we should make that clear. We cannot negotiate our way into making them choose one option over the other. We can perhaps try to persuade them, their industries and their electorates that they will be much better off if they continue to trade with us on roughly the current basis than if they move to WTO terms, under which they will be the principal losers. We are their single biggest market. A fifth of all German cars come here, much French wine comes here, and so on. Let us go to them and say, “It is a simple choice, make that choice”—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order.

--- Later in debate ---

[Heidi Alexander (Lewisham East) (Lab)]

It is a genuine pleasure to follow the right hon. and learned Member for Beaconsfield (Mr Grieve), who has made a characteristically thoughtful and informed speech.

This is the first occasion on which I have made a speech on the subject of the EU since the referendum. I have stayed away from previous debates in this Chamber because I felt conflicted—conflicted by my personal views and political instincts, and conflicted by my constituency’s large vote to remain and my country’s narrow vote to leave. I was a fervent campaigner for remain, and I believe that the British public were failed in the referendum by an exaggerated and embarrassing debate. I deeply regret my own failure as the then shadow Health Secretary to expose the lie that Brexit would automatically mean more cash for the NHS. But we are where we are: 16 million people voted to remain, 17 million voted to leave, and 13 million people who could have voted chose not to do so.

I stand by my long-held view that leaving the EU will be economically harmful, socially divisive and fundamentally detrimental to our country’s relationships with its closest neighbours. If I could see a positive way through this that would respect the referendum result and leave our country economically and socially stronger, I would grasp it, but at the moment I cannot. On that basis, I cannot see how I could vote to trigger article 50 without a credible plan setting out the Government’s approach to the negotiations, their high-level aspirations and the process that will be in place thereafter. The strength of the plan is critical, and I will not sign up to an arbitrary timetable set by the Government to placate their own Back Benchers.

We need basic answers to basic questions. Is the Government’s ultimate priority continued tariff-free access to the single market or an end to freedom of movement? They might wish to keep up the pretence that they can have both, but the mood music from Europe suggests otherwise. Tariff-free trade with the EU has to be the priority, and if that means we have to accept immigration from within the EU, so be it.

[Mr Lilley]

Will the hon. Lady give way?

[Heidi Alexander]

I will not give way. I have come here to set out my position, and that is what I will do. If retaining tariff-free trade with the EU means that we have to pay significant sums to access the single market, so be it. Would this be a better arrangement than we have at present? Good question. So yes, I support a second referendum on the terms of leaving the EU.

The reason that we are trying to conjure up a positive economic future for our country outside the EU is to deal with the issue of immigration. I accept that a good number of the people who voted in June to leave the EU did so because they wanted to control or reduce immigration. I understand that when decent jobs and decent homes are scarce and public services are under pressure, some people look around for someone to blame, but although it might be unpopular, I say that we are going to need immigration for some time to come. We are not having enough babies, and we have not been for decades. I am a 41-year-old woman without children. Babies grow up to be taxpayers who fund public services. Who will contributing to my pension and my care in 30 years’ time? The answer is immigrants and their children. I have no fixation with freedom of movement, and if other EU states were up for modifying it, I would be up for the conversation, but it makes no sense to take the economic hit of leaving the single market to curb immigration when we have a basic need for it.

I would also say that if anyone thinks we should extend the system we apply to immigrants from outside the EU to those from within it, we should be honest and admit that we would be expanding a broken system that causes sclerosis in the economy because of the turgid way in which immigration applications are processed and that exerts no control over people who overstay their visas. However, my fundamental concern about prioritising immigration over all else is that we run the risk of whipping up even more of the intolerance, division and—let us be honest—hatred that we saw in the referendum campaign.