Economy and Finance

Lord McFall of Alcluith Excerpts

Thursday 9th June 2016 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, it is a pleasure to participate in this debate and to congratulate my noble friend Lord Haskel not only on his excellent speech but on his persistence in ensuring that this subject is at the forefront of our attention in the House of Lords.

I suggest that the economic and financial prospects for the UK are grim if we leave the European Union. I agree, actually, with the late Margaret Thatcher, who, in quoting approvingly from Clem Attlee, said that referendums are a device for dictators and demagogues. This referendum mirrors the Scottish referendum in that there are bitter and bad-tempered exchanges, and it will leave a poisonous residue long after 23 June. It has denigrated the term “immigrant” to the extent that it has seeped into the bones of the electorate.

Facts and expertise have been disregarded and discarded. On ITV last week, Michael Gove, supposedly the most cerebral of the Vote Leave MPs, said that people have “had enough of experts”. I have more reason than anyone to be cautious of experts. As chairman of the Treasury Committee, I drilled holes in the Budget proposals of every Chancellor who came before us. However, although economic models are often wrong, that does not mean that they give no knowledge at all. Indeed, they build up a picture of evidence and trends. Forget the precise figures from the Chancellor—that house prices will fall by 18% and that every household will be poorer by £4,300 per annum. The important point is that the findings by a gamut of economic institutions and researchers—internationally, in the IMF, OECD and WTO; and nationally, in the Bank of England, the IFS and the National Institute of Economic and Social Research—are unequivocal in their belief that Brexit would be a very costly option in both the short and long term.

Only one economic modelling exercise has generated a positive case for Brexit, and that is from a Vote Leave economist called Professor Patrick Minford, of Cardiff University. His analysis has been demolished by the London School of Economics economists, and fellow Vote Leave member Andrea Leadsom, a Tory Minister, disavowed it in a recent “Newsnight” debate.

Let us assume that no precise figures are correct in the Brexit debate. What is incontrovertible is that the negative economic impact ranges from “pretty bad” to, in the words of Christine Lagarde of the IMF, “very, very bad”.

As it stands, Britain has 1% of the world’s population but 4% of global GDP. Already, as an EU member, we are well interconnected in today’s global world. That is a world that has three hubs: the USA, with NAFTA; Asia, with China and the Asian Development Bank; and Europe, with a single market and 500 million people.

Recently, I had the opportunity to have a reunion with a chemistry student who I taught over 40 years ago. He is immersed in the global hub that is Europe and is now leading on research into the Zika virus, which is blighting the lives of many infants in Brazil. I came face to face with a case where UK science is in the vanguard of the search for global solutions. His message to me—and the message of leading university chemistry heads in a letter published this morning in the Times—is that membership of the EU is integral to the success of science. I well remember the wise words of the noble Lord, Lord Parekh, when he said in a debate here on the Scottish referendum, in January 2014, that in conducting our argument we should always emphasise “the shared ‘we’” and our commonality. We should recognise how we would feel pain, and how both of us would suffer, if Brexit were to happen. On the commonality theme, I am reminded of Pope Francis’s short but hugely symbolic visit to the island of Lampedusa. When he visited the migrants there, he spoke about the issue of global indifference and stressed the physical, environmental and moral space we share, which is under threat as never before.

Mindful of our shared and common endeavours, let us ensure that the questions we ask in this debate are liberating rather than destructive. In that vein, we should pose questions such as: do we wish the European Union to become more effective in the way that it works; and, if so, how do we tackle a democratic deficit and ensure that the home country parliaments have their wishes better respected? Do we wish to strengthen and enhance areas such as international law, human rights, environmental justice and global peace and security, almost all of which hang by a thread at the moment? If we do, others will be safer, but we will be safer as well. On tax havens and the global financial system, do we wish to continue working with our EU partners so that we check rising inequality, enhance our public services and provide a more secure future for our young people?

This referendum is all about young people. They will be the losers if we persist in the bitter, negative and destructive exchanges. Economists are unanimous that Brexit will be a very costly political, economic and social option. I submit that that is too high a price for future generations to pay.