European Union (Notification of Withdrawal) Bill

Lord O'Donnell Excerpts

Monday 20th February 2017 Lords Chamber

[Lord O'Donnell (CB)]

My Lords, I should like to refer, first, to my interests in the register, particularly as president of the council of the Institute for Fiscal Studies and as chairman of Frontier Economics. In such a lengthy debate, I want to concentrate on those issues where I believe that I can add something—namely, the economic case and the implications for the Civil Service.

The eminent economic historian Professor Nick Crafts concluded a review of all the evidence on our membership of the EU, saying that the positive effects on competition and trade significantly exceeded the negative effects of the membership fee, the CAP and, indeed, badly designed EU regulation. I stress that this is an analysis of the past, not a forecast. Overall, being in the EU has boosted UK economic growth.

The economic impact of leaving has been less than expected so far, but it is now clear that when we leave we will not have full access to the single market and will have fewer migrants. Therefore, the longer-term effects, once we have left, will be negative—that is, it is likely that the economy will grow more slowly than it would have done had we stayed as a member. Some believe that this will be offset by free-trade deals with non-EU countries. As my former boss the noble Lord, Lord Lawson, will know, I am an unashamed free trader and believe that it will be fairly easy to do deals with countries such as Canada. However, when you look at the facts, it is hard to see how such deals could offset the costs of losing full access to the single market in terms of both zero tariffs and non-tariff barriers, and I worry that future regulations, set only by the EU 27, will worsen our competitive position.

Let us remember that the EU will remain our largest trading partner by some distance and we will not be round the table when those regulations are determined. It is ironic that Brexit is said to have boosted the prospects not of free trade but of President Trump and Madame Le Pen, who both favour protectionism.

It is against that background that Ministers and civil servants will have to negotiate our exit. As far as the Civil Service is concerned, I have every confidence that it will do its utmost to achieve the best possible deal for the UK. However, as my successor has said, it is under huge pressure. The negotiations are extremely complex and I have yet to hear of the Government closing down work to allow civil servants to transfer across to the new tasks. Indeed, that wonderful oxymoron, the great repeal Bill, will keep them and us busy in an effort that will probably leave things exactly as they are. However, negotiating with the EU has been a core competency of civil servants in both the home and the foreign services, and they are very good at it.

I am more concerned about implementation problems. We do not know yet what kinds of customs and immigration changes will emerge but we can be certain that they will involve more complex arrangements than exist at present vis-à-vis the EU. As the noble Lord, Lord Hague, mentioned, we have to wait for elections in the EU and then we have to think about the time that will be needed for ratification by EU Parliaments. The time left in which to carry out the negotiations will not be long enough to sort out many of the details, so, believe me, there will be a very long transition period. Therefore, it is important that this House concentrates on some key points that we need to put forward to the Government in amendments, which I hope will not add to the complexity of the negotiations. As someone who for years worked for various Prime Ministers of different parties on the Northern Ireland peace process, and as a proud O’Donnell, I sincerely hope that the final deal will not reintroduce borders between the Republic and Northern Ireland.

Over the years, I have done more than my fair share of negotiations with the EU and I believe that I understand the frustrations of those who want to leave. Too little has been done to ensure that the winners compensate the losers. I also believe that the creation of the euro was an enormous mistake—a triumph of politics over economics that in time may well be reversed. However, I believe that the EU without the UK and without people like the noble Lord, Lord Hill, around the table will be less of a force for good in the world and will be less economically successful, which will damage us directly. I accept that we are on course to leave but we need to strike the best possible bargain for the UK and, as the noble Lord, Lord Hill, emphasised, maintain the best possible relations with the EU 27.

We should, at the minimum, grandfather the rights of those EU citizens working here at the time of the referendum as a matter of principle. I would also favour Parliament having a genuine vote once a preliminary deal is reached and before it goes for ratification to the EU’s 27 parliaments and a number of sub-parliaments, which is quite likely because the deal will inevitably cover some national competences. The UK Parliament should have a serious role in what the deal should cover. That is what we in this House should aim for with judicious amendments that help us to achieve a better deal for all in this country. The “concession” of a vote which has, as the alternative, departure on WTO rules is no choice at all, and I differ from the noble Lord, Lord Lawson, about the impact of that. To be honest, I am very surprised that anyone would think that it was any concession.

This Parliament should get a say before the Walloon parliament, and here I disagree with the noble Lord, Lord Hill. When Monsieur Barnier negotiates, we have no guarantee that the individual EU 27 countries will accept whatever deal he has agreed, because it will be going for ratification to their national and sub-national parliaments. So we would not be putting our negotiators at a disadvantage; we would simply be levelling the playing field.

This negotiation will be much harder than anything I had to deal with—believe me, coalitions and so on are completely straightforward compared with this—so I end by wishing the Minister and his civil servants well in what will be lengthy and complex negotiations. I hope that in this House we can put forward some amendments that will strengthen their hand and get a better deal for all of us.