Brexit: Domestic and International

Lord Tugendhat Excerpts

Thursday 27th October 2016 Lords Chamber

[Lord Tugendhat (Con)]

My Lords, this is the second time in recent weeks that I have had the pleasure of speaking in a debate opened by my noble friend Lord Leigh and I am very grateful to him for initiating this one. I also look forward to my noble friend Lord Gadhia’s maiden speech.

Although I disagree with my noble friend Lord Leigh on a number of points, there are two on which I hope we do agree. One is that the decision to leave the European Union is a profoundly important one and the second is that, whichever side one was on in the referendum, one must strive to make it a success. To do that it is important to face facts. One of the biggest problems during the leave campaign was the extent to which those advocating leave tried to make everything sound so easy—epitomised by the remark of the now Foreign Secretary, Boris Johnson, that one can have one’s cake and eat it. That is something which he may be able to do but it is very difficult for the rest of us to achieve.

That error has been compounded since the referendum by the propensity of some Ministers to accuse those who point to difficulties of trying to undermine or reverse the referendum. That is a tone that has come through all too often in some ministerial statements. The reverse is true. We point out the difficulties in order to find ways of overcoming them and to avoid the pitfalls.

What is so extraordinary about the decision to leave the European Union is not that we have undertaken a profound change of policy—democracies do that. What is so extraordinary is that we are undertaking this immensely important change with absolutely no plan of campaign at all and having to make it up as we go along. That is why those of us on both sides of the argument have a duty to point to difficulties in order to find a way through.

Nothing is more important than ensuring continued access to EU markets on terms as close as possible to those that exist at present. This is partly for the obvious reason that just under half UK exports currently go to the EU and we must safeguard this very important bird in the hand, before we try to do anything else. It is also because membership of the EU in no way inhibits us from increasing our exports to other parts of the world. One only has to look at the great success achieved by Germany in China and India and also by other EU countries to see the truth of that.

In any case, it is quite clear that special deals with other countries cannot be signed before we have clarified and agreed our position with the EU. Even when that applies, the whole climate of opinion in so many countries, including the United States, to which my noble friend drew attention, is very hostile to trade agreements. Not only that, but trade agreements are extremely difficult to negotiate and even more difficult to get through domestic legislatures. That would perhaps particularly apply in some respects in our case, because the services which are so important to us give rise to such difficult political issues in many of the countries with which we would wish to reach agreement.

Apart from all that, I draw the House’s attention to one particular aspect of the British economy which is all too often overlooked, and that is the very high proportion of large British manufacturing companies that are foreign owned. The car industry is of course a particular example, but there are others. The UK has derived great benefit from foreign direct investment, but we must recognise that the companies that have bought, expanded and placed plants in this country have above all done so in order to serve the EU market. Those plants are part of a worldwide network. The companies concerned have plants in other parts of the world to serve markets in other parts of the world, so that if the plants in the UK become less competitive on the continent of Europe, those plants will not simply switch their products to other parts of the world, because the companies that own them have plants that already serve those other parts of the world. This is a problem that particularly applies in the case of the United Kingdom.

In making these points, I do not want to be thought pessimistic. If Britain, in accordance with the referendum result, takes over control of immigration from elsewhere in the EU, it cannot expect to remain in the single market on special terms. But that does not mean that a separate and distinct agreement, tailored to the new conditions, to the benefit of both sides, cannot be reached. What we must bear in mind, however, is that we have chosen to put non-economic self-interest factors at the top of our agenda. We have a right to do that, but so too do others, and when I read in today’s papers that Dr Fox is complaining that other people are putting politics ahead of prosperity, I feel he should look at the beam in his own eye.