European Union (Notification of Withdrawal) Bill

Lord Tyrie Excerpts

Tuesday 31st January 2017 Commons Chamber

[Oliver Dowden]

The Conservative manifesto committed us to renegotiation followed by an in/out referendum, which was exactly what we delivered. The whole argument I am making is that the question of EU membership is inextricably linked to that of the single market.

The problem with trying to control migration within the EU is that the Commission rigidly stuck to the doctrine that the free movement of people was one of the immovable pillars of the single market, and that any attempt to favour UK nationals over EU nationals was discriminatory and illegal. That was despite the fact that the whole reality of its application had changed since we initially agreed to single market membership, and that there was no similar perfect purity applied to the other pillars, particularly in services, in which the UK stood to be a major beneficiary of a pure single market.

[Mr Andrew Tyrie (Chichester) (Con)]

Is it not the case that several EU countries now have deep concerns about the consequences of unfettered free movement and that the collapse of Schengen, albeit for different reasons, is further evidence of that?

[Oliver Dowden]

I thank my right hon. Friend for his intervention; what he says is undoubtedly the case. The problem is that the Commission and other EU members move at a glacial speed, so there is unlikely to be a significant change in their approach to this pillar of the single market for some time.

Of course this issue was not the only factor, but it certainly gave strong impetus to the argument that the only way we could resolve the situation was through a policy of renegotiation followed by a referendum, which was what we fought the 2015 election on. Again, the Commission dogmatically refused to compromise on its conception of free movement, which was bolstered by Chancellor Merkel’s experience of growing up as a child of East Germany and innate hostility to any imposition of borders. Going into the referendum, we therefore could not credibly say that significant control had been restored.

Pitted against that strong argument for leaving the EU was the significant economic risk and dislocation that arose from losing unfettered access to a market of half a billion people, which we had achieved through full membership of single market. The decision therefore was about a difficult balance between control and risk, which was why it was absolutely right to put such a profound question to the British people in a referendum. We should be quite clear that the dilemma of EU membership was, in essence, the dilemma of our membership of the single market: the benefits of having free movement of goods, services and capital set against the loss of control over our laws and migration policy. These issues were the essence of the debate.

My innate conservatism favoured not taking that risk, but the British people took an alternative decision—this was whole point of asking them in the first place. So it is clear that not only should I respect that decision and vote to invoke article 50, but that I should also seek to implement it fully, which must mean leaving both the single market and the customs union. For people to claim that the Government do not have a mandate to do that is to completely ignore how we got to this situation in the first place.

Equally, however, we must be clear about the other choices that we have taken. I am glad that the economy has maintained momentum after the initial political decision to leave, and I am confident that in the medium to long term we can make a success of the huge liberation of leaving the EU. We can tailor our laws to meet the economic and trading interests of this country and those with which we choose to enter bilateral deals, rather than being bound by the lowest common denominator interests of a 27-member bloc. Indeed, we are well placed to exploit this position, as we have a centrally placed time zone, the English language, political stability, the rule of law, a competitive tax regime and tremendous creativity. But we should also not forget the risk we took by choosing to leave. I am sure that, in the short term, the depreciation of sterling is likely to lead to price rises this year, squeezing disposable income and consumer spending. The terms of our access to the single market will be different, causing short-term dislocation. Of course, the Commission and member states will initially—

--- Later in debate ---

[Mr Andrew Tyrie (Chichester) (Con)]

I was a remainer and I think it was a mistake to leave. I still think it is a mistake to leave, but that decision has been taken and tomorrow night the House will respect the decision. The question now is not whether we are leaving but where we shall arrive. We must focus on the best way of securing that, not only in our interest but in the interests of the whole continent. We need to grasp the opportunities of Brexit, which do exist, and their significance. The Prime Minister was right to say that she is going to seek a bold and ambitious trade agreement with the EU. Anything that disrupts trade is likely to diminish it and, therefore, output. A deal that safeguards both the UK and our counterparties from that disruption is therefore much needed, and in practice there may be only a little over a year to negotiate it.

So, a transitional arrangement—probably a formal agreement—is going to be absolutely essential. Without it, firms in the financial sector, for example, will act pre-emptively to protect their shareholders from the consequences of a cliff edge. A large number of them have given evidence to the Treasury Committee on exactly that point, and they are not all making it up. The action they will take has already begun in a small way, and it is much more than just brass plating. We need to be clear that the absence of a transitional agreement will cost jobs and economic activity, at least in the short to medium term, and we should not just let that business slip away.

A clear and early commitment from the Government to a transitional period—what I and a number of others have been calling a standstill—at the end of the article 50 process should be priority No. 1 for agreement at the start of the negotiations.

[Wes Streeting]

I am grateful to the Chairman of the Treasury Committee for giving way. Does he agree that such transitional arrangements are not only in our national interest, but in the interests of every other EU member state, which is why they should agree to the Government’s suggestion sooner rather than later?

[Mr Tyrie]

I agree. Other states have an opportunity to agree a deal, because it would be obtainable under qualified majority voting, and does not require unanimity, as a careful look at article 50 shows, although that point was not initially understood.

If the UK leaves the customs union, a huge amount of work will be required to develop and enforce rules of origin. Despite the extra bureaucracy, I still think there is merit in leaving. If the greatest opportunities turn out to be in Asia in the medium to long term, as many forecast, we should put the country in a position to benefit. I strongly agree with my hon. Friend the Member for Gainsborough (Sir Edward Leigh), who is no longer in his place, that a liberal economic internationalism should underpin everything we try to develop in our trade relations.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

I agree with much of what my hon. Friend has had to say. Does he agree that TheCityUK’s analysis has, it would appear, changed dramatically? Like him, it can see the advantages that might come from Brexit, having once been of the opinion that Brexit would be the worst possible thing for this country’s financial sector.

[Mr Tyrie]

TheCityUK did say that it was the worst possible thing for the financial sector, and it has clearly decided that the best thing to do is to look for the opportunities rather than spend time moaning about where we are. On the basis of what I read on my iPad on my way to the debate, it has focused on the point about the customs union.

The Treasury Committee has heard convincing evidence that both parties in the negotiations—both the EU and ourselves—have a lot to gain from maintaining a high degree of access to the single market, and a lot to lose from the absence of such access. We should bear it in mind that the EU, like the UK, benefits from our integration with European supply chains in the automotive and aerospace sectors, for example, and we all benefit from access to London’s deep and liquid financial markets, which lowers the cost of capital to European firms, and of course to British firms. Restructuring manufacturing supply chains would cost both sides a lot; so, too, would the fragmentation of the financial markets.

[Sir Gerald Howarth]

Will my right hon. Friend give way?

[Mr Tyrie]

I will not, if my hon. Friend will forgive me, for the same reason previously mentioned—I will not get any extra injury time.

Unlike the customs union, access to the single market is certainly not a binary choice: a wide variety of options is possible. We do not need to look into the crystal ball; we can read the book. Switzerland has better access than Saudi Arabia; Canada has better access than Columbia. Reverting to WTO rules would be a huge risk for the UK—one that we should do a great deal to avoid.

There is a majority in the country for leaving, and if that means anything it must mean an end to the direct applicability of EU law and the restoration of control over EU migration. We should also bear it in mind that there is certainly a majority in the country for a high degree of continued engagement with our closest neighbours, which many on the continent also want. Huge advantages can flow from maintaining a high degree of political and economic engagement from outside the EU. It can be as economically beneficial as it will be politically expedient to try to construct it. It can help heal the Brexit wounds to which the Prime Minister referred in her outstanding speech, and it can address the deep unease that seems to be developing about Brexit among the young. Many of them are rejecting much of the irrationality of current political discourse coming out of Washington, and many are certainly rejecting the populist economic nationalism that President Trump represents, which some also attribute to Brexit.

In demonstrating that we understand and are responding to those voices of concern, we can win support at home, and we can construct alliances among our counterparties abroad by making it clear that we want to engage deeply with the EU from outside. That is why, if we can avoid the politics of unreason and avoid, too, the divisions at home and abroad that a disorderly and confrontational Brexit could bring, we can still reap considerable opportunities from the Brexit decision.