EU: Future Relationship

Lord Wallace of Saltaire Excerpts

Thursday 27th February 2020 Lords Chamber

[Baroness Hayter of Kentish Town (Lab)]

I welcome the noble Lord, Lord True, to his role. He is the fourth Minister covering Brexit that I have faced. Two retired hurt—one fell out of a helicopter, and I think the other fell out with his political masters—although the last left the field having successfully delivered for his Prime Minister. While I wish the noble Lord well, I obviously hope we will be able to persuade him to listen to views other than just those emanating from No. 10.

Somewhat unusually, the lead negotiator—the Minister calls him a Sherpa—is a civil servant, David Frost. He is not a Minister; he is a civil servant, answerable neither to the Commons nor therefore, via a junior, to this House. We therefore welcome the Minister’s confirmation that he will be Mr Frost’s man in this House and report regularly as the negotiations proceed. Perhaps he will speak, or I can do so via him, to the Chief Whip to ensure we can have a proper debate on this document in the near future.

Today’s Statement is, needless to say, on a crucial and vital issue, but sadly I fear it does not bode well, since it leaves us with a query as to whether the PM really wants a deal, or at least whether he is willing to risk no deal simply to please his friends—whether Trump or the ERG—such that he prioritises a US deal over and above one with the EU. Without an EU deal, we would see tariffs, checks and barriers to trade implemented very fast, by January, in a way that would damage the whole economy. The price of a US deal, even if we got one, would be lower consumer standards, workers’ rights being jeopardised, and environmental concerns being downplayed. What would be the purpose of that?

The only reason seems to be the avoidance of the ECJ—a court—and, as we just heard, this reassertion of so-called “sovereignty”, which was mentioned 11 times in the Statement: a bit of a hang-up there. This is an interdependent world, where the value of currencies, confidence in economies, global interest rates, international tax and wage rates all impact on UK businesses every day. The idea that we live in this independent sovereign world unaffected by anything outside is a figment of the imagination. The best way to confront these global uncertainties is to work closely with our nearest partners and as part of a half-billion market to absorb the ups and downs in world trade and to secure a thriving market for UK goods.

Any idea that a deal suitable for a faraway country—3,500 miles in the case of Canada—would suit the sort of trade that we have with a continent 12 miles away at its nearest is surely pure fantasy. Do the Government understand that the imports and exports of meat, cheese, milk, nuclear medicines, flowers, fruit and vegetables depend on short distances, fast travel and a virtually identical time zone for that easy flow of trade? Or that our car manufacturers need rapid supplies of parts as well as exports of finished products which depend on easy access to the continent? Easy means quick and cheap. No wonder the Treasury predicted that a Canada-style free trade agreement would shrink the economy by up to 6.4%.

The Government seem to accept that there will be customs posts, tariffs and checks, and they even occasionally acknowledge that these will be between Northern Ireland and GB. But those cost money to businesses, to consumers, and to the taxpayer. I hope I have read it wrong, but this Statement seems to smack of a negotiating position which is seeking a very distant relationship with the EU, happy to establish barriers for those businesses trying to continue to trade with our largest economic partner. Despite the warm words which the Minister has just repeated, the Government’s commitments on rights, protections and standards, which were written into the political declaration that the Prime Minister signed, now appear to be at risk because the Minister seems to be saying that because some of ours are higher, we can junk all of the commonly agreed minima.

The political declaration promised that the Government would seek a free trade agreement that was underpinned by provisions that ensured a level playing field—the Prime Minister signed that—and safeguarded workers’ rights, consumer rights and environmental protections. Today’s Statement seems to back-track on both. That is not just bad for the people concerned, be they workers, consumers or those interested in the environment, but it is bad for business, with this new variable and reckless approach to negotiations taking business straight from one set of uncertainties to another. We know what businesses want from our deal with the EU: first, ambitious co-operation on regulation with regard to goods to reduce red tape for exporters; secondly, comprehensive coverage of services to maintain the competitive edge of UK providers—a vital part of our economy and, unfortunately, an element not mentioned in the Statement; and, thirdly meaningful customs facilitation to keep costs and complexities low.

It is no good the Prime Minister’s spinners attacking the CBI, as they did earlier this month, accusing it and others of neglecting their duty to prepare their members for the realities of a Canada-style free trade deal. Briefing from No. 10, referring to the CBI and others, said that they have a responsibility to their members that they are not fulfilling, and individual businesses might consider whether they are getting the best representation from the umbrella groups that they are funding. That sounds to me like Downing Street trying to encourage the CBI to mute its criticism of the Government’s strategy. That is not an open Government willing to listen to the views of others.

Without thriving businesses, we have no chance of levelling up or continuing to grow, so I urge the Minister to engage with representatives of consumers, of industry, of farmers and of the service sector so that real hard economic facts, rather than ideology and wishful thinking, will be the lodestar in the negotiations. Can the Minister confirm to the House that the Governments of Wales, Scotland and Northern Ireland as well as of Gibraltar will be fully involved in all stages of the negotiations so that the interests of all parts of the UK are safeguarded?

[Lord Wallace of Saltaire (LD)]

My Lords, I, too, welcome the Minister to his new position and look forward to a series of robust exchanges in the months to come. As I was coming down to the House, I was interested to learn that there is now a revised version of the Statement. Perhaps it might be of interest to the House to point out what has been revised. The original text stated that

“as a sovereign, self-governing independent nation we will have the freedom to … lower all our taxes”.

The Minister correctly read out the revised version, which is

“to set all our taxes.”

That seems a wise revision by a Government who are about to produce a Budget which intends to increase spending very considerably. If they were to promise in a wonderfully populist way to lower all our taxes at the same time, it would be a little more Trumpian than even Johnsonian.

I would like to tackle the language and assumptions of the Government’s current approach. This is a very harsh, autonomous independence. As has been pointed out, sovereignty—independent sovereign equality—runs all the way through it, as does the notion of the people’s Government, the “servants” of the people. Saying that

“we follow the people’s priorities”

is the not the language of Churchill or Thatcher. It is the language of Viktor Orban, the Prime Minister of Hungary, or even President Erdoğan of Turkey. This is not constitutional parliamentary language. This is not Edmund Burke. The Conservative Party has to recognise that it is slipping into different territory.

In his speech last week, David Frost started and finished by quoting Edmund Burke, but he also rubbished the idea of shared sovereignty. I recall listening to Geoffrey Howe and Margaret Thatcher talking about shared sovereignty and how we benefit in constructing a multilateral international order by sharing our sovereignty through international treaties and agreements, international organisations and international law. Britain has done a great deal in that regard. The language of the Statement suggests that we reject most of that and that we think we are now dealing with a power—the sovereign European Union—which is threatening our sovereignty and independence.

I have not yet heard any Minister say that in dealing with the United States we will expect the United States to treat us as a sovereign equal. I hope the Minister can assure us that we expect the same from the United States because it would not be desirable to establish our independence from the European Union hostile force—as it clearly in many ways is—by reinforcing our dependence in security, intelligence and a range of other ways on the United States. We see it in current extradition procedures and in the presence of American intelligence operatives in this country, who are not fully covered by treaty arrangements and not fully reported to Parliament. That is a degree of dependence which is certainly an evasion of British sovereignty, if we are going to talk about our sovereign independence.

How are we going to establish our political and economic independence by January next year? If we are going to be economically independent, are we going to ensure, for example, that all our key telecommunications equipment is made inside this country? Are we going to ensure that we have an independently owned steel industry, or at least a steel industry of some sort, or is that not part of economic independence? Do we think that supporting offshore financial centres under British sovereignty is part of independence, given that integration into the offshore world which is the ultimate denial of sovereignty in taxation and other terms? If we are not, that is misleading, populist language. It is wonderful to suggest that we stand for the people, but actually, we do not.

Free trade limits sovereignty. Protectionism is what protects sovereignty. North Korea is in many ways one of the most sovereign countries in this world. Once you open yourself to foreign investment and trade, you limit your sovereignty, and that is what we have done. We are one of the most open countries to foreign takeovers and, as a result, we have limited sovereignty and we have to share it with others. If we are talking the language of sovereign equality, we should remember what that great realist Thucydides said: strong states do what they like, small states—and we are smaller than China or the United States—do what they must.

There is no understanding of Britain’s position in the world now we have left the European Union. We have no foreign policy at present. That is not part of this current populist dimension. How do we approach climate change and how do we deal with pandemics? We have to share sovereignty. I hope, when it comes to the climate change conference, the Government will sign up to new international obligations, which will also limit Britain’s sovereignty. Perhaps it is only signing up to shared obligations with the European Union that we object to and we do not, apparently, object quite so much to signing up with China or India.

Can the Minister also assure us that what I understood the Statement to mean on regulatory divergence is that we demand the principle of regulatory divergence but, in practice, we shall be fairly closely aligned? We are standing up for the ideological dimension that we choose but, when it comes to it, we will probably go along with them. Of course, the alternative, if we do not align with European regulations, will be to align more closely with American regulations, rather than, I suspect, to choose our own.

I hope the Minister recognises that the change of tone from the political declaration we signed last October is very worrying for anyone who cares about our position in the world. He will have read the Times editorial the day before yesterday, which said that if we now suggest that we are not bound by agreements that we signed up to last year on Northern Ireland and on the political direction, no one will be prepared to trust us and we will not be able to get a future agreement. When a not particularly left-wing newspaper, such as the Times, says that about the Government’s approach to their negotiations, we should all be very worried indeed.

[Lord True]

I thank the noble Baroness and the noble Lord. Obviously, I thank them for their references to my arrival here. I feel privileged to follow my noble friend Lord Callanan in answering on this subject at this Dispatch Box. He was often stoic and always willing to be open to the rest of the House. I assure both noble Lords who have spoken that I will endeavour to be fully open and I look forward to working with them. I know my noble friend is a hard act to follow and I will try to do that.

I will come to each of the contributions in a moment. I felt that they had something in common. One was, perhaps, slightly more robust but there still seemed to be a lack of recognition on the Benches opposite of the fundamental change in the circumstances in which this nation—and, frankly, this Parliament—operates and, I submit, has a duty to operate. Not only was there a very clear referendum result some years ago, following which this House did not cover itself in glory in the way it behaved, but there has recently been a general election—as referred to in the Statement—in which the British people gave a decisive steer. It is a mandate—whatever people on the other side may feel —and an instruction that, as the Statement said, we on this side feel an overwhelming duty and responsibility to respond to. Everything that this Government will try to do in this House will start from the fundamental fact that the British people have voted to leave and they have voted to be independent and that is the policy that this Government will pursue.

I come to some of the points raised. With respect to the noble Baroness, it was a little like hearing the briefing on the process before Brexit actually happened. The Government are trying to be as open with the House as possible right from the start, publishing this mandate before the negotiations begin. We are in a new phase. Brexit has happened. In the period up until 31 December, we are seeking to reach an agreement with our friends and allies in Europe; that is, an agreement based on full respect and friendly co-operation, and centred on free trade. With great respect to the noble Lord, Lord Wallace, it sounded as though he was seeing the Government as inspired by Stalinist socialism in one country. The Government are fully alive to our international friendships and obligations, which stretch right across the world. I repeat that the key position, which this House must understand, is that we want friendly relations and co-operation between sovereign equals, but it must be informed by the decisions taken by the British people—by our mandate.

On workers’ rights and environmental matters, the Statement was unequivocal. The position taken by the Government is that we aspire to the very highest standards in those areas. We had exchanges earlier about environmental matters. There is no question of the Government resiling from that aspiration.

The noble Baroness asked about friction. Our objective is free trade. That was the proposal put forward by our European friends. But, if it turns out that some element of friction—which we hope will be minimal or non-existent—is present, we have made clear the importance of our need to be an independent, sovereign nation. The noble Baroness talked about a different relationship. We do not want a different relationship in the sense of being hostile, as the noble Lord implied. We bear no hostility to our European friends but we do want a free trade agreement as sovereign equals. In that sense, the relationship is certainly different.

Financial services are, of course, absolutely critical. The noble Baroness asked about this. The position is that, again, it is an area of hopeful co-operation. We have a common interest with the EU in establishing an enduring relationship on financial services, based on mutual trust and co-operation. As my right honourable friend said in the other place, that means completing equivalence assessments, one hopes by the agreed June 2020 deadline.

We must not run ahead of the negotiating process—it is yet to begin. It is disappointing to hear in your Lordships’ House the assumption that everything is impossible. I do not agree with that. I am happy to repeat that we will, of course, try to keep the House informed in an appropriate way as the negotiations go forward; yes, we will keep the devolved Administrations informed. Indeed, in the House of Commons, my right honourable friend expressed his gratitude for the valuable recent discussions he had had with representatives of the devolved Administrations.

On language, I was invited to be robust, but I must try to stop being robust now that I am a Minister. I want full co-operation and friendship with the noble Lord, who I enjoyed working with in coalition, but it is a bit rich to be given a lesson on language by a party that went to the last election planning to revoke Article 50 without any reference at all to the British people. To my reckoning, that seemed mildly harsh. I will not go into a philosophical argument about what sovereignty means. Some things the noble Lord said were true; some were not. This Government intend to be a leader on climate change, as we have already demonstrated.

I have tried to answer the questions, but I am sorry to have gone over time. We must accept this as a fresh phase, and I hope the whole House, on all sides, addresses this phase in the positive spirit of wishing to get a good outcome by the end of this year, both for this country and for the European Union. That is the position of this Government and what we will try to achieve.