Seema Malhotra
Main Page: Seema Malhotra (Labour (Co-op) - Feltham and Heston)Department Debates - View all Seema Malhotra's debates with the HM Treasury
Customs and Borders
Seema Malhotra Excerpts(6 years, 7 months ago)
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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I am glad to be able to speak in this debate, which was secured by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the right hon. Member for Loughborough (Nicky Morgan) and other Chairs of Select Committees.
A number of issues have been raised. In the interests of time, I do not propose to go over them, but they include the issue of no new barriers, the wider issues of regulatory convergence, the need to continue the ease of our trade and the dream of independent free trade agreements closing the gap created by what we will lose as a result of leaving the European Union, the single market and the customs union.
I want to raise a few of the wider economic issues that have not so far been addressed in this debate. The predecessor to the EU customs union first came into being about 65 years ago with a treaty establishing the European Steel and Coal Community. Some people seem to think that that makes it an anachronism. There is also an argument that the UK is now mainly a services economy, so an agreement that eases trade in goods is no longer as relevant as one that eases trade in services.
Putting aside the fact that goods remain around half of UK exports and so are still important and essential in their own right, the argument fails to grapple with the complexity of the modern economy that any stark dividing line between goods and services is false. Being in the customs union has relevance for services as well as for goods.
The UK economy is bound up in a complex network of EU supply chains for producing intricate products such as cars and pharmaceuticals. A substantial share of the value of these goods, ranging from 20% to 40% across most regions, according to estimates from the UK Trade Policy Observatory, is the services that go into them. Therefore, when a car rolls off the production line in Sunderland, Ellesmere Port or Luton, the value of that car includes the cost of accountants, administrators and auditors who the car company employs in making it. These services are then exported indirectly when we sell these cars abroad. Therefore, it is not only the goods but indirect services exports that rely on a near seamless passage that the customs union provides.
Robert Neill
The hon. Lady makes a very important point about the linkage between goods and services. A customs union does not deal with the issue of services, but does she agree that services do benefit indirectly, because many goods are exported with a financial service product attached—an insurance policy attached to a car and other forms of warranty, for example? The two are inter-linked.
Seema Malhotra
The hon. Gentleman makes an extremely important point and, indeed, takes my argument further. I thank him for his contribution.
The risk to these exports, both of goods and services, is not distributed evenly across the UK. The implications for regions in the UK, particularly the most affected regions, are stark. In Wales, the north-east and Yorkshire and the Humber—areas that can least afford an economic shock to their manufacturing bases—an estimated 55% to 60% of their indirect service exports goes to the EU, and they are therefore reliant on the customs union for efficiency and speed.
It would be a dereliction of our duty if we exposed regions, families and businesses to greater risk in a world that is already rife with uncertainty without a proper debate on the implications for their prosperity, especially as the most affected regions are also those least well positioned to respond to any shocks arising from leaving the customs union. As the City Region Economic and Development Institute at the University of Birmingham found, Brexit will aggravate, not reduce, inter-regional imbalances. Its research also found that the regions most exposed to Brexit are not remain-voting London and Scotland. For this risk of further damage, what do we have to look forward to in order to mitigate those effects? By the Government’s own analysis, whatever model for leaving the European Union that we take, there will be, at best, between 2% and 5% less growth over the next 15 years. That means lower wages than would otherwise have been the case, and lower tax receipts and therefore less in our public purse to redistribute resources to the very areas that expressed discontent in the referendum and, indeed, to go into our public services.
This issue is not just about economic divides. Perhaps I can come to my closing remarks with a few comments about Northern Ireland. It is clear to most—and I suspect even to the Government now—that there is no technological solution to achieving no hard border without infrastructure. The “Smart Border 2.0” report, which is often cited as an option, has rightly been acknowledged as insufficient by the Government. Perhaps I could quote from the report from the Exiting the European Union Committee. It says that
“we remain of the view that we cannot see how it will be possible to maintain an open border with no checks and no infrastructure if the UK leaves the Customs Union and the Single Market.”
I support the motion before the House today, because the customs union is vital to ensure that the complex supply chains within our economy continue to function effectively. This is also an argument based not just on politics and ideology, but on academic research and evidence. Anyone with a genuine interest in greater equity in the distribution of economic gains in our country cannot take these warnings lightly. For Ireland, supporting membership of the customs union is also about accepting the reality that, without it, a border in Northern Ireland is eventually inevitable. I cannot vote in any way in this House other than the one that makes a border in Northern Ireland less likely to happen.