Customs and Borders

Debate between Seema Malhotra and Robert Neill

Thursday 26th April 2018 Commons Chamber

[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]

Will the hon. Lady give way?

[Seema Malhotra]

I will not, unfortunately, because of the pressure of time.

[Robert Neill]

You will get an extra minute.

[Seema Malhotra]

Yes, all right, I will give way.

--- Later in debate ---

[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.

Euratom Membership

Debate between Seema Malhotra and Robert Neill

Wednesday 12th July 2017 Westminster Hall

[Robert Neill]

We must certainly do that and we must be flexible about the means by which we achieve it. There may be ways forward and my hon. Friend the Member for Stone (Sir William Cash) made a constructive point about a tribunal being one way forward. I take that in the spirit intended. Equally, the jurisprudence of the ECJ on Euratom matters is so discrete and so technical that it should give no offence to anyone, unless they are a complete purist about maintaining that jurisdiction.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

The hon. Gentleman is making an important point about a discrete and specific area. Does he agree that when people voted in the referendum last year, they voted on particular issues? I do not know of one moment on any doorstep when Euratom came up and people said they were voting for Britain to leave. They put their trust in the Government and Parliament to make sure that as we go through the process we do not do anything to jeopardise our interest for the future economy.

[Robert Neill]

I am sure that is the case; it did not come up on the doorstep for me. I spoke to a biochemist in the health service over the weekend who voted to leave, but said he certainly did not think we would go about leaving in such a rigid fashion that we would run into difficulties like this. The Government should change our approach to leaving in this and other matters.

I hope the position is clear. We all want the best possible outcome on this. The Government should seize the political initiative and seek to stay in if possible. If not, it is clear that we must go forward, but there must be no gap. It is more important that the Government deliver on that political objective than worry too much about some of the niceties.