Double Taxation Agreement: Gibraltar
Simon Clarke Excerpts(4 years, 6 months ago)
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The Exchequer Secretary to the Treasury (Mr Simon Clarke)
A new double taxation agreement with Gibraltar was mutually accepted in an exchange of letters signed in London on 1 October 2019 and in Gibraltar on 15 October 2019. The texts of the letters will be deposited in the Library of both Houses and made available on the gov.uk website. The texts will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
[HCWS19]
Oral Answers to Questions
Simon Clarke Excerpts(4 years, 6 months ago)
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Huw Merriman (Bexhill and Battle) (Con)
The Exchequer Secretary to the Treasury (Mr Simon Clarke)
A new business starts in the UK every 75 seconds. Following the patient capital review, we announced a £20 billion action plan to finance growth in innovative firms. To support that, we have established a new business finance council to ensure that Government, banks and other lenders work together to help small and medium-sized enterprises to access the finance that they need.
Huw Merriman
I welcome all of the Treasury team to their places and thank the former Chancellor, my right hon. Friend the Member for Runnymede and Weybridge (Mr Hammond), for letting me work so closely with him. It was an amazing privilege.
I spent an amazing day with my constituency businesses in the village of Beckley. They are concerned about business rates, on which I support their call for reform, as well as about the VAT threshold and lack of taper. They will also now be writing to me about the welcome increase to the national living wage. Can we do more to support small businesses? They are the backbone of rural economies and without them we will not have employment.
Mr Clarke
I thank my hon. Friend for his question and take this chance to thank him, on behalf of the Government, for the work he did with the former Chancellor. He is quite right to talk about tax reform. Of course, since 2016 we have announced business rates reforms and reductions worth more than £13 billion by 2023-2024. On VAT, in the run-up to the 2018 Budget we consulted on the threshold, which is the highest in the EU and the OECD. We have committed to keep that in place until 2022, but I am genuinely always interested in suggestions that I can discuss with colleagues.
Mr Jim Cunningham (Coventry South) (Lab)
When is the Minister going to do something about the delays in payment to small businesses that often affect their cash-flow? We have debated the issue for many years; is it not about time that the Minister did something about it?
Mr Clarke
Responsibility for this issue falls between the Treasury and the Department for Business, Energy and Industrial Strategy. A late-payment regulator has been set up. I talked about this issue with businesses at the Conservative party conference on Sunday; I take it very seriously and they highlighted it as an ongoing concern. It should come out loud and clear from the House that all businesses, particularly larger ones, have a responsibility to meet their payment terms, because that is crucial for small businesses. I think everyone in the House can unite around that common principle.
Several hon. Members rose—
Sir Greg Knight (East Yorkshire) (Con)
Is the Minister aware that one of the main difficulties facing small rural businesses is the non-availability of fast and reliable broadband? In the light of the announcement that the Chancellor made yesterday in Manchester, can we now assume that the days in which a geographically isolated business is also digitally isolated really are numbered?
Mr Clarke
My right hon. Friend is of course absolutely right that broadband connectivity lies at the heart of a modern economy. It was so welcome to hear my right hon. Friend the Chancellor of the Exchequer yesterday set out how £5 billion of investment is going to be devoted to making sure that we can deliver on the Prime Minister’s pledge to ensure full fibre broadband access by 2025.
Jim Shannon (Strangford) (DUP)
Will the Minister outline whether he has considered tax incentives for businesses to take on apprentice staff in administrative roles, with special reference to young people from learning-difficulty backgrounds, who take more time and patience to train? There are simply not enough places available; will the Minister undertake to make places available?
Mr Clarke
Again, that is a unifying principle to bring to the House. The Government have done an awful lot to try to promote the uptake of apprentices—we have seen action on things such as national insurance to try to make it more affordable for businesses to employ young people. The Department for Business, Energy and Industrial Strategy is very interested in all the work that goes on around supporting access into work for disabled people and people with learning disabilities, and would be interested to hear more from the hon. Gentleman about those ideas.
Douglas Ross (Moray) (Con)
The Exchequer Secretary to the Treasury (Mr Simon Clarke)
I discuss matters of importance regarding the Scottish economy with Government colleagues on a regular basis. In July, £32.5 million was allocated for the Moray growth deal.
Douglas Ross
The £32.5 million investment that the Minister has just mentioned, which was also matched by the Scottish Government, made the Moray growth deal the highest funded per head of population anywhere in the country. The next key milestone will be the signing of the heads of terms, so can he update us on the progress made towards that?
Several hon. Members rose—
Nick Smith (Blaenau Gwent) (Lab)
Mr Clarke
That was a truly ingenious question. Of course, the UK shared prosperity fund is really important. We continue to make good progress on its design. Ministry of Housing, Communities and Local Government officials have so far held 26 engagement events across the UK with over 500 representatives from a breadth of sectors. This is something that, obviously, has massive implications for Wales, and we are very happy to ensure that we engage everyone in that process.
Luke Graham (Ochil and South Perthshire) (Con)
The Moray growth deal, like the Clackmannanshire and Tay Cities growth deals, is bringing unprecedented investment into Scotland. Are the Minister and the Treasury considering reprofiling the investment over 10 years, as opposed to 15, as the local councils are asking me to do, so that we can get this investment and this transformational change in our communities?
Mr Clarke
I thank my hon. Friend for that question. Clearly, we want to see this investment move forward as quickly as possible. If he wants to raise that matter with us and indeed with the Secretary for Scotland, we can certainly talk about it, but I obviously cannot make any commitments here today.
Ben Lake (Ceredigion) (PC)
On the subject of growth deals, may I ask the Minister, in addition to discussions on the Moray growth deal, what discussions has he had with Cabinet colleagues on the progress of the Mid Wales growth deal?
Mr Clarke
We are committed to bringing forward growth deals across the UK. Obviously, in the devolved Administration areas, we want to bring forward money from our side, but with effect from the Welsh and Scottish Governments as well. We want to see progress across the UK; it is not restricted to Scotland.
Melanie Onn (Great Grimsby) (Lab)
Andrew Jones (Harrogate and Knaresborough) (Con)
One of the ingredients of economic growth—we have talked about boosting small businesses—is improving the productivity within the economy. What are the ministerial team doing to boost productivity?
The Exchequer Secretary to the Treasury (Mr Simon Clarke)
I thank my hon. Friend for his question; he was obviously responsible for this when he was Exchequer Secretary. Last week I met Charlie Mayfield for a very good discussion about the Be the Business fund that the Government have set up to support business-led movement to improve small business productivity. This includes running pilots in Cornwall to support the hospitality sector and in the north-west to support family businesses. There are other schemes, such as Made Smarter, which is a good pilot, in addition to a £31 million package announced at conference 2018 to improve SME management through peer-to-peer networks.
Jessica Morden (Newport East) (Lab)
Julian Knight (Solihull) (Con)
I am sure whatever cachet I had has now been completely ruined; thank you, Mr Speaker. There are reports that the Government are looking at bringing forward the date of the banning of diesel and petrol cars. Does the Chancellor share my concerns about the fiscal damage of lower new car sales, the lack of electric car infrastructure and the negligible impact that such a virtue-signalling move will have on emissions?
Mr Simon Clarke
I thank my hon. Friend for his question. He is a tireless champion of the motor industry, which we all take very seriously. The Government have made a commitment to delivering net zero emissions by mid-century; that is hugely important and has cross-party support across the House. We will not be making any precipitate moves that would concern him without proper consultation fully across Government about the ramifications of any change in that date.
Stephen Timms (East Ham) (Lab)
Sarah Newton (Truro and Falmouth) (Con)
I very much welcome the Prime Minister’s announcement of pound-for-pound replacement through the shared prosperity fund of the EU funding that Cornwall receives. We are really ready in Cornwall to drive our economy forward. Will the Chancellor meet the local enterprise partnership and all Cornwall’s MPs, so that we can make rapid progress in designing that fund?
Mr Simon Clarke
My hon. Friend is right that we need to ensure that the UK shared prosperity fund works for all the regions and nations of our country. I would be delighted to meet her, to ensure that we get all the suggestions from Cornwall as part of the process of designing that new fund.
John Cryer (Leyton and Wanstead) (Lab)
Can the Minister answer the question asked earlier by the right hon. Member for Hastings and Rye (Amber Rudd): what is the reason for not suspending the loan charge scheme until the inquiry is completed? It is a request not for a change of policy, but just to suspend the scheme.
No-deal Brexit: Short Positions against the Pound
Simon Clarke Excerpts(4 years, 6 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
John McDonnell (Hayes and Harlington) (Lab)
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on short positions being taken against the pound in the lead-up to a possible no-deal Brexit.
The Exchequer Secretary to the Treasury (Mr Simon Clarke)
It is not appropriate for the Government to comment on specific currency market movements, or on market positioning—
David Linden (Glasgow East) (SNP)
On a point of order, Mr Speaker. We cannot hear what is being said.
Mr Speaker
I am grateful to the hon. Gentleman. My advice to the Minister is simply to project. I know he will do so unfailingly.
Mr Clarke
I will do my best, Mr Speaker. One would not want to be accused of being unduly meek in the circumstances.
We accept the market-based price of sterling and do not have a view on what level this should be. Were the Government to speculate on the value of sterling, it could hurt confidence in our macroeconomic framework. However, as the price of sterling fluctuates in the normal way, Her Majesty’s Treasury believes that investors should be entitled to hedge, including by short selling. The foreign exchange market is a global market, and it is essential that we work with other jurisdictions to ensure a consistent international approach to the oversight of these markets. That is why the UK has supported the work of the Bank for International Settlements to create a single global foreign exchange code, and work is ongoing to ensure that it embeds common standards of good practice in this area.
The United Kingdom will be leaving the European Union on 31 October, whatever the circumstances. We must respect the referendum result. We would prefer to leave with a deal, and we will work in an energetic and determined way to get that better deal done.
John McDonnell
I welcome the hon. Gentleman to his post and congratulate him on his promotion.
The threats by the Prime Minister of taking our country over a no-deal cliff edge have created inevitable uncertainty in the markets, reflected in the varying position of the pound. Uncertainty, as we know, is the breeding ground for speculation. Evidence has mounted of sizeable sums being mobilised to short the pound, betting on sterling falling in the case of a no-deal Brexit. We have heard nothing from the Government until this morning. On the other hand, the former Chancellor has expressed his concern, saying that the Prime Minister
“is backed by speculators who have bet billions on a hard Brexit—and there is only one outcome that works for them: a crash-out no-deal Brexit that sends the currency tumbling and inflation soaring.”
The former permanent secretary to the Treasury, Nick Macpherson, said yesterday,
“Mr Hammond is right to question the political connections of some of the hedge funds with a financial interest in no deal. They are shorting the £ and the country, with the British people the main loser.”
Others will consider that what makes the situation so much worse is not just that we have speculators gambling on our country’s failure and at our country’s expense, but that the Conservative party has been willing to accept donations from those speculators. We are not talking about trivial sums: in this year alone, the Prime Minister and the Conservative party have received £726,000 from individuals who back a no-deal Brexit, many of them involved in hedge funds.
There are questions to be answered. Can the Minister confirm the Government’s estimate of the scale of speculation on the economic outcome of Brexit—placing bets on risks to our economy? Is there not a danger that the promotion of a no-deal scare by the Prime Minister, resulting in profiteering by his friends and donors, could be a seen as a conflict of interest by any standard, and contrary to the ministerial code, which says that Members
“must avoid real or apparent conflicts of interest”?
Should not the Minister who is responsible for overseeing the risks to our economy stand up to the Minister and tell him how inappropriate it is for any candidate for prime ministerial office, or any party, to accept funds from individuals who are speculating on the potentially enormous risks to our economy from no-deal Brexit? Will the Government now support Labour’s proposals for an inquiry into the finance sector, including the regulation of hedge funds and short selling?
Mr Clarke
The right hon. Gentleman talks about uncertainty, but the only people generating uncertainty in this place are the Opposition. It is they who are selling this country short. They will not vote for a deal, they will not vote for no deal, and they will not vote for a general election. As anyone who talks to British business knows, the main threat to our economy would come from the economic policies we heard set out in Brighton last week.
As I set out in my remarks, the Government’s central position is that we are working to secure a good deal, and the focus of that will be at the summit on 17 and 18 October. That remains our overwhelming focus and our best hope. Clearly, it does not help when the Opposition come together to remove our negotiating leverage in those vital talks.
The right hon. Gentleman referenced the former Chancellor of the Exchequer. I am grateful to the right hon. Member for Runnymede and Weybridge (Mr Hammond) for all the work he did as Chancellor to help prepare for no deal. We have been able to build on that over the last few weeks. I would note, however, when it comes to some of the more outlandish speculation in this area, that Frances Coppola in the Financial Times, in an article entitled, “The Mythical Bets On No-Deal Brexit”, wrote yesterday that this was yet another “tinfoil hat conspiracy theory”. That is about the sum of the merit of this debate.
The Government will not comment on individual positions—no one would expect us to—or the actions of individuals. We do not accept that there is any prospect of a conflict of interest. Insofar as anyone needs standing up to, it is not my right hon. Friend the Prime Minister; it is the right hon. Gentleman, who is making a political and, dare I say it, speculative attempt to throw mud around the House. I did not hear anything in his statement or questions that amounted to a substantive point; they amounted to trying to propagate myths and to smear. In a week when we are trying to lower the temperature in the House, the Opposition seem intent on stoking it. I have nothing further to add.
Amber Rudd (Hastings and Rye) (Ind)
I congratulate my hon. Friend on his elevation to this important role. While many of us on the Government Benches, and in fact across the House, are concerned about the impact on currency markets of the obvious contradiction between the Benn Act and the Government’s consistent position that we are leaving on 31 October, everybody on the Government Benches is united in the knowledge that the real damage to this country would be done by the Labour party getting any place in government. Every time it makes an announcement, it affects the markets, and that is what gives further uncertainty to this country and that is what would truly damage our economy.
Mr Clarke
Of course, I entirely agree with my right hon. Friend. We heard the danger set out last week. I thought that the prospect of a three-day week was bad; well, the Opposition have decided to split the difference and have a four-day week. Much of what we heard in Brighton was a recipe for business disaster and the very damage that we need to avoid and which we have spent the last nine years trying to put right.
Alison Thewliss (Glasgow Central) (SNP)
The pound was shorting at a two-year high in August. The Prime Minister’s sister, Rachel Johnson, has said that people
“have invested billions in shorting the pound or shorting the country in the expectation of a no-deal Brexit.”
The former Chancellor has said that
“there is only one outcome that works for them: a crash-out no-deal Brexit that sends the currency tumbling and inflation soaring.”
Frances Coppola, who the Minister was keen to quote earlier, said that at the very least there was a conflict of interest. The Prime Minister received at least £375,000 from donors associated with hedge funds during his leadership campaign, and we already know from the Jennifer Arcuri case that he is no stranger to conflicts of interest. Will the Minister launch an investigation into this whole affair, because the public need to know what is going on behind the scenes? Will he also accept that those who are already wealthy seem to have everything to gain from a no-deal Brexit but that my constituents and thousands and thousands of others across these islands are still struggling to make ends meet after a decade of austerity and it is they who have everything to lose?
Mr Clarke
I thank the hon. Lady for her question. We served together on the Treasury Select Committee. She speaks about her constituents. My constituents in Middlesbrough South and East Cleveland could not by any metric be described as wealthy and they enthusiastically support the idea of our delivering on our manifesto commitment—and indeed on the referendum result—to leave the European Union. The Government’s position on no deal is very clear: we want a good deal, a fair deal, that does not leave this country as a rule taker in perpetuity. If we secure a deal, my point, very simply, to the Scottish National party would be: if they want to avoid no deal, they should vote for the deal we bring back.
Tim Loughton (East Worthing and Shoreham) (Con)
I congratulate my hon. Friend on his appearance at the Dispatch Box. Does not that limp excuse for an urgent question reveal the contempt the Opposition have for financial markets, which contribute 11% of tax revenue to the Exchequer? Does he agree that the fact that, of the $6.6 trillion of currency dealing done globally, 43% is now done in the City of London—a record high—is a vote of confidence in the City and the way the Government are handling it, and how far does he think the pound would fall if that lot on the Opposition Benches ever got into power?
Mr Clarke
The pound would need a good head for heights in that scenario. My hon. Friend is absolutely right. The City of London is, of course, one of the great assets of this country and something we should celebrate rather than castigate. It is a source of enormous tax revenue, which underpins our vital public services, and there is no doubt that it is one of the key cards in our hand when it comes to the Brexit negotiations and securing a good deal. So I absolutely agree with him. We sometimes need to do more to talk it up, rather than talking it down.
Sir Vince Cable (Twickenham) (LD)
Is not the implication of the Minister’s first answer that the authorities would allow the currency to fall indefinitely, without intervention, if that is where the market leads?
Mr Clarke
The Government’s position is that we do not adopt a fixed target for sterling, as clearly we believe that it is sensible for the currency to find its own level in various circumstances. Obviously that freedom for the currency to float is important. Look, all of us in this House believe that the country will succeed in a whole variety of different scenarios. I believe that sterling will find an appropriate level in any scenario, and clearly there are aspects of a fall in sterling that would make it easier to export, so it is not a zero-sum game. We have to trust the market to find its own level.
Sir Mike Penning (Hemel Hempstead) (Con)
There is one obvious point, even for people, like me, who are not economists: if we talk down the country and the economy, that is where the economy will go. Thank goodness the Labour party is not in power, because it would destroy the economy.
Mr Clarke
That is exactly the point I was making, because we need a bit of self-belief in our country. Here we are in the world’s fifth largest economy, and in a country that is widely regarded around the world as a bastion of strength, and we will absolutely succeed in all scenarios. When it comes to Brexit, the Government’s strong preference is to get a deal, but the overwhelming point that people need to hear from this Dispatch Box is that we are leaving the European Union on 31 October, delivering what the people asked us to do, and indeed what most of us in this House were elected specifically on manifestos to deliver.
Helen Goodman (Bishop Auckland) (Lab)
The Guardian is today reporting that Crispin Odey is shorting house builders and shopping centres, which means that in the event of a no-deal Brexit, when they cannot build homes and more shops close, he will make a packet. Surely the Minister can see that there is a massive conflict of interest, particularly for the Leader of the House, who has been financed by that man for years.
Mr Clarke
The passion that the hon. Lady shows is certainly a match for what I heard when I was in Bishop Auckland recently to address some of her constituents, because they were very clear that we should be leaving the European Union. I have already said that I do not propose to comment on the actions of individuals, because clearly it is for them to account for their actions. The Government do not take a position on the actions of individuals. We do not take a position on the issue of short selling.
Maria Caulfield (Lewes) (Con)
May I welcome the Minister to his post? Does he agree that a sure-fire way of stopping speculators benefiting from a no-deal Brexit would be for the shadow Chancellor and his comrades to vote for the Prime Minister’s deal when he brings it back and to stop no deal in the first place?
Mr Clarke
I agree with my hon. Friend. Clearly, if we can secure a good deal that is fair to this country, which is our central aim, that is what everyone in the House should get behind, because that will take our country out of the European Union on the smoothest basis—[Interruption.] The hon. Member for West Ham (Lyn Brown) says “Fantasy” from a sedentary position, but what I think is fantasy is the idea that our chances of securing a good deal are improved by continuing to propagate a surrender Act. That is the problem, I am afraid to say, that lies at the heart of this debate. The Opposition are, in essence, trying to take power without responsibility, and it is highly unfortunate and detrimental to this country’s interests if we do not all work together as a nation to deliver on what we, as a country, decided was our future course of action.
Hilary Benn (Leeds Central) (Lab)
Can the Minister confirm that the Government’s own economic assessment shows that a no-deal Brexit would have the most damaging consequences for the British economy, investment, jobs and businesses? As that is the case—[Interruption.] Well, we have all read the assessment produced by the Government. As that is the case, can he explain to the House why he is prepared to contemplate that outcome, given the impact it would have on British business?
Mr Clarke
The right hon. Gentleman makes a point that we have often debated in the House. We believe on the Government Benches in delivering on the referendum mandate, which was to trigger article 50 and leave the European Union. The operation of article 50 is clear—we leave with a deal if we can secure it, but without a deal if we cannot. The Government have invested billions of pounds in no-deal preparation. Much of that money has been invested subsequent to the November 2018 report, which did not touch on dynamic policy options open to the Government after we leave the European Union. I think in my own region, for example, of free ports. The modelling is not perfect, and does not encompass all the options that are open to us. None the less, as I say, the base case—the Government’s working assumption—is that we will leave the European Union with a deal.
That is what we are working towards. The crucial summit is only three weeks away, and it would help if the House got behind the Government’s efforts to try to secure a sensible deal, take us out and move the country forward. This is the umpteenth debate that we have had in the House on this issue. We go round in circles and do not make progress, because one side of the House refuses to contemplate any sensible way out of this impasse.
Several hon. Members rose—
Michael Tomlinson (Mid Dorset and North Poole) (Con)
Thank you Mr Speaker, you are very kind. It is wonderful to see the Minister in his place, oozing calm and authority, in sharp contrast to the stoking of fears and division on the Opposition Benches. We have just heard about the risk to the economy, but the real risk to the economy is not Brexit nor yet a no-deal Brexit. The real risk is letting the shadow Chancellor anywhere near No. 11 or the Treasury.
Sammy Wilson (East Antrim) (DUP)
Does the Minister not find it ironic that the shadow Chancellor should be concerned about the future value of the pound and the impact on speculation, given that he and his party have spread economic gloom and doom, have talked the economy down, and have proposed lunatic economic policies if ever he should get his hands on the levers of power in this country? Does the Minister agree that the real honeypot for speculators is not our leaving the EU but the prospect of a Labour Government?
Andrew Jones (Harrogate and Knaresborough) (Con)
I congratulate my hon. Friend on his appointment. He is doing brilliantly in his first appearance at the Dispatch Box. He discussed bringing certainty to the markets by delivering Brexit. The main message that I hear from constituents in Harrogate and Knaresborough is that after three and a half years of talking there has been enough talking—why do we not just get on with it? Does he agree with them?
Mr Clarke
I thank my hon. Friend, who has been a distinguished holder of this office. He is absolutely right. There is in all walks of life a demerit to uncertainty. There is a real problem whereby we marched the country up to the top of the hill in the run-up to 29 March, then had to march down again. We are close to our projected exit date of 31 October. It would be really, really problematic for all those businesses that are making preparations, and in some cases stockpiling provisions as well, to keep going backwards and forwards on this question. The country voted to leave in 2016. It reaffirmed that by voting by over 80% for the two main parties that were committed to delivering on that result in 2017. We need to get on with the job. There would not be anything for people to speculate on if we could achieve certainty in the House.
Tracy Brabin (Batley and Spen) (Lab/Co-op)
Over the weekend, I watched “The Big Short”, and I would encourage everyone to watch that film about sub-prime mortgages. In it, there were several hedge funders who made billions from the collapse of the market. They did not care that honest, ordinary Americans lost their homes and jobs. When that happens, when we have a no-deal Brexit and hedge-fund managers make billions, how will the Minister support my constituents, who will be impoverished, and will perhaps lose their jobs and homes? What is he going to do to level the playing field? Actually, it is a question of morality.
Mr Clarke
I am an historian rather than an economist, but I certainly do not take my lessons on hedge fund activity from Hollywood. We need to be very clear about the fact that there is a real need to provide certainty, and that certainty is hugely important.
Let me say gently—and it is gently—that I did not vote for the deal on the first two occasions when it came forward, for the very reasons that my right hon. Friend the Prime Minister did not do so, namely the concerns about the backstop provisions. Those provisions need to be addressed, and we are working to address them. Fundamentally, we did vote to leave, on a deal or no-deal basis. The hon. Lady’s constituents voted to leave the European Union. [Interruption.] The hon. Member for Stalybridge and Hyde (Jonathan Reynolds) says, from a sedentary position, “Not on a no-deal basis.” I find that my constituents are very clear about the fact that they voted to leave, deal or no deal, and that was very clear at the time.
Craig Mackinlay (South Thanet) (Con)
I congratulate my hon. Friend on his new position. He is truly doing sterling work this afternoon. It will come as no surprise to him to learn that I am fully in favour of well-run and smooth capital markets, from which London is reaping an international reward. Would he care to speculate on what sort of short-selling and sterling damage would be done under the Labour party—given their unfunded tax proposals and their potential sequestration of public assets—and what the market would think of them if they were anywhere close to power, which I pray that they will not be?
Mr Clarke
My hon. Friend is absolutely right. I am afraid we cannot get around the fact that we are now dealing with something very dangerous in terms of the division between the two parties: the division between economic rationality and a programme that would well-nigh destroy the free-market economy in this country. [Interruption.] Labour Members scoff and sneer, but the reality is that anyone looking at the prognosis from the Labour party conference last week—let alone the trillions of pounds of commitments that Labour is now adding up—will see that it would not only destroy our public finances, but would do massive damage to the competitiveness of British business, on which jobs and homes and mortgages depend.
Mr Chris Leslie (Nottingham East) (IGC)
Does the Minister accept the specific conclusions in the Office for Budget Responsibility’s fiscal risks report? In July, the OBR ran a stress test on a no-deal scenario, on the model of the International Monetary Fund. It predicted that sterling could depreciate by 10% immediately, because
“market participants judge that a fall in the pound is needed to compensate for the reduced competitiveness with the EU… inflation is initially higher, due to the weaker pound”,
which contributes to the UK’s entering “a year-long recession”. Does the Minister accept the OBR’s analysis, or does he believe that this is “a price worth paying”?
Mr Clarke
What I will say is that I believe we can avoid that scenario entirely if we get a good deal and leave the European Union according to plan, on 31 October. We are very clear about the fact that, in a scenario whereby we cannot get a deal through the House, we will deliver on the referendum mandate and leave the European Union. That is uncontested Government policy. We will ensure that we make the dynamic policy choices that will enable our economy to remain strong, robust and full of opportunity.
Mr William Wragg (Hazel Grove) (Con)
Would my hon. Friend care to comment on this splendid irony? Mr George Soros, who in 1992 made a fortune in short positions against the pound, is now one of the bankrollers of the Continuity Remain campaign.
Mr Clarke
Tempting as it is to follow the trail laid down by my hon. Friend, I will content myself with saying that, just as I would not comment on the actions of individuals in my reply to an Opposition Member, I will not comment on the actions of individuals now. However, the idea that there are vested interests on only one side of the debate could clearly be contested.
Catherine West (Hornsey and Wood Green) (Lab)
One of the areas of the economy that the casino-style hedge funds will be betting against is the housing market. What assessment has the Treasury made of how many fewer homes will be built, and which section of the house building economy will be worst affected: renters, first-time buyers or pensioners?
Mr Clarke
To the best of my knowledge, we have not commissioned specialist advice on the housing market. If I am incorrect, I will ensure that that is set out in writing to the hon. Lady. It is very clear that the UK housing market is in its most robust condition for many years. Indeed, we are now building many multiples of the situation we inherited in 2009, when house building had well nigh stagnated. Of course, many of the problems faced in our housing market stem from the disastrous failure of the last Labour Government to build enough homes in the first place.
Luke Graham (Ochil and South Perthshire) (Con)
Uncertainty hits not only the London markets but the markets in Edinburgh and elsewhere across the United Kingdom. Does my hon. Friend agree that the best way to end this uncertainty is to vote for a deal, as he did back in March?
Mr Clarke
I thank my hon. Friend for his question. Yes, I did vote for a deal on 29 March, and I did so because I feared losing Brexit altogether. I think that was a real risk at that point, and it remains a real risk now, thanks to the antics of the Opposition. If only all of Scotland was as well represented as those areas represented by the Scottish Conservatives, who of course have adopted a totally sensible and unifying position, which is that we should get on and deliver, as one country, what our one country voted for.
Hannah Bardell (Livingston) (SNP)
The economies of the UK were damaged almost irreparably by spivs and speculators in 2008. Have the Government and the Prime Minister learned nothing from that experience, which hit the poorest in our society the worst? This is not about whose policy position is best or worst; this is about transparency, honesty and the Prime Minister’s relationships with these short-changers to society. Will the Minister acknowledge the seriousness of the matter and call an independent investigation into the Prime Minister’s conduct?
Mr Clarke
Actually, this is about democracy and whether we implement the result of a national referendum in which more than 34 million of our fellow citizens expressed their view. For my part, I intend to honour what they voted for. That is the position of this Government, and I think that view is shared by anybody who understands the damage that preventing our leaving the European Union would do to faith in democracy.
Adam Afriyie (Windsor) (Con)
My hon. Friend is doing a great job on the Front Bench, to which we welcome him. This urgent question is deeply partisan and political—we all know that—but it strikes me that our economic growth looks pretty good this year. PwC also predicts pretty good economic growth. Just to negate the nonsense coming from the Opposition, can my hon. Friend tell me how well preparations are going for a no-deal exit?
Mr Clarke
My hon. Friend is absolutely right: the third quarter figures for the UK economy look very robust. Clearly, there is a lot to be said about the ongoing work to make sure that we are ready for a deal or no-deal scenario. My right hon. Friend the Chancellor delivered the spending review earlier this month and today he will give an excellent speech in Manchester, no thanks to the Opposition, setting out our plans for how we move forward. Clearly, we are deploying billions of pounds and the most robust plans available to make sure that we are ready to thrive in all scenarios.
Sir Edward Davey (Kingston and Surbiton) (LD)
When the last Conservative Chancellor, a former permanent secretary to the Treasury and the Prime Minister’s own sister blow the whistle, the Minister simply cannot brush aside these most serious claims of a conflict of interest. Some of the Prime Minister’s biggest donors are clearly betting against Britain, and, intentionally or not, the Prime Minister is aiding and abetting them by pursuing a no-deal Brexit. I therefore ask again: will the Government set up an urgent independent investigation?
Andrew Bridgen (North West Leicestershire) (Con)
Does my hon. Friend agree that speculation in the future movements of markets or currencies—some people think they will go up, others that they will go down—is a sign of a healthy free market economy, and that there is no speculation in the direction of travel of the shadow Chancellor’s favoured economic model in Venezuela, where the bolivar continues to crash, which is hardly surprising because inflation there is running at about 1 million per cent. this year?
Mr Clarke
My hon. Friend puts it with his customary robustness, but he is absolutely right that the real threat to the economy, to the strength of sterling, to our competitiveness and to jobs and living standards across the country would be a series of bad decisions made by a reckless, hard-left Labour Government.
Jenny Chapman (Darlington) (Lab)
My constituents and the Minister’s constituents are working multiple jobs and long hours to keep themselves afloat. Does he understand at all just how distasteful it is for them to see people making millions betting against our country?
Mr Clarke
I yield to nobody in my appreciation of how hard people work in the Tees valley and, indeed, how passionate they are about our area, but there is absolutely no doubt in my mind that democracy needs to be honoured. We need to deliver on the referendum result and to get this done. There will no actions for the City to take if we get a good deal across the line and the hon. Lady votes for it.
Huw Merriman (Bexhill and Battle) (Con)
In June, the Bank of England reported that, thanks to the mitigation and preparation put in place by the Government, any hit to GDP in the event of a no-deal Brexit would be reduced by two and a half percentage points. Will the Minister, whom I welcome to his position, confirm that we have had more preparation since then? That means we should be further protected, meaning these individuals will not make their money.
Mr Clarke
My hon. Friend is, of course, absolutely right that we are stepping up our preparations to cover all eventualities. That is why we made provision in the spending review, which was designed to ensure that we go into this autumn with the options open to us kept as wide as possible. Of course, it is also why the provisions of the surrender Act, which the Opposition brought forward against the will of this Government, are so unwise.
Thangam Debbonaire (Bristol West) (Lab)
Does the Minister not understand that my constituents in Bristol West are smart enough to spot the hypocrisy of Members on the Treasury Bench telling us that we should vote for a deal when, first, none exists and, secondly, they did not vote for it last time? Does he not understand that my constituents can also spot the other hypocrisy of criticising people for making uncosted spending assessments mere hours after the Secretary of State for Health and Social Care said he does not know how he will pay for all these hospitals he has promised us? Does the Minister not understand that my constituents can spot all of this?
Patrick Grady (Glasgow North) (SNP)
The best way to stop the speculation and the uncertainty is for the Government to accept there is a majority in this House that will not let a no deal happen and, therefore, if the House does not agree a deal, we will not, in fact, be leaving on 31 October.
Cat Smith (Lancaster and Fleetwood) (Lab)
In response to an earlier question the Minister said he is more of a historian than an economist, so he might remember that hedge funds were also reported to have taken short positions against the pound during the 2016 referendum. Is he satisfied that the regulation of short selling and hedge funds is adequate?
David Linden (Glasgow East) (SNP)
In the interest of transparency, will the Minister agree to publish details of all call logs and meetings between every Minister and Crispin Odey?
Ian Austin (Dudley North) (Ind)
Is not the shadow Chancellor peddling conspiracy theories about shadowy figures working with the Government to manipulate the economy for personal gain because he is a self-proclaimed Marxist who wants to undermine trust and confidence in how our economy and our country work? [Interruption.] It is no laughing matter, as that is what he is trying to do. There have, in fact, already been two investigations into these wild claims. One, as we heard earlier, by the Financial Times that said this is
“firmly in the realm of conspiracy theories.”
The second investigation was by the independent fact-checking organisation Full Fact, which demolished this crazed nonsense in an article headlined, “We think there’s a big error in that viral article about hedge funds and Brexit”.
Mr Clarke
Would that all parts of our country were as well served as Dudley is by the hon. Gentleman, who is absolutely right: it is genuinely dispiriting that in the mother of Parliaments we find ourselves debating material that is more fit for the tinfoil hat brigade than for Parliament at a crucial time in our country’s history.
Jack Dromey (Birmingham, Erdington) (Lab)
As deputy general secretary of the old Transport and General Workers Union and then Unite, I led the battle against the Kraft takeover of Cadbury. A successful and profitable British icon was taken over by a debt-laden American multinational because the hedge funds bought 31% of the shares and sold Cadbury short. Does the Minister not recognise that there is a potential conflict of interest when we have a Prime Minister prepared to sell Britain short by way of a no-deal Brexit, backed by those who make billions daily out of selling our nation short?
Mr Clarke
The short selling regulations cover the sale of shares, so that falls within the remit of the existing legislation. Clearly, we all want to see our country thrive and move forward towards a better future. That will be best done by voting for a deal, as of course many of the members of the hon. Gentleman’s former trade union will have done.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
I hope the Minister recognises that we are talking not about companies protecting themselves in good faith from the devastating impact of a no-deal Brexit, but about large-scale—industrial—shorting of the pound, that that can drive extreme behaviours, as well as market crashes, and that, at the very least, this needs to be investigated by the Electoral Commission, in order to see what the influence is. But my question to the Minister is simple: does he know the level of exposure to the shorting of the pound?
Mr Clarke
The Government do not take a view on this issue. [Interruption.] But what is clear is that the hon. Lady can avoid the outcome that she so wants to avoid, by voting for a deal when one is brought forward—that is, and always remains, the case. So we now need to move forward with some purpose, rather than with wild speculation, trying to smear the Government as somehow being in hock to these interests—it is not working. Any rational observer will see that this is not an argument that sustains itself.
Alan Brown (Kilmarnock and Loudoun) (SNP)
The Minister keeps trying to make this about leaving the EU on 31 October or not, but it is all about transparency and conflict of interest. We are talking about hedge fund managers who previously backed the leave campaign and in 2016, after the referendum, made some £350 million overnight. Therefore, £375,000 of backing to the Prime Minister is nothing compared with the billions of pounds these people might make if there is a no-deal crash out. Surely the Minister understands that this is about a conflict of interest and transparency. If he is so confident about the Government’s behaviour, why does he not authorise an investigation?
Matt Western (Warwick and Leamington) (Lab)
Let me give the figures some context. Correct me if I am wrong, but I believe that back in 2016 Odey fund management made £300 million on shorting sterling. By contrast, the UK automotive industry has spent £350 million ensuring that it is protected against a no-deal Brexit. Does the Minister not recognise that we are vulnerable in our manufacturing sector—in our heartland communities—to losing jobs and businesses because of the practices of these short sellers? Lord Macpherson, the former permanent secretary to the Treasury, has tweeted:
“Mr Hammond is right to question the political connections of some of the hedge funds with a financial interest in no deal. They are shorting the £ and the country, with the British people the main loser”.
What does the Minister say?
Mr Clarke
I point to the wise words of the Opposition Deputy Chief Whip in the House of Lords last November, who said that short selling
“is not necessarily the evil practice that the popular press held it to be…It had a role.”—[Official Report, House of Lords, 28 November 2018; Vol. 794, c. 706.]
Christian Matheson (City of Chester) (Lab)
Short selling may have a role, but not when Government policy deliberately manipulates the currency to provide a big pay-out to individuals who have paid huge amounts of money either to the Conservative party or to individual right hon. Members. That is the problem. Does the Minister not understand that this is not about the Government’s taking a position on currencies? It is about the stink of something that does not seem quite right.
Liz McInnes (Heywood and Middleton) (Lab)
The Minister quotes Frances Coppola, but she also said:
“Many hedge-fund managers see Brexit…as an opportunity from which they obviously hope to profit, and they are positioning their portfolios accordingly”.
She fears that that creates “psychological pressure” on the Prime Minister
“to deliver what his backers want rather than what is in the best interests of the country”.
How can the Minister convince the people of the UK that the Prime Minister has the moral courage to resist that psychological pressure?
Mr Clarke
The Prime Minister has the moral courage to deliver on the referendum result, take our country forward, deliver what millions of people voted for and make our country a better place to live. If we are going to exchange quotes, let me quote a bit more from the article:
“In short, there is no evidence that the hedge funds that have backed Johnson’s election campaign have ‘millions of pounds’ of speculative bets on no-deal Brexit. They have millions of pounds of speculative bets on UK companies, yes, but that is simply business as usual.”
Kerry McCarthy (Bristol East) (Lab)
The reason why this is not business as usual is that we are faced with Government Ministers who have close connections with and financial interest in some of the speculative funds and who are making a decision that would have catastrophic consequences for my constituents and for businesses in my constituency, and there is no transparency as to the closeness of that relationship. It cannot be divorced from what is going on in this place, which is why the Minister needs to agree to the requests for an inquiry. We need to get to the bottom of this.
Peter Grant (Glenrothes) (SNP)
How does the Minister defend a situation in which anyone who is caught insider gambling deliberately to fix the result of a game of cricket goes to jail, but anyone who is insider gambling deliberately to crash the economy is likely to end up in the House of Lords?
Mike Amesbury (Weaver Vale) (Lab)
I welcome the new Minister to his place. Will he clarify the statement he made earlier that the former Chancellor, the right hon. Member for Runnymede and Weybridge (Mr Hammond), is part of the tinfoil hat brigade perpetuating a conspiracy theory in regard to this serious matter?
Bill Esterson (Sefton Central) (Lab)
A number of hedge funds expect to benefit as a result of their short positions on a number of sectors in the economy, including construction and shopping centres. It cannot be right that as a deliberate result of Government policy those hedge funds are going to cash in at the expense not only of those sectors but of the constituents of every single Member of this House.
Mr Clarke
Government policy is to leave the European Union with a deal, if at all possible, and that remains our central case. The hon. Gentleman’s question in many ways summarises the past few minutes, in so far as it does not get to the substantive point, which is that the only reason we are at risk of a no-deal exit is that we have not managed to persuade the Opposition that they should get behind our attempts to secure a better deal rather than seek constantly to undermine them.
European Union (Withdrawal) Act
Simon Clarke Excerpts(5 years, 4 months ago)
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Mr Davis
That is what is laid out in the proposal, but the transition will then come to an end, and at the end of that, we will still have to make a decision on where we are going, backstop or no. I am afraid that we are always in, and the point is that it is at the behest of the European Union, not at our behest. I have nothing against the European Union, but it is the negotiating partner that may gain an advantage from delay.
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
May I reassure my right hon. Friend on that point? It is clear from article 3 of the protocol that it is not necessarily a right for us to have that extended transition. We can only ask for it, and that is a different thing.
Mr Davis
Yes, that is also true, but the general point is that the overall timetable is not in our control; it is in the other side’s control. As we have seen throughout this entire negotiation, the moment we gave away sequencing at the beginning, we gave an advantage to the other side. My right hon. Friend the Member for Clwyd West (Mr Jones), the former Minister of State, is nodding: he remembers it.
There are essentially three emblematic conclusions to this. The first is the World Trade Organisation, which we have talked about already—I doubt whether it will be a deliberate conclusion, but it is a possible one—the second is Norway, which a number of Members on both sides of the House have suggested might be the best outcome, and the third is Canada plus, plus, plus. There are compromises between them; there are mixtures of them; but those three essentially capture the possible outcomes.
Let me start with the issue on which I disagree with pretty much everyone who has spoken so far: the World Trade Organisation deal, the so-called no deal. The Chancellor called it a strict no deal, because he knows full well all the preparations that have been made in the Government to create a basic no deal, or basic negotiated outcome. There is a whole stratum, a whole spectrum, of possible types of no deal. Some of them deal with the issues that my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston) raised earlier—aviation, data and so on. If this deal goes down, as I think it will in a few days, there will be a scramble in London and Brussels to start putting those one-on-one, unilateral negotiations together. So there is a range of possibilities.
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
Reflecting on the recent debate in this House and in the country, I wish to open with the words of Sir Winston Churchill from 1934:
“all down the centuries, one peculiarity of the English people…has cost them dear. We have always thrown away after a victory the greater part of the advantages we gained in the struggle. The worst difficulties from which we suffer do not come from without. They come from within…from the mood of unwarrantable self-abasement into which we have been cast by a powerful section of our own intellectuals. They come from the acceptance of defeatist doctrines by a large proportion of our politicians… Nothing can save England if she will not save herself. If we lose faith in ourselves, in our capacity to guide and govern, if we lose our will to live, then indeed our story is told.”
Sadly, what has characterised these negotiations has been exactly that spirit. The Government have approached Europe as a supplicant, accepting a series of conditions that have led inexorably to this place. At the heart of that lies the backstop, but I will not rehearse arguments that have been well echoed this afternoon about why it simply does not work. Our own Ministers, the Irish Government and the EU have all made clear that under no circumstances will there be a hard border in Ireland. If this is a prison, it is one into which we will lock ourselves if we sign up to this deal.
Despite the Government’s best efforts to convince us otherwise, the EU clearly wants us in the backstop—why wouldn’t it? It would have total control of our trade and customs policy; it would have our £39 billion. It would have ensured that we cannot out-compete it through level playing field provisions, and it could offer unilateral access to our economy and its trade negotiations with third countries. That must be rejected. It may be that our doing so will finally prove to the European Union that, as the Prime Minister long insisted, no deal is better than a bad deal. I continue to believe there is a better deal to be done, but we must face the possibility that that may not be possible.
In such a case, I am clear that we should leave on 29 March next year on World Trade Organisation terms, in accordance with the European Union (Withdrawal) Act 2018. I do not say that lightly. It will require courage and resolution, as well as a dynamic policy response that should include exciting ideas such as free ports. For reasons that are bewildering to me, the Government have failed to initiate serious preparations for that scenario when there was good time to do so. That was not due to negligence; rather it was a conscious policy lest—God forbid!—the Europeans understood from our making such preparations that we really were resolved to leave in earnest. That has been a lamentable failure and must change now, for every day is of value.
That must be accompanied by a wider change of policy. If the deal is rejected by the House, as I hope it will be, the ghosts of “Project Fear” must be exorcised. They have offered bad counsel for far too long, seeking always to reduce the path of negotiation to a minimalist and apologetic legal separation, rather than a great nation setting forth into the world.
My final words are to those colleagues who seek to prevent a clean Brexit through amendments tabled to that effect. I say simply that they should think well upon it, because without a clean Brexit we truly would be hostages to fortune, choosing only between the Scylla of a bad deal and the Charybdis of a second referendum, and that latter scenario would do untold damage to people’s faith in democracy. People in forgotten parts of Middleborough and East Cleveland voted to leave. They still want to leave, and they want to leave properly, preferably with a good deal agreed in honour, but if necessary, by trusting in our strengths, and with resolve to succeed as a global free-trading powerhouse.
Jim Shannon (Strangford) (DUP)
It is always a pleasure to follow the hon. Member for York Central (Rachael Maskell).
Members will have noted during this week’s business a most sincere and clear lack of pleasure from the Democratic Unionist party in what is happening. I was not pleased to learn that the legal opinion of the Attorney General was not to be made public; I was not pleased to learn that the Attorney General shares my concerns about the undesirable features of the backstop; and I had no pleasure in the vindication of our demand for the legal opinion, as it backed up my biggest fears.
The legal opinion is clear that the protocol is
“binding on the United Kingdom and the European Union in international law… NI remains in the EU’s Customs Union, and will apply the whole of the EU’s customs acquis… Northern Ireland will remain in the EU’s Single Market for Goods and the EU’s customs regime, and will be required to apply and to comply with the relevant rules and standards.”
It is little wonder that constituents in my fishing village of Portavogie have always been clear that they want fewer restrictions and they want to be less encumbered and less prevented from fishing in their own waters. In Portavogie, Ardglass and Kilkeel we have been on the frontline of EU aggression and bureaucracy.
About the insurance policy, Ministers have told us, “We don’t want it and they don’t want it.” Well, if none of us really wants it, why is it there? That is the question I ask myself.
Jim Shannon
No, I will not give way.
Why is the insurance policy almost the only thing that has been agreed? If it will not be necessary, why have we spent 18 months discussing this and little else? I am not a fisherman by nature, but I know codswallop when I see it, and that is what this is. And for good measure there is the £40 billion. My goodness, who in their right mind would do that? It is unbelievable.
What rational person would think that Europe, which has fought so hard for this and which has pinned all its bargaining and all its red lines on this one insurance policy to ensure there is no legal form of leaving this international treaty unilaterally without consent, will ever decide to allow us to walk away when there is no mechanism legally to compel it to come to an agreement? Not me and, let us be honest, not anyone in this House. Please forgive me for expressing some disgust in a promise made by some in this House that has then been denied us—those Members, and the Government, know exactly who I am referring to.
We are small but we are part of this wonderful United Kingdom of Great Britain and Northern Ireland. I sincerely believe that we can and will survive the Brexit process, but only if we stand together. The Belfast agreement clearly says that Northern Ireland remains in the UK until a majority vote to leave is plain. It states:
“Northern Ireland in its entirety remains part of the United Kingdom and shall not cease to be so without the consent of a majority”.
Yet the Attorney General clearly states that we are now a third country. So can that be legally acceptable? I say no.
The red line that my party has—I have heard Members referring to this—is not in red pen; it is in the blood of family members, people such as my cousin Kenneth Smith, of neighbours, of colleagues and of constituents—of your constituents and mine. They have shed blood to defend the right to democracy and to determine that nothing can enforce a united Ireland other than the will of the people. The Government have created the potential for an all-Ireland. Members must be very clear about what I am saying here, as I mean this. They must see the mistrust I have for the Government at this moment in time. They have drawn a dust sheet over the lines drawn in the precious blood of so many I loved. This Government are proposing to allow my beloved Northern Ireland to become a violated, voiceless, vetoless victim of Europe’s desperate grasp for control over our UK.
So next Tuesday, I am going to stand up for my people, and I urge others to do the same. I will stand up for our own nation and for our own good. I urge the Government to go back to Europe with the courage of their conviction that this UK will be no one’s vassal state and that Northern Ireland’s blood-bought birthright is not for sale.
Dr Fox
My right hon. and learned Friend is right. It is certainly true that the draft political declaration was not as favourable to an independent trade policy as the final declaration is, given the changes that the United Kingdom insisted on in that negotiation. I was much heartened by those changes, not least because the declaration talks of building on and improving customs co-operation, not just building on it, and it cross-references the other elements of that to include protection of our independent trade policy.
Mr Simon Clarke
On the subject of forecasts and scenarios, may I refer my right hon. Friend to Open Europe’s excellent report, published this week? It is clear that the gains from artificial intelligence over the next 10 to 15 years will more than outweigh any conceivable loss from any scenario surrounding our exit.
Dr Fox
Indeed—my hon. Friend is right to say that that was correct in all scenarios. The doom and gloom pushed in some quarters is not consistent with the reality of Britain’s economic performance.
Now is the time to raise our sights and acknowledge that there is a world beyond Europe and there will be a time beyond Brexit. The referendum settled the question of our departure from the European Union. This House voted overwhelmingly to hold that referendum. The British people voted on the understanding that we would enact the result.
In 2016, we did not have a consultation with the British public; we were given an instruction to negotiate this country’s withdrawal from the European Union. That point was made in powerful speeches by my right hon. and learned Friend the Member for North East Hertfordshire (Sir Oliver Heald) and my hon. Friends the Members for Tonbridge and Malling (Tom Tugendhat), for West Worcestershire (Harriett Baldwin), for Berwick-upon-Tweed (Anne-Marie Trevelyan) and for Stafford (Jeremy Lefroy), among others. They all come from different parts of the political debate—a clear indication that we have to find a compromise that makes this workable. The withdrawal agreement achieves just that. Most importantly, it enacts the democratic will of the British people.
I remind the House that this is the only deal on the table. It has been painstakingly negotiated by both sides and of course we do not have every single thing that we wanted—but then again, neither did the EU. That is the nature of international agreements. The deal is a compromise, as was pointed out by my right hon. Friend the Member for Mid Sussex (Sir Nicholas Soames) in an outstanding, personal and passionate speech, the likes of which we would love to hear more of in this House. That message was echoed by my hon. Friend the Member for Eddisbury (Antoinette Sandbach) and my right hon. Friend the Member for Ashford (Damian Green).
Do I think the agreement is perfect? No, I do not. Did I think it would be? No, I did not. But does it do enough to get us out of the European Union? Yes, it does. For those who want another referendum, let us be very clear: the one thing that will not be on offer in any further referendum, just as it was not in the last one, is the status quo. The status quo has never been on offer; this is a dynamic progression in the European Union. The EU is committed, as it has been since the treaty of Rome, to ever closer union. We wish our European friends well in that endeavour, but it is not the right course for Britain. We must be free from the one-way ratchet of federalism, as my hon. Friend the Member for South Dorset (Richard Drax) said in his powerful intervention.
Oral Answers to Questions
Simon Clarke Excerpts(5 years, 5 months ago)
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Mel Stride
The hon. Lady raises the issue of the CDS system. The current expectation is that that will be fully functioning by the end of March next year, which means we therefore have a robust back-up in the extension of the CHIEF—Customs Handling of Import and Export Freight—system. This is to make sure that that gears up for the huge increase in the number of customs declarations that will need to be made in a no-deal situation. We will of course continue to work hard on that matter.
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
Further to the answer the Financial Secretary gave to my hon. Friend the Member for Dover (Charlie Elphicke), will he publish, when he is publishing the CGE analysis, the assumptions underlying all potential EU exit scenarios, including those on World Trade Organisation terms and with a free trade agreement?
Mel Stride
The commitment we have made is that the deal agreed between us and the EU—we are confident we will achieve exactly that—will be fully analysed in an appropriate way and delivered to this House so that during the days in the run-up to the meaningful vote all Members of the House will have an opportunity to properly study that analysis.
Freeports
Simon Clarke Excerpts(5 years, 6 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
I beg to move,
This this House has considered the establishment of freeports in the UK.
It is a pleasure to serve under your chairmanship, Mr Hanson. I thank the Backbench Business Committee, chaired by the hon. Member for Gateshead (Ian Mearns), for granting this timely debate, and the many supporters who helped to secure it, in particular the right hon. Member for Birkenhead (Frank Field). He is a great champion of both Brexit and the north of England, and is held in the highest regard on both sides of the House. He has asked me to pass on his apologies today; he is unfortunately detained on Merseyside.
What is the issue that unites us, and what is a freeport? At its simplest, a freeport is an area that is physically within a country but legally outside it for customs purposes. Consequently, goods that enter a freeport do not incur import duty. Instead, import duty is paid only if and when goods pass from the freeport into the domestic economy. That offers a number of advantages, as, for example, goods can be imported, processed and then re-exported without incurring any duty. That incentivises international businesses to use the freeport as part of their supply chain, thereby stimulating domestic manufacturing and creating jobs in the process. The deferral of duty also enables goods to be stored or processed in the freeport before entering the domestic economy. That allows businesses to better control their cash flow and, again, encourages domestic manufacturing, as import tariffs on processed goods are often less than those on the individual component parts.
In addition to the benefits accrued through duty-free status, freeports often offer their users a number of additional advantages, including tax reliefs and a simplified regulatory environment. It is important to stress that there is no one model of freeport. All freeports are different in the mix of advantages that they offer and the physical form that they take—I think we will hear from colleagues today about issues ranging from seaports to airports. The debate, therefore, is about not only whether the UK should establish freeports, but what form they should take. I will begin, however, by briefly describing the case for freeports in general.
Freeports are not a new idea; indeed, approximately 3,500 freeports are now operating in more than 135 countries. The UK is unusual in that we have no operational freeports. If we are to compete seriously in the global trading system once we leave the EU, that has to change, as my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) pointed out in his excellent paper for the Centre for Policy Studies.
Wherever freeports have been implemented properly around the world they have had that effect. Just look at how quickly and impressively the Jebel Ali free zone in the United Arab Emirates has transformed Dubai. In the space of a few decades, that free zone has brought unimaginable wealth to that country. The free zone alone now hosts 7,000 global companies, employs 145,000 people and accounts for around 40% of the UAE’s total direct foreign investment.
Jebel Ali is the most unique and dramatic example, but freeports have demonstrated their worth in highly developed and mature economies as well. The growth in freeports in the US, for example, has outperformed the US economy as a whole. One report predicts that if freeports in the UK were as successful as those in the US, we would create an additional 86,000 jobs. There is every indication that freeports in the UK would be just as successful as those around the world—perhaps even more so, given our excellent links with the United States, Europe and the Commonwealth.
A report commissioned from Mace Group by my fellow Conservative, Tees Valley Mayor Ben Houchen, looked at what a programme of supercharged freeports in the north of England might mean for our economy. It found that such a programme, once established, would boost UK trade by nearly £12 billion a year, create 150,000 extra jobs across the north, including 17,500 in Tees and Hartlepool, and provide a boost to northern powerhouse GDP of £9 billion a year—equivalent to £1,500 a year for every household in the north.
Although the jobs created by freeports would extend to the service sector as well, the vast majority would be in manufacturing. That in itself would be another huge advantage for the UK economy. Although manufacturing as a share of our economy has declined from 32% of gross value added in 1970 to 10% today, it still accounts for 13% of business investment, 50% of UK exports and 70% of business research and development. It also creates high-paying jobs, with the average worker in manufacturing earning £3,400 more than those in the rest of the economy.
Increasing the size of our manufacturing sector is also central to boosting the stagnant levels of productivity that the Government have rightly identified as a key structural challenge for the UK economy. As the Government’s industrial strategy White Paper points out:
“The productivity of the sector has increased four times faster than the rest of the economy”.
By boosting the share of manufacturing in the UK economy, freeports would have positive effects on productivity, wage levels, the current account deficit, investment, and research and development.
Although I would love to see freeports dotted around the entire UK coastline, like giant magnets pulling in container ships from all around the world, I also want to fly the flag particularly for Teesport, and I am delighted to see my friend the hon. Member for Redcar (Anna Turley) here to make that case. Situated immediately adjacent to the site of the former Sahaviriya Steel Industries steelworks—now the centre of the largest regeneration project anywhere in the UK—Teesport is undergoing huge investment to prepare it to rival the major ports in Europe. It handles more than 5,000 vessels each year and around 40 million tonnes of cargo, on an estate covering almost 800 acres. Teesport has all the qualities that will allow it to prosper as an international hub for trade and supply chain processing: deep water access that allows volumes to be maximised, the availability of extensive brownfield land surrounding the port, excellent transport links to the rest of the country, a ready supply of skilled workers, and a local economy that has so much unrealised potential.
For all the reasons that I have set out, I strongly believe that freeports could transform the economic growth and prosperity of the north-east, as well as the wider UK economy. However, as I have mentioned, freeports come in many forms, and it matters a great deal for the success of a freeport that it consists of the right features. Members may be aware that the UK has experimented with freeports once before. My researcher dredged out a wonderful report from the 1980s by the Adam Smith Institute, setting out the experiment that was launched in 1984, giving six ports around the UK freeport status: Belfast, Birmingham, Cardiff, Liverpool, Prestwick airport and Southampton. All those freeports, however, failed to achieve the success that we have witnessed in others around the world, because they did not offer anything like the advantages that could be acquired in many other freeports outside Europe. That was partly due to an uncharacteristic lack of ambition by the Thatcher Government, but mostly due to the regulatory constraints placed on them by the EU.
It is therefore crucial that, if and when we reintroduce freeports to the UK, we allow them the oxygen that they need to breathe and come to life. That is where I take issue with the Government’s current position. In his reply to a written question from me earlier this week, the Financial Secretary to the Treasury emphasised that the Customs and Excise Management Act 1979, which I am sure we all know well, already provides a legal basis for the designation of free zones, and will continue to do so following our departure from the EU.
I am a great admirer of the Minister, and I know that he is deeply committed to boosting our economy. I am also genuinely grateful for the supportive conversations that I have had with other Treasury Ministers about how we could aim to deliver a new generation of freeports. However, if we are not prepared to go further than we did in the 1980s, the results will be the same. During that first freeport experiment, Dr Eamonn Butler and Dr Madsen Pirie, by surveying the characteristics of freeports around the world, produced a list of the advantages that freeports need to succeed, and I will mention a few of them now.
At the macro level, freeports must be able to offer lower levels of taxation and less burdensome regulations than exist outside. Those conditions are crucial for attracting new business, creating jobs, and encouraging start-ups. Freeports also need to be able to curb bureaucratic administration by having both automatic concessions and collective processing. Automatic concessions would mean that freeport users do not have to undertake the costly and lengthy process of applying for individual concessions, such as for inward processing relief. Collective processing would also reduce paperwork, as the freeport operators would deal directly with customs documentation on behalf of all, or a number of, their tenants.
Successful freeports must also offer their users security. The heightened security around freeports is often perceived as a necessary burden, required to prevent smuggling. However, the existence of a highly secure customs perimeter affords freeport users huge cost savings in the form of lower insurance premiums. High-value stock is also more secure, and the insurance need cover only the duty-free, rather than duty-paid, value of the stock.
The final advantage that all freeports must be able to offer businesses is improved cash flow. To an extent, it will arise naturally because of the ability to defer duty payments until the goods actually leave the freeport, but additional measures can be taken. Ideally, VAT should be scrapped on transactions within the freeport so that businesses are not required to wait for needless VAT refunds.
In summary, we should not aim to establish the type of insipid freeport that one finds across the European continent. Instead, we should aspire to construct supercharged freeports like those found in China, the US and the middle east.
Michael Tomlinson (Mid Dorset and North Poole) (Con)
My hon. Friend makes a powerful and compelling case. He mentioned that freeports come in all shapes and sizes. Does he agree that the UK’s regional airports present an opportunity to expand freeports or free zones? It is good to see the Minister in his place; does my hon. Friend, like me, look forward to a positive answer from him to the call for freeports, not only in the north-east but in our regional airports?
Mr Clarke
I agree completely that the opportunities are not restricted to Teesport or even to seaports. Airports could be a logical centre for such innovation; I know of freeport zones in Tennessee that are centred around local airports and that keep spreading prosperity to areas that are not naturally at the centre of current economic success. That is the point: freeports can really diversify the benefits of a liberalised economy into areas that have struggled to attract the levels of inward investment that other cities or areas have enjoyed. Regional airports should absolutely be part of the strategy. I think the Government would broadly agree that if the idea is taken forward, it will not be in any way restricted to seaports.
Why are freeports back on the agenda now after a three-decade hibernation? The answer, of course, is Brexit. Leaving the European Union is the perfect opportunity to establish supercharged freeports, for three reasons. First, we will be free from EU regulatory restraint and will therefore have the freedom to create something meaningful, rather than just glorified bonded warehouses. Secondly, as we pivot from Europe to the rest of the world, we will need to be even more competitive to attract new business. I cannot emphasise enough that if we accept a looser economic relationship with Europe, we will have to establish better ways of enhancing our trade relationships with the rest of the world or the exercise will lose all economic meaning. Thirdly, in the event that we end up with no preferential trading relationship with the EU, freeports will help us to maintain frictionless trade, especially for just-in-time supply chains.
That brings me to my final point, which is about our future relationship with the EU. The type of freeport that we can introduce post Brexit is inextricably linked to the type of relationship that we forge with our European partners. At the heart of the question lies state aid, on which the EU has much more stringent rules than the World Trade Organisation. The most fundamental difference is that under WTO rules, only “financial contributions” count as subsidies, whereas the European Commission defines state aid as
“an advantage in any form whatsoever”.
Although setting up a freeport is possible within the EU, the state aid restrictions make it impossible to set up the type of successful freeports that we want and need, with power to attract meaningful levels of foreign investment and incentivise the onshoring of jobs. Crucially, members of the European economic area are automatically bound by all EU state aid rules, while Canada, in its new comprehensive trade agreement with the EU, applies none of them. If we are serious about establishing freeports in the UK, our future relationship with the EU will therefore need to look a lot more like Canada plus than like EEA minus.
From the proposals in the Chequers White Paper, it looks as if the freeport opportunity will die without a shot fired. The White Paper pledges that
“the UK would make an upfront commitment to maintain a common rulebook with the EU on state aid”.
That makes really depressing reading. By committing to apply the entire EU state aid rulebook, we are tying our hands and sapping our ability to attract foreign investment, boost international trade and ultimately create thousands of jobs in the UK, mostly in manufacturing.
To avoid any misunderstanding by the Government, I want it to be crystal clear that, for me, that is not good enough. The whole Chequers approach is characterised by the desire to split the difference between being a member of the EU and being an independent country, but it ends up delivering the benefits of neither. Along with the wider democratic deficit involved in our voting to leave the EU, but then accepting being a rule taker, that is why I must end my speech by emphasising that I am deadly serious that I cannot and will not support the Chequers proposals if they form the basis of an agreement with the EU in a few weeks’ time.
Freeports are one demonstration of why we would fare far better in a looser trading relationship with the EU based on a super-Canada deal. The remaining negotiating time should be spent in practical engagement on the Irish border, to which very clear solutions have been suggested and which I believe is much more about a political than a practical obstacle. It is very simple: time—both for freeports and for a proper Brexit—is running out.
Judith Cummins (Bradford South) (Lab)
It is a pleasure to serve under your chairmanship, Mr Hanson. I congratulate the hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) and my right hon. Friend the Member for Birkenhead (Frank Field) on securing this important and timely debate.
We have heard how our ports play a vital role in facilitating our global trade, and about their importance to coastal communities and regional economies. However, 95% of our goods trade passes through our ports, which is significantly higher than the EU and international averages. Our businesses depend on our ports to get their goods to overseas markets. Our ports handle an estimated 500 million tonnes of freight each year, making our port industry the second largest in the EU, with more than 100,000 people in towns and cities around our coast employed directly, and many thousands more in supporting and related businesses. In 2015, the maritime sector accounted for approximately £4.7 billion in tax revenues—some 0.7% of the total tax take that year, with the port and shipping industries being the largest contributors.
I welcome the renewed focus on the maritime sector in the wake of Brexit. Although it is right that we consider the role that ports play, we must also consider that role in the context of Brexit. The Department for Transport estimates that in 2017, 55% of international tonnage passing through UK major ports was to or from the EU. It is still our largest trading partner, accounting for 44% of our exports and 53% of our imports.
The Government’s chaotic handling of Brexit could cause tariffs to be imposed on exported goods, along with increased paperwork, inspections, audits and so forth. It could cause bottlenecks at ports here and on the continent. Security or customs delays could cause substantial tailbacks leading up to our ports as freight lorries are forced to pool while waiting for ports in France or the Netherlands to clear any backlogs that build up there.
The impact on ports such as Dover, where 99% of through trade is to or from the EU, will be substantial. Other ports, such as those that are members of the UK Major Ports Group, have suggested that they are investing substantially in infrastructure and capacity expansion, to be prepared for any eventuality. Sadly, it seems that the Government have yet to adequately prepare for the same. Towards the end of last year, at a hearing of the Public Accounts Committee, Her Majesty’s Revenue and Customs told Members of Parliament that the new customs declaration system would not be fully up and running in time for Brexit and that the system had not been designed with any increased customs processing in mind.
That is precisely why Labour has repeatedly called for a new customs agreement with the EU, to ensure that our businesses can continue to export tariff-free and without friction at the border. Today’s debate should perhaps have focused on that and the Government’s complete failure to ensure that our ports are supported in the event of any change to our current trade relationship with the EU. Nevertheless, we are here to debate the reintroduction of freeports. I say reintroduction because, as many Members have alluded to and will remember, the UK has already experimented with freeports at the ports of Liverpool, Southampton, Tilbury, Sheerness and Prestwick airport. Those freeports, established while we were a member of the European Union, were freeports in the true sense of the term: a defined area outside our customs territory, where goods could enter without attracting taxes or tariffs.
If the Government are considering whether to re-establish such a model, will the Minister tell us why, under the coalition Government, it was decided in 2012 that the freeports would not continue? Are we really talking about not a freeport per se, but a free trade or free enterprise zone, where goods can be manufactured and services rendered without being subject to the ordinary tax and/or legal regimes of this country?
Ministers, including the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Richmond (Yorks) (Rishi Sunak), have suggested that the Government should consider adopting the American model of free trade zones, in which businesses would be given tax incentives to relocate. Although there may be evidence to demonstrate that such a model creates employment and attracts investment, very rarely is any assessment made of the extent to which those jobs and that investment are displaced, resulting in job losses and business closures elsewhere.
There is evidence around the world to suggest that such free trade zones are exploited by investors and businesses that seek to take advantage of general tax holidays and lax employment laws, while failing to produce the economic benefits promised.
Mr Simon Clarke
I thank the hon. Lady for highlighting the importance of EU trade, with which I completely agree. On displacing business from elsewhere, which is really important, I know from conversations with Ministers that that is at the heart of the Treasury’s concern to ensure that we do not just end up shifting jobs from one part of our country to another. This is about winning business from outside the UK for the UK that otherwise would not be here. I do not believe, for example, that if we had a string of freeports around our country they would take jobs away from other port areas in the UK. It would be about winning new businesses and jobs.
Judith Cummins
I will come on to the importance of defining what is a freeport. A 2011 review of special economic zones by the World Bank suggested that many such models had become white elephants, with the cost of revenue lost to the Exchequer outweighing the benefits. At the same time, The Economist reported that they create distortions in economies and that many fail, leaving a long trail of failed zones that either never got going, were poorly run or in which investors gladly took tax breaks without producing substantial employment or export earnings.
Reports have repeatedly surfaced from free enterprise or free trade zones around the world that demonstrate lax enforcement of labour laws. Polish workers have been sacked for an illegal strike against poor working conditions at a business located in a special economic zone. There are similar examples in China, Cambodia and elsewhere. The European Parliament’s director general for external policies found that often in such zones
“the governance of labour rights may differ from the rest of the country and fall below international legal standards”.
If the Government are considering such a model, will they tell us how they intend to ensure that workers’ rights are protected and enforced? Will the Minister tell us what discussions he has had with trade unions?
Serious concerns have been raised about how a combination of tax incentives and relaxed monitoring and supervision, even by competent regulators, has resulted in a reduction in finance and trade controls and enforcement, creating opportunities for money laundering and the financing of terrorism. The intergovernmental Financial Action Task Force raised precisely those concerns in the inaugural review of free trade zones in 2015. It noted that
“the same characteristics that make FTZs attractive to legitimate business also attract abuse by illicit actors”.
The Financial Action Task Force also noted that FTZs have been used in the transport and production of weapons of mass destruction.
Mr Simon Clarke
I thank everyone who spoke in the debate. I particularly thank the Minister for sending out a really encouraging signal that there is serious engagement from the Government. The gauntlet is thrown down to us and the ports sector to make the proposition viable.
The hon. Member for Redcar (Anna Turley) set out a compelling case, which is close to my own heart, for why Teesport is such a great candidate to be a freeport if the initiative gets off the ground. Leaving aside what Harold Macmillan would term a little local difficulty about our positions on Brexit, I welcome the consensus that we have achieved. There is no suggestion that a freeport should, for example, weaken workers’ rights. It would be insanity as well as bad practice for us to do anything that took us down that route. This matter is about economic potential, not deregulation in that sense.
My hon. Friend the Member for Cleethorpes (Martin Vickers) is such a doughty champion. I am so pleased that he set up the all-party group. Obviously, his area, like mine, could benefit enormously from making a go of freeports. He pointed out that the initiative is perfectly designed for northern communities that have been left behind. It is absolutely about embracing the opportunities of Brexit, as he rightly said.
My hon. Friend the Member for Hornchurch and Upminster (Julia Lopez) spoke. It is rare that I get the chance to praise London and the opportunities that it offers. It is true that London is a complex and diverse city. The idea that it is all Bentleys and million-pound homes in Sloane Square is not true. It is important that places like Havering get to benefit from initiatives such as the logistics hub. The hon. Member for Redcar and I are working on promoting such a bid for Teesside—nothing passes without Teesside getting a mention. Logistics hubs are a great idea and Havering seems to me to have many of the characteristics that would make it a successful location.
[Mr Peter Bone in the Chair]
My hon. Friend the Member for North East Derbyshire (Lee Rowley) has emerged as the foremost champion of social and economic liberalism within my intake of Conservative MPs. He rightly identifies that we need to be nimble, dynamic and fearless as we leave the European Union. If we are to do that, I think freeports are a great opportunity. I wish him luck working out how to get the sea a little bit closer to North East Derbyshire.
The hon. Member for Dunfermline and West Fife (Douglas Chapman) eloquently set out his party’s position on Brexit. He is absolutely right about the importance of EU trade. I draw him back to my point that current EU state aid rules restrict us from creating freeports in a way that would allow them to succeed. He made his own powerful case for Rosyth to form part of a freeport, were such a policy to be initiated. He is certainly right to pay tribute to the work of the UK ports sector in helping us to prepare for today’s debate.
The hon. Member for Bradford South (Judith Cummins) rightly highlighted the importance of EU trade. We struck genuine cross-party consensus that this must not be an opportunity to deregulate things that are important to all of us, including hard-won advances in workers’ rights. It did seem slightly ironic that she took the Government to task over the lack of clarity on Brexit. I lose track of the exact position of the Opposition on this point, but it is fair to say that it is difficult for all parties, and we need to bear that in mind.
More broadly, I hope that Labour can find a way to make this policy a part of its platform, as it has enormous potential for many Labour constituencies. The fact that the hon. Member for Redcar is here and the fact that the right hon. Member for Birkenhead (Frank Field), a friend whom I admire greatly, is the co-sponsor of the debate, shows that this idea goes to the heart of regenerating places that have had a really raw deal over the last 30 years and have really struggled with the challenges of deindustrialisation. They could potentially benefit enormously from making this policy work. I certainly do not think we need to worry about her colourful suggestion about the transport of weapons of mass destruction. I promise now that Teesport will not become a centre for that—it is the only thing that I will rule out for Teesside.
I turn to the points made by the Exchequer Secretary to the Treasury, my hon. Friend the Member for Newark (Robert Jenrick). It was a huge pleasure to welcome him to Skelton a few weeks ago; we had a really good visit. I know he is one of the most thoughtful and effective champions of enterprise in Government and someone who I think will go right to the very top of Government—he certainly deserves to. It is great to hear about his close engagement with the ports sector and he is right that the onus now passes to the sector to come up with workable, serious proposals. We have expanded upon the intellectual framework for why this could work and it is now about getting the granularity of detail that the Government require to make it happen.
Whatever the framework within which we choose to leave the European Union, it must allow the broadest possible powers for future enterprise. That takes me back to my point about Chequers. I really do want to see supply side benefits realised. There is a particular opportunity at a time when the Government have embraced a place-based industrial strategy to make the case for areas like the Humber and South Tees, where there are enormous brownfield sites. I appreciate there are ports that are constrained, such as Dover and Liverpool, but there are others where the potential is unlimited—as much land as is needed can be given. This is something that is exciting and it resonates.
It would be wrong of me to close without paying tribute to the work of Ben Houchen and the whole regeneration initiative, which is making a huge impact cross-party. It is getting people’s hopes up in places like South Tees. Sometimes it is not just about changing the economic reality but about changing the intellectual and emotional response to where we are now. We have had one narrative for a long time and hopefully we are starting to get into a much more enterprising and forward-looking mood in our area. This is an exciting and hugely challenging time. There will be great opportunities and pitfalls in the months and years ahead. That is what comes when one takes back control of policy. Today has crystallised the next steps that we are going to have to take in order to make freeports a serious, workable prospect for our future.
Question put and agreed to.
Resolved,
That this House has considered the establishment of freeports in the UK.
Customs and Borders
Simon Clarke Excerpts(6 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
I am a firm supporter of the Prime Minister’s position on this question, and I will set out why.
I am clear that continued membership of the customs union would represent a breach of faith with the referendum result and with the wishes of millions of Labour voters up and down our country. It would also be a serious misjudgement, given the way it would leave our country bound by EU rules on trade but with no say on them, which would represent the worst of all possible worlds.
The only large country that has a customs union with the EU but that is not an EU member state is Turkey, but Turkey’s customs union is almost unbelievably asymmetric. The EU does not need Turkey’s consent to enter free trade agreements with any other country, and Turkey is obliged to reduce its tariffs with such countries. However, the third country with which the EU enters an FTA is under no reciprocal obligation to open its markets to Turkish exporters. In other words, Turkey has to open her markets but might reap none of the benefits. This is not an academic issue. Turkey finds herself in that situation in her trade with countries like Mexico and South Africa.
In a frank interview last summer with the BBC, the shadow Secretary of State for International Trade, the hon. Member for Brent North (Barry Gardiner), warned it would be a “disaster” for Britain to find itself in that situation. I agree with him, and I wish the Labour party were not now attempting to U-turn on that logic.
In a customs union, Britain would be reduced to taking whatever deal we are handed by Brussels, with no say on the outcome.
Antoinette Sandbach
My intention would not be to enter a Turkish-style agreement, and the EU has already conceded that the UK would be able to have a say, but not a veto, on future trade agreements.
Mr Clarke
In essence, not having a veto is not having control on the outcome. An agreement would be negotiated for us that we would either have to live with or reject. There is no sensible outcome we could live with over which we have no control.
It gets worse. Turkey can sign free trade agreements with other non-European Union countries only if she has the EU’s permission—we would have to get clarity on whether that would apply in this instance. I suspect Turkey only subjects herself to such a humiliating state of affairs because she continues to hold out the hope of becoming a full member of the European Union.
The state of affairs for Britain would be far worse, infinitely worse, than remaining a member state of the European Union, where we at least have a seat at the table when it comes to our trade deals.
Angus Brendan MacNeil
Has the hon. Gentleman considered that Turkey might be staying in the customs union for economic advantage? Has he thought about the economics of the situation?
Mr Clarke
I do not believe that it is to our economic advantage. Turkey has long prized EU membership as a status symbol, but I do not believe the economics add up.
Those lobbying for a customs union know that staying in the customs union without a voice at the table would be worse than being a fully signed-up member, as was made more or less explicit by the hon. Member for Pontypridd (Owen Smith) when he said that we would need to stay in the single market as well as the customs union, which goes a long way towards revealing the true motivation of many who make this argument—they see it as a stepping-stone to undoing the people’s vote to leave.
We need to remind ourselves of why the leave campaign lobbied to leave the customs union in the first place. The EU has been slow at negotiating trade deals on our behalf, not least because there are 28 members states on one side of the negotiating table. The EU’s trade talks with Japan have taken 61 months and are still awaiting ratification. By contrast, it took Switzerland 28 months to settle its deal with Japan. EU trade talks with the US have been ongoing for 64 months now, with no sign of progress, whereas the US managed to negotiate trade deals with Canada in 20 months, Australia in 14 months and South Korea in 13 months. At the time of the referendum, the EU had managed to negotiate trade agreements with only two of the UK’s 10 largest non-EU trading partners.
Not leaving the customs union would also fatally damage the prospects for the idea that, more than any other, has captured the imagination of the Teesside public since our vote to leave. A free port at Teesport, which is a project championed by Tees Valley Mayor Ben Houchen and me, would be an enormous boost to local industry and provide a great incentive to reshore jobs to the South Tees mayoral development corporation site. That goes directly to the point that the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) made about north-east jobs. There has been enormous buy-in from local people and businesses to this idea, and people are genuinely excited about what it would mean. However, a free port will not be possible if we do not leave the customs union.
Some people try to maintain the argument that free ports are possible within the EU. The reality is that those zones that exist are glorified bonded warehouses—places where people can defer tax, duty and VAT. What Ben and I are saying is that within the Tees free port there will be the potential for significant tax and regulatory divergences, but that will be stymied if we remain in a customs union.
Outside a customs union there are other significant advantages.
Mr Grieve
How does my hon. Friend imagine that he can engage in this regulatory divergence without incurring tariffs with those countries with which we do our principal trade or the economic consequences that flow from that? I can understand the fantasy behind the picture he paints, but it simply is not the reality of what will happen if we cut ourselves off from our principal trading partners.
Mr Clarke
It is certainly not dreamland. If my hon. Friend reads the compelling paper written by my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) for the Centre for Policy Studies, he will see why it is not dreamland, why there is such ministerial buy-in and why there is so much enthusiasm from the business community in the north-east.
The additional advantages are that we can cut tariffs on products such as food, clothing and footwear. These goods happen to be where the highest tariffs are concentrated and are those on which the poorest in society spend the greatest proportion of their income.
Others have made points about Northern Ireland on which I shall not dwell at length given the shortage of time, but the chief executive of HMRC Jon Thompson told the Exiting the European Union Committee:
“We do not believe, and this has been our consistent advice to ministers, we require any infrastructure at the border between Northern Ireland and Ireland under any circumstances.”
I will leave that point there.
Britain remaining inside the customs union with the EU would be unwise, unnecessary and unacceptable to me and millions of people who voted for Brexit in good faith.
Spring Statement
Simon Clarke Excerpts(6 years, 1 month ago)
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Mr Hammond
I am not sure about the end of the hon. Lady’s question. Is she asking whether the Government have ruled anything out? The Government have not ruled out anything—we are still considering this issue. Of course these workers must have the pay to which they are entitled and which they should have been paid. What we are doing—the Cabinet Office is leading on this—is working with the key providers to see how best to deliver that in a way that does not have negative impacts on the provision of care.
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
Youth unemployment in my constituency has fallen by 55% under the Conservatives, which is fantastic news. Does my right hon. Friend agree that the last thing young people in Teesside need is a reckless borrowing binge to reverse that progress?
Finance (No. 2) Bill
Simon Clarke ExcerptsWednesday 21st February 2018
(6 years, 2 months ago)
Commons ChamberRead Full debate Finance Act 2018 View all Finance Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 21 February 2018 - (21 Feb 2018)
Anneliese Dodds
In practice, most of the commentary that I have seen from experts and those working in the housing sector suggests that in areas where there is extreme competition between different types of buyer—for example, first-time buyers, those buying additional properties, investors, and those moving to a second or third property—such a measure may help initially, but the overall cost increase will also affect first-time buyers. They will therefore be buying at a higher price, so most of the impact of the measure—as with previous stamp duty changes without a boost in supply—will help sellers, not buyers. That was the Conservative Government’s own assessment of the impact of their previous cut to stamp duty in the absence of additional measures to boost supply.
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
The hon. Lady gave us a tour de force in the Public Bill Committee, but on the narrow point about the proposed changes’ impact on prices, the director of the Institute for Fiscal Studies, Paul Johnson, said that although there may be an increase in the price faced by first-time buyers,
“this does not mean first-time buyers are worse off as a result. They are in general better off. Instead of paying, say, £100,000 for £98,000 worth of house plus £2,000 of tax they might be paying £102,000 for £102,000 worth of house.”
What is her response to that point?
Anneliese Dodds
I am aware of what Mr Johnson said, but I think he has fallen into the trap of looking only at the impact of the change on an individual buyer and forgetting that it will have an impact on the housing market, particularly in areas where there is strong supply and strong demand, and where such a change is likely to push up prices. I agree with Mr Johnson on many things, but in this case, unfortunately, the context has been missed, and it is important that we bear it in mind.
Anneliese Dodds
I am grateful to the right hon. Gentleman for mentioning that. For some time, Labour has proposed changes in this area, but they were dismissed as “Venezuelan-style socialism,” which I think was the phrase that we heard from Government Members. We are concerned about this issue, but we are also concerned about matters in the planning system that the Government have not touched, such as the fact that the rules on viability put all the cards in the developers’ pockets. That means that, if someone wants to develop any social supply, there are pressures on the affordability of the rest of that development. We are very aware of that and have worked on it consistently. Sadly, we have not always been supported in that, but I am happy that the right hon. Gentleman has come on board with Labour policy, and that the Government have as well.
There is a general lack of measures and lack of action on other elements of the housing crisis, which is so problematic—the stamp duty change seems to be the only real, significant change in relation to housing policy. Sadly, all of us as Members are seeing the impact of the housing crisis in our postbag, in our surgeries and, very sadly, on many of our streets. Rough sleeping has more than doubled under the Conservatives. It is the No. 1 issue that is mentioned to me on the doorstep in my constituency. I am sure that is the case for many other urban MPs. Even those who do not see it in their constituency probably see it, sadly, when they come to work here. Of course, we had a terrible tragedy in that regard recently.
Mr Simon Clarke
Housing stress is a major driver of homelessness, the causes of which are very complex. Does the hon. Lady accept that the Homelessness Reduction Act 2017 is major step in unlocking the resource that is required and in getting people to focus, crucially, on getting into a home, as the first step towards making a more lasting move forward in their lives?
Anneliese Dodds
I am grateful to the hon. Gentleman for that intervention. I will come later to some of the other contributors to this problem, which are not dealt with in the Bill or the rest of the Budget. I would just say that, although we supported many of the principles in the Homelessness Reduction Act 2017, again the problem is that, while we can place new requirements and duties on local authorities, if we do not fund them or provide the supply of accommodation to discharge them, local authorities will end up having to make invidious choices between individuals, as my own local authority has discovered. There is support for the principle of the Act, but without the means to deliver it there is considerable concern.
I am grateful to the hon. Gentleman, however, for focusing on that issue. His focus is not reflected, sadly, in the Budget or the Bill. We have only had mention of three small-scale pilots to help to deal with rough sleeping, which is woefully inadequate and no match for Labour’s commitment to a proper rough-sleeping strategy. Under Labour Governments, we had one of those and we got rough sleeping down and virtually eliminated it in many areas. We have also said that we would reserve 8,000 units for people with a history of rough sleeping.
The Government have a commitment to halving rough sleeping by 2022, but to do this they have to change their policies. There is huge uncertainty about the funding of supported housing, which has led to a reduction in investment in that area—unnecessarily—particularly following the negative lessons of the Supporting People funding: there was initially a ring fence, but then it was taken away. We hope that that will not happen with supported housing. We have also seen swingeing cuts to council budgets in this area, which has meant that the county council in my area and many others will not be supporting any homelessness places, at least initially. Coupled with reductions in social security and mental health support, this has led to burgeoning numbers of people sleeping on our streets.
This is not just about rough sleeping, of course; it is also about homelessness generally. On housing provision, recent research from the Institute for Fiscal Studies has shown that the Government are still failing to tackle the fundamental problems in our broken housing market, and it does not conclude that the stamp duty change will deal with those fundamental problems. For example, the Government promised to build 200,000 new cut-price starter homes in 2015. Three years on, not a single one has been built. Before Christmas Ministers said they would be working out the definition of “starter home”, so they do not even know what their policy is going to deliver. They have not even decided on their definitions, let alone delivered those starter homes. In contrast, Labour would commit to building 100,000 social and affordable homes a year, focus Help to Buy funding on first-time buyers on ordinary incomes and build 100,000 discounted first-buy homes.
Overall, the Government’s own figures speak for themselves. The number of home-owning households rose by 1 million under the last Labour Government but has fallen under the Conservatives.
Taxation (Cross-border Trade) Bill
Simon Clarke ExcerptsMonday 8th January 2018
(6 years, 3 months ago)
Commons ChamberRead Full debate Taxation (Cross-border Trade) Act 2018 View all Taxation (Cross-border Trade) Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
The Prime Minister at the time was perfectly clear that leaving the European Union did indeed involve leaving the single market and the customs union. It is sophistic in the extreme to suggest that people did not mean to leave the European Union and its institutions when we voted to leave.
Mr Leslie
Oh, that’s right—he is not here anymore. I vaguely remember who the Prime Minister was at the time.
The ballot paper text is a matter of record for all to see. It asked whether we should remain in or leave the European Union, but it did not go into the details, because in a parliamentary democracy those sorts of details are naturally left to us. This is on our shoulders. We are accountable to our constituents for interpreting that referendum result and putting it into effect, always with an eye on protecting their best interests. That is our job—it is what we are elected to do.
Government Members may think that it is in their best interests to leave the customs union, but that was not on the ballot paper. I disagree with them. I do not think that leaving the customs union is in our best interests, and certainly not those of my constituents. We are talking about a potential impact on half the goods traded by the United Kingdom, as half our goods trade goes to the European Union. These are not inconsiderable issues. Some 2.5 million lorry journeys a year through Dover might be affected. Whole businesses have set up “just in time” business models, down to a matter of minutes, for how goods and components will be sourced throughout supply chains and how inventories will be sourced from across the whole European continent, but they now face being upended not only by the potential duties imposed by the Bill, but by other, non-tariff barriers including bureaucracy, additional form-filling, registrations and inspections. Goods coming in might have to go to one side, both at the port of departure and at the port of entry, to be checked for sanitary and phytosanitary compliance. There are all sorts of inhibitors to the free flow of goods. I and other Opposition Members are talking about free trade. That is what we should be standing up for, which is why this is an incredibly important issue.
Tom Brake (Carshalton and Wallington) (LD)
Let me start where the Minister started. He spoke of wanting to secure the greatest possible economic advantage for the United Kingdom, but I am afraid that what we have is a series of Ministers who are wilfully proceeding with Tory Brexit decisions that they know are damaging to the UK’s economic interests.
Some Conservative Members—although not Ministers —state openly that they realise that what the Government are pursuing is damaging to our economic interests. Some are embarrassed by that, and I shall not embarrass them by naming names; they are keeping their heads down and staying quiet. Some think that this is a price worth paying. Some believe that it will benefit the United Kingdom, although sometimes the advice that they give to others is the complete opposite of their claims to that effect.
All those who follow this debate, whether they are leave or remain supporters, ought to be aware that Ministers are advocating a move that they know is damaging to the UK’s interests and that they are doing so because on 23 June 2016, on one day of the electoral cycle, people voted to leave the European Union. People need to remember that Conservative Members who were overwhelmingly in favour of our remaining in the EU know that this will cause us damage, but are proceeding with it nevertheless. The Government will not admit that, and they will not release the information that would enable us to know it. We have already had the rather circular argument about sectoral analysis, impact assessments and so on. The one thing that the Government are not willing to do is share the information about what the economic impact of Brexit will be.
The hon. Member for Folkestone and Hythe (Damian Collins), who is no longer in the Chamber, made a very sensible point. He understands perfectly well the impact that leaving the EU and the customs union would have on the port of Dover. He rightly pointed out that countries trade more effectively with countries that are close to them. That is why the idea that there is a trade deal out there with Australia or New Zealand that will replace the trade deals that we have with the European Union is a fiction.
There have been many references to frictionless, seamless trade. That is fine; everyone wants to achieve that. The only problem is that, so far, no one has actually identified how it will work. It is great to have the aspiration, but in practice no solution is available. The same is true of the border between Ireland and Northern Ireland. The hon. Member for Nottingham East (Mr Leslie) confirmed that that can has been kicked down the road. No solution has been identified in phase 1 of the negotiations. It has been accepted that there is a huge problem, but also that the can will be kicked a little further down the road.
Mr Simon Clarke
The whole point is that the Irish border issue cannot be resolved until we know the wider context of the trade agreement that has been established. The right hon. Gentleman is getting the logic back to front.
Tom Brake
We will wait and see whether I have got the logic back to front. I suggest to the hon. Gentleman, however, that the idea that it is possible to have on one hand a completely seamless border and on the other hand a United Kingdom that is outside the European Union does not work. There must be one of two solutions. The first, relating to where that border sits, would be very unpopular with members of the Democratic Unionist party, while the second goes against everything that the party in power is advocating. I do not think that there is a simple solution, and that is why I think that the issue has been kicked down the road. I suppose people are hoping that, perhaps as a result of phase 2 of the negotiations, there will be a miracle solution that will make possible a frictionless, seamless border between Ireland and Northern Ireland, but given that no one has identified it so far in the 18 months or so that have elapsed since the referendum, I am not confident that anyone will come up with it in the time that remains.
I believe that the Bill is unnecessary and, indeed, highly damaging. It was required only because the Government have set themselves against the solution that is our staying in the customs union. The hon. Member for Gloucester (Richard Graham) tried to highlight the differences between Labour Front Benchers and some of his hon. Friends, which is easy enough to do, but he could equally have chosen to highlight the differences on the Tory Benches. At least one Tory Member, the right hon. Member for Broxtowe (Anna Soubry), considers the solution that the Government are trying to identify in all their fudges and workarounds to be staying in the customs union, and I agree with her. If there are differences of opinion, they exist on both sides of the House, not just between Labour Front and Back Benchers.
We will oppose the Bill’s Second Reading, not for—I was going to say mealy-mouthed reasons, but that might be unfair. I do not know the hon. Member for Bootle (Peter Dowd) terribly well, but I have no reason to believe that he is, in fact, mealy-mouthed. I must say, however, that Labour Members are trying to sit on the fence for as long as is physically possible, in spite of repeated interventions from their own side. At some point, they will have to jump in one direction or the other. It must be getting very uncomfortable for them, sitting on that fence. The longer they sit on it, the sharper and more uncomfortable for their backsides it will become. At some point, they are going to have to jump. I hope that they will jump in the direction that they are being encouraged to do by some of their Back Benchers and by the Liberal Democrats, the Scottish National party, Plaid Cymru and the Green party—namely, in favour of staying in the customs union and the single market long term, not just as a means of massaging support over the next few months but in the long-term interests of the United Kingdom.
As I have said, I do not want to describe Labour Front Benchers as mealy-mouthed, but there is clearly some difficulty with the position that the Labour party is trying to adopt, and I would like some clarity on this. Labour Members say that they are interested in preserving jobs, for instance, and I wonder what work they have done to assess the impact of a substantial number of job losses in the transport industry. A lot of goods are transported from the Republic of Ireland to Dover through Northern Ireland and the United Kingdom. Those involved are thinking of simply cutting out the rather complicated business of crossing the UK border altogether and instead shipping the stuff straight from Ireland to, say, Cherbourg. That would result in the loss of many jobs in Britain along the way.
We have heard many references to the VAT change, which could affect between 100,000 and 150,000 businesses. Concern was expressed earlier that some larger businesses can be quite aggressive towards small suppliers, but a lot of the businesses affected will be small businesses that suddenly find themselves in difficulties with their cash flow. I wonder what analysis the Government have carried out on that. I am afraid that, as in so many areas relating to Brexit, the answer is that there has been no impact analysis and that the Government are simply proceeding with these changes.
One of the key claims by the leave campaign was that leaving the EU was about cutting red tape. I would love the Minister to confirm that the measures in the Bill will cut red tape for businesses, but frankly I cannot see how businesses will benefit from a reduction in red tape in any shape or form as a result of this legislation. Instead, businesses that are not subject to red tape at the moment will have to take on red tape that they have never previously had to deal with. The Minister must at least try to address that point, given that one of the main claims made by leave campaigners was that leaving the EU would cut red tape for businesses.
We could talk at length about the delegated powers, as we have done on many other Bills relating to Brexit, but there is no point in rehearsing the arguments that have been made on those Bills, because the Government are clearly intent on taking advantage of the situation and cutting Parliament out of the loop as much as possible.
If the Government want to proceed in the way that they are doing at the moment, trade remedies will be essential. Members will be aware that trade remedies are currently implemented by the EU, which has more than 100 such measures in place against imports from 25 countries. To what extent does the Minister expect those measures to be replicated? Also, does he believe that it will be possible for the UK, operating alone, to have more effective trade remedies than those currently implemented by the EU with its 28 member states? Again, we need clarity, honesty and accountability. We need to hear from the Minister whether he thinks that the trade remedies available to the United Kingdom on its own will be weaker and less effective than what is currently available to us as a member of the European Union.
I welcome the fact that the Government will legislate to ensure that we can maintain a system of trade preferences for developing countries. I have already referred to the VAT issue and to the impact on red tape. I hope that the Minister can confirm that the Bill will have no red tape implications, although it is hard to see how he could possibly do so. [Interruption.] Would my hon. Friend the Member for Edinburgh West (Christine Jardine) like to intervene on me?
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
After the successful conclusion of the first phase of our Brexit negotiations last month, it is great to see Ministers pressing forward to build our future trading relationship with Europe and the rest of the world. This Bill, as Opposition and Government Members have identified, will be critical in establishing the framework within which that trade is conducted. It is of huge significance to my constituents in Middlesbrough South and East Cleveland and for the people of Teesside as a whole. I never forget that the north-east is the only net exporting region of England. In that regard, there are two main elements that I want to address tonight. The first is trade remedies, which are vital for the UK and Teesside steel industries, and the second is the special customs procedures that will be central in allowing Teesside to fulfil our ambition to host the first free port in the UK after Brexit.
Turning first to steel, as we know, the past two decades have been extremely challenging for the industry. Most recently, a combination of a surplus of global production, shamelessly exploited by the Chinese to dump steel, and our high domestic industrial energy costs led to the crisis experienced by the industry in 2015, but the steel sector remains a cornerstone and an enabling sector of our wider economy. The Government’s own study of the future of the industry estimates a massive £3.8 billion opportunity in steel demand by 2030. That progress, however, depends in large part on having a strong trade remedies regime, which brings me back to the Bill.
I am a passionate advocate of free trade, but free trade does not mean trade without rules. State-subsidised exports and those dumped at artificially low rates are a distortion of the free market. Steel producers, as people in Redcar and Cleveland know only too well, are particularly vulnerable to unacceptable trade practices. As the hon. Member for Aberavon (Stephen Kinnock) identified, more than one third of the 92 EU trade remedy measures currently in place appertain to steel. It is therefore critical that our post-Brexit trade remedies framework is robust and firm. On the whole, I am confident that the Bill will deliver that, but there are three areas where I believe improvements could be made.
Given that the Financial Secretary has already been generous enough to meet me before Christmas and that the Minister for Trade Policy has agreed to meet me later in the week, I will limit myself to touching on those areas in outline. First, there is the broad lack of detail. For example, there is currently very little detail of how investigations by the Trade Remedies Authority will be conducted and remedies applied. There is also uncertainty about how injury to producers will be calculated and quantified. Finally, the Bill enables the Secretary of State to overturn TRA recommendations on the grounds of public interest, but it is not yet clear how that public interest will be defined. I urge Ministers to put more detail into the Bill where possible. Where such technical details would be inappropriate, I encourage them to publish secondary legislation as soon as possible, even if only in draft. Although I appreciate that some of the finer details may depend on the outcome of the negotiations, some clearly do not.
Secondly, although it is entirely reasonable that an economic interest test is conducted by the TRA prior to the recommendation of definitive measures, it is not clear why such a test is required before the recommendation of provisional measures. My concern here is time. The reason provisions measures exist at all is that trade investigations can necessarily be lengthy and it may take some time before the authority reaches a definitive decision. It is possible that a great deal of damage could be inflicted on our domestic producers before a definitive investigation could be completed. Will the Minister therefore agree to review the extent to which the economic interest test may delay provisional measures, especially those safeguarding against a flood of exports?
Finally, the Bill states that the TRA will be unable to open an investigation if the UK market share of a domestic industry filing a complaint is below a certain threshold, which is as yet unspecified. That provision will leave many producers uncertain whether or not they fall within the scope of the Bill’s protections. In addition, while I understand the rationale for requiring a threshold in theory, I am concerned that a too onerous threshold could serve to undermine the World Trade Organisation right for infant industries to seek protection and also to prevent industries that mainly export from seeking relief.
The special customs procedures outlined in the Bill will be central to allowing Teesport to fulfil its ambition of being the first major free port in the UK. A free port, for Members who are not aware of the concept, is an area that is physically within a country but legally outside it for customs purposes. Goods that enter a free port do not incur import duty. Instead, import duty is paid only when goods pass from the free port into the domestic economy. The hon. Member for Redcar (Anna Turley), who is not in her place but it is so good to see her back in the House today, made a very good case for why Redcar and, by extension, Teesside are so well qualified to host the first free port in the UK after Brexit.
Worldwide, there are approximately 3,500 free ports located in 135 countries. We do not have any. Our membership of the customs union and the stringent state aid regime have acted as a block on their creation. Brexit therefore presents a fantastic opportunity to introduce free ports in the UK.
Teesport handles more than 5,000 vessels each year and about 40 million tonnes of cargo on an estate covering almost 800 acres. Situated immediately adjacent to the mayoral development corporation, Teesport is undergoing huge investment to prepare it to rival the largest ports in Europe. It has all the qualities that will allow it to prosper as an international hub for trade and supply chain processing. A free port at Teesport would aid the Government’s wider objectives of rebalancing the economy from south to north and from the service sector to manufacturing.
To that end, I am pleased that the Bill makes express reference to free ports and sets out the regulatory framework under which a free port would operate. My only request to the Minister is to provide additional clarity on paragraph 9 in part 4 of schedule 2, which states that processing in a free port could take place only if
“the processing of the…imported goods…results in the production or manufacture of other goods in which the imported goods can be identified”.
I would be grateful if the Minister gave examples of which manufacturing processes would and would not be permitted under that definition. That is important because it will mould the future shape of free ports in this country by determining the extent of the economic activity that may take place within them. To my mind, it is important that at this early stage, we maximise flexibility so as not to unduly hinder the new and unique opportunities that an independent trade and customs regime will bring.