European Union (Withdrawal) Act

Debate between Vince Cable and Chris Leslie

Wednesday 9th January 2019 Commons Chamber

[Sir Vince Cable (Twickenham) (LD)]

One problem of having extended debate and resumption of debate is that we are getting a lot of repetition and recycling of arguments that we have heard many times before. For that reason, I want to focus on one specific issue, which is the idea of World Trade Organisation rules and exactly what they mean. The term “WTO rules” is used casually in every pub, and in every radio interview I encounter, but I suspect that many of the people who use it are not at all clear what it means.

Before getting into the detail of that, I will make one general point about no deal, which was brought out rather brilliantly by the right hon. and learned Member for Holborn and St Pancras (Keir Starmer), who got to the heart of this very well. He exposed the fact that no deal is actually a choice. It is not just something that happens; it is the conscious choice of a Government who could choose to revoke article 50, as the Father of the House keeps reminding us. That may be a difficult decision and a very unpopular one, but article 50 could be revoked, and by choosing not to revoke it, the Government will be choosing to have no deal, with all its catastrophic—or so they tell us—consequences.

Let me narrow down to the specific issue of what the WTO rules would be if we found ourselves in a no-deal world. The basis on which I speak is that many years ago, long before I came into the House, I was part of a small community of international trade specialists and got involved in negotiating the so-called Uruguay round and then the Doha round as part of the World Trade Organisation—or, as it was then called, the general agreement on tariffs and trade. I saw at first hand the way in which the WTO system operates. I realise that there is no longer just a small community of anoraks, which is what we were. A large number of people now consider themselves experts on trade policy, but the glibness with which the term “WTO rules” is applied leads me to believe that there are probably not too many anoraks, because there are some very real difficulties in applying WTO rules.

The World Trade Organisation is to trade what the United Nations is to peace. It has some admirable principles, but I think most Members, and certainly those on the Government Benches, would consider it seriously negligent of us to make our national defence dependent solely on the rules of the United Nations. Rules have to be enforced, and they have to be effective.

We need to look back on what the World Trade Organisation is and what it is trying to achieve. In the post-war world, it has established one central principle, and actually it is not free trade; it is something called the most favoured nation—MFN—rule. It is about non-discrimination. It has one big waiver, which is to allow common markets and customs unions such as the European Union to function on the basis of total free trade within themselves, but its whole objective is to stop the proliferation of bilateral agreements.

Such agreements were common in the inter-war period, and they are becoming fashionable again. Many people who are in favour of Brexit say that they are the whole purpose of trade policy. Those people want deals with numerous countries, but the whole purpose of the WTO was to stop this happening. It was supposed to be a multilateral organisation. In that capacity, the WTO achieved a great deal. It cut tariffs to single digits on most manufactures except agriculture, and it got rid of quantitative restrictions, except for the quotas that still exist for agriculture and textiles. It also began to establish a set of rules around intellectual property and various other intangible non-tariff barriers regarding, for example, government procurement.

The problem is that the WTO reached the zenith of its authority about 10 years ago, when the Doha negotiations collapsed and multilateral trade negotiations ceased to make any progress. This was largely due to the obstruction of India, Brazil and, to some extent, the United States. The European Union was actually the main liberalising force, but anyway, the negotiations collapsed and the WTO’s authority is now much less strong. Where does that leave us in terms of what the WTO rules now mean? If they mean anything, it is the application of the rule of law. In the WTO, the rule of law operates through dispute panels, which in theory have the same force as the European Court of Justice in settling disputes. It baffles me that Conservative Members are so affronted by the intrusiveness of the European Court of Justice, because it was designed to achieve precisely what the dispute panels of the WTO were designed to do.

However, like the United Nations, the WTO is not a desperately effective body, and many of its rulings are not carried through. Because it is a weak organisation, it is possible for big countries to bully weak ones. A celebrated case some years ago involved a trade dispute between the United States and Costa Rica—over men’s underpants, as it happens—and Costa Rica won the dispute. The United States felt deeply humiliated and refused to comply. A face-saving compromise was eventually reached, but that dispute sowed the ill feeling that in due course led to President Trump, who has made it absolutely clear that he does not believe in the World Trade Organisation. He does not want it to work, and he is doing everything he possibly can to stop it working, including not sending judges to sit on the dispute panels. It is now a very weak organisation. If we were to crash out of the EU under WTO rules and found ourselves in a dispute with the United States—or, indeed, with the European Union, which we had left—we would not be able to rely on the WTO dispute panels to settle the dispute in an orderly manner.

That is one of the WTO’s central weaknesses. Another is that, throughout its history, it has been overwhelmingly concerned with getting rid of tariffs. The main problem in international trade these days is the divergence of standards, which is of course why we originally entered the single market under Lord Cockfield and Mrs Thatcher. That was perfectly logical. If we are trying to liberalise trade, we attack the non-tariff practices that obstruct trade, hence the harmonisation of rules on mutual recognition. However, the WTO does not do that. It has very weak rules covering government procurement and all the barriers that are dealt with in the European Union through the rules on state aid, competition and the like. That, in turn, means that there is very little in the WTO that covers the services sector, which, as we have been reminded, accounts for 80% of our economy. We have a fair degree of liberalisation in the services trade in the European Union, which benefits our high-tech industries, financial services and so on. No such arrangement exists in the WTO. Those sectors are completely unprotected.

Finally, and not least, the fact is that some tariffs remain, and they are on agriculture. We have the problem that if we leave the European Union with no deal, on WTO terms, the European Union’s tariffs on dairy products, lamb and various other items, which are quite high, immediately kick in. The problem with that, as we discovered when we had the foot and mouth epidemic, is that if we cannot export, prices crash. The only logical response from the farming industry, in order to maintain the value of the stock, is to slaughter large herds. This will happen. We know there is a paper at the moment in the agriculture Department—the Department for Environment, Food and Rural Affairs—setting out a plan for slaughtering a third of all British sheep in order to maintain the integrity of the market. That is an inevitable consequence of a high tariff obstructing British exports.

That is not all; I had only 30 seconds in the House yesterday, but I mentioned the particular problem associated with exports through the port of Portsmouth. It is actually the lifeline to the Channel Islands; that is the main route. The Channel Islands are not otherwise affected by Brexit of course, but they will be in this case. If trade is obstructed at the port because of the need to comply with veterinary requirements, phytosanitary requirements and things of that kind, lorries will be obstructed and fresh produce will not be able to get through. Quite apart from the disruption to traffic, the whole system of agricultural trade and the supply of food to the Channel Islands will simply dry up. We have an enormous practical problem resulting from this.

[Mr Leslie]

The right hon. Gentleman is giving an excellent speech, which is very helpful indeed. Did he see that the Financial Times reported yesterday that the Department for Transport commissioned research that says that just a 70-second delay in authorising a vehicle at the border could mean a six-day queue to get on a ferry?

[Sir Vince Cable]

Yes. Indeed, if I have made a contribution to this argument, it is in pointing out that this is not just a problem in Dover; this problem exists in all the ports around the country. There is going to be serious disruption of supply chains—of the supply of fresh food and many other items. Those people who trivialise the issue by simply saying, “WTO rules—nothing to worry about”, are completely disregarding these consequences.

The conclusion I come to—I think many Conservative Members share it, publicly or privately—is that no deal is just not a viable, acceptable option under any circumstances. We will therefore, within the next few weeks, be brought to the point at which the Government will have to revoke article 50. That would be a major step; it would be overturning the result of the referendum. I feel uncomfortable about Parliament, through Government, doing that. That is why I and other people who are not enthusiasts for referendums believe that the only way of dealing with this properly and of reasserting democratic legitimacy is to go back to the public and seek their approval for doing just that.

Green Investment Bank

Debate between Vince Cable and Chris Leslie

Tuesday 24th May 2011 Commons Chamber

[Vince Cable]

As I said, we are trying to create a stable framework—what is sometimes called a regulatory asset base—against which long-term investment decisions can be made. We have heard several references to the electricity market review and feed-in tariffs. The Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Bexhill and Battle (Gregory Barker), is involved in the process of establishing a clear set of rules. The green investment bank will sit alongside those clear policy frameworks in order to ensure that large-scale investment takes place.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

If the Secretary of State is considering the location of the green investment bank in its ability to deliver, he must surely take seriously the bid from the city of Nottingham because of our combination of financial services and low-carbon business innovation. Will he or his officials agree to meet a delegation from Nottingham so that we can overwhelm him with our case?

[Vince Cable]

As I say, we have not come to a decision on the ideal location, and we are certainly open to good, new suggestions. The hon. Gentleman and his colleagues in Nottingham will have to think about whether, for example, they have a sufficient concentration of project finance specialists; I am sure that they have.

Department for Business, Innovation and Skills (Performance)

Debate between Vince Cable and Chris Leslie

Wednesday 2nd February 2011 Commons Chamber

[Vince Cable]

I will finish this point before I take an intervention.

The Governor of the Bank of England calls in aid the former director-general of the CBI, who has made some strong criticisms. We have, of course, listened to those criticisms and treat them with respect. It is worth going back to what the director-general said. In the opening part of his speech, he described the fundamental problem facing the UK economy, which we are now trying to deal with. It is worth reading that part of his speech at a little length, because it encapsulates what this whole growth debate is about. He said:

“This coalition Government has been single-minded—some might even say ruthless—in its approach to spending cuts. Very unpopular decisions are being driven through on the argument that they are essential to the long-term stability of the economy. That policy is strongly supported by business, on the grounds that sound public finances are an essential foundation for a sound economy.”

[Interruption.] In case this gentleman becomes an icon for the Labour party, let me quote what he said next. He said that there were “two reasons” why the public finances were in a mess:

“One is that the tax and spending policies of the last Government created a substantial structural deficit—a hole in the budget that had to be tackled irrespective of what happened to the economic cycle.

That’s what made substantial spending cuts inevitable, irrespective of who won the last election.”

That is the position we are in.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I am grateful to the Secretary of State for giving way, but his professorial picking through of a variety of quotes is quite pitiful. Can he tell us where his growth plan is? Where is it?

[Vince Cable]

I will describe in detail the various steps being taken to sustain growth. If there were a silver bullet, the right hon. Member for Southampton, Itchen and his hon. Friends would have found it—but they did not.

Oral Answers to Questions

Debate between Vince Cable and Chris Leslie

Thursday 13th January 2011 Commons Chamber

[Chris Leslie (Nottingham East) (Lab/Co-op)]

It is clearly embarrassing for the Business Secretary that he has failed to deliver robust action on banker bonuses and to deliver the net lending targets. If he cannot persuade the Chancellor to fulfil those coalition agreement promises, will he resign?

[Vince Cable]

That is an utterly absurd question. The hon. Gentleman knows that after the massive banking crisis that happened under the last Government as a result of poor supervision of an overweight banking sector, this Government are trying to introduce measures to make it more stable and to contribute to the real economy. That will happen; it did not happen under the last Government.

Oral Answers to Questions

Debate between Vince Cable and Chris Leslie

Thursday 14th October 2010 Commons Chamber

[Vince Cable]

Yes, there is further scope to simplify the landscape of further education quangos, and we intend to pursue that. There are far too many organisations, making it impossible for further education colleges to do their job, and we will remove some and simplify the whole system greatly.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Has the Secretary of State also done a U-turn on his views of Sir Philip Green, who gave advice about non-departmental public bodies? Once upon a time he said, talking about Sir Philip Green, that he had

“no time for billionaire tax dodgers who step off the plane from their tax havens…and have the effrontery to tell us how to…run our tax policies”.

Has he changed his mind on that as well?

[Mr Speaker]

Order. We do not need a character assessment of Sir Philip Green, what we require is comments on the subject matter of the question. The Secretary of State is welcome to volunteer them, otherwise we will move on.

Capital Gains Tax (Rates)

Debate between Vince Cable and Chris Leslie

Wednesday 23rd June 2010 Commons Chamber

[Vince Cable]

I have answered the question; I do not want to pursue it.

Were the private promoters able to take the project forward, we would be delighted, because as a commercial project it has many attractions. However, the Government could not commit large amounts of money to such a project.

The shadow Chancellor made a series of challenges, which I will take systematically. He asked why we, and I personally, have endorsed austerity policies and especially quick cuts; he asked about the issues around fairness and value added tax, with which I will deal; and he asked about the important economic question of how we get growth emerging from a period of austerity, and I will try to answer that. First, however, let me explain why I changed my mind—for I did change my mind—about the necessity for early action on the budget deficit. Let me describe the sequence of events, because I think that it is quite important.

As the shadow Chancellor knows, because he was still Chancellor then, when the election took place there was, in the background, a major sovereign debt crisis in Europe. The day after the election, when there was a hung Parliament, the then Prime Minister suggested to me, I think for reasons for courtesy, that I talk to some senior officials in the Government and the governor of the central bank about the existing situation, in order to obtain their assessments of what was going on. I did so. The leader of my party talked to the governor, and I have talked to him since.

The advice that I received, uncompromising and unequivocal, was that the incoming Government, whoever they were—we did not know who they would be at the time—would have to act immediately and decisively on the budget deficit, because there was a serious threat to this country. I took that advice, but was left with a nagging question. The former Chancellor was presumably receiving the same advice. What would he have done? Was he proposing to disregard it? The line of policy that he is developing now suggests that he would have liked to disregard it, but was he going to do so, or was he going to be responsible, accept the advice and act on it? Because he is a responsible and serious man, I think he would have accepted it.

We now know, because the figures are becoming clear, that in the current financial year, when, as the shadow Chancellor said, the economy was fragile, he was introducing a fiscal tightening of £23 billion. The new Government have introduced a tightening of £6 billion. The last Government did not announce that fiscal tightening—it emerged in the small print from the Institute for Fiscal Studies—but the shadow Chancellor did it, and he clearly did it with good reason. The problem was that it was never clear what the Government were doing, it was done in a very chaotic way, and some Ministers—including Lord Mandelson, my predecessor—plainly wanted to support the Chancellor and to act in the public interest, and got on with those cuts. When I entered the Department, people such as further education lecturers and scientists were being made redundant as a result of the measures that had already been initiated by the Government in response to the crisis that they knew existed.

[Chris Leslie]

The right hon. Gentleman may well have had his damascene conversion, for who knows what reasons, but does he not owe an apology to the millions of people who thought when they voted Liberal Democrat that they were voting for a pro-growth strategy and against these massive cuts? Should he not apologise to his own electors?

[Vince Cable]

No; we are trying to deal with the problem that the hon. Gentleman and his colleagues left behind.

[Vince Cable]

I know that we were not in the same position as Greece. I was not talking about what the Greeks and the eurozone needed to do; I was talking about what we needed to do, and the advice that we received.

There is an evidence base to look at. It is true that, as the shadow Chancellor said in his speech, the cost of borrowing in terms of bond yields was starting to fall under the last Government. That is because markets are driven by expectations, and they expected a change of Government. Since the election, however, and since this action was taken and announced, the cost to the United Kingdom of borrowing, in terms of bond yields, has fallen by 20 basis points. In Greece it has risen by 170 basis points, or 2% in ordinary language. It has risen by 94 points in Ireland, by 95 in Portugal, and by 65 in Spain. Spain is a serious, big country: we are not talking about tiny, peripheral economies. It is a serious country, which was caught up in the financial firestorm that we have had to head off from here. That was the basis on which we made decisions.

Let me now develop that immediate question into the broader issue of the Chancellor’s Budget and the magnitude of the task that we had to undertake. There is, of course, a difference between the problem of the deficit and the problem of the debt. There is a public debt problem, which is growing rapidly, but as the Chancellor has pointed out and as I have often pointed out myself, it is not greatly out of line with what is happening in many other countries, or with what has happened historically. The real problem for the United Kingdom is the massive level of public borrowing. That is why markets are important. The deficit in the last financial year was 11% of GDP; in the current financial year, it is 10.5% of GDP. That money—£155 billion—must be borrowed. My views on that, on how it should be dealt with, and on the kind of radicalism that is needed had nothing to do with the formation of the coalition. My views were set out a year ago, when I wrote a pamphlet which did, indeed, bear a strong resemblance to what the Chancellor produced yesterday in terms of scale, scope and speed.

Let me tell the shadow Chancellor why I feel strongly about the need to act in such a decisive way in terms of fiscal policy. There are two reasons. First, I saw the disaster unfolding under the last Government, when they were overtaken by a major financial crisis for which they were not prepared and to which they had massively contributed. Of course there is a global problem—we know that—but its impact has been much more serious in this country than elsewhere. That is because the Government allowed household debt, in relation to income, to rise to the highest level in the developed world; because they acted and planned on the assumption that house prices rise for ever, although we know from the evidence that they go up and down roughly every 17 or 18 years, as they have done for the last 300 years; and because they created, encouraged and fostered an almost Icelandic dependence on major international banks, the combined magnitude of whose balance sheets represented 400% of our economy.

The Government allowed that to happen. Some of us warned about the dangers, and they took no notice: they said that we were scaremongering. But the crisis hit them, and, having experienced it once, we on this side of the House are determined that such a financial crisis should not happen again as a result of sovereign risk. That is why we are decisive, and why we feel that we need to act.

[Chris Leslie]

If what the right hon. Gentleman says about the banks is true, why has the Budget been quite so lenient with them? Why has it taken only £1 billion from them, when the rest of the country is having to pay £14 billion as a result of the measures in the Red Book? What will his Department do to prevent the banks from passing even that £1 billion on to their customers?

[Vince Cable]

That was a very strange intervention. It may reflect the fact that the hon. Gentleman—whom I respect a great deal—has rejoined the House following the election, and may not be familiar with the arguments that led up to it. He will know, however, that the last Government were going to phase out their bonus tax. We have reintroduced a stable system of taxation on banks, the incidence of which will increase over time. Of course, many things need to happen to the banking system. We will discuss, as colleagues, how we should deal with such matters as bank lending, on which there is an outrageous record of bank dysfunctionality.