European Affairs

William Cash Excerpts

Thursday 15th March 2018 Commons Chamber

[Paul Blomfield]

We could draw some interesting conclusions from the Conservative manifesto at the last election, but we all need to face facts and perhaps the Government need to change views in the cold light of those facts. I always find it interesting to take interventions from the right hon. Gentleman. I do not know whether he is still advising—

[Sir William Cash (Stone) (Con)]

rose—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I think the Opposition spokesman is still dealing with the previous intervention, and he may in due course come to another intervention.

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[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

I shall proceed as quickly as possible. The hon. Member for Sheffield Central (Paul Blomfield) rather marred his speech by playing the man and not the ball. It is much better if we deal with the arguments, instead of imputing motives or sentiments that were at that very moment being disowned by my right hon. Friend the Member for Wokingham (John Redwood). That was rather unfortunate.

I wish to point out that the agenda is not being set by a small group of MPs; it is being set by the British people—more than 52% of the electorate. Those who argue against leaving the customs union or for staying in the single market are arguing against the right of the British people to take control of their own affairs. Let us make no bones about this: the Labour party has now adopted a position in favour of some kind of weaselly half-Brexit, which is not what the British people voted for. The Prime Minister said that she does not recognise any distinction between hard or soft Brexit; there is leaving the European Union or somehow staying in, which seems to be the position the Labour party has now adopted.

Let me set out two contexts. First, many who supported remain seem to believe that people who voted leave in the referendum were voting to turn their back on the world. They claim that the UK’s decision was driven by isolationist and xenophobic undercurrents and see the leave vote as representing intolerance, prejudice and a call for protectionism. Vote Leave did not campaign for that. We deliberately left the Vote Leave website up—Members can take a look if they like. Vote Leave did not argue for isolation, intolerance or economic protectionism. Those may be the views of a vociferous minority, but the Ashcroft polling that was undertaken at the time of the referendum found that for nearly half of leave voters, the biggest single reason for wanting to vote leave was

“the principle that decisions about the UK should be taken in the UK”.

Lest we forget, that is the first context. The debate was about taking back control—about democratic self-government and our country’s right to make its own laws, to decide its own taxation and spending and to choose how it engages with other countries on matters such as trade, foreign affairs and defence. It was about leaving a bloc that is not only in relative economic decline but increasingly in a state of economic and political crisis.

[Sir William Cash]

I very much agree with my hon. Friend. Had the speeches by Mr Juncker and President Macron about moving towards a more integrated Europe—a sovereign Europe, as President Macron says—been put to the British people before the referendum, we would have had a proportion of the vote vastly greater than 52%.

[Mr Jenkin]

I was going to make that point later in my speech, but shall no longer do so, for the sake of brevity.

The EU undermines democracy, prosperity and international co-operation. It is plagued by high unemployment, high debts, an ageing population that is much too dependent on state welfare, a dysfunctional euro, unaccountable political institutions and a democratic crisis. It puts up barriers to the combination of world-class universities, technological innovation and venture capital that is fundamental to the technological innovation on which the future of our economy depends.

Since the referendum, we have seen the landmark statements to which the Chairman of the European Scrutiny Committee, my hon. Friend the Member for Stone (Sir William Cash), referred. In fact, Martin Schulz, the former President of the European Parliament, wants a full united states of Europe by 2025. The formation of the euro, which was always a political project, transformed the EU, making full integration an imperative to try to prevent the eurozone from breaking up. In the end, the euro will fail anyway, because there is no political consent for the scale of fiscal transfers necessary to compensate for the huge internal trade imbalances.

The second context is economic. Shortly before the referendum, the Treasury forecast that a leave vote would inflict an economic shock on the UK, leading to reduced trade and foreign direct investment, recession, and the loss of 500,000 jobs. I am sorry to disappoint the hon. Member for Sheffield Central, but the Treasury’s analysis has proved to be manifestly wrong. It also ignored the long-term future of global trade and economic growth. Between 2016 and 2017, UK GDP increased by 1.7%, and economic growth continues to surpass expectations. Tax receipts are higher than expected, and the UK is running a current budget surplus for the first time since the year leading up to July 2002—long before the crash, and two years earlier than anticipated just last year. UK unemployment has continued to fall from 8.5% in late 2011 to 4.4% in late 2017, and the unemployment rate was recently at its lowest point since 1975.

Although some businesses are moving parts of their operations to other EU countries, the number of jobs being moved is significantly lower than expected. Foreign direct investment has continued to grow and, since the referendum vote, there has been a string of major inward investment decisions. In fact, the year of the referendum, 2016, turned out to be another record year for inward investment. We have seen Wells Fargo committing to a new £300 million London headquarters and Nissan announcing its new Qashqai and X-Trail models to be built in Sunderland, making Sunderland a super plant of 600,000 vehicles a year. In December 2017, GlaxoSmithKline revealed its plans to invest £40 million in the UK’s life sciences sector. At the beginning of this month, Siemens committed to building a £200 million train manufacturing plant in the UK if it wins orders for new rolling stock, and, just last week, Toyota announced that it will build the next generation of its Auris hatchback at its Burnaston plant in Derbyshire, including a £240 million upgrade of the plant.

That is not a matter for gloating or complacency, but it shows that inward investment is not dependent on membership of the EU. What about the longer-term prospects for trade and economic growth? In recent years, UK trade has shown a well-established trend, as the proportion of UK exports sent to the EU has been declining. It peaked at 54% of UK exports in 2006. By 2016, that had fallen to 43%. That decline in the importance of our EU trade has set in despite the UK being in the EU, in a customs union and in the single market. Conversely, over the same period, the non-EU share of UK exports has increased. For example, China’s share of UK exports grew from 1.6% in 2006, worth a mere £5.4 billion, to 3.3%, worth £16.8 billion, in 2016.

Trade has also grown significantly with the Commonwealth. UK exports to Commonwealth countries have increased from 8.8% of our exports, worth £21.5 billion, in 1999 to 8.9%, worth £48.5 billion, in 2016. The Commonwealth is a fast-growing market, reflecting much of our language, values and administrative and constitutional heritage, and therefore has great potential for the UK.

The EU is still the UK’s largest trading partner if taken as a bloc, but if we consider individual countries, the UK’s largest trading partner is the United States of America. It seems to have passed the hon. Member for Sheffield Central by that, while the UK has had a trade deficit with the EU every year since 1999—worth £82 billion in 2016—we achieved a £39 billion trade surplus with non-EU countries in 2016. Outside the EU and the customs union, the UK will be able to develop new trading relationships with many of these countries, but not under his party’s policy. Some of these opportunities, including the possibility of joining the Trans-Pacific Partnership and the strong prospects of a comprehensive free trade agreement with the US, including financial services, more than match the potential of our existing relationships with the EU.

The 11 TPP countries have a population of almost 500 million people and represent more than $10 trillion in economic output, which is 13.5% of the global total. The Commonwealth has a population of 2.3 billion people. A comprehensive trade deal with the US, which includes services, would give UK firms better access to its population of more than 320 million and to the world’s largest single economy. With the UK accounting for 7% of world service exports and the USA 15%, they would together account for over a fifth of the global total—a market of huge significance.

Outside the EU, the UK will also be better placed to develop trading opportunities with countries in Asia and Africa, where the most rapid growth is expected to occur in the future. When concluding free trade agreements, we can set our own negotiating priorities that best match our economic interests. The EU has historically represented the UK’s interests poorly not just because it is incredibly slow, but because, inevitably, the EU cannot prioritise UK trading interests such as access for services, which is, of course, of prime importance to our economy. EU negotiators have to take account of 28 states’ interests, which can be very different from our own, and to reflect the protectionist priorities of producer interests, such as the Italian shoe industry, French agriculture and the German chemicals manufacturers.

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[John Redwood]

No, that is not true. In their devolved areas, they have genuine power, which they exercise in accordance with their electors’ wishes, but of course this is the sovereign United Kingdom Parliament, and the devolved powers come from the sovereign Parliament, as the hon. Gentleman well understands, which is presumably why he likes being here.

[Sir William Cash]

Will my right hon. Friend also bear in mind the manner in which laws are made in Europe? They are made behind closed doors in the Council of Ministers with no proper record of who votes, how and why—we are outvoted more than any other country—and then those laws come here and are imposed upon us in this Parliament.

[John Redwood]

I quite agree.

We wish to take back control. We will be a very different and much better country when this Parliament can settle how much tax we levy, how we levy it, how we spend money, how we conduct ourselves and what kind of laws we have.

My main remarks for the Minister and his colleagues on the Treasury Bench, however, concern the conduct of the negotiations. Like the Minister, I wish the Government every success. I hope that they get a really good deal—I look forward to seeing where they get to—but the EU is trying to make the process as difficult as possible by insisting on conducting the negotiations in reverse order. It says first that we have to agree to pay it a whole load of money that we do not owe. It then says that we have to agree a long transition period that coincides with its further budget periods, so that it can carry on levying all that money, and that is before we get on to what really matters: the future relationship and the questions of whether there be a comprehensive free trade agreement, what it will cover, and if it will be better than just leaving under WTO terms.

In order to have a successful negotiating position, the Government have rightly sketched out a couple of important propositions. The first is that nothing is agreed until everything is agreed. That is fundamental, and I urge Ministers to understand that they must not sign any withdrawal agreement unless and until there is a comprehensive agreement that is credible and that can be legally upstanding, because there is no point paying money for nothing. There would only be any point in giving the EU all that money if there was a comprehensive agreement that the Government and the country at large could be proud of, and which enough leave voters could agree with as well as remain voters.

The second thing that the Government have rightly said is that no deal is better than a bad deal. That, again, is fundamental to the negotiations. I have never made any bones about this, because I said before the referendum that no deal was quite a likely outcome, and a fine outcome. For me, no deal is a lot better than staying in the EU: it would give us complete control over our money, meaning we could start spending it on our priorities; it would give us complete control over our laws, meaning we could pass the laws and levy the taxes that we wanted; it would give us complete control over our borders, meaning we could have the migration policy of our choosing; and it would give us the complete right and freedom to negotiate a trade policy with the EU and anybody else. That would depend, of course, on the good will of the other side as well, but I would far rather be in that position than part of a customs union in which I had little influence and that was extremely restrictive against others. There is therefore an awful lot going for no deal.

The Minister and his colleagues must stick to the proposition that they will recommend a deal to the House only if it is manifestly better than no deal. They need to keep reminding the EU negotiators that no deal offers Britain most of what it wanted when it voted to take back control.

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[Mr Leslie]

It is very tempting to table a series of motions to keep extracting documents from the Government. For all the bluster of the Chancellor’s spring statement, I still regard the best documents published by the Treasury for quite some time, albeit reluctantly, to be the 30 PowerPoint slides that show, among other things, a £55 billion black hole in our public finances by 2033 if we opt for the middle scenario—the FTA-style scenario—and cuts to our public services that would result in the imposition of at least another decade or more of austerity. My hon. Friend the Member for Sheffield Central (Paul Blomfield) made an excellent speech and I say to him and my other Front-Bench colleagues that, having got the Labour party to support a customs union, the logic of all their arguments points to supporting retaining our participation in the single market, to avoid that austerity in years to come.

I want to finish on the arguments relating to the single market. We need to remember that the UK is an 80% service sector economy. While being in the customs union is good for the 20% of the economy that is based on physical or manufactured goods, 80% of our economy is based on services. That is why the single market matters—because it applies particularly to trade in services. Many trades and services will not be tariffed, taxed or diminished—they may be banned altogether, particularly in the field of financial services, which the Financial Secretary mentioned in his opening remarks. Financial services alone represent 11% of our economy and contribute £66 billion in revenue to our Exchequer every single year. That £66 billion pays for the schools and hospitals in the constituencies of all hon. Members, but, again, the Government are scrabbling around and trying to find some sort of mutual agreement on financial services. Just getting it referenced in a flimsy, two-sided A4 document on the future trade relationship will definitely not suffice.

[Sir William Cash]

Will the hon. Gentleman explain why it is that we have an £82 billion deficit with the other 27 members of the European Union, according to the Office for National Statistics?

[Mr Leslie]

In some areas we buy more of their goods than we sell, and in others we sell more goods than we buy. We have a significant surplus in financial services. We do financial services particularly well in this country. The Investment Association is exceptionally worried about the lack of co-operation agreements, which is a particularly technical term. We currently have such agreements by virtue of our membership of the European Union, but they will lapse on exit day. To what extent are the British Government seeking new or rolled-over co-operation agreements with each of the other 27 member states—perhaps the Under-Secretary of State can get advice on this from his officials by the time he winds up—so that the activities of some financial services are even legal in those countries?

The single market is also about goods, because some goods contain services aspects. Medical products require certification in order to be sold around the European Union. On the automotive sector, the Society of Motor Manufacturers and Traders has referred to the dangers of non-tariff barriers: regulatory alignment or divergence could be thrown into chaos if we leave the single market. I think about the single market benefits that consumers in the UK gain because they have safe products, a right of redress and enforcement on consumer goods. That is why the single market matters, and there are other issues besides.