Monday 2nd July 2018

(6 years ago)

Lords Chamber
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Motion to Take Note
Moved by
Lord Boswell of Aynho Portrait Lord Boswell of Aynho
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That this House takes note of the Report from the European Union Committee UK–EU relations after Brexit (17th Report, HL Paper 149).

Lord Boswell of Aynho Portrait Lord Boswell of Aynho (Non-Afl)
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My Lords, the House having a few minutes ago considered the repeated Statement on the outcome of the European Council meeting, we now move to our debate on the European Union Committee’s report on UK-EU relations.

It was originally intended that the European Council meeting this past weekend would mark a decisive step forward in the Brexit negotiations. It was to be the meeting at which the withdrawal agreement would be signed off and the outlines of what will become the accompanying political declaration, setting out the framework for future UK-EU relations, would become clear. None of that has happened. I will not labour the point, but the result, as our report points out at paragraph 121, is that we now have only a matter of weeks, in practice, in which to finalise the framework for future UK-EU relations.

Noble Lords’ European Union Committee, which I have the honour to chair, has published more than 30 Brexit-themed reports since the referendum. Perhaps in company with others, we have reached, if not actually passed, the point of Brexit-fatigue, but the fact is that our relationship with the EU matters. It matters economically, it matters to our internal and external security, and it matters culturally and socially, so tonight’s debate could not be more timely. Apart from anything else, it gives us a chance to discuss what we expect from the Government’s forthcoming White Paper, which was originally planned for early June, and is now, we understand, to appear next week following what is widely reported to be a crucial gathering of the Cabinet at Chequers on Friday. I hope the Minister will be able to confirm tonight exactly when the White Paper will be published. I hope also that he will confirm that it will be more than a 150-page wish list or a copy-and-paste exercise merely regurgitating past statements. It has to have some bite.

If there is one point in our report that I would like to emphasise to the House, it is that the Government need to understand that there is no free lunch. If we want to derive benefits from a new relationship with the EU, we will have to pay a price. That may be an economic price—we may have to pay for access to specific agencies or programmes—or it may be a political price—we may need to compromise, for instance on allowing a continuing role for the European Court of Justice or even on free movement—or there may be a trade-off between the two, but there will be a price. That is the nature of any negotiation. You identify the benefits you want to achieve, you work out how much you are prepared to pay, and then you start talking. The greater the benefits, the higher the price you can offer. This applies as much to the EU as it does to the UK. The EU also has much to gain—access to the City of London’s capital markets; tariff-free access to the UK market; the maintenance of supply chains; and, as the Prime Minister rightly emphasised at the European Council, the expertise of our security services—and the EU will also have to pay a price.

I stress to the House that our report does not recommend a particular option for future UK-EU relations, and let me be clear that it is not a covert plea to reverse the referendum result. It is clear in the title of the report we have just issued that that is not our intention. There are different views within the committee, and we would, like Parliament as a whole—indeed, like the nation—find it difficult to agree on a single model. Where we do agree is that, as illustrated in the very simplified graphic on page 18 of our report, there is a continuum where benefits and compromises exist in balance. You cannot have all the benefits without the compromises, as the Government occasionally seem to imagine, nor can you demand all the compromises without offering the benefits, as some of Monsieur Barnier’s speeches sometimes might suggest.

I deliberately emphasise to the House the two-sided nature of the negotiation because, for obvious reasons, our focus in the report is largely on the Government’s approach. That is our job. We are a Select Committee of your Lordships’ House, and our job is to scrutinise the UK Government. I trust that those with analogous roles in Europe, in the European Parliament and in national Parliaments across the EU 27, are doing their jobs with equal vigour, and I will touch on that now.

It is striking that the European Parliament, building on the tightly defined role afforded it by Article 50—the withdrawal provision—has been more constructive and imaginative in its approach to future relations than other European institutions, for example the European Council or the European Commission. Maybe it is because parliamentarians collectively are more sensitive to the realities of people’s daily lives than Governments and civil servants, but whatever the reason, the European Parliament, in defending citizens’ rights, including the rights of UK citizens resident in the EU, and in using the language of partnership through its advocacy of an association agreement, has made a positive contribution, on which I hope we can all build.

As I said a moment ago, time is short. We have a matter of weeks in which to make progress. We need a breakthrough. Both sides need to realise that people’s lives, their security and their prosperity are more important than abstract red lines. I hope that next week’s White Paper will achieve that breakthrough. It will not be easy, and I do not underestimate the difficulty of balancing benefits and costs, particularly when you start to factor in the benefits that the UK could conceivably achieve by not entering into a structured relationship with the EU. This particularly applies in respect of trade, where the economic benefits of entering into a customs union with the EU need to be set against the benefits of negotiating trade agreements with countries outside Europe. While we understand the scale of that challenge, we are clear that the Government’s White Paper will be judged against a number of key principles. These are set out in paragraph 125 of our report and I will briefly run through them. First, will the White Paper focus on achieving real, tangible benefits from our relationship with the EU? We know that we are leaving on 29 March next year, so it is time for a new mindset. What is true of any major project or programme is true of these negotiations: you need to focus on achieving benefits from them.

Secondly, will the White Paper build on areas of mutual UK and EU interest? Those should be the quick wins. Thirdly, will it offer a realistic assessment of the costs and trade-offs that will be required if the benefits are to be achieved? The Government have spent much of the last two years assuring us that they want to retain many of the benefits of EU membership but without sufficiently acknowledging the cost. In the interests of even-handedness, I could say the same about the Opposition. That mindset needs to change.

Fourthly, will the White Paper express an inclusive vision of future UK-EU relations, commanding broad support? The inwardness of much of the discussion that has filled the press in recent months is, frankly, disturbing. Getting agreement within a Cabinet committee, or even within the whole Cabinet, is not enough. The country is deeply divided and simplistic majoritarian arithmetic is not sufficient. It was Daniel Hannan—most definitely not a remainer—who in evidence to us highlighted the narrow margin in the referendum and argued that a nuanced approach was required. There will always be diehards on both sides, but the Government need to set out a vision that appeals to the whole country: those who voted remain as well as those who voted leave.

Lastly, the White Paper needs to use the language of partnership. This is why the European Parliament’s support for an association agreement is welcome. The White Paper needs to reset the tone of the negotiations in order to start rebuilding the trust that has been so eroded in recent months. Then the onus will be on the EU to respond positively. Mr Barnier might disagree but the EU also has its red lines, and it will need to show flexibility. Simply insisting on the indivisibility of the four freedoms will not help the two sides to make progress.

I do not have time now to cover everything in our report. There is the specific and pressing problem of applying the principles of the future relationship to Ireland and Northern Ireland, which we touch on briefly but on which we published a comprehensive report as early as December 2016, and we remain firmly on the case. There are what might appear to be second-order issues that could derail the negotiations, as the recent disagreements over Galileo demonstrate. We also need to defend the interests of the Crown dependencies, Gibraltar and the other overseas territories.

I conclude with a final word from my own experience. No one should regard negotiations of this seriousness and complexity as a pushover but there are dangers in a bunker mentality, which both sides appear to have adopted. There is also a time for openness and even a degree of generosity of spirit. That time is fast approaching. I beg to move.

Lord Whitty Portrait Lord Whitty (Lab)
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My Lords, I thank the noble Lord, Lord Boswell, for steering this report and initiating it himself, and for giving the House such a masterly presentation of what it is advocating. That makes it rather more difficult for the rest of us, and I may need to be slightly more controversial than I had originally intended simply to distinguish myself from the noble Lord. Still, his basic message is that time is short and it is time to abandon the red lines on both sides.

We are in a very difficult situation. Let us remind ourselves that the withdrawal treaty has not yet been agreed and that the issue of the Irish border threatens our even reaching stage one in any mutually agreed arrangement for the future. The transition period has also not been agreed, and therefore the question of what happens after 29 March next year is not as certain as a number of people and businesses already think. We are looking positively at October or November for not only agreement on the withdrawal agreement but a political declaration on all aspects of our future arrangements. Some on the European side refer to this as a four-pillar approach: the first pillar on economic affairs and trade; the second on internal security, police and justice matters; the third on external security and foreign policy; and the fourth on what my colleague, the noble Baroness, Lady Noakes, would probably refer to as the “odds and sods” of the agreement but it will include important things such as R&D, transport and, importantly, internal migration within the former EU.

How has it taken the Government so long to get to the point where the communication to the EU of our basic approach to the long-term relationship will depend on agreement by a fractious Cabinet this weekend? I claim no great foresight on this but the noble Baroness, Lady Verma, and I chaired a committee nearly 18 months ago at which we pointed out some of the arrangements that were needed and some of the decisions that would have to be made. For example, we referred to our future trade arrangements. We said the EEA option would be the least disruptive, although of course it had downsides in terms of freedom of movement. We said that all international agreements require some degree of compromise. We argued then that it is possible that a temporary arrangement to stay within the customs union, or a union with the customs union, would be a very sensible defence. Even this week we have seen the strange position of Michael Gove being ahead of the game once again by tearing up one version of the customs arrangements before, as I understand from the papers today, the Prime Minister tore up two. So we do not even know where we stand on basic trade in goods.

Our committee also said at the time that the issue of trade, important and central though it was, would have to be considered eventually in the context of other arrangements. We touched on an association agreement, which we come back to in this report. We were ambivalent about it because there were members of the committee, witnesses and others, who saw association agreements as a way into the EU rather than facilitating a way out. However, association agreements are much wider than that. One of the things that we must by now have noted about the EU is that it needs a legalistic basis for agreeing any movement, and association agreements in their broadest sense are clear within the treaties of the EU whereas bespoke agreements of any sort are not. Association agreements, for example, cover not only potential accession countries but countries such as Chile, which, as far as I know—I keep in touch with Chile as I have family there—have no intention whatever of joining the EU. So association agreements could be central to bringing together all the different themes of trade, security and foreign policy in a way that would give us a context and a totality of approach and give the Europeans what they need in terms of a legal base.

I have also on occasion been critical of how the negotiations have proceeded. A few months ago, I tried to relate them to my experience conducting industrial relations negotiations and talked about how so many mistakes have been made by the Government in that respect. I add another point to what I said then. In any such negotiations, it is very important to ensure that the people you purport to represent understand what you are doing and that, at the end of the day, there must be some compromise. I fear that the leadership of the Conservative Party has not obviously observed that and some of the members of the party are taking advantage of that failure to lay down those rules.

However, on reflection, this process is less like a negotiation over wages or the price of a house and rather more like a divorce. That is partly because it has serious emotional overtones but also because there are always complexities that you do not appreciate at the beginning. It is not a no-fault divorce. It is we who are walking away from what has for a long time been a tetchy marriage. As a result, we are not having any serious communication of minds between us and the European Union. We are in terms of procedure and what needs to be done next, but in terms of approach there is serious dissonance.

The Select Committee has picked this up on our visits to Brussels and in the report back that we get from the Secretary of State. It is all very formal and helpful, but indicates that there is no meeting of minds. To take the divorce analogy a stage further, we have made a grudging contribution to the ongoing upkeep of the house, but we are not engaged in what our future relationship will be. There are so many arrangements that we have to untangle and redefine after 45 years of marriage.

I shall focus a little on trade. A disturbing idea in the past few days is that we can reach agreement with the EU on customs for goods and ignore the whole of the service economy. That seems a crazy position for a country whose employment and GDP is now 60% in services. In the modern world, it is difficult to disentangle some of the contracts that offer products from the service element of looking after those products. So that is difficult to do in any case, but a single market for goods and a complete barrier on services as a result of regulatory non-alignment would be a foolish outcome for this country.

All the service sectors, which are so important to our economy—as important as manufacturing—require some across-the-board arrangements. They require the right of establishment, they require something such as passporting, they require intellectual property rules, they require data protection and data flow rules and mutual recognition of qualifications. They also require access to EU agencies in many areas, an issue which I was raising throughout the passage of the withdrawal Bill but has not yet been resolved, despite the fact that the Prime Minister’s Mansion House speech recognised that in some cases, we will need associate membership—if we can achieve it, if the Europeans agree—in some of those sectors. There are 30-odd agencies to which many sectors have to redefine their relationship. We hope we can get some degree of membership or associate membership to them. All these service sectors, from finance to the performing arts, need some access to those arrangements.

Most mention as their first item their need for access to the talent and labour available from the European Union. Some would say that it is our own fault that we have not trained people to be medics, scientists, vets or to contribute to the physical and performing arts, but the diversity of people who are talented in those areas that the European Union has brought us has been an important part of British success in those sectors. That means that the trade agreement is interrelated to the agreement, if we can reach one, on the future access of workers—of people—between the EU and the UK. We will need a bilateral agreement, as one of our sub-committees said a year or more ago, as part of the final deal.

We will also need respect for the rights of those workers and individuals. I was worried when I read a government paper that stated that environmental standards have to be as good as or better than those of the European Union once we have complete control of our regulations. It did not say that in relation to workers. It simply said that those standards should reflect the changing nature of the labour market. That is not much of a commitment to workers at either end —British workers or European workers coming here.

There are a lot of questions that the Government need to address. After all the division, manifest in the press and beyond over the past few weeks, the Government need in the next few days to come to a position that defines their approach to the negotiations, which can elicit a positive response from the European Union and which the British people will understand. At the moment, I fear that the Government are a long way from that position.

Lord Risby Portrait Lord Risby (Con)
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My Lords, it is truly an enormous pleasure for me to participate in this debate because I recently became a member of the European Union Committee. I pay unreserved tribute to the committee members and the members of staff, including the clerks, who produced the report.

We are indeed at a critical juncture in respect of the matter in hand, with the Prime Minister’s Chequers meeting, the publication of a White Paper and so much to be done before the autumn. What makes the report stand out, as so beautifully enunciated by the noble Lord, Lord Boswell, is that it is a successful attempt to move above and beyond the often emotional observations of the commentariat: either claiming that the EU is bullying us and out to destroy the United Kingdom or that we have been unable to clarify our position on anything of substance. Although I would have preferred more advances to have been made by our Government in some respects, I can only hope that the shared collective statements about a very positive post-Brexit relationship can take substance before the October European Council.

Of course, these negotiations are substantially focused on trade, but we need to see this whole discussion in the context of some remarkable developments which are clearly beginning to affect us all and may do so enormously in future. President Trump is shortly to meet President Putin. I speak as the chairman of the British Ukrainian Society, which tries to build bilateral links between our country and a country which has suffered grievously from Russian aggression.

We in Europe have collective energy interests. Nord Stream 2 will go ahead, avoiding Ukraine. Russia presently supplies 30% of Europe’s energy needs—40% in the case of Germany—and this will rise. All of us in Europe will, to a greater or lesser extent, be affected by this huge gas transmission system. I simply point out that Russia has a history of pricing its energy on the basis of how it determines the political attitude of the recipient country. That in itself means that we have a common interest in looking at our energy security.

One of the most telling observations about politics was once made by the late German Chancellor Willy Brandt, who said that politicians go in to politics to resolve a given set of problems but, once resolved, they cannot move on. That applies to institutions as well. It is very important, as we have this negotiation, to move away and understand the challenges that face us both across the channel and among ourselves, and not adopt positions that are frankly completely ossified.

This report highlights or notes our shared common strategic foreign policy and defence interests. The post-Brexit partnership with the EU, in my view, has not been given the importance that it should have been thus far in this key area. I therefore greatly welcome the European intervention initiative, spearheaded by President Macron and structured in a way that enables the UK to participate in crisis situations near Europe’s borders. It may well be that the defence umbrella with which the United States currently provides Europe will undergo change. In fact, we know that President Trump has expressed dissatisfaction with the levels of European defence spending on NATO. In these rather known unknown circumstances, it is simply imperative that Britain should not be treated as a detached third party. Of course, we are in the context of NATO— but imaginative defence, security and intelligence structures should be pursued in our common interests in Europe.

If we reflect on the past 20 years or so, we can see that a number of very disagreeable regimes have disappeared. In developing countries broadly, we have seen a great acceptance of the values of more active civil society, judicial oversight and electoral processes. These are values that are shared right across Europe. The belt and road project initiated by China is truly massive and focused particularly on infrastructure development. Yet investment does not come with any requirements on good governance. With our generous aid budgets and access offered to our markets, these must continue to be used to encourage good governance.

I say this because the UK and the European Union essentially share the same values. As China becomes ever more a player on the world stage and the United States feels that its generosity and world view is insufficiently appreciated, it is most important that the UK and the EU co-operate, as we recently saw at the Paris climate change conference, on consumer protection or over Iran, based on our common values or perceptions. I hope that some of those issues come to elevate the context of these negotiations. If, after all, our European neighbours thought that we would set off a chain reaction with the departures of other countries, that has certainly not happened at all.

I turn to the issue of the financial sector and the City of London. There have been assertions by some, including the European Banking Authority, that the UK’s financial sector has not adequately prepared for Brexit. The City of London provides a level of expertise, lending and specialist activity that is unique. Indeed, there has been an enormous amount of preparation for exactly the process that is taking place. Inevitably, new arrangements will be made by many British-based financial institutions to set up activities within the EU, but what needs to be understood within the EU is that the City of London is an immense asset for the whole of Europe. If its ability to function is materially impaired, the major beneficiaries will not be Paris, Frankfurt or Dublin but New York, Singapore and Hong Kong.

Of course, the essence of these negotiations are about trade and creating a customs structure, but what this report sets out so admirably, in the clearest possible terms, are the current positions in respect of trade and services of the European Commission, the European Parliament and the UK Government. It does the same thing in the areas of trade. At the heart of this is the need to have a mutually beneficial customs relationship and a mechanism for adjudicating disagreements. As my noble friend Lord Boswell indicated, a price will have to be paid on both sides. However, it is worth reminding ourselves at this juncture that, with the difficulties currently happening within the European Union, the United Kingdom has absolutely no interest in anything but a prosperous and harmonious European Union, as we seek to maintain the breadth and depth of our trade relationship.

I heard a speech very recently by that most experienced European figure, José Manuel Barroso, in which he repeated that the EU always reaches agreement at the last moment, whether discussing matters internally or with third parties. Indeed, we saw that illustrated over the migration crisis, and I suspect that that is precisely what will happen in our negotiations. It is perfectly true that the hand of an individual, business or country is strengthened if there is a threat of walking out of a negotiation. What, however, is undeniable is that all of us who have tried to follow the whole Brexit process know how immensely complex and entwined our commercial relationship is with the EU. Therefore, any enthusiasm for this tactic on my part is tempered by my difficulty in answering the question of the extent to which Her Majesty’s Government have prepared for such an eventuality—because I think, however regrettably, that the hour, if ever there was one, has probably passed.

I conclude by repeating the last sentence of the conclusions of this excellent report, because it says it all:

“The success of the negotiation can then be measured by the willingness of all parties to compromise, as they discover mutual interests and deliver shared benefits”.

Baroness Quin Portrait Baroness Quin (Lab)
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My Lords, as the first Member of your Lordships’ House to speak who is not a member of the European Union Committee or one of its sub-committees, I none the less congratulate the committee and the relevant sub-committees very warmly on this report. It is a concise report that none the less covers a huge amount of ground and many different subjects, and does so in a very straightforward and comprehensible way. Indeed, reading it I wished that similar straightforward material had been put through every door during the referendum campaign over two years ago.

When I look at the speakers’ list and around the Chamber, I see a number of Members with whom I have worked on European issues over a long period of time. Perhaps I could mention those doughty trade unionists—my noble friend Lord Whitty, who has just spoken, and my noble friends Lord Lea of Crondall and Lord Monks. I rather wish that, with their wealth of negotiating experience they were negotiating for us at the moment instead of the current Cabinet, which, unfortunately, seems to be catastrophically divided, and whose squabbling in public has been such a feature of recent days. Indeed, in the report that we have in front of us, there is a very helpful list in different colours—red, green, yellow and white—of the state of negotiations. I imagined when I was reading the report a similar table outlining the positions of the various members of the Cabinet. But I suspect that a tremendous amount of that report would have been covered in bright red.

At the time of the referendum, many prominent people who voted leave were prone to say to people like myself, who voted remain, “What part of the word leave don’t you understand?” At the time, there was a very great deal that we did not understand about the word leave—such as what the result would mean in terms of trade, financial services and the National Health Service, about which there has been much reporting over this past weekend. Then there is security policy, police co-operation, environmental action and so on. What worries me is that, two years on, we still do not know what the Government’s position is on some of the many fundamental issues that confront us. I hope that we will be clearer by the end of this week, with the Chequers away day and the publication of the White Paper—but it worries me that, while a lot of Ministers seem to support the Prime Minister in her undoubted goal of future close co-operation with the European Union in the interests of both Britain and Europe, others seem to want to have almost nothing to do with the EU and contemplate a no-deal scenario with enthusiasm. Some have even gone as far as the Foreign Secretary apparently did when confronted by the economic worries and uncertainties facing both our large and small companies, just to tell business to “Eff off”. Indeed, on the same occasion, apparently he said something to the effect that he imagined that it would be the hard-liners and no-dealers who would win in the forthcoming Cabinet discussions.

So this is a very worrying and alarming situation, but against that situation the committee’s report makes some interesting suggestions about the way in which we can move forward. I agree with the report in its call for a change of tone in the negotiations, with less concentration on red lines and more concentration on those areas where co-operation is undoubtedly needed and in the interests of both sides, and we should try to build on that for the future. I have a feeling that the Prime Minister and her closest supporters would welcome such a change in approach, but I am not sure that is true of the whole Cabinet or of the whole of the Conservative parliamentary party.

I was also struck—the noble Lord, Lord Boswell, referred to this—by the report’s highlighting of the proposal from the European Parliament that some kind of association agreement could come forward from the negotiations, as my noble friend Lord Whitty also mentioned. The relevant section of the committee’s report is paragraph 105. I was interested that this approach was welcomed by people from both sides of the argument, including Daniel Hannan MEP and the excellent North East MEP Jude Kirton-Darling, to whom I would like to pay tribute because she is a very devoted and hard-working MEP. It was interesting that they both welcomed that approach, which also occasioned some warm, or warmish, words from the Secretary of State for Exiting the European Union.

Certainly, I agree with the report that, if we do not manage to get the negotiations on to a more positive footing, the prospects are deeply alarming. Even so, we have to confront very real difficulties. In listening to what has been said so far in this debate about Northern Ireland, and what has been said about Northern Ireland really from the outset of the leave vote, I cannot see how that can be resolved without something that closely resembles the customs union and the single market arrangements that we already have, which are very much in the UK’s interests but also very much in the interests of Northern Ireland and the Republic.

Before I close, I have two questions for the Minister. One is a general question, and one is specific to the north-east of England, to which both the Minister and I belong. The general question relates to paragraph 52 of the report, which quotes Professor Derrick Wyatt, who said that negotiations on free trade agreements,

“used to be mainly about tariffs, but now they are relatively little about tariffs. They are about non-tariff barriers and harmonisation of regulatory standards. They reach deep into the domestic policy-making sphere”.

Does the Minister agree with that statement? Does not that make a nonsense of the claims that we will be free to adopt whatever standards or rules we want after Brexit, either in our relationship with the European Union or in any free trade agreements that we may negotiate with other countries?

My second question, relating to the north-east, arises from an Oral Question that I asked the Minister, about a month ago now, on the impact assessments that the Government had carried out on the likely impact of Brexit on particular regions of the UK. Those showed that the north-east was likely to take by far the biggest hit economically under any of the scenarios but particularly under the scenario of no deal. At the time, the Minister said in response that the assessments were “incomplete”. My question to him is: when will those impact assessments be refined and completed; when will the completed assessments be published; and will they be shared with us here in Parliament and more widely with the public?

I know, as many people tell me, that my region, the north-east, voted by a majority to leave—although it has to be said that the city of Newcastle voted to remain—but none of us wants to see the north-east punished for having voted leave, and yet the Government’s own figures suggest that it will be. Therefore, I want answers to the questions that I have raised. It is such a serious issue that I intend to keep on raising them again and again, as I am sure the Minister will appreciate.

I conclude by warmly congratulating the committee once again. I hope that the Government will listen to the recommendations in the report, that they might, indeed, even be influenced by the report in their deliberations at Chequers and in the publication of the White Paper, and that they will turn their back on the folly of a no-deal outcome to these negotiations, which are so important for the future of our country.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I again thank the noble Lord, Lord Boswell, for chairing the committee so well. It is perhaps not unreasonable to mention that we had a debate within the committee on whether to shelve the report until after the White Paper came out, because it was so imminent when we first considered our report, or whether we should continue. Of course, we have just been taken in so often: it was quite obvious that the White Paper was not going to be produced, and that it would be another month or two months until it was available—and we are already here at a debate on our report, so it must be well behind.

It is a great pleasure to follow the noble Baroness, Lady Quin, and all that she has said, but I also agree entirely with the noble Lord, Lord Risby, that issues such as Nord Stream 2 are key and on the importance of the financial services industry in the UK. However, I have to say to him that, after Brexit, we will be just like a third country as far as the EU 27 will be concerned —we will be the same as Singapore and New York. Although other EU capitals will probably benefit relatively marginally, certainly in Paris that marginal benefit will be important to them, and it is a foundation of building up their capability. That is how they see it. I do not think it is appreciated how important the City is, and that is a great loss because it is important not just to us but to the broader world.

I may disappoint the noble Lord, Lord Risby, in that I will probably be slightly more polemical than he would like in this debate. We are two years on—two years. We have eight months to go, and we will no longer be a member of the European Union. It is unlikely that this can be solved at five to midnight—sorry, five to 11 o’clock, British time—on 29 March, because the EU has to go down legal processes and, apart from anything else, it needs a vote of assent from the European Parliament. Therefore, the usual rules of stopping the clock will not work, because we are working within a strict legal framework.

So where have we got to in these two years that we have had? Of course, nothing is agreed because, as we are told by our EU 27 partners, nothing is agreed till everything is agreed and so we have nothing agreed. However, we sort of have a formula for payment: we have negotiated down to, I think, £35 billion to £39 billion in compensation, except that the National Audit Office has pointed out that, to taxpayers, it is actually some £10 billion worse than that—there is the £7 billion in refund that goes straight to the private sector and the £2.5 billion that we will owe the European Development Fund is not included in that figure because it is not technically part of the EU. So we are £10 billion worse off on that.

On citizens’ rights, I endorse the Government’s strong welcome to EU citizens to remain here but, strangely enough, it is the European Parliament that has criticised the EU 27 for not being able to safeguard the rights of UK citizens within the EU 27. The European Parliament and its rapporteur seem to have been stronger in this area than the UK Government themselves. We are clearly not there yet, and on Northern Ireland we are obviously nowhere at all. We are somewhere on those three areas of the withdrawal agreement, but not where we expected to be and nowhere on Northern Ireland.

We have agreed a transition deal in principle, but it is for 21 months. I cannot imagine that the future relationship, whatever it is, will not be a mixed agreement. We not only have to negotiate that agreement, and the UK Government have not yet decided what we want, but we have to agree it with the EU 27. It then has to go out to all the Parliaments—and one or two regional ones as well—to be ratified. It is an impossibility that this can be completed within 21 months. That means British business will go over at least two, maybe three, cliff edges and changes to regulations. The other side has already told us that we can forget areas such as the European arrest warrant and Galileo.

We hope to get the White Paper on the future relationship next week, but we are nowhere on it at the moment. We have no British ask whatever, but we have the red lines. The Prime Minister outlined these at the Conservative Party conference in 2016, when I am sure she got a huge round of applause for them from her party members. However, as a result of declaring them we effectively dug ourselves, and the EU, into the trenches from which we have not been able to move since. I do not commend the EU’s response either. We have—if Led Zeppelin were dead they would turn in their graves—a “Stairway to Brexit” from the EU side, which goes through all the different options. Against our red lines we are, at best, looking at a Canadian or a South Korean deal, which does not suit the UK in any way. The question is: how do we break out of this trench warfare? That is how our two MEP witnesses said it.

Following the theme of the noble Baroness, Lady Quin, the only way we can break out of this and come to some sort of sensible negotiation and agreement is by an association agreement. We have an excuse to go down that route, in that the European Parliament has mentioned it and written about it as a sensible option. We should use the European Parliament’s not inconsiderable leverage with the EU 27 to go down that route and start talking about an association agreement. The EU currently has those agreements with countries such as Moldova, Israel, various north African countries and some eastern European ones. They are not exactly the sort of agreements that we would necessarily want. Many of them, particularly in eastern Europe, are with countries aspiring to future membership rather than retreating from it. However, that is how this can be unlocked and we should move forward with it. I suggest that we get Guy Verhofstadt to intermediate for us. He seems to get on very well with David Davis, the Secretary of State. Perhaps he is the person to broker some movement on this.

As we have seen from the Statement this afternoon, Brexit is about number five on the EU’s priority list. We have lost leverage with the EU because of the lackadaisical and divided approach that the Conservative Government have taken. Immigration, the eurozone and the rule of law in eastern Europe are all more important issues to the EU 27 than our going, which they have already banked. It is a very sad situation, but that is where we are. Once the Conservative Party and the Government had lit the blue touch paper, we could have asked for—and got—a Brexit with dignity. It is such a shame that we could not even manage that.

Lord Jay of Ewelme Portrait Lord Jay of Ewelme (CB)
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My Lords, it is always a pleasure to follow the noble Lord, Lord Teverson. I agree with him about the association agreement approach; it justifies really careful study. I welcome the chance to discuss the report this evening, before this week’s meeting at Chequers and the publication of the White Paper planned for next Monday. I say “planned” because we have been disappointed once or twice over the last few weeks, but we look forward to seeing it when it appears. I congratulate my noble friend Lord Boswell for his introduction to the debate. It has been a privilege to be a member of the European Union Committee.

Focus on the longer-term relationship between the UK and the EU is overdue and welcome, but it presupposes that the present negotiations on withdrawal from the EU do not break down and that we do not end up with no deal. The harder you look at the prospect of no deal, the less palatable it seems. I will start by looking at it, because doing so shows up what the longer-term relationship needs to be and where Britain’s real interests lie. The main components of the withdrawal negotiations now under way are foreign and security policy, internal security and trade and economic relations. Our own interests are inextricably linked with those of the EU and require the closest possible relationship we can get on foreign and security policy, all the more so with a maverick US president. Let us hope that he becomes less maverick after his visit here, but the precedent is not hugely strong.

We participated in Operation Atlanta, curbing piracy in the Indian Ocean, because it was very much in our interests to do so. The same was true of our participation in Operation Sophia, the humanitarian mission in the Mediterranean, as the Leader of the House mentioned earlier today. We rightly continue to work closely with France and Germany, as well as with Russia and China, to preserve the Iran deal—hard though that is faced with American determination to end or amend it—because, again, it is in our interests to do so. I cannot see that it is in our interests to walk away from protecting ourselves in these challenges and, no doubt, in future ones. However, I have no doubt that there will continue to be fierce domestic battles about how much this nation is prepared to pay to support them.

On internal security, our own interests point, once again, to the need for a close relationship with the EU, as do those of the EU itself. The Prime Minister is absolutely right to argue that there is mutual interest in continuing close co-operation with Europol, Eurojust and other EU institutions and arrangements such as the European arrest warrant. I hope that the other 27 EU member states, whose first duty, like ours, is to the security of their citizens, will recognise this and trump—I am increasingly hesitant to use that word—the Commission’s negotiating stance. As other noble Lords have said this evening, the Government need to recognise that, seen from Paris, Berlin, Rome or Madrid, finding a solution to the risk Brexit poses to internal security is far less immediate a problem than finding one to the migration issue and the domestic political challenges they now face. Last week’s European Council showed that clearly. Britain, alas, is not the only European country to face difficult domestic political challenges. Even so, to walk away from those issues—to give up looking for a deal—cannot be in our or anybody else’s interests.

Turning to economic issues, do we really want to contemplate, even in extremis, planes not flying from our airports, 20-mile queues to the Channel ports, or lack of access to key medicines and equipment needed by the NHS? Of course not. Who would gain from that? Businesses—that means employers and employees—urgently need to know what the future holds. No wonder we are seeing stories of investment withheld or threats to relocate. To talk of walking away only compounds the problem and does no one any good. I agree very much with what the noble Baroness, Lady Quin, said on that point.

I will not argue now the merits or demerits of the customs union, a customs union, customs arrangements, maximum facilitation, a customs partnership or any other possible permutation. Let us hope—I am sure the Minister can confirm this in his summing up— that the White Paper will be clear and that the Commission will not rubbish it. I am glad to see a smile from the Minister; it is always good to get that. I emphasise, as I have done before in your Lordships’ House, that whatever arrangement is agreed on the customs arrangements must avoid any physical controls on the Irish border. I should be grateful if the Minister confirmed that the avoidance of any sort of physical controls on the Irish border is indeed the Government’s intention. I have long thought that Ireland is the most complicated issue we face in the Brexit negotiations. For Brexit to jeopardise 30 years of careful peacebuilding across the Irish border would be simple madness, and future generations would not forgive us if that happened.

I will make one final point on no deal. Are the Government really prepared to go back on agreements reached for EU citizens to live and work in the UK, and for UK citizens to get healthcare in other countries? Of course not.

Of course we need to prepare for no deal. It would be wholly wrong not to do so. But our real need must be to focus on what we want in the longer term from our relationship with the EU on foreign and security policy, internal security, economic issues, citizens’ rights and, as I say, Ireland. Our relations with the EU will continue to be by far the most important we have around the world. Look at a map and look at the figures; there is no doubt that that will remain the case.

None of us here knows what the outcome of the negotiations will be, although many of us will have views. But we do know that, as in any negotiation, we shall need, as the report says, a clear sense of our objectives and a willingness to cede some points, painful though that will be, to gain others. That is what negotiation means and what negotiating is. That is certainly my experience of negotiating over the years—I do not want to get into my anecdotage—with Margaret Thatcher, John Major, Tony Blair and others. That is the essence of negotiations. The noble Lord, Lord Teverson, also made the point that the Commission will need to show the same flexibility if the negotiations are to succeed, which is in everyone’s interest. At some point the Commission will have to recognise that, tempting though it is to talk about the Canadian option, the Swiss option or the Norwegian option, we and it are engaged in unprecedented negotiations for which there is no existing institutional blueprint. Both sides will simply have to engage, make compromises and, in all our interests, reach agreement. Time is running out. Let us hope that at Chequers this Friday the appetite for dissension—and dissent—has run out too. Ministers need to stop negotiating acrimoniously with each other and start negotiating seriously with the European Union.

Lord Soley Portrait Lord Soley (Lab)
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It is a pleasure to follow the noble Lord. He chairs the Home Affairs Sub-Committee on Brexit, of which I am a member, and one of the things we have focused on recently is security, which is so important here.

The report is absolutely delightful to read—I agree with almost every word. Every now and then I look at the speeches made by Monsieur Barnier or by the Secretary of State David Davis, and I noticed that they flag up areas of agreement and say that there is more agreement than we sometimes recognise or is recognised in the media. I hope that they are right. If at some stage in the very near future they suddenly produce, with a flourish, an association agreement, nobody will be more delighted than me. But if they do not, and we run into difficulties at the Cabinet meeting at the weekend, which we might well do because of the infighting at the moment, we will be in deep trouble.

When I started reading this document, one phrase, which we all need to bear in mind, caught my eye almost immediately. It says in the fourth paragraph of the summary:

“We note the European Parliament’s advocacy of a UK-EU Association Agreement, and suggest that UK commitment to such a dynamic and evolutionary partnership could bring a positive change in the tone and language of the negotiations”.

I agree. Two of the key words there are “dynamic” and “evolutionary”. One of the things that will not happen is that we will end up with a number of set and rigid parts of an agreement which will be hard to change as the relationship between the EU and the UK develops. It almost certainly has to be flexible and dynamic. I therefore welcome that and think it is a great use of language. The committee also says that the use of red lines by both sides—it is both sides—is disastrous in trying to get to a solution. I understand how important it is for both sides to say that they will not accept certain changes in the run-up to the hard side of the negotiations. But at the end of the day, those red lines on both sides have to be breached. There cannot be an agreement without some degree of breaching. It might be marginal, but there will be breaches, and if there are not, there will not be an agreement.

Ever since the referendum—the result did not surprise me that much, although I voted remain—I have felt that the key to understanding this is to understand that the United Kingdom needs the European Union and the European Union needs the United Kingdom. That is not just for the financial, economic and trade reasons, which of course we spend a lot of time on, but it is also, as the noble Lord, Lord Risby, mentioned, about security, defence and the political impact this will have on British and European Union influence around the world. It has damaged both of us in terms of political influence. I worry about that, and if the European Union looks as though it is fracturing and the United Kingdom is getting more distant from the European Union, the only winner in that situation will be Mr Putin; he will be delighted, because that is part of Russian foreign policy. We need each other.

I was delighted again at the suggestion of a joint UK-EU parliamentary group, which I suggested in this Chamber immediately after the referendum, and for which I got support from all sides of the House. We have to do that. We cannot do it yet, because the agreement has not been made, but when it is ready, I hope that we will rapidly set up a high-powered UK-EU parliamentary group. Again, we will need that degree of interaction between the two parties to make it work.

We will need joint institutions—I have gone on for some time about how they will be necessary. If we are to get agreement on security, on policing and the security exchanges in general, as I hope we will, but there is an idea that we cannot have institutions that constantly examine changes in UK and EU law and the way they affect the exchange of information about intelligence, policing and crime, we will have a rather rigid system which will not be flexible enough to meet the demands of the occasion. We have to build flexibility into this, and that is why I was so pleased to see reference to a “dynamic and evolutionary” partnership—a phrase used several times in the report. That is what we need.

I do not want to speak for too long, so I shall conclude my remarks with this final point. If, as I said, the Government come up with an association agreement that covers the many points that we are all nervous about, nobody will be more delighted than me. It really will be good news. Maybe that is what David Davis and Michel Barnier are talking about when they say that the agreement is about more than is immediately apparent. However, if there is not such an agreement, we will be in deep trouble, and it will be deep trouble not just for the UK but for the European Union. I say to the Government that if they are in that situation and if, after the Cabinet meeting, there are still divisions that prevent us getting an effective and good agreement between the EU and the UK, they will need to step outside party-political lines and reach across the Chamber. They need to talk to people like my right honourable friend Keir Starmer and to my noble friend Lady Hayter on the Front Bench here, who has done so much. They have good knowledge of the situation.

The Minister might smile but this is not about the Conservative Party and the divisions within it. I understand that; there are divisions in the Labour Party too, as well as throughout the country. When a country is deeply divided like this, a politician with good judgment will step outside that and put the needs of the country before the needs of his or her own political party. If the situation is as bad as some people suggest, the Government need to make that gesture and move. If they fail to do so, frankly both the EU and the UK will be greatly diminished, not only in our eyes but in the eyes of the world. My belief is that in the longer term the European Union will have one advantage from the United Kingdom leaving, and that is the fact that the United Kingdom has always been a drag anchor on further political union within the EU. My guess is that over time some key countries in the European Union will move further and faster on political union. I say “Good” to that. It is in our interests that they do so and we should encourage and support it. However, let us not pretend that somehow or other this will not have a profound effect on the United Kingdom.

Lord Cormack Portrait Lord Cormack (Con)
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My Lords, it is a particular pleasure to follow the noble Lord, Lord Soley, because I agree so much with what he said. When he talked about cross-party co-operation, he was right. In many ways, the situation that we face needs a national Government, although I accept that in the conventional sense that is not a starter. I regret it but I accept it. However, as we go through these next few crucial months, it is important that there is a sharing of information and aspiration across the party divide, not least because the overwhelming majority of Members of Parliament in both Houses do not want a no-deal or a hard Brexit.

The noble Lord, Lord Soley, was right too when he talked about the need for joint institutions and parliamentary groups. When the new relationship is developed, there must be no question that there must be a very senior British diplomat as ambassador to the EU. That is absolutely crucial.

We are all very much in the debt of my noble friend Lord Boswell of Aynho—I call him that even though he is not aligned. He made an excellent speech and used three words that really sum up what I have just touched on. He talked about the need for a generosity of spirit. If ever there was a need for understanding and a generosity of spirit in our national affairs, it is now. The report that his committee has produced does honour and credit to your Lordships’ House. It is balanced, judicious and wise—a word that is not always used of parliamentary reports.

Although not an original analogy, the noble Lord, Lord Whitty, used the analogy of divorce, and I want to talk for a moment or two about the human dimension. We have to remember that we are the ones who are walking away, and we need to maintain relationships with countries with which we have enjoyed close individual friendships, in some cases over centuries. My noble friend Lord Risby referred to former Commissioner Barroso, with whose country we have the longest alliance, going right back to the early 14th century.

The situation that faces us and the human dimension of it were brought home to me just a few weeks ago when I spent an evening with some Finnish friends. I had the honour to be chairman of the British-Finnish All-Party Parliamentary Group for 20-odd years. One of the Finns present, who was a former senior member of the Government and served his country with great distinction, helped to negotiate Finland’s entry into the European Union. He said to me, “I am grief-stricken”. He meant it and he was. We have to remember that, in spite of this divorce, rupture or break—whatever we care to call it—people like him are desperate to maintain close and cordial relations with our country.

The Baltic states are in a similar situation. I shall never forget being in the Baltic states in 2004 and being greeted by the rector of the University of Tartu in Estonia. He was speaking to a group of British parliamentarians and said how proud he was that his nation could now look not east but elsewhere, and particularly to the United Kingdom, for friendship and leadership. They feel let down and we must not forget that. They are bruised by what we have decided to do.

Although I do not think that there are many in the Chamber this evening, I want to appeal to the ones who were on the winning side. I acknowledge that they were on the winning side and I have never sought not to acknowledge that. However, I want to appeal to them yet again to recognise that the margin of victory was clear but small. This cannot be a situation where triumphalism dominates and the winner takes all. As this report makes so abundantly plain—it uses the word many times—there has to be compromise. There has to be give and take. I include in that sentence myself and all those of us who voted remain, just as my noble friend Lord Boswell did. We have to compromise and we have to give, but that applies right across the board.

If we are to have any sort of settlement that is not going to bring increased poverty, anxiety and worry to areas, particularly like the north-east as represented by the noble Baroness, Lady Quin, and from where my noble friend the Minister comes, we must not sacrifice everything that we have obtained from our membership. I go back, too, to the individual nation states that are the members of the European Union, with each of which we must maintain as close and cordial a relationship as we possibly can. Time is running out. We have this White Paper on the horizon. I look forward to seeing it with a degree of trepidation, but I hope that it will be reassuring. I hope that it will be a basis for all of us to move forward, but there is not a lot of time.

I conclude by appealing—I referred to this when the Leader of the House gave her Statement earlier today—through my noble friend the Minister. I do not know whether he will be at Chequers or not, but I hope that those who are there will talk to each other as friends and seek to come together in a spirit of compromise and realism to give us the basis in these last few months for meaningful negotiations. We have talked about a meaningful vote enough in this House, but it is meaningful negotiations that we now want—negotiations that will produce a result that we can all accept. I hope that there will indeed be an outbreak of Cabinet collective responsibility after Friday and that it will hold. I hope that individual Members of the other place, who are, in parliamentary terms, in a minority, will not issue threats to the Prime Minister or anyone else. The time for threat is over. The time for healing has come and if we cannot act in that spirit we are not serving our country as we should.

Lord Lea of Crondall Portrait Lord Lea of Crondall (Lab)
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My Lords, this is an excellent report—a gold standard, as one has come to expect. I add my appreciation to the committee’s members and the clerks, all of whom are to be congratulated. I acknowledge and thank my noble friend Lady Quin—neither of us is a member of the committee—for making reference to the TUC trio, if I may put it in those terms. I am glad that we are able to make a contribution more or less always on the same hymn sheet.

After the White Paper, there will no doubt be some parliamentary process. Then there will be the Recess and the parliamentary conference season. The only date that is clear in the autumn is that of the political declaration on 18-19 October, just two weeks after we get back. But the relationship between that date and the “finishing line”, to use the language of the report, is mentioned in paragraph 13 of the summary, which states:

“While the ‘political declaration’ may not be legally binding, we accept that at least at a political level it may bind future European Councils”.

Apart from that, all is still rather foggy—as in, “Fog in Channel: Continent Isolated”. I can imagine that particular dictum being put in rather different terms in Brussels, or indeed Paris or Berlin and so forth, where they think that we are trying to kick the can down the road indefinitely.

The analysis of each of the issues in turn is a model of its kind—for example, the succinct analysis of the EEA, EFTA, the EEA Joint Committee, the specific characteristics of Norway and Iceland and the question mark over the credibility of the idea that the EU might simply wish to do a free trade deal with Britain on its own. The Government have been far too quick to rule that out. Today’s Prime Minister’s Statement from the European Council states:

“Our White Paper will set out detailed proposals for a sustainable and close future relationship between the UK and the EU—a partnership that means that the UK will leave the single market and customs union, but a partnership which supports our shared prosperity and security”.

Apart from anything else, a point emphasised in the European Union Committee report is that at that stage it simply leaves on one side a fact that we are all conscious of: namely, that to a great extent it will be perforce the Irish tail which wags the UK and European dog. At paragraph 57 the report states that the Irish question is “uniquely” able to determine not only the process but the substance of the outcome. Churchill’s phrase,

“the dreary steeples of Fermanagh and Tyrone”,

is once again haunting us at the present time.

Against that background we have heard some extraordinary invective from Ministers in the Government. For obvious reasons I will not quote what the Foreign Secretary said recently about business, but, given his predilection for the Anglo-Saxon expletive, I would say that until now business has been very restrained in speaking out. I shall mention one statistic which came as a shock to me. I was at a small but well-informed meeting of the London representatives of multinational companies operating in Britain in terms of direct investment. I do not mean equity investment: I mean people who are typically involved in manufacturing, services and so on. They are saying that the foreign direct investment decisions on regards jobs, plant, technology and so on being made now to cover the next two years are in value terms some 80% down on what they were two years ago. If that is not a shock, I do not know what is.

The trade-offs set out in the report are well described, but I would go a little further. The trade-offs should be described as arising specifically between packages. There is a trade-off between trade-off package A and trade-off package B, but there are also trade-offs within each of the packages. I hope that, if the White Paper does one thing, it will be to copycat the reality of this point as it is described in the report. However, I fear not: say the phrase “trade-off” and not just the Foreign Secretary but many Members of the Cabinet smell a rat.

We are now stuck with these red lines. I admire the pithy remark by Frances O’Grady set out in paragraph 18:

“It is fine having red lines, but you do not publish them”.

My own bottom lines of course include the protection of workers’ rights, and that means not just relying on HMG’s good will but staying in the Maastricht treaty extension of the single market, that being the only way in which we can guarantee the rights negotiated in Brussels, whether we are in pillar I of the EEA, which is the EU, or pillar II, which is EFTA.

As my noble friend Lord Whitty reminded us in his report a few months ago, the EEA outcome would be the least destructive as far as trade is concerned. It is not the end of the story, but that is a very clear statement. I think that the opposition to the EEA has been considerably overstated. Of course we are not rule-makers as opposed to rule-takers, but let us take a current example that we will all understand: FIFA. We are rule-takers and rule-makers, are we not, and is that not true of most of the civilised things that we do together around the world?

In conclusion, I want to mention that as regards the association agreement, I think that I am with the implication of the remark made by the noble Lord, Lord Jay, and I can see the attractions of that label. Equally, however, we need to cast a beady eye over any idea that this is a magic potion and that with one leap Jack was free. We have to be a bit careful about supposing that the component parts of the EEA, embracing all the trade agreements around the world, will suddenly, with a wave of a magic wand, allow us to make trade agreements in place of the 50 or so made under the present umbrella. The referendum was a bit of prime ministerial party opportunism that went wrong. Perhaps we are now able to see whether we can unscramble this particular omelette—without, I hope, leaving too much egg on our respective faces.

Earl of Sandwich Portrait The Earl of Sandwich (CB)
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My Lords, I am delighted to join this debate on the EU Committee’s latest contribution to the mêlée of ideas now swirling round our exit from the EU. The report shows how hopelessly tangled the Government’s position on Brexit has become. It makes a growing number of people doubtful about whether it can ever be achieved, as we have heard—although there is a bit more realism in this debate.

My main reason for speaking is simply, as a former committee member, to reinforce some of the report’s conclusions. Reading the report and the Library summary made me admire the many teams of civil servants and researchers who have had to prepare so many documents for negotiations that will be out of date only days later. Frankly, this was not what the majority voted for. They wanted a clean break—to cast off, in nautical terms, from Europe—and they were looking for an independent offshore island that has not existed since the time of William the Conqueror.

I refer first to paragraph 123 of the report, which has already been highlighted by my noble friend. It states:

“Given the closeness of the referendum result, the Government must articulate an inclusive vision for future UK-EU relations, commanding broad support, in order to achieve an acceptable and durable outcome”.

That echoes the committee’s previous report, paragraph 120 of which quotes the Prime Minister as saying that she needs,

“to make an inclusive case for EU membership, one that speaks for all”.

It cannot be said loudly enough—the noble Lord, Lord Soley, and others said it—that this country is in two halves that have to be brought back together. As the Times said today, the Prime Minister has got to discipline her band of hard Brexiteers and show them the futility of their arguments.

The noble Lord, Lord Cormack, said that the time for healing has come—but it will need statesmanship and leadership, not bickering and fudge. I sympathise with those in No. 10 charged with minuting ever-shifting policies. But, as the noble Lord, Lord Whitty, said, there must be a plan that people can understand and that a clear majority of MPs will vote for, if and when they get a meaningful vote. Otherwise, there is a real risk of a rift inside both the Tory and Labour parties at every stage of negotiation, which would then lead to an even messier election. If it requires a second referendum, which will become more likely next year, so be it—but that would be a defeat for the Government and might not be conclusive. Far better for the Prime Minister to lead from the front with a genuine plan and a timetable. I am hopeful that the White Paper, when it finally comes, will contain that degree of realism.

I am not sure that Brexit exists any longer. It was an ideological statement of a bare half of the population in an advisory referendum that should and could never be translated into policy. Events have shown that it will be quite impossible for the UK to leave a partnership that has evolved over decades, demonstrated so many advantages and raised so many standards. Of course, we have projected our own ideas into the EU and Europe has benefited from that—and, had we stayed, we would have an even stronger influence in some sectors. But the fact remains that we will have to rebuild a partnership that will be very similar to the one we had, short of actual membership. No wonder Brussels has been exasperated by our failure to see that it is the club that makes the rules, not the individual members.

The situation at Westminster is dire. The intellectual justification for Brexit is there, but there is simply not enough support for it in either the Conservative Party or the Commons as a whole. The Irish border issue will remain insoluble right through the trade and customs legislation into next year; it is impossible to see a way out of it. There is no way out unless a viable customs arrangement is put forward and supported by the Cabinet this Friday at Chequers. Otherwise, the report suggests that we will have to enter an association agreement as though we were Turkey, Georgia or Ukraine. I was in Georgia when the association agreement was signed—I know how much it means to Georgia—but I am not certain whether it is the right way forward.

We should also be concerned about the effect of our so-called departure on the present structure of the EU. A very few short-sighted Brexiteers may rejoice at what they hope will be the potential collapse of the euro and the Union, but the more discerning will see the damage already done by our departure and will want to start repairing it. The EU needs the UK, not just in defence and security and policing—as the Prime Minister re-emphasised for her own reasons last week in Brussels—but in a range of other areas, such as the environment, labour rights, education and international development. As the report states:

“The United Kingdom and the rest of Europe are geographically, economically and culturally intertwined”.

Of course, we have to accept that the EU is fragile in some places. We have to remember that we are members still and partly responsible for that: we helped to enlarge it and to hold it together. I am sorry that Germany is out of the World Cup, because she is our ally and needs to hold her head high. Chancellor Merkel has won our admiration thus far for so carefully steering the EU through the reefs. The coalition with the CSU is currently in deep trouble—but I am optimistic that it will survive.

It may be that, over time, we shall see a Europe of concentric circles—a very good phrase from one of the MEP witnesses quoted in the report—but we need to decide to which circle we belong. Perhaps we should ourselves make more effort with the question of migration. For years we have stayed out of Schengen while keeping a very close eye on lorries entering Calais, because the Dublin rules have served us well. Yet we are engaged in that other dimension of migration, which is the push factor in north Africa. We have opted in to the Khartoum process, which is trying to deter migration out of countries such as Libya, Eritrea and Nigeria. We provide the home base of Operation Sophia, as has been mentioned, which has had considerable success in the Mediterranean. These are both important EU projects and we will need to be associated with them well beyond 2019. I think that the Minister has already given that assurance.

On international development, which is another vital element in migration policy, the noble Lord, Lord Risby, referred to common values. The EU is already reorganising institutions such as the European Development Fund and the Cotonou agreement. I understand that both the FCO and DfID are keen to remain closely involved in any new configurations of these that emerge. I am relieved to hear that. On trade, we shall scrutinise the trade and customs legislation to ensure that it will protect the interests of developing countries. Again, we have had some reassurances there. The MoD is also engaged in critical aspects of European defence and security outside NATO. All these projects have to go on in a dangerous and unstable world environment.

So I look forward to some more clarity, if not from the Minister today then from the Prime Minister on Friday. What game are we really playing? Is it not time that we gave it a name and drew up our ground rules? There are 27 states waiting to play, and, like the noble Lord, Lord Tomlinson, they are getting impatient. So are the British people—on both sides of the referendum.

Lord Monks Portrait Lord Monks (Lab)
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My Lords, I agree with rather a lot of what the noble Earl, Lord Sandwich, said, but I make one conspicuous exception—his remarks about the German football team. Like many others, I was quite pleased to see them knocked out before they encountered our boys.

I add my appreciation to the long list of tributes being paid to the noble Lord, Lord Boswell, his committee, its staff and all those who have been involved in the preparation of this report. It is an excellent one and I hope it will not be added to the rather long list of excellent reports from this committee whose exact effect on government policy over time I am still trying to see—not very much, in my perception. I ask the Minister what points he will take from this report into the deliberations that will take place at Chequers later this week and in the preparation of the White Paper subsequently.

The report certainly reminds us time and again what a vast and complex exercise it is for the UK to give effect to this schism with the European Union. I suspect that few of us in this debate need any reminder. I have long been convinced that the referendum decision in 2016 risks triggering a national calamity by launching the UK on a journey that could lead to less influence, a weaker economy, job losses and lower public revenues available for the NHS and our other vital services. We are on a road to diminution if we are not careful.

The Government’s flat-footed interpretation of the referendum vote has made matters worse. In retrospect, should not the Prime Minister, before triggering Article 50, have tried to build an all-party approach at Westminster, as some previous contributors to this debate have mentioned? I do not pretend that it would have been easier, but it could not have been much worse than trying to build a consensus in her own Cabinet and her own party, which has been extremely painful to watch. Instead of reaching out, she started with her red lines, which got a round of applause from the Brexiteers in the party but which in reality took us into a cul-de-sac, a dead end from which we are finding it devilishly difficult to extricate ourselves.

Parliament must share some of the blame for this. We have been spectators observing the fumblings of the Government, tolerating their inability so far to come up with any realistic vision of how the UK will relate to the EU in the future. This House supported the idea of Parliament giving the Government a mandate. Unfortunately, the other place narrowly turned it down and an opportunity was missed.

Now we await next week’s White Paper. The Prime Minister, a bit like Baldrick in “Blackadder”, may have a cunning plan which she will unveil at Chequers this week to her Cabinet. Let us hope so, because there is a great need for a realistic and pragmatic plan on which we have a chance of negotiating a decent and practical deal with the EU. But, as the committee’s report details in its careful and judicious language, the challenges are formidable and none of us should be holding our breath tonight.

There must be every prospect of a withdrawal agreement foundering on any one of a range of issues, starting with the Irish border question, to which an agreed solution remains elusive—I fear, even remote. A host of other issues are well illustrated in the helpful charts in the report. It is ironic that the Brexiteers who favour no deal can probably look to the EU as their main ally, because the EU will not compromise its rules and principles, and will not add more border in Ireland to what already exists. British negotiators, with their airy talk of bespoke deals, have yet perhaps fully to recognise this strand in the Commission’s thinking.

As my noble friend Lord Lea said, the trickle of jobs and investment going abroad is already evident. If the UK is to end up as a mere third country aiming for a Canada-style free trade agreement, with no certainty for several years about what that deal will be, expect the jobs and investment emigration to accelerate. I do not believe that businesses are bluffing. Indeed, I am with those who think that they have been far too polite. One reason for that is that many of them are foreign owned and do not want to be seen to be interfering in British internal life and democracy. Only now are they becoming rather desperate and speaking out strongly.

How can we get out of the situation we are in? First, we have to take the least worst options available. For me, that is joining the EFTA and remaining in the European Economic Area, and, from that core, negotiating some bespoke aspects of our future relationship.

In today’s Statement, the Prime Minister again ruled out membership of the single market and the customs union. But whether or not the terminology can be changed to “customs partnership” or “market access”, perhaps under the umbrella of an association agreement—which the report helpfully reminds us is a mechanism the European Union is familiar with and will therefore gravitate towards, rather than to something unfamiliar—let us remember that the EU will always want to keep the arrangement in essence as close as possible to the existing system, especially on trade. So should we.

Earl of Kinnoull Portrait The Earl of Kinnoull (CB)
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My Lords, what a pleasure it is to follow the noble Lord, Lord Monks, and his incisive wit, as we heard in a very clear speech. I declare my interests as set out in the register of the House, in particular as a member of the EU Select Committee and, for reasons that will become clear later in my remarks, in respect of the insurance industry as well. I congratulate our chairman, the noble Lord, Lord Boswell, who has overseen the production of more than 30 reports, all unanimous, since the referendum. He continues to keep our spirits high in these very busy times. He made a very powerful speech, which I hope will be widely read in many countries. I should mention that we are very lucky to have 24 dedicated and immensely skilled staff, led by our principal clerk, Chris Johnson, who is deputising as clerk this evening as well, and our committee clerk, Stuart Stoner, who I see is also with us. I pay very warm tribute to them all.

I shall make just three points this evening, and in one context. My context is simple. The lives of 500 million people will be affected by what is agreed between the parties in this negotiation. Damage inflicted by one party on another will inevitably be reciprocated somehow or other, as indeed we are about to discover in the seemingly forthcoming world trade rumpus. Those who are party to the negotiations must therefore have regard to what works for all 500 million and not just their 65 million or their 440 million. As we said in our summary,

“this means using the language of partnership, and accepting that compromises will be necessary”.

Indeed, many others have alluded to that. As the noble Lord, Lord Jay, alluded to, and I say again, the UK and the rest of Europe are historically, geographically, economically and culturally intertwined. We are each other’s ultimate repeat order customers and agreement reached must not leave a bad taste for one or other party. I note that in commercial life I have never known an act of generosity go unrewarded and I very much hope that the negotiating teams have had that experience to guide them.

My three points concern the EU agencies for security and, curiously, reinsurance. Turning to the EU agencies, I note that there are 37 of these today, 36 of which the UK is a member of. At the time of writing our report there was considerable confusion as to what exactly we had asked for and what the responses had been. The European Maritime Safety Agency has Iceland and Norway as full members. The European Aviation Safety Agency has Iceland, Norway, Liechtenstein and Switzerland as full members. Looked at through the lens of the interests of 500 million people, should the UK not be a member of at least these two agencies? Have we asked to be members of these agencies? What response have we had from the EU negotiators? Similar cases can be made for a large number of other agencies. I very much hope that the White Paper will be clear about our ask where agencies are concerned. In that, I very much echo the noble Lord, Lord Whitty.

Turning to security, I was alarmed and hugely disappointed to read the front page of the Times on Friday 29 June, which suggested that EU negotiators will not allow the UK access to three vital systems; presumably there will be a similar lack of access to UK databases with this type of information on them for EU countries. The EU negotiators are citing legal framework problems. The three systems are the Schengen Information System, which shares information on criminals, missing persons and persons under surveillance; the European Criminal Records Information System, which allows police from one country to check if a suspect has committed a crime in another; and Prüm, the new EU-wide DNA database. Again, looked at through the lens of the 500 million and in a world of heightened terror problems, is it not crystal clear that a different approach is urgently needed?

It is not as though the EU has not found a way in the past. In 2017 two British MEPs, Labour’s David Martin and Alyn Smith of the SNP, published a European Parliament report called Variable Geometry Within the EU, which explains in 31 clear pages all the many ways in which the EU has flexed itself to cater for oddities. I dare say that in each case the EU as a whole was satisfied that the accommodations were in the interests of all concerned. This approach is needed again here. Therefore, I ask the Minister to confirm that we are seeking mutual access to these three information systems and—not that I do not believe the front page of the Times—what the current EU negotiation stance is.

My final point concerns non-life reinsurance. Insurance allows the western world to function. Every aspect of personal or commercial life is the subject of the pooling of risk that is insurance. Under Solvency II, the EU led the world in creating the modern way of regulating insurers, a key strand of which is determining how much capital they require to trade. Insurers’ capital is made up of permanent capital—shareholders’ equity—and temporary capital that they source from reinsurers as reinsurance. In the EU the temporary capital counts only if it is from an EU reinsurer or one based in an equivalent jurisdiction.

The largest reinsurance market in the world is in Bermuda and it is thus not surprising that it was granted equivalence for the start of Solvency II. Not to have done so would have hugely damaged the insurance industry throughout the EU. EU insurers in the aggregate would have been far short of the required capital under Solvency II, and whatever corrective strategy they chose to take would have caused problems for large numbers of personal and commercial clients. The second largest reinsurance market is London. The same considerations apply. Again, looked at through the lens of the 500 million, the granting of equivalence where reinsurance is concerned would seem very much in everybody’s interests. Can the Minister confirm that the equivalence position is being talked about and tell us the EU negotiators’ current position?

In closing, I note that the common theme that runs through our report is the need for a collaborative approach and a can-do attitude. The report calls it,

“the language of partnership, and accepting that compromises will be necessary”—

the lens of the 500 million people. That is a challenge that those who gather at Chequers later this week have the opportunity to take up. I very much hope that they do.

Lord Desai Portrait Lord Desai (Lab)
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My Lords, as I am the last Back-Bench speaker in the debate, there is not much left for me to say. We have an excellent report from the noble Lord, Lord Boswell. As many people have pointed out, we do not have many choices that are pleasant, and we can hope only that when the Cabinet meets and the White Paper is published, it will draw on some of the wisdom that the noble Lord, Lord Boswell, has provided. Indeed, he has provided the optimal solution—and if the Cabinet could not be bothered, it could just say, “The option preferred by the report of the noble Lord, Lord Boswell, is the one to go for”. Of course, chance would be a fine thing.

I will concentrate on something different that is germane to the report. When the referendum was held—we will not debate whether the result was narrow or broad—had anybody in the Government drawn a picture of what it would mean to withdraw? I ask this because there was a famous episode when Harold Wilson became Prime Minister in 1964. The Civil Service had two draft reports for him—one for devaluation of the pound and the other against—and said, “Prime Minister, you have to decide”.

Did Mr Cameron ever have a detailed report on what it would mean to withdraw and what it would mean to stay? We obviously did not have to worry about what it would mean to stay. I ask this because, having lived through the experience—I am sure others will agree—I think a lot of the things that people thought were simple have turned out to be very complicated. People thought that out meant out—that we would have freedom from the bureaucracy of Brussels and could fly the flag of free trade everywhere, and that would be that.

Nobody told them about Northern Ireland. Coming from an ex-colony, that does not surprise me; the English do not always remember the rest of their empire. But they were not worried about Northern Ireland and were not even aware that a withdrawal would mean a major schism between it and the Republic, and that there would be consequences. That is quite remarkable. I have not been to see the wiring and the plumbing here in the Palace, but I presume that what nobody realised was that the community we had joined, the Common Market, was full of tangled wires like that, and that it would be very difficult to risk pulling something out and walking away.

My noble friend Lord Whitty gave the analogy of divorce, which has been used before. Most people thought that our going away would be just like walking out, without saying anything further about the law, responsibility for the children, the division of assets or anything like that. I am puzzled by this, because it says something about the quality of governance in a country. Here we are, travelling through a train wreck: the windows are shut and we cannot get out but we can see the train wreck happening. It is going to happen. The only question is whether it will be a big jolt or a small jolt—but there will be a jolt. There is the problem of governance: at what stage did the Government neglect to find out what it would mean to withdraw?

Did even the hard Brexiteers ever have a document prepared or published in which they knew all the things that would be done? I think that when we had our first debate after the referendum, the noble Baroness, Lady Randerson, spoke from the Liberal Democrat Front Bench to point out that the prospect of British airlines landing at European airports was under threat. I thought, “Nobody has told me that yet”. As has been pointed out, there are also problems with sharing information on terrorists or such simple things as being able or unable to import our daily supplies.

Even when all this is over and we have certainty, we do not know what kind of settlement we will get. That is another thing we have to mention. We all wish for it to be a good one but we must all be prepared for a bad one. I am told that in the City of London, quite a lot of businesses are prepared for the worst-case scenario. One always has to prepare for a worst-case scenario, but let us be there so that we can see what the worst-case scenario is like. Right now, the uncertainty is absolutely crippling. As the noble Earl, Lord Kinnoull, pointed out, everybody in the insurance industry and the banking industry is worried. We ought to have a sort of working party or plan for what to do when we finally know what we have got.

I think a hard Brexit is most likely. I am not an optimist in this respect; I am a pessimist. I think we are going to get a hard Brexit because I do not think there will be sufficient agreement in the Government. But, whatever it is, we ought to be prepared for the consequences of a bad Brexit. How will we cope with a bad Brexit? What would be our options in terms of economic policy for the future? How will we adapt to a bad Brexit? At some stage, if we still have the European Union Committee or some version thereof, that should be its first task—and I hope that the noble Lord, Lord Boswell, will guide us through that problem as well.

Baroness Janke Portrait Baroness Janke (LD)
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My Lords, I welcome the opportunity to speak in the gap on this report, which I read with great interest. The spirit of generosity, magnanimity and compromise over the costs and benefits that the noble Lord, Lord Boswell, spoke about is very welcome. In my area—Bristol and the south-west—there is huge anxiety and a lack of confidence in matters moving forward on Brexit. Noble Lords talked about Airbus. Airbus is in Bristol in addition to being in Wales. The south-west also has the largest number of small and medium-sized enterprises supplying the aircraft industry, aerospace and the motor industry. In the absence of a plan, reassurance or understanding of the Government’s game plan, there is huge anxiety, and not only in business and among investors. Long-term investment in Airbus is being decided now. Citizens have lost confidence that Brexit can be delivered without major harm to them and their employment. So I welcome the spirit of the report. I hope it may have some effect, but it is understandable that there is a lack of confidence.

We have heard about security issues. There is a huge amount to be resolved there. I am a member of the Home Affairs Sub-Committee, which has produced reports on this. There are issues about Europol, Eurojust, the European arrest warrant and data sharing, as the noble Earl, Lord Kinnoull, and the noble Lord, Lord Jay, said. People have mentioned Northern Ireland. This all takes time to resolve. Our witnesses emphasised that it is not just about having a plan; it is about having time and understanding what it takes to resolve some of these major issues. We are discussing a report about health tomorrow. I have hardly heard health mentioned in the Brexit debate but it is another major issue. I was encouraged by the mention of the association agreement. I hope this broader, more strategic approach may help the Cabinet to move forward in its work.

The other thing that affects confidence is the fact that there is so little time. I and others in my party worry that whatever is agreed will be agreed in so short a time that there will be very little opportunity for us or for anybody else—interested parties—to comment or to input into a major decision for this country. I hope the White Paper will address these matters and the need for confidence, understand the wish for leadership and demonstrate inclusivity in this very divided country that other Members have talked about.

Baroness Hayter of Kentish Town Portrait Baroness Hayter of Kentish Town (Lab)
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My Lords, as the noble Lord, Lord Jay, said, it is brilliant timing to have this debate just now, almost on the eve of what people have referred to as the Friday Chequers session—or maybe it will be Saturday and Sunday as well. Maybe the best thing would be just to lock the doors. My father used to be the security officer at Chequers and he had the key to the front door; maybe we should lock it and not let them out until the white smoke appears.

We face a serious situation. It is 461 days on, there are 270 days to go, and what do we know? We know there will certainly not be the smooth and orderly Brexit predicted by the Prime Minister. As the noble Earl, Lord Sandwich, said, the country remains divided, the Government having failed to repair the divisions of the referendum between the 48% and 52%. Parliament is divided, leaderless and restless. It is ready and eager to comment on the Government’s plans but they have yet to appear. The Cabinet is seriously divided; it is,

“in a remarkable state of disarray”,

says the FT, with the behaviour of Ministers labelled “bizarre and inexcusable” by the former Deputy Prime Minister, Damian Green. Clearly getting unity among 27 is rather easier than among the Cabinet’s 25. Last week the noble Lord, Lord Bridges, attributed the Government’s chaos and confusion to the Prime Minister’s loss of a majority when she,

“returned to office but not to power … unable to stamp her authority on her warring Cabinet”,

with Ministers,

“lobbing grenades at each other”.

This is a very recently former Conservative Minister describing others as lobbing grenades at each other. Another government aide even wondered now whether the Cabinet were fractured beyond repair.

Yesterday Graham Brady warned that a divided party would let Labour in. I would welcome that; we would certainly sort out this unholy mess. As my noble friend Lady Quin suggested, with all our trade unionists we should be able to do that. Short of that happy day, however, we need leadership and a good deal from the negotiations for the sake of UK plc. We need the spirit of generosity recommended by the noble Lord, Lord Cormack. What we do not need is offstage threats from Back-Bench Tories putting egos above the national interest. I noticed that on Twitter Nicholas Soames has urged one particular miscreant to “put a sock in it”—his words, not mine.

Equally serious is that business is being ignored. So frustrated is business that the directors-general of BusinessEurope and the CBI as well as the general secretaries of the ETUC and the TUC issued a joint statement urging faster progress, while the CBI, the British Chambers of Commerce, the EEF, the Institute of Directors and the Federation of Small Businesses wrote to the Prime Minister protesting at the lack of progress. Rather than telling business to “something off”, it would be rather better if the Government heeded these views of business and those of Standard Life, the Society of Motor Manufacturers and Traders, Cicero, BMW, Siemens, INEOS, the Freight Transport Association—all those other wealth generators and job creators.

It is not just business; voters are being ignored as well. Their refusal to provide a mandate for a hard Brexit has been conveniently overlooked and, unsurprisingly, two-thirds of them think the PM is making a hash of Brexit. Consumers and young people are being ignored, the Government more set on finding a Brexit to satisfy their own warring factions than a Brexit for those young people’s futures.

Trade experts are ignored, especially when they remind the Prime Minister that we export 10 times more to the EU than to China, 25 times more than to Canada and 40 times more than to India, and that therefore any new trade patterns will take many decades to make good losses with the EU. By the way, any idea that a US deal would be great for us somehow overlooks the interests of America—their desire to send us hormone-injected beef and chlorinated chicken and to get their hands on part of our precious 70 year-old NHS, as well as Trump’s current imposition of new tariffs on imported steel and cars.

Meanwhile, Europe is exasperated by what it calls a blurred Brexit, with EU politicians, business leaders and regulators watching in dismay as UK Ministers fail to agree coherent negotiating positions among themselves, let alone present them in the Brexit talks. They, along with my noble friend Lord Whitty, are mystified that two years on, the Government are yet to sort out the divorce, let alone our future trading, security, defence and other relationships.

Unlike the noble Lord, Lord Cormack, I have not met any Finns recently, but an exasperated former Scandinavian Minister said that our Prime Minister had,

“reached the point where she is making contradictory commitments, and any semblance of consistency was lost long ago under the weight of these blurred promises”.

This is serious stuff.

We have all read that Jean-Claude Juncker said:

“We cannot go on with a split Cabinet. They have to say what they want and we will respond to that”.

That brings us to the EU Committee’s excellent report—a gold standard, in the words of my noble friend Lord Lea. It is about the only bit of sense coming out of London at the moment and does the Government’s job of setting out the options for the future, stressing that it is a matter of only weeks before the framework for future UK-EU relations has to be finalised, as that is meant to be part of the October political declaration.

The EU Committee report includes a swathe of practical advice, such as, as we have heard, to expect compromise and that even the simplest model for future UK-EU economic relations—i.e. a free trade agreement—will require acceptance of a degree of regulatory alignment. The report also evaluates the potential options for trade and sets out the criteria against which the White Paper should be judged, as spelled out by the noble Lord, Lord Boswell.

The report notes the CBI’s assessment of the potential impact on SMEs of leaving the customs union and that 150,000 businesses export only to the EU, with no ability to create systems able to deal with border controls. It highlights the benefits that the UK gets from being party to 57 trade deals successfully negotiated by the EU, the loss of which would be highly disruptive, but whose continuation is not guaranteed. In my view, the 46 pages of that report should be compulsory reading for the Cabinet before it heads off to Chequers, because that would ensure the influence hoped for by my noble friend Lord Monks.

The Cabinet might also take some other advice, whether from the expert CER or the noble Lord, Lord Bridges, who calls on the Government to commit to remain completely aligned to EU regulations and standards covering goods and agricultural products, together with zero tariffs and trusted trade schemes to deal with rules of origin, which would help minimise friction in trade and help address the Irish border. He also suggests that we should remain convergent on data sharing, recognise legal contracts and professional qualifications and be party to critical EU agencies, where necessary under the jurisdiction of the ECJ. This is a man who has looked at these things, who has been around the capitals of Europe talking to people and has some sense of what will be possible for both us and them.

Meanwhile, the Law Society worries about judicial co-operation, the European arrest warrant and recognition of family judgments and calls for legal services to be included in any EU-UK trading arrangement, and for a dispute resolution and enforcement mechanism. The transport sector worries about flights, lorry parks, passenger rights and compensation. Architects worry whether they can contract abroad. The creative industry worries about free movement for stars, designers, musicians and IP. The tech sector worries about access to talent. The financial sector worries about everything, despite its preparations, mentioned by the noble Lord, Lord Risby, and as stressed by the noble Lord, Lord Teverson —and we all worry about Northern Ireland.

But all of this is worse, of course, because of the lack of foresight, as described by my noble friend Lord Desai. It is no good threatening the EU with no deal in the face of the Government’s own assessment that GDP could decline by 7.7% over 15 years—let alone Airbus’s warning, as the noble Baroness, Lady Janke, said, in saying that a no deal would lead to,

“severe disruption and interruption of UK production”,

forcing it,

“to reconsider its investments in the UK, and its long-term footprint in the country”.

John Lewis’s chairman described no deal as “unthinkable”, with “grave” consequences. As the noble Lord, Lord Jay, and the earlier report on no deal stressed, the implications for this country of no deal are too serious even to contemplate.

The country is facing a crisis of the Government’s own making. Far from the Brexit negotiations being one of the easiest in human history, we have yet to see the White Paper, or the fisheries, agriculture or immigration Bills. Then there are no moves on security, defence and defence systems and the agencies mentioned by the noble Earl, Lord Kinnoull, as well as finding a solution to the Northern Ireland border or clarity over our future customs arrangements with the EU or our relationship with the single market. As my noble friend Lord Soley says, we are in “deep trouble”.

Our plea today is for leadership and direction, and we are not alone in asking for that. Matthew Parris speaks for many when he says that,

“the office of prime minister is effectively unoccupied”.

My question to the Minister is akin to that of my noble friend Lord Soley. When will his Government put the country before his party’s internal squabbles?

Lord Callanan Portrait The Minister of State, Department for Exiting the European Union (Lord Callanan) (Con)
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My Lords, it is my great pleasure to respond to tonight’s debate on the European Union Committee’s report. I am grateful for the opportunity and start by extending my thanks to the noble Lord, Lord Boswell, to all members of the committee for their contributions to the report and to everybody who has spoken in tonight’s debate.

I assure noble Lords that a response to the committee is in full preparation, and we expect to be able to publish it over the summer. As I expected, many of the points raised by noble Lords about our future partnership with the EU relate directly to the ongoing negotiations. As such, I hope noble Lords will understand that it will be difficult for me to go into great detail on some of the areas at this stage. Nevertheless, I will endeavour to respond to as many of the points as possible. Noble Lords have raised a wide range of issues this evening; let me start by going through some of those points in greater detail.

On our ambitions for the future relationship, as the Prime Minister has made clear, we want our future relationship with the EU to be a deep and special partnership, taking in both economic and security co-operation. The Prime Minister set out the Government’s vision for a future partnership in her Mansion House speech in February, which contained what she referred to as the five foundations that must underpin our trading relationship with the European Union.

First, our agreement should create a deep and broad economic partnership that supports trade and co-operation between the UK and the EU. That should be supported by reciprocal and binding commitments to ensure fair and open competition. The level of integration between the UK and EU markets mean that these reciprocal commitments will be particularly important in ensuring that UK business can compete fairly in EU markets and vice versa. Secondly, we will need a completely independent arbitration mechanism—again, something fairly common to free trade agreements. This will ensure that any disagreements about the purpose or scope of the agreement can be resolved fairly and promptly. Thirdly, given the close relationship that we envisage, we will need an ongoing dialogue with the EU and to ensure that we have the means to consult each other regularly. Fourthly, we will need an arrangement for data protection. The free flow of data is critical for both sides in any modern trading relationship. Fifthly, we must maintain the links between our people. EU citizens are an integral part of the economic, cultural and social fabric of the UK, and UK nationals are viewed in entirely the same way by communities across the EU.

The Prime Minister has also set out, in her Munich speech in March, her vision for a future security partnership with the EU. This would encompass both internal and external security cooperation. On internal security, the Prime Minister has proposed a new UK-EU treaty that would cover practical co-operation on law enforcement and criminal justice matters, including on extradition, co-operation with and through EU agencies and exchange of data. Furthermore, this treaty would need to respect our sovereign legal orders and be dynamic to respond to emerging and future threats to our common security interests. It would also, clearly, need to be supported by comprehensive data protection arrangements.

On external security, we are seeking a partnership that will enable the UK and the EU to combine our efforts where it is in our shared interests. Let me say in response to the noble Lord, Lord Jay, that that future relationship on foreign policy, defence and development is focused on three key areas: regular consultation on global challenges and sanctions; co-ordination on the ground, including through EU mechanisms for defence and development, where appropriate and mutually beneficial; and continuing to develop new capabilities to meet future threats. Underpinning arrangements for the exchange of information and expertise will support this partnership.

For more than half a century, the UK has worked with our European partners to forge our common security, based on the fundamental values we all share. Close co-operation has been, and will continue to be, the most effective response to the common threats that we face. As we leave the European Union, our commitment to the security of Europe is undiminished. We want to continue using our assets, capabilities and global influence in support of our common security interests. Our proposed future security partnership builds on the breadth and depth of our shared interests and values, and must be a partnership that underpins practical collaboration to tackle real-world challenges, both within Europe and beyond.

Let me turn to the negotiations so far. The Government have published a joint statement with the European Commission that sets out the significant progress that we have made in finalising the text of the withdrawal agreement on the majority of the remaining separation issues. While there are still some key questions that remain to be resolved, we have had constructive discussions and our negotiating teams are currently working hard and at pace to ensure these are finalised by October. We remain confident that a deal is in the interests of both sides, so we approach these negotiations anticipating success. We do not want or expect a no-deal outcome. However, as the Leader of the House said earlier today, a responsible Government should prepare for all potential outcomes, including the unlikely scenario in which no mutually satisfactory agreement can be reached, and we are doing that. But I stress that we do not want or expect a no-deal outcome. The most important issue for us now is focusing on negotiating the right future relationship.

Let me address the point made by the noble Baroness, Lady Quin, on the impact on the north-east of England. We are undertaking extensive work to consider the impact on all regions of the UK of all the potential outcomes, and the impact on particular regions will be at the forefront of our minds. We will continue to undertake that analysis and, where it is possible to share it without compromising our negotiating position, of course we will do so.

We have, jointly with the European Commission, published the topics for discussion on the future framework. This incorporates the economic and security partnerships outlined by the Prime Minister as well as the institutional framework that will underpin them and other cross-cutting issues. The joint publication reflects the determination of both sides to achieve a broad partnership that stands the test of time after the UK leaves the EU. It remains our view that it is pragmatic common sense that we should work together to deliver this outcome for both sides. So we are continuing to work hard to have all of this agreed by October. We have been having regular discussions with the EU on the future framework, outlining our positions on a wide range of topics covering the future security partnership and the future economic partnership. We have continued to publish key documents on these topics.

The noble Lord, Lord Boswell, and other noble Lords asked me about the White Paper. The Prime Minister announced that the Government will publish this the week beginning 9 July, and it will set out the UK’s position on a future relationship. In response to the noble Lord, Lord Monks, I am not sure exactly how cunning he will find the plan when we publish it, but the Secretary of State for Exiting the EU has said that it will offer,

“detailed, ambitious and precise explanations of our positions”,

and will set out what,

“will change and what will feel different outside the EU”.

This answers the first question asked by the noble Lord, Lord Jay. His second was: will the EU rubbish it? I leave him to reflect on what the reaction to it might be. Following the White Paper, we hope to see our negotiations accelerate and intensify and, as I said earlier, we remain confident of reaching agreement on the withdrawal agreement and future framework by October.

The noble Baroness, Lady Quin, the noble Lords, Lord Teverson, Lord Jay, Lord Soley, and Lord Whitty, raised the issue of association agreements. Guy Verhofstadt and a number of Members of the European Parliament have also raised this when I have met them. We are considering the merits and drawbacks of such an agreement. It has the merit that the EU understands it; it is an established legal procedure. However, it has some drawbacks: it is not possible to agree things outside it. We are not ruling it out; we are exploring it and looking at whether it might be the appropriate model. In response to the noble Lord, Lord Teverson, I know Guy Verhofstadt well. I used to sit next to him for many happy hours in the EU Parliament’s conference of group presidents. He has many virtues but being a trusted intermediary whom we should use is perhaps not one which we should explore on this occasion.

The noble Earl, Lord Kinnoull, and the noble Lord, Lord Whitty, asked me about the UK’s membership of different agencies. The Government have said on a number of occasions that we will want to explore membership of some agencies with our EU partners. The Prime Minister mentioned a few of them in her speech. Where there is a demonstrable national interest in pursuing a continued relationship with an agency or other EU body, the Government will carefully examine whether or not we should do so. No final decisions have yet been made on that future relationship with those EU agencies, but where there is one we will happily contribute to the costs. The Prime Minister has said that we accept that there will be a role for the EU’s Court of Justice in such circumstances. If noble Lords can contain themselves, there will be some more detail on this in the White Paper.

The noble Lord, Lord Monks, raised the issue of joining the EEA/EFTA and the customs union. Neither the EEA/EFTA countries—Norway, Iceland and Liechtenstein—nor Switzerland are currently, individually or through membership of EFTA, part of the customs union, though they are members of the single market. The customs union has a single external border which sets identical tariffs for trade with the rest of the world. International trade policy is consequently an exclusive competence of the EU, to avoid the creation of different customs rates in different parts of the EU’s customs union. To make a political point, we are criticised extensively by the Labour Party. Of course, the Labour Party is now in the somewhat bizarre position of being in favour of a customs union but then, in the House of Commons, voting against the trade agreements that the EU negotiates as part of that customs union, so I do not think that we will take its criticisms too seriously.

Turning to trade and our future customs arrangements with the EU, the Government are working towards a customs solution that will allow us to trade goods and services with the EU as frictionlessly as possible but also free us to strike trade deals around the world and, crucially, avoid a hard border between Northern Ireland and Ireland. As has been reported, the Prime Minister has set up working groups on the two options—the highly streamlined customs arrangement and the new customs partnership—but of course the exact nature and form of the final customs relationship will be subject to negotiation.

The noble Baroness, Lady Quin, raised the issue of free trade agreements, which, as she correctly said, concern tariffs, although it is equally important to discuss non-tariff barriers and regulatory standards. She was essentially correct in the points that she made, but of course these are valuable tools and we should still seek to agree them as far as possible.

The noble Earl, Lord Kinnoull, asked me about equivalence in financial services. The Government have been clear that they want a comprehensive and ambitious deal with the EU. We think that it should cover financial services and protect the role of the City of London as a top global financial centre. That point was also well made by my noble friend Lord Risby. Reaching an agreement will require detailed technical talks but, as an existing EU member state, we will begin those talks from a unique position, having the same regulatory frameworks and standards. As we move from our current relationship to our future partnership, people and businesses in both the UK and the EU will benefit from the implementation period that we have agreed. We want to establish access to each other’s markets, based on maintaining the same regulatory outcomes over time with a mechanism that determines proportionate consequences where those outcomes are not maintained. It is important that we take that forward into the future negotiations.

On the subject of Northern Ireland and Ireland, the UK has been clear that we are committed to turning all the commitments made under the joint report into legally binding text. I think that that answers the point made by the noble Lord, Lord Jay. Again, as I am sure noble Lords are aware, there are some aspects of the Commission’s proposals which we agree with—particularly the preservation of the common travel area—but the Prime Minister has made clear our position on the other elements of the draft text and has said that we should never accept a border in the Irish Sea. That remains our position, and that is why those parts are marked as not agreed in the withdrawal treaty text. However, we are taking discussions forward with the European Commission and the Government of Ireland to try to resolve this issue.

Turning to the vital subject of security, I welcome the report’s conclusions on both internal and external security. I reiterate our unconditional commitment to a close relationship with our European partners to keep all our citizens safe as the UK leaves the EU. I believe that the Government’s approach is in alignment with the principles in the report, in that it is practical and legally viable and would maintain and build on the areas of greatest value to our common security. There is now a need to agree with the EU structures to allow this to happen. The Prime Minister made clear in her Munich speech that we must do whatever is most practical and pragmatic to provide security for our citizens and not allow rigid institutional ideology to inhibit our co-operation and jeopardise their security.

My noble friend Lord Risby, in his excellent contribution, talked about the importance of energy security in this context. I agree that that, too, will be an important part of our security partnership. That is why, on internal security, the Prime Minister has proposed a stand-alone UK-EU treaty that would ensure that we continue to co-operate where it is of mutual benefit and would minimise any disruption as we move to the future relationship.

To be fully effective, this treaty should meet three requirements. First, it should be respectful of both UK and EU sovereign legal orders. Secondly, it should include comprehensive data protection arrangements. Thirdly, it should be adaptable in the face of future threats. This new relationship should of course be underpinned by shared rules and agreed safeguards that are strong enough to provide trust and legal certainty for all sides. We believe that our proposal is legally viable, and has precedent in the comprehensive strategic relationships that exist between the EU and other third countries. It would serve our common security interests, while respecting both of our sovereign legal orders. Of course, there will be challenges to be overcome, but it is in all our interests to get this right, and with the ambition and political will on both sides, we are confident that this can be achieved.

On external security, we have proposed a future partnership that offers us the means and choice to combine our efforts where it is in our mutual interests. Our proposals set out a framework of consultation and co-ordination, enabling co-operation on shared priorities, including the ability to scale up in a time of crisis— a point reiterated by the noble Lord, Lord Jay. The UK will pursue an independent foreign policy after leaving the EU, but we will continue to defend our shared security and project our shared values. The partnership that we have set out therefore respects both the decision-making autonomy of the EU and the sovereignty of the UK.

The noble Earl, Lord Kinnoull, also spoke about access to information. There is no legal barrier to the EU agreeing to establish an internal agreement giving a third country access to the Schengen information system. As I have noted, the UK is at a unique starting point, with a strong history of working closely with member states as partners and allies. We make a key contribution to security and justice both in Europe and globally and we will seek an agreement with the EU that recognises the unique position that we hold. The exchange of criminal records between the UK and the EU is key to effective law enforcement co-operation. The Government are exploring options for continued criminal records information exchange between the UK and the EU to ensure that appropriate mechanisms are in place to prevent criminals evading justice. This will be a key part of a future agreement with the EU on internal security. Following a vote in Parliament in December 2015, the UK has now rejoined the Prüm Council decisions. Prüm implementation continues and we expect to start exchanging data through Prüm in the near future.

Agriculture and fisheries were only lightly mentioned, so I will move on.

I agree with much of what my noble friend Lord Cormack said on the subject of the ongoing relationship. He made clear that he voted remain and I have been clear that I voted leave. I, too, have many friends across all European countries, including, incidentally, in Finland. The current Foreign Minister of Finland is a good friend of mine. In fact, he is a great football fan and he texts me regularly during Newcastle matches. He is a fan, bizarrely, of Millwall—the explanation for which would take too long to bother noble Lords with tonight. But my point is that we all have friends across Europe and in different European countries. Of course, many of them regret the democratic decision that we have taken to leave, but we will want to maintain those friendships into the future.

I also agree with my noble friend that it is important that we take on board all opinions—the 52% who voted to leave but also of course the 48% who voted to remain. I do not know whether he made that point to the committee during his evidence, but my friend Daniel Hannan MEP has said on a number of occasions that we need to construct a Brexit that can take all parts of the country with us and accommodate all the different points of view. That would include those who voted remain as well as those who voted to leave.

To conclude, the Government are committed to getting the best possible deal for the United Kingdom in the forthcoming negotiations. We will continue to update Parliament on the negotiations for our departure from the European Union. Again, I reassure noble Lords that we are working to publish our formal response to the committee’s report as soon as possible. I am grateful to all noble Lords who contributed to the debate tonight, which was fairly wide ranging and informative. I am sure that the House will continue to play a valuable role in the work of the Government and contribute towards securing a deal that works for everyone, however they voted in the referendum.

Lord Boswell of Aynho Portrait Lord Boswell of Aynho
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My Lords, I note that we have more or less worn out the light of the summer evening and I think it would be fair to say that this debate largely speaks for itself. Nevertheless, despite the lateness of the hour, I want to make a brief but not, I hope, perfunctory comment about the contributions of colleagues. They have set out so well from the range of their different experiences the complexity and the urgency of addressing this problem. In thanking the speakers in the debate, I thank also colleagues from the EU Select Committee who have not spoken but who have contributed massively to the report, and, indeed our sub-committees which fed into our work and thoughts. Last but in no sense the least, I should like to record the dedicated and immensely professional work of our committee staff. Like everyone else, they are facing an unprecedented workload in these circumstances.

The debate has been a worthwhile exercise, and it would indeed be churlish if I did not add the Minister to my encomium, because he has closely attended to the debate. He has—not all Ministers do these days—stayed firmly on message, which is welcome. He has given us some specific information or confirmed the position on the White Paper. I was interested in his rehearsal and formulation of the association agreement and it was also interesting to have such a long and helpful exposé on security matters. We touched on those and no doubt will wish to return to them. But I will stress to the Minister tonight that the ball is very much in his court and that of the Front Bench to report to their colleagues and make sure that they are aware of the depth of feeling in this place, and in particular the urgency that we attach to the issue.

I offer for nothing one piece of domestic political advice to the Government Front Bench, which I can say now as a non-aligned Peer. The supreme test of statecraft, if at the moment you are looking just at the interests of the United Kingdom, is whether we manage to serve our people wherever they live within the United Kingdom and however they voted in the referendum. It is actually doing a job for people and not adopting any particular theories or interpretations of the past.

I will conclude by making the point that this has never been seen as a unilateral report; it is a call to both sides to get together on the negotiations. In terms of a successful negotiation, you need two to make a positive contribution to success. I would just say in conclusion that the time is fast approaching when it is in the interests of both the United Kingdom and the European Union 27 that we get on with the job: simply, action this day. I beg to move.

Motion agreed.
House adjourned at 9.38 pm.