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Lord Newby
That this House takes note of the case for a UK-EU customs union and the impact of connections with the EU single market on the United Kingdom economy.
Lord Newby (LD)
My Lords, it is a great pleasure to introduce this debate. It will see a number of comings and goings. We welcome the noble Lords, Lord Doyle, Lord Docherty and Lord Pitt-Watson, and the noble Baroness, Lady Gill, and say farewell to the noble Lord, Lord Offord. For the noble Lord, Lord Doyle, the House of Lords must seem like a haven of peace and tranquillity compared with his previous domain in Downing Street, not least in recent days. The noble Baroness, Lady Gill, brings a welcome additional Sikh voice to your Lordships’ House, and the noble Lords, Lords Docherty and Lord Pitt-Watson, bring a combination of business, academic and charity experience to our proceedings. We look forward to all their speeches today. We wish the noble Lord, Lord Offord, well as he contemplates pastures new.
The wording of today’s debate may sound rather dry and technical, but it deals with two of the biggest issues facing the country: how to improve growth and prosperity, and what our place in the world should be in the current turbulent times. I support the Government in making growth a, if not the, top policy priority. Growth in the UK has stalled over recent years, and this has led to constrained real incomes, weakened public revenues and, as a result, higher government borrowing. The Government sought to stimulate growth through a variety of investment incentives and educational and productivity measures, but these have been patchy and, even if eventually fruitful, will in many cases not yield real benefits for years to come.
There are many explanations as to why the UK’s growth has been so anaemic in recent years, but there can be no doubt that one of them is Brexit. There are many estimates of the impact of Brexit on the UK economy, but they all point in the same direction. Probably the best known is the OBR’s estimate that Brexit will reduce GDP by 4% over a 15-year period, that UK-EU trade will fall by 15%, and that Brexit has already had a negative impact on the public finances to the tune of over £40 billion over the period to 2024. Recent research by the US National Bureau of Economic Research suggests that the negative impact of Brexit has been much greater. What we know for certain is that goods exports to the EU in 2024 were 18% below 2019 levels and food exports were down 30%.
Inward investment, which is crucial to productivity and growth, has also been hit. House of Commons research has shown that FDI flows are well below the levels projected under pre-Brexit trends, and research by the Productivity Institute has shown that, post-Brexit, there are intensified regional inequalities in the inward investment that we are still attracting.
Polling amongst SMEs shows that over half believe that Brexit has made them less competitive globally because of shrinking access to EU customers and disrupted supply chains. And things are not getting better. The British Chambers of Commerce, reporting just last month, said that trade frictions are worsening. The reasons for this dismal picture are not hard to see: increased bureaucracy, including customs declarations and physical checks; competing regulatory frameworks; staffing shortages; and the inability of UK companies to participate in EU programmes, which have not been replicated by this country. So, Brexit has unambiguously hit growth and, if things remain unchanged, will increasingly do so.
In the meantime, the international context has changed significantly, and not in a good way. The Ukraine war has posed increasingly urgent questions for the whole of Europe, including the UK, about how it defends itself, both economically and militarily, against an aggressive Russian state. For the past year, President Trump’s re-election has led to a Catherine wheel of anti-European rhetoric and actions that have destabilised the Atlantic economic and security status quo. It is impossible to predict how the remainder of the Trump presidency will unfold, but there is now, I think, a widespread realisation that whatever happens, we will not return to the transatlantic economic and security equilibrium that we enjoyed throughout the post-war era.
This realisation that things have changed for good and that a new policy response is required has been articulated most eloquently by Canadian Premier Carney, speaking in Davos last week. He argued that the post-war rules-based international order has been upset and that new approaches are needed. He argued that sovereignty grounded in rules had to be increasingly anchored in the ability to withstand pressure, and that the key now was to build coalitions that work.
For Britain, by far the most significant coalition that can work better is that with the EU. The EU has responded to US threats to NATO funding by stepping up to the plate on increased military expenditure—in the case of Germany, dramatically so. In recent days, it has effectively faced down President Trump by threatening retaliatory tariffs if he imposes tariffs on Europe in his bid to take over Greenland. Post-Brexit, there have been some who have called for a much closer economic alignment with the US and further distancing from the EU. If it ever was, that approach is now clearly no longer a viable option.
The only viable option, in a world where Russia acts as a brutal aggressor, China poses a raft of security and economic threats, and the US is unreliable at best, is for the UK to rebuild and strengthen its ties with the EU. There is a need for this on security issues, on which there is already considerable progress, but there is also definitely a need for it on economic grounds. This inevitably means readdressing the issue of our membership of the EU customs union and the single market.
There are the beginnings of a recognition of that from the Government, who have embarked on a so-called reset of our relations with the EU. This led, last summer, to the first post-Brexit UK-EU summit, and agreement on a new strategic partnership with the EU that covered a significant but limited range of issues, including fishing, energy, student exchanges, and food and agricultural products. Progress on these matters has been somewhat fitful, but the Government have recently committed to reaching detailed agreements on all the issues covered by the new strategic partnership by the time of the next summit, which is expected by the summer. I would be grateful if the Minister could confirm that that is still the Government’s aim and expectation.
The Government have also signed a number of trade agreements with non-EU countries, which offer the prospect of increased long-term trade flows. Sadly, the potential benefits from those deals are extremely modest. Indeed, it is estimated that the benefits of even the limited measures in the Government’s reset will bring at least twice the benefits of the UK-India trade agreement, which is itself by far the most significant of our new trade agreements. In our view, the measures proposed in the reset, although positive and valuable, are not enough—nowhere near enough.
Our argument that rejoining a customs union with the EU is now urgently required to promote growth has been accepted by some members of the Cabinet. Wes Streeting has made the point repeatedly in recent months, as has David Lammy, who argued last month that such a move was essential to reduce trade friction. The Business Secretary, Peter Kyle, has also turned his mind to the issue in recent days. Early last week he described Lib Dem calls to rejoin the customs union as “utopianism” and said:
“What gives me anxiety is growth this year … that gives me more concern than … the customs union”.
However, he then went to Davos and said that
“it would be crazy not to engage with the prospect of a customs union”.
One hopes that he does now engage with the issue—and on a more consistent basis. Keir Starmer has also said that he is prepared to consider closer alignment with the single market, but not to the extent of returning to freedom of movement. If all this is timid—far too timid, in our view—at least it shows that the Government accept that closer alignment with the EU would indeed bring benefits to the UK.
No such timidity of approach applies to Kemi Badenoch, who recently said that joining the customs union would be “bizarre”. It would, she said,
“make us all poorer and damage British business and … farming.”
Given that this is the exact opposite of what British business is saying, the bizarre thing is that she seems to believe it. As for Reform, Nigel Farage is promoting the idea of a free trade deal with the US as the answer to our economic problems, and regards even the Government’s reset as a “giveaway”, which he will fight “tooth and nail”. He, at least, has the sole virtue of consistency.
Noble Lords will be aware that Liberal Democrat policy is to rejoin both the customs union and the single market, with the ultimate goal of rejoining the EU. Therefore, for us, the question is how we get there. We accept that, as the single market covers both services and goods, and the UK’s trade in services with the EU is large and in positive balance, being a member of the single market would bring greater overall benefits than membership of the customs union. However, we believe, from a practical point of view, that it would be more straightforward to negotiate a customs union deal, that time is now of the essence, and that we could get started on it straightaway.
We must accept that the EU does not see the prospect of years more negotiations with the UK on these issues as a priority, and is likely to prove a tough negotiator. It is particularly likely to be unsympathetic to any deal with the UK that seeks to cherry-pick bits of the customs union or single market that particularly benefit us. Any British Government will have to be prepared to accept this, and to explain it to the electorate. The seductive mantra of Boris Johnson of having your cake and eating it was always false. It would be a recipe for failure if we adopted that as our basic negotiating stance.
The EU, like the UK, is in something of a state of shock, given on the one hand the threats from Russia and on the other the new unreliability of the US. There is a new recognition that the whole of Europe, including the UK, must act decisively against these external threats, and a new willingness to contemplate closer working arrangements.
There is also now much stronger and majority support for getting the UK back into the heart of the EU, particularly among young people. This was recently brought home to me when, a few months ago, at the end of a school talk in Bridlington—one of the strongest pro-Brexit communities in 2016—I asked the pupils whether they agreed with my approach to the EU. To my surprise and pleasure, a forest of hand went up. They clearly see the EU as offering new opportunities for themselves and their community. We should not dash their hopes.
It is therefore for the UK now to set out clearly and unambiguously its long-term aspirations for a renewed relationship with the EU, and to prosecute that policy energetically and with urgency. The Government have made a few tentative steps in the right direction, but they are not enough. Today’s crises require swift and substantive action. The Government must now rise to this challenge. I beg to move.
Baroness Gill (Lab) (Maiden Speech)
My Lords, I rise with some hesitation and a great deal of gratitude to make my maiden speech in your Lordships’ House. I am acutely aware of the experience, independence of mind, and breadth and depth of knowledge that surrounds me.
Last Tuesday was a sublime experience for me and my family and friends; I still pinch myself to check that it was real. I am deeply grateful to my supporters, my noble friends Lord Kennedy and Lady Smith, for their guidance and support over many years. I am also grateful for the kindness shown to me by Black Rod’s office, by Mr Ingram and his team of doorkeepers, and by the Reading Clerk, Dr Christopher Johnson. His flexibility in enabling me to take my oath on my mother’s Gutka, a Sikh prayer book—sadly, she passed away just before Christmas—meant so much to me, especially as the first Sikh woman on the Labour Benches.
It has been quite a journey since I left Ludhiana, in Punjab, as a child. With huge support from my family, friends, members of my party and my colleagues at Sikhs for Labour, I have arrived here. My first home was in Southall, a rich, multicultural area that is one of the beating hearts to this day in the London Borough of Ealing—unsurprisingly, given that for many decades it has been a first stop on many migrants’ journey into this land. That was at a time when bussing children out of their locality was the norm, and I ended up at Walford High in Northolt. I give thanks to investments by earlier Labour Governments, and two super teachers who mentored me to go on to further education and to embrace every opportunity that came my way. Hence, Southall is part of my title, as I too want to inspire the present generation of children who are growing up there, and at my old school, that you too can dream and aspire to succeed in whatever walk you choose.
My political home is the West Midlands and it is fitting that that is included in my title too. My love of jewellery is known to many, especially pieces made by our talented artisans. I first came across them in the Jewellery Quarter, thanks to the Birmingham Assay Office, which had concerns about proposals from Brussels that we worked together to mitigate. I moved into Jewellery Quarter soon afterwards, and long before it became hip and one of the best places to live in the country. It was such a rewarding experience, with its wonderful restaurants, cafés and bars, excellent road and rail connections—a perfect example of imaginative inner-city regeneration—that I stayed there for over two decades.
I come here conscious that my experience is only one among many, but I am hopeful that I will none the less be of service to this House in the debates that lie ahead. Over the years, I have been privileged to work in three main areas: housing and regeneration, reducing inequalities, and Britain’s relations with the EU. Having spent my life in public service, though with spells in corporate and tech sectors that left their indelible marks on me, I saw first-hand when I was running a housing association the real difference a good home can make to a person’s life chances in education, health and employment. I am still totally committed to eradicating inequalities in all fields. Today, inequality can be experienced in several ways, including digital inequality. So how we succeed as a society will depend on how data is harnessed and how we manage AI to reduce its impact, including on those in the creative sector.
Brexit cut my tenure of almost 16 years as an MEP short. As it happens, this coming Saturday, 31 January, will be exactly six years after Britain left the EU. How regrettable it is to see the damage inflicted on our economy. I remain a passionate advocate of the project, though my son still reproaches me that I was very much absent when he was growing up. Nevertheless, he has grown up to be a fine young man, working as a creative, as it happens, who cares deeply about his work and society.
Recent international developments have brought us to a turning point in our relations with the EU. Not only is it necessary to rebuild the trust lost in the Brexit years, but trade and defence must be our top priority, given that the world has changed around us and our approach to alliances must do, too. I welcome that this Government have signed a trade agreement with India, as did the EU on Tuesday, which I championed for many years while I was there.
However, as the EU has been faced with new challenges, its instruments and procedures need to evolve accordingly. At the same time, UK-EU relations need to be more ambitious, particularly in the fields of trade, defence and security. Rejoining instruments from another era such as the customs union cannot be the answer. New challenges demand new structures and new models of co-operation.
I look forward to working together with your Lordships in this House in facing today’s challenges and defending nothing less than the cause of a better life for our fellow citizens in a troubled and turbulent world.
Lord Monks (Lab)
My Lords, I thank the noble Baroness, Lady Gill, for that absolutely excellent speech, revealing her rich experience in many areas across both the European Union and localities in the UK. She has already made one significant mark on our work: I was not aware that you could have two locations in your title. I am sure there are precedents for it, but the noble Baroness, Lady Gill, has certainly established that. I am pretty sure that, if the citizens of Jewellery in Birmingham and Southall in Ealing get to read that speech, they will be very proud of their girl for what she is achieving on their and other people’s behalf in this country.
We are proud of her on these Benches, too. She is going to bring a fresh perspective on a number of things, including housing and inequality, and perhaps on the EU as well. She was not exactly on any party line with her remarks at the end, but her basic pro-Europeanism shone through very strongly. We look forward to further speeches to come, which again will make us think and take us forward. We have a new colleague who will be a big hitter in this Chamber. While I am on my feet, I wish the other noble Lords who will be delivering their maiden speeches today all the very best for the future. If they do as well as the noble Baroness, Lady Gill, they will be doing very well.
I follow the noble Lord, Lord Newby, in a number of ways—not all ways—and I appreciated his opening speech very much. It set the scene for this debate very well and the scene for the country more generally. I, too, like him, remember vividly in the EU referendum that not everyone on the leave campaign thought that leaving the EU necessarily meant leaving the customs union and the single market. I remember the noble Lord, Lord Hannan, was among those who initially thought that. Reference has been made to Boris Johnson’s famous remarks that we could have our cake and eat it, keep the benefits and still leave—one of the biggest whoppers told in that very bitter campaign.
Now, we are faced with reality, and a hard reality it is, too, as the evidence of the costs of leaving the EU continues to pile up. I am not going to repeat all the statistics that were mentioned by the noble Lord, Lord Newby, other than to say that goods exports are still languishing below pre-2019 levels. I am particularly concerned about small firms, bewildered still by increased paperwork and customs-related red tape.
Nor are non-EU countries filling the gaps. The new trade deals have so far been disappointing. The one with India is unfortunately not yet in force. Others, such as the one with Japan, replicate the EU arrangements; Canada is more interested in a deal with the EU than with us; and the deal with Australia is very good for Australia, but reflects a desperation on our part to get some agreements over the line. As for a deal with the US, as Mark Carney said at Davos recently:
“We are in the midst of a rupture, not a transition”.
I acknowledge warmly that the US has helped rescue us and other Europeans in the past, but can we still rely on it, given the capricious behaviour of the present White House Administration? Well, nobody is too clear about that.
So it seems to me that this can be used in a number of ways, with a number of opportunities as well as a number of threats. It can be used to open a new chapter with the EU, as we huddle together with our neighbours and allies and try to make common cause on a wider range of issues. Defence is an obvious priority area at the moment, but trade should also be another. Prime Minister Carney’s call for medium-sized powers to come together should be heeded and used by the UK as a way to approach our problems in a new way. We need that new way and we need it quickly: we need this reset of key relationships, as the Government are at last exploring.
As the excellent Library briefing for this debate reminds us, the Office for Budget Responsibility reckons that UK imports and exports are both 15% lower than if the UK had remained in the EU. That is a heavy blow to our growth prospects.
I live in hope that people on the other side of this House will begin to acknowledge that the history of our brief time outside the EU has not been good; it has been bad. There have been failures all around, and it was precipitated by us leaving the EU. I look forward, not backward. I do not want to replay old arguments, but I hope that the reset will be bold and wide-ranging. It should challenge those in the Conservative Party—and, I guess, the Reform party too—to recognise the reality that we need a new deal with the EU and perhaps follow up the Carney speech.
There are four major claimed benefits of Brexit, as set out recently by the Conservative Party leader, particularly the freedom to negotiate our own trade deals.
Lord in Waiting/Government Whip (Lord Katz) (Lab)
Order. We have quite a tight time limit, and everybody wants to hear from my noble friend and for her to be able to respond, so if my noble friend could finish—
Lord Monks (Lab)
I finish with an appeal to the other side to open their minds and maybe open their hearts a little bit, recognise the situation we are now in, not the situation we were in, and take the country forward on that basis.
Lord Lamont of Lerwick (Con)
My Lords, it is a great pleasure for me on behalf of these Benches, this side of the House, to congratulate the noble Baroness, Lady Gill, on her admirable maiden speech. She referred to feeling a little intimidated coming here and to the experience and depth of knowledge in this House, but from her speech, it was perfectly clear that she is going to add considerably both to the experience and the depth of knowledge, and we strongly welcome her for that. She has huge experience in the European Parliament—as she said, she spent 16 years there. That is one area of expertise, but she also has expertise on housing, because she was the chief executive of a housing association. Her maiden speech was both eloquent and moving. She referred to her love of jewellery, and I am sure she will be a jewel in your Lordships’ House for a long time to come.
As was said in the noble Baroness’s excellent maiden speech, and by the noble Lord, Lord Newby, of course, it is a good idea that Britain should seek to improve its relations with the EU. But a customs union is emphatically not the way, and quite rightly, the Prime Minister has said that a customs union is a red line. We just hope that it is one of these red lines that he does not actually cross.
Brexit can be, has been and was blamed by the noble Lord, Lord Newby, for almost everything. Ministers refer to the OBR, which said that Brexit has already caused a 4% decline in GDP. But, as the noble Lord, Lord Newby, admitted, the statistic actually was that the 4% decline would happen over 15 years. Some 4% over 15 years is, on an annualised basis, a very small amount, difficult to measure accurately, especially when the effects of Brexit, as the OBR has admitted, can hardly be distinguished from those of Covid, energy prices or the war in Ukraine.
The noble Lord, Lord Newby, pointed out that goods exports to the EU remain below pre-pandemic Brexit levels. In 2024, as he said, they were 18% below the 2019 level. However, goods exports to non-EU countries over the same period were also down by 14%. So what do we conclude from this—that Brexit has caused damage to exports outside the EU? That seems rather improbable.
Over the same period, the UK’s performance in services was much better and well above its pre-epidemic levels. The fact remains that since Brexit, the British economy has moved largely in line with the larger EU economies. Italy and Germany have performed worse than Britain, France slightly better. Germany and Italy did not leave the EU and yet have performed worse than us.
A customs union is not the answer. If the question is growth, there must be a different way, and a customs union could do great harm. There would be very little gain from lower tariffs, because most UK-EU goods trade is already tariff-free. If we joined a customs union, we would have to accept tariff-free imports from those countries that the EU had negotiated trade agreements with, but we would not have the reciprocal benefit of being able to export tariff-free to those countries.
Our ability to do independent trade deals would end. We would have to renegotiate or cancel trade deals done since Brexit. The loss of the US agreement would be significant. It is actually our largest single trading partner. The pharmaceutical industry sells 25% of its exports to, and enjoys free access to, the US, while EU pharmaceuticals pay a tariff of 15%. Are we going to put this hugely important industry in danger through leaving that agreement or having to renegotiate it?
Alignment, a favourite subject of noble Lords, of regulations makes sense where individual sectors actually want it, provided that it is repealable and changeable if conditions change. Dynamic alignment, where we permanently hand over control of our laws, is a step too far and unnecessary.
It is interesting to recall how the financial services sector, which we were told after Brexit must align with the EU to survive, is now, according to recent reports in the FT—
Lord Lamont of Lerwick (Con)
I am just finishing—is now pleading for exclusion from any steps towards alignment. The Liberals claim a customs union would boost government revenues. They have suddenly become followers of Donald Trump, believing that “tariff” is the most beautiful word in the English language, but a customs union would mean that we would be obliged to share our customs revenues with the EU.
A customs union does not make any sense. The Prime Minister is quite right. It ought to be a red line. Gladstone would have been horrified at the stance of the Liberal party. He would have called what it is putting forward the road to servitude. It makes no sense.
Lord Katz (Lab)
My Lords, before we come to the next speaker, I just remind your Lordships’ House that this is a time-limited debate, and we also have a number of maiden speeches, which will obviously go a little over the speaking limit. We want to leave enough time for the Minister to respond to the many questions that your Lordships will have. We ask speakers to please stick to the four-minute speaking time.
Lord Hannay of Chiswick (CB)
My Lords, the noble Lord, Lord Newby, is surely to be congratulated on his timely choice of topic. The hard fact is that both this House and the other place will be debating how to remedy the lamentable post-Brexit deal struck in 2019 for the foreseeable future. I welcome most warmly the maiden speaker who preceded me, the noble Baroness, Lady Gill, and the three who will succeed me.
What I regret about the scope of our debate is its failure to address the single most urgent issue in our relationship: the security relationship with other European countries. With Putin continuing his aggression against a democratic European country—Ukraine—and doubts over the attitude of President Trump on this and other issues, there is no time to lose on strengthening European security co-operation and the European pillar of NATO. The failure to agree the first step along that road at the end of last year was totally regrettable and does not reflect well on either side, most prominently, in my view, on the European Union.
I hope the Minister, in replying to this debate, will borrow a phrase from a previous Prime Minister of her party and say that we will not take no for an answer and will persevere with our efforts to build that stronger security relationship.
Many of the items agreed at last May’s UK-EU summit as part of the reset are extraordinarily welcome, and I hope the Minister will give the House an update on the state of negotiations and on the preparations for the next meeting in that series, scheduled for this summer.
The veterinary agreements are clearly essential to remove the many sanitary and phytosanitary obstacles hampering agri-food trade in both directions. The energy agreements on our emissions trading schemes and on co-operation over interlinking connectors and the development of renewable energy projects in the North Sea will equally be mutually beneficial. The EU’s introduction of cross-border adjustment measures a few days ago makes it essential that we avoid those sea bans becoming yet another non-tariff barrier to trade when we need similarity of treatment to prevent the diversion of imports into the EU and resulting damage to ourselves.
A mobility agreement for young people moving in both directions would be a welcome complement to the decision to rejoin Erasmus+. Should we balk at the need to accept, in some areas, continuous adjustment to changes in EU rules? I do not believe so. After all, any British-based company that trades into our largest overseas market, the EU, is already having to meet those rules. There is no impediment to our having stricter rules than the EU. When the Minister replies, can she say where the consultation over rejoining the pan-European rules of origin convention has got to and when the Government will announce a decision on that? I will not comment on the customs union issue, because there is nothing like enough clarity yet on what that might entail to form a judgment. I will listen carefully to those in this debate who support going down that road.
It is often said by commentators that the EU does not rate the reset of the UK-EU relationship as being very high among its crowded order of priorities. No doubt there is some truth in that, but it is not the whole truth. The changes in geopolitical circumstances since the referendum in 2016 have made it more necessary to build a solid new post-Brexit relationship, capable of greater load bearing than the one agreed in 2019. It is essential that we show a firmness of purpose and a restoration of trust and do not repeat the errors of earlier years by squabbling among ourselves over the details of the way ahead.
Lord Docherty of Milngavie (Lab) (Maiden Speech)
My Lords, I begin by thanking Black Rod, Garter, the clerk, the doorkeepers and all the staff of this House for the kindness that they have shown me since joining. I thank noble Lords from every side who have, without exception, made me feel so welcome. I thank my supporters—my noble friends Lady Armstrong of Hill Top and Lady Elliott of Whitburn Bay—for their encouragement and support, and my noble friends Lady Smith of Basildon and Lord Kennedy of Southwark for the thoughtfulness they have both shown towards me.
I grew up in a small suburb of Glasgow that few people have heard of and even fewer can pronounce. I studied at Strathclyde University, but it was at school that my interest in politics first developed. I attended St Ninian’s High School in Kirkintilloch. While my favourite subject was art, I vividly recall a young teacher in my third-year guidance class who was at pains to emphasise the importance of democracy. Indeed, that teacher created an election just to show us how democracy worked. It was the first time I stood for election. When it was time to vote, the teacher stood at the front of the class behind an improvised ballot box and we lined up to vote. My opponent happened to be in front of me. As he cast his ballot, he turned around to tell me that because there were only two of us on the ballot, he felt the right thing to do was to vote for me. I am embarrassed to admit that I also thought the right thing to do was to vote for me. I won by one vote.
After university I began a career in banking, specialising in real estate, PFI and public/private partnerships. In 1997 I was seconded to work for the incoming Labour Government on their regional development policy. I left the city in 2002 and moved to Newcastle upon Tyne, which is my adopted home. It is where I met my husband and where our children are growing up. Since then, my work has involved almost every aspect of economic development, principally in the north-east of England. It is a challenge to persuade private capital, which has a choice, to regions that have historically lower levels of accumulated wealth, capital formation and economic growth. Accelerating growth in our regions is essential—which is not to argue for slower growth in London and the south-east, although London and the south-east should irrigate, not drain.
That brings me to this debate. I was interested to hear the noble Lord, Lord Hannan, discuss last week the symbolism of the Woolsack and the centrality of business and wealth creation to the well-being and functioning of the state. I could not agree more. If only economic growth could be delivered by certainty of view alone. If one relies not on self-belief but on evidence and fact, one can only conclude that the decision to leave the customs union has been nothing other than an unmitigated disaster—for UK business, for our economy and for the Exchequer, upon which the health of our public services depends.
Drawing together my start in the classroom where I cast my first vote and today, there is a common factor in each beyond my own involvement. The energetic young teacher in whose class I first stood for election was then called Mr McFall. He is better known to noble Lords as the noble Lord, Lord McFall of Alcluith, the Lord Speaker. It would have been beyond the comprehension of my teenage self to imagine that 43 years later I would be introduced to this House at all, never mind be welcomed by the noble Lord, Lord McFall. His lifetime of public service is an inspiration. In an infinitely more modest way, I am grateful to be given this opportunity to serve.
Lord Lilley (Con)
My Lords, it is a great pleasure to follow the noble Lord, Lord Docherty of Milngavie, to congratulate him on his excellent and witty speech and to welcome him to your Lordships’ House, where he will no longer have to depend on the votes of his opponents or anybody else to retain his seat.
The noble Lord was very modest in his speech and did not mention his professional career as chief executive of Tees Valley Regeneration and executive director of the Home Group, one of the biggest UK social enterprises. He also did not mention his passion for the arts, which I look forward to hearing about in future speeches. He was a founding trustee of the Baltic gallery in Gateshead and commissioned Anish Kapoor’s Temenos in Middlesbrough, which features on the British passport. He was also a trustee of Arts Council England. In an interview last year, he said:
“What gives me joy … is when I have been involved in recruiting people who have gone on to excel and grow in their roles”.
He has excelled and grown in his roles up to now and will continue to do so, no doubt, in your Lordships’ House.
As far as trade relations are concerned, Britain is to the EU much as Canada is to the United States of America. We both have free trade agreements with zero tariffs and zero quotas with our large continental neighbour. Neither Britain nor Canada has a customs union or a single market requiring it to adopt the tariffs and all the product laws and standards of its large neighbour. Yet I know of no Canadians who, even pre-Trump, ever advocated Canada joining a customs union, still less dynamically aligning its laws and standards with those of America.
Can the noble Lord, Lord Newby, tell us why a customs union or single market is good for Britain but would be bad for Canada—or vice versa? Why did he not tell us that a customs union would require Britain to reinstate the over 2,000 tariffs on goods that we do not produce, which we abolished when we left the EU? Why should British consumers pay higher prices to protect inefficient EU producers? For example, since Brexit we have allowed a tariff-free quota of sugar, which costs $449 a tonne coming from Brazil. Back in the customs union, it would cost us $892 per tonne from France. Vote Lib Dems for higher prices. A customs union would also mean scrapping our trade agreements with the Pacific trade pact, the largest grouping by GDP in the world, and with India, the largest country by population, with which our trade deal has important service industry chapters.
The sole benefit of a customs union is that it avoids the need for declarations of origin. The Swiss calculate that these cost less than 0.02% of the value of their trade with Europe. Hence Switzerland, like Norway and Iceland, refuses to join the EU customs union. Turkey does have a customs union with the EU, but that means that when the EU negotiates a free trade deal with another country, Turkey has to remove its tariffs on that other country’s goods, but the other country does not have to remove its tariffs on Turkey’s goods. Is that what the Lib Dems want?
I was the Trade and Industry Secretary who oversaw Britain’s entry into and creation of the open market back in 1992, and I assumed it would benefit our trade. I also negotiated the Uruguay trade round, the last successful world trade agreement, which halved tariffs and created the WTO. I made bullish speeches about how both of these, particularly the single market, would boost British exports. A quarter of a century later, a study showed how British exports had actually fared. I confess it proved that I had been wrong. Britain’s goods exports to the single market stagnated over nearly 25 years, growing by less than 1% a year. By contrast, our goods exports to more than 100 countries with whom we traded solely on WTO terms grew fourfold, by 87%.
I have long been at a loss to explain why anyone should want to return to a relationship with our former partners that was of so little benefit to us and would involve handing back control of our laws and our tariffs and paying for the privilege of doing so, but a psychotherapist friend explained to me that people who have escaped from a long-term coercive relationship often have an irrational urge to return to the partner who controlled their lives, dictated how they spent, made them subject to detailed and unnecessary rules and restricted their relationships with anyone else. I think we should be understanding of the noble Lord, Lord Newby, and, indeed, the Government’s European Minister as they endeavour to recover from this syndrome, and gently point out that others who once succumbed to coercive control from the EU, such as the National Farmers’ Union, now warn against returning to the ban on gene-edited crops and bovine TB vaccines and ending the ban on live animal exports. The City now wants to be excluded from any reset and has allegedly, according to the Financial Times, persuaded the Government that that would be right. The AI industry rejoices in escaping from the stifling controls of EU law. I wish the Lib Dems and their friends on the Labour Benches a speedy recovery from their addiction to coercive control.
Lord Razzall (LD)
My Lords, having listened to the noble Lord, Lord Lilley, in the past, I am sure noble Lords will accept that I do not agree with much of what he said. The context in which we are discussing this is, to me, the obvious failure of the Brexit project. I take the comments made by the noble Lord, Lord Lamont, about the 4% of GDP spread over a period, but I would prefer to look at the recent figures from the National Bureau of Economic Research, a well-respected American organisation, that says the cost to us of Brexit has been between 6% and 8%, which, aggregated, is something like £95 billion of our GDP.
I think the other thing that is worth commenting on, which nobody has—unfortunately the noble Lord, Lord Gove, has left the Chamber—is that one of the things that the Brexit debate entrenched in our culture is that political lying is all right. Where is the money we were promised on the side of the bus for the NHS? Where are all the Turkish immigrants we were promised in the emails that were sent to people in the last two weeks of the campaign? This, to me, has been the absolute zenith of lies and nadir of results. I take the point that has been made about some trade deals having been entered into, but most of the trade deals that were entered into by the new regime were simply Snopaking out “EU” and substituting “UK” in those trade deals. The noble Lord, Lord Lilley, referred to the CPTPP, but the estimate of the impact of that on our trade deals is infinitely less than the cost of losing the opportunities that we had with the European Union.
I do not know whether our friends in the Labour Party, who were referred to by the noble Lord, Lord Lilley, include the Prime Minister, who in May 2025 clearly indicated that he wanted to reset our arrangements with the European Union. This has not been terribly successful so far. Obviously, the progress on Erasmus has been good, but we have pulled out of the attempts to participate in the €150 billion European Defence Fund, we have not been able to deal with the internal electricity market, which we thought we would be able to do, and the phytosanitary agreement, which somebody over there mentioned earlier, that we hoped that we would get has not yet happened.
We have been asked to say what we mean by a customs union. Now Al Pinkerton, the MP, ironically, for Surrey Heath—he replaced the noble Lord, Lord Gove—argued for a bespoke customs union deal with the EU, not including agriculture, with consultation on all trade deals. It should be a bespoke deal. He proposed that in a Bill in the House of Commons and it went through, with some Labour people supporting him. It will not get into legislation, but it did pass. Turkey has had that arrangement since 1995. Why can we not have it?
Lord Doyle (Lab) (Maiden Speech)
My Lords, I rise for my maiden speech with a real sense of the responsibility that comes with joining a body so rich in experience, expertise and public service as your Lordships’ House. I thank Black Rod, the indefatigable doorkeepers, the police and security officers, the clerks and officials and everyone who has made me feel so welcome. I also thank my noble friends Lady Armstrong of Hill Top and Lord Liddell for their support and guidance, not only at my introduction but over many years, and I pay tribute to my fellow maiden speakers today.
I am profoundly grateful that my parents are here today. When I say that I would not be here without them, I do not just mean that scientifically. They taught me so much, above all that every single individual can make a difference, and when you are born into that way of being, it really is a gift. I also remember my sister Catherine, who we lost more than 30 years ago; we still miss her every single day. Catherine was born with Down syndrome and, although she did not live to see it, the progress that has been made in healthcare and opportunities and visibility for people living with Down really has been wonderful to witness.
My journey here began at the University of East Anglia, where I joined the Labour Club and met an inspiring dean of biology, Dr Ian Gibson, who was Labour’s candidate for Norwich North. One day, they asked for a volunteer press officer: cue awkward shoe-gazing around me, and then suddenly I found my hand in the air. Little did I know that I would spend the next three decades at the intersection of politics, media and public service. I may have worked for some famous names in that time, but the real privilege I have had has been helping to tell the stories of those who have been left out and left behind, both at home and abroad. I pay tribute to and thank all the colleagues I have worked with over those years, many of whom are now here in this House, including my noble friends Lord Kennedy of Southwark and Lady Smith of Basildon, who I thank for all their guidance and support thus far.
I also want to remember two former Members of this House in particular: Lord Gould of Brookwood and Baroness McDonagh, both of whom were remarkable inspirations for me.
I chose Great Barford for my introduction. It is where my sister and I were born. This is an exciting time for Bedfordshire, with East West Rail, the new Universal Studios theme park and, at Tempsford, a new town. I intend to champion these projects and more, because Britain needs to stop prevaricating and start building. Growth is not an abstract theory but an expression of our responsibility to future generations.
One of the privileges I had growing up in Bedfordshire was a fantastic free county youth music programme. The inspiring teaching gave me opportunities I could never have imagined, including the chance to sing at the Royal Albert Hall. Fortunately for the audience, I sang with several other hundred young people as well. But somewhere along the way, we seem to have lost the consensus that the arts, music, film, theatre and dance matter as an essential means of developing confident, creative and capable citizens. I very much hope that the Government’s curriculum review will mark a decisive turning point in rebuilding a shared understanding that creativity, culture and learning are key to what makes life worth living, as well as essential drivers of our national success.
It is my belief in the creative industries that made me so keen to make my maiden speech in this debate on our relations with Europe. There is much we can do to reduce self-defeating barriers post-Brexit. Take the example of touring artists and crews. For them, those barriers are not an abstract concept but lost work, lost income and lost opportunity. This does not have to be our reality. Let us fix the visa waiver programme, flex the 90-day rule for those touring and cut the costs to make moving equipment less expensive, which has also done such harm to our haulage industry. As Sir Elton John put it:
“It’s heartbreaking to see the hopes of Britain’s next generation of creative talent downtrodden and destroyed by bureaucracy and red tape”.
When I nervously collected my first parliamentary pass almost 30 years ago, I could not possibly have imagined that one day I would stand here as a Member of your Lordships’ House. I have learned so much over my career, but I have never lost sight of that simple lesson my parents taught me: that change is made by people and that the world does not improve by chance. Government matters because it gives individual effort collective backing. It allows values to be translated into action and hope into reality. As we consider our future relationship with Europe, we must recommit ourselves to the values we share: dignity, respect, democracy and the rule of law. Because even in these times—especially in these times—I believe that when we choose purpose over complacency and co-operation over conflict, progress is possible.
Lord Liddle (Lab)
My Lords, it is a great pleasure to welcome my new colleagues who are making their maiden speeches today—my noble friends Lady Gill and Lord Docherty, my good friend who is to come later, and my noble friend Lord Doyle, who is a very close friend and from whom we have just heard an excellent maiden speech. I first came across my noble friend 30 years ago, when he had just arrived in Westminster and was working for the newly elected Labour MPs for East Anglia. He was so keen on this job and he was homeless, so he camped out in Charles Clarke’s office while he sorted out his personal affairs. He always had that trademark, and he has kept it: he is the man with the duffel coat. He always reminds me, whenever I see him, of Paddington Bear. In a way, that is appropriate, because he is a man of great culture and a real expert on film, so he will bring great wisdom on cultural questions to this House.
In the past 30 years since I first met my noble friend, he has done a great variety of very interesting things. He has worked intimately with some of the most consequential people on the centre-left of British politics: first for Tony Blair in No. 10 and then in his role as Middle East peace envoy, then for David Miliband—Labour’s lost leader—in his role with the International Rescue Committee, and finally for Keir Starmer. Working for Keir Starmer, he was not one of the fast-rotating group of people who have been in and out of No. 10; he was a crucial aide. I do know how many people know this, but he sustained Keir Starmer at what was the deepest crisis point of his leadership of the Labour Party after the loss of the Hartlepool by-election in 2021. When he worked on the Batley and Spen by-election, he persuaded Kim Leadbeater, Jo Cox’s sister, to be our candidate and we squeezed home by 300 votes. That is probably one of the most consequential acts of his political career. In his three decades of politics, has shown outstanding loyalty to the bosses he has worked for.
My noble friend is a very considerable person. He is a man of faith who has struggled with some of his inner tensions and conflicts and overcome them. He brings to this House much more than the experience of a press officer; he is well informed across a wide range of national and international issues. He is a committed lifelong social democrat and he is going to make a great contribution to this House.
On the subject of the debate, I will not delay the House long, but I will say this. I have great respect for the intellect of the noble Lord, Lord Lilley, but I have never heard such rubbish on the question of Europe. He referred to his role in the Uruguay round. Let me remind him, it was the European Commission that negotiated the Uruguay round.
Lord Lilley (Con)
In fact, it was jointly negotiated by member states and the European Commission. I was there for all nine days of the negotiations in the Heysel stadium, so the noble Lord is wrong.
Lord Liddle (Lab)
Do you know why we won the Uruguay round? It is because we had the strength of the bloc of the European Union behind us. It was not just something that Britain achieved on its own.
Secondly, the noble Lord talks about the stagnation in our export of goods and completely ignores the vast expansion of our trade in services with the European Union, which is being put at risk by increasing barriers. He neglects the fact that, in 2016, the British public were promised a growth miracle as a result of leaving the EU. Where are the benefits of all that loosening of rules that were supposed to happen? We were promised the end of free movement, and what did the Conservatives do? They went on to create the biggest inward movement of people into this country we have ever seen, so what hypocrisy they have talked on immigration. If we had stayed in the single market and in Europe, the growth we would have seen as a result would have meant that none of the tax rises that we needed to have since the 2024 general election would have been necessary. Those are facts.
The economic situation is getting worse as we lose the strength of the European bloc. We no longer have the competitive pressure of the single market, which is what makes business efficient. As we lose that competitive pressure, we will find that Brexit is not a one-off loss; it will affect our competitive position for years to come.
I said I would not talk for long, but may I just make one point? We should look at the customs union and try to speed up the reset. I agree with the noble Lord, Lord Hannay: we need independent expert advice on what we would try to achieve and how. This is something of great complexity. We need to look objectively at the consequences of having an independent trade policy. I do not think they are very considerable, but I am willing to be proved wrong in an independent expert inquiry, which I hope Keir Starmer will set up.
Lord Dodds of Duncairn (DUP)
My Lords, I warmly congratulate the noble Baroness, Lady Gill, and the noble Lords, Lord Docherty and Lord Doyle, on their excellent maiden speeches. I look forward to that yet to be made, and to the valedictory speech of the noble Lord, Lord Offord.
Under a customs union, the EU would strike deals in its own interests, while the UK would be required to apply those terms automatically, without any guarantee of reciprocal access or consideration. Countries negotiating with the EU would have no obligation whatever to offer the UK equivalent market access, yet we would be bound to trade terms we did not negotiate. There is a constant underplaying of or failure to grasp the asymmetry this creates, with obligations imposed in this country but no corresponding duties on third countries.
Having said that, I want to highlight where we are as a country in real terms regarding a customs union, because there seems to be a reluctance to face up to reality, and it has not been mentioned thus far in this debate. We need to face the fact that this country has already acquiesced in precisely such a customs arrangement, not merely in theory but in practice, through the Northern Ireland protocol/Windsor Framework. It is not an inevitable outcome of Brexit, as some would say, but a choice—the wrong choice—about how to manage trading arrangements.
We have a situation, which is either not noticed by people or deliberately ignored, in which part of this United Kingdom is today subject to the European Union customs code and single market rules: rules it does not make and cannot amend. In 2026 in Northern Ireland—part of the United Kingdom—EU law, not UK law, applies dynamically in over 300 areas of law, covering goods manufacturing and agri-food production, never mind the effects of EU VAT rules, state aid rules, Article 2 requirements covering human rights and equality legislation, and all that. So, in debating the pros and cons of the customs union and the single market in the abstract, how can anyone not have regard to the fact that we already have such arrangements in reality for one part of our country?
The Windsor Framework formalises a reality in which internal trade within the United Kingdom is governed by rules made abroad and enforced with no democratic control. A July 2025 report from the Federation of Small Businesses found that the Windsor Framework has created significant disruption to internal UK trade, with over one-third of businesses having stopped trading between Great Britain and Northern Ireland, while 58% report moderate to significant challenges. It says it is fuelling confusion and cost, breaking down UK internal market connectivity rather than resolving trade barriers. It says it is creating a “labyrinth” of bureaucracy, making it harder to move goods within the UK than to export globally.
Whether noble Lords are for or against a customs union for the UK as a whole, one thing that is not sustainable is having one part in the customs union and the rest out of it. That is not acceptable or sustainable. It is complex and unnecessary. It raises impediments to our prosperity. It erects barriers between us in Northern Ireland and our largest market in Great Britain. The cost is being paid by consumers, manufacturers and businesses. Fundamentally, it is a breach of democracy. Laws being made for British citizens in Northern Ireland are being made by a foreign entity in its interests, with no input, role or vote for any elected representative from the people of Northern Ireland, either in the Northern Ireland Assembly or at Westminster. That is an unsustainable position. We must take this into account in any debate regarding the customs union, the single market and the reset.
Lord Tugendhat (Con)
My Lords, I too congratulate the maiden speakers on their contributions. Time restricts me from saying more, but time does not diminish the warmth of my welcome to them, and I look forward to hearing from them on many occasions in the future.
When I began to consider this Motion from the noble Lord, Lord Newby, my mind went back to when I was in the Army during my national service in the 1950s. We were forever being told, in lectures on tactical exercises, that time spent in reconnaissance is rarely wasted. It enables one to see whether the objective is attainable, how best to go about it, whether there should be a direct or flanking movement, or whether indeed it is worth while in the first place.
Of course, I agree with the noble Lord, Lord Newby, and others who have spoken in favour of his Motion, that we must improve our access to the European Union for trade and goods. I agree that removing obstacles to do that ought to be a high priority of the Government—I believe that it is—and it is certainly something that industry is crying out for, especially the smaller companies, which were worst hit by the agreement we signed when we left the EU. It is also one of the most obvious ways in which we could improve our rate of growth. However, I must say that I doubt whether setting an ambitious and clearly defined objective such as a customs union is the best way to proceed, quite apart from the other disadvantages of the union which a number of my noble friends have pointed out. It could all too easily turn out to be the diplomatic equivalent of laying siege to a castle that never falls.
I say that because, sadly, the EU in recent years has all too often shown itself unable to reach the internal agreements necessary to take big initiatives. Its decision-making process has atrophied since—not because—we left. One has only to look at the failure to carry forward the single market or to achieve a capital markets union. The ambitious Draghi plan has remained largely a dead letter.
Perhaps more relevant to those examples, let us look at what has happened to the proposed trade deal with the Mercosur group of Latin American countries. It was first mooted, I believe, some 25 years ago, and serious negotiations began in April 2019. The agreement was finally signed this month, only for the European Parliament to refuse to ratify it and refer it to the European Court of Justice, which at best means a further delay.
My fear is that if we set our cap at the customs union, quite apart, as I say, from other issues, we could become embroiled in protracted negotiations that would embitter relations and lead, if not to failure, at least to disappointing results. Far better, in my view, is to identify a number of specific and often technical issues on which agreements would create a balance of tangible benefits for both sides. I have in mind very much the kind of agenda the Government are already pursuing.
I believe that if the UK and the EU can reach agreements on prosaic matters of this kind that could create a habit of co-operation between us, that might lead on to a more ambitious framework that, instead of drawing on the models of the past, is suited to the circumstances of the present and of the future.
Lord Stephen (LD)
My Lords, I draw attention to my offshore wind interests as declared in the register. I add my congratulations to those offered to the excellent and entertaining maiden speakers that we have already had. Perhaps I may ask for the discretion of the House in mentioning a maiden speech still to come, from the noble Lord, Lord Pitt-Watson. I remember, as a young Liberal in Aberdeen, attending many hours of meetings with Helen Pitt-Watson, which brings back very fond memories to me. I very much look forward to the noble Lord’s speech.
I also welcome the co-operation that was announced on Monday this week by the UK and EU nations in relation to offshore wind and North Sea interconnectors. The headline from the so-called Hamburg declaration was the joint development—the co-operative development—of 100 gigawatts of new projects based around a shared, Europe-wide grid system. Much more co-operation of this kind is surely sensible and badly needed—a significant step, perhaps, on our way to a new single market and customs union.
My friend the late Eddie O’Connor was a very big figure in offshore wind who founded Airtricity and then Mainstream Renewable Power. He championed the idea of a European supergrid with huge energy and passion. The challenge is simple: to create and deliver a renewable energy network across the UK and Europe that is fit for the 21st century and beyond. With determination and drive, I am certain that we can make it happen.
It is also great to see plans announced across several EU countries to adopt contracts for difference to underpin and anchor their own offshore wind developments. These so-called CfDs were first introduced in the United Kingdom in 2012 by then Secretary of State for Energy Sir Ed Davey. They have saved the UK electricity consumer billions compared to the previous ROCs system. Despite one serious and, sadly, completely avoidable misstep in relation to CfDs back in 2023 with AR5, contracts for difference have continued to be a big success in the UK, and AR7, announced on 14 January, just completed with 8.3 gigawatts of new capacity awarded—the biggest ever.
In contrast, Germany, Denmark and the Netherlands have recently struggled with their own power auctions. This is not good for the climate emergency, and Governments together must do better. Nations can learn from each other; they can work together. They can—we can—get better at all of this.
In the UK, it is not perfect, but it is generally positive. All the mainstream UK parties have supported the energy transition, net-zero targets and the importance of real and rapid progress. The only party to stand out is Reform UK. Its policies are strident, negative and hostile. In July last year, the party’s deputy leader, Richard Tice MP, wrote to the chief executives of all the major offshore wind developers threatening to strike down all contracts for difference signed under auction round 7 if the party ever won power—an astonishing, aggressive, anti-business move threatening to break binding commercial and legal agreements being entered into right now.
Such a move is in stark contrast to the words of the noble Lord, Lord Offord, Reform’s new Scottish leader, when he gave his maiden speech in this place in January 2022. He spoke warmly about his attendance at COP 26 and the tremendous achievement of the UK presidency in increasing commitments to net zero from 30% to 90% of world emissions. It will be interesting to learn whether Reform UK has—
Lord Katz (Lab)
I ask the noble Lord to conclude. He is getting over the time limit, and it is a time-limited debate. I keep on having to stress that.
Lord Stephen (LD)
I apologise. It was my reference at the beginning to some personal matters that have taken me over. Across the UK and the EU, all this is very important, yes, for the economic benefit for our nations, but, more importantly, for the future of our planet.
Lord Katz (Lab)
My Lords, for those immediately following those giving a maiden or valedictory speech, an allowance is made for the tributes being paid and the clock does not start until their remarks start. For others speaking in the debate, the time starts when they stand up, and that needs to be no more than four minutes.
Lord Verdirame (Non-Afl)
My Lords, I, too, welcome and congratulate today’s four maiden speakers. We very much look forward to their future contributions.
While there have been statements by the Government on the relationship with the EU, we have not had a comprehensive policy statement setting out their objectives in the negotiations. A paper on the defence partnership was published on the same day as the UK-EU common understanding. Similarly, the Cabinet Office policy paper on the internal electricity market last December dealt with the outcome of discussions with the EU. However, we are not here just to debate outcomes; we are here to scrutinise and seek to influence government policy. To do so, we need to understand what that policy is. Will the Government commit to publishing a comprehensive policy statement on negotiations with the EU similar in detail to, for example, the July 2021 Command Paper on the renegotiation of the Northern Ireland protocol?
As for the case for rejoining the EU customs union or parts of the single market, I will make three brief comments. First, any such decision, now that we are out, would be very different from the decision to leave the European Union, and the dividing line will not be the same as in the referendum. We are too large an economy to join a bloc in which we would have no say. Reference was made by the noble Lord, Lord Newby, to Mark Carney’s fine speech in Davos, but I do not see how rejoining the customs union would fit in with that speech. His argument is not that middle powers should tie themselves to bigger powers; it is the opposite of that. Middle powers should maximise their autonomy and influence through flexible and variable arrangements in which they retain a say with a wide range of powers. By all accounts, we are a bigger middle power than Canada and less dependent on the EU than Canada is on the United States.
Secondly, the European Union faces complex and decisive choices in the years ahead. As Mario Draghi warned, doing nothing or doing too little means accelerated decline. In recent interventions, he has complained that little has changed since his report and that conditions are worsening. What would this mean for us if we chose to join a customs union or parts of the single market now? It would put us, I am afraid, in a bleak position. Either we would have joined a bloc that fails to meet the challenge and declines faster, or, if the EU takes bold and transformative decisions, we would have joined that bloc just before those decisions are taken and without any ability to influence them.
My final point is on reports about a so-called Farage clause that the EU would be seeking as part of its reset—a penalty provision on future renegotiations. As some will remember, in particular the noble Lords, Lord Frost and Lord Barrow, a similar proposal was made in December 2020. It had a different name then; it was called the hammer clause. Imagine if the hammer clause had been agreed by the then Government. The Government today would have a weaker hand in their discussions with the EU. A penalty clause or mechanism will affect any future Government, whatever their colour, including a Liberal Democrat Government seeking to rejoin the European Union, because if there is one thing we can be certain of, it is that there will always be negotiations. We negotiated on the way in, we negotiated while we were in, we negotiated as we came out and we are still negotiating. Does the Minister agree that it would be reckless and irresponsible for any Government today to weaken the negotiating position of a future Government? Can she reassure us that no penalty clause would be agreed to?
Lord Jackson of Peterborough (Con)
My Lords, Brexit was a traumatic episode for our Liberal Democrat friends, but it happened in 2016. British people voted to take back control of our economy, our laws and our borders. A way forward was defined by British sovereignty and British interests: a belief in British exceptionalism, and not a cultural cringe to the European Union or an orderly management of decline, as was unfortunately enunciated by the Liberal Democrats. I am glad the Government stated in their manifesto that there would be no return to the single market, the customs union or freedom of movement. Yet the proposals to bring the UK in line with the EU’s electricity market and to reach an SPS agreement threaten to undermine the substance of that promise, which will have calamitous impacts on British farming, according to this morning’s Times.
If the UK aligns with EU rules, it would include targets toward the promotion of renewables and alignment on carbon emissions trading systems. Since leaving the European Union, we have diverged with it on our policies towards energy markets. This included the launch of the UK Emissions Trading Scheme. As of 27 January, the UK ETS carbon trading price was £49.19, while the EU’s ETS was £64.23. Aligning with the EU’s carbon price would raise the cost of industrial carbon for British businesses by more than 30%. The UK already has some of the most expensive energy costs in the world. A dynamic alignment agreement would leave us at the mercy of whatever economic policy mistakes the EU would tie us to. This looks likely, with the EU planning, for instance, to expand its ETS policy in 2027 to include buildings and road transport in the economic activity covered in carbon pricing.
Further integration with the EU would be damaging for British business and industry. It would undermine any innovation in agri-food brought about since the passing of the Genetic Technology (Precision Breeding) Act 2023. We have an advantage over the EU in helping to create food able to withstand future climate and biodiversity challenges. Even the French newspaper Le Monde argued recently that the EU’s common agricultural policy is not sustainable and does not aid in creating robust production practices.
Those who advocate for a customs union fail to grasp that the UK is a far more flexible and dynamic trading partner than we were, or could be, in the EU. When the UK left the EU, we rolled over existing trade agreements to make sure that there was continuity for British business. It has taken the UK less than two years on average since Brexit to negotiate many trade deals. In contrast, the EU takes seven to 10 years on average. In the 10 years before we left the EU, annual customs revenue at the UK border varied between £2 billion and £3 billion—the UK received just 20% of it. Outside the EU, in 2023, that revenue was 100% to HMRC and £5.5 billion. Our deal with Japan could boost UK GDP by £1.5 billion over time and link us more to the Indo-Pacific region, where the UK estimates that 54% of global growth and technological advances will occur between now and 2050, and where NATO estimates that two-thirds of future global wealth will be concentrated.
In conclusion, 80% of British economic output came from the services sector. Services provide the largest part of the UK economy and will likely continue to do so. In 2024, UK exports of services to the EU were up 19% in real terms since 2019. Exports of services to non-EU countries have grown by 23%. UK trade in services has outperformed the G7 average since 2021, and Brexit has been a benefit for the largest part of the UK economy. It is clear that, in the past five years, Britain has set out on a new future where we are free to trade with who we want and make decisions which are best for the British people, not a bureaucracy in Brussels. To go back on this will be an error of the highest magnitude.
Lord Pitt-Watson (Lab) (Maiden Speech)
My Lords, it is with great pleasure that I rise in this debate to make my maiden speech. I should begin by giving thanks to all Members of the House for their warmth, their welcome and their generosity: to the Garter King of Arms, Black Rod, the Clerk of the Parliaments, the doorkeepers and all the others who work here; to my noble friends Lady Smith of Basildon and Lord Kennedy of Southwark; and to my noble friends Lord Wilson of Sedgefield and Lord McNicol of West Kilbride, who introduced me to the House.
I would also like to thank the noble Lord, Lord Stephen, for remembering my mother. She was a music teacher. My dad was a Church of Scotland minister, so I think that, like a few Members of this House, I am a child of the manse. But my career has been in business, particularly in finance, which is what I would like to talk about today.
For Britain, finance is the real jewel in the crown of our economy. It is 9% of our economy, but it earns for us a trade surplus of £70 billion, much of that through the European Union, so the finance industry is critical to any element when we think about our trade. But it is not just self-interest that makes the finance industry so important. Finance is central to the solution of the big problems of the world. It is almost impossible to imagine a prosperous economy without a successful finance industry. I led the finance initiative at the Paris climate talks; we will not solve the climate problem unless the finance industry is on board with that. If you look at poverty in the developing world—I was treasurer of Oxfam—and if we are to get people out of poverty, they need financial services. If you look at innovation—I chaired the endowment at Nesta—again we need the money and the stewardship to make sure that that innovation can take place.
The main part of my financial career was in another element: it was about the power of the finance industry and how that is exercised. Because the finance industry holds the shares in companies, that gives them the opportunity to approve or otherwise the boards of directors and therefore to have great influence. That influence needs to be seen through the eyes of the savers—the millions of people who save through their pensions into the finance industry. Of course, they want profitable companies, but they also want companies that pay regard to the society and the environment in which they trade.
The greatest part of my finance career was with an entrepreneurial pension fund called Hermes, and we worked very strongly on that. We encouraged people to get together on that as well. I consider myself one of the midwives of Principles for Responsible Investment, which now has over $100 trillion of investors signed up to it—and it is based in the UK. It was not just me—there were many people who were involved—but the UK is the centre in the world of responsible investment and of people trying to make sure that our money is used well for the people that it ought to be used for.
But there is another, less rosy side. We all remember the global financial crisis. There are many failures in the financial system. It is not highly regarded by the people of Britain. Most critically, when academics study the financial system, the cost of taking money from point A in the outside world and investing it where it is needed in point B has hardly fallen over 100 years. That is a real challenge.
But such challenges, I think, can also be big opportunities. I have a professional interest in working on thinking about pension structures. We believe it is possible that, with a better pension structure for the same cost, people who are saving for their pension could be enjoying a reliable income in retirement maybe 30% higher than they are currently getting through the UK system.
The other thing I do is teach. I teach finance at Cambridge on a course that is considered radical. It is called The Purpose of Finance, and it simply asks the students to debate what is the purpose of this industry at which Britain excels. It is not just about analysis, and it is not just about markets and regulation. It is also about institutions and innovation and cultures and governance and incentives and professionalism.
Finance is critical. It is critical to this debate about the trade relationship with Europe. It is a jewel in our economic crown. As we think about finance, we surely want that industry to grow and to prosper, because it is purposeful in delivering to the outside world—as all commerce should be. In the future, as part of my work here, I hope I can contribute to the House’s deliberations on these sorts of matters.
Lord Davies of Brixton (Lab)
The House has seen four brilliant maiden speeches today, and I am sure that in the coming years we will benefit from everyone who has joined us. It is my honour and pleasure to follow my friend, David Pitt-Watson, who has now joined the House as Baron Pitt-Watson. His territorial designation is
“of Kirkland of Glencairn in the County of Dumfriesshire”.
What an asset he will be to the House—what a CV. In his speech, he only touched on what he will bring to our deliberations. This House will welcome, value and learn from his range of experience. Wikipedia has him down as a businessman and a social entrepreneur, but also a Labour councillor and a Labour bureaucrat, blending a life in academia and a life in business—successful, but always with a social purpose in mind.
I will touch on just a few things from my noble friend’s extensive CV: a Pembroke visiting professor at the Judge Business School, Cambridge University; influential books translated into five languages; and a lifetime achievement award last year from the International Corporate Governance Network. The citation for that award states that he is
“one of the most influential pioneers of responsible investment and stewardship. His leadership in creating ventures that advanced governance advocacy and institutional stewardship services set new global standards and inspired market-wide change”.
I am sure that many Members of the House will also welcome the fact that my noble friend is always a Scotsman. Finally, I hope the House will forgive me when I say I particularly welcome David because he is greatly interested in pensions, for that is how we met many years ago. He is not just interested but a tenacious and ultimately successful thought leader, and one of the leading advocates of a new type of pension provision, collective defined contribution schemes—CDCs. This will be of increasing importance in our development of better pensions.
Moving on, I look forward to the valedictory statement from the noble Lord, Lord Offord. It will be interesting, if not necessarily in line with what I believe.
On the subject of the debate, I want to make just one crucial point. I hope that everyone has now read or, better, watched Prime Minister Carney’s brilliant and important speech that sets in my mind the context for this debate. There is a new international political geometry. First, it is clear now that size matters; economic power, soft power and military power will also be increasingly important. Secondly, the delusion of “take back control” has been exposed for us all to see. Thirdly, we can no longer rely on the United States. We will always be friends—culture and language will always bring us together—but it will be that friend that we know we cannot rely on any more.
The inevitable conclusion of this, given our broad political and cultural affinities to Europe and the simple fact of geography, is that we have to work out a new relationship with Europe. Brexit has been a disaster. Let us talk seriously about how to proceed rather than being swept along by events.
Lord Offord of Garvel (Reform) (Valedictory Speech)
My Lords, I add my congratulations to the four maiden speakers on their excellent speeches. As they arrive and I depart, I feel in this debate a sense of Groundhog Day as we are replaying Brexit 10 years later. I wonder what the electorate would make of this, especially when in the other place at the time, in 2016, the MPs who were in favour of leaving were only 25% of the House whereas the public were at 52%. I wonder whether there are shades of that here again today.
When I was Exports Minister for 15 months, we worked very hard on the free trade agreements post Brexit because we knew that when we had joined the EU, which was then the Common Market, Europe accounted for a third of global trade, but that when we left in 2019 it was 20% of global trade. The OECD Going for Growth report says that by 2050 it will be 10% of global trade. Ergo, the EU is in decline and what is booming is foreign markets—Asian markets and Indo-Pacific markets—which is why we went for the CPTPP and worked on trade deals with India and America. We have to look globally and not be bogged down in this debate 10 years later.
Moving to my imminent departure, I was listening to Oral Questions today—over the five years that I have been in this House, I have made a point of being at most of those—and one theme that came through a lot while I was sitting here, especially from the other side of the House, was an undying ideological faith in the power of the state to solve all our problems for us. If there is a problem, the state must fix it. Taxpayers’ money must fix it. There must be a quango or state body that can fix it.
I will give noble Lords a warning from my beloved home country of Scotland. We have just had 25 years of devolution, and we have done an experiment of letting the state take control of our lives. When devolution began in 1999, the state spent 43% of GDP in Scotland. Today it spends 55%. What have we got in return? Our political class has created a welfare economy that does not create any wealth. Work does not pay any more than welfare. Some 93% of Scots think the NHS needs significant reform and our once-famous education system has gone from outstanding to average. In the meantime, we have destroyed our world-class energy industry in the north-east through ideological policies on energy pricing, resulting in the biggest transfer of money from poor people to rich people since Robin Hood. I suggest that the noble Lord, Lord Stephen, reflects on that as a former MP for Aberdeen.
That is why I am going home, heading back to Scotland to stand for Reform in the election for Holyrood. I am fed up with this mid-table mediocrity in Holyrood and the cosy consensus, some of which your Lordships heard from the noble Lord, Lord Stephen, on his time there. We need change. We need to make Scotland the most prosperous and successful part of the UK. If we are successful, we will have debates in Holyrood for the first time ever about how to grow the economy and make our people wealthier, not just how to spend other people’s money.
That is my plan. We are going to focus very hard in the last 99 days. Make no mistake: it is now a two-horse race between the SNP and Reform. A poll out just five minutes ago from Ipsos MORI puts Reform now in second place. We are going to take up that fight to get Scotland back to the top of the table, where she deserves to be.
I wish everyone in this House well. I want to give a personal tribute to one fellow Peer in particular who is not in his place today, the noble Lord, Lord Jack of Courance, who, as Secretary of State for Scotland, brought me into politics five years ago. He is a great friend and mentor, and he was a very effective Secretary of State.
Finally, I say to all fellow Peers: keep doing the work but do not rely on the state for everything. Thank you.
Lord Frost (Non-Afl)
My Lords, I am delighted to follow the noble Lord, Lord Offord. As he says farewell to this Chamber, I congratulate him, on behalf of the whole House, on his forthright but reflective valedictory speech. We overlapped only very briefly as Ministers in the last Government, but, as I think we all know, the noble Lord served that Government with an energy and determination that were very much needed at times.
If I may say so, not least because it was a step that my own party stopped from me taking at the last election, I admire the noble Lord for having the courage to relinquish his seat in this House and move properly to elective politics. I have little doubt—and, having heard what we have heard, I am sure that none of us can have any doubt—that he will be an effective and tenacious campaigner in Scotland. I wish him personal fulfilment in this new project and whatever follows it.
I turn to the subject of this debate. Here we are again. This is nth instalment of the long-running box set series of the British establishment’s obsession with being in customs union with the European Union. This has lasted 10 years. We saw it straight after the Brexit referendum, and, as early as January 2017, the noble Baroness, Lady May, in her Lancaster House speech, spoke of a “customs arrangement”, rather than leaving the customs union properly. By 2018, the then Cabinet Secretary, Jeremy Heywood, had invented the Heath Robinson-style dual customs arrangement—a Schrödinger’s customs union that apparently left us both in and out of the customs union at the same time. The 2018 withdrawal agreement would, of course, have kept the whole country in a customs union with the EU and given the exit keys to the European Commission.
Finally, the then Prime Minister, Boris Johnson, and I, did what had to be done. We took Great Britain out of the customs union—Northern Ireland, as we then hoped, was to follow later—giving us freedom of trade and the ability to set our own regulations. Until that point, we had seen nothing but a complete lack of confidence in Britain’s ability to trade with the EU, as we did, and do, successfully with the rest of the world.
However, here it is again; the obsession has returned. Just as everyone has got used to the new situation, with remarkably little difficulty, the same voices return. It seems that the Government increasingly want to wind the clock back. This is simply a grasping after nurse—a search for a refuge from hard decisions in the warm and deadening embrace of the Brussels institutions.
The arguments against doing this are just as strong as they have always been, and we have heard many of them today. First, trade deals under the customs union give third countries preferential access to our market but do not give us preferential access to theirs. Secondly, we get no say in EU negotiating positions and no assurance that our interests will be protected. Thirdly, as we are told, we do not get even proper friction-free participation in the EU’s market unless we join the single market as well. I am grateful to the noble Lord, Lord Newby, for at least being honest in saying that that is also his policy objective. Fourthly, we lose our ability to lower our own tariffs, which we have done for third-country food that we do not produce ourselves. Even the Government reduced some tariffs last year, and they made a point of saying so. Fifthly, we would have to undo our own trade agreements. Is it seriously suggested that, having joined, we should now leave the CPTPP and our trade deal with India to join the EU’s putative deal, which will have been negotiated with none of our interests in mind? It makes no sense.
The Lib Dems know this. They know more. I think that is why they claim to think they can negotiate some sort of special customs arrangement—oddly enough, one that excludes agricultural goods, even though that is the area in which, under the reset, we will be joining the single market. I can tell them that the EU does not do this sort of bespoke agreement, and we should have learned that in the years after the referendum. As for the Government, they are already dipping a toe in the customs union water by agreeing to follow the CBAM rules of the EU. Some Ministers appear to be for, some against, and I hope the Minister will be able to clarify.
This is all displacement activity. Being part of the customs union again makes sense for only one reason: if you want to start going back towards the EU. It is the Monnet method of one thing leading to another. That is why we hear the calls to rejoin the customs union. I urge its proponents to be honest: if they want to rejoin, they should admit it. They should make that case to the British people and see how far they get. Meanwhile, I hope—although not with great expectation, I am afraid—that today will be the last we hear of the nonsense on the customs union.
Lord Moynihan of Chelsea (Con)
My Lords, earlier speeches today have claimed with a straight face that had we not left the EU, our GDP would now be 4% or 8% larger than it is now. The OBR, which was named by the Sunday Times this week as the UK’s joint worst forecaster, has embraced that analysis. Yet our economy has managed the same, admittedly low, growth rate as the three key EU economies: Germany, France and Italy. The belief that we would have grown 8% more than those three had we stayed in the EU is, frankly, nonsensical.
The claims come from a doppelganger analysis which asserts that we are 62% identical to the US so we should have grown just as quickly as the US has. We have stifled building, driven the rich away, discouraged tourists, ballooned the obstinately unproductive public sector, medicalised anxiety and made not working pay more than getting a job. We entered into the disastrous net-zero experiment, while the US has provided abundant cheap energy—the essential precondition for economic growth. Yes, if we had done what the US did, our economy would be at least 8% larger than it is now. But we did not, so it is not. Net zero has decimated our manufacturing industry. Petrochemicals, ammonia and pharmaceuticals have all shrunk dramatically, with plants closed and manufacturing moving offshore. Goods exports are therefore indeed down, because there are fewer goods to export. We do not make them any more.
Exports of services, however, are growing rapidly—over 20% in the last two years. That would have been impossible had we stayed in the EU, where digital services, for example, are stifled by inflexible data regulation. It could be worse for us, we could have stayed in the EU, costing us far more per week than the £350 million on the side of the bus, retaining the EU’s high tariffs with the rest of the world, adopting the tens of thousands of new regulations and directives passed since we left, a 15% US pharmaceuticals tariff instead of our 0%, 50% on steel and aluminium rather than 25%, and no superior trade deals with the US, Japan, India, South Korea or, above all, the Pacific partnership.
To believe we would have had faster growth were we still in the EU is—forgive me—seriously delusional. As for wholly or partially rejoining or dynamic alignment, the EU would undoubtedly demand costly retrospective contributions to its recovery and resilience facility and withdrawal, as many noble Lords have said, from our many valuable, recently signed trade deals.
The UK will fare far better outside the EU. We were told at the time of the referendum that the City would die if we left the EU. It has not, and now the City wants to stay out. Our digital economy will never flourish under the EU’s crippling digital regulations. Our rapidly growing trade with the US will wither under extra imposed tariffs. There is plenty we could do to grow our economy faster. Relinking to the EU is not one of those things.
Lord Wallace of Saltaire (LD)
My Lords, we have been hearing different versions of economic and political reality in this debate. I want to focus in my short speech on two issues that lie behind negotiating a customs union: the question of sovereignty and an EU reset; and the foreign policy, security and defence aspects of again moving closer to the EU and its member states. Right-wing media again leapt up to cry, “You’re threatening British sovereignty” as soon as resetting our relationship with the EU was proposed, but the idea that the UK could somehow maintain absolute sovereignty in an integrated international economy with instant communications was always a myth.
I recall Geoffrey Howe, when he was Foreign Secretary 45 years ago, talking about sharing sovereignty with our European partners. He did not spell out explicitly that the alternative was yielding sovereignty to the United States, adopting US regulations and following its international political lead. We are now seeing that alternative spelled out brutally in threats from President Trump against our attempts to tax and regulate US tech corporations that dominate our social media, and to maintain higher standards of food production than US exporters want. I think it is clear, in an underlying way, that the alternative the noble Lord, Lord Offord, and others want to present is a Britain that would become like the Republican vision of the United States, with a small state, gross levels of inequality and a very damaged society.
As other noble Lords have said, particularly the noble Lord, Lord Davies of Brixton, we now face a much more hostile global environment, in which even middle-level powers such as the UK find it hard to stand up alone to pressure from China or the USA. The collective weight of European democracies, exercised through the EU, is, however, capable of maintaining autonomy. We need to contribute to that collective weight to protect our preferred patterns of market and product regulation and our environmental and social protections. We are a social democracy, and we do not wish to become an American-style very unsocial democracy. We need to co-operate on security and defence, pooling our efforts to resist the imperial ambitions and subversive activities of Russia and China and now, sadly, also of the United States.
Britain played a leading part in developing the EU’s co-operation in foreign policy. I recall Jim Callaghan, when Foreign Secretary, returning from an early meeting of what was then called European Political Co-operation and enthusing about how useful it was in promoting British interests. Five years later, Lord Carrington’s London report set out proposals to institutionalise regular consultations on international threats and initiatives. When the Berlin Wall came down, I recall the Metropolitan Police asking Chatham House, where I then worked, to organise a seminar on how to build closer police co-operation with our European neighbours. When Europol was then established, it had a substantial number of UK staff and a British Secretary-General. Similarly, when the European Defence Agency was set up, it had a further number of impressive British staff concerned to promote both shared and UK interests.
Brexit threw all this away, with Brexiteers arguing that America was the only ally we needed, that the Indo-Pacific was the future and that European co-operation contributed little to Britain’s security. We have now learned how wrong they were, and our Labour Government are hesitantly beginning the long, hard path back to what we have lost. The Government are still too timid on this, as on other policy areas, and they need to explain to the British public how much our international context has changed for the worse, how much more important our security and defence have become, and how our natural partners in defending and promoting our national interests are our neighbours across the channel.
Lord Elliott of Mickle Fell (Con)
My Lords, we have had four excellent maiden speeches today, and this is my first speech on Britain’s relationship with the European Union, so I should begin by declaring an interest—my previous position as chief executive of the Vote Leave campaign, and therefore perhaps as the person most responsible in the Chamber today for our having this debate.
I am reminded about my role in Brexit every time I walk into Parliament. Behind the security post inside Peers Entrance is a copy of my 1,032-page book on the subject, Change, or Go, which I co-authored with my noble friend Lord Moynihan of Chelsea, in 2015. Other copies on the Parliamentary Estate can be found propping up computer monitors, or even literally being used as doorstops. On the subject of today’s debate, Change, or Go included a long section on what was referred to in those days as the Turkish option—membership of the EU’s customs union. After briefly touching on trade, I would like to highlight the regulatory implications of Britain joining a UK-EU customs union for tech and the life sciences.
On trade policy, it is clear that the Government would need to abandon the trade deals they have negotiated. Speaking in Davos last week, the Chancellor said:
“We can’t go back in time and since we’ve left the EU we have done trade deals with India, with the US, with South Korea, and obviously you would lose the benefit of some of those trade deals if you were to re-enter a customs union”.
Unlike some of the speakers on the Labour Benches, I agree with Rachel Reeves. We should keep control of our trade policy.
Secondly, there is the regulatory impact on our thriving tech and AI sector—the largest in Europe—which is worth some $1.2 trillion. As the economist Douglas McWilliams, author of The Flat White Economy, said:
“We have the most successful tech sector in Europe. The reason why is we are outside the Digital Markets Act, the Digital Services Act, and the AI Act, which are three European acts which heavily constrain tech growth in the EU”.
The Prime Minister agrees with this point. When he launched the Government’s AI opportunities action plan, Keir Starmer said:
“I know there are different approaches around the world. But we are now in control of our regulatory regime … so we will go our own way on this.”
Were we to join a customs union and have a deal similar to Turkey’s, we would not be allowed to do that. Article 9 and the second clause of Article 54 would prevent us going our own way on tech and AI.
Finally, there is the impact this would have on our world-leading life sciences sector. The head of the MHRA told the “Today” programme recently that clinical trial applications rose by 9% last year. Inside a UK-EU customs union we would lose the benefits of the international recognition procedure, which enables it to take advantage of approvals by their equivalents in Switzerland, Japan, Canada and Australia. We would also have to row back on the landmark pharmaceuticals deal with the US, which the Government achieved just last December. This success is a direct result of regulatory decisions we have made since Brexit. Why would we chase away world-leading trials and potentially harm the most vulnerable patients in society? There are many other areas of government policy that I could have spoken about: education, farming and housebuilding, to name just three.
What the noble Lord, Lord Newby, is proposing, would open up a regulatory Pandora’s box on a plethora of policy areas that the Government would be wise to avoid. Unless those advocating a UK-EU customs union outline what it would mean for all the many issues raised in today’s debate, it will be clear to this House and to the public that they simply do not have a credible plan.
Lord Fox (LD)
My Lords, the noble Baroness, Lady Gill, and the noble Lords, Lord Docherty, Lord Doyle and Lord Pitt-Watson, all gave excellent speeches, and all demonstrated the differences, and the different approaches, that they will bring to these Benches, from which the whole House will benefit. Welcome to them. The noble Lord, Lord Offord, in his hustings—I mean valedictory—speech, set out why, in one sense, I will miss him, and I give him a cheerful wave as he heads north. This has been a fascinating debate, and I thank my noble friend for causing it.
As one of the vice-presidents of the Liberal group on the NATO Parliamentary Assembly, I met this week with the Finnish president of the group and the other VP, who is Canadian. The purpose of the online meeting was to work out how we as a group, within the NATO PA, should be responding to the unprecedented attack on the cohesion and values of the western alliance.
I raise this because the political environment to which we were responding, and the implications of this, would have been unthinkable a very short time ago. At the heart of what we were discussing is how we all work together, not just in the High North and not just in defence, but economically and politically, and at a values level. The scale of the change means that last year’s view has changed so dramatically from this year’s view. This pace of change has pushed the world to levels of uncertainty that transcend contemporary experience in this country.
Given this acceleration into political mayhem, I wondered, how will this debate shape up? What new ideas will the Brexit promoters produce? How are they reacting to the new reality? Well, noble Lords were here too and have heard that those opposing this Motion remain very firmly where they were just after the referendum. To the noble Lord, Lord Jackson, I say, yes, it has been traumatic for the Liberal Democrats; it has been traumatic for the country; and it has reduced the wealth of the country. That is a good definition of trauma.
When Boris Johnson told the country he was “getting Brexit done”, he ambiguously offered some sort of 19th-century version of the UK, while at the same time promising to use all the levers of the state and increase public spending to level up—which was more like a 1960s version of British government.
Of course, he achieved neither, choosing instead to do things completely differently. For example, as was mentioned, having “taken back control” of our borders, Mr Johnson went on to welcome nearly 1 million people per year to the UK under lawful migration. Levelling up never got off the ground. At the same time, those who had called for “Singapore-on-Thames”—which seemed to ignore there was another part of the country—were frustrated both with him and his temporary successors. Perhaps the only bright spot for these devotees was joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership: I thought I would give it its full name at least once today.
The reality is that, as my noble friend Lord Newby and others set out, Brexit has had a catastrophic effect on our economy, depriving the Exchequer of perhaps £40 billion, perhaps £95 billion over a period. Inward investment has dropped, our exports to the EU have reduced by about 18% from 2019 levels, and food exports are down by a massive 30%.
Yet still the proponents of Brexit continue. Some double down; some say it was the wrong Brexit; some see Covid as the unique source of its failure; and many more try to blame the current Government for everything, saying it is all their fault. To be clear, the totally botched exit deal with the EU and the subsequent fiasco was the work of the Conservative Government. It was all their own work. In spite of the bravado, many of them know that the number on the side of that famous campaign bus, far from being positive, is a big negative number.
The noble Lord, Lord Dodds, raised the really important point of the position of Northern Ireland. Without going back too far, I remember that many of us warned the Government of the day that this would be a problem. That view was decried. “It will be all right”, they said. Well, the noble Lord, Lord Dodds, has described the fact that it is not, and it remains a very present problem.
It is easy to forget how inept and how flyblown the Conservative Brexit Governments were who delivered us to this point. So, it is good that noble Lords remind us of that from time to time.
Although many noble Lords may be in denial, beyond Westminster, there is certainly greater realisation from the British people about how poorly Brexit is serving them. I agree with my noble friend Lord Newby that there is now much stronger and, indeed, majority public support for getting the UK back into the heart of Europe. This shift would help the Government to move on what they say is their primary mission: growth. The truth is, Labour will not succeed unless it gets our economy growing strongly again, and the best and perhaps quickest way to do that is in a customs union with Europe.
More than this, and returning to the conversation with my NATO PA colleagues, we agree that the western alliance has to stand up to President Trump and push back against his bullying. We know that we have to do that together. Economic ties are part of a process of pushing back against that bullying.
Some will say, “At least we have our Brexit freedom”, and they have. Well, freedom works only if you spend it wisely. The Prime Minister will, no doubt, come back from Beijing waving investment promises from President Xi: promises that will stretch the balance between risk and reward and make very little impingement on our huge deficit of £40 billion to £50 billion with China.
Meanwhile, the India-UK FTA has been hailed as a great breakthrough. As we know, it does not give increased access for services, and most of the benefit from the sale of goods will be in five to 12 years’ time. The EU now has one, which Brussels boasts includes
“tariff reductions that none of its other trading partners have received”.
In that regard, I ask the Minister to confirm that the EU deal is indeed better than ours, as Brussels says. Can she write to me with the details on where the differences are?
Our freedom has yielded Beijing’s possible investment, India’s slightly improved access for goods, some minimal uptick that will come from CPTPP and a very fragile agreement with the USA, which exists as long as Donald Trump decides it should continue. This is the freedom dividend and I am sure that noble Lords can see that it offers only a tiny fraction of what we have lost. That is why I am supporting this Motion. It is time that the UK set out in a clear and unambiguous way the UK’s long-standing aspirations for a renewed and much closer relationship with the EU.
My noble friends Lord Newby, Lord Razzall, Lord Stephen and Lord Wallace have done a wonderful job in setting out how a closer relationship would benefit the UK. I suspect a majority of noble Lords will not have been swayed to support our entry to a customs union, but, save for a few speeches, there has been a general softening of the approach to Europe, particularly on the Government Benches, and I welcome that softening.
Baroness Finn (Con)
My Lords, I begin by congratulating the noble Baroness, Lady Gill, and the noble Lords, Lord Docherty of Milngavie, Lord Pitt-Watson and Lord Doyle, on their maiden speeches today. Their thoughtful, witty and heartfelt contributions demonstrate that they will be a huge asset to your Lordships’ House, and we look forward to hearing more from them in the years to come. We will miss the noble Lord, Lord Offord of Garvel, and we are sorry to see him leave in this way.
Many of the arguments in today’s debate will be very familiar to the House. I do not intend to relitigate the referendum or to reopen the entire Brexit debate. However, I will address directly the core proposition of the Motion before us today: the case for a United Kingdom and European Union customs union and the related question of closer connection to the EU single market.
It is important at the outset to be clear about terms, because this debate often proceeds as though the single market and the customs union were flexible or à la carte arrangements. They are not. Participation in the EU single market entails acceptance of the four freedoms, including the free movement of people, which is set out explicitly in the EU treaties and has been repeatedly reaffirmed by the European Court of Justice. There is no precedent for participation in a single market without freedom of movement, and the European Commission has consistently ruled out such an arrangement. As my noble friend Lord Tugendhat correctly pointed out, we have to be realistic.
Equally, a customs union with the European Union requires the participating state to align its external tariffs with those of the EU and, crucially, to accept trade policy as set by the EU. This means allowing Brussels to negotiate and conclude trade agreements on our behalf. This is not compatible with an independent trade policy or consistent with the Labour Party’s manifesto commitments, which ruled out rejoining the customs union or the single market. The proposition before us today therefore sits uneasily not only with the outcome of the referendum but with the stated positions of parties across this House—and, ultimately, is against what the British people have voted for repeatedly over the past decade. My noble friend Lord Jackson of Peterborough rightly cautions against such an approach.
The EU customs union is open only to EU member states. Norway and Iceland, frequently cited in these debates, are not in a customs union with the EU. They participate in aspects of the single market through the European Economic Area but retain their own external trade policy and sit outside the customs union. The only large non-member state in a customs union with the European Union is Turkey, which entered into a customs union with the EU in 1995. It did so in the expectation that this would be a stepping stone to full EU membership; that expectation has not been fulfilled.
Under the terms of the customs union, Turkey is required to align its external tariffs with those of the EU and to grant market access to countries with which the EU concludes free trade agreements. However, those third countries are under no reciprocal obligation to grant equivalent access to Turkish exports; it is an asymmetrical trading relationship, as the noble Lord, Lord Frost, and my noble friend Lord Lilley have made clear. The EU has concluded trade agreements with countries such as South Korea, Mexico and South Africa; Turkey has been obliged to open its markets to those countries, while in some cases Turkish exporters have faced barriers in return. Under that arrangement, Turkey has, for instance, been forced into a non-reciprocal trading relationship with South Korea, which does not provide the country with open access to its own market. Turkey still experiences queues at the border. A customs union does not remove regulatory checks, rules of origin procedures or non-tariff barriers. In short, it does not deliver frictionless trade. Most importantly, Turkey has no seat at the table when EU trade policy is decided; it is bound by decisions that are taken elsewhere.
As a member of the EU, the UK had a vote in the Council, representation in the Commission and elected members of the European Parliament. Under a customs union without membership, we would have none of these things. We would be obliged to follow a common external tariff and trade policy over which we exercised no formal control. It is therefore difficult to see how such an arrangement could be described as a stable or acceptable long-term settlement. It would mean ending our independent trade policy while accepting a democratic deficit greater than one that existed before we left the European Union. It would mean leaving our existing trade agreements with India and the Pacific trade pact. As the noble Lord, Lord Frost, and my noble friends Lord Lilley and Lord Moynihan of Chelsea have pointed out, this would not be beneficial.
Businesses across the country have spent several years adapting to the post-exit trading framework. They have invested heavily in new systems, technology and infrastructure to comply with the regime put in place by Parliament. Dynamic alignment, as currently envisaged by the Government, risks constraining the areas where the United Kingdom has already chosen to divert from EU rules to address domestic priorities. A clear example is bovine tuberculosis, which costs farmers around £150 million a year. The UK is trialling vaccination as a practical solution, yet EU law prohibits the use of bovine TB vaccines in cattle. Alignment risks preventing the UK from pursuing an effective domestic response. The noble Lord, Lord Dodds, has highlighted the problems of dynamic alignment in Northern Ireland.
As my noble friend Lord Elliott has rightly observed, membership of a customs union would also prevent the United Kingdom from pursuing an independent approach to technology and AI policy. In short, dynamic alignment risks closing off innovation, weakening resilience and undermining British agriculture. The Prime Minister has said that he is not prepared to rip up the benefits of Brexit. Does the Minister agree that the risks that I have outlined threaten exactly that?
Businesses do not want perpetual renegotiation of our relationship with the EU but clarity, consistency and confidence. Threatening to upend the regulatory and trading environment yet again, simply to pursue closer alignment for its own sake, undermines all three. Will the Government commit to publishing, as the noble Lord, Lord Verdirame, has suggested, a policy paper on the objectives of their negotiations?
There are only two coherent options: full membership of the European Union or an independent United Kingdom outside its customs union. A stand-alone customs union is not a stable resting place; it would bind us to obligations without influence and leave us with less control than we had before we left. The British people were asked what they wanted, and they chose an independent United Kingdom. This is a position that we on these Benches recognise and respect.
In their pursuit of a closer relationship with the European Union, the Government are potentially in danger of undermining the very freedoms this country regained by leaving the bloc. We must be clear that surrendering our ability to innovate, to respond flexibly to domestic challenges and to support our own economy would amount to abandoning the principles that underpinned the decision to leave in the first place. Seeking to improve the UK’s trade and investment relationship with the EU and to remove genuinely unnecessary barriers to trade is a legitimate and worthwhile objective, but it can succeed only if the Prime Minister is firm and unambiguous about his red lines. Without that firmness, pragmatism slides into concessions that the British people have consistently voted against. It is vital that the Government negotiate in a way that consistently safeguards the interests of the British people, and I hope the Minister can assuage these concerns in her response.
Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)
My Lords, I thank the noble Lord, Lord Newby, for securing this timely and important debate. It must conclude at 15.02 pm, so I will get through as much as I can. I will obviously look at Hansard. I think I will write a great deal to noble Lords—I apologise.
Before I respond to the substance of the debate, I want to recognise some of the extraordinary contributions we have heard today. Four maiden speeches and one valedictory is quite something in one debate. The thoughtful final contribution to your Lordships’ House from the noble Lord, Lord Offord, was as expected. I understand the business that he founded in 2013 was called Badenoch & Co; I wonder whether the noble Lord is planning on renaming it “Farage & Co”.
I turn to my noble friends who made their wonderful, brilliant maiden speeches today. I was so pleased to see my noble friend Lady Gill join our Benches. I campaigned with her in the West Midlands when she was first elected, which I have now realised was 27 years ago. I am delighted that she was able to use her mother’s Gutka to take her oath.
Turning to my noble friend Lord Docherty’s one-vote win: for many of us, a win is a win. What a wonderful example of how small our world is that Mr McFall—who is now the noble Lord, Lord McFall—has been part of his journey and remains, at least for a time, the man standing at the front.
I have known my noble friend Lord Doyle for more than two decades. I know his family is proud of him because his friends are too. I know that his sister is looking down on him today as she does every day. We are lucky to have him.
My noble friend Lord Pitt-Watson is a child of the manse. He gave us such a thoughtful and considered speech. We are lucky to have him, and I look forward to his contributions.
Moving to the subject at hand, this Government were elected with a clear manifesto commitment to reset relations with our European partners, to tear down unnecessary barriers to trade, and to increase national security through strong borders and greater international co-operation, all without returning to the single market, the customs union or freedom of movement, the red lines in the Labour Party manifesto. That is exactly what we are doing.
In May last year, the Government agreed a new strategic partnership with the EU, which the Government announced at the historic UK-EU summit, the first since Brexit. The deal we secured with the EU is good for bills, good for our borders and good for jobs, and, most importantly, it delivers on what the British people voted for. We now move on with the detailed negotiations. We are making good progress on talks with the EU since the summit to implement the joint commitments made, and I confirm to the noble Lord, Lord Newby, that we aim to reach detailed agreements by the next summit.
As we discussed in your Lordships’ House last month, the UK and the European Commission have agreed a new deal for the UK’s association to Erasmus from 2027, opening up opportunities for students and professionals that will be good not just for young people at university but for those at colleges and in workplaces across the country, who will now have the opportunity to study abroad, broaden horizons, experience other cultures and have a better understanding of the people who are some of our closest allies.
Noble Lords will be aware that we have also concluded exploratory talks on the UK’s participation in the EU’s internal electricity market and are proceeding swiftly with negotiations on a UK-EU electricity agreement. These are important steps in delivering tangible benefits for the people of the United Kingdom, making it clear that rebuilding our relationship with the EU is engagement with a purpose. This closer co-operation will bring real benefits that will be felt by businesses and consumers in the UK and across Europe—the same businesses and consumers who will also feel the benefits of the food and drink agreement which we are negotiating with the EU, boosting our exports and cutting costs for importers.
In part in response to the genuine concerns of the noble Lord, Lord Dodds, I say that an SPS agreement will be highly beneficial to Northern Ireland. It will remove a broad and wide-ranging set of requirements for goods and plants moving from Great Britain to NI because the same regulations will be followed across the UK. Agreement will smooth flows of trade, protect the UK’s internal market, reduce costs for businesses and improve consumer choice in Northern Ireland. The same businesses and consumers who will benefit from that will also feel the benefit of linking our carbon markets—cutting costs, making it cheaper for UK companies to move to green energy and, once agreed, saving the EU carbon border adjustment mechanism charge being paid on £7 billion-worth of UK goods exported to the EU.
By the time of the next UK-EU summit, we aim to have concluded the negotiations not only on a food and drink deal but on linking our carbon markets, and to have agreed a youth experience scheme. The food and drink and ETS linking measures alone are set to add up to £9 billion a year in the UK economy by 2040 in a significant boost for growth, bringing down bills for British people and opening up new opportunities.
I have 30 seconds left. I have a great deal more to say, but I will undoubtedly discuss these matters repeatedly in your Lordships’ House in the coming months and years. The one thing I will say is that this Government, within the red lines we have outlined in our manifesto, are committed to delivering for the people of the UK and resetting our relationship with the European Union.
Lord Newby (LD)
I thank all noble Lords who have spoken in this debate. I say to the noble Lord, Lord Frost, that he will be disappointed if he expects us to stop talking about the issue, but we are going to stop talking about it now.
Motion agreed.