Beyond Brexit: Institutional Framework (EUC Report)

Lord Hannay of Chiswick Excerpts

Monday 6th December 2021 Grand Committee

[Lord Hannay of Chiswick (CB)]

My Lords, this triple debate surely falls into the “better late than never” category, being nearly a year after the reports were published and with none of the committees and sub-committees who authored them still in existence. However, I am delighted that we have today been addressed by some of those former chairs. Fortunately, their successor committee, the European Affairs Committee, on which I have the privilege to sit, is still chaired by my noble friend Lord Kinnoull, who led off our debate so admirably.

Looking first at the matter of trade in goods, about which our European Affairs Committee is on the point of publishing a further report, the issue that stands out, to me at least, is SPS—sanitary and phytosanitary controls. This is resulting in much lost or delayed trade and substantial increased costs on business, in the absence of an agreement between the UK and the EU. These controls are also an important element in the problems which have arisen over implementing the Northern Ireland protocol, about which my noble friend Lord Jay spoke so powerfully. Such agreements between the EU and a third country on SPS do exist. They exist between the EU and Switzerland and the EU and New Zealand. The Commission has indicated, so I understand, that it could contemplate a time-limited duration for an agreement with the United Kingdom, which would meet the eventuality of that agreement conflicting with any free trade agreement that the UK might want to enter into.

Why do the Government not use the trade and co-operation agreement machinery to explore the possibility of an SPS accord, given that several options are available? It is simply not a convincing answer to say that this was considered during the pre-Brexit negotiations and discarded. That was then and this is now, as the noble Lord, Lord Frost, is fond of saying in a different context. Nor can it reasonably be answered that the absence of a SPS agreement was endorsed by the result of the 2019 election. I doubt whether many people down at the Dog and Duck would be aware of what the acronym “SPS” means or entails, let alone that they were voting to do without it without an agreement with the EU.

On the report on trade in services, there seem to be two issues that stand out, both of which have been referred to by previous speakers: performing artists and Erasmus. The committee on which I serve now is already in correspondence with the Minister over performing artists, but so far this feels more like a dialogue of the deaf than a constructive and concerned response to the dire situation into which one of the most vibrant and profitable sources of our invisible exports has been cast following Brexit. The Government’s reliance on bilateral contacts with individual member states to seek remedies to the sector’s problems has so far borne absolutely no fruit and is unlikely to resolve the cat’s cradle of problems over visas, cabotage, carnets and activities involving several member states at a time.

The evidence we took revealed the sector’s impression of the Government’s complacency and obfuscation at the damage caused by Brexit, not simply that due to Covid, as it became daily more evident. Here too I suggest that it is not enough simply to say that the EU rejected our preferred solution in the pre-Brexit negotiations and we rejected theirs. Sure, but it is surely time now to go back to the negotiating table, bilaterally and with the EU as such, and through the TCA’s machinery to explore alternatives to those two failed attempts. I hope the Minister will now say that the Government are prepared to do that.

The decision to drop the UK’s involvement in Erasmus+ has never been properly explained, let alone justified. It looks like an act of vandalism that has brought to an end a process of co-operation that benefited hugely generations of students on both sides, and, of course, generations who have yet to get to university. The Turing Scheme is no substitute since it provides for no reciprocal access to our universities. It would surely make sense now to explore whether some basis for co-operation between Turing and Erasmus+ can be worked out. Again, I hope the Minister will undertake to explore the potential for that.

The final recommendation of the report on the UK-EU institutional framework reads as follows:

“What is vital … is that both sides approach the new relationship constructively, in good faith, with the aim of rebuilding the trust that has been so undermined in recent times. Liberal democracies are precious, and they should work together, not pull apart.”


One can say only ditto to that, and deplore how far short of fulfilling those worthy objectives the actual conduct of the relationship has fallen in the intervening period.

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[The Minister of State, Cabinet Office (Lord True) (Con)]

My Lords, perhaps I may say in preamble that it is never, and certainly is not, the intention of this Government to be triumphalist, aggressive or divisive on these questions. That has always been the position of Her Majesty’s Government. We see the European Union as a close friend and partner, as the Prime Minister repeatedly states, and we wish for nothing other than good relations with our partners. I hope that I can disabuse the noble Lord, Lord Desai, of his fears on that count.

I thank all noble Lords who have spoken for the contributions made today. As noble Lords will know, parliamentary scrutiny is invaluable and essential in my judgment. The Government remain fully committed to ensuring that this House can play a full role in making this new relationship with our European partners a success.

These reports were published in March and have all been responded to in writing by the Government, but it is welcome that the Committee has had this opportunity to debate them. I have found it a fascinating debate. Progress has been made since the reports were published, even in the face of a global pandemic and the resulting international economic downturn that has affected our partners and ourselves in different ways.

First and foremost, the trade and co-operation agreement has been fully ratified, both in the EU institutions and in the UK by this House and the other place. This landmark moment fulfilled our promise to take back control of our laws, borders, money, trade and fisheries. The importance of this crucial first step was rightly highlighted in the reports debated today. I therefore thank noble Lords on all sides of the argument for their efforts, which ensured that ratification occurred as swiftly as possible in what were challenging and unprecedented conditions.

I also place on record my thanks to the then European Union Committee of this House, along with its sub-committees, which duly scrutinised the trade and co-operation agreement in its series of Beyond Brexit reports. I am grateful to the committee for its valuable work on each of these. Equally, I thank the successor committees—the European Affairs Committee and the Sub-Committee on the Protocol on Ireland/Northern Ireland—for continuing the work of scrutinising our new relationship with the European Union. I hope that it will not be invidious or embarrassing if I express what I think is the sense of all noble Lords who have spoken: that is, the affection, respect and gratitude that we all feel for the noble Earl who initiated this debate for his leading role in all these fora.

On trade in goods, the trade and co-operation agreement was the first free trade agreement that the EU has ever reached based on zero tariffs and zero quotas. This is in line with our aim to provide liberalised market access for goods. I remind noble Lords that the intention on our side was not to seek fully frictionless trade, as the EU was clear that this would require regulatory alignment with its rules. Instead, a balance was struck that safeguarded the UK’s regulatory autonomy and sovereignty as an independent trading nation.

The report notes the importance of establishing the governance—I will return to this—that underpins the TCA as a route to improving UK-EU trade. I am therefore pleased to confirm that, immediately following ratification of the TCA, the Government have established the committees that support the agreement. With one exception, all those committees have already met, including the Partnership Council chaired by my noble friend Lord Frost. As I say, I will return to this point, but the UK and EU have already begun to discuss shared objectives and address the agreed commitments made in the TCA that will help to promote trade in goods between us.

The report also reflects on how important support and good communication between government and industry is; I agree with what many noble Lords said on that. The Government have committed significant funds and resources to supporting and listening to industry and others, and will continue to do so. We are also ensuring that they have a formal voice in the implementation of the TCA, through the civil society forum and the domestic advisory group. The noble Lord, Lord Kerr, asked about them; I will return to them later.

On trade in services, the Government welcome the report’s recognition of the unprecedented and highly liberalised provisions in the TCA for digital services and professional and business services, which will help to ensure that these important UK sectors continue to thrive. The Government also agree that UK businesses need our support to maximise the opportunities of our new relationship with the EU as they recover from the impacts of this pandemic. That is why we have provided extensive guidance for those exporting services to the EU and introduced the new Professional Qualifications Bill, which will provide certainty to business and help to maintain the incoming flow of professionals by giving more autonomy to UK regulators to tailor recognition according to the needs of their profession.

The noble and learned Lord, Lord Thomas of Cwmgiedd, made important points about the law. The Government recognise the importance of the legal services industry in the UK and the role that it plays in facilitating professional services generally. That is why we fought hard for this sector in last year’s negotiations to secure unprecedented provisions regarding the right of UK solicitors, barristers and advocates to practise in the EU using their UK title in both UK and international law. This will be key in ensuring that the UK remains an attractive and competitive trading partner in professional services with the EU, and that, as the noble and learned Lord hopes, UK law remains popular as the governing law of choice for commercial contracts worldwide.

The Government recognise the major contribution that the financial services sector makes to the UK economy. We took swift action to ensure a smooth end to the transition period and have since set out the forward path for the UK’s regulatory landscape in financial services. The UK remains committed to world-leading regulatory standards and has been clear that it stands ready to work with the EU to promote important emerging sectors such as green finance and fintech.

I turn to the report on institutional frameworks. As it helpfully sets out, there is a wide range of supporting governance that underpins the agreement. The breadth of this institutional structure and the mechanisms that it contains are designed to reflect the significant breadth of the agreement, the wide range of areas of co-operation that it covers and the unique nature of the agreement itself. This is only right. As I set out a few moments ago, the UK and the EU are now using these channels to implement the agreement and improve the trade between us. I assure noble Lords that the reports being debated today have contributed significantly to the helpful discussions being had in these fora.

The noble Baroness, Lady Armstrong of Hill Top, made an interesting and penetrating speech about UK-EU trade in goods. She referred to a number of factors, most notably Covid lockdowns across Europe and businesses adjusting to our new trading relationship, which made it inevitable that exports to the EU would be lower at the start of this year than they were at the start of last year. Indeed, the Office for National Statistics cautions that it is difficult to disaggregate the various factors and identify the underlying causes at this point, so we cannot yet draw any clear conclusions. Despite this, overall freight volumes between the UK and the EU were back to their normal levels by February 2021, and we are seeing food and drink exports grow. Exports increased in seven out of 10 of the UK’s leading export markets during the first half of 2021.

As I said, the deal maintains zero tariffs and zero quotas on trade in goods between the UK and the EU. This is the first time that the EU has ever agreed to complete tariff-free, quota-free access in an FTA. It provides for streamlined customs arrangements, including recognising our respective trusted trader schemes, to support the smooth flow of goods at the border and reduce administrative costs for traders. I agree with the noble Baroness on the need to improve, for example, conditions for road hauliers.

The noble Lord, Lord Hannay, and others said that sanitary and phytosanitary checks were creating difficulties for some sectors exporting to the EU. We proposed equivalence commitments in line with the WTO SPS agreement and the EU’s past FTA practice during the TCA negotiations. Given this, the EU’s refusal to include equivalence mechanisms was, to us, surprising. Nevertheless, the TCA contains provisions to co-operate with each other to review our respective SPS measures to avoid unnecessary barriers to trade.

The EU is applying a number of trade restrictions on UK exports. Some of these are due to blanket bans in EU legislation, such as the prohibition on the import of live bivalve molluscs from class B waters from third countries. Others are due to the EU not granting the UK full listed status, such as the ban on the import of seed potatoes and the granting of Part 2 rather than Part 1 listing for the movement of pets. I put in a plea for Dilyn the dog.

We remain unconvinced of the risk basis for these restrictions given our high biosecurity standards, and have consistently raised these trade barriers with the European Commission, including through the specialised committees. Any solution will need to safeguard UK sovereignty and autonomy and cannot involve aligning with EU law. However, I assure noble Lords that we stand ready to discuss such an equivalence-based agreement with the EU, and have raised it through the partnership council and the specialised committees that noble Lords referred to. In general terms, EU member states can, and do, attend specialised committees.

The noble Baroness, Lady Donaghy, the noble Earl and others raised financial services. In his Mansion House speech in July, the Chancellor set out the Government’s vision for an open, green and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across the United Kingdom.

The UK and the EU’s financial markets are closely linked, and the EU remains a key international partner for us. We hope that the EU will continue to be a champion for international trade and openness. I disagree with the noble Baroness, Lady Bennett of Manor Castle: international free trade has been one of the greatest boons to poor people and raising people out of poverty across the world in the history of mankind. We look forward to collaborating with the EU on a range of issues, such as green finance, in the next year.

The Chancellor was clear in his Mansion House speech that the EU will never have cause to deny the UK access because of poor regulatory standards. We welcome the European Commission’s recent announcement regarding the extension of an equivalence decision for the UK’s central counterparty clearing houses. The Government have made sure that the EU has all the information it requires to make a positive decision for the UK for all equivalence regimes, and we remain open to answering any further questions that the Commission may have. On the MoU, raised by the noble Earl in his opening speech, technical discussions have been concluded; the MoU can be signed once the EU has completed its formal processes that are required under its rules.

Many noble Lords referred to the UK’s participation in Union programmes. The Government are committed to the UK being a science and research superpower, and we value the strong collaborative partnerships that we have globally in the areas of science, research and innovation. Through the TCA, the EU and the UK agreed terms for participation in Horizon Europe, Copernicus and Euratom research and training. As the underpinning EU regulations were in draft at the time, a joint declaration was agreed, setting out the parties’ intentions to formalise the UK’s participation at the earliest opportunity and with the view that the UK would participate from the beginning of the programmes.

Although the UK stands ready to uphold the agreement reached last year, we continue to see delays from the EU in formalising UK participation. That is disappointing. The EU is obligated to finalise our participation under the TCA; it would in fact be a breach of the treaty if this were not delivered in a timely manner. Our priority is supporting the UK’s scientists and researchers. That is why the Government announced on 29 November a financial safety net, in the form of guaranteed funding for the first wave of eligible and successful applicants to Horizon Europe who have been unable to sign grant agreements with the EU as a result of these delays. We will support our science and research community, no matter the scenario. We had a set of alternative plans developed in 2020 and are revisiting these. We will certainly keep the House informed.

As to Erasmus, I know that is a matter of regret to some noble Lords. We considered carefully which programmes were in our interests to join. The UK would have made a large net contribution to the Erasmus+ programme. We have chosen instead to pursue a global exchange programme under the new Turing Scheme, providing opportunities in Europe as well as around the world for young people to experience international education.

The noble Baroness, Lady Donaghy, raised the important question of touring musicians. She was echoed by a number of noble Lords in their rightful concern about creative industries. The UK has a creative heritage of which we are rightly proud. It was perhaps inevitable that, following the UK’s departure from the EU, there would be changes in how creative professionals toured. I know that this, exacerbated by the pandemic, has led to uncertainty in the sector, since working and touring in Europe is such an important part of their professional lives. In the negotiations for the TCA, we sought to ensure that touring artists and their support staff would not need work permits to perform in the EU. Our proposals were rejected by the EU, although we have been able to agree similar measures with other like-minded partners, for example Norway and Iceland.

I am aware that there have been calls for the Government to negotiate a visa waiver. It is not government policy to seek such agreements and neither did the EU propose a visa waiver for paid activities during the TCA negotiations. What was proposed by the EU was a reciprocal visa waiver for short stays, for example as a tourist. However, nothing in this proposal would have compelled member states to change their visa regimes for paid engagements such as performing at a concert.

Our focus now is on working directly with member states, which are principally responsible for deciding the rules governing what work UK visitors can undertake. Having engaged with EU member states, we have established that UK musicians and performers do not need visas or work permits for some short-term tours in at least 21 EU countries. This includes Spain, a key touring market for the UK, which changed its rules on visas last month. This change is testament to the efforts of the sector as well as the Government.

I was asked about the governance framework. The first partnership council meeting took place on 9 June 2021. The meeting marked an important milestone in the relationship between the UK and the EU as friendly trading partners and sovereign equals.

[Lord Hannay of Chiswick (CB)]

The Minister unfortunately did exactly as I predicted, which is to describe in great detail why nothing was done for the performing artists in the negotiations pre Brexit. He explained carefully why our proposal was rejected by the EU and its was rejected by us, but he has not said anything about what we propose to do to remedy the damage being done, other than to refer to the bilateral contacts that we have had with member states. I am sure that the Minister knows perfectly well that many aspects in that sector cannot be dealt with successfully bilaterally. There is a need for both bilateral and collective discussion as things such as cabotage, carnets and so on cannot be dealt with bilaterally. Can the Minister not simply say that the Government will pursue, bilaterally and through the TCA, all avenues possible to get a better deal than we have at the moment, and not go back to Tweedledee and Tweedledum saying, “They said this and you said that in the negotiations”, but to see whether we cannot move forward on this bilaterally and collectively?

[Lord True (Con)]

My Lords, the noble Lord repeats the points that he made earlier. I have repeated and set on record the efforts made by the United Kingdom Government on behalf of these important industries and drawn your Lordships’ attention to progress that has been made. Without going over this ground again, I reassert the Government’s concern for the well-being of these industries. It is time to move on. I have already pursued, without an intervention, a good deal of time.

I was asked about the number of meetings of the specialised committees that have taken place. I say to the noble Baroness, Lady Chapman, that the Government take these seriously. As of Monday 6 December, almost all the TCA specialised committees have met. Nine of the 10 trade specialised committees have met. The SC on VAT is due to meet on 15 December. The delay is due to internal EU processes to prepare for decisions to be taken jointly by the UK and EU at the initial meeting. The Specialised Committee on Participation in Union Programmes is the only outstanding SC yet to convene. I understand that it will convene later this month. If I am incorrect, I will come back to noble Lords.

On the civil society forum, about which the noble Lord, Lord Kerr of Kinlochard, asked, the Government sought public views on how to engage with business and civil society groups on TCA implementation. We published the official response on 19 October. An expression of interest campaign was launched to determine membership. We received 83 expressions of interest. Individual businesses are not included in the scope of the domestic advisory group and the civil society forum, but they can engage departments through existing channels outside these fora. After careful consideration of possible dates, the first meeting of the domestic advisory group is planned for early 2022. The Government are in discussions with the European Commission to finalise the exact date for the first civil society forum, which is also planned for early 2022.

As for the parliamentary partnership assembly, noble Lords will be aware—I know I invite another intervention, but it is the reality—that this is a matter for Parliament rather than the Government. I pay tribute to the noble Earl, Lord Kinnoull, and to the Member of Parliament for North East Hertfordshire in the other place for their continued work on this important matter. The noble Lord, Lord Kerr, asked whether my noble friend Lord Frost was responsible for relations with individual member states. That is true, but he works hand in glove with the Foreign Office, with the active involvement of the Foreign Secretary and the Prime Minister.

I was asked about parliamentary scrutiny of the TCA. My noble friend Lord Frost of Allenton has been discussing these matters with the chairs of committees tasked with scrutinising the Government. These discussions are approaching their final phase and will, I trust, be agreed shortly. While I listened carefully to the noble Earl’s requests and will pass them on, I do not wish to cut across these discussions. The scrutiny of individual departments on matters relating to their individual policy remits, through EU committees and the normal committee processes, is included. In the interim, the Government are working diligently to ensure that committees can properly scrutinise government policy.

In answer to the point made by the noble Lord, Lord Jay of Ewelme, my noble friend Lord Frost has reminded colleagues of the importance of scrutiny and of Explanatory Memoranda being timely and of the highest quality. It is an important point, and I assure him that it has been taken on board.

The noble Lord also asked about the Northern Ireland protocol. In referring to this, I apologise—I know that he would wish me to do so—that my noble friend Lord Frost is unable to be here. Noble Lords will understand the current activity on this front. The Government are in intensive discussions with the EU with the aim of delivering significant changes to the Northern Ireland protocol. Most recently, my noble friend Lord Frost spoke with the European Commission vice-president, Maroš Šefčovič, last Friday via a videoconference. They covered the full range of outstanding issues; my noble friend welcomed the Commission’s professed readiness to make progress on them. The UK Government still want to find a negotiated solution if possible; we are ready to keep working constructively and intensively to that end. I must tell noble Lords that the gap between our positions is still significant, and progress on many issues has been limited. The UK Government’s position remains as before: the threshold has been met to use the Article 16 safeguards to protect the Belfast/Good Friday agreement if solutions cannot be found. However, my noble friend Lord Frost will speak to Vice-President Šefčovič again this week, and the UK and EU teams will have intensified talks in the coming days.

There has been some potential convergence on the medicines issue, which the noble Lord, Lord Jay, asked me about, but agreement has not yet been reached. So far, we have been unable to consider all the details of the EU’s proposals in the way we need to in this sensitive, critical and highly technical area, where solutions must work in practice and genuinely solve the problems. We continue to believe that more progress is needed on customs and SPS arrangements if we are to deal with the fundamental issue of improving the flow of goods between Great Britain and Northern Ireland. There have been some constructive talks on subsidy control, but the issue remains unresolved, as does the wider issue of governance.

I have a detailed response on Gibraltar that I should give to the noble Baroness, but I am looking at the clock. I can give it to your Lordships now; perhaps I should. In 2020, the EU insisted on a two-phase process for negotiations which required a separate UK-Spain agreement—the framework—prior to formal UK-EU negotiations on a legally binding treaty. On 31 December 2020, the UK Government, the Government of Gibraltar and the Spanish Government reached agreement on a political framework to form the basis of a separate treaty between the UK and the EU regarding Gibraltar. The negotiations between the UK and the EU on that treaty began in October, and three rounds have taken place so far; the FCDO is leading on these negotiations. In the discussions to date, the UK has made clear the need for an agreement that reflects the delicate balance in the political framework and Gibraltar’s unique circumstances and is proportionate to Gibraltar’s size and the small volume of trade at stake. The UK remains steadfast in its support for Gibraltar, its people and its economy in any scenario and will not compromise UK sovereignty.

I have spoken at great length—I apologise to your Lordships for that—but the reports were of fundamental interest and importance. I have sought to answer many of the questions asked in the debate, though perhaps not to everyone’s satisfaction. I conclude by thanking noble Lords not only for their valuable contributions this evening but for their extraordinary hard work, intelligence and thought that have gone into producing these reports. I have no doubt that they will help us going forward as we seek to cement our new relationship with the EU alongside other international partners. That is our wish, and I hope it is a wish that all of us, whatever our past feuds and differences, now share.

Protocol on Ireland/Northern Ireland: Effect of Renegotiation on Other Trade Negotiations

Lord Hannay of Chiswick Excerpts

Thursday 21st October 2021 Lords Chamber

[Lord Hannay of Chiswick (CB)]

My Lords, will the Minister tell us what the case is for the UK being the only country in the world which has two separate Ministers and two separate departments, each dealing with roughly one-half of our overseas trade? What are the consequences for our handling of negotiations? What analysis has he received from the embassy in Washington on the realism of expecting decisive progress on a US-UK trade agreement under the Biden Administration?

[Lord Frost (Con)]

My Lords, the decision taken, which I think is a good one, is that the UK-EU TCA is so sui generis—in fact, it goes much beyond trade into many wider areas such as law enforcement, road transport and so on—that it is best to handle it in a sui generis way. I do not know whether that decision is for ever, but it is the one that has been taken at the moment. We are ready to talk to the US about an FTA when it is ready. The US is conducting a review of its external trade policy at the moment. Some negotiating rounds have already taken place, but we stand ready to talk when both sides are ready.

Protocol on Ireland/Northern Ireland (EUC Report)

Lord Hannay of Chiswick Excerpts

Monday 13th September 2021 Grand Committee

[Lord Hannay of Chiswick (CB)]

My Lords, the report from your Lordships’ European Affairs Committee and its Northern Ireland sub-committee and the introduction to both by our two chairs do not stand alone. They need to be considered alongside the Government’s July White Paper on the same subject. Indeed, the fact that the Government chose to table their proposals for modifying the Northern Ireland protocol just 24 hours ahead of the committee’s report without waiting to consider its views or, indeed, without taking the opportunity to provide in evidence, which the noble Lord gave to the committee not long before, their own thinking was, I fear, a singular and lamentable act of disrespect to Parliament.

Although a member of the European Affairs Committee, I can without immodesty say that the report is a balanced, unvarnished account of the difficulties that have arisen over implementing the protocol, since we did not modify or criticise any of the sub-committee’s findings. I wish I could say the same of the White Paper, but it is an altogether more partisan document, designed as much to dismantle and renegotiate as to implement what was agreed so recently between the UK and the EU.

The hard fact is that the protocol was agreed by the two parties to it and was then endorsed and ratified by the two parliamentary institutions on both sides, thus becoming binding international law. It must seem odd to some looking at this that its principal negotiators on our side, the Prime Minister and the noble Lord, Lord Frost, now find so much in it to challenge despite probably having more experience of the way the EU operates than any of their predecessors in these jobs. Did they really not understand what it meant, or did they understand and conclude the agreement without any intention of implementing it? I shall be interested to hear which of those two the noble Lord, Lord Frost, opts for.

No one disputes that implementation raises a number of sensitive and complex problems which need solutions. They are reviewed in detail in the committee’s report. They cannot and must not be ignored. No one disputes either that solutions need to be found in a spirit of pragmatism and flexibility, but pragmatism and flexibility are two-way streets; they are not something you can ask just one side to show. You have to be prepared to show it yourself as well. I am afraid that pragmatism and flexibility are not encouraged by modifying deadlines and the protocol unilaterally, as the Government did earlier in the year, nor by threatening to invoke the main safeguard clause if we do not get our way, nor by seeking pretty fundamental changes in the governance procedures laid down in the protocol, nor by dismissing out of hand the idea of negotiating sanitary and phytosanitary conditions on a temporary basis, which would remove many implementation problems. Better surely to practise the qualities we are calling for, pragmatism and flexibility, and to eschew megaphone diplomacy.

A clear example of megaphone diplomacy was last week’s speech by the relatively new leader of the Democratic Unionist Party, Sir Jeffrey Donaldson. That sort of bluster and blackmail will serve no useful purpose, provoking, as it has already done, a reiteration of the EU’s refusal to renegotiate the Northern Ireland protocol, so recently concluded. It reflects too a refusal by the DUP to recognise the validity of a protocol which was agreed by the UK Parliament despite the DUP’s objections. That is the very conjunction which resulted in Britain’s exit from the EU despite the majority of Northern Ireland voters having voted to remain. Surely what is sauce for the goose should be sauce for the gander.

There are obviously major issues at stake here, including the overall health of the UK-EU relationship, which can hardly be said to be flourishing. We should not forget that triggering the Article 16 safeguard clause would open up the possibility for the EU to retaliate. Do we seriously accept the assertion that it is the protocol which endangers the Belfast agreement rather than a breakdown over implementing it being the immediate cause, with the main cause, of course, being Brexit? I know that that last statement will be considered a bit provocative, but how else is one to interpret a reversion to pre-Belfast agreement rhetoric by the leader of the DUP, which we heard last week?

Then, what price the prospects for a UK/US trade deal in circumstances where the protocol fails to be implemented or is set aside? The Government quite rightly take the view, and have often said so from the Dispatch Box, that Britain’s interests are best served by upholding the rules-based international order, but this protocol is part of that order. A post-Brexit Britain whose word is no longer its deed will pay a heavy and unnecessary price. It is surely preferable to negotiate calmly and purposefully to implement the protocol that we put our name to. I hope that the noble Lord, Lord Frost, when he replies to this debate, will confirm explicitly that that is the objective that the Government are pursuing.

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[Lord Frost (Con)]

I thank the noble Lord for his intervention. The point that he mentions in paragraph 71, the issue of engagement of the Northern Ireland institutions in this process, is one of the most sensitive of all and I do not think it would have been right for us to set out a specific way forward in the Command Paper.

The difficulty we have is the lack of democratic consent for specific measures as they come through from the EU’s law-making process. At the moment those are imposed without consent. We are proposing a reordering of the governance arrangements of the protocol so that the consent, if it exists in Northern Ireland for such measures, can be more real, meaningful and based on genuine debate. There are a number of ways of achieving that if the EU wants to go down that road and that is a pre-eminently political question for people in Northern Ireland, as well as one for the UK Government. That is why we have set out the issue without proposing a specific way forward, but it is very much an issue for discussion.

We want to proceed by negotiation and that is part of it. I want to be clear about what is possible for us in doing so. First, the Command Paper sets out how the tests for Article 16 are, in our view, met. I urge the European Union to take that judgment seriously. It would be making a significant mistake if it thought we were not ready to use Article 16 safeguards if that were the only apparent way forward to deal with the situation in front of us. As my noble friend Lord Hannan commented, there is ample justification for doing so.

Secondly, if we are to avoid this situation there needs to be real negotiation between us and the European Union. The noble Earl, Lord Kinnoull, correctly referred to the need for an atmosphere of co-operation and trust. Others, such as the noble Baronesses, Lady Suttie and Lady Chapman, and the noble Lord, Lord Empey, echoed that. The question of trust has come up a lot in these discussions. The noble Lord, Lord Jay, asked for assurances that the time we have before us would be used constructively and the noble Baroness, Lady Ritchie, asked for an assessment of progress on that negotiation. We have had several technical discussions. I will give the floor to the noble Lord, Lord Hannay.

[Lord Hannay of Chiswick (CB)]

The noble Lord mentioned Article 16. Can he answer two questions? First, does he agree with the view expressed in the debate—which I do not agree with—that the European Union triggered Article 16 in January? My understanding is that the Commission sought the powers to trigger but never triggered. The more important question is: have the Government done any analysis at all of the sort of compensatory measures the European Union would likely take if we triggered Article 16 in circumstances it considered unjustified?

[Lord Frost (Con)]

I thank the noble Lord for his intervention. The issue of what the European Union did or did not do at the end of January deserves a bit of comment. There are two aspects to this. The first is the question of Article 16: was it triggered or not? In a way, obviously, the intention is as important as the fact. It is our view that it was triggered, however briefly. It was certainly the intention to do so. The second aspect of what the EU did in January—the reason why Article 16 was used—sometimes gets less comment. It intended to use it to put in place a process across the land border on the island of Ireland, something that for the previous five years we had been told was impossible, undesirable and disastrous. That is as much why this struck and changed the debate so much as the very fact of Article 16.

On the second point, if we were to use Article 16, it would obviously be open to the EU to consider countermeasures if it wished. I do not want to get too far down the hypothetical road, but it is obviously a possibility. Of course, there has been a good deal of analysis of that. We would have to see what the situation was in those circumstances, but everyone has an interest in avoiding needless deterioration of trade and needless further economic difficulties for either side, at a time when supply chain and trade costs are so significantly raised already. That will obviously be a matter for the European Union, and we have to take it as such.

To return to my flow, regarding where we are in talks at the moment, we have had a series of technical discussions with the EU and continue to do so. These have been quite helpful, but they are nevertheless talks about talks; they are not yet a process that gets to the fundamentals, and we need to get into that. We must get into something more substantive as a matter of urgency.

A real negotiation does not mean the EU coming up with its own plans for solutions within the framework of the existing protocol and presenting them to us, take it or leave it. To be honest, I have been a bit concerned by a couple of the comments I have heard from Commission representatives in recent days, which seem to suggest they might be considering that way forward. The noble Lord, Lord Kerr, picked up the comment by Maroš Šefčovič the other day, when he said:

“A renegotiation of the protocol … would mean instability, uncertainty and unpredictability in Northern Ireland.”


Unfortunately, we already have all those things in Northern Ireland. The question is: how do we move on from them? I do not take Commissioner Šefčovič’s words as a dismissal of our position. I take them as acknowledgement of it, but also as a fairly clear indication that there is more to be done. I urge the EU to think again on that point and consider working to reach genuine agreement with us so that we can put in place something that will last.

I am conscious of time and will wind up quickly. The negotiations need to begin soon. I will not put a timescale on that, but it needs to be urgent as the situation is urgent.

Finally, I would urge the Commission to be sensitive to the situation in Northern Ireland in its actions. The EU has a treaty with us, and as my noble friend Lord Moylan made very clear, that does not make it a part of the Government of Northern Ireland. We are very happy to receive representatives of the Commission in Northern Ireland at any point, so that they understand the situation there, but I gently suggest that they should be cautious in coming to public judgments about the situation, or suggesting it is for the EU itself to decide how to resolve it. I do not think that will make the situation calmer; it will make it more difficult.

The situation we face is complex and challenging, self-evidently, but there is still a real opportunity for us both to find durable arrangements. That is our intention and our wish, and that is where we will be putting all of our effort in the next few weeks—in arrangements that can win the confidence of communities in Northern Ireland. We are ready to seize this opportunity and we urge, as strongly as we can, the EU to do the same. Bold action is needed to build a new, sustainable consensus. Once again, I thank all noble Lords for their contributions to the debate, and I look forward to continuing it, as I am sure we will, in many different fora in the future.

EU-UK Trade and Cooperation Agreement

Lord Hannay of Chiswick Excerpts

Friday 8th January 2021 Lords Chamber

[Lord Hannay of Chiswick (CB) [V]]

My Lords, since our marathon first debate on the UK’s Christmas Eve agreement with the EU last week, two things have happened: the agreement has entered into force and the UK has given effect to the provisions in domestic law. However inadequate one may believe it to be, as I do, it is water under the bridge, but there are plenty of loose ends remaining to tie up in the short term and some important policy choices to make in the medium to long term.

Two of the most important short-term challenges are financial services and data exchanges. On both, serious economic consequences will flow from whether the EU recognises the UK’s equivalence. Can the Minister assure the House that, in both cases, the Government will do everything they can to secure that equivalence? Do they recognise and accept that the more we seek to diverge from the EU—in practice, not just in theory—the less likely we are to achieve equivalence?

In the medium to long term, the big choice is surely whether we treat the present agreement as a ceiling, above which we do not seek to rise, or as a floor, on which other areas of co-operation, so far neglected, could be built. Which is it to be? Foremost among such areas, I suggest proper structures for co-operation on foreign and security policies, where we need to work with the EU institutions that take decisions in this field, as well as bilaterally with the member states, if we are not to drift towards irrelevance and lose influence. What is the Government’s thinking on this?

On student exchanges, the deplorable decision to turn our backs on Erasmus+ remains unexplained in any detail. Why, for example, do most other non-EU European countries find it of value? What can we do to restore reciprocal exchanges in this field, which Turing does not do? The fact is that we are at the beginning of a long and arduous journey of building our new partnership with our erstwhile EU partners, not strolling effortlessly through the sunlit uplands.

[The Deputy Speaker (Lord Faulkner of Worcester) (Lab)]

My Lords, the noble Lord, Lord Mann, has withdrawn from the debate, so I call the noble Baroness, Lady Morgan of Huyton.

European Union (Future Relationship) Bill

Lord Hannay of Chiswick Excerpts

3rd reading & 2nd reading & Committee negatived & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Wednesday 30th December 2020 Lords Chamber

[Lord Hannay of Chiswick (CB) [V]]

My Lords, the parliamentary proceedings in which we are participating are a travesty. How else can you describe a Bill set to go through all its processes in one day; a Bill endorsing an agreement of more than 1,200 pages; a Bill accompanied by a distinctly partisan summary circulated by the Government; and a Bill which is getting no genuine parliamentary scrutiny and has not been reported on by either of the two committees of this House explicitly set up to deal with these sorts of agreements? If that is taking back control, it is certainly not effective control by Parliament.

The Government’s case needs, of course, to be listened to and examined with care. But it is not helpful when it is accompanied by a tidal wave of hyperbole, flippancy and plain untruths. Does the jurisdiction of the European Court of Justice in this country cease on Thursday of this week? No, not in Northern Ireland, and not in respect of issues relating to the status of EU citizens living and working in this country. Are we regaining our independence on Thursday? No, we never lost it. How otherwise could we have decided to leave the EU? Are we regaining unfettered sovereignty, that golden calf before which so many supporters of leaving the EU seem now to worship? No, this agreement we are debating inhibits the exercise of our sovereignty in hundreds of different ways, as does our membership of NATO, our acceptance of the compulsory jurisdiction of the UN’s International Court of Justice and of the World Trade Organization’s dispute settlement procedures, as do the provisions of the rules-based international order we are, quite rightly, defending and promoting.

I suggest that one of the best tests of the agreement is what is not covered by it—what we really will lose on Thursday, or at least risk losing. That includes freedom of services, which are 80% of our economy and in substantial surplus with the EU; financial services, which depend on the thread of equivalence of treatment yet to be settled; recognition of professional qualifications, which depends on a cat’s cradle of bilateral arrangements yet to be negotiated; and data exchanges, which are still in limbo. Our internal security and the ways to deal with the challenge of international crime are severely reduced from what we have now, with the Home Secretary surely alone in asserting that we shall be more secure.

The Erasmus student exchange programme is being thrown overboard as too costly, but why on earth, then, do other non-EU European countries belong to it? There is not a trace of any provision on co-operation on foreign policy and security, yet we need not only bilateral co-operation with other European countries, but co-operation with the EU’s decision-making institutions. I really would like to hear the Minister’s views on Gibraltar when he comes to reply. Why are we not sticking to the commitment that we would not enter into a deal in which Gibraltar was not covered?

This is a sorry tale before we even get to the detail. I suggest a simple set of conclusions: Britain could have done better, Britain needs to do better, and Britain will do better at some future point when we have regained some of our national characteristic of pragmatism.

Beyond Brexit (European Union Committee Report)

Lord Hannay of Chiswick Excerpts

Tuesday 12th May 2020 Lords Chamber

[Lord Hannay of Chiswick (CB)]

My Lords, when I saw the title of the report that we are debating, which has been so excellently introduced by my noble friend Lord Boswell, I wondered whether our esteemed EU Select Committee was pulling our collective leg. Then I saw the date of the report—March last year—and realised that it was addressed to a different Government in a different Parliament and, shamefully, not debated when it should have been ahead of our leaving the EU this January.

The negotiations on our new partnership—I use the word to which we committed ourselves in the political declaration, not the Government’s reductive terminology of a free trade agreement—have begun, but so far they seem to be more a dialogue of the deaf than a prelude to a partnership. The Government seem to be applying social distancing to that political declaration, which provided an agreed framework.

Of the bones of contention so far identified, that of the level playing field is, in a way, bizarre, because we agreed in the political declaration to the following wording:

“Given the Union and the United Kingdom’s geographic proximity and economic interdependence, the future relationship must ensure open and fair competition, encompassing robust commitments to ensure a level playing field.”


Do the Government recognise that statement as one to which we subscribed?

Then, there is the Government’s determination to avoid an overall agreement out of a desire, apparently, to guard against the withdrawal of concessions in a different sector from the one in dispute. I fear that is futile and doomed to failure. Why? Because under the Swiss deal the EU has done exactly that, when it found that the Swiss were moving away from free movement and the EU withdrew access to Erasmus and research co-operation.

Thirdly, there is the implementation of the Irish protocol to the withdrawal agreement. Does anyone believe that checks and controls can be avoided? Obviously, there will be light ones, but none at all?

I fear that the verdict has to be that we are winning few friends and influencing few people. Why do we not just exempt the rest of the EU from the possible quarantine arrangements if they come here by aeroplane?

European Union: Negotiations (European Union Committee Report)

Lord Hannay of Chiswick Excerpts

Monday 16th March 2020 Lords Chamber

[Baroness Noakes]

I will come on to that in a short while. I was saying that dynamic alignment is simply not what the British people voted for in 2016 or in last year’s general election. It is right that it forms no part of our approach to our longer-term relationship with the EU.

One symbol of being an independent nation again is fisheries. The EU seems to think it can recreate the existing quota arrangements, which are so disadvantageous to our home fishing industry. That simply cannot happen. The fishing industry may not be the most important contributor to the nation’s GDP, but it is symbolic of what it means to be a free nation: controlling our own waters and setting the rules by which we will be responsible conservators of our fishing stocks.

I am also completely behind the Government’s decision that we should not seek any extension of the transition period at the end of this year, even in the face of the current pandemic, which may well disrupt negotiations but does not present an excuse for not completing them. It is essential that we move to prepare for life without a comprehensive agreement if we do not make enough progress by the summer. I have never been afraid of trading on WTO terms and I will not start now.

All in all, I believe that the Government’s approach as set out in Command Paper 211 and as illuminated by the wonderful speech last month by Mr David Frost, our chief negotiator, is terrific. I hope that the House will support it.

I turn now to the other Motions before us, namely the Motion in the name of the noble Earl, Lord Kinnoull, on behalf of the EU Select Committee, and the amendment in the name of the noble Baroness, Lady Hayter. If I had to sum up both of these Motions, I would say that they are seeking to rerun battles that have already been fought and lost. I was absolutely amazed that the EU Committee managed to hang its first report on Section 29 of the EU withdrawal Act. I shall express no opinion on the validity of the argumentation around this as set out in chapter 1 of the report. It may well be technically accurate. I do not, however, believe that Section 29 was intended to be used for the purpose of requiring a debate on the negotiations on our longer-term relationship. I had understood that section to allow Parliament to raise important issues about EU legislation passed in the transition period and therefore applying to the UK while we do not have any representation in the EU.

Noble Lords will be aware that the terms of the 2020 withdrawal Act differed significantly from the version of the earlier Bill that was considered by the last Parliament. The earlier Bill required the approval of Parliament to the Government’s negotiating objectives, which themselves had to be consistent with the political declaration. It also required three-monthly reports to Parliament on the progress of negotiations. Those provisions were inserted in a doomed attempt to get the last Parliament to pass the withdrawal Bill. But since then, the general election has given a huge mandate to the Prime Minister to “Get Brexit done”. The provisions for involving Parliament in the negotiations were removed from the Bill which became law in January this year. The will of Parliament is now clear: these provisions of parliamentary scrutiny are neither necessary nor desirable; yet here we are with the EU Committee using Section 29 of the Act to achieve a debate on negotiating principles, and even calling for the Government to publish a comparative analysis of the political declaration and the Command Paper.

The political declaration has no legal force and, as the EU Committee’s report makes clear, neither the Government nor the EU are using the political declaration as the starting point for their negotiations. We have moved on. I respectfully suggest that the EU Committee does as well.

[Lord Hannay of Chiswick (CB)]

Will the noble Baroness explain why it is that she believes that the European Union is not behaving in a manner consistent with the political declaration when my noble friend’s report says quite explicitly that it is?

[Baroness Noakes]

I will say to the noble Lord only that it may have the headings of the political declaration but the content is significantly different in a number of places, as indeed was set out in the EU Committee’s report.

--- Later in debate ---

[Lord Hannay of Chiswick]

Well, my Lords, that really was back to 1958.

Were the coronavirus pandemic not dominating the public debate almost to the exclusion of everything else, the admirable and forensic report of your Lordships’ EU Select Committee, which was so excellently introduced by my noble friend Lord Kinnoull and which we are discussing today, and which deals with the opening positions of the UK and the EU in the post-Brexit new relationship negotiations, would be getting a great deal more attention, and rightly so. The political and economic choices that will be made in these negotiations will be felt for a long period—a period measurable in decades, not just in months and years—and very possibly long after the consequences of coronavirus will have been consigned to the history books and academic research. The consequences of the post-Brexit negotiations are likely to be seriously negative, which is no doubt why the Government are still refusing to publish any impact assessment of the proposals that they have put on the table in Brussels.

This report tells us that, on 31 January, this country ratified a political declaration annexed to the withdrawal agreement which set out the framework for our new relationship with the EU, and that from 3 February onwards—a mere four or five days later—every statement made by the Government treated that framework with blithe disregard, often contradicting it. Before anyone jumps up to say that the political declaration was not legally binding, I would not dream of suggesting that it was, but the time was when this country prided itself that its word was its deed. No more, apparently. Such blatant disregard for what we signed up to will carry a heavy cost in lost trust and confidence on the other side of the negotiating table. That will no doubt become clear when the two parties meet to thrash out the details of the Northern Ireland protocol to the withdrawal agreement, the interpretation of which by the Prime Minister bears no resemblance to what he actually signed up to.

The level playing field will clearly be a major bone of contention. In the political declaration we agreed—I emphasise: “we” agreed—and ratified the following words:

“Given the Union and the United Kingdom’s geographic proximity and economic interdependence, the future relationship must ensure open and fair competition, encompassing robust commitments to ensure a level playing field.”


There is not much ambiguity there, you might think, but the Government are driving a coach and horses over it by turning to the precedents of the EU’s agreements with Japan, Canada and South Korea, all many thousands of miles distant and much less interdependent with the EU, and ignoring the fact that agreements with its neighbours—Norway, Switzerland and Ukraine, for example—all have elaborate level-playing-field provisions.

Why are we insisting on the principle of regulatory divergence before we have even worked out in what sectors divergence might be to our advantage? I noted that today the noble Lord, Lord Goldsmith, made it quite clear that we have not worked that out yet on motor vehicles and chemicals. I wonder whether business really wants us to diverge. Surely it would have made more sense—and still makes more sense—to discuss the practicalities of divergence, not the principle of it.

Then there are all those regulatory agencies for which we seem determined to set up or restore separate, national institutions come what may, for largely ideological reasons. That will involve more costs, some no doubt to be loaded on to business, and more civil servants. Will it also mean more safety and protection for consumers? That is not terribly likely. Think of the implications of leaving the European Medicines Agency. As for internal security and law enforcement—on which the EU has made great strides in recent years from which we have benefited substantially—if the use that we have made of those new instruments is anything to go by, will we be safer without the European arrest warrant, or less safe? I think the answer is the latter.

One of the most blatant departures from the political declaration, which has already been mentioned, is the way that we have turned our back on any systematic co-operation with the EU on foreign and security policy, opting instead for bilateral ad hoc approaches. However, we will have no control over this. If the EU decides to act together on an issue of foreign policy, security, defence or sanctions, we will have no choice but to deal with it on that basis or not at all. Will we have more or less influence on the formulation of EU policies if we refuse systematic co-operation? That question is not too difficult to answer.

It is not too late to remedy some of these defects as the negotiations proceed—not too late even to reach mutually beneficial arrangements over fisheries which give our fishers a better deal than they had in the past, so long as we do not take an all-or-nothing approach. But imposing artificial deadlines which ignore what is written in the political declaration about the possibility of extending the transitional period and threatening to walk out in June are not the best ways to promote out interests, nor are they likely to succeed. That is why I support the resolution in the name of my noble friend Lord Kinnoull and the amendment moved by the noble Baroness, Lady Hayter, and why I regard the Motion in the name of the noble Lord, Lord True, as grossly inadequate to meet the challenges that lie ahead.

--- Later in debate ---

[Viscount Trenchard (Con)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Falkner. She made some very interesting new points to inform your Lordships’ debate. I thank the noble Earl, Lord Kinnoull, for introducing this debate. His committee rightly concludes that the recent Council decision raises matters of vital national interest.

I believe that the matters that the committee raises are not exactly new, because we have been debating them since before the referendum of 2016 and, indeed, before that. Indeed, a majority of the electorate voted to leave because they considered that remaining in the EU raised matters of vital national interest. They thought that reclaiming our right to have our laws made in this Parliament by MPs accountable to the British people was one of these matters.

I am sure that your Lordships are grateful to the noble Earl’s committee for its report and for promoting debate on our EU negotiations, which will, whatever their outcome, profoundly and permanently change the United Kingdom. However, even if we had not left the EU, the continuing incremental transfer of competences to the European institutions would have continued to profoundly and permanently change the country.

I regret that the negotiations leading to the withdrawal agreement were conducted ahead of and separately from the current negotiations on our future relationship with the EU. As your Lordships know very well, Article 50 states that the negotiations on the withdrawal of a member state shall take account

“of the framework for its future relationship with the Union.”

My understanding is that it was expected that the framework for the future relationship would be agreed at the same time as the withdrawal agreement. Article 50 does not suggest or imply that there should be two separate sets of negotiations or agreements. The EU insisted that we should agree the terms of withdrawal first, dealing with the future framework in the separate and non-binding political declaration.

The political declaration, as your Lordships are well aware, provided for a number of possible outcomes, ranging from continued close alignment with EU laws and regulations, to a clean break with full restoration of national sovereignty but also starting from a point where our legal and regulatory systems are identical.

The Conservative Party manifesto—on which the new House of Commons was elected—made it very clear that the Government would seek a future relationship with the EU based on a free trade agreement similar to that enjoyed by Canada; leave the single market and the customs union; and not agree to the continuing jurisdiction of the ECJ in this country. The Prime Minister made it clear in his Greenwich speech that if the EU would not agree to an FTA similar to that which it has with Canada, the UK would seek trading arrangements similar to those which the EU has with Australia.

I am opposed to the amendment of the noble Baroness, Lady Hayter, which seeks to exercise control over the actual process of our negotiations, or even debate the terms of emerging agreements. This would detract from our negotiator’s ability to obtain the best possible result for the UK and make it more likely that we will not be able to reach agreement with Mr Barnier and his team. I therefore urge your Lordships to reject this amendment, which, if agreed, would send the wrong message to the EU, and damage the authority of Mr Frost and our negotiating team.

One area where the Government’s Command Paper differs significantly from the EU’s decision is state aid. Indeed, the amended text of the decision adopted on 25 February implies not only that the EU will require the UK to continue to apply existing state aid legislation, but that it will be expected to adopt new or amended EU state aid rules in future. But the UK is very far from being the worst culprit of the excessive use of state aid. As the Prime Minister pointed out, and as the noble Baroness, Lady Falkner has just reiterated, the EU has enforced state aid rules against the UK only four times in the last 21 years, compared with 29 enforcement actions against France, and 67 against Germany. The recent hardening of the EU’s position on state aid will make it very difficult to reach agreement on a satisfactory FTA within the time available.

I would like to say a few words about services, especially financial services, based on more than 40 years’ experience as an investment banker. The political declaration suggested that the EU and UK should seek close and structured co-operation on regulatory and supervisory measures, including by working together in international bodies. As a member of the committee’s Financial Affairs Sub-Committee, formerly chaired by the noble Baroness, Lady Falkner, and now chaired by the noble Lord, Lord Sharkey, I can confirm that we have discussed this matter to a considerable extent. Our witnesses have included the present Governor and the Governor-designate of the Bank of England. Both have expressed the view that we should not be a rule-taker from the EU and should in future adopt a regulatory regime which recognises London’s connections with other important financial markets, such as New York and Tokyo.

I regret that the EU did not match our decision to grant temporary equivalence to EU clearing houses for two years, but was willing to grant this only for one year. Does the Minister concur that, in agreeing the basis of granting and withdrawing the recognition of equivalence in financial regulation, we should not establish a cumbersome and bureaucratic bilateral structure for assessing divergence with the EU which would, in effect, tie our rule-making more closely to Brussels than to other important financial markets, such as those of the US and Japan? Does he also agree that in future the UK should seek to maximise its influence in establishing best practice and designing proportionate regulation at the global level, through bodies such as the International Organisation of Securities Commissions, IOSCO? There are several EU financial rules, such as AIFMD, Solvency 2 and MiFID 2 which contain elements which we tried to resist and from which we may wish to diverge. If the structures we agree with the EU unduly restrict us from divergence, it will complicate our freedom to reach agreements on regulatory equivalence with third countries such as the US and Japan.

I agree with the former Chancellor who called for a durable equivalence relationship, whereas the EU has stated that its equivalence decisions can be withdrawn at 30 days’ notice unilaterally, as it has done in the case of Switzerland. This has increased the cost of trading in Swiss stocks, especially in the case of smaller companies.

On defence, the Government’s Written Ministerial Statement contains no specific reference to defence but states that foreign policy alignment, which is likely to be substantial, does not in itself require a joint institutional framework. However, the EU’s decision reflects the political declaration in agreeing that the UK may co-operate in certain projects under the European Defence Fund and PESCO. Our Armed Forces enjoy a close collaborative bilateral relationship with those of France. Does the decision mean that UK-France defence co-operation will be possible only under the framework of the EDF or PESCO in future? Does that mean that in order to co-operate, British forces could work with French forces only under the command of a European general?

[Lord Hannay of Chiswick]

Perhaps I can give the noble Viscount an answer to his question. The answer is no, it does not mean that. It could only mean that if the French agreed to make it mean that, and they will not.

[Viscount Trenchard]

I thank the noble Lord for his assurance.

As noted in paragraphs 34 to 40 of the report, the decision envisages an overall institutional framework, which suggests the EU wishes to enter into an association agreement. Does the Minister agree that such an arrangement would be inconsistent with the Written Ministerial Statement, which proposes a suite of agreements appropriate to a relationship of sovereign equals? Will he confirm that the Government have made it clear to the EU negotiators that the UK will not entertain such a semi-detached continuing relationship with the EU which would make it impossible for this country to respond positively and flexibly to the opportunities that our new freedoms to pursue an independent trade and regulatory policy will provide?

I much look forward to other noble Lords’ contributions and especially to my noble friend’s winding-up speech.

--- Later in debate ---

[Lord Hamilton of Epsom (Con)]

My Lords, your Lordships’ House has always regarded itself as the guardian of our constitution. Of course, included in our unwritten constitution, although many people wish it were not, is the whole question of referenda. I know that many people think we should never hold referenda in this country, but the fact is that it was decided that we should.

I want to put a hypothetical question to your Lordships’ House: what would have happened if all the Euro-enthusiasts, described by a noble Baroness on the Liberal Democrat Benches as Euromaniacs, had succeeded and kept us in the EU when the country had voted to leave—or, indeed, kept us in Brexit in name only when the country had made it quite clear that it wanted to leave the EU? I totally accept that this is a hypothetical question because the whole situation has now changed. For that reason, I do not expect my noble friend the Minister to reply to this—he should not reply to hypothetical questions—but your Lordships’ House should give thought to this matter because, let us face it, that referendum was in the 2015 Tory manifesto and was honoured in both the 2017 manifestos of the two major parties, which said that they would honour the result. If at the end of all this we had decided that somehow we were going to stay in the EU, where would that have left democracy in this country? We must think about this very seriously. Your Lordships’ House has done itself no credit in its role of scrutinising the whole business of European legislation and conspiring to do everything it could to ensure that we would never leave the EU at all.

I turn to the report. Much comment has been made about the level playing field, but also included in that is the fact that the role of third countries has been completely redefined. I thought that a third country was a country that did not happen to be in the EU—as simple as that—and that once you signed the withdrawal agreement and left, you were no longer in the EU but were a third country, but oh no, that seems to have been redefined. Now, for some reason, our closeness to the EU puts us in a unique category, and the amount of trade that we have with the EU puts us in a special position. I was somewhat surprised because, reading the report—

[Lord Hannay of Chiswick]

Obviously the noble Lord did not listen very carefully to the quotation that I read from the joint declaration. It makes it quite clear that we recognise that geographical proximity, and the extent of our independence, require a level playing field. Perhaps he could answer that question.

[Lord Hamilton of Epsom]

That is the point I am trying to make; this should have been answered in the report. It does not matter where it comes from. Whether our closeness to the EU makes any difference to our relationship with it is questionable. The problem is that we have had the nerve to vote in favour of leaving the EU. Therefore, the EU must redefine the position of a country that leaves so that it can mete out special treatment to that country and somehow discourage others from leaving as well. This report should have addressed these issues. Does it make any difference whether or not a country is close to the EU? Does the size of trade make any difference? I agree that our trade with the EU is probably greater than that with the United States, but the United States does a massive amount of trade too. Nobody is asking for a level playing field with the United States, and they would be told where to go if they tried. We should be questioning these things, as I hoped the report would. Perhaps the noble Earl, Lord Kinnoull, can tell me why this was not included in the report.

Brexit: Financial Assistance for Businesses

Lord Hannay of Chiswick Excerpts

Wednesday 26th February 2020 Lords Chamber

[Lord Agnew of Oulton]

I am not sure if the noble Lord is talking about Northern Ireland or the United Kingdom in general. We have intensively engaged with the 3,000 UK/EU-only high-value traders over the last 18 months—that is, £250,000 or more. They report a high level of readiness; 71% reported themselves ready in October, and that number is going up every month. Yes, there will be frictionality. When we went into the general election, our simple message was “Get Brexit done. Restore sovereignty to this country.” I know there are many noble Lords who are not comfortable with that but it is our direction of travel.

[Lord Hannay of Chiswick (CB)]

My Lords, will the Minister recognise that he has indulged in a little bit of selective quotation? He has quite correctly referred to the statement that Northern Ireland remains within the UK customs arrangements, but he has not quoted the statement which is equally in the agreement and says that the customs rules of the European Union will apply to Northern Ireland after the end of the transitional period, as well as during it. Could he just tell us where those rules will be applied, physically and geographically?

[Lord Agnew of Oulton]

My Lords, the protocol protects the all-Ireland economy. It also makes clear that Northern Ireland is and remains part of the UK’s customs territory, and it allows the UK to ensure unfettered market access for goods moving from Northern Ireland and Great Britain. In October, the Prime Minister told the House of Commons that there would be no checks between Great Britain and Northern Ireland but that there would be some light-touch measures. That was reiterated by my right honourable friend the Chancellor of the Duchy of Lancaster, when he too said there would be light-touch administration.

Detainee Issues

Lord Hannay of Chiswick Excerpts

Thursday 18th July 2019 Lords Chamber

[Lord Young of Cookham]

Perhaps it would help my noble friend if I refer to the specific paragraph in Sir Adrian’s letter. He said:

“It was argued in number of responses to the consultation that there should be a post-notification process for individuals who have been mistreated following a failure properly to apply any new guidance or principles. This would enable them to seek redress. Reprieve and Freedom from Torture, in a joint submission, made substantive representations regarding the UK’s international obligations in this regard”.


I will write to my noble friend when I have discovered the other part of Sir Adrian’s recommendations, which builds on the current position, but makes more explicit that there is now an obligation, if people come across mistreatment, to pass it up the chain. I recognise that the paragraph I just read out was not directly relevant to my noble friend’s question.

[Lord Hannay of Chiswick (CB)]

The Minister has revealed the Government’s recent steep learning curve on extraordinary rendition, helped along the path by the activity of my noble friend Lord Tyrie. Do the Government now take the view that extraordinary rendition and what happens to people so rendered could bring anyone complicit in it within the scope of the International Criminal Court? That seems the common-sense conclusion from what they have found.

[Lord Young of Cookham]

The noble Lord may be right. If it were an offence under the law just referred to, as Ministers are obliged by the Ministerial Code to abide by national and international law, they would be precluded from taking action that ran the risk of that breach.

G20 Summit

Lord Hannay of Chiswick Excerpts

Monday 8th July 2019 Lords Chamber

[Lord Hannay of Chiswick (CB)]

My Lords, this debate could and perhaps should have taken place a little earlier—ahead of the G20 meeting—but at least we now have the benefit of knowing the outcome of the meeting, and can make some assessment of it. It has been most excellently introduced by the noble Lord, Lord Howell, whose rotation off the chairmanship of the International Relations Committee is deeply regretted by all its members, myself included.

Our letter to the Prime Minister noted that the G20 was falling short of its earlier promise when it helped to handle the aftermath of the world financial crisis in 2007-09. Has the Osaka meeting changed that judgment? I do not think it has. It is still falling short of its ability to deal with a whole range of issues which are crying out for effective collective action—including, most prominently, trade policy and climate change—but that does not mean that we could do without the G20. To coin a phrase, if it did not exist, we would need to invent it, bringing together as it does the countries with 80% of the global economy, and bridging the divide between fully industrialised countries and those that are still developing. The G7, which has only industrialised countries, is not a substitute for that.

We should have no illusions about how alarming the situation on trade policy currently is. A whole range of unilateral, illegal protectionist measures initiated by the Trump Administration are shaking to its foundations our open-trading system, which has brought such benefits over the past 70 years. This is the most immediate and most fundamental challenge to what we frequently refer to as the rules-based international system, which it is in our national interest to support and strengthen. The Trump/Xi meeting dealt with some trade issues, but let us not kid ourselves. It was not a ceasefire, as it has been described by rather gullible journalists. It merely avoided making a bad situation a lot worse. What action are the Government taking to reverse that trend towards protectionism? What will be done to ensure that the World Trade Organization’s dispute settlement procedure does not collapse in a few months’ time as a result of the US refusal to appoint new adjudicators or panel members?

On climate change too, the result was certainly sub- optimal, but the commitment of 19 of the 20 participants to the Paris accords was, in my view, better than accepting the weasel words that the US would have preferred. The great challenge that lies ahead is in implementing and strengthening those Paris accords, inadequate as they certainly are, and that lies ahead, but I would like to know what strategy the Government have for doing better when the UN Secretary-General calls together a summit meeting on climate change this autumn.

I have two final points. Others have made the point that it is necessary to find some way of monitoring progress in fulfilling commitments in the periods between these annual meetings. I would like to hear what the Government think can be done about that. Suggestions have been made about the IMF or the OECD doing it; there are perfectly good ways in which participants could be brought up to the fact that they are not actually doing very much to fulfil the warm words they agreed at the last meeting. Secondly, I give three cheers for the successful conclusion of the EU-Mercosur agreement, which was announced during the summit, even though that achievement looks set to become yet another piece of Brexit-related collateral damage if the two aspirants to the Prime Minister’s post get their way and take us out of the European Union by 31 October.