Trade Bill

Baroness Bull Excerpts

Committee stage
Tuesday 13th October 2020 Lords Chamber

In the previous Trade Bill, this amendment was taken to a vote and passed. If the Government do not accept this amendment, I hope we will do the same again.

[Baroness Bull (CB)]

My Lords, I support this amendment, which seeks to secure the continued success of the UK’s trade in goods and services with the EU, and to preserve the mobility framework that will be vital in achieving that aim. I will also focus on services, because they have undoubtedly been the Cinderella of the Brexit story or, as Sir Ivan Rogers memorably described them last year, the dog that has failed to bark.

I wondered then whether it might be that trade in goods has predominated because the at-the-border issues they involve are easier to grasp than the behind-the-border issues of domestic rules, regulations and qualifications that underpin trade in services. It might be because of the confusing range and diversity of sectors that shelter under the umbrella of services, from IT to hairdressing, education to tourism, architecture to the arts, as well as health, insurance and financial services. Or it might be because the biggest service earners—the financial and insurance services—are heavily skewed to London and the south-east: 48% of the £128 billion those two service sectors contribute to the UK economy is generated by London alone. That uneven geographic distribution and economic contribution does not sit easily with the language of levelling up, and supporting bankers and brokers may not be much of a vote winner either.

However, like it or not, this country has long been predominantly a services economy. In 2019, services contributed around 80% of UK economic activity, and they account for about 30 million jobs. The EU single market is the primary destination for UK services exports, with the UK running a trade surplus with the EU in services. This dominance of the EU for our services exports is not surprising. One of the best-established empirical results in international economics is that bilateral trade decreases with distance.

There are five modes of services traded across borders: remote, in the supplier’s country, in the consumer’s country, via fly in, fly out, and as an integral component of a traded good. That last mode of attached or embedded services—perhaps the long-term maintenance contract for a machine, for example—has been a great big growth area for the UK in recent years. The majority of Rolls Royce’s revenues come not from the sale of the aircraft engines and other goods it produces but from the accompanying services that are sold as part of the package.

In each mode there is an inextricable link between services and mobility. Service provision, as the noble Lord, Lord Fox, pointed out, requires people on the ground. Services provided in this country—higher education or tourism, for example—depend on inward mobility. Services provided in other countries, including those all-important embedded services, require outward mobility. Some of our most important and successful service industries are heavily dependent on EU workers: financial services, education, health, road haulage, and, as I often remind this House, the creative industries. The Royal Institute of British Architects estimates that one in four architects working in the UK is from the EU. In tourism, 10% of workers are EU nationals, as is 6% of the NHS workforce, and we have discussed over and over again the importance of EU migrants to our care sector.

Even before Covid, the loss of free movement post Brexit threatened the sustainability and success of the UK services sector. Covid continues to have a devastating effect on parts of the sector that rely on human gatherings and interactions: hospitality, air travel, restaurants, hotels, as well as arts and entertainment. Only last week, the Lords Economic Affairs Committee heard devastating testimony about the effects of the pandemic on the UK’s cultural and creative industries. However, according to research from the LSE, Brexit will deliver a double shock to the economy. Business conditions will worsen for those sectors that have been able to better weather the Covid storm—IT, financial and legal services, for example—because of the barriers it will impose on the continuation of trade, whether or not there is a deal. These of course include the end to the reciprocal mobility that has underpinned the UK’s status as a world leader in services provision.

Sir Ivan Rogers, in the same speech I referred to earlier, suggested that the UK services industry’s needs have been sacrificed to the primary goal of ending free movement, and it is hard to disagree with him. This amendment seeks to preserve a mobility framework with the EU. In doing so, it would help preserve one of the UK’s most successful sectors, and along with that the jobs, revenues and opportunities that it provides.

[Baroness Noakes (Con)]

My Lords, I had initially intended to take part in the debate on this amendment solely for the purpose of probing whether study, which is mentioned in the amendment, can logically be regarded as necessary for trade in goods or services. I had not expected this debate to go into our border control policies, with yet more angst over not having the same rights to travel throughout the EU as exist even today.

I would just say to noble Lords, including the noble Lord, Lord Fox, who seems to think that Conservatives might be upset at restrictions on movement, that we voted, both in the referendum and in the last general election, to take control of our borders—that is what the people voted for. That has consequences. Noble Lords who are trying to constantly recreate what we have had in the past as members of the EU do themselves no service. We have to change what we are doing going forward. That is not to say that we cannot have sensible arrangements with both the EU and other countries to facilitate the trade in goods and services, which I fully support. However, we should not be constantly harking back to life as it was when we were a member of the EU.

Trade Bill

Baroness Bull Excerpts

Report stage & Report: 2nd sitting (Hansard) & Report: 2nd sitting (Hansard): House of Lords
Tuesday 15th December 2020 Lords Chamber

[The Earl of Clancarty (CB)]

My Lords, in the Chamber at least: take two.

I am grateful to the noble Lord, Lord Fox, for tabling this amendment, which I support. We do not yet know whether we are going to get a deal with the EU or what exactly the deal will look like if we do. What we can say is that a no deal on services will be a no deal for the country, irrespective of whether or not we get a deal. The Government and the media have consistently underestimated the importance of service industries both to this country and as part of our trade with Europe. Services are 80% of our GDP, a statistic we have repeated many times in this House. Our services trade with Europe makes up 51% of our services exports. As it stands, Europe is a hugely important market for services—the most important. Because of the significance of geography to service industries, it is one that is frankly irreplaceable.

Services have not been ignored in all quarters. In an interview with the Observer on November 1 before stepping down as director-general of the CBI, Carolyn Fairbairn said that her “really big disappointment” was the lack of help for services in the potential deal. The recent report by the EU Services Sub-Committee, The Future UK-EU Relationship on Professional and Business Services, raises similar concerns—not least those shown by the creative industries. The amendment moved by the noble Lord, Lord Fox, does not specify precisely what the mobility framework should look like. The so-called mobility arrangement that Liz Truss has just signed with Switzerland agrees 90 days’ visa-free work a year. If this a sign of what is to come for EU countries, it will still not be enough on its own for much of the sector—which demands longer stays and ease of movement between European countries. This will be particularly so for the performing arts, IT and the holiday industry, for instance. Can the Minister supply more details of this arrangement and how it will affect those industries?

In the meantime, it is no wonder that potential clients across many sectors in Europe are now advertising for those who have European passports, while those with only British passports are expressly excluded in such advertisements. This is now the norm, as clients and so much of the sector see British workers as too much trouble and red tape if they are not to be allowed the necessary physical mobility these industries demand. If this is to be the case it will be a tragedy for our service industries. The bare fact is that without a meaningful mobility framework many will lose their livelihoods and others significant job opportunities.

There are allied concerns, some of which the noble Lord, Lord Fox, referred to. It is essential that there is a data adequacy agreement and mutual recognition of professional qualifications. For many, there are concerns about costs. According to the Incorporated Society of Musicians, in normal times over 20% of British musicians travel to Europe at least 11 times a year. The ISM has also calculated that in a worst-case scenario, musicians who carry instruments abroad may incur additional costs of £1,000 a year. Like many who work in services, most musicians are self-employed. Such costs would need to be borne personally, which for many may prove simply too prohibitive.

The creative industries are hugely important financially, and in terms of cultural exchange and soft power. Coming on top of the effect of Covid, all of this will be threatened without a mobility framework in Europe. Moreover, these industries, along with the rest of the services sector, are as much in the dark about a potential deal now, with 16 days to go, as they were four years ago. As I said in Committee, many in the sector are crying out that even now they lack real guidance.

The Government and the Opposition will note that the amendment from the noble Lord, Lord Fox, cuts to the heart of things and is a more focused version of the one he moved in Committee. Purely and simply, it asks for a mobility framework on services. At the same time, manufacturing will also be affected without such a framework because of the importance of servitisation —including maintenance and repair of goods—to those industries, and to which the noble Lord, Lord Fox, referred.

We know that deals that would have allowed better access to the single market will have been offered to the UK. We have also heard what the former Australian Prime Minister, Malcolm Turnbull, had to say on an Australian-style deal on WTO terms, with

“a lot of friction in the system in terms of services”—

surely an understatement. It is essential that a framework for services between the UK and the EU is put in place.

[Baroness Bull (CB)]

My Lords, it is a pleasure to follow the noble Earl, Lord Clancarty. I pay tribute to him for his tireless advocacy on behalf of the creative industries, particularly the music sector. As he pointed out, the amendment does not seek to recreate the past, as was suggested in response to a similar amendment in Committee. It seeks very specifically to secure the continued success of UK services, and in doing so to preserve the employment the sector provides, the economic contribution it generates and, as the noble Lord, Lord Fox, outlined, its potential to contribute to this country’s recovery from the pandemic.

The UK is predominantly a services economy, with services contributing around 80% of economic activity in 2019 and providing jobs for 85% of the UK workforce. It is not a coincidence that the primary destination for UK services exports is the EU’s single market. One of the best-established empirical results in international economics is that bilateral trade decreases with distance. The closer the country, the easier it is to get feet on the ground. Aside from services provided remotely, all modes of service require this physical presence. Thus, there is an inextricable link between mobility and service success.

British in Europe, an organisation representing the 1.2 million British people living in other European countries, gave extensive evidence in June to the Select Committee on the Future Relationship with the European Union on the extent of the problems British citizens will face if they are denied appropriate mobility in Europe. To date, these concerns have been largely ignored, but they are proving to be well founded, with anecdotal evidence emerging of UK passport holders already missing out in exactly the ways anticipated even before the end of the transition year, with employers reluctant to hire UK citizens, job offers withdrawn, and, in one recent widely publicised example, British passport holders excluded from the casting call for the role of a British prince in a new film due to “new Brexit rules”.

Contractors working across multiple European countries face even more complex issues in being obliged to comply with multiple different formalities to gain a temporary right to continue working as a provider of cross-border services. Without a framework in place, British service providers will face exactly this patchwork quilt of unilateral solutions and immigration rules in the different EU countries to which their work takes them. Big companies that have the resources to tailor and adapt will probably survive, but individuals, freelancers and owners of small businesses will once again be the ones to suffer.

These small businesses are also likely to be hit hardest by any failure to secure an adequacy decision with the EU. A recent report from the New Economics Foundation and UCL estimated that SMEs are each likely to have to find between £3,000 and £10,000 to cover additional costs of compliance if they want to continue to transfer data from the EU to the UK, with the aggregate cost to UK businesses in the region of £1.6 billion. This is money that could certainly be better spent, especially as UK business recovers from the pandemic.

Even before Covid, the impact of leaving the EU without a mobility framework to replace the current one threatened the sustainability and the success of UK services. We know that Covid has had a devastating effect on those parts of the sector that rely on human gatherings: hospitality; air travel; the creative industries; arts and entertainment. In the creative industries alone, Labour Force Survey data from the ONS reveals job losses of 55,000, a 30% decline since March and significantly higher-than-average numbers of people leaving creative employment. This is clear evidence of the scale of the crisis in a sector which has, over recent years, contributed over £111 billion annually in GVA.

The absence of a mobility framework will not just put at even greater risk these elements of UK services that are already on their knees but risk also those which have been better able to weather the Covid storm—IT, financial and legal services—because of the barriers that it will impose on the continuation of trade. The UK service sector is one which can claim to be world-leading, and I am still at a loss as to understand why it has received so little attention throughout the Brexit negotiations. That is why I support this amendment, and in doing so, once again ask the Government to do everything that they can to secure an appropriate mobility framework with the EU. This will protect not only the jobs of four in every five UK citizens but the crucial contributions that services make to our economy and, through that, to communities up and down the country.

[Baroness Noakes (Con)]

It is a pleasure to follow the noble Baroness, Lady Bull, but when I read Amendment 13 I thought that she and the noble Lord, Lord Fox, had temporarily forgotten that the Government were elected on a promise to get Brexit done, and that a part of that promise was to take back control of our borders. That means controlling who comes into our country. My right honourable friend the Home Secretary has made fantastic progress in reorienting our approach on this. I know that some noble Lords still cling to a faint hope that, even though we have left the EU, we can carry on much as before, and at the heart of this amendment is that very notion. Whatever noble Lords who support the amendment have said, at the heart of what they are trying to achieve is something akin to the status quo.

In the negotiations, which have been so tortuous, it has not been difficult to miss that mobility has simply not been on the table. Indeed, the provision of services that is the target for the amendment is not a significant part of the negotiations. These are facts. Do noble Lords think that, at this late stage, the UK should go back to the EU and say that negotiations should start all over again and build in a mobility framework? That cannot be more than a pipe dream. It might be realised in due course, but noble Lords must accept the reality that there will be no special arrangements in the near term. We must learn to live the new normal of the UK being outside the EU, with all that this entails. Some service providers, notably financial services, have already adapted their business models; others will have to follow. Noble Lords may not like change and may wish to cling to the past, but we have moved on, and this amendment belongs in another era.