EU-UK Relationship (Reform)

Brian Binley Excerpts

Tuesday 18th September 2012 Westminster Hall

[Andrea Leadsom]

I have been following that matter and know that the Prime Minister has said that he will be responding shortly, so I am sure that my hon. Friend’s question will be noted.

[Mr Brian Binley (Northampton South) (Con)]

Does my hon. Friend recognise the need for contingency planning and negotiation before a referendum? Will she be urging the Minister that contingency plans need to be created now and announced well before the European elections in 2014, and will she tell the Minister that, in this country, the F-word is impolite?

--- Later in debate ---

[Andrea Leadsom]

Yes. I thank my hon. Friend for that intervention. I am coming straight on to that point now, so I am very pleased that he has raised it.

The EU is already a significant trading partner, but there are significant opportunities for growth. Services account for 71% of EU GDP, but only 3.2% of that comes from intra-EU trade, and the UK Government continue to push for the completion of the single market, especially in services. Financial services gave us 11% of our tax receipts in 2009-10, providing a trade surplus of £31 billion in 2010. Financial services is an incredibly important sector in which there is enormous capacity for growth. Of course, that is why the Prime Minister used his veto last December.

What are the alternatives to EU membership? There are probably four. First, there is most favoured nation terms, under which around half of manufactured exports to the EU would face an average tariff of more than 5%, with some sectors being particularly badly hit, such as UK car exports, which would face a tariff of 10%. That would have a significant effect on UK business, making us a far less attractive location for foreign direct investment. In addition, the UK would lose its influence on framing EU regulations, so it would be required to buy in to EU regulations in order to trade with the EU but would have no say in framing them.

[Mr Binley]

Will my hon. Friend give way again?

[Andrea Leadsom]

I would just like to get through my list of alternatives and then I will give way, if my hon. Friend wants to make a point. I am conscious that lots of other people want to speak.

The second alternative is the European economic area option, or the Norwegian option. The UK would be outside the customs union and hence subject to complex and costly rules of origin. The UK would still be subject to most EU regulations, but it would have limited or little ability to shape them. Access to the single market for goods and services would be maintained; the UK would not be subject to common agricultural policy, common fisheries policy or regional policy; and the UK budget contribution would probably be significantly reduced.

The third alternative is a free trade agreement or the Swiss option, under which the UK would be outside the customs union and subject to rules of origin, but would not be formally subject to EU social or product regulation. In practice, all product regulation would probably be replicated in order to export to the EU. Again, under this option the UK would not be subject to CAP, CFP or regional policy, and the budget contribution would probably be significantly reduced. Free trade would be subject to a negotiated agreement.

Fourthly and finally, there is the option of being part of the customs union, or the Turkish option, under which the UK would be a member of the customs union, with free access to trade for goods, but services and agricultural products would not be covered by that option. The UK would be required to negotiate free trade agreements with any country with which the EU opens trade negotiations. We would be outside the EU treaties and institutions, so we would not be subject to CAP, CFP or regional policy, and it is not likely that we would have to make a significant budget contribution. We would not be subject to social regulation, but we would be subject to all product regulation with no ability to influence the shape of it.

[Mr Binley]

Mr Hollobone, I must point out that I am sitting on a Statutory Instrument Committee this morning and I know that you would not want me to miss that, so I will have to go very shortly.

Will my hon. Friend destroy the myth and say that, because of the £57 billion deficit with Europe, Europe is not going anywhere in trade, simply because it is not in its interests?

[Andrea Leadsom]

That is absolutely correct in principle, but as my hon. Friend—being a business man himself—would admit, we cannot simply change overnight, so we would be subject to an exceedingly long-term renegotiation with enormous complexities along the way. It is not quite as simple as he puts it, but yes, essentially I agree with him—it is certainly in the EU’s interests to continue to do business with us, even more than it is in our interests to do business with the EU.

Personally, I think that if we were to leave the EU, the world would not end, but my point is that it would be far better for Britain to negotiate better terms and to remain part of the EU.