Queen’s Speech

Lord Desai Excerpts

Wednesday 28th June 2017 Lords Chamber

[Lord Desai (Lab)]

My Lords, the result of the election was very clear: my party won but was clever enough to leave the mess to the other side to sort out—the best of all possible worlds. But whatever my own preferences, we are where we are. Not only that, but the train has left the station and the negotiations have started. So it is not possible now to wish, as some people do, that this will never happen. It is going to happen. The question is how best the Government can achieve their objectives. That is how an economist has to think. We know the objective, so what can be done?

One of the most important things will be the budget discussion. Noble Lords will have seen the report from the European Union Sub-Committee on finance of your Lordships’ House, of which I have the honour to be a member. We have set out a number of alternatives. The figure of €100 billion is not cast in concrete. There is scope for negotiating and to show the European Union that there is a minimal amount to our obligation that cannot be calculated by our gross contribution of 12%, by the contribution net of our rebate, or by what we receive in return from the European Union after some other deduction. It could be as little as 4%. So there is a lot of scope for negotiating, and the first thing the Government should say is, “We know we don’t have to pay this much, we only need to pay a small amount, such as €20 billion. But, because we want goodwill and smooth negotiations over the next few stages, we are willing to meet half way and give you €40 billion”—something like that. That is very important, because, until we clear the budget, nothing further will be discussed. It is imperative on the part of the Government to thoroughly understand the negotiations about the budget and go in with a strong hand.

Secondly, however we interpret the results of the referendum, and whatever our preferences, it is quite clear that immigration remains a no-go area. As an immigrant, I wish it was not like that. I wish it was the other way round—I know all the arguments in favour of immigration. The nation was not afraid of immigration until after the financial crisis. Under the new Labour Government, we were the most generous country in the European Union, admitting people from an enlarged Europe. We were much more generous than Germany or France. But the atmosphere has changed and now people do not like it—and we have to do what people want us to do and not interpret that as we would like to.

Given that immigration is off the table, the other main aspect of the Brexit debate—mainly among the leaders of the Conservative Party—is the idea that leaving the European Union would release us to make lots of free trade agreements. That may be the case, but it will not be quick or easy. I wish there was a bit more realism on that so people could understand that when Brexit is done and we are free of our obligations of being in the customs union and have moved into the WTO area—supposedly in the next 18 months—it will take, on average, 10 years for any free trade agreement to be negotiated. I did not make that up: it is a fact. The free trade agreement between Canada and the European Union has taken longer than that.

So we have to be prepared for a period of uncertainty. We will not know the nature of the post-Brexit British economy for 10 years. The Government will have to prepare themselves for taking the people into their confidence and saying, “We know where we are going and we are not there yet, but we know what the costs will be and in the meantime, this is the map of where we are going”. That has not been done so far. Brexit may be Brexit, but a variety of things can happen over the next 10 years and it is imperative on the Government to come clean about what they think will happen after Brexit and before we are into the heaven of free trade agreements with the whole world.