EU Referendum and EU Reform (EUC Report)

Lord Pearson of Rannoch Excerpts

Wednesday 15th June 2016 Lords Chamber

[Lord Pearson of Rannoch (UKIP)]

My Lords, I cannot help mentioning that, of the 34 speakers in this debate, I can see perhaps only two who think that we should leave the European Union. I remind your Lordships, and anyone who may read this debate—and indeed the one that follows, where I cannot see a single Brexiteer on the Order Paper—that your Lordships’ House is a very Europhile place, well-stocked with former government Ministers, Members of Parliament and servants of the EU, who between them have been responsible over long, and what they no doubt regard as successful, lives for bringing this country to its present state of subservience to the corrupt octopus in Brussels. It must be disappointing for them to see so much ingratitude and anger boiling up among the British people against the project in which they have invested so much and in which they so fervently believe.

That is why, during this referendum campaign, we have seen Project Octopus turning into Project Fear—we are told to be fearful of leaving the clutch of its tentacles. This morning we have Project Panic as the Chancellor threatens us with all manner of taxes and pestilence if, as the world’s fifth-largest economy, we dare to take our own place outside the failing project of European integration and simply join the 160 other countries in the world that have not made the mistake of joining it.

At the heart of this threat of economic disaster if we vote to leave next Thursday lies a wholly improbable scare: that somehow we would lose our present free trade with the single market and have to pay job-destroying tariffs to export into it. I propose to spend the rest of these few minutes examining that central fallacy in the remain position.

Government figures suggest that around 10% of our GDP goes in trade with clients in the EU—supporting some 3 million British jobs; another 10% goes to the rest of the world; and 80% stays in our domestic economy. But EU overregulation strangles all 100% of our economy, so 90% of it would be set free from Brussels overkill if we leave the EU. Of course, we would have to meet single market requirements for the 10% that we export to it, just as we do for what we export to the foreign markets outside the EU.

[Lord Hannay of Chiswick (CB)]

The noble Lord says that EU regulation strangles our economy. Can he explain why the OECD found that we were the second-least regulated economy in the OECD—that is, we were less regulated than its non-EU members—and that the only country less regulated than us was another EU member, the Netherlands? Perhaps he could give a little thought to that before he makes foolish remarks such as the ones he has just made.

[Lord Pearson of Rannoch]

My Lords, I do not see that anything the noble Lord has said alters what I said. The Dutch Prime Minister recently went so far as to say that he thought a large proportion of the Dutch economy was afflicted by EU regulations. The noble Lord will simply have to wait until we are out of the European Union and then he will see how we set ourselves free.

As I was saying, we would go on exporting to the rest of the world as we do now. We would meet the conditions required by the rest of the world, just as it pays to put the steering wheel on the left if you are selling a car to the United States.

The Government’s ONS Pink Book reveals that our growing trade deficit with the single market reached £85 billion in 2015. This means that manufacturers in the EU sold us £85 billion-worth more in goods than we sell them. If we accept the Government’s suggestion that some 3 million jobs support the 10% of our GDP which exports to the single market, this means that there are around 5.5 million jobs in the EU which support exporting to us. So if the politicians in Brussels try to impose tariffs on our trade together, that would hit 2.5 million more jobs in the single market than it would here and would not be tolerated by EU manufacturers.

Let us take the specific example of our car trade, which the Prime Minister and other Europhiles pretend would suffer a 10% tariff on its exports to the single market if we leave the political construct of the EU, with consequent job losses here. That must be nonsense, because we import twice as many cars from the EU as we export to it—1.7 million cars in and 700,000 cars out—while EU manufacturers also enjoy having 64% of our domestic car market. So those powerful manufacturers, with their suppliers and employees, will simply not tolerate a tariff which would damage them so much more than us, however much Herr Juncker and Herr Schäuble and sundry other mischief in Brussels might wish to punish us for leaving the rest of the EU.

[Baroness Armstrong of Hill Top (Lab)]

I wonder if the noble Lord will reconsider what he has just said. Nissan in the north-east exported 800,000 cars in 2014, largely to the EU and all of them through EU agreements. It exports one in three of the cars exported from this country, so he has his numbers wrong somewhere. Nissan may well be thinking, given that its major owner is actually Renault, that if we in the UK are not in the EU, it might as well move to France.

[Lord Pearson of Rannoch]

My Lords, I do not, with all due respect to the noble Baroness, withdraw a word of what I said. The fact is that 1.7 million cars come into this country from EU manufacturers—they have 64% of our market. I was about to say that anyone who wants to read the detail of what I have just said should consult the globalbritain.org briefing notes, particularly Nos. 114 and 118, which give the detail which is supported by the Society of Motor Manufacturers and Traders.

Time moves on, but the noble Lord, Lord Lamont, made another good point in yesterday’s Daily Telegraph. The tariff which we might suffer on our goods going into the single market would be around 3%, if the Brussels politicians get their vindictive way, but the net £10 billion we pay to Brussels every year is equivalent to a tariff of around 8%. Whichever way you look at it, tariffs will not be imposed to our detriment, so the whole economic scare story falls away.

In conclusion, I am often asked what happens if we vote to leave the EU next Thursday. The answer is: nothing much in a hurry. For a start, it will take the Conservative Party until its conference in September to elect a new Prime Minister, who would start withdrawal talks, so there will be plenty of time for the Eurocrats—

[Lord Lea of Crondall (Lab)]

On the thought about nothing happening next Thursday if the vote was for Brexit, until recently we were told that the idea of economic effects was scaremongering. Does not the noble Lord observe that the pound has been falling, and would he say that nothing will happen to the pound in this scenario?

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[Lord Pearson of Rannoch]

My Lords, a falling pound is not a disaster; it helps our exports, for instance. It has been falling, but not as fast as some other currencies. We will have to see what happens, but there is no disaster here: the pound goes up, the pound goes down. A far more important influence on trade is the interest rate and the exchange rate, so I really do not accept that point. The noble Lord is clutching at straws to make it look as though we will be in terrible trouble next Friday if we have voted to come out of the EU; we will not.

As I was just mentioning, the new Prime Minister will emerge next September and it is he who will start withdrawal talks, so there will be plenty of time for the Eurocrats and noble Lords to cool down and face the reality of the strength of our negotiating position. For instance, we do not have to trigger Article 50 immediately. We do not have to trigger it until we have pretty much agreed the terms of our departure. We have other strong cards to play in the meantime. For instance, we could offer to reduce our net £10 billion over a period of years. We could say that we will not impose tariffs on our trade together if they do not try to mess around with the City of London. We could withdraw from the supremacy of the Luxembourg court and take control of our borders in a way that causes them least inconvenience, and so on.

After all, we wish them well. We are not their enemies. We want to continue in friendly collaboration with them, but we want to get off their “Titanic” while we can.

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[Lord Collins of Highbury (Lab)]

My Lords, I, too, thank your Lordships’ EU Committee for its excellent reports, and the noble Lord, Lord Boswell. The reports have focused on key issues arising from the Government’s negotiations and have addressed that vital question of plan B. Since their publication, events have overtaken us. With just seven days left, the shape of the campaign has been pretty well determined. As the committee demanded of the Government, I shall today focus on a positive vision for a reformed EU. However, there is no disguising what the committee highlighted and has been confirmed by the IMF, the OECD, the Bank of England and many economists a vote leave will lead to a lengthy period of uncertainty while any future relationship with the EU is concluded, causing a serious shock to the UK economy.

The Brexit campaign cannot sweep away the effects of this period of limbo, as my noble friend Lord Liddle called it, nor can it dodge any longer the questions about what alternatives to membership may look like. Boris Johnson and Nigel Farage will take us back to a future reminiscent of the 1980s, when unemployment was said to be a “price worth paying” and things such as paid leave, health and safety and equality rights were considered red tape holding back progress.

However, as we have heard in this debate, the EU is not just about economic security; it is about a vision of a continent where co-operation overcomes conflict. As a nation, we have a moral and practical interest in preventing conflict, stopping terrorism, supporting the poorest in the world and halting climate change. Britain leads in Europe on these issues and, in turn, Europe helps to lead the world. Those who advocate that Britain should turn its back on the European Union have a very heavy responsibility to prove their case.

As the committee reminded us, the Government were clear throughout the negotiations that their support for continuing EU membership would depend on reaching a successful outcome. Yet the referendum question makes no reference to the “new settlement”. The simple truth is that this is not a referendum on David Cameron’s reforms; it is on weighing up the benefits of membership of the EU overall.

Nor is reform just about what Britain asks for now, as we have heard in this debate; it is a constant process of trying to make Europe more effective in generating jobs, investment, growth and security, and our influence in the world. Labour has an alternative agenda for progressive change in the EU: to strengthen workers’ rights in a real social Europe; to put jobs and sustainable growth at the heart of European economic policy; to democratise EU institutions; and to halt the pressure to privatise public services. It is a vision of a real social Europe, one which protects the “going rate” for skilled workers, prevents the undercutting of wages and directs EU funding to places where the pressures are greatest.

As Jeremy Corbyn has argued, the only way to secure these changes will be to remain in the EU. I am confident that the public will trust the Labour movement to stand up for working people rather than the likes of Nigel Farage or Boris Johnson. As we have read in the reports and heard in the debate, what progress we have made on reform will be lost if we vote to leave. Instead, we will be left with just two years in which to negotiate not only a new trading relationship with the European Union but also with the 53 other countries with which we currently have trade agreements because we are members of the European Union. We would be entering a negotiating process where EU member states would retain significant control despite the Commission having responsibility for its conduct. As the committee pointed out, there is the potential for some countries vetoing certain elements of the agreement to secure better deals on others. That is what negotiation is about, and if you think that can be conducted quickly, you are living on a different planet from me. In effect, nothing would be agreed until everything was agreed.

One of the most important aspects of the withdrawal negotiations would be determining the acquired rights of the 2 million or so UK citizens living in other member states and, equally, of EU citizens living in the UK. As my noble friend Lord Judd said, for many people, immigration is the issue in this referendum. They feel that our country has become too crowded, that our services are under pressure, that we are losing our identity and that leaving the European Union would restore control over these things. We have an obligation to be honest with one another about the nature of the world in which we live and the changes that have happened—and will happen whichever way people vote on 23 June. Immigration into Britain will continue whether we stay or go, as the leave campaign has now admitted. Immigration brings challenges to the UK, which is why Jeremy Corbyn and Andy Burnham said last week that we want to see EU protections for people’s wages and a special fund to help the most affected communities. But being in Europe helps Britain to control immigration so that it works for us. For example, it helped us to persuade France to move Britain’s border from Dover to Calais. Leaving would put that at risk.

Anyone who thinks that voting leave will solve problems—such as the shortage of housing and the crisis in the NHS—in time will be bitterly disappointed. As we have heard in this debate, failure to prioritise those issues is the fault of government, not Europe.

What is plan B if the UK votes to leave? Will the Minister address how the Government plan to deal with the fundamental issues raised by the committee? What alternative arrangements are considered for the UK’s Council presidency in the second half of 2017? What oversight will the UK Parliament have over the negotiations on withdrawal and the new relationship beyond existing ratification procedures? What is the Minister’s assessment of the timeframe to disentangle EU law from domestic law and how this may impact on the devolved nations? Does the Minister agree that it may be necessary in the national interest to maintain a significant amount of EU law in force in national law?

As we heard from the noble Earl, Lord Selborne, the excellent report by our Science and Technology Committee makes a number of interesting points about the situation facing UK science if there were to be a Brexit. For example, it stresses that the UK is one of the world’s leading scientific nations, in terms of both fundamental and applied research, and that we have retained this leading position in the face of growing competition from around the world. It also says that the overwhelming balance of opinion made known to the committee from the UK science community valued greatly the UK’s membership of the European Union.

That point was made effectively by Sir Paul Nurse in his article in the current New Statesman edited by Gordon Brown—I strongly recommend that issue to all noble Lords. Sir Paul highlighted the recent survey in the science journal Nature, which showed that 83% of UK scientists want Britain to stay in the EU—a much higher proportion than in the general population. That is because science flourishes in environments that pool intelligence, minimise barriers and are open to exchange and collaboration. The EU helps to provide such an environment, and scientists value it. There is no doubt that some will see no problems if the UK leaves the EU, but as Sir Paul says,

“the great majority of scientists”,

support remain. He goes on:

“In contrast, hardly any accomplished scientists are arguing that leaving the EU would be good for UK science”.

Does the Minister agree with Sir Paul when he says that superb science is one of the UK’s biggest assets, one that makes all our lives better? Over recent decades, the EU has played a critical role in helping UK science. What is good for science is good for the UK, and what is good for UK science is staying in the European Union.

In conclusion, I turn to my noble friend Lord Howarth and quote what I read in yesterday’s FT, which summed up the position in which we now find ourselves. It states that,

“the continent’s present troubles should serve as a reminder of its capacity for self-harm. The rise of populism, drawing from the well of economic and social discontent, carries disturbing echoes of the 1930s. A confident Britain would see this as a moment to lead rather than leave”.

[Lord Pearson of Rannoch]

Will the noble Lord explain the difference between populism and democracy?

[Lord Collins of Highbury]

Democracy is David Cameron and populism is Boris—what is his name?—Johnson.

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[Lord Pearson of Rannoch]

Before the noble Lord leaves the trade aspects, is he going to answer the points I put to him? For instance, they have two and a half million more jobs selling things to us than we do to them. Taking as I did the specific example of our motor trade, given that they send us 2.4 cars for every car we send them, and they have 64% of our market, are the noble Lord and the Government really saying that the eurocrats in Brussels would actually try to impose a tariff on that? Is it not perfectly obvious to anyone used to international trade that all this would continue as it does now?

[Lord Faulks]

The noble Lord is very confident about the future. I do not share his confidence. Of course trade will continue in one guise or another, but how can we be certain that the trade arrangements will be exactly as he would want them, given all the uncertainty that exists?

[Lord Pearson of Rannoch]

I am merely saying that they would continue as they are.

[Lord Faulks]

I do not think there is any guarantee of that. I will make some progress, if I may.

Full access to the single market would require us to continue to contribute to the EU’s programmes and budget. An approach based on a free trade agreement would not come with the same level of obligations, but would mean that UK companies had reduced access to the single market in key sectors such as services—almost 80% of the United Kingdom economy—and would face higher costs. We would lose our preferential access to 53 markets outside the EU with which the EU has free trade agreements. This would take years to renegotiate, with no guarantee that the UK would obtain terms as good as those we enjoy today. In order to maintain the rights of UK citizens living, working and travelling in other EU countries, we would almost certainly have to accept reciprocal arrangements for their citizens in the United Kingdom.

As the paper also sets out:

“Whatever alternative to membership the UK seeks following a decision to leave the EU, we will lose influence over EU decisions that will still directly affect us. We need to weigh the benefits of access to the EU and global markets against the obligations and costs incurred in return. It is the assessment of the UK Government that no existing model outside the EU comes close to providing the same balance of advantages and influence that we get from the UK’s current special status inside the EU”.

As to science and technology, we have seen both sides make their case for and against EU membership over the past few months. I am pleased that today, we have heard from members of the Science and Technology Committee, who bring another important angle to this debate, and to whose inquiry the Government have provided evidence. The UK plays a leading role in many aspects of EU research and science programmes. These provide access to opportunities of a different scale and scope from those that are possible nationally.

The UK received over £7 billion in EU funding for science and research between 2007 and 2013, second only to Germany. However, there is still scope for improvement, both in how the EU manages science funding and in simplifying the bureaucracy and transparency of funding instruments. The Government are keen to ensure that EU decision-making is based on the best scientific evidence. The UK has robust systems in place for providing science advice to government. Similar systems at EU level are currently being reformed.

Universities and science Minister Jo Johnson gave evidence to the inquiry earlier this year, saying:

“Britain's success as a science powerhouse hinges on our ability to collaborate with the best minds from across Europe and the world. This report is further evidence that the UK’s influential position would be diminished if we cut ourselves off from the rich sources of EU funding, the access to valuable shared research facilities and the flow of talented researchers that provide so many opportunities to our world-leading institutions”.

I will conclude by once again welcoming these reports. The noble Baroness, Lady Smith, rightly described them—perhaps rather rare in this debate—as showing objectivity. The Government will respond in due course, but I am grateful for all the contributions noble Lords have made to the debate today.

I have described the reforms that the Prime Minister secured in the UK’s settlement with the EU. There is of course more work to be done in reforming the EU, but the settlement shows the commitment of the European Commission and all 27 other countries in the EU to taking action. The Best of Both Worlds: the United Kingdom’s special status in a reformed European Union sets out the Government’s view that the UK’s national interest is best served by remaining in a reformed EU.

I have explained that the process of withdrawing from the EU is untested. The UK and the 27 other member states, along with EU institutions, would need to negotiate the UK’s new relationship with the EU. There would be difficult trade-offs, and this would lead to a considerable period of uncertainty, as we set out in the government paper.

On EU membership and its relationship to UK science, I have taken note of the committee’s report and restated the Government’s position that they believe the UK’s influential position in this field would be diminished if we cut ourselves off from EU funding, shared facilities and talented researchers.

As my right honourable friend the Prime Minister has said, this will be a once-in-a-generation vote. The Government’s position is clear. Our new settlement resets the balance in our relationship with the EU. It reinforces the clear economic and security benefits of EU membership, while making it clear that we cannot be required to take part in any further political integration. It creates a mechanism for reviewing existing EU laws and ensuring that decisions are taken at the national level whenever possible. It is in our national interest to remain in that reformed EU.

My noble friend Lord Cormack rightly referred to paragraph 258 of the committee’s report on the EU referendum and reform, with its emphasis on values as well as pragmatism. What unites the 28 member states is much greater than what divides them. I hope noble Lords will forgive me one personal observation, just as the noble Lord, Lord Browne, provided one. My grandfather fought at the Somme. My father fought in a number of theatres of war between 1939 and 1945. My generation has been spared that. We should not take peace for granted. For all its imperfection, the EU has helped to provide peace. It represents values that endure. Let us remain within it.