Rt Hon Lord Lilley

    Lord Lilley:

    My Lords, it is a pleasure to follow the noble Lord, Lord Pendry, and to be able to agree wholeheartedly with so much of what he said, with the importance of the issue he raised and with his final sentiments.

    I hope that the British Government and the EU will, over the next 24 or 48 hours, reach an agreement that the United Kingdom can leave the EU on 31 October, with a free trade agreement with the EU, and allowing the UK to negotiate its own trade deals with the rest of the world. However, before discussing those issues, I must make a confession. As a Minister, I misled the British people in two respects pertinent to our discussion of those issues, and I want to set the record straight.

    As Secretary of State for Trade and Industry under Margaret Thatcher and then John Major, I was responsible for negotiating the Uruguay round, which halved tariffs, began to pare back non-tariff barriers and, eventually, set up the World Trade Organization. I was also responsible for implementing the single market programme that made us part of the single market. When doing so, I made enthusiastic speeches about how both these agreements would boost Britain’s exports to the world and the EU. As a scientist by training, when I make a prediction, I subsequently try to check whether it has come true. If it has, I claim credit for it. If it has not, I usually keep quiet, though I try to learn from my previous failures, so that I can do better next time.

    Looking back on both the Uruguay round or World Trade Organization and the single market, what effect have they had on our exports? In the quarter of a century since the WTO was established, our goods exports to those countries with which we trade just on WTO terms have risen by 87%. That is a fair amount, but anyone looking at it fairly must recognise that, on previous trends, a large amount of that growth would have occurred anyway. A small part of it only can be attributed to the near halving of tariffs between industrial countries and the removal of some non-tariff barriers. Growth of our exports to the EU single market over the last quarter of a century has been even more disappointing—20% barely, over 25 years, which is less than 1% a year, less than the trend before the single market was growing and less than most people would have expected had there been no single market to encourage and promote our exports. It is true that, over that period, our imports from the single market and the rest of the Common Market grew substantially and, as a result, our deficit in goods with Europe rose. All the figures I have referred to are for trade in goods. Our deficit in goods has reached nearly €100 billion, which wipes out the surplus that we earn with the rest of the world on all our trade.

    My conclusion is not that trade deals are useless but that they are far less important than both sides of the debate about Brexit realise. Be they free trade agreements or the less conventional, but supposedly much more thorough, single market, they have much less effect on our trade than most of the discussion in this place would lead us to believe. They can be useful. I certainly prefer low or no tariffs to high or rising tariffs. I prefer the removal or reduction of non-tariff barriers, but what drives trade is not trade agreements; it is producing goods and services other people want to buy and getting out and selling them. And what drives that is much more than trade agreements; it is what Keynes called “animal spirits”, which are more likely to be stimulated by creating a competitive domestic environment, by reducing the regulatory burden—without reducing standards, by the way—and by better skills and more investment. It is that rather than trade deals, useful though they can be.

    Be that as it may, the core argument of those who have been trying to persuade the people of this country to reverse the decision they took in June 2016 and remain in the EU is that our prosperity depends on us giving up our democratic national control of our trade, regulatory and economic policy. They assume there is a trade-off between prosperity and democracy. I do not think that is true. Prosperity and democracy normally go hand in hand because, in a democracy, if the Government do not deliver prosperity, you chuck them out and replace them with a Government that can do better. Unfortunately, that is not what the EU is like. Its effective Government, the Commission, is not elected and cannot be removed. Its main economic policy is the euro, which has been a disaster, particularly for southern Europe. Some 40% of young people in Spain are unemployed, 45% in Italy and 53% in Greece. Millions of people of all ages have lost their jobs, but no Commissioner has lost his or her job because they are not accountable in the way we expect.

    Baroness Quin:

    My Lords, I think I heard the noble Lord say that the Commission cannot be removed. That is not true. The Commission has to be appointed by the European Parliament and sometimes it does not accept the nominee of the particular country, and also each country is itself ultimately responsible for appointing its own Commissioner. Moreover, it is possible for the European Parliament to sack the Commission as a whole. I do not know why the noble Lord has made this claim.

    Lord Lilley:

    Theoretically it can, but de facto it cannot. The European Parliament did once sack the whole of the European Commission because of corruption when Madame Cresson appointed her dentist, but then the Commissioners were virtually all reappointed. If that is the noble Baroness’s idea of democratic accountability, I have to tell her that it is one of the reasons I am in favour of getting out.

    It is indeed that lack of accountability which makes me—

    Lord Kerr of Kinlochard:

    As regards the time the noble Lord is referring to, the European Parliament did sack the Commission.

    Lord Lilley:

    I just mentioned that, so I wonder if the noble Lord was listening to me. The European Parliament did sack the Commissioners, but they were all reappointed—virtually all of them except for Madame Cresson.

    I shall give way again so that the noble Lord can tell me what really happened.

    Lord Kerr of Kinlochard:

    The Commission exercised its power, just as it is exercising its power now, in the case of some nominees for the next Commission, not to appoint them. When there is a complete slate, it will vote on that slate collectively. The European Parliament has a good deal more say over the appointment of the Executive than we in this House have over the appointment of, say, the Civil Service. While it is a good thing that we do not have a say over appointments to the Civil Service, the structure in Strasbourg and Brussels is more democratic than what we have here.

    Lord Lilley:

    I believe that what the noble Lord has just told me is that it reappointed the slate, and that is broadly my recollection. But in practice it does not. However, what I said about the experience of southern Europe not leading to anyone being removed is a simple fact.

    Baroness Crawley:

    I am grateful to the noble Lord. We were both around at the time, but I do not believe that Madame Cresson was reappointed.

    Lord Lilley:

    That is exactly what I said. The desire to suggest that I did not say things that I did say is interesting.

    I believe that it would be better if our laws are made in this country, that our borders are controlled from this country and that our money is spent in this country. That is because, over time, Ministers who are accountable to the people will adjust their policies, laws and regulations better to address the interests of the people. Of course, those with experience of Europe will say that that can be done at the European level, but it is more likely that the policies will reflect the interests of the people of this country if they are made by those who are accountable to the electorate. That, if you like, is the main reason that I and 17.4 million people voted to take back control of our laws, our borders and our money.

    However, there is another respect in which it would be profoundly beneficial to our country if we did so, and it is one that may find rather more support among those who have just disagreed with me than they would expect. Once we are responsible for our own policies, Eurosceptics will no longer be able to blame Europe for all our problems. Europe enthusiasts will no longer be able to look to Europe for the solution to all our problems. We will know that our mistakes are our own and that we will have to make them and mend them, that our successes will be our own and that our responsibilities will be our own. That is something we should look forward to, and the sooner the better.

    Lord Hannay of Chiswick:

    My Lords, in following the noble Lord, Lord Lilley, I suggest that he was far too modest when he recanted on his good work in agreeing the ending of the Uruguay Round and setting up both the World Trade Organization and the single market. I congratulate him. His success in that respect is not taken away by a selective quotation of trade figures that gave a very big number for our increase in trade with third countries—a rather small quantum when compared with the smaller figure for the increase in the much larger quantum of our trade with the European Union. I conclude my point by saying, “Well done”.

    Lord Lilley:

    May I express my gratitude? Our trade with all countries outside the European Union is greater than our trade with the European Union and has grown faster than our trade with the European Union. That is why the share of our trade with the European Union has fallen from 60% to 45% and, on present trends, is set to fall to 30% by 2030.

    Lord Hannay of Chiswick:

    I do not want to continue the battle of figures for too long but, of course, a large part of our trade with countries outside the European Union benefits enormously from the relationships which we, as a member of the European Union, have with those countries.

    I was tempted to devote the whole of my contribution to the all-consuming topic of Brexit but I resisted that temptation. What is going on in north-east Syria and with the US’s green light to the Turkish military action there? However often it denies that it gave the green light, I am afraid that President Trump’s conversation with President Erdoğan and his subsequent tweet about the withdrawal of US troops was as green as green lights go. It was taken as such and quite a lot of people have now died as a consequence. It is not only a tragedy and a moral outrage; it also has serious negative consequences for our security and that of our European neighbours and partners. To play fast and loose with the handling of IS detainees and to destroy the one force that stood up for and shed its blood for our shared policies is not only morally reprehensible; it is, in policy terms, unconscionable.

    I welcome the Government’s initiative at the UN to bring the matter before the Security Council and to state clearly there that we oppose Turkey’s actions. To its shame, the Security Council was struck by its usual paralysis when dealing with Syria and was unable to take any action. Now that the international opposition to what Turkey is doing has grown, is there not some scope for reverting to the UN Security Council and seeking agreement on action to stop this conflict and to bring about a ceasefire? Now that the US has adopted some—admittedly pretty inadequate—sanctions measures against Turkey, I would like the Minister, in replying to the debate, to let us know whether we too will go down that road, as surely we should. What is the scope of the decision taken by the EU earlier this week that its members would cease arms sales? I had a rather unsatisfactory exchange with the Minister yesterday because the words he used in his Statement were, as I described them, a little on the weaselly side. I hope we will hear that we will stop the sale of arms to Turkey and that the Minister will deal with these urgent questions, which need clear policy statements.

    Turning to Brexit, I support and strongly endorse what the noble Earl, Lord Kinnoull, said about our policy of not attending European meetings. If I remember rightly, it was introduced in September—one of the greatest acts of bureaucratic vandalism that I have seen for a long time. Would the Minister be so good as to tell us one benefit that has accrued to this country as a result of that decision, apart from giving a lot of civil servants some more free time? I imagine that he and his colleagues would not consider that a benefit on the whole. Perhaps he could address that point.

    In the current state of the negotiations, it would be pretty unwise to probe too deeply into the detail. I will not do so but here are one or two simple questions that I hope the Minister will be able to deal with when he replies to the debate. Do the Government now accept that, even if some sort of deal is struck by Friday this week with the European Council, there will necessarily have to be an extension of the Article 50 period to enable the processes of parliamentary approval on both sides to be completed and for the legislative processes necessary to bring our domestic law into line with any provisions in the deal to take place before we can ratify? Does he seriously believe that that can all happen before 31 October? If he says yes, I shall see whether his fingers are crossed behind his back.

    Secondly, do the Government now recognise that any deal will require substantial changes in the deeply flawed proposals that they put on the table a little over a week ago, in particular with respect to the issue of consent by Stormont and the customs arrangements for trade within Ireland and between Northern Ireland and the rest of the UK? It would be nice to be told that the negotiations are no longer in that place.

    Thirdly, do the Government also recognise that their wish to junk the commitments to a level playing field that were in the political declaration will have serious consequences for our subsequent relationship with the European Union? By saying that we no longer wish to stay in step with it on regulatory issues and to continue to accept the work of Europe-wide rules-setting bodies, such as those for aviation safety, the environment, labour and other issues, we are raising issues of deep concern that go far beyond the current obsession with issues relating to Northern Ireland. The Government’s suggestion that a move in this direction, away from a level playing field, is designed to enable us to have higher standards has zero credibility. It is quite clear that it is designed to enable us to have lower standards.

    The likelihood of any deal or agreement at this week’s European Council and what it might contain are, necessarily, a mystery. I fear that they will have to remain so at least until this Saturday’s emergency Session, if indeed that takes place. But what is no longer in doubt is that, in every area of policy, post-Brexit arrangements are either highly problematic—that certainly goes for the content of a UK-US trade agreement—or clearly less advantageous to us than the terms of our EU membership. That is the basis of the case for calling and holding a confirmatory referendum on any deal that may be struck or on leaving without a deal. The result of such a referendum would have to be accepted by all as binding on this occasion as it was not on the last one. It is the one way of cutting through to a real end game, not just bringing up the curtain on years of further negotiation in which the UK will hold very few cards. To those who assert that such a course of action would thwart the will of the people, I say this: well, you let this genie out of the bottle to settle an internal dispute within one party, which it evidently did not do. Why not join us now in putting that genie back into the bottle?

    Lord Lilley:

    Although I was not here, I was under the impression that the Act required to hold a referendum was voted through by 498 MPs in that House but not opposed by this House. To attribute it to one party is, therefore, incorrect.

    Lord Hannay of Chiswick:

    My Lords, I am afraid that that is very far from the truth. The reason it was not opposed here was because of the Salisbury convention, which says that, if a party wins an overall majority in an election with such an issue in its manifesto, this House will not oppose legislation on that issue. That was the sole reason it was not opposed in this House—none other.


    Lord Callanan:

    Actually, the law does not say that that cannot happen. At the risk of returning to a subject that we have covered extensively, a decision on whether we leave on 31 October is now not a matter for UK law; it is a subject of European law. That is one of the great ironies of this process. However, I repeat what I have said to the noble Lord on many occasions: we will of course abide by the law. If he wants to look at the record, he will see that my right honourable friend the Brexit Secretary, appearing in front of the Brexit Select Committee this morning, said something very similar.

    While our focus remains on securing a deal, we are still ready to leave without one on 31 October. Last week, we published the Brexit readiness report, which sets out the preparations that the Government have undertaken to ensure that the UK is prepared for 31 October. As I set out on that occasion, when repeating the Statement made by the Chancellor of the Duchy of Lancaster in the other place, the report includes the steps that businesses and citizens should take, including to bring about the smooth flow of goods.

    We have announced spending of more than £8.3 billion for Brexit planning. We have signed or secured continuity trade agreements with non-EU countries, as well as continuity agreements across many key sectors including aviation and civil nuclear power. We have launched a public information campaign—Get Ready for Brexit—to advise everyone of the clear actions that they should take to prepare for leaving with no deal. Of course, as always, we have given particular focus to citizens’ rights, which was raised by a number of noble Lords including the noble Baroness, Lady Miller, and the noble Lord, Lord Randall. Our message to EU citizens in the UK is clear, and I will repeat it: you are our family, our friends, our colleagues; we value your contributions to this country and we want you to stay. We are now working to gain reciprocal assurances from other European countries towards UK nationals living in their countries.

    I highlight to the noble Baroness, Lady Miller, that the UK pushed hard in the negotiations for UK nationals living in the EU and for EU citizens in the UK to retain or have the right to stand and vote in local elections. However, the EU did not want to include these rights in the withdrawal agreement, so we are to forced to pursue—and are actively pursuing—bilateral arrangements with individual member states. We have written to every other member state seeking such an agreement. I am pleased that we have so far reached such agreements with Spain, Portugal and Luxembourg. We are in discussions with a number of others.

    The noble Baroness, Lady Finlay, asked about support and funding in devolved Administrations. The Government have provided them with over £300 million since 2017 to prepare for Brexit. We continue to involve them in ongoing discussions on funding, including under the provisions of Project Kingfisher. Last week, I was in Edinburgh with my right honourable friend the Chancellor of the Duchy of Lancaster for discussions with the Scottish and Welsh Governments and the Northern Ireland Civil Service. These covered ongoing negotiations and no-deal planning, in which the devolved Administrations are extensively involved.

    I move on to trade. For the first time in nearly 50 years, the UK will have an independent trade policy. We will be able to set our own tariffs, take our own decisions on regulatory issues and create new and ambitious trade relationships around the world. My noble friend Lord Lilley—who spoke with great experience—touched on this, and I agree with many of the points that he made.

    Lord Lilley:

    I am grateful to my noble friend for saying that. I take this opportunity to put the record straight and apologise to the House. I said that no Commission had ever resigned en masse. Actually, one did. I said that only Madame Cresson resigned. Actually, most of them were not reappointed, but she was the only one found guilty by the European Court of Justice. I wanted to correct that because I do not like misleading the House.