We will want to have reached agreement on our future partnership within two years of the article 50 process. Article 50 is clear—we did not write it—that it should take two years to negotiate the withdrawal, and any deal must take into account the new relationship. We recognise that a cliff edge for business or a threat to stability would be in neither side’s interest. A phased process of implementation in which both Britain and the EU institutions and member states prepare for the new relationship is likely to be in our mutual interest, and that will be to everyone’s benefit if that is what we agree.
The tech sector is clear that the UK needs a watertight legal agreement on international data flows from the day we leave the EU; transitional arrangements just will not do. The best route will be an adequacy agreement, as other means are currently under legal challenge. As it took seven years to negotiate an adequacy agreement with Bermuda, what is the Secretary of State doing, with colleagues, to ensure that we avoid a cliff edge on data flows?
The hon. Gentleman raises a very important point, because that is central not just to IT and database industries, but to every industry now. The difference with Bermuda is that it was not at a point of identity of data standards when it started its negotiations. We will be at a point of identity at the point of departure, and we will undoubtedly have to agree some regime whereby we maintain equivalence—not identity, but equivalence—thereafter. It is unlikely that we will need transitional arrangements on that; it is much more likely that we will need an ongoing relationship on it.
Blaenau Gwent has relied on EU structural funding in recent years and, though we are leaving the EU, the need for infrastructure investment remains really high. Infrastructure has a long lead-in, so will the Secretary of State tell me what transitional arrangements will be in place to ensure that Blaenau Gwent gets the best deal to boost its economy after 2020?
The Treasury made it clear, very rapidly at the beginning of this process, that it would underwrite agreements made with the European Union that carried on beyond the point of Brexit as long as they met value-for-money requirements. The responsibility for making that judgment in the case of the hon. Gentleman’s constituency will lie with the Welsh Government, so I do not see that there is a risk there. Beyond 2020, the EU will have its own budget arrangements anyway, and we will be in the same position.
Will my right hon. Friend guarantee that the very last thing he is going to do is to accept any blandishments from those on the other side of the House, and that he is going to start discussing in detail—in this House or elsewhere—the transitional arrangements with the EU?
Of course my right hon. Friend is right. This is not about some arrangement to extend the discussions or the negotiations; it is about practical implementation issues that may well turn out to be in the interests of both sides, and it is in those circumstances that we would achieve them.
Does my right hon. Friend agree that it will be important to encourage co-operation between the regulators during any transition period for financial services, to ensure that we have an orderly transition to the new arrangements with Europe?
My right hon. Friend is absolutely right. One of the ongoing streams of work in Whitehall involves arranging to talk to the regulators, and some of those discussions have already happened. The Governor of the Bank of England has commented on the need to maintain stability after Brexit, and that will be an important part of our negotiations.
Because of the Government’s decision to leave the single market, lots of agreements will cease to have effect the day after we leave. One of those is the agreement that allows British airlines to fly to any airport in the European Union. Given that airlines sell tickets up to 11 months in advance, what assurance can the Secretary of State give to passengers that the tickets they buy before we leave the European Union will still be valid after we leave?
The right hon. Gentleman is partly right. Many of the arrangements for European routes are partly dependent on the EU, but there are also bilateral and other arrangements. He is exactly right to suggest that we will be setting out to ensure that those forward contracts stand.
Further to what the Chair of the Select Committee, the right hon. Member for Leeds Central (Hilary Benn), has just said, will the Secretary of State tell us whether the transitional arrangements will be discussed right from the beginning of the negotiations? Transitional arrangements cannot be left until the last moment; they need to be hard-wired into negotiations from the very beginning.
They will undoubtedly be part of the early discussions, but the need for transitional arrangements will depend on what the final arrangements will be. If we do not know where we are going to end up, we cannot have a transitional arrangement. Also, our overarching offer of a comprehensive free trade arrangement will remove the need for transition in some areas, although not in the highly regulated ones. The Chairman of the Select Committee was exactly right to suggest that aviation is one of those areas, and it is not the only one. The original questioner, the hon. Member for Cambridge (Daniel Zeichner), mentioned data, which is another area in which regulation will matter. In many cases, however, such arrangements will not be necessary.
Will the Secretary of State tell the House what he sees as the main differences between agreed interim arrangements as part of a phased process of implementing our future relationship with the EU, as sought by the Government, and a negotiated transitional deal?
The reason that we have specified this in detail was that the term “transitional arrangements” meant several different things to different people. For example, some thought that it would be good to have a departure deal and then to spend years in a transitional arrangement carrying on the negotiations. We have specifically differentiated that from what we are talking about; that is not what we want. We want the decisions to be concluded within two years, but implementation might take longer in a whole series of areas, including customs and financial services regulations.