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Brexit: Economic Impact

Volume 737: debated on Tuesday 5 September 2023

5. What recent assessment he has made of the potential impact of withdrawal from the EU on the economy. (906197)

Good morning, Mr Speaker. Brexit was a choice made by the British people and it remains a big opportunity for the economy. Rather than relitigating that debate, this Government are committed to embracing those opportunities.

Prior to the EU referendum, the Bank of England warned that Brexit would seriously damage the UK economy, weakening the pound and causing inflation. The Government have now delayed import checks on animal and food products for the fifth time, because the costs would add to inflation. Does that mean the Chancellor finally accepts that Brexit is contributing to the UK’s cost of living crisis?

No, but of course we are sensitive about the timing of introducing those changes because of cost of living pressures. I am sad to have seen, since we last met in the House, the hon. Lady announce that she is stepping down; we have much in common on patient safety. On the NHS, she will know that because of Brexit an extra £14.6 billion is being directed to public services every year, including the NHS and including in Scotland.

Adam Posen, a former member of the Monetary Policy Committee, has described Brexit as a

“trade war by the UK on itself”.

This unnecessary trade war has had a real impact on small businesses in my constituency such as Guild Antiques & Restoration, which has found that its orders from the EU have fallen off a cliff edge and its costs have increased. Scotland did not choose Brexit and we are all worse off as a result. What can the Chancellor do to fill the economic gaps his hard Brexit has caused?

There is a certain irony in the Scottish National party opposing Brexit at the same time as advocating a far more draconian separation for Scotland, including a new currency and border checks. On businesses in Scotland, as part of the UK, Scotland is now an independent coastal state for the first time in nearly half a century; the 21,000 people in Scotland who work in financial services are benefiting from the Brexit freedoms in the Edinburgh reforms; and there is extra support for Scottish pubs, because, for the first time, we have a lower beer duty relative to supermarkets.

It is not just Brexit trade barriers having a devastating impact on Scotland’s economy, because the loss of freedom of movement has hugely damaged our businesses’ ability to recruit staff. Many businesses have had to reduce their offer, cut their opening hours or close altogether. It is estimated that over the bank holiday UK pubs alone lost out on £22 million because of staff shortages. Does the Chancellor accept that small businesses such as those cannot keep picking up the tab for his Government’s disastrous Brexit? What is he doing to solve these staff recruitment problems?

May I gently say to the hon. Lady that this country has actually grown faster than France or Germany since we left the single market? This is a bit of a smokescreen for the SNP’s economic policies, which have led to more people out of work and fewer people in work in Scotland than in England.

Leaving the EU gives us the opportunity to modernise our regulations and adapt them to local and national domestic interests, but we will seize the benefits of doing that only if we deliver on regulatory reform. So will my right hon. Friend drive that across Departments so that we can increase prosperity and raise living standards as a result?

No one knows more about regulatory reform than my right hon. Friend, who wrote an excellent booklet on it. We look at that booklet ahead of every fiscal event, be it autumn statement or Budget. I hope that she noticed in the Budget big reforms to our medicines regulation. We will continue to learn from the things she advocates.

For generations, Britain’s world leadership on financial services and financial markets has been a key part of our economy. I agree that the post-Brexit initiatives such as the Edinburgh review have made excellent strides on making sure that we keep that world leadership. May I encourage my right hon. Friend to look at the report from UK Finance on the tokenisation of markets, as being the world leader in that innovative area would reduce costs for investors, enable money to flow into less liquid assets and fundamentally unlock future growth?

I thank my right hon. Friend for her question. Thanks to the excellent work of the Economic Secretary to the Treasury, we have repealed 100 EU rules and regulations in the financial services sector, and we will look very closely at the opportunities when it comes to tokenisation.

Last week, the Government admitted that their planned introduction of food import checks from the EU would lead to an increase in inflation, hitting the pockets of ordinary people during the worst cost of living crisis in our lifetimes. In the Labour party, we believe that a bespoke veterinary agreement would cut red tape from business and avoid pushing costs on to ordinary people. Are the Government planning to negotiate a veterinary agreement, and if not, why not?

I gently say to the hon. Lady, who I have a lot of time for, that the last thing business wants is the upheaval of a huge renegotiation of our trading arrangement with the EU, which is the largest tariff-free free trade deal by volume in the world.

Thank you, Mr Speaker. The Chancellor claims that it is a success that inflation in the UK has risen higher and remains more stubbornly so than in the EU. Adam Posen, formerly of the Bank of England, has underlined that up to 80% of the UK’s additional inflation woes can be laid at the door of Brexit—something the Tories and Labour are united on. All the while, food price inflation is crushing household budgets. So why have this Government done nothing? Why have this Government learned nothing from countries such as France, which has worked with food suppliers to keep food prices capped to help those most in need?

I welcome the hon. Gentleman to his position. His constituency predecessor served as a Minister in the Treasury—whatever greatness the hon. Gentleman goes on to, I am sure he will not sully himself with that role. When it comes to inflation, we have a high level of imported food, like Germany; a high level of imported gas, like Italy; and low unemployment, like the United States. These factors have come together to give us the inflation rate we have. When it comes to growth, the hon. Gentleman will have noted last week’s numbers, which show that we have recovered better from the pandemic than France, Italy or Germany, and we are doing extremely well, despite all the pressures we face.

I notice that the Chancellor did not say anything about food inflation hurting families. Well, Tory and Labour “little Britain” attitudes do not stop at food price inaction. Energy costs are a key driver of inflation and costs for families. Energy bills are too high. The Spanish have taken bold steps by cutting VAT and introducing a social tariff to help their people. This Government plan to do nothing for this winter, which is particularly galling for people in Scotland who will continue to pay more for their energy than elsewhere in the UK. Will the Chancellor act on our demands for a £400 energy price grant to be introduced this winter?

Let me tell the hon. Gentleman what we are doing for his constituents, and indeed all the people of Scotland: around £3,000 of support for the average family up and down the country, including in Scotland; paying half people’s energy bills, on average; and a huge amount of support through the benefits system. Nearly £100 billion of support shows that we are stronger together.