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Brexit Negotiations

Volume 787: debated on Monday 11 December 2017


My Lords, with the leave of the House I shall now repeat a Statement made by my right honourable friend the Prime Minister in another place. The Statement is as follows:

“With permission, Mr Speaker, I would like to update the House on the negotiations for our departure from the European Union.

On Friday morning, the Government and the European Commission published a joint report on progress during the first phase. On the basis of this report and following the discussions I held throughout last week, President Juncker is recommending to the European Council that sufficient progress has now been made to move to the next stage and begin talks on the future relationship between the UK and the EU. President Tusk has responded positively by proposing guidelines for the next phase of the negotiations.

I pay tribute to my right honourable friend the Secretary of State for Exiting the European Union and our whole negotiating team for their calm and professional approach to these negotiations. We have argued robustly and clearly for the outcomes that we seek: a fair and reciprocal deal that will guarantee the rights of more than 3 million EU citizens living in the UK and 1 million UK nationals living in the EU so they can carry on living their lives as before; a fair settlement of the accounts, meeting our rights and obligations as a departing member state, in the spirit of our future partnership; and a commitment to maintain the common travel area with Ireland, uphold the Belfast agreement in full, and avoid a hard border between Northern Ireland and Ireland while upholding the constitutional and economic integrity of the whole United Kingdom.

I shall set out for the House the agreements we have now reached in each of these areas. More than 3 million EU citizens make an extraordinary contribution to every part of our economy, society, culture and national life, and I know that EU member states similarly value the contribution of the 1 million UK nationals living in their communities, so from the outset I have made protecting citizens’ rights my first priority. However, for these rights to be truly reciprocal, they need to be interpreted consistently in both the UK and the EU. The European Union started by wanting all EU citizens’ rights to be preserved in the UK by a prolongation of EU law; it said these rights should not require any UK process to implement them, and that they should be supervised by the Commission and enforced by the European Court of Justice. Those proposals were not acceptable. When we leave the European Union, our laws will be made and enforced here in Britain, not in Luxembourg, so the EU has accepted that we will incorporate the withdrawal agreement into UK law. Citizens’ rights will then be enforced by our courts when appropriate, paying due regard to relevant ECJ case law, just as they already decide other matters with reference to international law when it is relevant.

In the interests of consistent interpretation of citizens’ rights, we have agreed that, when existing law is not clear, our courts, and only our courts, will be able to choose to ask the ECJ for an interpretation prior to reaching their own decision, but that will be a very narrow remit and a very small number of cases—and, unlike now, they will not be obliged to do so. This will be voluntary. The case itself will always be determined by the UK courts, not the ECJ, and there will also be a sunset clause so, after eight years, even that voluntary mechanism will end.

The end-point of this process is very clear. EU citizens living in the UK will have their rights enshrined in UK law and enforced by British courts, and UK citizens living in the EU will also have their rights protected. The jurisdiction of the ECJ in the UK is coming to an end. We are taking control of our own laws once again, and that is exactly how it should be.

I turn to the financial settlement. Following some tough conversations, we have agreed the scope of our commitments and the principles for their valuation. We will continue to pay our net contributions under the current EU budget plan. During this time, our proposed implementation period will see us continuing to trade on current terms. We will pay our fair share of the outstanding commitments and liabilities to which we committed during our membership. However, this is conditional upon a number of principles we have negotiated over how we will ultimately arrive at a fair valuation of these commitments, which will bring the actual financial settlement down by a substantial amount.

This part of the report we agreed on Friday, like the rest of it, is also subject to the general reservation that nothing is agreed until everything is agreed. This means we want to see the whole deal now coming together, including the terms of our future deep and special partnership, as I said in Florence. These are the actions of a responsible nation honouring the commitments that it has made to its allies, having gone through those commitments line by line as we said we would. It is a fair settlement for the British taxpayer, who will soon see significant savings compared with remaining in the European Union. It means we will be able to use that money to invest in our priorities at home, such as housing, schools and the NHS. It means the days of paying vast sums to the European Union every year are coming to an end.

Our departure from the European Union presents a significant and unique challenge for Northern Ireland and Ireland, so it is absolutely right that the joint report makes clear we will uphold the Belfast agreement in full. This agreement, including its subsequent implementation agreements and arrangements, has been critical to the progress made in Northern Ireland over recent decades. Our commitment to those agreements, the principles that underpin them, the institutions they establish and the rights and opportunities they guarantee remains steadfast.

The joint report reaffirms our guarantee that there will be no hard border between Northern Ireland and Ireland. So much of daily life in Northern Ireland depends on being able to cross the border freely, so it is right that we ensure that no new barriers are put in place. We have been absolutely clear that nothing in this process will alter our determination to uphold the constitutional and economic integrity of the whole United Kingdom. It was right that we took time last week to strengthen and clarify the joint report in this regard, listening to unionists across the country, including the DUP. On Friday, I reinforced this further by making six principled commitments to Northern Ireland.

First, we will always uphold and support Northern Ireland’s status as an integral part of the United Kingdom, consistent with the principle of consent. As our Northern Ireland manifesto at the last election made clear, the Government I lead will never be neutral when it comes to expressing our support for the union. Secondly, we will fully protect and maintain Northern Ireland’s position within the single market of the United Kingdom. This is by far the most important market for Northern Ireland’s goods and services and Northern Ireland will continue to have full and unfettered access to it. Thirdly, there will be no new borders within the United Kingdom. In addition to no hard border between Northern Ireland and Ireland, we will maintain the common travel area throughout these islands.

Fourthly, the whole of the United Kingdom, including Northern Ireland, will leave the EU customs union and the EU single market. Nothing in the agreement I have reached alters that fundamental fact. Fifthly, we will uphold the commitments and safeguards set out in the Belfast agreement regarding north-south co-operation. This will continue to require cross-community support. Sixthly, the whole of the United Kingdom, including Northern Ireland, will no longer be subject to the jurisdiction of the European Court of Justice.

As the joint report makes clear, our intention is to deliver against these commitments through the new, deep and special partnership that we are going to build with the European Union. Should this not prove possible, we have also been clear that we will seek specific solutions to address the unique circumstances of the island of Ireland. Because we recognise the concerns felt by either side of the border and we want to guarantee that we will honour the commitments we have made, we have also agreed one further fallback option of last resort, so if we cannot find specific solutions, the UK will maintain full alignment with those rules of the internal market and the customs union which, now or in the future, support north-south co-operation, economic co-operation across the island of Ireland and the protection of the Belfast agreement.

The joint report clearly sets out that cross-community safeguards and consent are required from the Northern Ireland Executive and Assembly for distinct arrangements in this scenario, and that in all circumstances Northern Irish businesses will continue to have full and unfettered access to the markets in the rest of the United Kingdom on which they rely, so there can be no question about our commitment to avoiding borders both north-south and east-west. We will continue to work with all Northern Irish parties and the Irish Government in the second phase of the talks, and continue to encourage the re-establishment of the Northern Ireland Executive so that Northern Ireland’s voice is fully heard throughout this process.

Finally, in my Florence speech, I proposed an implementation period to give Governments, business and families the time they need to implement the changes required for our future partnership. The precise terms of this period will be for discussion in the next phase of negotiations. I very much welcome President Tusk’s recommendation that talks on the implementation period should start immediately and that it should be agreed as soon as possible.

This is not about a hard or a soft Brexit. The arrangements we have agreed to reach the second phase of the talks are entirely consistent with the principles and objectives that I set out in my speeches in Florence and at Lancaster House. I know that some doubted we would reach this stage. The process ahead will not be easy. The progress so far has required give and take for the UK and the EU to move forwards together, and that is what we have done. Of course, nothing is agreed until everything is agreed, but there is, I believe, a new sense of optimism now in the talks and I hope and expect that we will confirm the arrangements I have set out today in the European Council later this week. This is good news for people who voted leave, who were worried we were so bogged down in tortuous negotiations it was never going to happen, and it is good news for people who voted remain, who were worried we were going to crash out without a deal. We are going to leave but we are going to do so in a smooth and orderly way, securing a new deep and special partnership with our friends while taking back control of our borders, money and laws again. That is my mission, that is this Government’s mission, and on Friday we took a big step towards achieving it”.

I commend this Statement to the House.

My Lords, I am grateful to the noble Baroness for repeating the Statement. I listened with interest when she said that there was now a new sense of optimism, because, if ever the term “political rollercoaster” was apt, it has to be now.

We welcome an agreement that—subject to this week’s European Council—allows the UK to proceed to the next stage of these talks, allowing exploration of what the future relationship will look like and providing certainty about how our exit will impact individuals, consumers and businesses. It is important now for negotiators not to have their hands tied by unhelpful and ephemeral red lines, but to keep options on the table. Swift progress on a time-limited transition, rather than implementation, is essential. We have always said that these negotiations are complex. On both sides, integrity and honourable behaviour are essential, as is competence. The Government must be serious in both intent and actions—and that is all the Government, not just some Ministers. There can be no freelancing on this and the Prime Minister has the right to insist that her Ministers back her.

Last week, many of us cleared our diaries for Tuesday in expectation of a Statement regarding an agreement on a deal with the EU that would allow us to progress to the second crucial phase of the Brexit negotiations. On Monday evening, it became clear, in the most spectacularly embarrassing way, that such optimism was misplaced, as the Prime Minister’s DUP colleagues who keep her in government would not support the arrangements. It is hard to understand how such a humiliating failure could have been allowed to happen. But then, after renewed and long, intensive discussions by the Prime Minister and her team, it was finally announced that the Government had reached agreement with the EU to move to phase 2. We welcome the fact that talks will move on. However, there is a fear that this seems to be unravelling quicker than a hand-knitted Christmas jumper.

Can the noble Baroness confirm the status of the agreement that has been reached? Yesterday the Brexit Secretary, David Davis, said that the agreement was not legally binding unless there was a final deal and that it was instead a mere statement of intent. Today, however, he said that the agreement is a legal guarantee that will be honoured whatever the outcome. Which is correct?

Is this agreement conditional or not? In all three areas—the honouring of obligations through the financial settlement, on citizens’ rights and the border with Ireland—there needs to be clarity on whether there is a genuine, lasting agreement or a possible agreement dependent on the next stage of negotiations and our future relationship with the EU 27. That has to be made crystal clear so that there can be no misunderstanding at any time. In her response the noble Baroness may find it useful to clarify the implications for this agreement of the phrase:

“In the absence of agreed solutions”,

in paragraphs 49 and 50 of the joint report with regard to the border with the Republic of Ireland.

Given that the European Council has yet to formally accept the Commission’s recommendations, does the noble Baroness consider that the comments by David Davis will help or hinder in future negotiations? Even today he confessed on the radio that, “I don’t have to be very clever. I don’t have to know that much. I do just have to be calm”. That does not seem to be a great strategy for proceeding. Across the country many businesses do not feel at all calm. They need certainty to plan for their future, and the Government have a duty to provide such certainty. Given that the Brexit Secretary is all over the place and hardly a safe pair of hands, can I seek assurances that there is now ongoing engagement with the European Parliament given its role in advising the Commission and the Council, and its power of veto on the withdrawal agreement?

The Prime Minister previously declined an invitation to address the European Parliament and recently had her session with its Conference of Presidents cancelled at the last minute due to political group presidents being unable to find diary space. Can the noble Baroness indicate whether the Prime Minister has scheduled a new meeting with representatives of the European Parliament given the importance of engaging with them? To return to a point made earlier, does the noble Baroness also agree that when continuing such negotiations it is unwise to set unrealistic red lines?

The Commission’s communication to the European Council notes that “significant divergences remain” on future governance and enforcement and, specifically on the border between Northern Ireland and the Republic of Ireland, it questions the agreement regarding the border. On page 9 it says that the intention to avoid a hard border,

“seems hard to reconcile with the United Kingdom’s communicated decision to leave the internal market and the Customs Union”.

I heard what the noble Baroness said regarding Northern Ireland. Can she tell us whether this is a commitment, an agreement or merely a statement of intent?

The Government’s future partnership paper outlined a number of potential dispute settlement methods without committing to or endorsing any of them. Can the noble Baroness tell us when we can expect the Government to commit to a specific approach?

On citizens’ rights, both the joint report and the Prime Minister’s open letter to EU citizens earlier today leave many questions unanswered. For example, when will this new independent national authority—I have never heard of it before—be created, and will separate primary legislation be required? It was not mentioned in the previous Queen’s Speech. Clearly, there has been some consideration of its role; how much will it cost? The noble Baroness spoke of significant amounts of money coming back to the UK that would not be spent in Europe, and I recall that significant financial savings of £350 million a week would be made available to the National Health Service. Can she tell us specifically how much of that will be spent on this new agency or authority?

The Prime Minister’s Statement talks of,

“a fair and reciprocal deal that will guarantee the rights of more than 3 million EU citizens living in the UK and 1 million UK nationals living in the EU so they can carry on living their lives as before”.

Can the noble Baroness confirm whether this is absolutely accurate? The joint report makes no reference to preserving the ability of UK citizens living in the EU 27 to continue moving freely between those countries. For example, will a UK citizen working for a company in Frankfurt with offices based in Milan and Paris still be able to be posted to any of those offices to live and work or will it just apply to the country that they live in now?

Finally, in my lifetime there has been no more important negotiations for the future of this country than these. We need wisdom and thoughtfulness, not just wishful thinking. Take the events of the last week or so, particularly those over the weekend. Not only do they not inspire confidence for British business and in Parliament but, equally seriously, they may damage our reputation and standing with the other EU countries. When the noble Baroness is sitting round the Cabinet table with her colleagues later this coming week, will she read the riot act to squabbling, inconsistent Ministers? It is not just themselves and their party that they are damaging but the national interest.

My Lords, I begin by congratulating the Prime Minister on an achievement which many —including many of her colleagues—thought was impossible. She has survived to fight another day and on that she is to be congratulated. The deal she struck last week, however, is not the stuff of congratulations. Before we look at it, can the Leader of the House confirm its status, to take up the point made by the noble Baroness, Lady Smith? Is it a mere “statement of intent”, which the Brexit Secretary believed it to be yesterday, or “more than legally enforceable”, which he believes this morning? Or does its status change with the Secretary of State’s mood?

There are three main pillars of the deal, and the first is citizens’ rights. Friday’s agreement confirms that there will be no certainty until any final deal is reached, leaving EU citizens in the UK and UK citizens in the EU as continuing bargaining chips. How then can the Prime Minister claim that this is her top priority? This uncertainty is compounded by the provision that all 3 million EU citizens in the UK will then have two years to submit applications for registration. Until these applications are satisfactorily processed, their status will be unconfirmed. Can the Government give the 3 million any assurances as to when they hope to complete the registration process? A charge is payable also by those who currently do not have permanent residency. How much will that charge be and how many people do the Government estimate will have to pay it?

On the financial settlement, the Government argue that the payment will be up to £40 billion. Can the Leader confirm that this figure does not include over £10 billion of contingent liabilities and could, therefore, be significantly greater?

I have mentioned so far issues that are capable of resolution, albeit at significant cost. The issue of the Northern Ireland border is not. As Jonathan Powell put it in Saturday’s Financial Times:

“In fact, the problem of the border is not resolved at all but simply left hanging”.

The Government’s preferred solution to the border issue appears to involve agreeing with the EU that we remain effectively, if not in name, inside the single market in terms of rules and regulations. In other words, we will supinely accept whatever rules the EU adopts. Can the Leader confirm that this is indeed the Government’s preferred outcome? If so, will she accept that far from taking back control of our markets and trade, we have completely lost control, and in doing so made it practically impossible to carry out independent trade deals which improve on EU trade deals because we have agreed to follow EU rules?

One aspect of the Northern Ireland agreement is particularly troubling to me. People in Northern Ireland will retain EU citizenship. They will, in the words of Leo Varadkar,

“have the right to study in Paris, buy property in Spain, work in Berlin”.

They will also retain an EU passport. I and my children are denied these rights. I will be reduced to waving to friends from Northern Ireland, with as cheery a hello as I can muster, as they sail past me in European airport passport queues—they in the EU citizens’ line and me with the rest of the world. I will be furious, and I suspect that many millions of citizens of Great Britain will also be furious, when they learn that they have become second-class citizens in their own country.

However, despite all the flaws, the Government will now move on to the trade talks. I realise it is pointless asking the Leader what the Government hope the outcome will be as they have not made up their mind but, before they do, I suggest that she has a quiet word with the Brexit Secretary. In his interview yesterday on “The Andrew Marr Show”, he said that he would take the best bits of existing EU trade deals and,

“add to that the bits missing, which is the services”.

Could she point out that services represent 40% of our exports to the EU and that this share is growing rapidly? Far from being the bits which are missing, free access to EU markets for our service exporters would be vital to the economic prosperity of the UK were we to leave the EU.

The Prime Minister deserves a celebratory glass for surviving until Christmas. She should savour it because the difficult part of the EU negotiations is now about to begin.

I thank the noble Lord and the noble Baroness for their comments and for their support and recognition that we have indeed moved on.

The joint report about which they both asked sets out the agreement we have reached in phase 1 and we are clear that we want to honour the agreement made, as we believe are the EU. However, we now need to turn this into a withdrawal agreement, which we have said we will put into primary legislation. So this is a report on phase 1; we are all committed to what is in the report and the agreements made; and we now need to turn that into a withdrawal agreement, to which we have committed. We will bring that forward in legislation, and that will be the opportunity for Parliament to discuss and scrutinise that agreement.

On Northern Ireland, which again both the noble Baroness and the noble Lord asked about, we have been consistently clear that there will be no return to a hard border in Ireland, and we have always said that the details of how we maintain an open border will be settled in phase 2 of the negotiations, which we hope to confirm we are moving to on Friday, where we can agree our future relationship with the EU. I can confirm to the noble Lord, Lord Newby, that the whole of the UK, including Northern Ireland, will leave the EU customs union and the EU single market, and nothing in the agreement alters that fundamental fact. However, we are confident that, working together, we will ensure that we have no hard border in Northern Ireland. We have said, as I outlined in the Statement, that there is a fall- back option if that does not happen, but we are confident that we will come to an agreement that suits us all.

On monitoring compliance, the EU Commission will retain its existing role in monitoring compliance with EU law in member states, and this will extend to compliance with the withdrawal agreement. The Commission will not monitor compliance in the UK. We will create a new independent authority to do this and will set out details in due course.

The noble Baroness, Lady Smith, asked about onward movement for UK citizens in the EU. She is right that that has not yet been resolved, but we have been very clear that it is something we want to come back to in the next phase of the negotiations.

The noble Lord, Lord Newby, asked about the new settled status scheme. We have been clear that we will introduce the scheme under UK law for EU citizens and their family members. The scheme will provide a transparent, smooth and streamlined process, and it will incorporate appropriate criminality checks. The application will cost no more than a British passport, and EU citizens will have two years to apply. The Home Office will be bringing forward a scheme on a voluntary basis to enable EU citizens and their family members to confirm their status as soon as possible.

Finally, on trade, we have always been clear that we are not looking for a Canadian or Norwegian-style deal, but one that is specific to UK circumstances and is specific to the fact that we are starting off in a completely different position in terms of our relationship with the EU from that of any other country so far.

My Lords, I welcome the Statement repeated by my noble friend. It seems to me that, whatever side of the argument you were on, it was necessary to get through into the proper discussion of what our future relationship will be. The fact is that the EU had set down preconditions before that could start, so I am delighted that those have now been overcome and we can move on to the further procedures. Perhaps I may say again what I said last week about Northern Ireland. It is a very difficult problem, and it is impossible to see how it is going to be settled until we know what the future final trading arrangement is going to be. That must be the logical consequence. It should never have been inserted as a precondition to resolve this issue in advance of the trade talks going forward. The case of EU citizens and the financial arrangements are now agreed. I hope that everyone, whichever side they are on, will get on with the talks in order to find a satisfactory way through for all concerned, both in the EU and in the UK.

I thank my noble friend for his comments. He is absolutely right to say that this is all still subject to the Council agreeing that sufficient progress has been made, which we hope and expect to be able to hear later this week. He is also absolutely right about Northern Ireland. We have always been clear that the details of how we maintain an open border will be settled in phase 2 of the negotiations where we agree our future relationship. We are confident that, with good will on both sides, we will be able to do this.

My Lords, on the point that nothing is agreed until everything is agreed, and looking at the paragraph which refers to the financial settlement, I see that it states,

“we want to see the whole deal now coming together, including the terms of our future deep and special partnership”.

Can the noble Baroness confirm that what she is talking about is the framework for the future relationship which is set out in Article 50? She is not talking about the conclusion of a trade deal, because that will take many years beyond 2019. Given that, next autumn the Government will be signing up to pay £40 billion as a divorce settlement, but essentially on trade by the time we leave the European Union it will be a pig in a poke and we will have no idea of what eventual deal will be agreed.

The Prime Minister has said that the money we have discussed is in the context of agreeing our future partnership. We have also been very clear in setting out the valuations and we have agreed the important principles that will apply to how we rely on them. Further, we have agreed a fair settlement with the final bill estimated to stand at around £35 billion to £39 billion, which noble Lords will be aware is at least half of the reports we have had previously about how much money would be involved in the financial settlement. This is a good deal and it also means that we can begin to unlock the talks in order to start talking about the deep and special relationship and our future trading partnership.

My Lords, can the Minister respond to one point that occurs to me very sharply? The statement that nothing is agreed until everything is agreed seems to apply to all three pillars of this first-phase agreement. Is it really conceivable that the Government will take away the agreement that is reached on the status of EU citizens here and our citizens across Europe if there is no agreement? Is it their position that they will remove that? If that is the case, what assurance is being given to those 4 million citizens since they will then know that they will not have clarity until the last minute of the last hour of the last day of the negotiations?

Secondly, on the Irish issue, could not the Minister perhaps apply a common-sense rule which is that the text, it seems to me, states clearly that if there is no agreement, the regulatory alignment will apply in order to avoid a hard border? Is that the position, or is it also subject to being taken off the table if no agreement is reached?

The Statement was very clear, and I hope that I was also very clear in my response to the noble Baroness and the noble Lord, that we all want to honour the agreements set out in the joint report. We have also said that the withdrawal agreement and implementation Bill, which we will bring forward, will set out what is in the withdrawal agreement—including citizens’ rights, any financial settlement and the details of an implementation period—which will be implemented directly into domestic law by primary legislation.

On Northern Ireland, the Statement made clear that we have agreed a fall-back option of last resort. We simply do not believe that we will be unable to find specific solutions to the border issue; we are confident that we will do so. If we cannot, the UK will maintain full alignment with internal market and customs union rules, which currently support north/south co-operation, economic co-operation across the island of Ireland and the protection of the Belfast agreement—and will do so in future. The joint report also clearly sets out that cross-community safeguards and consent are required from the Northern Ireland Executive and Assembly for any distinct arrangements in this scenario. As I said, we do not believe that it will come to that.

My Lords, in respect of that quote that the Minister has just given from paragraph 49 on the rules that support north/south co-operation and the all-Ireland economy, have the Government done a sectoral analysis or impact assessment on which aspects of the single market would not be covered by the commitment to “full alignment”? Presumably, it is a very wide field, covering agriculture, sanitary standards, consumer protection, transport, competition and environmental standards—I believe that about 142 issues were identified as being covered by north/south co-operation in Ireland. Which single market rules would not be covered by the promised full alignment? If they are rather small in number, would it not be simpler all round to stay in the single market and customs union, instead of things being so complicated?

I am afraid that the noble Baroness’s question is predicated on us not reaching a suitable outcome that we all want. I just do not accept that.

My Lords, does my noble friend accept that the agreement and report not only carry forward the negotiation process, as we know was intended, but introduce a very welcome degree of flexibility to what has been a rather over-polarised situation and debate? Does she agree that, under the principle of mutual recognition negotiated long ago—which has allowed all EU member states to vary rules, regulations, taxes and other provisions very widely, as long as they share and respect the broad aims of the EU—this means that, in practice, “alignment” can be interpreted in any way that we choose, provided that it is consistent with the deep and special relationship and common sense? Is this flexibility not greatly welcome and does it not allow us to get on to the next phase in a constructive way?

I agree with my noble friend. As I say, we hope very much that the Council will agree sufficient progress on Friday so that we can move on to what we all want to do: talk about our future relationship. It is important for us to agree those terms now. As we have made clear, we are starting from a unique position of full regulatory alignment and we want to maintain our current high standards. This is a good basis for a constructive, deep and special future trading partnership.

My Lords, will the Leader accept that this Statement is still facing both ways? In saying that we are not going to stay in the single market, it is trying to put a sticking plaster over a rabbit hole which is not there. Given the deal that we struck in good faith with the Irish Republic whereby all parts of the United Kingdom will be in the same position, it is essential to stay within the single market. No trade deal, such as that referred to by the noble Lord, Lord King, can alter that fact.

No, I am afraid that I do not agree with the noble Lord. As we have made clear, the whole of the UK, including Northern Ireland, will leave the EU customs union and the single market, and nothing in the agreement alters that fundamental fact. I would have thought that noble Lords would be pleased that we have made progress, have reached the end of phase 1, have come to an agreement together and are looking to move forward. It would be nice if we all did that in a constructive and positive manner because we all want the best for this country and to make sure that our future is bright.

My Lords, if the Government are committed to full regulatory alignment between Northern Ireland and the rest of Ireland, and there is no distinction to be drawn between the position of Northern Ireland and that of the rest of the United Kingdom, does it not follow that there must be full regulatory alignment between the United Kingdom as a whole and the European Union?

We have been clear that maintaining alignment means that we may have the same objectives but that they may be met in different ways.

My Lords, may I congratulate the Prime Minister through my noble friend on the pragmatism that she has shown thus far? I urge my noble friend to urge the Prime Minister to show similar pragmatism in the future, because does she understand that, despite the voices of some prominent members of my own party, there is very limited support for a hard Brexit? Consequently, if we are to get approval for the ultimate outcome of these negotiations, it has to be on the basis of a very close alignment between the institutions of the European Union and those of the United Kingdom.

My Lords, as the Prime Minister’s Statement said, this is not about a hard or soft Brexit; it is about ensuring that we have a deep and special new relationship with the European Union, because we want a deal that works both for our citizens here and for the European Union. It is in all our interests to work towards that. I hope that, come Friday, when it has been acknowledged that sufficient progress has been made, we can begin taking those steps into phase 2 of the negotiations.

My Lords, the Minister implied that if the agreement is confirmed, goods and people will move totally freely between Ireland and Northern Ireland—and likewise between Northern Ireland and Great Britain. This being so, will she confirm that goods and people will move equally freely, as they do today, between Dublin and Holyhead?

As I have said, we want to ensure that we maintain the constitutional and economic integrity of the United Kingdom. We will be working in phase 2 to look at the details of how we deal with the border issues that we have discussed. However, we have been categorical that there will be no hard border within the island of Ireland.

My Lords, having been through the agony of the negotiations on the Belfast agreement, I have every reason to know what the phrase “nothing is agreed until everything is agreed” means. There are two things about the border: one is the movement of people and the other is the movement of trade. Trade must obviously be retained until the next stage of the negotiations with Brussels, but in so far as the movement of persons and the reference to the common travel area are concerned, can the Minister assure me that the thousands of Irish citizens who are EU citizens and who move into the United Kingdom because they want all the benefits of being British will continue to have those benefits under the common travel area?

I note that the Statement gives a lot of importance to getting out from under any jurisdiction of the European Court of Justice. I find that a little surprising in view of the recent report by the Institute for Government, which shows that the British Government have fewer cases before the European Court of Justice than do most other members of the European Union—and, indeed, that most of those are decided in favour of the UK. I am puzzled also as to whether the deep concern with national sovereignty and the willingness to make financial and economic concessions in order to regain this sovereignty applies to other international courts. The Leader of the House may be aware that President Trump has just attacked the arbitration tribunal of the World Trade Organization, suggesting that it is biased against the United States, that it does not respect American sovereignty and that the United States might have to leave the World Trade Organization. Do the British Government sympathise with President Trump in that suspicion of international courts, or is it is just the European Court of Justice that we object to?

EU citizens’ rights in the UK will be upheld by implementing the agreement in our law, instead of continued EU law enforced by the EU courts. Our courts will pay due regard to EU case law as agreed at the point of exit to interpret that law as needs be, just as they decide our law now in reference to international law, where relevant, such as the UN Convention on the Rights of the Child.

My Lords, it is the turn of the Labour Benches and I suggest that we hear from the noble Lord, Lord Campbell-Savours.

My Lords, the Leader of the House is a member of the Cabinet and therefore I am sure that she will know the answer to my question: is it the Government’s intention that at the ferry port at Belfast there will be no customs officials or immigration officers in attendance with the remit or ability to check non-UK citizens travelling to ports in Scotland, England or Wales?

Will my noble friend answer a very simple question? The Statement says that there will be a large sum of money available to Britain because of our leaving the European Union. Will she promise to place before the House the details of that sum of money, how the addition is done and how it is that the Government make that statement in full and flat opposition to every independent commentator in this country?

We have agreed a number of important principles that will apply as to how we arrive at valuations in due course. These will ensure that the process is fair to the UK. As we leave and pay off our commitments, there will be significant sums left to spend on our priorities and a precise schedule of payments will be agreed in the second phase.

My Lords, when we come to negotiate our future trading relationship, why do the Government not say that we will be generous and offer continuing free trade? That is, after all, much more in their exporters’ interest than it is in ours. I say this because, as the excellent Civitas analyses show, there are about 6 million jobs in the EU exporting to us and we have about 3.5 million jobs exporting to them. If the Eurocrats are selfish enough to force us to the WTO conditions instead, their exporters will pay us some £13 billion in new tariffs, whereas we will pay them only about £5 billion. As to what cash we should pay them, surely we should leave that to the very end of the negotiation, and its amount should depend on whether they have tried to mess around with the City of London in the meantime.

We are committed to seeking continuity in our current trade and investment relationships, including those covered by EU FTAs and other preferential trading arrangements. We are working to agree arrangements with those partner countries to replicate, as far as possible, the effects of these agreements.

My Lords, the agreement envisages that our courts will have a discretion to refer cases about citizens’ rights to the European Court in Luxembourg. Do the Government intend that legislation will provide any guidance to our courts as to how they should exercise this discretion? If the Government do not provide guidance, our courts will be required to decide issues of very considerable political sensitivity.

The ability of our courts to ask the ECJ for a view will be voluntary, very narrowly defined and time limited. Our courts can choose to ask the ECJ for a legal view on the law in relation to citizens’ rights where there is a point of law that has not arisen before. If the past is a guide, we would not expect this to happen very often; it currently happens for about two or three cases a year in this area of law. This ability will be strictly confined to those citizens’ rights as exercised under the withdrawal agreement by EU citizens who were settled here before we leave the EU. It will not extend in any way beyond that.

The noble Lord, Lord Wallace of Saltaire, suggested that the response of the UK Government to the continued relationship with the ECJ might be typical of a general hostility towards international tribunals. Will my noble friend the Leader of the House confirm that it means no such thing and that the fact that we will no longer have a relationship with the ECJ is simply because we will no longer be a member of the European Union? We therefore do not need the ECJ to determine disputes that arise out of that membership, save for that important and limited exception referred to in relation to EU nationals, and subject of course only to whatever may be in the implementation agreement that is to follow.

My Lords, the noble Baroness has got her sums wrong. The country is already 15% poorer as a result of the devaluation which followed Brexit and our growth rate has gone down by 1% per annum—about £20 billion, which is twice our annual contribution to the EU. We shall in fact have fewer resources for all those good causes, such as the NHS, education and housing, that she mentioned as a result of leaving the EU, not more. I ask the noble Baroness a simple question. Is it not the case that if you have no customs controls between Northern Ireland and the Republic, then Northern Ireland and the Republic are within a common customs area or customs union and that if you have no customs controls between Northern Ireland and Great Britain, then Northern Ireland and Great Britain are within a common customs area or customs union? In those circumstances, we in Great Britain are in the same common customs area or union as the Republic of Ireland and, since the Republic of Ireland will remain in the European Union, we, the Republic of Ireland and Northern Ireland as well would all be in the same EU common customs area. Irrespective of the declarations which the Government might like to make to the contrary, no doubt for party management reasons, is the reality not that as a result of these negotiations we will, de facto, remain—and if so, I congratulate the Government on it—within the common customs area of the European Union?

I am afraid that I cannot be clearer that I have been already. The whole of the UK, including Northern Ireland, will leave the EU customs union and the EU single market. Nothing in the agreement alters that fundamental fact.

Given the Minister’s non-answer to the question of the noble Lord, Lord Deben, and her rather worrying answer to that of the noble Lord, Lord Pearson, will she confirm that the United Kingdom Government, having agreed the definition of their financial obligations, will under no circumstances refuse to honour them, as a matter of honour?

As the Prime Minister has made clear, the money is on the table in the context of agreeing our partnership for the future. If that is not agreed, then the financial offer is off the table.

My Lords, we should all thank and congratulate the Prime Minister but might I appeal to my noble friend? We have had Ministers at the Dispatch Box saying time and time again that they cannot give a running commentary on negotiations—fine. But can we please have a cessation of the running commentary from members of the Cabinet?

All I can say to my noble friend is that the Cabinet are united in their happiness that we have reached phase 1—

Thank you. We hope to have reached sufficient progress on phase 1 negotiations by the end of the week and we look forward unitedly to helping to ensure that this country has the best future ahead, with a strong relationship with the EU on different terms.

My Lords, is it not increasingly apparent that there is in reality no way to avoid a hard border unless we remain in the single market or some equivalent to it? What has happened in these discussions is that the issue has been effectively passed to where it ought to have been in the first place, namely, the negotiations on trade. I welcome that fudge because it means that the process continues, but at the end of the day there is no way to avoid a hard border without the equivalent of the single market.

I am afraid that I do not accept that premise because we believe the best way to avoid a hard border is to negotiate the right trading relationship between the UK and the EU, and that is what we will now be able to do. Discussions on the border will be a critical part of the phase 2 negotiations.

Correct me if I am wrong, but I believe I heard the Minister say that during the period of payments—which I welcome, incidentally—trade will continue on current terms. I think that was the phrase that was used. If that is right, what does that mean if it does not mean either the single market or the customs union or something of that nature? Admittedly it is only for the period in which the payments continue, but for that period, trade continues under current terms, which is, I think, the Statement the Minister read out.

It is actually during the implementation period that the UK’s and the EU’s access to each other’s markets could continue on current terms. During the implementation period, we would stay in all EU regulators and agencies and take part in existing security measures.

My Lords, it was very interesting to see how worried the European Union became when there was a risk of the UK crashing out, showing, I think, that we have a stronger negotiating hand than some might think, if we keep our nerve. Contrary to what some have said, some fear that regulatory alignment means a soft Brexit by stealth, making us a rule taker in relation to all future EU rules rather than a rule maker. Is this a valid concern?

As I have said, maintaining alignment means that we may have the same objectives but we may well want to do something in a different way. However, in discussing our future trading relationship, we should also understand that we are in a unique position with full regulatory alignment at this point. We want to maintain high standards going forward, so we believe this is an excellent basis for a strong future relationship.

My Lords, perhaps I can ask the Minister for clarity. She talked about the situation going forward. Is it correct—I shall be glad for her to correct me if I am wrong—that the European Union has trade treaties, I think 58, with other countries, most of which include a most favoured nation clause so that any if offer of a trade treaty is made to a third party, such as the UK, similar terms have to be made available to every country on that most favoured nation list? Is that not the reason why the notion of Canada-plus-plus-plus becomes an extremely difficult challenge?

We are discussing with our trade partners how to ensure continuity and provide certainty for businesses by transitionally adopting existing EU trade agreements. This will be a technical exercise rather than a renegotiation of existing terms. The Trade Bill will provide measures to ensure that agreements with third countries can carry over and be fully implemented within UK law.

My noble friend will understand that there is deep concern about the financial settlement, but should the guiding light of Her Majesty’s Government not be value for money? It is not the absolute figure that is important but that any money spent is real value for money for the British people.

My noble friend is right that the Prime Minister has also been clear that the UK will honour its commitments and obligations. We have agreed a fair settlement of commitments we have made while a member of the EU in the spirit of our future partnership.

My Lords, I welcome the fact that over the next eight years, our courts will be able, in the event of dispute as to citizen’s rights, to refer the case to the ECJ for interpretation. But are there any circumstances in which the Minister could foresee that, having obtained such an interpretation although the case itself would be determined by the UK courts, they could actually refuse to follow it?

As I have already said, the ability of our courts to ask the ECJ for a view will be voluntary, very narrowly defined and time limited. The courts can choose to ask the ECJ for a legal view on the law in relation to citizens’ rights where there is a point of law that has not arisen before, but our courts will make the final judgment on each case, not the ECJ.

My Lords, will my noble friend comment on media reports that the financial settlement outlined in last week’s report is substantially lower than many earlier estimates of what the EU was demanding from us?

We have agreed a number of important principles that will apply on how we arrive at valuations in due course. Our commitment, in terms of the numbers that are out there, is the equivalent of around four years’ full membership, two of which will be covered by the implementation period. We have agreed with the EU the scope of the UK’s commitments. The bills cannot go wider than that, and the noble Lord is absolutely right that we expect the settlement to come in significantly below many of the initial projections made.

My Lords, will the Leader of the House tell us what will be implemented during the implementation period?

The implementation period will ensure that the changes necessary for the new relationship will be put in place, as well, as I have said, as a framework based on the existing structure of EU rules and regulations.

My Lords, I obviously applaud the Prime Minister for getting us to the base camp of the negotiations. It is much to her credit that she showed such persistence last week. Following on from the last question, however, I urge my noble friend to urge her colleagues to bring as much honesty and clarity as possible to the next phase of the negotiations. There is still talk of the implementation period being one in which we implement the final treaty. With due regard to the noble Lord, Lord Kerr, I struggle to find within Article 50 any reference that gives the European Union the remit to negotiate a full new treaty between now and the end of March 2019. Therefore my understanding is that at best the British Government would be able to negotiate a heads of terms with the European Union, but nothing more. Would my noble friend care to clarify whether that is or is not the case?

My noble friend is correct that there will be many elements during the implementation period. We will now start to discuss that with the EU—hopefully come Friday, once we have made sufficient progress. We are extremely pleased that Donald Tusk has indicated that he wishes to get on with discussions on the implementation period as quickly as possible, because we need to clarify all these issues so that we can move on.

My Lords, I listened carefully to the comments from the Benches opposite, including those of the noble Baroness, Lady Smith. Can my noble friend go a little beyond her remit and speculate as to what she thinks the Labour Party’s position is on any of these issues this week?

My Lords, does my noble friend agree that it is not helpful to keep talking about a Norwegian, Swiss or Canadian model in the way that people are, since we are much bigger than Norway, we have many much closer links with the EU than Switzerland and we are much closer than Canada? One of the most important two things that she said in answer to a number of questions was that we are looking for a bespoke deal that reflects the particular circumstances of the United Kingdom and its relationship with the other members of the EU. The second was that we are not starting from scratch. We are starting with a common edifice, and the question will be how much of the edifice we maintain and how much is taken away. That is a very central point, which a number of people have failed to grasp.

My noble friend is absolutely right. We are indeed in an unprecedented position of starting with the same rules and regulations in our discussions and will of course maintain our unequivocal commitment to free trade and high standards.

My Lords, it may be of help to think of the implementation period as one during which, knowing what the ultimate position is going to be, we prepare to reach it.

Will the noble Baroness help me on this question of full regulatory alignment between Northern Ireland and the Irish Republic? Who is going to determine that? Will it be the Supreme Court of Ireland, the Supreme Court of the United Kingdom or the European Court of Justice? She said about 10 minutes ago that the present situation is one of full regulatory alignment. What happens if the status quo changes?

As I have said on a number of occasions, alignment is about pursing the same objectives. The same goals can be achieved by different means, and it does not need to mean regulatory harmonisation. Indeed, the Taoiseach has said that not everything has to be the same.

My Lords, the Prime Minister’s Statement twice repeats that nothing is agreed until everything is agreed. Does the noble Baroness not think it a good idea that the Government should work up a plan B, for no deal, because in that way we will get a much better deal with plan A? The great advantage of plan B, and leaving with no deal, is that we cease to pay into the European budget.

We are absolutely focused on getting a good outcome that works for both the UK and the EU. We believe it is in both sides’ interests to do that, but yes, we have a duty to plan for the alternative, as any responsible Government would.

My Lords, the House will note my particular interest in financial services. I welcome the Statement. Will the Government pay particular attention in phase 2 of the talks to the benefits to both the UK and the European Union of continuing trade in financial services and the role that the City of London plays as an asset for the whole of Europe?