House of Lords
Monday 4 February 2019
Prayers—read by the Lord Bishop of Lincoln.
Introduction: Baroness Blackwood of North Oxford
Nicola Claire Blackwood, having been created Baroness Blackwood of North Oxford, of North Oxford in the County of Oxfordshire, was introduced and took the oath, supported by Lord Young of Cookham and Lord O’Shaughnessy, and signed an undertaking to abide by the Code of Conduct.
Oaths and Affirmations
Lord Reay took the oath, following the by-election under Standing Order 10, and signed an undertaking to abide by the Code of Conduct.
Health: Public Health Grant
My Lords, despite funding pressures, councils are successfully improving people’s health, and most indicators of public health are stable or improving. Since 2011, the number of smokers has dropped by a fifth. Last year, 98% of adults accessing drug treatment services did so within three weeks and 90% of people with HIV were treated successfully. Future budgets will be influenced by the next spending review, when we intend to make a robust case for the value of prevention.
My Lords, local authority public health budgets have been reduced by £700 million since 2014. Due to rising rates of gonorrhea and syphilis and the problems young people have in accessing contraception, does the Minister not think there is an urgent need to rethink the Government’s strategy?
My Lords, as I said, we will be making a robust case for the value of prevention in the spending review. The reduction to the grant to which the noble Baroness refers is not a new cut. It was agreed in the 2015 spending review in a difficult financial environment. Local authorities have been aware of these cuts for over a year and have been able to plan accordingly. But there is much more to public health than the grant itself—for example, our national childhood obesity strategy and NHS England’s world-leading diabetes prevention programme. As the noble Baroness knows, the NHS long-term plan has an emphasis on prevention.
My Lords, I was the Secretary of State who introduced the public health grant to local government. Is my noble friend the Minister aware that this was done because many of the wider social determinants of health can be better influenced through the action of local authorities than by the NHS alone? That was the reason why the public health grant was included within the ring fence in 2010 to 2014, which guaranteed a real-terms increase in the public health grant to local authorities; this was reversed in 2014. Will my noble friend the Minister consider restoring the value and growth of the public health grant in the context of an agreement with local authorities to act on those wider social determinants of health?
I agree with my noble friend, and that is why we are making a robust case to the Treasury in relation to the spending review. Health improvement is about far more than the services funded through the grant, as my noble friend says. The transfer of local health responsibility to local government provided the opportunity to join up public health with decisions on other local services such as housing and economic regeneration. We see local authorities commissioning different kinds of public health services which better fit local circumstances and priorities and deliver improved value. We therefore recognise the importance of the grant.
My Lords, I refer to my entry in the register of interests. I want to develop the question from the noble Lord, Lord Lansley. Demand for sexual and reproductive health services is rising. Public health data has indicated a 13% increase in attendance at sexual health services between 2013 and 2017, and over the same period the Health Foundation has found that health budgets have been cut by 25%. Will the Government’s prevention Green Paper therefore include a call for fully funded local authority public health services?
My Lords, the noble Lord, Lord Cashman, is right: spending on sexual health in 2017-18 has reduced by 4.3% from 2016-17. However, a reduction in spend does not necessarily mean a deterioration in outcomes. For example, the number of hospital admissions for drug-related mental health and behavioural disorders has dropped 16% since 2015-16. The Green Paper on prevention will set out further plans in much more detail, considering the best available evidence.
My Lords, does the Minister agree that it is actually not in the interests of the NHS to cut local authority public health services? Local authorities should be celebrated for what they are doing in many different fields, not least in supporting charitable bodies that are doing so much, in addition to what we have all heard of, by supporting people who are socially isolated and depressed and would otherwise be admitted to hospital.
My Lords, local authorities and charities are doing an excellent job and I commend the work they are doing, but the Government are investing £16 billion during the current spending review period on the provision of local authority public health services. That is on top of funding for Public Health England and what the NHS itself spends, which includes over £1 billion on immunisation and screening programmes and £340 million in 2016-17 on vaccine stocks. I agree that local authorities do a great job in challenging times.
My Lords, can we return the Minister to the original Question? Does she agree that increasing spending for the NHS, including a prevention vision, in the 10-year plan while cutting funding for services that impact on public health is a false economy? Could she please explain to the House the dichotomy of saying, “We want to spend more money on public health”, but actually cutting public health spending? Frankly, I am stumped.
I think I have already answered the Question. The reduction in the grant to which the noble Baroness has referred is not a new cut, as I have already said. It was agreed in the 2015 spending review, in a difficult financial environment. Difficult decisions had to be made. Local authorities have been aware of these cuts for over a year and have been able to plan accordingly. I have already stressed the balance we have between prevention and ensuring we address that. We are going to be putting £4.5 billion into primary and community care services, in addition to the money we are already putting into current services.
My Lords, we seem to be relying more on local government: additional preventive health campaigns; local five-year plans as part of the integrated care system; and greater social care provisions. Can the Minister please articulate exactly how the December 2018 reduction of the public health grant can have any positive impact for local authorities?
I understand the point that the noble Baroness is making, but I have already said that this is part of a longer plan. The grant in itself is not the only part of the NHS plan. There is much wider spending by the local authorities and joined-up thinking. The Green Paper that I have already mentioned, Prevention is Better than Cure, was published on 5 November 2018. This will support healthy life expectancy, by at least five extra years by 2035, and close the gap between the richest and the poorest. The Government are taking concerted and proper action to address these issues.
NHS Staffing: Long-term Plan
My Lords, the Secretary of State for Health and Social Care has commissioned the chair of NHS Improvement, working closely with the chair of Health Education England, to lead a number of programmes to engage with key NHS interests to develop a detailed workforce implementation plan. These programmes will consider proposals to grow the workforce, including consideration of additional staff and the skills required to build a supportive working culture and ensure first-rate leadership for NHS staff.
I thank the Minister for her Answer. Both the NAO and the Commons Public Accounts Committee have stressed that the NHS long-term plan is at risk and cannot be delivered if current staff shortages of over 100,000 are not addressed, and if we do not recruit more staff in key specialities to meet future need and demand. Last Thursday’s major debate on the plan showed that this view is shared across the House.
Today is World Cancer Day. The ambition in the plan, for example, to diagnose 75% of cancers at stage one or two by 2028 is welcome, but there are chronic staff shortages in the cancer workforce across both primary and acute care, with more than one in 10 diagnostic posts currently unfilled. It is the same scenario for other key priority ambitions in the plan, but the long-term workforce implementation plan, as the noble Baroness said, has yet to be drawn up, developed and costed, and is not included in the extra funding promised for the NHS. Do the Government have any idea how they are going to take the NHS plan forward?
We absolutely do. The NHS employs record numbers of staff now compared to any other time in its 70-year history, with significant growth in newly qualified staff over the period from 2012. There are almost 13,400 more nurses on our wards since 2010. However, the noble Baroness is right—the current vacancy levels are not sustainable. Therefore the Government have put several actions in place to increase nursing workforce supply, covering improving staff retention, return to practice, overseas recruitment, expanding nursing associates, improving sickness absence and a review of language controls.
Bearing in mind that one of the key problems facing doctors is those leaving the NHS as soon as they qualify—a significant number, both male and female, choose to go abroad—should the Government not have a look at the Singapore system, where they have to sign up for five years once they qualify and after that it is entirely free, regarding their medical practice?
I thank my noble friend for that question. I am certainly aware of the Singapore model. I reassure him that we are expanding undergraduate medical education by funding an additional 1,500 medical school places in England. We have also recently announced the removal of doctors and nurses from the ambit of the cap on tier 2 visas, which means that all overseas doctors needed in the UK should be able to come and work here. We have more doctors than ever before, but there is no doubt that the pressures are huge. That is why we want to train more doctors. However, I understand the point that my noble friend makes, which is perhaps something we need to consider.
Do the Government recognise the GMC’s statement that the medical profession is on the brink of breaking point, that up to a third of doctors report being burnt out and that around 10% at times have depression? There is evidence that errors are twice as likely to be made by people who feel burnt out. Do the Government recognise that this is urgent and whatever plans they have to train more people will take several years to come through the system?
I agree with the noble Baroness: we need to take care of our workforce and ensure that supportive mechanisms are in place so that there is greater flexible working. We are already looking at medical training and different modules. We want a first-class workforce and we will do everything in our power to support doctors so that they stay and remain healthy while they work in the NHS.
Is the Minister aware that we have recently opened a new medical school in the University of Lincoln? We hope that this will assist the recruitment and retention of more doctors. However, what are the Government doing to mitigate the increased cost of specialist community nursing provision in remote and sparsely populated rural areas?
I am delighted that a new medical school is being opened in Lincoln, which is very welcome. On community nursing, we are trying to attract more nurses and medical practitioners to areas where there is greatest need, which are community nursing, psychiatry, mental health and learning disabilities. Last year, the Secretary of State announced golden hellos. We are also looking at further, more flexible training to enable a greater number of people to enter the profession.
My Lords, with concern being voiced about current vacancy levels among mental health professionals, let alone the additional 21,000 mental health practitioners the Government have said will be needed to treat a million more people by 2021, will the Government agree to fund a collaborative mental health careers campaign aimed at secondary school, college and university students, particularly psychology graduates, to help plug this gaping hole?
My Lords, we are looking at allied professionals and more creative ways of bringing a wide range of people into the profession. I cannot comment precisely on the question that the noble Baroness has asked. However, as she is aware, HEE has published the mental health workforce plan, which has the stretching ambition of delivering 21,000 new posts and employing 19,000 additional staff. As well as increasing recruitment and retention in mental health training, the NHS is creating new roles such as physician associates, nursing associates and allied health professional associates as well as looking at advanced clinical practitioners. On the specific question asked by the noble Baroness, I shall write to her.
My Lords, the RNLI is an independent organisation that declares its lifeboats available to Her Majesty’s Coastguard. It determines how and where it deploys the resources that it has available. Based on historical incident data and the outputs of the RNLI’s risk-assessed five-year review, we do not anticipate that its decision to replace the all-weather lifeboat with an Atlantic 85 vessel at New Quay will have an impact on HM Coastguard’s capability to co-ordinate search and rescue in Cardigan Bay.
I, too, hesitate to criticise such a respected charity, but the replacement of the all-weather lifeboat with an Atlantic 85 inshore vessel, which cannot be launched in stormy conditions exceeding force 7, leaves a gap of 63 nautical miles in all-weather search and rescue provision. This and the alleged lack of a proper, open consultation with any local stakeholders concerned with sea safety in Cardigan Bay are a matter of grave concern to the local community. Will my noble friend the Minister intervene and ask the RNLI to publish its evidence and perhaps also to review its decision?
My Lords, the RNLI’s decision was underpinned by extensive research of incident reports as well as information gathered in face-to-face meetings and workshops at the lifeboat station both before and after the coast review visits, to ensure that local knowledge and concerns were considered. The decision is a significant investment by the RNLI in the area—which of course we are very grateful for—with new, faster boats at all three RNLI stations. The RNLI view is that that is the optimal combination for future life-saving in the area. It has shared a 30-page extract of the report with the lifeboat operations manager, and I understand that it is in dialogue with a campaign group to ensure it has the appropriate information.
My Lords, I declare an interest as a former Lord Lieutenant of the county and my wife is from a long line of New Quay sailors. The Government have paid £3.5 million since 2014 to increase capacity and resilience in rescue, so they cannot wash their hands entirely to the RNLI. Since it is proposed that all-weather lifeboats will be as far away as Pwllheli and Barmouth, will the new inshore lifeboat at New Quay diminish capability? Will there be a gap in safety provision in Cardigan Bay in severe weather?
My Lords, the noble and learned Lord is right to point out the change in provision. Three 17-knot Mersey class all-weather lifeboats are being replaced with two Shannon lifeboats at Pwllheli and Barmouth and there will be a smaller but faster lifeboat at New Quay. This was based on a risk-based review that looked at the entire area and the RNLI’s decision to replace the all-weather lifeboat was, as I said, underpinned by extensive research. It is convinced that this is the optimal amount of resource for the area.
I declare a personal interest as someone with long-standing family connections in the area and as a supporter of this campaign. The RNLI of course does wonderful work, but I am afraid that in this instance it has been totally lacking in transparency with the people of New Quay about the reasons for its decision. Despite what the Minister said, independent research shows that in severe weather conditions—force 7 in daylight and force 6 by night—it does increase the risk. There is a 70-mile gap, as I understand it, between the nearest all-weather lifeboats and it simply takes that much longer to get there. Should not an organisation such as the RNLI that depends on trust be more open about its decisions and in this instance look again at the increased risk of this decision?
I thank the noble and right reverend Lord for his question. I know of his long-standing interest in the area. The RNLI, as I said, has shared a 30-page extract of the report and is working closely with a campaign group. I understand that the campaign group is made up of passionate people who want to ensure that they have the optimal provision in the area. As I said, along with the replacement new boat, the all-weather lifeboats in the surrounding area will be replaced with much faster ones. There is also a new helicopter base in St Athan, and the new boats, the helicopter and the increase in lifeguarding on the coast will not only maintain but improve life-saving provision in the area.
The RNLI’s decision to move the all-weather facility from New Quay has led to huge public disquiet in the area—an area where people understand the important role fisheries play in providing a livelihood for commercial fishing and angling vessels. They also understand the danger to the fishermen who brave all weathers. What assessment has the noble Baroness made of the importance of the all-weather lifeboat to the safety of fishermen in Cardigan Bay?
My Lords, the RNLI carries out a coastal safety review every five years. It is a very extensive review based on extensive research; it considers all the rescue records and looks at all the reports of launches and incidents carried out by the lifeboat stations. It has concluded that services by the New Quay RNLI all-weather lifeboat could have been carried out safely and effectively by an Atlantic 85 inshore lifeboat, supported by the new, faster lifeboats at neighbouring stations if required. I understand that people who have long experience in this area locally are concerned about it. The RNLI continues to have conversations with them and will ensure that they are given the appropriate information.
My Lords, the Minister was asked just now what assessment she had made of the need in the area. She told us what assessment the RNLI had made. She referred to the campaigners as being passionate. We can also say that the RNLI is passionate, because day in and day out volunteers are out there saving people’s lives and collecting and raising the funds to do so. This is a difficult decision that has been made. What engagement do the Government have with the RNLI to ensure that the interests of the public are taken into account, so that the Government can assure themselves that the work it is doing takes public safety into account? That may allay some fears of those who are concerned about this decision, or who may be in a position to provide funding so that they do not have to make this decision.
My Lords, lifeboat provision in the UK is delivered by independent charitable organisations that declare their lifeboats available to Her Majesty’s Coastguard. As I said, we are very grateful for their work. It is the responsibility of the organisations to decide on the specific operational capacity they consider appropriate, but of course the MCA works closely with the RNLI on the coastal review. The noble Baroness was quite right to pay tribute to the scale of volunteers in this area—it is extremely impressive. The Coastguard Rescue Service is made up of approximately 3,500 volunteers; the RNLI has 5,000 volunteer lifeboat crew; and, as the noble Baroness said, there are more than 23,000 volunteer community fundraisers. They all contribute to providing the excellent service on our coasts.
Broadcasting: Public Sector Content
My Lords, Ofcom has consulted on proposed changes to the linear EPG code and on how the prominence regime may need to change to ensure that public service content remains accessible, regardless of how consumers access it. That consultation closed in October 2018 and we look forward to receiving its findings in due course. If Ofcom makes it clear that there is a problem which needs fixing by legislation, we will look to bring that forward.
My Lords, children are being increasingly exposed to inappropriate content on social media, and public service broadcasting plays an important role in providing parents with a safe, trusted space where children can access high-quality, entertaining educational content—especially now that the new BFI contestable funding will be available to programme makers. However, it is difficult to find these PSB channels because no two electronic programme guides are the same. They are confusing and very frustrating. Does the Minister agree that it is essential we update the EPG rules as a matter of urgency, to ensure that viewers can easily access this excellent PSB content?
I agree that PSB content is important—in fact, 83% of people think that children’s provision by public service broadcasters is important. Ofcom’s consultation on the rules for prominence and proposed changes to the linear EPG includes a proposal for prominence for children’s PSB channels. Ofcom already has the powers to review and revise the code, so any final decision on changes to the linear prominence regime is a matter for it.
My Lords, it is unusual for both of my questions, carefully prepared, to have been answered before I put them, but that will not stop me asking the Minister to repeat the assurance he gave that, if the Ofcom report suggests that legislation is necessary, the Government will do it.
I can do better than that. I will repeat what the Secretary of State said to the DCMS shadow Secretary of State:
“The Government has made clear that if the Ofcom report concludes that there is a problem with the current prominence regime that needs fixing with the legislation, then we will look to bring that forward”.
My Lords, the Sky Q box prioritises access to its services over PSB catch-up services. Many television manufacturers have partnered with Netflix to prioritise its services on their channel controllers. Is the Minister not concerned that the PSB digital channels, paid for with public money, are losing out in the battle for channel prominence to the video-on-demand giants?
My Lords, I recognise that most of what we have talked about today is for linear services. Of course, a change is taking place: people now have subscriptions for watching on-demand programmes on their internet browsers. This creates a number of challenges and we have agreed that, if Ofcom makes suggestions that take that into account, we will bring legislation forward when the time arises.
My Lords, I fear I will ask the Minister to repeat, yet again, what he has said. Does he not agree that prominence is not a perk for PSBs but a fair and essential exchange? I do not know how many of you listened this morning to Radio 4’s “Start the Week”—a really quite frightening public service broadcast programme about the tech titans’ struggle for our individual attention. Will the Government commit to supporting the urgently needed updating of prominence rules through legislation?
My Lords, I think I have done that—twice. We are aware that the technology is changing, and noble Lords might be interested to hear an example. More UK households now own a voice-activated smart speaker than own Britain’s third most popular pet: a rabbit.
UK Shared Prosperity Fund
Private Notice Question
To ask Her Majesty’s Government what progress it has made on the design and implementation of the proposed UK Shared Prosperity Fund in the light of reports that the Prime Minister is considering providing additional funds to former steel and mining communities and industrial towns.
My Lords, we intend to launch the single prosperity fund consultation shortly, as confirmed by my right honourable friend the Prime Minister in the other place last month.
My Lords, first, is the money that the Prime Minister has been scattering around actually new money, or is it money that would otherwise come out of this shared prosperity fund? Secondly, we might need this fund in seven weeks’ time. How come, therefore, we have yet to have a consultation on it? We do not know whether it will be allocated on the basis of need or prosperity. Can the Minister assure us that, if it is needed in seven weeks’ time, it will be up and ready for the communities it is to serve?
My Lords, first, the noble Baroness will be aware that current EU programmes will run their course—in some cases, beyond 2020—so I do not quite recognise the urgency of which she speaks. At the same time as the Prime Minister announced that the consultation would be short, she talked about the importance of tackling inequalities between communities—something I am sure the noble Baroness welcomes, and it may well be something that the right honourable Member the leader of the Opposition chose to discuss with the Prime Minister. I am sure that she would hope so because, clearly, this is very important. We have been doing a lot of work with engagement events around the country. The consultation will start shortly and the decisions will be made in the spending review.
My Lords, in a letter in today’s Times, my noble friend Lord Thomas of Gresford makes it clear that the offer of cash subsidies to an MP for the benefit of constituents provided that the MP votes for the Government’s withdrawal agreement is in breach of Section 1 of the Bribery Act. Does the Minister agree that having ad hoc, specific discussions of this nature is not just legally unwise but a disreputable act of a desperate Prime Minister?
My Lords, I bow to nobody in my discipleship of the noble Lord, Lord Thomas of Gresford, on legal issues, and I am sure that what he says is correct, but noble Lords should not believe everything that they see in the newspapers. What is important in regard to any fund—such as the shared prosperity fund, on which we will consult shortly—is that it tackles inequalities across communities. I am sure that the noble Lord would agree with that, and I would think that he would want to engage in the consultation on that basis.
My Lords, I answered that, to the extent that I said that any spending decisions would await the spending review. However, the noble Lord will be aware of the amount that is currently spent on EU programmes—more than £1 billion per year—which I am sure will inform that review. Any decisions will await the spending review, but I am sure that that is a good guideline figure.
My Lords, it was on that basis that I said that the Prime Minister was very keen to say that this was about tackling inequalities between communities, which I would think noble Lords would welcome very widely—I hope that the Labour Party does—and we will be keen to stress that in the consultation and the future spending review.
My Lords, twice now the Minister has referred to inequalities being a key factor in the shared prosperity fund. How does that sit with the latest consultation on the fairer funding formula, where deprivation and need have been excluded? Will this not mean robbing Peter to pay Paul when it comes to inequality and need?
My Lords, I will make two points. First, I referred to inequalities in communities because that was in the Written Statement on the UK single prosperity fund made by my right honourable friend the Secretary of State for Housing, Communities and Local Government in July; it was restated by the Prime Minister, and in looking at that consultation we have talked about the importance of people, infrastructure, business, environment, ideas and place. The noble Lord referred to the fairer funding formula but did not do so totally fairly, if I may say so. He will be aware that deprivation is recognised as a key factor in many areas, such as health.
My Lords, to come back to the question asked by the noble Lord, Lord Thomas of Gresford, can we have the position made absolutely clear, that the money that was being talked about over the weekend is not in any way conditional upon support for the Government in the House of Commons? Can that be made absolutely clear at this Dispatch Box?
My Lords, I will make two points. The first is a relatively minor one, but lest the Order Paper appear strange, the noble Lord, Lord Thomas, did not table the Question but was cited in another question. In relation to the content of the letter that was read out, I am sure that the noble Lord is right legally. I say simply that the context of this consultation, when it happens shortly, is about ensuring that we address inequalities between communities. That is the essence of what we are looking at.
My Lords, that is well beyond my brief. I am not quite sure whose discussions the noble Lord is referring to. As he will be aware, many confidential discussions are held, and both MPs and Ministers respect their confidentiality. It is unthinkable that a Government Minister is breaching the law in the way that has been suggested—directly and, in some cases, indirectly—in the Chamber today. Once again—your Lordships should not need encouragement in this—noble Lords should not believe everything they read in the newspapers.
My Lords, in view of the Minister’s concern for former steel- and coal-mining areas, I ask that it be extended to areas devastated by the demise of the shipbuilding industry. On the allegations of bribery, does that not apply to the agreement between the Government and the DUP?
My Lords, the noble Baroness is fair. I shall address the first part of her question, which is certainly fair; the second, I think, was a throwaway comment. I am sure she is more concerned about the shipbuilding industry than scoring political points. On shipbuilding, I address her to the fact that much of the EU funding that will no longer be in place has been to assist such areas—the north-east, which I know she is familiar with and concerned about, is one of those areas. As I said, it is about addressing inequalities in communities, so I am sure those communities would be part of that; for example, there has been an engagement exercise in Gateshead, where I am sure this policy issue would be considered in framing a consultation. There have been engagement events around the whole country—the UK, not just England.
My Lords, will this policy affect Airbus or Vauxhall in north-east Wales? It will cause tremendous devastation of the economy in those areas. Does he really think that coming out of Europe will be to our benefit and ease the austerity in Wales and other places?
My Lords, I bow to no one in my respect for Airbus, but I would not be as keen as the noble Lord is to write it off. He will be aware that it is in an area not currently in receipt of cohesion funding, and I shall not be making decisions here—I do not have the writ to do so anyway—about who gets money after the consultation and the subsequent spending review. Those are the parameters: the consultation will happen shortly, the spending review later, and that is when decisions will be made which will shape what happens post Brexit.
My Lords, I thank the right reverend Prelate for raising the matter. I can confirm that this will be a wide consultation. I very much hope that the sorts of organisations he referred to will participate, and obviously we will react to what we find in the consultation.
Arrangement of Business
My Lords, I should like to make a short business statement about our sittings in February. Noble Lords on all sides of the House will have noticed that, last Thursday, the Leader of the House of Commons informed that House that it was no longer the intention for it to have a February recess in the light of the significant decisions taken by that House last Tuesday.
In our House, we have discussed our sitting patterns on the Floor of the House on several occasions in recent months. Noble Lords will be aware that I have always said that I thought it would be necessary for us to sit throughout February. Had the House of Commons decided to proceed with its anticipated February half-term, I would have suggested that we have a long weekend to allow all Members and staff some additional time away.
However, given that the Commons will now sit throughout February, I believe it would be wrong for us to do otherwise. I assure the House that we will have plenty to do in the weeks ahead. Whatever noble Lords’ views on Brexit, I think everyone agrees that we must allow the maximum time for scrutiny, and that is what I propose we do.
My Lords, I am grateful to the noble Lord the Chief Whip for making the announcement. When he last spoke about this and we pressed him on dates, he said that he was speaking in code and that if we looked at Hansard we might get a better idea. Many of us did, and still had no idea. Perhaps now we understand why. We certainly understand the volume of work that has to be undertaken. If the Government were to rule out no deal as an option—or, as the Prime Minister seems to think, a sword of Damocles if her deal is not accepted—the workload may be slightly less. Of course, we stand ready to play our part.
The Chief Whip will be aware that the business this week in this House is rather light. The House of Commons has risen early on several occasions recently, and there are two Bills currently stalled in the Commons that this House has been waiting for: the Agriculture Bill completed Committee on 20 November, but there is still no date in the other place for either Report or Third Reading; the Fisheries Bill finished Committee on 17 December, and there is no date scheduled for the Commons Report or Third Reading. Both need to be through Parliament by 29 March. The Healthcare (International Arrangements) Bill has its Second Reading tomorrow, but there have been two months between Committee and Report in the Commons. It seems that while we will sit longer to undertake this business, the Commons and the Government have been rather tardy in bringing forward the needed legislation. I assure the Chief Whip that we stand ready to play our part, but we expect the Government to do so as well.
My Lords, I wonder if the Chief Whip might explain something to us. Under “Business of the House”, today’s Order Paper says:
“The Lord Privy Seal … to move that Standing Order 40(4) (so far as it relates to Thursdays) and (5) be suspended until Monday 3 June so far as is necessary to enable notices and orders relating to Public Bills, Measures, Affirmative Instruments and reports from Select Committees”.
What is the relevance of Monday 3 June?
Noble Lords are not obliged to claim their expenses but, should they wish to do so, they can. I think this House offers the taxpayer very good value for money, and I am not at all ashamed of its deliberations and their necessity. We should be proud of this House. I am very grateful to the Leader of the Opposition for registering her support for the programme we will have to consider over the next couple of months. We know that we will be busy and I am grateful for the support of noble Lords in going through that process together.
Business of the House
Motion on Standing Orders
Business of the House
Motion on Standing Orders
That Standing Order 40(4) (so far as it relates to Thursdays) and (5) be suspended until Monday 3 June so far as is necessary to enable notices and orders relating to Public Bills, Measures, Affirmative Instruments and reports from Select Committees of the House to have precedence over other notices and orders on Thursdays.
My Lords, in agreeing the Procedure Committee’s first report of this Session on 4 December 2017, the House decided that Thursdays after the end of January this year should be used for legislation rather than general debates. As with the equivalent Motion last year, this Motion simply allows legislation to take precedence over other types of business that would otherwise have priority on a Thursday. I beg to move.
Committee (4th Day)
Relevant documents: 33rd Report from the Delegated Powers Committee, 13th Report from the Constitution Committee
45: After Clause 5, insert the following new Clause—
“Future partnership with the European Union: services
It shall be the objective of an appropriate authority to take all necessary steps to implement a future trade agreement with the European Union that—(a) ensures no additional barriers to trade in services between the European Union and the United Kingdom are erected after exit day;(b) protects—(i) the right of UK nationals and businesses to provide or receive services in the European Union, and(ii) reciprocal rights for EU nationals and businesses to provide or receive services in the United Kingdom;(c) protects—(i) the right of UK businesses to establish a company in an EU member state, and(ii) reciprocal rights for EU businesses to establish a company in the United Kingdom.”
My Lords, Amendment 45 is in my name and that of the noble Lord, Lord Purvis, for whose support I am very grateful. We are reaching the last quarter of our time on this Bill in Committee, and we have never touched, in any serious way, the question of services, which make up 80% of our GDP; they are an important part of our economy now and will be in the future. That curious absence of services has prompted this amendment; it is a probing amendment in the sense that I do not think there is any issue between the Government and us on this. We both recognise the importance of it and want to make sure that it is successful, but it is an opportunity for the Government to set out clearly what they intend to do in this area and to bring forward any thoughts they have about how the importance of services might continue, as the negotiations, which are currently with the EU and will return to the other place shortly, progress.
We hear a lot, importantly, about manufacturing and the physical goods that this country makes and imports. We do not hear nearly as much about services, and that is curious. It is important to be clear why that is. Direct trading of services across borders by purchasing or selling architecture, legal opinion or forms of insurance is a well-known measure of activity. This area has grown considerably and the UK economy is strong and strengthened by that. Business services, financial services and other aspects such as travel, including the tuition fees of foreign students who study in the UK, transportation and telecommunication information services make up the huge proportion of our activity in this area. Most trading of this type is with the EU. It is over 50% if Switzerland is included in the figures, but we also have considerable trade outside the EU and we should not forget that.
It is also important to recognise that, in some senses, exactly how this takes effect is hidden from plain sight. I should explain: we know a lot about the physical movement of things like car parts, because we are told, time and again, that the issue in modern-day trade is not so much the individual purpose of creating a particular object, machine or type of equipment; it is the assembly of the various parts. In the case of a car, bumpers, injectors and all sorts of things that go into the modern car cross the channel several times before being assembled, either here or elsewhere, in the final product, which is then sold. We are concerned about that and much of the Bill has this as part of its process, but the point is that this is not just about physical material. There is also a question about knowledge, intermediate input, services, financing and having the right people in the right place, which is necessary for this complicated pas de deux to work.
The single market, which underpins all this in the EU, plays a pivotal role in facilitating this process of increasing specialisation, because it includes as its basic point—this is derived from consideration within the GATS treaty under the WTO—the four freedoms for moving goods, services, capital and people. Hence, a focus on manufacturing the individual item sees only part of the story.
Why do services not feature more strongly in our discussion and debate? There are three reasons. First, services agreements are a relatively new form of trade negotiation. There are not that many around. They are difficult, because you have to negotiate and consider individual aspects, often regulatory and non-tariff barriers, to the way the trade happens. They cannot always be done by fiat from government; they have to involve large numbers of other companies and organisations. They are bureaucratic; they are not necessarily all organised from a particular aspect in government, such as BEIS or the Department for International Trade, because regulators and government departments will be involved in legal services and other areas. Finally, because different regulations belong to different bodies, it is more difficult to trade one sector, as it were, against another. There is not really an easy route through this, and that may explain why it is often left to the last.
I welcome the Government’s response on that, but it is a cynical response. We have done so well in services trade in recent years and our performance is one of the strongest in the world. We have more to lose in trade negotiations that focus on individual hardware and machinery parts if they do not also make sure that those trading in legal and other services are considered as well. We are in a quandary. We can argue the easy option of a goods-only agreement, because the rules for that are relatively straightforward: the tariffs are already very low anyway and we are not talking about substantial changes to the way in which we would do it. But if you include services then we are talking about a whole range of new activities, new players and the offering of new types of discretion. I will wait to hear the Government’s response, but it could be argued that we in Britain are not yet ready to engage with that successfully.
In that context, the opportunity is there for the Government to respond positively on how we are going to take forward this issue and how important it is to make sure that we get it right, and to make sure that we in this country do not suffer simply because the dog that did not bark—services—is still not barking. I beg to move.
My Lords, I am grateful to the noble Lord, Lord Stevenson, for moving the amendment, which I happily signed. It will be no surprise that we on these Benches favour, still, the United Kingdom continuing as part of the single market of the European Union. However, in many respects this is a mitigating amendment on the basis that, if we are to leave the European Union, the most significant non-financial services sector for the British economy is, as the noble Lord, Lord Stevenson, said, the services sector. It is right, therefore, that we give proper focus to it in this Bill.
Up until this point, we have discussed the emerging elements of the continuity agreements. We have seen so far only one published, that of Switzerland, and are awaiting others. In the continuity agreement, Switzerland has components on services, and guarantees free movement of people for those providing services. That is beyond the elements in the immigration White Paper and in the withdrawal agreement from the European Union, and it is beyond what the Government have said. There are, however, some indications that the Government recognise that services are critical to the British economy. But it goes beyond that, as do our discussions with Switzerland, which are on the gold market and property.
This affects all parts of the United Kingdom. The UK is more dependent on services, especially non-financial, than perhaps any other country in the world. We export more in absolute terms than any country other than the United States. We have been able to get to that position because we have been doing so within an integrated market of the European Union. In many respects, we in the United Kingdom have been the driving force of the emerging integrated markets in the European Union. It is an irony that, as the architects of this approach to developing the services markets across the European Union to benefit our country, we are going to leave it.
If we are to have a future relationship, it is critical that we focus not only on tariffs and non-tariff barriers but on what is necessary to ensure that we can continue to benefit, at least to some degree, from a services relationship with the European Union. This applies particularly in digital services, as well as in the wider elements of research and development.
Many months ago, your Lordships’ committee reported on this, and in December 2017, in the name of the noble Lord, Lord Whitty, this House had an opportunity to debate the significance of the non-financial services sector to the British economy. Now, we have the Government’s clear position: we will be leaving it. We are choosing to leave an integrated market, which we have led, so how do we focus on some of the component aspects?
In the withdrawal agreement, we have seen some elements of mutual recognition of qualifications and some elements of professional standards being aligned so that those working in the services sector can be part of a wider operation on the continent and with the European Union. However, this is only a very small aspect of the overall need to have a much closer alignment. It requires government honesty: we may well be leaving the single market, but it needs to be clear what very close alignment would look like.
This applies to the discussions taking place this week and next week on the alternative to a backstop. The arrangements for the Northern Ireland backstop were as much to do with the continuity of the services sector for those providing professional and trade services from north to south and south to north as they were with the checking of the origin of goods at a border for tariff purposes. The all-Ireland economy is, by and large, an all-Ireland economy because of services. We are treaty-bound to protect that, so it is very important to have more clarity from the Government on what they expect to see as alternative arrangements to the Northern Ireland protocol if we are to protect the core elements of an all-Ireland services economy.
We know that we cannot rely on a much wider alternative, which is the WTO. In its last set of discussions, it could not even agree on a communiqué about taking forward future services agreements on a WTO basis. We know that the USA and China are in dispute not only on trade in goods, but also on services, and we know, as the noble Lord, Lord Stevenson, said, the complexity of even the European Union introducing services components to third-party trade agreements. If we know that it has been difficult, with the UK as the driving force, to secure agreements with other third countries, why do the Government think that it will be easy for the European Union to do it with us?
This amendment, therefore, is very important. I hope that it will allow the Government to be much clearer, because the services sector of the United Kingdom has, in many respects, been the driving force of growth in the UK, one that we cannot afford to put at risk.
My Lords, both the noble Lords, Lord Stevenson and Lord Purvis, have stressed how important the services sector is to the economy of this country and to the exports that we sell. However, anybody involved in the financial services industry would say that they have not been much helped by the single-market provisions of the EU, which have put up many non-tariff barriers, to which the noble Lord, Lord Stevenson, referred. It is probably quite ambitious, if we hope to have a free trade deal with the EU, to think that we are actually going to lower the non-tariff barriers that have been erected during our membership of EU, when the single market was supposed to provide a market for services as well as goods but effectively has not actually done so. I will be very interested to hear what the Minister has to say about this very important sector of the economy. We have not been much blessed by reciprocal agreements with the EU over financial services and very many other services in the past because of the non-tariff barriers that have been erected against them.
My Lords, I strongly support this amendment, which is of profound importance. I apologise for an intervention that I made in Committee last week, where I was ticked off by the noble Viscount, Lord Younger, for intervening on an amendment when I had not been present for the start of the debate. I apologise again; I should know the rules better.
I was privileged to serve on the EU Internal Market Sub-Committee of your Lordships’ House. We conducted an inquiry into non-financial services, and I was very struck, not having known much about this before, by the importance of non-financial services. The sector makes up something like two-thirds of the total of the services trade. This is important, particularly for people who think that services just mean finance and the City. It is far broader than that and a lot of members of my own party might better understand that point.
We took evidence from architects, broadcasters and lawyers—covering a full range of services—and what struck me most in their evidence was the importance attached to free movement as a positive business advantage that they enjoyed. That point came out in many different representations. Clearly, if we leave the EU—which I do not want to see happen—free movement will come to an end. But what scope will the Government make to try to replicate the benefits of free movement for our service sector in the immigration policy that they then pursue? Secondly, are they willing to be flexible in their immigration rules when they consider negotiations on services? Are we saying that we have the autonomous right to determine our own immigration policy and the rest can go away and live with it, or are we prepared to give concessions on free movement for the benefit of businesses based in Britain? What does the Minister have to say on those questions, which are of crucial importance and are very unclear in what the Government have so far said about their immigration policy?
In my view, this is a very important aspect of Brexit that has been greatly neglected in the discussions. All the talk has been about the customs union, integrated supply chains and all the rest, which are of course all important, and on this side of the House we are very anxious to see a customs union. But a customs union is not by any means the only way of mitigating the damage of Brexit. For the services sector, some replication of free movement will be essential. What is the Government’s response to that?
My Lords, I follow the noble Lord, Lord Liddle, in pursuing the aspect of services, and I have a specific question for my noble friend Lord Bates, who I think will be summing up. This debate is not dissimilar to the one that we had on the free movement of professions, and I am mindful of the fact that my noble friend Lady Fairhead has said on a number of occasions that the Bill before the Committee today is all about continuity. I also have regard to what my noble friend Lord Hamilton said—that there has been precious little reciprocity in terms of setting up and establishing services elsewhere in the European Union to date. So that does not fill me with confidence about what the legal position will be going forward.
There are some very helpful pages on the European Commission website about what the position will be as regards professions after 29 March and in the longer term, but there is precious little about establishing companies. This is becoming a matter of increasing urgency because we can see, in particular if we look at financial services, that the issue is not just free movement of people but free movement of services and capital. We have recently seen an increasing exodus of capital and people moving from the City of London to bases in Dublin, Frankfurt and Holland—and even Paris and Copenhagen are pressing for people to go and set up businesses there.
I would like to ask my noble friend the Minister how we are pursuing this on a reciprocal basis. We saw with professions, in the case of lawyers, that we have adopted the statutory instrument and the necessary regulation. What is the legal position of a UK company that wishes to establish itself and offer its services, first in the event of no deal after 29 March, secondly in the event of a deal during the transition phase, and thirdly at the conclusion of the transition period, whether it is as planned or extended? It strikes me that many of us are focusing on businesses already established in the UK and providing services. My concern is how much the ability of those looking to set up and establish themselves will depend on the right of residence, either now or at some future date in what will be a third country after 29 March.
My Lords, I think that this is a very good amendment and I will come to the substance of it in a second. I just want to make two points by way of introduction. First, here we are at the beginning of February—a new week and a new month—and we are still in an absolutely ludicrous position, presenting an almost unbelievable picture to the world of a country with a Government doing their best to damage their own economy. Every day we have new evidence of this. Today we had the worrying story from Nissan. Many of us who have focused on the mess the Government are in could speak on the subject for hours.
There is another example from the last few days. We say that when we leave the European Union we want to sign trade agreements with those countries which currently have trade agreements with the EU. One of those countries is Japan. Japan has just signed a trade agreement with the EU. At the very best, I suppose, if the Japanese were to give us exactly the same terms—which is unlikely because our bargaining power vis-à-vis Japan is nothing like the power that the EU has—it would take a minimum of five years, and probably nearer 10, to conclude this deal. So the Government are saying that we are walking away from a trade agreement in order to spend a vast amount of time and money and suffer a lot of uncertainty before perhaps, in many years’ time, finally reaching another trade agreement that may not be as good as the one we now have. I put it to the Government: what kind of reason or logic is that? What a way to run a state. What a way to look after not only this generation but future generations of British people and make sure that they have a viable economy on which they can actually base a reasonable standard of living and a reasonable level of public services.
The Government are already under attack in this place, quite rightly, for their delivery of public services. We had a very interesting series of Questions earlier about the health service. The Government are undermining the future ability of the British economy to deliver the wealth we need to maintain our public services at acceptable international levels. This is quite apart from the impact of their policies on individual wealth and prospects for individuals who want to travel or study abroad or benefit from all the other freedoms we will be giving up. It is a very serious matter. The muddle the Government are in about the damage that is being done makes the whole picture even more disgraceful—that is the only word I can use.
I think my noble friend’s amendment is excellent. I agree with everything he said when he introduced it—and that noble Lords on both sides of the House said—about the importance of services. We all know that they are 80% of the British economy. But I have one question. Why has he not put goods in there as well? It seems to me that exactly the same principles apply to goods. I just looked at the amendment, and if you were to add the words “goods” wherever “services” are mentioned, you would not produce any particular anomalies or logical or linguistic problems. I do not know why goods have been left out of this particular picture. As I said, exactly the same principles apply. We want there to be no new barriers—that sums up everything. “Barriers” includes tariffs, quotas and non-tariff barriers, so the ground would be covered quite well by doing that.
My noble friend rather implied that he was putting forward this amendment in order to have a debate on an important subject—which is a very worthy thing to do in this place. Perhaps I have that wrong, but it sounded as though that was what he had in mind, and we are of course having that debate at the moment. However, it seems to me that it would be even better if we got this proposed new clause on to the statute book. We would be doing a very good day’s work for the country if we could manage to do that. Therefore, I ask my noble friend why he came to his decision. I am sure that there must be a very good reason, which perhaps I am being foolish in not anticipating, but I do not understand why we do not include goods.
These debates are becoming extremely unreal. One likes to think that one’s service in Parliament, whether in the Commons or in the Lords, is based on being clear in one’s mind and discussing and working out with colleagues what is the best policy for this country. But we have a Government who are not pursuing the objective of the best policy for this country. We have a Government who are destroying British industry and commerce where they can—so it is a very unreal situation. I do not know how much longer this country can go on in the hands of people who take that attitude when they have in their charge the very considerable, and in my view very important, responsibility of governing the United Kingdom to the benefit of our citizens both of today and of tomorrow.
My Lords, in following the noble Lord’s remarks, perhaps I may say that the unreality of debates in Committee on this Bill will be exacerbated if we not only have amendments that, quite properly, raise relevant issues that are not presently included in the Bill but we then use them as the basis for a wide-ranging debate on every occasion. Let us not do that. On occasion, we in this House look broadly at what the resolution to our current impasse might be, but we also have a responsibility to use our time well on this Bill to try to ensure that it is effective legislation, because we might need it.
In that context, there is a very simple reason why trade in services is not in the Bill: the General Agreement on Trade in Services is multilateral, not plurilateral, so there is no need to legislate for this as it is something we are a party to only by virtue of our membership of the European Union. That is why the government procurement agreement has got into the legislation. If that were true for the General Agreement on Trade in Services, that would have to be included as well, but it is not; every member of the WTO is a member of the GATS.
However, the question is: do we want to legislate to mandate the Government in the negotiation on a future free trade agreement to seek to provide for a continuing and complete reproduction of our current relationship with the European Union, or at least to the extent that the amendment asks for that? As far as I can see, it asks for it up to mode 3—it does not include mode 4 arrangements, which allow for natural persons to be present in other member states—thus excluding the free movement of individuals for the purpose of the delivery of services in other member states. Therefore, it is not a continuity amendment, or at least it cannot be presented as such.
From the point of view of Ministers, broadly speaking at the moment it is important for us to understand to what extent free trade agreements that might be reproduced by way of continuity agreements in the event of a no-deal exit might lead to the perverse situation whereby we have greater service sector access to third countries than we do to the European Union, which would mean considerable dislocation for service industries in this country.
Finally, much as I wish that we were staying in the European Union and continue to argue that we should be in a customs union with a degree of regulatory alignment—we will come on to that briefly later—I certainly would not go as far as the amendment implies, which is that effectively we should be rule-takers on services with the European Union. That could be a very unhappy place for us to be, given that services make up 80% of our economy, as has been said. The fact that we are in a customs union for goods will therefore not preclude us from engaging extensively in discussions on trade in services with third countries, which is where much of the action may well be in future trade negotiations.
My Lords, 80% of the UK economy—in fact, I think the figure is 85%—comprises services. I support the noble Lords, Lord Stevenson and Lord Purvis, in bringing forward this probing amendment although, for the reasons given by my noble friend Lord Lansley, I am not convinced that we should change the Bill and make ourselves rule-takers on services. If noble Lords will allow, I would like to keep the issue of the free movement of people separate. The question is: do we lose as much from losing the single market on services? It is not very well developed at all. I know this because I tried to cut down barriers on services within the EU when I led the presidency work in BEIS in 2016.
Last week the Chancellor spoke at the UK Finance dinner, which I attended. I was sorry as a result of that—the timing was unhelpful—to miss the last group of amendments, of which mine formed part. The Chancellor talked about liberalising trade in services—a sort of WTO services round—going forward. Of course, this would also extend to the European Union if it were to happen.
I have two questions about services for my noble friend the Minister, the answers to which will help me when we consider the Bill on Report. First, can he elaborate on the Chancellor’s idea, or emerging Treasury ideas, of doing something on services beyond the European Union, which would help us in the European Union as well? Secondly, can he confirm that the Government’s proposed deal—the withdrawal agreement or the political declaration—would not get in the way of bilateral deals with third countries on services, given that the multilateralism that I love is very hard going? In other words, would we be able to conclude a deal with the US—again, very tough—or, perhaps more realistically, with the emerging and already emerged countries of Asia, where we are now selling a lot of services and where it seems that aligning some of the rules on services could be extremely valuable?
My Lords, on behalf of all those who have spoken, I thank the noble Lords, Lord Stevenson and Lord Purvis, for bringing forward Amendment 45, the purpose of which is to provide an opportunity for the Government to put some remarks on the record about our approach to services which, as we all agree, is of crucial importance. So, before coming to some of the specific questions that have been raised during this short debate, I will take advantage of that opportunity to set out the Government’s position as it now stands.
As my noble friends Lady McIntosh and Lady Neville-Rolfe, and indeed the noble Lord, Lord Stevenson, said, the UK’s services economy is a global success story. Our internationally competitive industries play host to world-leading firms as well as thriving small and medium-sized enterprises, and we have undertaken significant engagement with the sector on issues related to EU exit.
I would like to reassure the House that the Government are seeking arrangements for services and investment that cover all modes of service supply—my noble friend Lord Lansley correctly referred to the variations; that provide substantial sectoral coverage, including measures on professional business services, which my noble friend Lady McIntosh referred to; that go well beyond both sides’ WTO commitments as set out in the General Agreement on Trade in Services, which my noble friend Lord Lansley also mentioned; and that build on the provisions in existing EU agreements.
Moreover, through the political declaration we have secured a commitment from the EU 27 that our future trading relationship will be ambitious, comprehensive and balanced, and will include market access commitments to ensure that service suppliers and investors do not face quantitative restrictions such as monopolies, economic needs tests or joint venture requirements, which my noble friend Lord Hamilton expressed concern about; national treatment commitments, to ensure that UK service suppliers and investors are not discriminated against by the EU 27 and vice versa, as my noble friend Lady McIntosh referred to; new arrangements on financial services, grounded in economic partnership, providing greater co-operation and consultation than is possible under existing third country frameworks; appropriate measures on the recognition of qualifications, as referred to by the noble Lord, Lord Purvis, to support UK professionals practising in the EU 27 and vice versa; arrangements that allow for temporary entry and stay in each other’s territories for business purposes, including visa-free travel for short-term visits, as the noble Lord, Lord Liddle, rightly identified from his extensive work examining the internal market as a member of the Select Committee; and mechanisms to promote voluntary regulatory co-operation to guard against the introduction of unnecessary barriers to services, trade and investment, to which my noble friend Lady Neville-Rolfe referred. I pay tribute to the work that she did at BEIS in seeking to remove those barriers.
We have also been clear that after we leave the EU, the UK will have an independent trade policy covering all aspects of goods and services. To deliver that objective, it will be important to retain regulatory freedom where it matters most for the UK’s services-based economy.
I turn to some of the points that have been raised.
Before the Minister moves on to detailed points, perhaps this might be a good moment for him to tell the Committee, out of all the countries with which we would like to have our own free trade agreements after we leave the EU—if we leave it—how many have indicated that they wish in principle to negotiate and sign such an agreement with this country; how many have said that they would do so on terms identical to their existing free trade agreement with the EU; and how many have indicated that they would not want to pursue such a negotiation at all?
The noble Lord will remember from day three of Committee last week that one of the questions asked was whether we could provide the Committee with some running status on where we are with all those free trade agreements. That is a perfectly reasonable approach and it is something that my noble friend Lady Fairhead agreed to take back to look at and come back on ahead of Report. Rather than using this opportunity to rehearse that, I will say that it is something that we are looking at. Specifically on the EU and Japan, I was going to come to that topic and say that there is a working group with Japan to seek to replicate its effect as part of the continuity arrangements.
My Lords, on the point about freedom of movement, I have two specific questions for the Minister. I accept what he has said, but I would like to quote a personal example and declare an interest. For a period, my wife was chief executive of the English National Ballet. It was a requirement for the success of the English National Ballet that ballet dancers from all over the world were able to join, but the ENB had great difficulty with ballet dancers from outside the EU because they do not earn anything like the money that is put down in the Immigration Rules to justify easy entry. Are the Government prepared to be flexible on the earnings requirement to enable cultural organisations, which are very important to the British economy, to easily access talent from the EU, where people’s salaries will not initially be that high?
Secondly, if you are a small business in services and trying to expand by getting jobs, projects and contracts on the continent, one of the obvious business strategies you would pursue is recruiting young people from the countries in which you hope to do business. You take them into your consultancy, or whatever, and that gives you language and personal links into the markets you are trying to target. Again, there is no guarantee that, under the immigration policy outlined by the Home Secretary, young people coming from European countries would be able to get jobs in that kind of situation. We asked for a clear statement of the Government’s trade policy. The Government have to be clear on these issues before we can proceed on the Bill.
I am happy to do that, and perhaps get some notes—I know we have a group coming up on the mobility framework, to which those points will perhaps be pertinent. I will, if I can, address them there. I also draw the noble Lord’s attention to section 9 of the political declaration, paragraphs 50 to 59 inclusive, which sets out the Government’s position on that.
The noble Lord, Lord Stevenson, and my noble friend Lord Hamilton pointed to or asked a very important question on bilateral services-only trade agreements. There is no precedent for a bilateral services-only trade agreement. Where service agreements exist, they are notified to the WTO alongside a wider agreement that also covers goods. We are leaving the customs union so that we can set our own tariffs and have an independent trade policy tailored to the strengths and requirements of our economy, which therefore includes—by implication and explicitly—the importance of services to our economy. The political declaration sets out a plan for a UK-EU free trade area for goods, including no tariffs, with ambitious customs agreements. This will be the first such agreement between an advanced economy and the EU.
The noble Lord, Lord Purvis, referred to the situation in relation to Northern Ireland. Without wanting to revisit that whole area in this group, the situation is that in Northern Ireland, under the common travel area, the rights to work, study and access social security and public services will be preserved on a reciprocal basis for UK and Irish nationals in the other state.
I turn to the questions raised by my noble friend Lady McIntosh and, in particular, the two questions raised by my noble friend Lady Neville-Rolfe. My noble friend referred to the Chancellor’s speech on liberalising services and looking for a more ambitious way forward. I am sure that is at the core of government policy, otherwise the Chancellor would not have said it. I do not have the text in front of me, so I cannot comment on its full meaning, but I will write to my noble friend on that point. My noble friend Lady McIntosh also asked a three-pronged question. For a company setting up in the UK, what would its situation be in the event of no deal on day one; in the event of the implementation period; and at the conclusion of a future economic framework? Some of those outcomes will depend on the extent of the negotiation, which we have set out in the heads of agreement in the political declaration. Between Committee and Report, I will write on my noble friend’s specific point relating to that. Again, I thank the noble Lord for giving us an opportunity to raise this very important issue.
Can my noble friend clarify the point about services and goods? I asked whether we would be able to continue to do deals on services if we had a tight agreement—a customs union or whatever —with the EU. He was saying that goods and services tend to be linked in trade agreements and are never separate. Would that mean that we could not have services agreements, assuming we got something quite tight on goods? That would obviously be a problem. I know that they are linked—often, the service for your car and the computer in it are as important as the car itself—but I had seen them as distinct in the WTO. If my noble friend could write to me on that, I would be very interested.
I will be glad to do so. In a lot of such agreements, especially for the major manufacturers, the bulk of the value of the trade or the deal is the service package and the support provided thereafter. I will be very happy to write to my noble friend ahead of Report.
In the early part of his speech, the Minister read out an impressive list of points that had been achieved or secured before he moved on to his brilliant ex tempore dealing with the questions raised in debate. I confess that I did not recognise those points. I cannot remember seeing them in the withdrawal agreement. Was he perhaps referring to the relevant part of the political declaration, in which case surely those points have not been secured or achieved and what has been agreed is that all these things may be discussed over the next three, four or five years as the long-term relationship is considered?
The noble Lord, Lord Lansley, and I have referred to the WTO. My understanding is that there have been objections to the UK’s submission of services schedules to the WTO and therefore they are unlikely to be certified if we leave at the end of March. We can still trade on them, but they are likely to be uncertified. Can the Minister give a little context about what concessions we might make or what discussions we would have with those countries that have lodged their objections? Clearly, they feel that we will not provide the same kind of market access to UK services as under the existing agreements. We could be starting from a situation that is much worse than simply carrying on with where we are at the moment at the WTO. If the Minister cannot respond at the moment, perhaps he could write.
I am very happy to give further detail on that in the general update between Committee and Report, but, as the noble Lord knows, the schedules were tabled in December followed by a 90-day consultation period. There can be a variety of perspectives on them before they are finally adopted. I will get an update as to where we are on that before Report.
My Lords, it sounds as if we are starting off a new train of activity or various letters. I suspect that it might also be helpful if we had a short meeting on some of the issues just to draw them together. Like the noble Lord, Lord Kerr, I was entranced by the detailed nature of the early part of the Minister’s response and I got a bit lost—I think it was on the fourth point the second time round. We will need to read him and understand not only what he was saying but where these points are to be found in more detail. The chance to be able to do that in the context of the very rich debate we have had would be helpful.
That is not to say that I think there is that much between us: with friends like the noble Lord, Lord Hamilton, how can I complain? We are on the same side here, most unusually and extraordinarily, agreeing on points of some substance. There is some progress, it has not always been easy going and I think the noble Lord, Lord Lansley, was right to point out that this is partly because we are centring on an agreement which is brokered by the WTO through the GATS system. He is correct—his background in the chambers of commerce means that he reads these documents carefully and understands their provenance—that the wording of the amendment is indeed taken from the four pillars, but I was unable to get the fourth pillar in; the clerks would not accept that. The noble Lord, Lord Fox, managed to get it into the next amendment but one, so we will have that debate shortly. That complication sets us off in slightly the wrong direction: we are not trying to change that structure in essence, because that is the overarching world system and we have to be careful we do not try to take on too many battles at the same time.
The political declaration is not the same as the agreement and of course all that gets wrapped up into some form of yet-to-be-understood free trade agreement which may or may not include both customs elements and services agreements. I think the noble Baroness is right to pick up the question of how all that melds together: will we be able to trade off some aspects of our services in order to achieve a better tariff arrangement, or is it better to keep them separate and deal with the different arrangements? I do not think we have a clear answer to that, but I do not think we are very far apart on it. We want this to be the best for Britain. We have done pretty well, against all the odds. Why change it if it is not certain that the changes are going to be beneficial to us?
Having said that, the question from my noble friend Lord Davies is right: what is the point of this amendment if it does not improve where we are? That is where the test has to be. We must look carefully at the responses and make sure we have the right view. There may be some argument for having something, either in this Bill or in the non-continuity Bill yet to come, if that is the Government’s intention. However, at this stage we are unable to say that, so with that in mind, but with thanks to all who have contributed to a very rich debate, I beg leave to withdraw the amendment.
Amendment 45 withdrawn.
Amendments 46 to 49 not moved.
Amendment 50 had been withdrawn from the Marshalled List.
Amendments 51 to 60 not moved.
61: After Clause 5, insert the following new Clause—
(1) Within three months of the passing of this Act the Treasury must launch a consultation on proposals for the establishment in the United Kingdom of Free Zones, as defined by the Customs and Excise Management Act 1979.(2) The Treasury must lay a report of the consultation under subsection (1) before both Houses of Parliament within six months of its launch.(3) The report under subsection (2) must include—(a) proposals for the Free Zones to be established, and(b) an account of the extent to which each proposed Free Zone would allow UK manufacturers to secure an integrated supply and value-added production.(4) Within six months of the report under subsection (2) being laid, a Minister of the Crown must by regulations made by statutory instrument make provision for the establishment of Free Zones as set out in the report under subsection (2). (5) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”
I am grateful for this opportunity to raise the issue of free zones. I thought I was likely to end up moving this amendment at about 10 pm last Wednesday, so it is a pleasure to have it on in prime time but, recognising the value of this time, I will be as brief as I can.
The point about this amendment is that free zones were legislated for way back in 1979. Indeed, they featured, not least during the 1980s, as part of a broader industrial strategy. I do not propose today to debate the merits or otherwise of free zones, because there are arguments that cut both ways. They are, by their nature, a distortion: they distort the customs and regulatory framework in favour of specific geographical locations. None the less, there can be significant benefits associated with that happening in circumstances where one needs to advantage certain geographical areas. That is why, for example, they have been used in the past, and are used widely around the world, in relation to some more disadvantaged economic areas, and specifically in relation to ports of entry—not just seaports but airports and the like. The reasoning there is that the ports of entry to an economy are often in competition not so much with other parts of the geography of that country as with other ports in neighbouring areas.
The European Union has a general disinclination towards free zones because the single market effectively creates one single customs territory. Arguing against myself, if we were to be in a single customs territory with the European Union, the question of free zones would probably not arise at all—but if we are not to be, it ought to arise. Under these circumstances, it would be good to legislate in the Bill to encourage Her Majesty’s Treasury to bring forward both a consultation allowing the merits of free zone designation and its use in this country to be debated, and proposals to Parliament about how that designation might be deployed.
There are ports that are interested in this, and the Treasury’s approach—that it is happy to consider free zone designation under the 1979 legislation—is understandable. But it is for the ports themselves to decide whether they wish to do this. I understand some ports may wish to; Teesport and Humberside are interested, and Associated British Ports is interested. If we leave the European Union and do not form part of a customs territory with it, they may well bring forward proposals. In the interests of the legislative approach to this, we should have something that encourages that to happen as quickly as possible in an ordered way. That is why the deadlines in the amendment are swift: to initiate a consultation within three months, and to report on that consultation within six months. In quite short order after exit day, we in this country could see to what extent our ports would need and benefit from free zone designation to enable them to compete more effectively with other ports—not least those on the other side of the North Sea or the English Channel.
That is the reason we should think about this. Those bringing their goods to Europe have never previously had to think about customs or other formalities, or the imposition of duty on those goods if they are brought to the United Kingdom and then re-exported elsewhere in Europe. Unfortunately, they may have to think about that.
I am grateful to the noble Lord for giving way. As he rightly says, free ports are distortionary by definition. If you create a free port close to another port, one will survive and the other will probably disappear altogether. Does he think his Government would be tempted by the thought that they could say, “If we have a local MP who votes for us and supports this Government, we will make the port free; but if we have an MP who dares to vote against us, we will make the port unfree and ruin it”?
The noble Lord will observe that the amendment seeks a consultation on the part of the Treasury, and that consultation would undoubtedly enable these issues to be explored on an even-handed basis. In the scenario I was describing, any port would be free to come forward and seek designation. It is not something that would be handed out on the basis of any partiality; rather, it would be done by examining the cases made by those ports. The point is that whereas in the past we may have concluded that there was no basis for introducing such a distortion into our economic activity, if and when UK ports are principally having to compete in international trade with other European ports, we may conclude that it is not a distortion to trade inside the United Kingdom. Actually, it is an aid to competitiveness for the United Kingdom in relation to ports elsewhere in Europe. I beg to move.
My Lords, I thank my noble friend Lord Lansley for moving this amendment. He has managed to get on to prime time in this territory. I once represented a seat on Teesside, which is very close to my heart. The idea has been advocated by the excellent mayor there, Ben Houchen, and by some of the local MPs, such as Simon Clarke and Rishi Sunak.
To reassure my noble friend, the Customs and Excise Management Act 1979—CEMA—allows for the designation of free zones, as he mentioned. The Taxation (Cross-border Trade) Act, which the Government passed through your Lordships’ House last September, allows HMRC to make regulations regarding goods kept in a free zone. Under CEMA, operators are free to apply to become a free zone. The Government are open to any ideas that might deliver economic advantages for the UK and will continue to examine the role that free zones may play as part of this. Assuming that we will have an independent trade policy, we will be able to have these types of examinations and innovations.
Existing customs facilitations in the UK offer the same benefits as free zones, but are not geographically limited and can be accessed anywhere across the country, thereby potentially having more widespread benefits for the UK as a whole. For example, a manufacturer could import materials for its products and store them in a customs warehouse anywhere else in the country, without duties being paid on them. The manufacturer or its supply chain could then use those materials in its manufacturing process under inward processing relief and could export the finished goods without any UK customs duty ever having to be paid. Those existing facilitations, therefore, avoid the distortions to which the noble Lord, Lord Davies, referred, which can arise from free zones where a manufacturer or its supply chain would be required to locate on the same site to benefit.
The UK’s ability to formulate a free zone that diverges from the Union customs code will depend on the future relationship with the European Union. The Government have also been clear that it is a commercial decision for operators to make on whether they want to apply for designation of an area as a free zone, and we will review any applications made. I am not able to be more helpful than that to my noble friend at this point, much as I may wish to be.
Since there is no recent substantial experience of free zones, does my noble friend not think it would be helpful—if we arrive at the point where we exit the Union customs code—for the Government at least to initiate a consultation to look at the criteria that would be applied in examining the designation of free-zone status?
My noble friend will be aware that “consultation” has a specific meaning now in legal terms, which is quite an onerous responsibility of the process. We could seek ways to discuss—perhaps with BEIS as part of the industrial strategy—or to engage with others who are interested. He mentioned Humberside, Teesside and others, and I think we could look at ways in which that could be done. I am very happy to take that thought back to the Treasury and write to him further on that.
Amendment 61 withdrawn.
Amendments 62 to 65 not moved.
66: After Clause 5, insert the following new Clause—
“Trade agreement with the EU: mobility framework
It shall be the objective of the Secretary of State to take all necessary steps to secure an international trade agreement with the European Union which includes a mobility framework that enables all UK and EU citizens to exercise the same reciprocal rights to work, live and study for the purpose of the provision of trade in goods or services.”
My Lords, we have come to the fourth day of Committee on the Bill. Before the noble Lord, Lord Liddle, became herald to this issue, we really had not talked about people. Trade is about people—it is about people who make and sell things, people who sell their services abroad, and people who come to this country to sell their services and goods to us. There are strong arguments for the preservation of free movement in any future treaty. Amendment 66 requires the UK to negotiate with the EU an international trade agreement that allows UK and EU citizens to continue to work, live and study abroad.
Free movement is good for the economy: it boosts efficiency and innovation. Meanwhile, its impacts on public services, crime and unemployment are generally positive—I will come back to those points shortly. There is a cultural and societal benefit which comes with the opportunity to work, live and study in other cultures and develop mutual understanding and friendships. These are often set to one side and referred to as “soft power” in a way which suggests that they are somehow less useful than hard power. However, these are important things, to do with the influence of our country in the rest of Europe. I will focus on the first two elements of the benefits from free movement.
In no small measure, we have a Prime Minister who is obsessive about the need to end free movement; this is reflected fully in the political declaration and the way we are moving forward. As the Minister set out, there is some outline in the political declaration, but of course, as the noble Lord, Lord Kerr, pointed out, it is merely a wish and not a reality. The political declaration says that free movement of people will end—we know that that is what the Prime Minister set out to achieve. The UK and the EU will provide visa-free travel, but only for short-term visits; both parties will consider visa conditions for research, study, training and youth exchanges; both parties will consider addressing social security co-ordination; both parties will consider measures to minimise border checks; both parties will seek to co-operate on parental responsibility measures; and there will be a framework to enable people to travel temporarily to the other territory for business purposes. The exception to this is the common travel area within Ireland, which will be unaffected. However, the rest of the immigration process, just like the rest of Brexit, is left hanging.
I am interested in what the Minister can say; clearly, he may not be able to say it directly. Those bullet points are interesting, and are clearly a result of a joint discussion between the European Union and the United Kingdom. Which of those points arose from the United Kingdom’s point of view and wish list, and which of them came from the European Union? In other words, what was the thinking of the two parties going forward?
Before we look at the trade influences specifically, I want to make the point clearly that ending the free movement of people in and to this country is a stupid idea. I shall take as my text to prove this the Migration Advisory Committee’s report of 18 September. When it comes to the impact of economic migrants from the EEA, the committee finds that, overall, there is,
“no evidence that EEA migration has reduced employment opportunities for UK-born people on average”,
and that overall there is,
“no evidence that EEA migration has reduced wages for UK-born workers on average”.
The committee notes that there is:
“Evidence that immigration has, on average, a positive impact on productivity”,
“High-skilled immigrants increase innovation”.
I remind your Lordships that those two issues of innovation and productivity are key objectives of the Government’s Industrial Strategy. The committee also notes that EEA migrants,
“make a larger contribution both in terms of money and work to the NHS than they receive in health services”,
and that there is:
“No evidence that migration has reduced the quality of healthcare”.
Quite the contrary, I would say. Indeed, it is clear that the social care sector struggles to recruit sufficient people. With the current freedom of movement calling that into question, what will happen in the future?
The House of Commons Library estimates that in 2017 there were 10,705 doctors, 20,276 nurses, and 14,247 clinical support staff in the NHS who were EU nationals. It estimates that in the last two years the net number of nurses and midwives who were EU nationals, for example, has fallen by over 5,000. We heard in today’s Question Time about the struggle that the NHS is having to recruit future doctors. There were 41,000 nursing vacancies in England, and the Royal College of Nursing estimates that this will rise to 48,000 by 2023 as fewer start nursing degrees each year. In social care, things are much worse, with about 110,000 vacancies.
The Migration Advisory Committee found no evidence that migration has reduced parental choice at schools. Nor has it reduced attainment, and there is no evidence that it has an effect on the overall level of crime. The committee noted that EEA migrants pay more in taxes than they receive in benefits for public services. However, and tellingly, the committee is also not convinced that sufficient attention is paid to ensuring that the extra resources that have come in from those migrants is being spent in the areas where they live. That is a very important point.
Housing raises another important nuance. In pointing out that only a very small fraction of migrants occupy social housing, the committee also pointed out that, given that virtually no new social housing was being built, any migrant in social housing is excluding a UK-born tenant. The committee also found that migration has increased housing prices. It then went on to note that the housing issue cannot be taken in isolation from other government policy. “Hear, hear”, I say to that. For my part, it is clear that the woeful performance in housebuilding by successive Governments is a much larger irritant on the housing issue in this country than migrants. The evidence points to the need not to stop the beneficial flow of economic migrants but for targeted government investment in the communities that have generally been termed to have been left behind.
As the noble Lord, Lord Heseltine, so eloquently put it in his speech during our debate before Christmas, these communities will not be benefited by making Britain poorer, and one way to make the UK poorer is to end free movement.
It is fair to say that there is a huge cognitive dissonance between the published evidence of the Migration Advisory Committee and the political declaration and immigration White Paper. Her Majesty’s Government are seeking to exclude a group of people who contribute positively to our national life. Worse than that, in justifying their policies, they vilify that group for issues that are caused by government mistakes and mismanagement.
The immigration White Paper makes clear distinctions between what are termed skilled and unskilled workers—here we come to the point raised just now by the noble Lord, Lord Liddle. It uses the existing salary threshold of £30,000 to differentiate between those two groups of future employees. Yes, it makes the process of applying for tier 2 visas easier by proposing to abolish the 270,000 annual cap and the resident labour market test, which was a heavy administrative burden on businesses trying to hire from overseas. However, the salary cap is a fundamentally wrong proposal, because it conflates salary with skill. There are many jobs, not least in research and development, where experts are paid below that cap. They still have fabulous skills to offer this country, but they earn less than a £30,000 salary. The White Paper itself estimates that, overall, those restrictions would reduce the net inflow of EEA long-term workers by about 80% in the first five years. This would result in GDP being up to 0.9% lower in 2025.
So-called unskilled workers will not be offered a route into the UK in the long term, according to current proposals. In the interim, the Government will allow unskilled workers to apply for temporary, 12-month visas. This fails the logic test. High-skilled workers may be contributing more in tax, but lower skilled migrants are offering a huge contribution in the services they offer to this country. The Migration Advisory Committee report makes that clear.
There is also a tacit admission in the Government’s own words when they allude to work-related schemes. Once we start looking for sectors that might need such schemes, frankly, we can include the vast majority of the UK economy, but given that agriculture and the hospitality industry are two important parts of our international trade, perhaps the Minister can explain what volume of work-related immigrants the Government anticipate being admitted and how that equates to the stated needs of those two industries.
I am also anxious to learn the Government’s view on how self-employed people or freelancers will trade across the EU-UK border. Here I declare an interest, as I have at least one family member who is a freelancer. Self-employed people are vital to our service industry and dominate in particular sectors. I know that my noble friend Lord Clement-Jones will speak on their role in the tech and creative sectors, for example. How will self-employed people be able to contribute, going forward?
If Brexit happens, any trade deal negotiation with the EU will include gives and takes to reach agreement. That is what negotiation is all about, even if the current Secretary of State for International Trade has not quite worked that out yet. Telling people what you want and expecting them to give it all to you without making concessions is not the way it goes. Moving slightly in the opposite direction to the noble Lord, Lord Liddle, I am concerned that we are seeking to use free movement as a bargaining chip in our negotiations with the European Union—it is too important for that—because this ignores one central fact: by rejecting access by EEA citizens to the UK, the Government are guaranteeing that UK citizens will similarly be barred from the European Union. This is not sensible and is damaging to our economy and to the future prospects of those who seek to have a life, work and study abroad. It is for this reason that the amendment seeks to get the Government to confront the evidence that stands in the face of this policy.
I have at least modest hopes for this amendment. First, I hope that Her Majesty’s loyal Opposition show more resolution to support the principles of free movement than was demonstrated by the Labour Front Bench during the debate on the immigration Bill in the other place. Some of us on these Benches were amazed and, frankly, saddened by that shambolic performance in the other place. I am sure that in this House the Labour voices will be unequivocal.
If the noble Lord reviews what I said in Hansard, he will see that I talked about two particular issues highlighted by the Migration Advisory Committee.
In addition to listening for the reaction of the Labour Front Bench in this House, from the Government I am listening for the Minister to publicly acknowledge the benefits that EEA migrants have brought to the lives of all of us in the UK. More than that, I hope to hear the Minister confirm that Her Majesty’s Government understand that trade is intrinsically about people, whether working alone or in companies and organisations, and—as previous speakers have brought out—that this is even more important in an economy centred on services, such as ours. Therefore, the more they can move and trade, the better it is for the United Kingdom’s economy. I wish to hear that the Government understand that to restrain the trade of EEA nationals in the UK will not only forfeit the benefits they bring but materially restrain hundreds of thousands—if not more—UK people trading in the EU 27. I would like the Minister to rule out the use of this as a bargaining chip in negotiations. That is why I would like to write this into the Bill. I beg to move.
My Lords, my noble friend Lord Fox has introduced his amendment extremely eloquently and convincingly. In supporting it, I highlight the fact that without the right deal on movement of talent and skills, our creative industries will face major challenges. Some 5.7% of the UK workforce is made up of EU 27 nationals. However, 6.1% of the creative industries workforce is made up of EU 27 nationals. More than that, 10% of the design, publishing and advertising workforce are EU 27 nationals. Some 25% of our visual effects in film—VFX—workforce is from the EU, and that rises to 30% in gaming. We are highly dependent, in those areas of the creative industries, on EU 27 nationals.
Take the music industry, for example. Some £2.5 billion was generated by music in export revenue. Germany, France and Sweden are among our top export markets, and are major destinations for our musicians. In the recent ISM survey of musicians, 39% said that they travel to the EU more than five times a year; 12% travel to the EU more than 20 times a year. More than one in eight performers had fewer than seven days’ notice between being offered work and having to take it, and more than a third of musicians said they received at least half their income from working in the EU 27. There are warnings from these musicians from their experience with the rest of the world. More than a third of musicians had experienced difficulties with visas when travelling outside the EU. In fact, of those experiencing difficulties, 79% identified visas as the source of those difficulties. Musicians in particular rely on being able to work and tour in Europe freely, easily and often with little notice.
It is equally important that the other people vital to touring, such as roadies and technical staff, are able to travel on the same basis. It is also vital that instruments and equipment can be moved around easily, and this must be a reciprocal arrangement. On touring, the Government have said that the UK will look to reach an agreement allowing musicians and museums to tour major events with their equipment and goods. What is considered a major event is not clarified and there are few details on what an agreement would look like.
The Government propose that the new immigration system will preserve the current rules for employing non-visa nationals for short-term work to join a UK production. This allows them to work for up to three months without a visa, requiring only a certificate of sponsorship from their employer, which is cheaper and easier to obtain. For periods longer than three months, the Government are reaffirming that the current tier 5 creative and sporting route, which caters for creative workers such as musicians, actors or artists who are working and touring in the UK, will continue. This is welcome but, again, without the right reciprocal provisions, Brexit is likely to make touring much more difficult for musicians and crews to move across Europe. Increased red tape will make it harder to promote music overseas.
Then, if the withdrawal agreement is agreed, from January 2021 non-visa nationals looking to take up permanent employment in the UK, such as VFX workers, will need to obtain a tier 2 visa. This requires sponsorship from an employer, which must pay a skills charge to make the recruitment. Workers must meet a minimum salary requirement to be eligible for a tier 2 visa. Like my noble friend, I welcome that the Government now plan to consult on the appropriate level for this requirement in the coming year, but the Migration Advisory Committee—MAC—has recommended that it stays at £30,000. There will need to be considerable changes to these proposals if the Government are to ensure that sectors such as the creative industries continue to thrive post Brexit. As the Creative Industries Federation has said,
“high skills do not always command a high salary”.
There is still a huge lack of clarity. The UK Screen Alliance has criticised the plans for a post-Brexit visa system. It says the Bill’s proposed visa system will “severely limit” the VFX and animation industries’ access to international talent. It also says that expensive new EU visas will add significantly to operating costs and impact on the sector’s competitiveness in the global market. Alan Bishop, the chief executive of the Creative Industries Federation, said about the White Paper:
“Unfortunately there is very little in this white paper which will give creative businesses and freelancers in the UK any confidence for the future … government has failed to recognise the challenges freelancers face within the current immigration system—a significant challenge for the Creative Industries Federation where 35% of creative workers are self-employed. Freedom of movement has given British businesses access to the best and brightest freelancers from the EU, presenting those businesses with opportunities to grow and contribute to the continuing health of the UK economy. For international non-EEA freelancers however, the current immigration system provides no long-term route. This is why the Federation has called for the introduction of a freelance visa”.
Those are the words of two significant organisations in this field.
The Government have had plenty of time to consider all these issues and have had plenty of sound advice, not least from quarters such as the July report of the House of Lords European Union Committee, Brexit: Movement of People in the Cultural Sector. That is why this amendment is so important, and I very much hope that the Minister will reflect in his response that the Government fully understand the needs of the creative sector.
My Lords, a powerful case has been made by the party to my left. My sadness is that the framing of the amendment before us deals largely with how any future trade agreement with the EU should have a relaxed approach to the mobility framework and, picking up the point of our earlier debate, tries to insert in some measure the fourth pillar of the GATS process, which allows for individuals to travel in support of goods and services.
The case we heard, and the emotion it raises, are about the much broader ideas of freedom of movement and the ability to transfer skills, particularly in the creative industries. Although it was not specifically mentioned, presumably it seeks to try to loosen the way in which the Government currently treat overseas students. There is a wider, richer, deeper and more important argument about the need for mobility, its importance for any modern nation state and the contribution it can make to our economy and our culture. That needs to be answered, but it is not picked up particularly by this amendment.
We too discovered this problem when tabling amendments. The title of the Bill means that we can not have as broad a discussion as we would wish. However, there is an immigration Bill coming, and others in your Lordships’ House will want to pick up many of the points made here and raise them in the context of a much wider and more appropriate set of immigration conditions and arrangements, which will satisfy much of the discussions we have heard this afternoon.
On the narrow question of where we move, it would be wrong to try to seek a broader solution to the problems identified through a generic approach. There is no doubt that what appeared to be—and it was appearance rather than reality—unbridled immigration was a factor in the referendum that led to the formation of the Brexit arrangements. We would be stupid to ignore that. There are probably answers and solutions that would be satisfactory to all concerned, but not in this amendment. Nevertheless, I will listen carefully to what the Minister says in response to this point. This issue will not go away and we look forward to returning to it at a future stage.
I am grateful to the noble Lord, Lord Fox, for introducing this amendment, which deals with an important area already touched on this afternoon. It will of course be pored over in some detail as the immigration Bill makes its way to your Lordships’ House.
There is no dodging the key line in the political declaration. At paragraph 56, I think, it makes it clear that free movement will end as the UK leaves the EU. The noble Lord is passionate in his advocacy of free movement, and he has expressed his view that it is a stupid idea—I think I quote him correctly—to get rid of it. But, as the noble Lord, Lord Stevenson, identified, this issue is more complex. To use his term, unbridled immigration was an issue, and we would be stupid to ignore that. Therefore, there is a difference of views here but, as the noble Lord invites me to set out the Government’s position, I will put it on the record if I can.
I appreciate the desire to ensure that businesses and individuals who trade in services and goods between the UK and the EU will have the ability to move across borders to do so. The Government are committed to securing the best deal for UK businesses. We have set out a clear proposal for an ambitious future relationship with the European Union, including a reciprocal framework for mobility. This was reflected in the political declaration on our future relationship. The detail will be discussed in the next phase of our negotiations.
One area where I am absolutely at one with the noble Lord—and, I am sure, with all Members of your Lordships’ House—is in seeking to separate out, in the sometimes rather toxic atmosphere of the current debate, the immense contribution to our national life made by the many people who have come here to work or study in the arts. We have to separate out what is happening in the wider political debate from our deep appreciation for all that they do for our public services, our academic institutions and the economy in general. That is beyond doubt. However, our gratitude is not limited only to those who have come here from the EU. It applies to people who have come from around the world to this country; we appreciate the contribution that they make and it is right that we put that on the record.
The Government recognise the need to ensure that we have sufficient mobility provisions with the EU to support our trade agreement, and that we implement an immigration system that works in the national interest. The political declaration makes it clear that arrangements for market access with the EU as part of the future relationship should allow for a temporary entry and stay in each other’s territories for business purposes in defined areas. It also makes it clear that we want visa-free travel for short-term visits. We have said in our White Paper on our future relationship that we recognise that mobility is a key element of economic, cultural and scientific co-operation. On the cultural element, of course, I identify strongly with what the noble Lord, Lord Clement-Jones, said about the contribution of the arts and the creative industries.
We want to support professional service providers to reach clients and advance manufacturers to deploy key personnel to the right place, and to encourage scientists to collaborate on world-leading projects. We have also said that we want to agree provisions on intra-corporate transfers that allow UK and EU-based companies to train staff, move them between offices and plants and deploy expertise where it is needed. The noble Lord, Lord Fox, said that we were using future context for a lot of the aspirations in the future framework, but in effect his amendment would provide a carte blanche. We need to see that the agreement we reach regarding people accessing the UK post-Brexit is reciprocated for the many people in this country who make a significant contribution to other EU countries in a variety of fields. The correct place for that discussion is during discussions on the future economic framework, which will occur once we leave the European Union. I am sorry to disappoint the noble Lord but, for that reason, I feel unable to go further at this point and ask him to withdraw his amendment.
My Lords, earlier the Minister mentioned crossing borders. Would that include onward movement, which is a particular concern of not only individuals and self-employed people in this country but British people living in Europe? Time and again, I have heard that that is a particular concern.
The Minister said that perhaps this amendment would be better placed elsewhere, but I wondered why, in the sequence of events, the UK did not agree a temporary arrangement with Switzerland on continuity, for example, in the case that I raised earlier in Committee. Instead, the Government have agreed a permanent relationship arrangement with the Swiss for free movement of people for three months a year if they are providing services. Clearly, the Government thought it was not sufficient to wait until we debated the Immigration Bill, when we could have considered that aspect of our relationship with Switzerland and others. But the Government have made a decision. So as my noble friend Lord Fox indicated, it is right that we press the Government much more. Why did the Government make a case for giving Swiss nationals a permanent right of visa-free travel and work for three months a year, but are taking a distinct approach to other countries, including our EU partners?
Obviously, those are discussions that will have to be concluded in the future framework. On the specific point about Switzerland, however, the noble Lord suggested that the services elements were additional to the Government’s policy on immigration as set out in the Immigration Bill. That is not correct; it is not inconsistent with the provisions in that Bill.
On the point made by the noble Earl, Lord Clancarty, on onward movement for EU nationals, the UK pushed strongly for the inclusion of onward movement rights during the first phase of negotiations on citizens’ rights in the withdrawal agreement but the EU was not ready to include them at that time. I made that point about reciprocity earlier. We recognise that onward movement opportunities are an important issue for UK nationals in the EU and we remain committed to raising this during detailed discussions on our future relationship. That is the latest position we have at the present.
There has been a lot of concern in the past that the position of the Commonwealth, relative to that of the EU, has been bad—that EU citizens and EU goods can come to this country without let or hindrance, whereas people and goods from the Commonwealth are unable to do so and have to take their place with the rest of the world. As I understand it, following our departure from the EU, our Commonwealth will be in the same position as people from the EU, and indeed the rest of the world. Can we be assured that the Government’s future policy in relation to the Commonwealth will ensure that it will have equal access?
I listened very carefully to the final words that the noble Lord used when he talked about “equal access”, and I draw back from that a little. But on the broad principle, when we talk about the scheme of preferences and economic partnership agreements that we have with Commonwealth countries, if we have an independent trade policy, of course we will be able to take that into account. We would be free to do that. Similarly, if we are not part of free movement within the EU and have our independent immigration policy, we are in a position to set out the terms on which we want to admit people to work in this country. I hope that is helpful to the noble Lord.
My Lords, I thank noble Lords for the minimal debate that we have had around this. I will look closely at Hansard, but I did not hear the Minister refer to the £30,000 threshold issue and the false dichotomy between skilled and unskilled. Between now and Report, I would like the Minister to come back to that, and I apologise if he did indeed raise it.
Before the noble Lord sits down—I have always wanted to say that—I did have some notes on that. Perhaps I could intrude on the noble Lord’s wind-up to say that the Government are committed to ensuring that the future immigration system works in the international interests of all the UK. The Migration Advisory Committee advised that the £30,000 salary threshold should still apply. The Home Office is undertaking an extensive programme of engagement on its White Paper proposals and will discuss with business and a variety of other sectors, including the creative industries, what a suitable threshold should be. If a skilled job is considered to be in shortage in the UK, a lower threshold is likely apply. I hope that helps the Committee and the noble Lord.
It helps somewhat, and I urge the Government to consult extensively with the care and food service sectors. Hygiene skills, for example, benefit the food sector a lot. I am sure most employees there earn less than the scheduled threshold. There is also the issue of freelancers and self-employed people. I will not get the Minister up again but I will be looking for a response on that. I also did not hear from Her Majesty’s loyal Opposition anything other than what I would call a very weak response. It was, frankly, disappointing. With that proviso, I beg leave to withdraw.
Amendment 66 withdrawn.
66A: After Clause 5, insert the following new Clause—
“UK membership of EFTA and the European Economic Area
It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the United Kingdom to become a member of the European Free Trade Association and continue as a signatory to the EEA Agreement.”
My Lords, I will begin by reading the amendment to set out what I am trying to do here:
“It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the United Kingdom to become a member of the European Free Trade Association and continue as a signatory to the EEA Agreement”.
It will be recalled from last summer that this policy had—has, I guess—the support of this House. I now wish to scrutinise some of the practical issues of attaining it. Given that all the other ideas seem to have fallen by the wayside, one after the other, like dominoes, I think this is the only one standing. It now has even more steam behind it.
Before I come to the main issue, I should like to make a point about Nissan and Sunderland. This is central to why we need to stay in the single market and customs union. Reading between the lines, Nissan is saying almost as much in those terms. There is a slow-burn catastrophe of collapsing foreign direct investment in Britain. I made a speech a year ago saying that the plans—not forecasts but plans—were down 80%. I was talking to the FDI people around a table. This is now exemplified by the huge Nissan setback. By the way, many Members here, in their previous incarnations, have worked very hard to secure that work. On this occasion, no one is blaming the workers or their trade unions. That is a change, is it not? They blame those who play to the gallery. Boris Johnson and his press acolytes spring to mind, with their self-serving and grossly misleading propaganda two years ago and since. They ought to be ashamed of themselves.
Even now, on the options before us, Her Majesty’s Government are still in denial about the vital requirement to enhance and protect our world market share of investment and trade by staying part of the customs union and the single market/common market. That, in turn, is the secret of Europe’s world market share vis-à-vis the USA and China, as well as Japan and other parts of Asia, as a preferred production location. The same applies to many services.
One precondition of staying in the EEA is that we address and find answers to some of the technical issues surrounding the route out of the current impasse by moving—albeit as a second best, although in this Bill we are talking against the background of leaving the EU, not about whether that is a good idea—from the current Pillar 1 of the twin-pillar European Economic Area—that is, the European Union—to Pillar 2, which is EFTA. In that way—I think it is the only way—we can still be part of a family of agreed rules and justiciable arrangements, with the emphasis shifting on the latter point from the European Court of Justice to the EFTA Court.
First, I wish to get out of the way a rather unnecessary obstacle. I refer to the publication by this Government on 20 December—when we were all going off on our Christmas holidays—of the EEA EFTA separation agreement with the UK. This is a treaty provision whereby we will leave the EEA on 29 March, which is next month. I have two questions on this, and I have given the Minister some notice of them. First, would the departure requirement in Article 71 of the draft agreement be automatically frozen in the hypothetical situation of reaching agreement with the EU to extend the Article 50 period so that it did not happen on 29 March? Secondly, if we crash out, we must surely wish to preserve the right to apply to rejoin EFTA. Can the Minister please indicate how that could be done? In addition, would not Parliament have the right to vote on such a treaty question if it were no longer logically derivative of the wider constitutional Act, under which we do not have a separate vote?
I now turn to some of the issues of substance, as distinct from process, associated with these two major areas of policy. A year ago, the conclusion of the House of Lords European Union Sub-Committee chaired by my noble friend Lord Whitty—as I understand it, this conclusion has not changed—was that for trade issues membership of the EEA would cause much less damage to Britain than any other option. As far as the single market is concerned, this embraces the four freedoms of goods, services, capital and labour, including all the regulations derived through the Maastricht treaty, including the baker’s dozen of workers’ rights, and their upgrading, which we negotiated under the Social Chapter. I would like the Minister to confirm that I have this right. There are some reports that the upgrading has been now affirmed by the Prime Minister as being part of a sort of voluntary commitment. The process by which this miracle would happen under her approach—that is, without the EEA—is much less clear, whereas the social part of the negotiations would be automatically covered by staying in the EEA, as in Norway and Iceland, et cetera.
Does the Minister not agree, therefore, that the only way we can leave the EU and remain in the single market—which is just as essential for BMW, Airbus and Unilever as the customs union—is by rejoining EFTA? We left EFTA at midnight on the last day of December 1973 and one second later we were part of the EEC. We could do the same thing in reverse, with—this is my point, of course—no time gap in our ongoing membership of the European Economic Area. I invite the Minister and any other noble Lord who wishes to contradict what I have just said to stand up and give a reason.
Jeremy Corbyn paid tribute in the Commons last Tuesday to the cross-party Norway Plus Group, echoing its view that we need not only full access to the single market but a customs union. This policy is supported by the TUC, under the distinguished leadership of Frances O’Grady. I prefer to say “the” customs union because I am agnostic about whether there is a cigarette paper of difference in this context between the definite and the indefinite article. The EU customs union and the single market cover a wide range of electronic data, driving licences and product standards as well as labour standards, et cetera; together, they could determine that we have no problem on the Irish border and no problem on Dover-Calais, and we have eight weeks to fix the situation. Does the Minister agree? If not, will he say why not and give an alternative view?
On the wider issue of negotiations in this complex area, from red lines to financial contributions, we must take head-on the Boris Johnson fallacy that you can have your cake and eat it. I thank Mr Johnson for drawing that nonsense to our attention; it is about time that we—and he—started to realise the converse truth that nothing comes for free when creating the conditions, nationally or internationally, for wider economic and social progress.
I recognise that the scenario I am spelling out is not problem-free. EFTA has free trade agreements with third countries which are not the same as the EU’s; the UK, as a member of EFTA and in a customs union with the EU, could not join those. Indeed, the UK must fully respect the fact that EFTA states need to protect the integrity of their agreements. But on the basic premise of staying in both the customs union and the single market, this is a policy on which, as I understand it—and there have been many quotes saying at least as much—the leaders of Norway and Iceland have in different ways stated that they would be open to negotiation. I will return in a few moments to that somewhat complex choreography.
I now turn to the objection raised by some political pundits to the EEA option, which has been rhetorically posed in the phrase that we would be a “rule-taker rather than a rule-maker”. Membership of the EEA is not unique in being open to that characterisation, is it? It depends on which category of membership you want to pay for: you cannot have it both ways, even if the penny has not yet dropped for Mr Boris Johnson and such circles. We cannot leave the EU table and then complain that we do not have a vote there. How is that idea still running? Moreover, as Jacques Delors foresaw in 1990, EFTA with the UK again a member would probably evolve into a more influential and substantial body than is currently the case; there would be scope for further strengthening the pre-legislative consultation protocols within the EEA and with the EU. It shows, apart from anything else, a woeful lack of imagination to call such a development “leaving Britain as a vassal state”.
One broader point on which to conclude concerns attitudes in this country, among people at work, in the different regions and so forth. It is not much of an exaggeration to say that almost no one is aware of the provenance of all the workers’ rights that we have strengthened through European negotiations, including for migrant workers. Most people probably think that we negotiated them at national level. I am happy to take some of the credit for that—as, I am sure, are my noble friend Lord Monks and all the rest of us—but the point is that we did it at European level because otherwise we would have been told by the employers here, or in any other individual country, that we would be undercut. The noble Lord, Lord Stoddart, is looking puzzled by that; perhaps he would like to tell me why he does not accept that.
Incidentally, there are one or two of us, including my noble friend Lord Monks and me from the TUC and other colleagues on these Benches—my noble friends Lord Morris, Lord Jordan, Lady Donaghy and Lady Drake, among others—who have direct experience of the Social Chapter negotiations, either through central bodies or through industry federations irrespective of which European trading bloc the national affiliate belonged to. There is a long list of a dozen or so new rights, ranging from part-time workers to workers posted across frontiers, with the principle that none of those can now be undercut, and that is a process that needs to develop and continue. It has a high degree of resonance with trade union representatives around the country.
Active negotiators know that what we have been doing through the TUC for years now, at EU and national level in social partnership, brings in innovative new ideas such as European works councils, just as over those same years in the OECD we have won the right to challenge in a national court a lack of consultation in a multinational corporation. I have been part of that in an exercise in the United States of America. These ideas in a world of globalisation—a word that has lost its gloss in Davos, we are told—needs strengthening, not weakening, with a lot more involvement of a well-informed public square and of active participatory organisations, notably the trade unions.
The cross-border arrangements within the European Economic Area are one of a whole range of issues that on the ground and in the air are evolving at speed. As I pointed out in the pamphlet that I wrote with Michael-James Clifton, which was circulated widely in Parliament, it is indeed common sense to consider from time to time reviewing the modalities of the different options for employment, residence and citizenship, while having full regard to cross-border employment arrangements in fields ranging from science and engineering to culture and the arts, encompassing the theatre and classical music with opera and ballet, to which the noble Baroness, Lady Bull, among others drew attention in an earlier debate.
Lastly, I will say a word about the financial position. As I understand it, Norway pays per head half of what is paid as a full member of the EU, although it is difficult to make comparisons because Norway is a richer country in GDP per head through its energy resources. However, in all of that, surely the bottom line is the pub test: “You gets what you pays for”. That may better meet the curmudgeonly mood of Britain today.
My proposal to help us out of this impasse is a dose of lateral thinking. I submit that it can be best taken forward following the terms of this amendment, which are worth being a bit pedantic about. It is a different way from that envisaged so far in the whole gamut covered by the Common Market, the Maastricht treaty and the EEA treaty. How do you look at all that lot together? All 30 countries—that is 27 plus three—have skin in the game, to use the modern vernacular, and now is therefore the time to innovate and to include them all together.
My proposal is that the UK triggers a meeting of the EEA Council, the umbrella body which comprises the members of both the EU and EFTA. Its agenda would at first be procedural: to reconcile the process of parallel sets of negotiations versus sequential ones, between the UK and the EU on the one hand and EFTA on the other, with a view to us staying part of an evolving EEA family of nations. This seems to be the only way to avoid everybody tripping over everybody else in attempting separately sequenced negotiations. It is an outcome that nearly everyone can just about live with, if not happily ever after. I beg to move.
My Lords, I really had to get to my feet since I was referred to by the noble Lord, Lord Lea of Crondall, to tell him that it was not puzzlement on my part. It was thinking about what he was saying about the Social Chapter, because the Labour Government at the time opted out of it. What I am concerned about—
As soon as I said that, I knew it was wrong, but in fact Mr Blair continued that way and did not introduce the Social Chapter. What I find strange about the noble Lord, Lord Lea, and others, is that they do not seem to understand that once we are an independent nation we can make the rules that we want, which may be better than the rules that 27 other member states—or 28 with ourselves—make in relation to the rights, privileges and wages of workers in this country.
That is the central point. The reason we could not do it at national level, whether in Europe or the wider world, is that our employer would say we will be uncompetitive. However, in a big bloc like the EU where we negotiated at Brussels level under the Social Chapter, they cannot say that—at least for the most part within the family of the European Union. That is the point that the noble Lord, Lord Stoddart, has not answered.
That, of course, is a matter of opinion. There are others who say that because we are members of the EU we cannot make the laws that we want in this country, which would benefit the whole country including the workforce. People should have more confidence in this country, the way it is governed and those who can govern it.
The noble Lord, Lord Lea, blamed—or seemed to blame—Brexit for Nissan reneging on its agreement to make its new model in this country. However, Nissan itself has said that the world decline in demand for vehicles, particularly diesel vehicles, was the main reason it wished to save money by developing the vehicle in Japan. We ought to be careful that we do not blame Brexit for everything that goes on in the world and this country. I hope that the noble Lord understands that I was not puzzled about what he was saying—I was merely thinking about what he was saying. Of course he will realise that I was actually listening to him, as I always do.
I thank the noble Lord for his compelling and persuasive speech. For those of us who are determined that we should not leave the European Union without any deal whatever, it is important to think about the points that he has raised. We are at the stage now where someone like me needs some guidance. There is no point haring off after something that it is not going to happen. We had a discussion in this House on these very questions, and when we had plenty of time to implement this solution, Labour Benches decided to vote against it and therefore implied that they were not in favour of it at that point, and probably that they would not be in favour of it at any point. I suspect that is still the case.
Before we get ourselves embroiled in Norway-plus as an alternative, I would certainly find it useful to know whether it is the noble Lord’s view that the Labour Party Front Bench is ever likely to support this proposal—
I can help the noble Lord on that. In the six months since the summer, Jeremy Corbyn—whether you think his policy is that of a snail or a crab—has moved to say that we in the Labour Party are in favour of staying in the customs union and a/the single market. That is Front-Bench Labour Party policy.
I think it is access to the single market, and we are both aware of the difference between those two things. Also, it is “a” customs union; I noticed that the noble Lord referred to “the” customs union. That is also something different, so his view is not quite that.
There is a second question: whether if the Labour Party decides it is going to move to this position—either as a snail or a crab; those were the noble Lord’s chosen animals—that it would then support the withdrawal agreement, which would be needed in order to pave the way for this. If it is not going to, that is significantly less attractive to someone like me looking to ensure that we do not leave without a deal. These questions are not put as a challenge—they are a genuine dilemma for those of us who are now looking at what the solutions are, who are not persuaded after the Brady amendment that we are going to get very big changes from the European Union, and who want to be sure that we can all agree on something.
If the protocol of the House allows me, I will answer questions as they come in this way. The proposal I made at the end of a negotiation involving the EU as well as EFTA is one way of getting out from under the dilemma that some future for Britain within the common market and the customs union could be found. It would not simply be “the” withdrawal agreement; it would be the withdrawal agreement/going along with EFTA under the EEA umbrella agreement, with an understanding between the 27 and us. That is my proposal.
It is a credible proposal, but only if it has some sort of political support. The questions I put are merely a matter of guidance to me—and I am sure to lots of other people like me—and I am hoping that we will get a little bit of illumination from both Front Benches that will help us along the way.
My Lords, against the framework of what the future relationship will be, I do not think that the proposal of the noble Lord, Lord Lea, that we do not follow the procedure set by Article 50 for withdrawal but instead combine a withdrawal agreement-plus with seeking to accede or re-accede to EFTA would find much support among our European friends and partners. They would say that that is not what Article 50 says.
The noble Lord has made clear on many occasions his view that the UK should seek the softest possible Brexit, and his amendment would achieve that. If we were to become a member of EFTA—I think that Norway, for one, has not expressed any enthusiasm for our accession or re-accession—it is true that we would escape the jurisdiction of the ECJ and instead be subject to the EFTA Court, but that court follows closely ECJ judgments.
The leader of Norway’s European Movement has stated clearly that it is in neither Norway’s nor the UK’s interest for the UK to become again a member of EFTA. Continued membership of the EEA would require us to accept future EU rules and regulations, but without a seat at the table and with a greatly reduced voice in the formulation of those rules and regulations. It would also prevent the UK having its own trade policy and remove the raison d’être of my noble friend the Minister and the Department for International Trade. We would not be able to enter new free trade agreements with other countries or accede to broader free trade partnerships such as the CPTPP, which includes Japan, an enormously important trade and investment partner, and leading Commonwealth countries such as Australia, Canada and New Zealand, whose trading regulations, policy and law share origins with our own.
The EEA/EFTA proposal would make this Bill redundant, because we would have no need to novate existing EU FTAs and it would negate the whole upside of Brexit, leaving us as effectively a vassal state of the EU. That is not what the people voted for and your Lordships’ House would not be serving the nation’s interest by supporting the amendment.
I hesitate to become too involved in this debate, which seems rather above the level at which I am accustomed to operating, but one or two things came to mind. As the noble Lord, Lord Lea, explained to me and as came through in his address, the purpose of the amendment is to make sure that we explore all possible options before coming to a conclusion on the many difficult issues before us today. He has done that clearly and it will be interesting to hear what the Minister has to say in response.
It would probably defeat any prospect for active negotiation to play the card that has been played in this amendment at this point, but it is worth bearing in mind the issues that it raises and the much broader point that the noble Lord, Lord Finkelstein, was keen to explore: so many strands to our positioning are being coalesced into a single deal/no deal debate, squeezing out our opportunities for further, richer and more flexible solutions to the long-term problems that we have all recognised and debated today. At this point, it would be best to hear from the Minister what the official line is and then see whether there are issues that we need to come back to on Report.
I thank the noble Lord, Lord Lea, for setting out the rationale for his amendment. He was sincere in his attempt to persuade us and very thorough, as I would expect of a distinguished economist, in setting out in some detail his thoughts on where this option might go. Whether it is plan B, C, D or E, the reality is that it is a proposal that the Government take seriously and I want to respond to it in that manner.
As my noble friends Lord Finkelstein and Lord Trenchard have mentioned, the very topic of EEA membership was debated in another place in relation to the EU withdrawal Act on 13 June last year and again in relation to this Bill on 17 July. The outcome was clear: the EEA is not the right model for the UK.
Membership of EFTA and the EEA would mean accepting the continued free movement of people, which both Conservative and Labour manifestos pledged to end at the last election—which I suspect is why the noble Lord, Lord Stevenson, suggested that this might be a debate that the Labour Front Bench wished to sidestep; of course, on the Government Bench we do not have that luxury.
EFTA promotes free trade and economic relations to the benefit of its four member states: Iceland, Liechtenstein, Norway and Switzerland. In this context, it also allows its members to negotiate trade agreements with third countries, either as a bloc or as individual states. There are consequences to joining EFTA and the benefits are not automatic. Most significantly, joining EFTA also means accepting free movement of persons with its four existing members—which the Government had expressly set out their position against in the previous debate.
To gain the benefits of the 29 existing free trade agreements negotiated by EFTA, the UK would have to negotiate its way into each trade agreement with the relevant third countries. There is no guarantee that this will be successful and it could take a long time to achieve. EFTA is not an off-the-shelf model that would deliver ready-made trade deals.
EFTA’s trade agreements were not negotiated with the size and type of Britain’s economy in mind. Were the UK to join EFTA, it would constitute 71% of an enlarged EFTA’s economy. While we want to maintain our deep and historic relationships with EFTA states, the UK is in many ways different from them. EFTA is not the right model for the UK.
I now turn to the noble Lord’s proposal to rejoin the EEA agreement after the implementation period has ended. The EEA agreement effectively extends the EU’s single market to three EFTA members, Iceland, Liechtenstein and Norway. Once the UK has left the EU, and the EU’s existing trade-related agreements with third countries cease to apply to the UK, the EEA agreement will therefore no longer apply to the UK. The EEA agreement covers the four freedoms: of movement of goods, services, persons and capital. Seeking to remain in the EEA beyond the implementation period would not pass the test that the Prime Minister set out for our future economic partnership with the EU. It would not deliver control of our borders or our laws.
On borders, remaining in the EEA would mean having to continue to accept all four freedoms of the single market, including free movement of people from across the 30 EEA states. On laws, it would mean the UK having to implement new EU legislation covering the majority of sectors of our economy, including services and digital, and would make us a rule-taker and not a rule-maker. In contrast, we are making an up-front sovereign choice to commit to ongoing harmonisation with EU rules on goods, covering only those necessary to provide for frictionless trade at the border. Our proposal provides regulatory flexibility where it matters most for the UK’s services-based economy. Moreover, continued participation in the EEA beyond the implementation period would not be sufficient to enable our commitment to avoiding a hard border between Northern Ireland and Ireland. This is a key priority for the UK Government and we remain firmly committed to that objective.
The noble Lord asked whether the UK could remain in the single market through being a member of EFTA, a point also touched on by my noble friend Lord Finkelstein. Participation in the single market is possible through either EU membership, Pillar 1, or through EFTA membership by signing up to the EEA agreement, so-called Pillar 2. We have no plans to join EFTA and its free trade agreements. Those agreements were not negotiated with the size and type of Britain’s economy in mind. Similarly, we have no plans to join the EEA by moving from the current Pillar 1, EU, to Pillar 2, EFTA. Leaving the EU offers us an opportunity to forge a new role for ourselves in the world, as the noble Lord, Lord Stoddart, drew attention to, to negotiate our own trade agreements, as my noble friend Lord Trenchard mentioned, and to be a positive and powerful force for free trade.
The noble Lord, Lord Lea, and my noble friend Lord Trenchard spoke about Article 50. Any Article 50 extension would see the UK remain in the EU as currently, meaning that we would also remain as an EEA member by virtue of our EU membership and the separation agreement would not enter into force during the extension period. It is not the Government’s intention to extend Article 50.
To deal with the other points, the noble Lord talked about convening a meeting of the EEA Council and asked whether it would be possible. The UK will be leaving the EU. We will have control of our borders. That is not what he was asking about, but the terms and conditions for rejoining the EEA agreement as an EFTA member would need to be agreed with the contracting parties—the EU, the remaining EU 27 and the three EEA EFTA states, Norway, Iceland and Liechtenstein—through the EEA Council. It is not the Government’s policy to join the EEA because it is not the right arrangement for the UK’s economy and size. I hope the noble Lord will feel that we have responded to his serious proposal with some serious reasons why the Government are not able to accept his amendment, and I hope he will withdraw it.
I thank the Minister for that very courteous reply. I do indeed believe that he has taken the points very seriously, as I would have expected of him. Neither of us is Wittgenstein. I say that because I fear that Wittgenstein would not have been very happy with some of the logic that has been heard in the last 20 minutes, which tends to be along the lines of, “We can’t do X because that is governed by Y”, as though that were the end of the argument, when in fact I dealt with that proviso in what I was putting forward. It is very difficult across the Chamber, if not impossible, to untangle the tortuous web we weave, but that is what I have been endeavouring to do. I would add that the EEA Council would undoubtedly be able to open a discussion with us: who is going to tell it that it cannot do that? Whether, technically, at that moment, Britain is a third party is a separate question, I would have thought. The agenda is, first, what can we do to avoid tripping over each other in sequential negotiations with the EEA and EFTA? That is a serious problem, given the asymmetry between the technical questions affecting the single market and the customs union.
British pragmatism and common sense—not that there is much of that around these days—is the territory that I am trying to get into. I very much hope that, in the spirit of what a number of people have said, there is food for thought in what I have been saying and, in the two or three weeks before we come back on Report, who knows? A day is a long time in politics at the moment. I beg leave to withdraw the amendment.
Amendment 66A withdrawn.
Clause 6: UK participation in the European medicines regulatory network
67: Clause 6, page 5, line 4, after “in” insert—
My Lords, I shall speak also to Amendment 68. These are probing amendments the purpose of which is to seek clarity not only about the Government’s intentions towards negotiations on the future relationship with the EU, but about the Bill and Clause 6 in particular.
Since Committee started we have seen one tangible example of what leaving the European Union means, because it also means that many European Union institutions are leaving the United Kingdom. When the flags were lowered and folded at the EMA headquarters last week, the director of the Wellcome Trust said that it was:
“A very sad day for the UK, a great day for the Netherlands”,
where the EMA will now have its temporary headquarters. I am fully aware that, in advance of our discussing this amendment today, many decisions have already been made at the EMA. I am also aware that, if we are leaving the European Union, our membership of EU institutions gives rise to significant complexities. However, that does not alter the fact that membership of the EMA is imperative to the United Kingdom’s medicines industry, our patients and consumers of pharmaceuticals.
The EMA is essential to the functioning of the single market for medicines in the EU, and the UK played a pivotal role in that process, not just in hosting the EMA for 23 years but also through the contribution of our scientists and researchers and our regulatory expertise. The agency’s work is vital and will continue to be so, providing EU citizens with effective, safe and high-quality medicines and maintaining a regulatory environment that fosters innovation and development of new medicines. It is vital that the UK continues to have a relationship, and my amendments seek clarity on how the Government see that relationship. We know that we are no longer able to engage as co-rapporteurs for new marketing authorisations applications—this will end regardless of what happens on 29 March 2019, agreement or no agreement. The only way we can stop this is if we continue our membership of the European Union, which is by far the most preferable of all the options, but on the basis that that will not happen, we also know that from March onwards the UK’s position will be considerably weaker.
Last April, the EU 27 completed the redistribution of the UK’s portfolio of more than 370 centrally authorised products to rapporteurs from the EU 27 plus Iceland and Norway. We know that significant damage has already been done. To put this in context, more than 40 million pharmaceutical packages are exported from the UK to the European Union every month, and more than 30 million are imported into the UK from the European Union. The UK pharmaceutical industry is integrated into the regulatory regime of the European Union, and separating this out has been a very painful process. The question remains: what will the relationship be going forward?
Paragraph 24 of the political declaration states—assuming this is still the Government’s position—the following:
“The Parties will also explore the possibility of cooperation of United Kingdom authorities with Union agencies such as the European Medicines Agency (EMA), the European Chemicals Agency (ECA), and the European Aviation Safety Agency (EASA)”.
What do the Government mean by co-operation? The Bill says—at the moment—that the Government should,
“take all necessary steps … to fully participate … in the European medicines regulatory network”.
It is for the Government to explain the disparity between the two. Why does the political declaration say simply,
“explore the possibility of cooperation”,
when the Bill says that the Government’s objective is full participation in the regulatory network? Why the disparity in language? Was this on the insistence of the European Union, or because the Government did not do what the House of Commons instructed it to do, taking a much stronger position in the Bill, with full participation as their intention?
On the previous day in Committee, it is fair to say that there was a degree of inconsistency from the Front Bench about the status of Clause 6, so I am happy to give the Government an opportunity to make the position crystal clear. The noble Baroness, Lady Fairhead, said that the Government could not accept this language going forward and that they were,
“reflecting on what should be done”.—[Official Report, 30/1/19; col. 1068.]
She said that there were “legal and technical difficulties” with the language. I am not sure whether she is shaking her head at me—I am quoting from Hansard, so I hope that I am quoting her correctly. If I am not, I will happily correct the record. The Minister also said:
“The Government do not endorse the wording of the amendment”,
which is now in the Bill,
“and consider that the wording has legal and technical difficulties, so we are reflecting on what should be done.”
Later in Committee, the noble Lord, Lord Bates, said:
“My noble friend Lady Fairhead made very clear our hesitation in the other place when this amendment was proposed, but it is now in the Bill. We see the commitment to all necessary steps in relation to the European Medicines Agency. We have been very clear that we do not wish to see that extended to other agencies, but it is there in the Bill at present”.—[Official Report, 30/1/19; col. 1155.]
Is that still the Government’s position? This is important. The House of Commons clearly instructed the Government, by changing the legislation, that it should have participation in the European medicines regulatory network as its negotiating position. The House of Commons also voted with clarity on the Government’s position on taking out the Northern Ireland protocol from the withdrawal agreement. Both have equal standing; in fact, the change of the Bill has higher standing, but the Government consider both to be mandates.
I am seeking clarity on two points. First, how do the Government see the language of co-operation being made real in practical examples? Does co-operation mean not only that would we be fully aligned, but that we would take all of the regulatory decisions of the European Medicines Agency if we are not a member of it? Would we submit to their licensing and marketing authorisations procedures? Will there be reciprocity in that? How will our separate regulatory bodies interact with the EMA as a third party?
Secondly, what do the Government intend with this Bill? Before we proceed to Report, we need clarity. On that basis, I beg to move my amendment.
My Lords, I just want to say a word on this. I will not add much, because the noble Lord, Lord Purvis of Tweed, has illustrated the nature of the issues here very well. I would just emphasise that, if the Government are looking to vary Clause 6 as it came from the other place, it is important for them to do so while recognising the importance of seeking to maintain and maximise our co-operation and partnership on medicines and clinical matters across Europe. There are issues such as European reference networks for rare diseases, which are valuable mechanisms for co-operation; there is work together on clinical trials and the implementation of the clinical trials directive.
As far as the European Medicines Agency is concerned, none of us realistically expects that, if we leave the European Union, we will have mutual recognition of authorisations between the Medicines and Healthcare products Regulatory Agency in this country on the one hand and the EU on the other. Even if we were to offer to recognise European Medicines Agency authorisations in this country, I do not think that will be offered, because the European Union will not contemplate a third country providing what it regards as the equivalent of its own authorisations with its own control of data and jurisdiction under the European Court of Justice. That is not going to happen.
However, from early on in the negotiations it was clear that we should aim, if possible, for the scientific evaluations presently carried out by the Medicines and Healthcare products Regulatory Agency, prior to the authorisation process, to continue to be done by the MHRA. That is not presently anticipated by the European Medicines Agency, and that is one of the reasons why the Dutch, Germans, French and others are gearing up their medicines regulatory authorities to do much more of this work. They recognise that—to give perhaps the maximum illustration—over 40% of the work on the authorisation of medical devices across Europe is done by the MHRA, and an even higher percentage for the more complex and significant medical devices. It is far from the case that this can be readily adopted and delivered in other EU member states. It is in their interests and ours to continue to work together—something like 80% of the total work is in the scientific evaluation rather than in the subsequent authorisation process.
I know Ministers are continuing to think about how we can achieve this level of co-operation, and I hope that, in that spirit, even if Clause 6 does not end up providing this mandatory structure for the negotiations, Ministers will be forthcoming none the less about how we might make progress in the direction that the noble Lord in his amendment is aiming for.
My Lords, I start by thanking my noble friend Lord Lansley, who has paved the way quite well for some of the remarks I will make on this issue. This amendment, spoken to by the noble Lord, Lord Purvis, raises an important issue which the Government are committed to addressing, and that is our future relationship with the European Medicines Agency.
Medicines regulation is inextricably linked to the UK’s fantastic life sciences sector. The UK has one of the most productive health and life sciences sectors in the world. The sector is critical to the UK’s health and economy, contributing over £70 billion a year and 240,000 jobs across the country.
We have been clear since the referendum result that our overarching aim for medicines and medical device regulation is underpinned by three clear principles: first, that patients should not be disadvantaged; secondly, that innovators should be able to get products to the UK market as quickly and simply as possible; and, thirdly, that the UK should continue to play a leading role in promoting public health. This is why the Government, in their White Paper The Future Relationship between the United Kingdom and the European Union, set out their aim to secure active participation in the EMA. The noble Lord, Lord Purvis, used the word “imperative”, and that is very much noted on this side.
However, the clause binds our hands ahead of negotiations with the EU on our future relationship. We have always been clear that continuing to share our skills and expertise is the best outcome for UK and EU patients. The noble Lord, Lord Purvis, cited part of the political declaration; that declaration underlines the UK and EU’s mutual commitment to working together in the future on medicines regulation, and to negotiating the UK’s ongoing co-operation with the EMA. That particular area was raised by my noble friend Lord Lansley, but I will go slightly further, because the noble Lord, Lord Purvis, picked up on the word “co-operation”. I say again that we want to retain a close working partnership with the EU to ensure that patients continue to have timely access to safe medicines and medical devices. The political declaration explicitly makes allowance for a spectrum of outcomes and commits both the UK and the EU to exploring the UK’s relationship with the EMA.
The Government, as I said earlier, set out their ambitions for the future relationship in the July White Paper, making it clear, again, that we are seeking participation in the EMA. I can provide the Committee with some additional detail, however, some of which has been alluded to by my noble friend Lord Lansley. The UK is seeking an agreement that will allow the UK regulator to be able to conduct technical work, including acting as a “leading authority” for the assessment of medicines, and participating in other activities, such as ongoing safety monitoring and the incoming clinical trials framework.
I hope these brief comments provide enough reassurance to the Committee. Given that continued EMA participation is already a negotiating objective of ours, we do not believe that this amendment is necessary. The Government are already committed to ensuring that, after we leave the EU, UK patients can access new medicines at the same rate as they do now.
I am most grateful to the Minister for giving way. A case in point that my noble friend Lord Lansley was talking about is not just medicines but vaccines. Apparently, in this country we no longer make any vaccines for human use, but all the European vaccines from all around the world are vetted by the Moredun Research Institute in Edinburgh. It will no longer be able to vet vaccines, and it has been told to destroy all its cultures if a no-deal Brexit goes through.
I very much take note of what my noble friend has said. I have no doubt that that point, and so many others, will be taken into account when these negotiations commence.
I wanted just to clarify one point that the noble Lord, Lord Purvis, raised on the issue of “all necessary steps”, which is engrained in the clause to which his amendment refers. It is a point that the Government are reflecting on, but I absolutely reaffirm our objective of as close a relationship as possible with the EU in this particular subject. I hope the noble Lord will withdraw his amendment on the basis of those remarks.
I am grateful to the Minister for his characteristically thorough response, except that we still have Clause 6 in limbo to some extent. I am not sure how long the Government can reflect on the language of their Bill, which the Government brought to the House without stating whether they intend to bring forward amendments on Report to change it. I think the noble Lord, Lord Lansley, made a very good point: this is a very significant issue that requires a degree of forewarning on what the Government’s intentions will be. I suspect we may just have to wait; we have pressed the Government enough at this stage with regards to getting some clarity on that point. It is frustrating that we still have some question marks that are being raised over the language of the Government’s legislation.
On the second point, I understand what the Minister says. There will not necessarily be any easy answers to this, but my point was that there can well be a marked difference between co-operation with, and participation in, European institutions—I think this is the point the noble Lord, Lord Lansley, was making, and I share his view. The European Union has been clear on that in the past. Indeed, on the previous day of Committee, my noble friend Lord Foster took part in the debate on communications and the regulatory bodies in the European Union for that. More recently, the European Union has changed its position to make it even harder for third countries to participate in the European agencies. Our bodies co-operate with the Food and Drug Administration in the United States. We have co-operation which is very deep, but when it comes to the key elements of whether medicines or vaccines are licensed, whether the research will be accepted on a reciprocal basis, and whether data is shared and can be legally shared between the two regulatory bodies, there are still issues that need to be identified.
It is reassuring to know that it is the Government’s intent, from the White Paper onwards, that we would have active participation, but at the moment it seems as if the political statement trumps that because it is more recent. However, the Government have reissued their position on active participation and, in advance of waiting to see what they bring forward on Report—if, indeed, they do so—I beg leave to withdraw my amendment.
Amendment 67 withdrawn.
Amendment 68 not moved.
Clause 6 agreed.
Amendments 69 to 74 not moved.
75: After Clause 6, insert the following new Clause—
“Objective to reform WTO procedures
(1) It shall be an objective of an appropriate authority representing the United Kingdom in meetings of the World Trade Organisation to ensure that the World Trade Organisation modifies its procedures in a way which secures the supremacy of international treaties arrived at under the auspices of the United Nations over trade agreements not arrived at under the auspices of the United Nations.(2) The Secretary of State must lay before each House of Parliament at least once in each calendar year following the commencement of this section a report on any progress made in achieving the objective under subsection (1).”
My Lords, I shall try to keep this brief, so I will not read out my amendment. We have heard a lot about the WTO over recent months; it is becoming the lazy answer to a lot of complex questions about how we withdraw from the EU. Some people are using the phrase “WTO terms” as if they are magic words that will solve all our problems. I was relieved to see the International Trade Secretary pouring cold water on those fantasies this weekend and I hope the Minister will take this opportunity to reinforce these statements in her response to my amendment.
For people such as me, who have spent most of their lives extremely sceptical of unaccountable, international governance structures, WTO terms are not the answer to our problems—they never have been. In fact, they are part of a global giant which undermines democracy and restricts the sovereignty of nations to implement their own policies. I find it hard to comprehend how anyone can complain about the EU being undemocratic and then champion the WTO as our saviour, using WTO terms to justify the most destructive and damaging route out of our current political stalemate. Many Greens, environmentalists and social justice campaigners have rallied against the WTO for decades and my amendment asks our Government to work towards adding some accountability to the WTO for reasons I will outline.
After the Second World War, there were two parallel, somewhat competing, initiatives which sought to establish an international system of rules and norms. One of these strands of thought gave rise to the United Nations, which has pursued peace, social development, environmental action and anti-colonialism as some of its fundamental aims. The opposing project established the Bretton Woods agreement, birthing the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade, which later became the WTO. This second strand of international co-operation placed the economic interests of the West, particularly the United States, far above the demands of developing countries, which were represented in the United Nations. Empires were dismantled but international institutions continue the exploitation of former colonies and the extraction of their precious resources. It is in this context that the WTO and the UN can be seen as somewhat at odds with one another.
More recently, the WTO has protected international economic management and trade from the environmental and social initiatives of the UN. I do not want to overstate the point because there are some WTO rules that allow environmental and other pressing needs to be addressed, but the WTO’s overarching purpose remains promoting international trade and eliminating barriers to trade. There are a number of examples of WTO rulings that interfere with environmental initiatives. The WTO intervened in an initiative of the Indian Government to rapidly increase the country’s production of solar panels and create a strong climate policy. Other WTO decisions have prevented companies adopting conservation rules that would protect endangered and declining species, such as dolphins, sea turtles and tuna.
There are many more examples of the WTO interfering with national sovereignty and international co-operation. The WTO has recognised that there are conflicts between itself and multilateral environmental treaties. It has identified 20 international environmental treaties that it considers could affect trade, such as banning trade in certain species or products—perhaps ivory, for example. The WTO notes on its website that no formal trade disputes have been brought with regard to these multilateral treaties, but I suggest that it is only a matter of time and must be playing on policymakers’ minds when making decisions.
The unique and complex problems posed by climate change, environmental damage and species loss, are not restricted to national borders. These issues are more important than trade. We know that there are now only—I was going to say 12 years—11 years and eight months to make fundamental changes to our economies if we are to have any hope of avoiding catastrophic climate change and ecological collapse. The fact that the WTO itself recognises that there is conflict between its rules and the multilateral treaties designed to avoid environmental disaster is proof that urgent reform is needed.
Our Government talk a good talk on the environment, but at some point they must deliver. That is why, with my amendment, I am asking the Government to negotiate to ensure that UN treaties are given priority and not undermined by the WTO. I hope that this amendment will be supported by everyone who recognises the urgency of the issues facing our planet and the need to reform global governance in response. I beg to move.
My Lords, I thank the noble Baroness, Lady Jones, for providing this opportunity to discuss these issues by tabling her amendment.
With regard to the World Trade Organization, we operate under WTO terms if we are not in a free trade agreement—that is, if we are not a part of the EU or currently part of an FTA. For example, WTO terms operate for most of our current trade with the US. On the noble Baroness’s point about how we do not wish to leave without a deal and move exclusively on to WTO terms, that is the subject of a future amendment, to be discussed later this evening. I stress once more that that is not the Government’s priority, which is to secure a deal.
I will touch on the reform of the WTO. This is a key global priority, which was highlighted in recent meetings of the G20 and mini-ministerial summits held in Canada last year, and at the annual meeting of the World Economic Forum in Davos. I agree with the noble Baroness that WTO reform is essential to address the functioning of the organisation, including the strengthening of its negotiating arm. Indeed, when I attended the OECD Ministerial Council Meeting in Paris last year as the UK Government’s representative, I emphasised the importance of, and the UK’s commitment to, advancing WTO reform discussions.
This is important, given that trade discussions relevant to some of the most critical global issues, such as climate change—which the noble Baroness so passionately commented on—are currently stalled. This House discussed the current state of the WTO’s environmental goods agreement in Committee the week before last. I restate that we are strongly in favour of seeing these negotiations restart and of playing a key role in them, given the important contribution this agreement would make to tackling climate change, which is a key priority for the Government and this country.
However, the UK cannot require the WTO to modify its procedures in a way that secures the supremacy of international treaties that were arrived at under the auspices of the UN over trade agreements that were not. The WTO and the UN, I am informed by our lawyers, are two distinct independent organisations, with two distinct bodies of international law. The WTO is not part of the UN system and exists independently in international law. That position is combined with the fact that there is an established principle of international law that there is no hierarchy of sources of international law. Reform of the WTO therefore requires reform of the WTO’s own treaties, which has nothing to do with UN law, nor can it. Trade agreements, too, whether they seek to reform the WTO, or are secured bilaterally, must comply with the relevant law, which is WTO law. They exist outside UN law. I hope I have provided clarity on the legal situation in this area.
My Lords, I think I have reiterated just how important climate change is to the Government’s priorities. The question is: what is the appropriate and most effective way to discuss climate change and to get rules put in place? There are differences of view over the most effective mechanisms, and many would say that trade agreements are not the right place. Others are more effective on that point. However, as we have tried to do and as the noble Baroness will have seen with our most recent trade agreements, such as CETA, we also include references to environmental standards.
I am trying to help both sides come to an arrangement. I do not think that the noble Baroness whose amendment we are talking about is trying to set out a route map for the Government—if she is, she is doing it in a very gentle and responsive way. I think she is struggling, as we all are, with the question: if you want to make changes—which she so evidently does, and which a lot of us would support—what is the best way of doing that? Obviously, the noble Baroness has made it clear that you can do it on three levels. You can do it on a case-by-case basis as trade agreements come up, inserting the points you want to make. Alternatively, you can go through the United Nations, which is separate but still obviously influential as regards the wider tone and context in which these matters operate. But the central point, as the noble Baroness said, is that the WTO itself is in some difficulty. It may be all we have and the only way we can do it, but is the Minister seized of the arguments being made that the status quo is not satisfactory in so many ways that there needs to be some sort of movement around the whole issue, but presumably focusing on the WTO, and does she support that?
I thank the noble Lord for his intervention. Absolutely; I hope I restated that the WTO needs reform in areas such as digital, speed of processing and a number of others. We will continue to be an active participant in those discussions. Therefore, I can say yes to reform. On the particular area of climate change, we also have a clear objective: the Government want to improve the culture of climate change and the approach to it. It is about what is the best way to achieve that, and that is what we are focusing on. With those clarifications, I ask the noble Baroness to consider withdrawing her amendment.
I thank the Minister for her answer and I thank the noble Lord, Lord Stevenson, for suggesting that I am in any way gentle; that is not a word normally applied to me, so I feel flattered.
I disagree so strongly with the government line that trade agreements are not the place to discuss, promote or encourage any sort of climate change mitigation measures. We cannot ignore any option for ameliorating what will be a climate crisis in a very short time. Therefore I very strongly disagree on that but, having made that disagreement clear, I beg leave to withdraw the amendment.
Amendment 75 withdrawn.
Clause 7 agreed.
Amendment 76 not moved.
Clause 8 agreed.
77: After Clause 8, insert the following new Clause—
“Territories forming part of a customs union with UK: amendment to the Taxation (Cross-border Trade) Act 2018
(1) The Taxation (Cross-border Trade) Act 2018 is amended as follows.(2) Omit section 31(5) (customs union with UK: import duty).”
Although this group of amendments points in different directions, the amendments have a common starting point, and it is therefore not inappropriate that they should be debated together. Amendment 77 is in my name, joined by other noble Lords, and others have put their names to Amendments 78, 79 and 80, to which I shall also speak.
The history is important, because it raises a wider point than we have recently discussed, although we have from time to time touched on it: the fact that the Taxation (Cross-border Trade) Act and this Bill are really two sides of the same coin. They deal with aspects of trade which need to be in place in the unfortunate event that we crash out of the EU, but they are also pointers towards how we would carry out our trade policy and activity in the event of either crashing out or, as the Government would wish, having an extended period during which various other agreements would be added to the withdrawal agreement and political declaration.
The question that underlies the amendments is: are we in a good place to take forward those future discussions, given the two pieces of legislation that we are looking at? Because of how the Taxation (Cross-border Trade) Bill was defined as it went through the other place, it came in a form expertly handled by the Minister but which allowed us only a limited degree of comment and an occasional question, which he was of course well able to answer but which did not allow us to either amend or question in any serious way how the Bill was framed or where it pointed.
In addition, at a very late stage in the process in the Commons, the Government accepted a group of amendments tabled by the rather quaintly named European Research Group which, to many people, were tabled very late, rather surprising and subject to little debate—they certainly did not go through Committee. So the Taxation (Cross-border Trade) Bill, unscrutinised by your Lordships’ House, was not even scrutinised to any great extent in the Commons after the later amendments arrived which changed its nature.
At the time, we felt that there were issues that could have been raised in debate, but we were unable to do so. Of course, the presence of the Trade Bill before your Lordships’ House and its ability to amend previous legislation opens up the opportunity to make some changes, if the House feels that to be an appropriate way forward.
In crude terms, Amendments 77 to 80 would reverse the late amendments made by the European Research Group to the Taxation (Cross-border Trade) Bill in the other place. In so doing, obviously one looks at the impact that those amendments had and tries to frame our amendments in relation to both the Bill and wider policy arrangements. Briefly, it is fair to say that the conclusion that we on this side have come to is that those amendments do not strengthen our position in general terms and that it should be the duty of this House carefully to consider whether they should be removed, because that would return the Bill to a much better place in terms of where we may require powers set out in the Taxation (Cross-border Trade) Act to be utilised.
For example, Amendment 77 removes the restriction in Section 31 on creating a customs union with the European Union by requiring a separate Act of Parliament to be passed before the designated powers could be used. We think that that should be amended because the restriction under the previous amendment will make it difficult for the Government to negotiate a customs union—or even the customs union—should that be the way that they wish to move in forthcoming discussions.
As it stands, the collection of taxes and duties on behalf of the European Union would be banned unless there are reciprocal arrangements, but Amendment 78 would change that. I think the debate has moved on here, and it could be argued that Amendment 78 is probably the least important of the group. Nevertheless, it was a change perhaps made in haste and, at leisure, the Government may come to the view that it is not the best way to try to open a negotiation if the possibilities one is offering are already restricted by the Act.
Amendment 79 would make it legal for the Government to enter into arrangements that would see Northern Ireland forming a separate customs territory from the rest of the UK. Although I gather that this has support from the DUP, it still makes it a very different situation and context for any discussion about the backstop arrangements. Other noble Lords may expand on that issue. As it stands, the Bill seems again to cut off an opportunity for future discussion and debate—which is even more important than when the amendments were tabled.
Amendment 80 concerns a rather significant change to the way in which VAT is charged in a customs union. It is perhaps of some interest to your Lordships’ House that we have not, within the duopoly of legislation with which we are currently dealing—the Taxation (Cross-border Trade) Act and the Trade Bill—dealt with the question of why the VAT rules that operate within the EU have not also been subject to attention. It will be interesting to hear the Minister’s response.
Of course, VAT is dealt with under separate rules under a separate agreement among the countries in the EU; it is not part of the EU as such, nor part of any other arrangements which normally interpose with trade. To that extent, the Schedule 8 arrangements in the Taxation (Cross-border Trade) Act are distinct and different. It is therefore important that we should have some response from the Government about how this should be taken forward.
The amendment proposed by the European Research Group and inserted into the Act is not the only story that needs to be told on this, but we may not wish to go all the way down that route, although expertise is available should we wish to do so. The Government should be very clear about how they intend to take this forward. I beg to move.
My Lords, I support the amendment in the names of the noble Lords, Lord Stevenson and Lord Purvis, and the noble Lord, Lord Bowness, who asked me to mention that he is unable to be here but that he continues to support the amendments. The noble Lord, Lord Stevenson, introduced the amendments admirably and explained very clearly why those parts of the Taxation (Cross-border Trade) Act which we seek to change are either unnecessary or damaging. He is absolutely right to say that the least important is probably the European Research Group amendment passed at a very late stage in the Commons, which we had no chance to intervene on effectively when it came through this House because it was a money Bill.
However, one part of it makes collection of customs duties possible only if the European Union collects customs duties and gives them to us. The original idea was that we would collect duties on behalf of the European Union; this was an essential part of the—now lost in the mists of time and buried deep under the soil—Chequers plan. The European Research Group amendment, frankly, neutered the Chequers plan, but as the European Union was never going to accept it anyway and made it clear at Salzburg and later that it would not accept it, there seems no point leaving it on the statute book.
The last point made by the noble Lord, Lord Stevenson, relating to Amendment 80 about VAT is actually extremely important. Anyone who seriously believes that preventing the British Government maintaining a VAT union, if you would like to call it that—a system that enables trade across borders between us and the European Union without the need for extremely elaborate VAT calculations, inspections, payments and so on—and doing away with that which exists now and going back to where we were before that existed will not put a huge amount of friction on our trade simply does not understand the realities. The VAT aspect is just as important as the tariff aspect and is separate from it. Unfortunately, the European Research Group—in its usual extraordinarily constructive way—has managed to insert something here that would be really damaging to our interests if it is sustained when we go into negotiations with the European Union about future trade arrangements. The only sensible thing to do—I hope the Government will give careful thought to this—is to get rid of this now and take it out of the Taxation (Cross-border Trade) Act.
We cannot be certain now what the Government and the European Union will do when negotiating our future trade arrangements. The Government are quite right to say they cannot guarantee how that will go. But they can remove this great ball and chain around their ankle, put there by the European Research Group, which would be really damaging to us if it ever came to be a central part of our future trade relationship. To say that relationship will be frictionless if the VAT aspect is not dealt with is just a bad joke, frankly, if you have to have VAT inspections, payments and all that sort of thing on goods that are passing. After all, the VAT levels are different in every member state, and the current system enables us to live with that without slowing down or impeding trade; that would go. So I really hope the Government—if not tonight, at least before Report—could say that they will take out that amendment, which should never have been allowed in. This is the single most important amendment in this group of four.
My Lords, I am very happy to have my name attached to these amendments. It shows the Government there is a degree of cross-party consensus that it is important that these aspects—which, as the noble Lord, Lord Stevenson said, did not get the level of scrutiny they deserved in the Commons—get scrutiny in Parliament. This is after the event, because in effect we are scrutinising legislation, but there is no harm in a bit of post-legislative scrutiny of the taxation Act. In an exchange the Minister and I had during the very brief proceedings in this House on the Taxation (Cross-border Trade) Bill, the Minister said there would be ample opportunities for scrutiny, such as during the upcoming Trade Bill, so we are taking him at his word and offering the Government a chance to give a full-throated defence of the ERG amendments passed in the Commons.
As the noble Lord, Lord Hannay, said, there are perhaps some unintended consequences of these amendments that we now need to properly scrutinise. It is an extraordinary position we find ourselves in where Members of the Government’s party moved amendments to the Government’s Bill that would in effect render the Government’s then policy on the facilitated customs arrangement largely inoperable. Now those same Members are meeting the same Government today to breathe new life into the very systems of a facilitated customs arrangement that they themselves rendered largely inoperable by their amendments. I was struggling for an analogy on the way to the Chamber this afternoon. I could not find one as ridiculous as the position we now find ourselves in. If it is the purpose of the so-called alternative arrangements working group that is now meeting to try to find solutions to the problems that they themselves created, I do not think that any alternative arrangements will come out of this working group.
The ERG amendments now sit most uncomfortably with the process under way, so it is right that we give them proper scrutiny. The Government say one of the amendments they accepted—that there would need to be a stand-alone statute for any customs arrangement agreed with the European Union—is not necessary for any other trade agreements. If I understand it correctly, the positon of the Government is that the free trade agreement with the European Union would undergo a CRaG process, which is an affirmative process to be approved because there is a treaty, but a secondary customs arrangement that would come with that would have to have a stand-alone statute. Why? What is the Government’s rationale for that? In the Commons, the Government simply said they thought it would be appropriate that there would be a stand-alone statute. I do not understand why, so I hope the Government might be able to tell us why that would be the case.
Clause 54 of the Act, which was an amendment, makes it impossible to operate under the Union Customs Code. The facilitated customs arrangement being aligned with the Union Customs Code and seeking to be operationally integral to it has been rejected by that amendment. Given that the withdrawal agreement is based on a customs territory which would be operating alongside Ireland, which would be operating the Union Customs Code, I do not understand how the Government see this working. Even more than that, in the withdrawal agreement the Government say that a customs territory would be operating with the Union Customs Code at the end of the implementation period in 2021. Even in theory that is questionable, given the position in the Conservative Party at the moment. But the European Union has put back the full implementation of the Union Customs Code until 2025, so even if the Government got their way it would not be operable for an extra four years after the end of the implementation period. So unless one of the alternative arrangements is to ask the European Union to accelerate its customs code process by four years, I am not sure how that will be able to be operational either.
I hear what colleagues have said about reciprocity, but on the flight down from Scotland this morning I read the HMRC guidance for businesses in the event of no deal. The Government’s advice to businesses, both here and in the EU, includes registering with EU member states’ regulatory bodies, for British businesses that are exporters, so that they pay their VAT to them. Here is the advice on parcels—not a theoretical or esoteric example, but an example now—for anybody in this country making an online purchase now for delivery in April, which is probably many thousands of people. I quote from the guidance for parcels to be delivered to us if there is no deal:
“For parcels valued up to and including £135”—
VAT will be levied on that, because it will no longer have the low-value consignment relief—
“a technology-based solution will allow VAT to be collected from the overseas business selling the goods into the UK … Overseas businesses will charge VAT at the point of purchase and will be expected to register with an HMRC digital service and account for VAT due”.
That seems to be in contravention of the law. Where is the reciprocity on that? Also, how many overseas businesses have so far registered with HMRC? How are they being informed, in their member states, that they need to? Unless that happens and there is an agreement, anybody making an online purchase with a parcel coming from the European Union will be paying more and may not even receive it in the way they are expecting.
It is important that the Government are clear about reciprocity. Not only is there a need for scrutiny, as well as confusion on the VAT aspect that clearly exists for businesses, but, as the noble Lord, Lord Hannay, indicated—and I agree with him—VAT is just one element of the trading relationship. It is only one element of the multilayered and complex transactions that exist across borders. Checks to ensure that the proper VAT levy is going to be applied are part of a process on rules of origin, on whether the tariff barriers are being circumvented or whether the product comes from a country with which we do not have a trading relationship, et cetera. All have to be underpinned by clear legal frameworks, not by assertions.
I conclude with one statistic that makes the case for a clear risk register for businesses as well as Governments to operate the necessary checks. This is an example from the Republic of Ireland, which trades with Northern Ireland. There are 1.5 million declarations annually through the customs system. From the Irish Government’s position, if there is no customs union with Brexit, that will increase to 33 million. The risk register provides that 2% of all those consignments need to be physically inspected and 6% need to be looked at for a documentary check. Now, 2% of 1.5 million is a burden in itself, but we all know what the calculation for 33 million is. That raises issues around VAT, customs compliance and the other checks that will be necessary. The Committee and the country deserve clarity from the Government. The clock is ticking and advice is already being provided, so businesses need that information now and that is why the Government should either defend these amendments or, as they may do with Clause 6, bring forward their own amendments to clarify and correct the situation.
My Lords, following the excellent speeches we have just listened to, beginning with my noble friend Lord Stevenson, I support this group of amendments and appeal to the Minister seriously to consider reversing the ERG amendments, not just for the detail and well-founded points and reasons that have already been made, but because the Government did not choose to accept them. They were foisted upon them, because of the arithmetic and politics of the situation, and wanting bigger fish to fry. As a result, we have a defective Bill, even by the Government’s own objectives. I ask the Minister seriously to consider on Report, rather than facing a possible vote and even defeat given the cross-party support that exists, getting the Bill back to where it was before the ERG plundered it.
My Lords, what connects this group of amendments is that they are European Research Group’s amendments in the Commons that were accepted by the Government. I do not think they should be treated by my noble friends on the Front Bench as if they all had the same merit or otherwise.
The single UK customs territory, which is now Section 55 in the Taxation (Cross-border Trade) Act, specifies that there should not be a separate customs territory between Northern Ireland and Great Britain. Frankly, I cannot see the circumstances in which this House or the other place would find this acceptable. That being the case, I cannot see any merit in this House seeking to ask the other place to think again about that issue. I do not think anybody in the other place is proposing to revisit it, so my suggestion is that we do not go down the path of thinking that Amendment 79 has merit.
I do not disagree about Amendment 80. I listened with care, but I would not like to try to explain it to somebody else and I am sure the noble Lord, Lord Hannay, is right about that.
I support Amendment 77 because I cannot see any good grounds for why legislation should require the Government to seek new primary legislation to have a customs union of any character with the European Union in the future. If, for example, we want to have a customs union with the United States of America, it could be done by an Order in Council. There is no basis for a distinction of that kind, other than the politics of the moment, and legislation should not be governed by the politics of the moment. If there is a proper process for the scrutiny and approval of a customs union, it should be set out in legislation and apply to any other country with which we establish a customs union and not discriminate and impose additional requirements specifically in relation to the European Union.
That just leaves Amendment 78. I confess I saw this being slightly of the moment, in that it was intended to entrench into statute the provisions in the Chequers White Paper relating to reciprocity in the collection of import duties on behalf of the European Union by the United Kingdom. But as I understood the White Paper, it did not necessarily mean that the European Union would collect import duties on our behalf. There was some suspicion on the part of our colleagues in another place that the negotiations might lead to such an eventuality, and that we would collect duties for the European Union but they would not collect duties for us, so they put this into the legislation. Frankly, that is not where the negotiations are now. We are either in a customs union or we are not; I do not think we are going to be in some sort of asymmetric customs arrangement of that kind. Nobody is debating that presently.
Amendments 77 and 80 have merit. I hope they are not going to be pressed at this point, but my noble friends should certainly think carefully about amending them when we come to Report to enable the other place to think again.
We discussed the customs union last Wednesday. That was the day before an interesting report was produced, principally by German economists at the Ifo Institute. I was encouraged by it, not least because I agree with it. It basically said that, to break the deadlock, both sides have to move from their red lines. In the United Kingdom’s case, that means no longer excluding the possibility of being in a customs union with the EU. In the European Union’s case, it means not treating such an arrangement necessarily to mean that the United Kingdom has to remain a member of the existing customs union or the Customs Union Code. They therefore propose the establishment of a European customs association, in which both the United Kingdom and the member states of the European Union would have voting rights. As a consequence, in the event that the European Commission operated as the representative of the European customs association, it would do so based on a mandate in which the United Kingdom continued to exercise the same kind of authority it presently exercises on the European Union’s customs arrangements.
This customs union would extend only as far as the present custom union applies inside the European Union. The document Hard Brexit Ahead: Breaking the Deadlock contains precisely the kind of discussion we have been having. It is not about whether we are in the customs union; it is what a customs union between the United Kingdom and the European Union might look like in the future.
It is doubly encouraging to see that not only put forward but put forward by prominent German economists. I hope that Ministers will continue to look at that in the time available before they have to come back and talk once more to the other place about what the next meaningful vote should be on.
My Lords, I support Amendment 77 for the reason that the noble Lord, Lord Lansley, has just given, and I strongly support Amendment 80, for the reason that my noble friend Lord Hannay gave.
Amendment 78, however, is very strange. I support it, but we are in Alice in Wonderland territory here. It is an entirely academic interest, because it seems to me implausible that Mr Barclay and Mr Paterson, and their high-powered alternative arrangements group, would come back to this alternative arrangement—the Chequers proposal—given that they ambushed the Government to take it out by their amendment to the taxation Bill.
It was always rather a fanciful idea anyway. In its brief life, it had several forms. First, it was proposed as a reciprocal arrangement. The foreigners would have to clog up Rotterdam, Antwerp, Hamburg and Bremen collecting our tariffs and operating our quotas, segregating our goods from goods going to the EU, which would be charged EU tariffs and subject to EU quotas. Once segregated, in some magic way, our goods would then proceed to the United Kingdom, having paid UK tariffs at their first European port of entry. That was never going to happen.
The second form, once noises from Brussels had been heard, was that we would do it for EU goods but the EU would not be required to do it for our imports at its ports. It was that, I think, which provoked the ire of the ERG: why should we collect foreign tax? But there was no possibility of the EU at any stage agreeing that we should collect its tariffs at our ports.
There are several degrees of lunacy here, and we have this very strange prohibition on the statute book. I think that the statute book should not contain nonsenses, and so I support the amendment. However, it does not matter. The EU would never agree this proposal in any of its incarnations. Mr Paterson, Mr Barclay and these other trade experts are not going to come up with it as an idea in the alternative arrangements committee, because they were dead against it. Therefore, although I support the amendment, I do not think one need spend a lot of time on it.
My Lords, I rise more in hope than expectation of being able to persuade your Lordships. I pick up the sense from the Committee that this is probably something that your Lordships will want to return to in more depth on Report. Perhaps the best service I can offer at this stage is to put on record the Government’s position, respond to some of the precise points and then await further developments as they may unfold between now and Report.
Amendments 77, 78, 79 and 80 relate to changes passed in the other place during the passage of the Taxation (Cross-border Trade) Act 2018. This Act is important legislation as the UK leaves the EU. It enables the Government to create a stand-alone customs regime by ensuring that the UK can charge customs duty on goods, set and vary the rates of custom duty, and suspend or relieve duty in certain circumstances.
I turn now to the substance of the original amendments to the Act, which these amendments seek to remove. Amendment 77 relates to Section 31(5), which requires further parliamentary scrutiny in the event that the power under Section 31(4) is used to implement a customs union with the EU. The Government support the principle of further parliamentary scrutiny in this case. My noble friend Lord Lansley suggested that this was perhaps reflective of the politics of the movement. As a distinguished former Leader of the House in another place, he will be very familiar with how that side of things works. However, as this House is aware, the Government have made it clear that they are not seeking to be in a customs union with the EU as part of our future economic partnership—I say that without wishing to reopen the many debates we have had on “a” and “the”.
It is important to reflect why the Government have taken this view and to consider what leaving the EU means. It means the ability to strike out on our own to forge new trade deals. In order to do this, one important element is to have the ability to set our own tariffs. Being in a customs union would deny the UK this ability and fundamentally undermine our capacity to negotiate new trade deals with old friends and new partners.
The noble Lord kindly outlined, as he saw it, the way in which Amendment 78 arrived, referencing first the Bill and then the amendment. The Government have been clear in their White Paper that the arrangement they are seeking will ensure that both the UK and the EU get their fair share of the revenues from the rest of world trade. Section 54 of the Taxation (Cross-border Trade) Act is in line with the proposals that the Government set out with a view to achieving just that.
Turning to Amendment 79, Section 55 of the Taxation (Cross-border Trade) Act 2018 requires a single UK customs territory. This is a statement of government policy and ensures that the Government will not act incompatibly with the commitments made in the joint report of December 2017, where they committed to protect the constitutional integrity of the UK.
I apologise for interrupting the Minister. I want to add perhaps another degree of lunacy to the several mentioned by the noble Lord, Lord Kerr. New Section 31 of the taxation Act, which Amendment 77 seeks to rectify, contains the following phrase:
“In the case of a customs union between the United Kingdom and the European Union”.
The Government said that that would not apply because the customs territory they are seeking to have will not be a customs union. So even if just to make the legislation neater, it should be taken out.
On defining the scope of the single customs territory, which we are seeking to do, the Government’s Legal Position on the Withdrawal Agreement, command paper 9747, says it is that,
“under which the UK aligns itself with the Union’s external tariff and there can be no tariffs or quantitative restrictions on imports and exports between the UK and the EU. The single customs territory therefore constitutes a customs union for the purposes of GATT19, but it is not the EU’s customs union as defined in Article 28 TFEU”.
It can either be one thing or the other, but the Government’s own document on the legal position says that the customs territory will be a customs union.
I will make some progress, but I will come back to that point—when inspiration arrives.
No UK Government, regardless of their political leanings, could ever accept such a carving up of the United Kingdom—I am referring here of course to the division between Northern Ireland and the Republic of Ireland. Indeed, on 15 October, in another place, the Prime Minister said:
“We have been clear that we cannot agree to anything that threatens the integrity of our United Kingdom, and I am sure that the whole House shares the Government’s view on this. Indeed, the House of Commons set out its view when agreeing unanimously to section 55 in … the Taxation (Cross-border Trade) Act 2018 on a single United Kingdom customs territory, which states: ‘It shall be unlawful for Her Majesty’s Government to enter into arrangements under which Northern Ireland forms part of a separate customs territory to Great Britain.’ So the message is clear not just from this Government but from the whole House”.—[Official Report, Commons, 15/10/18; col. 410.]
Turning to Amendment 80—before I come to some of the points raised during the debate—the Government’s position is that they will not seek to be in a customs union with the EU. We have debated this issue in this House and in the other place throughout the passage of this Bill—leaving aside the very clear response that is on its way to the noble Lord; he should be prepared for that. As has already been highlighted to the House, at Report stage in the Commons, MPs rejected an amendment seeking to keep the UK in a customs union with the EU.
On the specific points relating to import VAT, it is clear that the Government are highly cognisant of the concerns raised. I will deal with that point now because the noble Lord asked some very good questions on VAT treatment, and it is good to have an opportunity to put the position on the record. Goods from third countries are treated as imports, with VAT due accounted for on import or by the 15th of the following month as duty of customs. This means that, unlike acquisitions, there is a cash-flow impact because traders have to pay the import VAT and potentially recover it later when they submit their VAT returns. It also means that there needs to be an option to pay import VAT on the border, as not all businesses have the necessary guarantee to defer payment until the following month. Generally, import VAT is paid sooner on goods from non-EU countries than on goods from EU countries. This provides a cash-flow benefit to companies importing goods from the EU compared to businesses that import from non-EU countries. Without an UK-EU agreement to retain this treatment, goods entering the UK from the EU would be treated as imports and would be subject to the same rules as businesses moving goods from non-EU countries. This would mean businesses paying VAT on imports from the EU sooner, affecting their cash flow. The Government published a series of technical notices in August 2018 to help businesses prepare for the unlikely event of a no-deal scenario. The VAT technical notice, “VAT for businesses if there’s no Brexit deal”, announced that the Government will introduce postponed accounting for import VAT on goods brought into the UK.
The noble Lord, Lord Stevenson, asked why we accepted Section 54—originally New Clause 36—of the Taxation (Cross-border Trade) Act 2018. The Government did so because it was consistent with our position. It requires the Government to negotiate a reciprocal arrangement for the collection and remittance of VAT, customs and excise duties. The Government have been clear that both the UK and EU should agree a mechanism for the remittance of relevant revenue. The Government set out in their July White Paper that they propose a revenue formula that takes into account goods destined for the UK entering via the EU and goods destined for the EU entering via the UK.
The noble Lord, Lord Purvis, asked whether the customs territory is a customs union under GATT, and he deserves a full answer to his detailed question, so I commit to writing to him. That should be very clear to the noble Lord and all Members of the House—well worth waiting for.
I ask this question as someone who is not a politician and who therefore sometimes gets quite confused about the repetition of entrenched views, which have led us to the undoubted stalemate that we are in. This really concerns the point made by the noble Lord, Lord Lansley. I heard the Minister’s response, but it seems to me that everything I hear about Brexit suggests that the Northern Ireland backstop is a real sticking point. Is it not conceivable that, to get around that problem, the Government might have to consider some form of customs union?
It is a challenge when someone with the noble Lord’s intellect begins a sentence by apologising for not being a politician and then asks for clarity at the present time. We are discussing this legislation, but we all know that we are in one of the most fast-moving, dynamic episodes of negotiation that this country has ever entered into. We are gradually working our way through. The White Paper was published at a moment when we were seeking to flesh out exactly what the Government’s position was in response to the Commission saying, “We don’t know what the UK’s position is; we don’t know what they want”. Therefore, the White Paper was introduced at that point. Then there was the clamour for clarity for business—what it would do in the event of no deal—so the technical notices were issued. Then, we got to the position where we reached an outline agreement with the European Commission in December, against many people’s expectations, along with heads of terms for what a future economic partnership might be. That was then presented to the other place and roundly rejected. Therefore, we have now begun another process, so I readily accept that if one wants to score points by stopping the clock at various stages along the process and pointing to certain inconsistencies in it, the Government are pretty easy fare for that.
The Minister is making a very gallant effort and I applaud it. I enjoyed many of the things he said, particularly when he referred to a no-Brexit deal. I thought that was a very encouraging concept. I really cannot let him get away with where he is now, in this fast-moving situation he describes. Put yourself in the place of the EU 27: what are they supposed to think when the Prime Minister scuttles her own fleet? She orders her party to vote down the backstop in the treaty. The backstop is 21 articles, 10 annexes and 172 pages. The Prime Minister’s officials have negotiated that line by line, month by month and it is there because we asked for it. Then she decides that the best thing to do with it is to replace it with alternative arrangements, which are now being devised by Mr Owen Paterson and Mr Stephen Barclay. The Minister tells us that this is a fast-moving situation and it is quite hard to keep up with it, but there is nothing happening in Brussels but sheer astonishment at the failure of our system.
That is the noble Lord’s position on this: the reality is that the Prime Minister is seeking an agreement that can command a majority in the other place and that requires compromise. That is what the agreement represents. The House made its view on the withdrawal agreement clear; she is now seeing whether that can be addressed with the Commission. Personally, I wish her well and every possible success, as opposed to my own mis-speaking. Lest it be on the record, I am sure that Sigmund Freud would have observed that perhaps I had momentarily let slip an inner feeling, which, of course, has nothing to do with the position of Her Majesty’s Government, which I consistently seek to put forward from this Dispatch Box and proudly support.
The noble Lord, Lord Purvis, asked about support for government amendments that preclude the facilitated customs arrangements. We would argue that there is nothing about the amendments made to the Taxation (Cross-border Trade) Act in the other place that is inconsistent with the draft political declaration that will inform the future relationship. On the point made by the noble Lords, Lord Hannay and Lord Stevenson, about insufficient focus on VAT implications, the Government have been clear that we are aware of the potential impact on businesses of any move away from the concept of acquisition VAT, but we have also set out that in any scenario we are seeking to avoid any adverse effects. Amendment 80 does not affect that in our view.
On that last point, we keep talking about 29 March, but of course sales are already being made and shipping has already been arranged that may well arrive in this country or continental Europe after 29 March. The business decisions to invest, to make things and try to sell them have already been made, so minimising the impact is not possible. The impact has already started.
Yes, there is a reason why we have brought back the agreement—to resolve the situation.
As for whether the amendments have been considered in the other place, the other place voted for two of the original amendments and had the opportunity to vote on another two but decided not to do so, so the other place made its view clear on that point.