Exiting the European Union Committee
Oral evidence: The progress of the UK’s negotiations on EU withdrawal, HC 372
Wednesday 17 July 2019
Ordered by the House of Commons to be published on 17 July 2019.
Members present: Hilary Benn (Chair); Mr Peter Bone; Joanna Cherry; Sir Christopher Chope; Mr Jonathan Djanogly; Peter Grant; Wera Hobhouse; Andrea Jenkyns; Stephen Kinnock; Jeremy Lefroy; Mr Pat McFadden; Craig Mackinlay; Mr Jacob Rees-Mogg; Stephen Timms; Mr John Whittingdale; Hywel Williams; Sammy Wilson.
Questions 4703 - 4806
Witness
I: Rt Hon Stephen Barclay MP, Secretary of State, Department for Exiting the European Union.
Examination of witness
Witness: Rt Hon Stephen Barclay MP.
Q4703 Chair: On behalf of the Committee, can I welcome Stephen Barclay, the Secretary of State for Exiting the European Union? It is very nice to see you here again. As always, as you know with this Committee, there is a lot of ground that members wish to cover, so succinct questions and answers would be much appreciated. I will kick off. The two contenders for the leadership of the Conservative Party have both said that the backstop is dead, and it has been reported that, at your recent meeting with Michel Barnier, you told him that the withdrawal agreement is dead. Is the withdrawal agreement dead, in your view?
Stephen Barclay: No, there has been a bit of misleading information regarding the meeting, so it is helpful to be able to clarify that. The meeting was primarily focused on issues that Parliament had raised, such as citizens’ rights, the Costa amendment and an update on alternative arrangements. On the withdrawal agreement, I said the House had rejected it three times, including by a significant margin the third time; that the European election results, in my view, had further hardened attitudes across the House; and that I did not envisage the unchanged text going through the House. I do not think that was a particularly controversial observation. I would be interested if any members of the Committee fundamentally disagree with that assessment, but it was the assessment I gave.
Q4704 Chair: That is very clear. Did Michel Barnier give you any cause to believe that the EU side might be prepared to reopen the withdrawal agreement?
Stephen Barclay: Mr Barnier restated the position in respect of his mandate. As you are familiar with from your own conversations with the Commission, Taskforce 50 is very clear that it operates within a mandate and that mandate has certain terms. You will also be familiar with the terms of the extension that was granted in terms of Strasbourg and the constraints of that. Mr Barnier emphasised the strong desire from the Commission to avoid no deal and a recognition that it is in both sides’ interest to avoid no deal, but he did not open up in terms of changes to the specific text of the withdrawal agreement.
Q4705 Chair: He did not give you to understand there was any possibility of negotiating a different kind of deal.
Stephen Barclay: He referred to his mandate. If his mandate were to change, he would change as a result.
Q4706 Chair: We turn now to the question of no deal. You have said that there are risks with no deal. As you may be aware, we have recently taken evidence from a range of business organisations, representing Great British success stories, and what they said about leaving with no deal was pretty stark. Universities UK described it as a “creeping horror”. The Society of Motor Manufacturers and Traders said it is “simply not an option”. Make UK, the organisation representing manufacturers, described it as “economic vandalism”, and the National Farmers’ Union said it would be “disastrous”. Are those the sorts of risks you had in mind when you said there would be risks?
Stephen Barclay: It depends on the counterfactual, because there are risks with no Brexit as well; there are risks with a second referendum, not least a prolonging of uncertainty or a continuation of division. Look at the polling, as I am sure you have, of people like John Curtice, a respected independent pollster. His poll of polls on 23 June suggested very little movement, so there is a high probability of the same result or not a materially different result, but a further year of division and delay. One of the key messages I get from business is that they want clarity; they want resolution; they do not want further uncertainty.
I know the Committee has been taking evidence from different sectors, and I am sure we will get into that, but I will take one that I am more familiar with as a constituency Member of Parliament, with the NFU. Look at the case of the majority of farmers in my area and, while this is not a scientific poll, look at magazines such as Farmers Weekly. In the run-up to the referendum, two-thirds of their readers voted leave. The picture within communities is more nuanced. That reflects the fact that some farmers welcome the opportunities of leave; others are more concerned. The one that is often cited is the sheep sector. Both Defra and I are having discussions. For example, I had a roundtable last Thursday with farmers from NFU Yorkshire. We are engaging closely with them to understand their concerns and what the Government can do to support them.
Q4707 Chair: Since you mentioned the sheep sector, as you will be aware, Minette Batters of the National Farmers’ Union said that tariffs—because that is what would happen—resulting from a no-deal Brexit could mean a cut in exports and an oversupply of sheep meat, resulting, as she put it, in farmers going out of business and looking at slaughtering “quite a large percentage of the national sheep stock”. Is she wrong?
Stephen Barclay: This is the policy lead for Michael Gove and Defra, and I would draw attention to the evidence that he gave to Parliament. On 27 March, for example, he talked of specific intervention measures particularly for the sheep and meat sector, and that all livestock sectors will be included in the proposed compensation scheme. There is very intensive engagement between Defra, the NFU and the agricultural sector in terms of the support the Government would need to give. You are right that it is an outlier. It is an outlier because 97% of our sheep exports go to the EU, so it is distinct in that regard and that has a significant impact on the sector in the UK.
Q4708 Chair: The fact that the Government are talking about compensation for sheep farmers is an acceptance that there would be serious disruption if there was a no-deal Brexit. Is that correct?
Stephen Barclay: It is an acceptance. I do not think it is anything new. At each session at which I have appeared—and I have appeared before the Committee pretty much every other month, on average—I have said, and sometimes it has upset some of my colleagues, that no deal would be disruptive. I have always been clear on that, but no Brexit is the worse of those two outcomes. It is why I have always supported a deal. I have consistently voted for a deal. If we are left with a binary choice between no deal and no Brexit, as I said to the Committee last time, it is important to respect the democratic result.
There will be impacts on sectors and we should be candid about that. I am being very open with the Committee that, for example within farming, the sheep sector is an outlier. There will be opportunities in farming to design our own agricultural approach for the first time, to look at the high animal welfare standards we have and at food miles. There will be lots of opportunities as well, but we need to be candid about risk and the Government need to be ready to respond to those sectors. That is exactly what Michael Gove and Defra are doing.
Q4709 Chair: Would no Brexit be worse for the manufacturing sector and car-makers than no deal?
Stephen Barclay: Again, it depends what interventions Government take in response. For example, just this week the Prime Minister chaired a roundtable with the automobile sector. As you will know, currently only 1% of vehicles in the UK car market are electric. There are debates about what decisions the Government might take, both in discussions with the grid, but also in terms of the R&D budget—we have record investment into R&D—looking at how we stimulate those. It depends on the assessment you make about the direction of travel within the sector. For example, is the future around high-value areas such as battery assembly or more around the parts assembly in manufacturing? It depends on the interventions the Government take to support the opportunities within new markets in those sectors.
That is part of the discussion we often have within Parliament about the economic consequence of no deal. People go back to some of the forecasts from the Treasury and the Bank of England in November and, as you will be well aware, the problem with those is that they ignore the fact that the Government would take responsive action in the event of no deal. The question is to what extent that can work at pace to mitigate some of those impacts.
Q4710 Chair: Are the Government planning to compensate car-makers for the 10% tariff that every single one of the just under 2,000 cars a day that we export to the EU would face in the event of a no-deal Brexit, from 1 November?
Stephen Barclay: We, including the Prime Minister this week, are having extensive discussions with the industry, because it is more nuanced. Take the car industry; you have just seen the announcement on the Mini at Oxford, and you saw the JLR announcement in terms of West Bromwich. There are positive stories within the car industry. Within the European market, particularly the mass market range, there is often a five-year cycle. These issues are being led more by the Department for Business than my Department, but my point is there is a close interplay in terms of other policy decisions from the Government, not least on research and development, apprenticeships and the skills economy.
They also fit with growing trends. Part of the issue within the car industry has been changes in global trends. Diesel, for example, has been a factor, so it is a more nuanced picture. Of course, Government will need to look at the implications to trade flow across the borders and what we are doing on the short straits. I suspect we will get into that in due course. All these factors will come into play in terms of the car sector.
Q4711 Chair: A 10% tariff, if passed on to the consumers, is not a nuance; it is a cost to the businesses, in their profits, or to consumers.
Stephen Barclay: It will not be 10% on parts. That averages out at about 3%—2.5% to 4.5%. The tariff regime has been approached. Do not forget that 80% of goods will be tariff-free under the new regime. For the 13%, we have looked particularly at protecting sectors, one of which is the car sector. The other predominant one is agriculture. That is why the 13% is there. It is not 10% on parts, so one needs to differentiate. There will be impacts, but the future trend is into areas such as electric vehicles. There is a huge amount the Government can do in those areas, not just what we have in terms of the status quo.
Q4712 Chair: Electric vehicles would also face a 10% tariff. There is something I do not quite understand. In your responses you say there will be a problem but give the impression that it can be managed. If we look at the evidence we have had from those sectors, they are not feeling relaxed. When the Society of Motor Manufacturers and Traders says that a no-deal Brexit is “simply not an option”, do you accept that it reflects the view of the sector?
Stephen Barclay: To say it is not an option is just factually incorrect, because it is the legal default position of the Government. Just as a point of fact, that is incorrect. Is it undesirable? I have said that at each appearance before the Committee. That is why I have voted for the deal three times. It is for those who have not voted for the deal to confront the consequence of no deal. Is it disruptive? Yes. Are there mitigations the Government can take? Yes. Do I sit here saying it will be a panacea to all issues? No, because there is a pace and scale to adjustments. You would not design it to apply in such a way. But the UK market is the third most valuable within the EU, so it is a highly valuable market. We will also need to look at the support we can give to the industry and there are various computations of that.
Q4713 Chair: The Chancellor recently told the House that a disruptive no-deal Brexit would cost up to £90 billion. Do you agree with that figure?
Stephen Barclay: First, that is a prediction for 2035, and I am sure the Chancellor himself would say that it is difficult for any finance ministry to predict 15 years after the implementation period with certainty. Secondly, that figure assumes no Government intervention. Again, there are teams within the Treasury working on what Government intervention would be taken in the event of no deal. Self-evidently, the Treasury itself expects a landing zone to be different, because it is working on the measures to take in the event of no deal. It would not be working on those measures if it did not think they would have an impact on a future landing zone. One needs to look at that in the round.
I point, for example, to the recent financial stability report from the Bank of England. The Governor and his team have set out the significant progress there has been since November. The Governor takes a very similar line to me, in seeing disruption from no deal, but he has also talked about the significant progress that has been made since November, and the further extension period we have from March to 31 October also gives business more time to prepare.
Q4714 Chair: My question was whether the £90 billion that the Chancellor spoke about in the House of Commons reflects the position of the current Government. Either it does or it does not.
Stephen Barclay: It reflects research from the Treasury as to a position in 2035. It is for the Committee to form a view as to whether it would expect the Treasury and Government to take action in the event of no deal, not least when the Government itself is working to do so.
Q4715 Chair: Is it the Government’s assessment or are we now separating out the Treasury’s assessment?
Stephen Barclay: As a former Treasury Minister, I can say all assessments from the Treasury are collectively signed off as Government assessments.
Chair: Fine, so the Government’s assessment is as the Chancellor set out in the House of Commons.
Stephen Barclay: So that one does not pick out selectively from those reports, I am putting them in context. It is in reference to 2035 and to no intervention from the Government in the event of no deal.
Q4716 Chair: Lastly from me, are the Government now commissioning additional roll-on/roll-off ferry capacity?
Stephen Barclay: We have kept the House fully informed of what we have done. From a legal risk point of view, there is a timescale around these issues, so, in a written ministerial statement to the House a couple of weeks ago, we issued the framework that will then enable the Government, should it wish, to procure additional capacity in the autumn, without running into the difficulties that were experienced around the Eurotunnel litigation. A framework is in place that would enable capacity to be procured by the Government in the autumn.
Q4717 Chair: Will that be ferries, just so we are clear?
Stephen Barclay: Yes.
Chair: It is going to be ferries. I assumed that roll-on/roll-off has to mean ferries.
Stephen Barclay: It usually does.
Chair: I just wanted to be clear. Thank you very much.
Q4718 Mr Bone: Brexit Secretary, can you first tell us what a no-deal Brexit is, because I do not know?
Stephen Barclay: It is the legal default position of Parliament, which means we would then trade under WTO terms.
Q4719 Mr Bone: Does that mean there would be no deals whatever with the European Union?
Stephen Barclay: No. As you are aware, as an astute observer of these issues, we have put in place a whole series of agreements, in terms of trade continuity and air. I signed one with a Federal Councillor for the Swiss Government on workers’ rights, in this instance to the Swiss market. We have voting agreements; for example, I signed one with the Prime Minister of Luxembourg. There is a series of agreements the Government have put in place in the event of no deal. If I may say, “no deal” has become the lexicon by which leaving without the withdrawal agreement has become known.
Q4720 Mr Bone: That is critical, because people who follow this closely think that there are no deals between the British Government and the European Union on anything if no deal happens. Would that no-deal position, if it happens, be the endgame? Is that how we would carry on indefinitely or do you see something happening after that?
Stephen Barclay: No. This was an area we discussed in our previous session, when I said that so much of the focus to date has been on the winding-down arrangements. The withdrawal agreement is called a deal, but it is the winding-down provisions. The future economic partnership and relationship is still to come. It is my view that, given the size and importance of the UK on the border of the EU as a third country, insufficient focus has been put on that future relationship, rather than the winding-down provisions.
In the event of no deal, phase two issues would quickly come into play. Once you went into that, there would be a desire on both sides to look at where improvements could be made. I do not think anyone would particularly seek to stay on a barebones WTO basis for an indefinite period.
Q4721 Mr Bone: Secretary of State, from what you have said there, it is absolutely clear that it would be in everyone’s interest to reach a future trading relationship. You said that it would happen very quickly in a no-deal situation, which I think is entirely true, because there would be an imperative to do it. If the Government were to leave simply with a withdrawal agreement and a transition period, there would be a lengthy period when people would sit back and say, “We have two years to think about this”.
Stephen Barclay: I think it would be more nuanced. I hope it would be quick, because it would be in the reciprocal interest to do so; it would be in the EU’s interest and the UK’s. Look at the international nature of many businesses, such as a European business that has interests in the UK and across Europe. For the reasons the Chair set out earlier, it is in the interests of many sectors to reach those sorts of agreements. The reason I say that it would be more nuanced is because it would depend on the relationship that is in place and how we had departed. Questions over money, for example, would be germane to that conversation. You have taken the clear position that you do not think a penny should be paid.
Mr Bone: I think they should whistle for it, as someone once said.
Stephen Barclay: Clear enough to be a tune, in which case. You have set out that position. As you know from our previous exchange, I do not agree with that, because in some areas—for example, at its most basic, tariffs collected while a member but not yet remitted—there would be a legal obligation and a sliding scale would apply. I respect your view, but I am sure you recognise that those sorts of questions will also shape the nature and appetite of both sides to reach an agreement and how extensive that agreement is.
Q4722 Peter Grant: Good morning, Secretary of State. To go back to the backstop, both contenders for the job of your boss have said that the backstop is pretty much dead. The backstop was basically invented as part of the joint report of December 2017, as a contingency plan if the UK did not comply with its commitment to devise a way of managing the border in Ireland that was, first, consistent with the Good Friday agreement and, secondly, consistent with the kind of Brexit the United Kingdom wants. Has the United Kingdom Government yet published their proposals as to how to manage the border in Ireland, consistent with those constraints?
Stephen Barclay: First, it is not so much the leadership contenders who have said that the backstop is dead. Parliament has refused to ratify the withdrawal agreement and, central to the parliamentary debate, as you are well aware, Mr Grant, were concerns across the House in respect of the backstop. Those concerns were not simply within the governing party; the Leader of the Opposition at one stage spoke about his concerns about the indefinite nature of the backstop, so those concerns were wider.
In terms of what the future arrangements for the border would be, one area that both the UK Government and EU have recognised, in accepting that there will be a joint work-stream, is in terms of alternative arrangements. There is an issue in terms of the timescale and the negotiability of those, but the fact that the Commission itself agreed at Strasbourg for joint working on alternative arrangements shows there is merit in those in terms of the border. That work cannot start until ratification.
I raised that issue with Mr Barnier, because a point raised with me by colleagues across the House was whether, given the extension we now have, it made sense to wait further for ratification. Why not start that work at an earlier date? That is something the Commission is not currently open to, but clearly the new Prime Minister will need to test that, as part of his future discussion.
Q4723 Peter Grant: We are just over 100 days away from the third deadline to leave the European Union. Can I ask the question again, yes or no: has the United Kingdom produced a plan to manage the Irish border within the constraints set by the Good Friday agreement and the Government’s deadlines?
Stephen Barclay: In its most literal sense, yes, because we have said that we will have no checks and tariffs, as a policy. By its nature that will be temporary. Clearly in a no-deal exit, there will be a finite period for that. What the UK side cannot do is to say what the Irish Government’s approach to the border would be and, therefore what the impact would be in terms of the flow of goods from the north to the south.
Q4724 Peter Grant: With respect, Secretary of State, you have told me what is not going to happen. You still have not told me what the UK Government’s proposal is. The UK Government accepted responsibility in December 2017, as part of that joint report. It is the primary responsibility of the UK Government to come up with a proposal that could then be considered by not only the Government of Ireland but by the European Union. We are just over 100 days from needing that plan to be ready; are you telling me that the United Kingdom Government have not yet put forward a proposal of what they are going to do, as distinct from a wish-list of what is not going to happen?
Stephen Barclay: With respect, I thought I had said what the UK is going to do. It is not going to put up borders.
Q4725 Peter Grant: With respect, you have told me what is not going to happen. There are not going to be customs checks; there is not going to be this or that. How are you going to manage a border consistent with being a customs union border, which does not require checks that are inconsistent with our international undertakings under the Good Friday agreement and elsewhere? How can you have a customs border if you do not have any customs checks?
Stephen Barclay: The point is that we are not. The policy was announced on 30 March. The policy was for there to be no checks, with limited exemptions. Clearly, there are specific issues around biosecurity, for example, where there needs to be an island-of-Ireland approach in terms of highest risks, intelligence-led. The Government have said that they will not apply checkpoints at the border.
Again, there are specific issues within a no-deal Northern Ireland context, for example around the single electricity market. You will recall that that agreement was reached on a bilateral basis. It is in the mutual interest of both sides and, in that instance, both sides said that they are keen to see those arrangements continue. Indeed, the Irish regulator put out a statement on 5 March confirming that the single electricity market will continue to operate, and that was reaffirmed by the Northern Ireland Utility Regulator on 11 March, so it will be a continuity approach. I was recognising that that will have a temporary arrangement and further arrangements will need to flow should we find ourselves with no deal. Obviously the position of the Government is to seek a deal.
Q4726 Peter Grant: Can I ask you a question I have asked the sponsors of the Alternative Arrangements Commission interim report? They have not answered me yet. A scenario that is likely to develop quickly is of a man, or a woman for that matter, with a van, who makes 30, 40 or 50 crossings and recrossings of the Irish border every day, but who has not signed up to any of the voluntary trusted trader schemes. That van is never going to be checked, is it?
Stephen Barclay: If you look at the numbers, there are around 110 million crossings of the border and the population of Northern Ireland is 1.9 million. That gives you an idea of the scale of movement. When I went to the border, I saw a business that had half of its operation on one side, dealing with concrete, and the rest was on the other side, dealing with insulation. They both go on the van, because one is heavy and one is bulky, and that business operates interchangeably across the border.
Q4727 Peter Grant: Suppose, instead of one person with one van, you have somebody with 100 or 1,000 vans, adding up to 40,000 or 50,000 crossings and recrossings of the Irish border. You are still not going to be able to carry out customs-related checks on those vans, are you, because you cannot have customs checks?
Stephen Barclay: There are two issues with this. You referenced it in terms of the alternative arrangements work. There is a distinction between what is feasible and what technology there is. Within that there is the sub-question of what is deployable. There is technology that you could apply in North America, for example, but that, because of the security situation, would not be appropriate in Northern Ireland. The initial question is what technology there is that you could deploy. There is a segmentation question, because there is a big distinction between what you apply to the Diageos of this world and what you apply to a small trader with a handbag shop on the border, which goes to Dublin to source material—those sorts of businesses. Trusted trader schemes are very different for large firms. There is a question of proportionality.
Q4728 Peter Grant: How do you ensure, first, that somebody signs up to be a trusted trader, and how do you know that a lorry crossing the border is a trusted-trader lorry, if you are not allowed any additional infrastructure there?
Stephen Barclay: These are issues of negotiation. The whole nature of negotiation is that it requires a discussion between both sides. The reason the Commission signed up to this at Strasbourg is that it recognises there will need to be technology and negotiation of these points. There will also be a question of what exemptions there may be and what is proportionate, given we are dealing with relatively low numbers of trade, in terms of the wider EU trade flows. There is a distinction between large and small firms, and between sectors. These are issues of negotiation. They are not unilateral decisions for the UK Government.
Q4729 Peter Grant: The Good Friday agreement is not for renegotiation. The only two sides that can be renegotiated are leaving the customs union and no divergence between Northern Ireland and the rest of the United Kingdom, though in no doubt in some areas colleagues would have something to say if you wanted to open negotiations about permanent divergence between Northern Ireland and the rest of the United Kingdom. In your own words, there would need to be some negotiation. Are the Government willing to negotiate on leaving the customs union?
Can I remind you of the evidence of Sir Ivan Rogers to the Foreign Affairs Committee yesterday? You will be familiar with the advice that he gave to some of your earlier Cabinet colleagues that those three commitments are incompatible.
Stephen Barclay: I saw Sir Ivan’s advice on that.
Q4730 Peter Grant: Which of those three commitments would you expect the negotiations to centre on to remove that incompatibility between them?
Stephen Barclay: Part of this will be shaped by the willingness there is on the EU’s and the Commission’s side. We are mixing two related but separate issues. One is how one protects the single market, which is the driving issue for Taskforce 50, and how one safeguards the commitments of the Good Friday agreement. As I am sure Mr Wilson and those who have experienced and understand these issues most closely will be the first to recognise, a central part of the Good Friday agreement is the principle of mutual consent. It is built on the pillar of all sides, all aspects of the community, supporting and being consulted. One of the concerns in some quarters in Northern Ireland has been that some people do not feel that the element of mutual consent is fully reflected within the withdrawal agreement text. We need to differentiate. They are very closely related, but there is a difference between the Good Friday agreement and how one protects the single market and what flexibility, if any, the EU Commission is willing to give.
Q4731 Peter Grant: Is your evidence that the three commitments that I have described—leaving the customs union, maintaining the integrity of the Good Friday agreement and associated agreements, and no divergence between Northern Ireland and the rest of the United Kingdom—are non-negotiables for the UK Government? I am not asking what you think the EU might negotiate on. Is the United Kingdom willing to negotiate on any of those three?
Stephen Barclay: The best way forward with this—which is why I voted for it three times, and I respect that you did not, Mr Grant—is to leave with a deal. That is the best way forward. In the event of no deal, clearly these discussions will be shaped not least by the response of the Taoiseach and the Irish Government. In the event of no deal, there will be significant disruption to the Irish economy as well, which is why it will be in both sides’ interest to reach practical solutions.
Both sides have been clear throughout. I am here to speak for the current Government, not for either of the leadership candidates. That is not my role, but it is correct that both leadership candidates have reaffirmed, and the UK Government and the current Prime Minister have always been absolutely clear about, our commitment to the Good Friday agreement. I expect any UK Government to continue to do so.
Q4732 Mr Whittingdale: Can I return to no deal? The Chairman, in his questions, was talking about some of the negative consequences of leaving without a deal. A lot of those result from the imposition of tariffs should we not reach an agreement. You are aware that Boris Johnson has said that he believes that we could establish an agreement with the EU under GATT 24, which would allow us to maintain zero tariffs while we sort a full trade agreement. Do you agree that that is possible, if the EU were to sign up to it as well?
Stephen Barclay: I referenced the Bank of England Governor earlier and this was also covered in evidence that he gave to the House. The key is in the word “possible”. It is possible, but it requires mutual agreement; that is the crux.
Q4733 Mr Whittingdale: Is it something that you have raised with the European Union, as part of your own preparations for a possible no deal?
Stephen Barclay: I did not raise GATT 24 at my last meeting with Michel Barnier, but they are very familiar with the debate on the issue.
Q4734 Mr Whittingdale: Do you have any indication as to how they would react to such a proposal? Clearly it would be in their interests, as much as ours, to maintain zero tariffs if it could be done.
Stephen Barclay: Their public stance has been consistent so far, Mr Whittingdale, because they want to see the deal signed. Their position does not shift from their mandate and public position, because that is the outcome they would like to see. It will clearly be part of the discussion of a new Prime Minister to test different avenues. Speaking on behalf of the Government, I am mindful first that we do not know who the next Prime Minister will be. There are two very able contenders, and one needs to respect that process. If it is the candidate to whom you refer, I suspect he will wish to test that argument with them.
Q4735 Mr Whittingdale: To your knowledge, the British Government have not so far raised the possibility of a GATT 24 agreement in the event of no deal.
Stephen Barclay: The issue is well known to both sides.
Q4736 Mr Whittingdale: In answer to Mr Bone, you talked about the side deals that could be agreed, and you referred to one or two that are already in place, should there not be a comprehensive agreement. In what other areas are we currently working to try to achieve side deals in the next three months?
Stephen Barclay: Do you mean side deals with the EU or non-EU?
Mr Whittingdale: With the EU.
Stephen Barclay: The main one, which was part of my discussion with Mr Barnier, was around citizens’ rights. We can agree those with member states bilaterally, but the will of the House, as expressed through the Costa amendment, was for me to make representations to Taskforce 50 for that to be done at a European level. I have done so twice in correspondence and then in person. The Commission’s position has been not to move on that, notwithstanding commentary in the Dutch Parliament, within the European Parliament and from many within Europe that recognises the safeguarding of rights. That is the current mandate, as I set out at the start of the session.
Q4737 Mr Whittingdale: Another area where it would clearly be desirable to reach a side deal quickly is around data adequacy. How advanced are we in obtaining agreement on data adequacy?
Stephen Barclay: It is a really good point. If you recall my exchange with Mr Djanogly in our previous session, he asked about the City, which I know he is particularly interested in. You are absolutely right, because we have so much debate in Parliament on tariffs, but non-tariff barriers are often more significant, and data is hugely there. That has been a part of my discussions with counterparts in Europe.
The fact is that the UK has 40% of Europe’s data centres and they are not things you can just pick up and drop somewhere else. They are complex beings. Many of the underwater cables come through UK waters. There is a mutual interplay of data. It is not just in the big-ticket areas, such as finance, derivatives contracts and MiFID rules. There are requirements on personal data. Sometimes people say they are wholesale markets and, therefore, it is not an issue or you can look at standard contractual terms. There are areas where it bites in that sector, such as the MiFID requirements, but also in other areas. On flights, the EU recognised that there was a reciprocal interest in an extension. You can then read that across into travel firms, for example. Take a website; how is it going to send personal data for your holiday booking from the EU? My argument is that it is in the reciprocal interest of both sides to come to sensible arrangements on data, and that is a point I have raised with them.
Q4738 Mr Whittingdale: You have explained why it is extremely important that we should obtain an agreement. What chances are there of having one in place by 31 October?
Stephen Barclay: The Commission is in a position to answer that, but I am not. Obviously it has been raised. The debate with the current Government has centred on the deal and the fact that the deal, through its implementation period, secures these issues. That is the mandate and position that Taskforce 50 has. I went to Sibiu. I was asked the question of why I was going to Sibiu. Part of the reason was to give visibility to these issues because, to date, member states have been happy to subcontract to the Commission, to some extent.
People have often commented on how unified the EU has been. It is fairly easy to be unified on asking the Brits to pay more money, the Good Friday agreement, which people agree with, and citizens’ rights, which they like. Yes, they have been unified, but those are things that people agree on. That becomes more difficult on the impact of no deal, because that is asymmetric across Europe. It bites not just differently between countries, but also differently between geographic areas of countries. That has an interplay with coalition Government within those countries, and with different sectors and their significance within a specific economy. You are right on the issue and it is one we are raising. To date, the position has been that they wish to see the deal ratified. If the likelihood of no deal becomes more real, the debate will grow in issues like data.
Q4739 Mr Whittingdale: You say if the likelihood of no deal grows; from your own conversations and from what they have already seen will be the likely position of whoever becomes Prime Minister next week, they are talking about that likelihood increasing. Is it not sensible to get on with the discussions now?
Stephen Barclay: It is. I have been saying for quite a while, long before it was fashionable—and I do not think it will surprise you, Mr Whittingdale—that a no-deal outcome was underpriced. I have said that consistently. I have also argued that there should be acceleration of no-deal preparation, noting that it will be disruptive. From my point of view, it is far better to prepare. There has been no diminution of my effort to prepare for no deal, but it requires cross-Government focus to mitigate some of the risks.
Q4740 Mr Whittingdale: Can I lastly ask you about the preparations for no deal being made by some of your colleagues in the Cabinet? For instance, we talked about the possible necessity to provide compensation for sheep farmers. Is Defra, for instance, already drawing up plans so that such a scheme could be put in place almost as soon as any tariffs were imposed?
Stephen Barclay: I know that significant work has been done in Defra. I have asked questions around this, and significant work has been done. There has been very extensive engagement with the industry, through Defra. As I say, I was talking to the NFU just last week. In fact, I have a meeting with another group from the NFU later today, after PMQs. There is a huge amount of effort on this. We are acutely aware of the impacts in that sector and will work closely with it.
Q4741 Mr Whittingdale: Are you satisfied that all your other colleagues running Government Departments are devoting the same degree of attention?
Stephen Barclay: As a former senior Cabinet Minister, you are aware that there are always conversations around the Cabinet table on the pace and intensity of these issues. I reassure you that I have consistently made the case that we should prepare assiduously.
Q4742 Stephen Timms: I would like to pursue the discussion you were just having with John Whittingdale about data. You have said that, if we are heading to leave the EU without a deal on 31 October, there will be an increasing focus on this question of data. By that, do you mean that you have envisaged that we could obtain an adequacy determination from the EU before 31 October, or do you mean that there will be a number of side deals to mitigate the problems?
Stephen Barclay: First, we start from a point of equivalence because, as a member state, we are equivalent in terms of data. The normal expectation is that it would take 18 months for the data adequacy process to go through. The UK position is to take a permissive approach, so there would not be legal risks for a UK company sharing its data with Europe. On the current Commission position, there would be legal risks for an EU company sharing that data with the UK. It therefore depends on the extent to which mitigations have been put in place, such as in standard contractual terms, to address that. That is quite a big undertaking, particularly against the timescales we have. That is why, as part of the new Government, there will need to be urgent discussions, as a no-deal outcome becomes more real, in terms of what those issues are. Particularly on data, the economies are closely interwoven.
Q4743 Stephen Timms: You are saying that we will not have an adequacy determination by 31 October. That is clear.
Stephen Barclay: That is my current expectation, but these are issues for the Commission to determine.
Q4744 Stephen Timms: It takes at least 18 months and the process cannot begin until we have left the EU.
Stephen Barclay: We have to be a third country, yes.
Q4745 Stephen Timms: There cannot be an adequacy determination, but maybe there could be some side deals or something.
Stephen Barclay: Again, the public position of the Commission to date, which you will be well aware of, is no. It says there cannot be any cherry-picking, and therefore the answer is no. On the other hand, in a number of areas—for example, we touched on flights earlier—the EU has agreed to what is, in essence, a standstill provision. There are sectors where agreements have been reached, but the public position of the Commission on data is that it would amount to cherry-picking. My point is that it damages European businesses if they are unable to exchange the flow of information; therefore, it is in our reciprocal interest to come to sensible arrangements on it.
Q4746 Stephen Timms: What do you regard as the priority areas to reach such agreements?
Stephen Barclay: First, you want to reach an agreement on data per se, for a period of time, rather than to say that certain sectors are more expendable than others. You would not look to disaggregate certain sectors. If you started to do so, you would run into the famous Rumsfeld known unknowns and unknown unknowns. It is quite hard to predict what exactly the implications would be in advance.
Q4747 Stephen Timms: Given, as you have said, we are not going to get an adequacy determination before 31 October, it is quite hard to see what this might be. Are you envisaging a one-off temporary arrangement just around data?
Stephen Barclay: The Commission would have to take a view. The Commission position is to say it is fully prepared for no deal. It is a question for the Commission as to whether their businesses are fully prepared for the implications and difficulties of data being transferred to the UK. I pointed to the fact that, on data centres, the UK has a key infrastructure capability that is relevant to the EU. You are well aware from your time at the Treasury, Mr Timms, of the financial services markets and the interconnection on data there. Obviously we are talking about personal data here, rather than non-personal data, but the economies are interwoven and that is what I was signalling in response to Mr Whittingdale.
Q4748 Stephen Timms: Is it right that there are no current discussions along those lines?
Stephen Barclay: There are discussions that DCMS is having with its counterparts on it, but DCMS is leading on that issue.
Q4749 Stephen Timms: Is it your understanding that those discussions are making some headway?
Stephen Barclay: They are ongoing. Part of the difficulty comes back to the desire of the Commission for Parliament to pass the deal. That is where we have been. Once we move to a new Prime Minister and Government, there will be a renewed focus on some of these issues.
Q4750 Stephen Timms: One specific issue that will arise in the absence of an adequacy determination is that we will lose UK access to EU internal security and policing databases. Would you expect that the UK would lose access to those databases on day one of no deal?
Stephen Barclay: That is an area of discussion. The legal position is yes, which is why significant work has been done through the Home Office on the mitigations, for example the memorandums of understanding that would be signed and some of the bilateral arrangements. The one that my opposite number, Sir Keir, often quotes is the European arrest warrant. The UK currently surrenders eight times more people on that system than are surrendered from the EU to the UK. If a no-deal outcome becomes a more likely scenario, there will be a renewed focus on looking at the reciprocal interest here.
When I was new in post, I was quite puzzled because, regardless of party affiliations, I do not think any politician, in this House or in Europe, would say that they want to do anything that puts their citizens at risk. I was puzzled by what was driving this. Was it around the ECJ’s jurisdiction? What was at the heart of the EU’s objection? The explanation for me was that, if you can have a different third-country status with the UK on security, it opens the door to a different third-country status on some of the economic areas. It was a clear tough negotiating position on security because of the desire to see the withdrawal agreement passed. It may be, that, if we are in the situation that Mr Whittingdale referred to and I have referenced, in which a no-deal outcome is more likely than previously thought, the urgency of some of those discussions increases.
Q4751 Stephen Timms: As a final point, a moment ago you suggested that there might be memoranda of understanding. Are there current discussions between the Home Office and people in Europe about this? Would these be bilateral country memoranda of understanding?
Stephen Barclay: The Commission leads on these issues, so member states are mindful of its position. If we were in a no-deal situation, the scope for member states to enter memorandums of understanding and to do so quickly would be through a bilateral discussion with those member states. In March and April, we were close to a potential no deal, so we have some lessons to learn from that period.
Q4752 Stephen Timms: Some of the databases we have talked about are EU databases. Are there discussions about memoranda of understanding with the EU for those?
Stephen Barclay: As I say, this is not my Department’s lead. Security is a Home Office lead and data is a DCMS lead. To give you one example of why there is an urgency to this and why I can reassure you that there is a focus on this in Government, look at Northern Ireland. A lot of the security data-sharing is on EU systems now. That is how it is done, logistically and operationally. When I talk about the reciprocal interest in coming to sensible outcomes on these things, one can clearly see that it is in both the EU’s and the UK’s interest, particularly in terms of the island of Ireland, to ensure that we are able to share data in a sensibly way.
Q4753 Wera Hobhouse: We have covered all sorts of areas today. In response to Peter Bone, clearly a no-deal Brexit brings us back to WTO rules, so there is ultimately another set of rules to which we can fall back. We can discuss whether that is a setback. I think it will be, because frictionless trade is how we have worked with the European Union for the last 40 years. We are falling back to something that is more ancient, complicated and full of friction. That is fine, but I am alarmed to hear that the Government have made no progress in the new areas of data-sharing and how we are going forward in all of those areas. Clearly there is no other organisation that has a set of rules on which we can fall back if our rules with the European Union are no longer there. I am just noting that.
Going back to north-south co-operation within the island of Ireland, you have just alluded to how relevant data-sharing is to Northern Ireland. We will just go back to the alternative arrangements that are being discussed. First, why did the Government not publish the mapping exercise on alternative arrangements for Northern Ireland?
Stephen Barclay: There are two separate things. The alternative arrangements are around the use of technology at the border. The mapping exercise flowed from the Good Friday agreement and north-south co-operation.
Wera Hobhouse: They are linked.
Stephen Barclay: I think I am correct in saying that the mapping exercise was in my first exchange with the Chair at my first hearing. It related to the mapping exercise and the 156 areas of north-south co-operation flowing from the Good Friday agreement. That is a distinct issue from the alternative arrangements. They are two completely different things. You might be talking about the freedom of information request and data.
Wera Hobhouse: Yes.
Stephen Barclay: This afternoon, I am chairing a technical group of experts on the alternative arrangements. The UK has already committed £20 million; at Strasbourg the UK and EU agreed to alternative arrangements. There is also separate work in Parliament through the Prosperity UK commission, et cetera. That is one thing. North-south mapping is a different issue.
Q4754 Wera Hobhouse: Let us go to freedom of information.
Stephen Barclay: There was information released through an FOI request, and your question, if I am correct, is why we did not publish that. Is that what your question is driving at?
Wera Hobhouse: Yes.
Stephen Barclay: The reason is that that was draft work as part of the report; what we published was the final report. At my first session, I was bowled a bouncer by the Chair, because there was no mention in my briefing about a commitment that my predecessor but one had given that, once the withdrawal agreement was published, we would share the mapping report. The Chair understandably asked me, as the withdrawal agreement had been published the week before, when we would publish that. As I think the Chair would accept, I not only took that on board but ensured that it was published, in order that the House could have that. The point was that the documents that the FOI referred to were part of the scoping of that, but the final report was published, and what the UK published was the explanatory note that went with that report.
Q4755 Wera Hobhouse: Do you think the public has understood that?
Stephen Barclay: There is much of the wider debate that the House has that sometimes gets confused in the public debate. People in Northern Ireland follow this extremely closely. Some of the areas of co-operation in the terms of the Good Friday agreement are extremely closely scrutinised and deeply understood. People very much understand it in Northern Ireland, yes.
Q4756 Wera Hobhouse: Since we are talking about no deal, is it not very important that the public really understand all aspects of it? When we put out very complicated explanations to things, people are misled into believing simplistic explanations as to why a no-deal Brexit is not a particular problem.
Stephen Barclay: With respect, any suggestion of people being misled is completely wide of the mark. A commitment was made by my predecessor but one to publish a report, once the withdrawal agreement had been finalised. The Chair understandably asked me, on my first appearance, given that it had been published the week before, if we would then do so. I took that back to the Department and ensured it was published very quickly after. It was then published on 7 December. That is exactly how Select Committees and Government should work, so I am not clear what the issue is.
Q4757 Sammy Wilson: First, Minister, I am glad that you have made a distinction between the implementation of the single market and the Good Friday agreement, because very often these two things have become confused. You have mentioned the mapping exercise and 147 areas of co-operation that are supposedly dependent on our membership of the EU. Why did the Government never challenge that mapping exercise since, clearly, a lot of areas of co-operation are strictly between the Government of Northern Ireland and the Government of the Irish Republic on things that have no relation at all to our EU membership?
Stephen Barclay: As you know, Mr Wilson, a lot of that co-operation has evolved over time, some of it informally. Some of it has flown from the Executive when it was in place. The precise numbers are 142 areas in the draft report and 156 in the final report. As to why I have not personally challenged it, the timing is clear. I was appointed in mid-November, appeared in this session and it was published a few days later or certainly within a week of my appearance at the Select Committee. This was work that had been done alongside the withdrawal agreement, before I was in post.
Q4758 Sammy Wilson: For the record, maybe you could explain this to the Committee. I think of when I was involved in the Northern Ireland Executive and six areas of co-operation on the six implementation bodies took place. One of the first decisions we made was to build a joint cancer centre at Altnagelvin Hospital, half-paid for by the Irish Government and half-paid for by the Executive. Another was to make a decision to share health facilities at Newry Daisy Hill Hospital. Another was that the Irish Government would pay for the 20 illegal dumping sites, where contractors’ for Irish councils and public bodies had dumped waste illegally in Northern Ireland. These were areas of co-operation. Can you see how leaving the EU would prevent those areas of co-operation from continuing in the future?
Stephen Barclay: There is an interwoven nature to many relationships. You mentioned health. As a former Health Minister, I was always aware that 1.5% of the spend in the Irish health budget comes from the UK. There are 300 net beneficiaries of that relationship, which is why, when I talk about the reciprocal interest in reaching sensible bilateral arrangements in the event of no deal, health is a good example. In terms of the UK payment, just as more widely across Europe, we pay out 10 times more than we receive on health. That is why I always suggested there was a mutual interest.
Your point flows from that. Such is the interwoven nature of issues such as health, of course I expect that, in no deal, we will continue to have close relations with our neighbours. I expect co-operation to continue. The UK Government’s position is that the Good Friday agreement sets out specific aspects of that in strand 2, which you are extremely familiar with. That was reflected in Article 13, I think, of the protocol. We are keen to ensure that the UK Government respects the Good Friday agreement, the north-south co-operation and the mapping exercise. While, exactly as you say, some of these were informal over the years and some were from the Executive, we are keen to make sure that we honour the GFA terms.
Q4759 Sammy Wilson: None of them is dependent on EU membership, because EU membership is not mentioned at all in the Good Friday agreement, when those implementation bodies and areas of co-operation were outlined. The examples I have given you—and there are hundreds of other examples—are not, were not and will not be dependent on EU membership in the future.
Stephen Barclay: If we are able to get the Executive restarted, the linkage between those in the north discussing issues with those in the south can happen in all scenarios. The withdrawal agreement—and, again, this is before my time—reflected the shared commitments from both sides in terms of the GFA, but I hear the point.
Q4760 Sammy Wilson: Earlier on, you were asked about the arrangements for the Irish border. The UK Government have decided, for whatever reason—and I do not understand why—to impose no tariffs on goods moving from the Republic to Northern Ireland, but the Irish Government have made it quite clear that they will impose tariffs on goods moving from Northern Ireland to the Republic. In your discussions with the Irish Government, how have they indicated that they will police the border to collect those tariffs?
Stephen Barclay: The discussions with the Irish Government have been led more by David Lidington and Karen Bradley, rather than DExEU. That reflected the terms when I was appointed, because we were expecting to move into phase two and not be stuck in phase one. In terms of what they have said on that, there has been limited public commentary as to how the Irish Government would approach that, but that is a question more for the Irish Government than for me.
Q4761 Sammy Wilson: Does it surprise you that, on the one hand, they say they will have no infrastructure at all on the Irish border and yet, on the other hand, they make it clear that they intend to collect customs duties from goods crossing the Irish border from Northern Ireland to the Irish Republic? Would that not indicate to you that there are ways other than putting structures on the border for collecting those taxes?
Stephen Barclay: As you know, Mr Wilson, the Taoiseach has said that the Irish Government will not put infrastructure on the border, just as the UK Government have. Also, through the Commission, the Irish Government have accepted that there is a role for alternative arrangements moving forward, in terms of how we manage the border. There is a timing issue around those work-streams in terms of their desirability. It will be for the Irish Government to set out how they intend to do this operationally.
Q4762 Sammy Wilson: So far they have made no indication publicly, in the Bill that went through the Dáil, but have they made any indications privately to the UK Government as to what arrangements they will put in place, so that the UK Government will know what advice to give to traders crossing the border, who will have to pay the tariffs that the Irish Government say they are going to impose?
Stephen Barclay: I have not been given that information, no.
Q4763 Sammy Wilson: Does it not strike you as significant that we have this situation in which the Irish are saying that this border is very important, that it impacts on the Good Friday agreement and that they intend to take actions that may have an effect on it, but they are not sharing this with the people on the other side of the border?
Stephen Barclay: As I say, these issues are more germane to the Irish Government than to someone speaking on behalf of the UK Government. Clearly it will be for the Irish Government, in conjunction with the Commission and Taskforce 50, to set out how they will meet their commitments to protect the single market, but that is more of a dialogue between the Irish Government and the Commission as to how they want to do that operationally. What the UK Government have said is that, under our commitments to the Good Friday agreement, we will not put up infrastructure at the border.
Q4764 Sammy Wilson: What indications has the Commission given, in the discussions, as to the arrangements that need to be put in place along the Irish border to enable the Irish Government to collect the taxes that will eventually go to the Commission?
Stephen Barclay: These are questions for the Irish Government to address, as to the legal framework that it seeks to meets its commitments to the single market. I refer you to the various remarks that the Taoiseach and others have made when pressed on that.
Q4765 Sammy Wilson: The EU has also made a commitment to the Irish Government that the land bridge across GB, which is so important for Irish trade, will not be disrupted in any way. That means that arrangements will have to be put in place for the crossing from Dublin to Holyhead and from Dover to Calais. Have there been any discussions with the EU on how that free-flowing border will operate in two places, for Irish goods?
Stephen Barclay: I have been to both, because I think it is important to look at these things physically. Your question teases out an important point, which is that, in much of the UK debate, we are presented with the worst of both scenarios. We are presented with it solely being a UK problem if there are difficulties with trade flow at Dover, and that is then presenting to me as causing all sorts of alarming stories to health supplies and various things, which are not accurate.
Then there is the fact that 40% of Irish exports go through the short straits. It is therefore not simply a UK issue if there are delays to lorries at Dover; it is a shared issue between the UK and EU. That is why significant work has been done by the French authorities at Calais to put technology in place. I see a lot of the stories about the length of delays. While again I accept there will be disruption—there is disruption now on certain days—a lot of the stories exaggerate the impact, because it is both in the UK’s and EU’s interest to get this right.
I think this is a wider issue. I spend quite a bit of time with chief execs of supermarkets, suppliers and different firms. If one looks at the way a lot of businesses are structured, in terms of the supplies that come from the Midlands in GB to businesses in Ireland, the 25 to 26 hours in terms of alternative shipping routes or the way drivers’ rotas are structured—often they change their rota and hours—these issues are more interconnected. That is why it is in both sides’ interest to ensure we have good flow through the short straits. It is why the authorities in Calais have done work on this. Also, we have Dover; Eurotunnel has put in additional capacity, for example. We get stories saying there will be huge delays, but that the impact will only be on one side. My point to the Committee is that these issues are reciprocal.
Q4766 Sammy Wilson: The point I am trying to get at is that, if the EU has made these commitments of free-flowing trade for Irish goods and goods to Ireland, through GB across two sea crossings, has it shared how it intends to do that? That has implications at Holyhead and Dover. If it can afford that to the Irish lorries carrying Irish goods, how can it not afford it to lorries carrying goods from GB?
Stephen Barclay: I do not think the Commission would suggest that it can give a commitment as to whether there would be congestion on a motorway in the UK. It can give commitments about common transit documentation and how that would be approached, but it cannot give those sorts of commitments. If there were a delay, for example on the roads leading to Dover, it would apply to the 40% of Irish exports, just as it would to the UK.
Within the UK, it is quite difficult to disaggregate. One of the questions I asked was whether we could take a different approach for the 30% of lorries that are empty, as opposed to those that are loaded. Actually, there are behavioural difficulties in how you do that operationally because, if a route is quicker, there is a tendency for people to use it, even if their lorry is not empty. There are operational difficulties in doing that. When I say that these issues are reciprocal, my point is that there is a shared interest in keeping flow. It affects not just the Irish Government, but the exporters coming in from European businesses. It is in both sides’ interests. Four out of five hauliers are European, so there is a shared interest in keeping that flow moving as well as possible.
Q4767 Mr Djanogly: Can I suggest that there is quite a lot of confusion out there, among businesses and the public, on the chances of no deal, not least because different people have been saying different things? Would you put the chances of no deal at 1 million to one?
Stephen Barclay: I agree that there is confusion. That is in part because some people hear, coming out of this building, some people saying that no deal is the legal default, and they hear other people saying Parliament will take no deal off the table. There is then a distinction to draw with what Government have done for no deal, with over 300 work-streams and a huge amount of work over three years and what large corporates have done, many of which have had large work groups on it. There is frustration at having stored stuff in March/April and having to store stuff again. There is a distinction between them and many SMEs, which question whether it is worth spending money on preparation and if it going to happen.
Clearly, when the Prime Minister is in, the communication around that will be reflective of any position the Cabinet takes. In terms of the messaging, we can get into the detail of the numbers and where we are at, if that is helpful in terms of the current reach on messaging, but we are looking very actively. For example, I have been discussing with the No. 10 behaviour impact team about how to shift from what were predominantly technical notices previously. There was a massive amount of work, with 104 technical notices. A huge amount of work went into them, and we did comms in the run-up to March, which reached 99% of people but did not necessarily drive their behaviour. A lot of SMEs said, “We do not think it is going to happen”. The question for the new Government’s comms strategy will be how they get that message across.
Q4768 Mr Djanogly: I appreciate that you cannot talk for the new Government but, as things stand, you seem to be saying that the chances are rather higher than 1 million to one that we will go out with no deal.
Stephen Barclay: As currently slated, there are 24 sitting days in September and October. That is the current parliamentary position. As colleagues know, the withdrawal agreement is a significant piece of legislation and that is a short period of time. You cannot programme motion the Lords. There is a question that goes to the Chair’s earlier question: will there be a concession from the EU that is palatable enough for Parliament to pass? There will be a wide range of opinions on that around the table.
Q4769 Mr Djanogly: What is your opinion, as things stand?
Stephen Barclay: As I said earlier, no deal is underpriced. It is still this Government’s intention, and both leadership candidates’ intention, to seek a deal, and it is the will of many Members of Parliament for there to be a deal. The question then is whether there is a deal that is palatable to Parliament. If not, will Parliament vote to revoke or leave with no deal? There are experienced parliamentarians around the table, all of whom will have their own view as to what the likely outcome is.
Q4770 Mr Djanogly: If there were no deal, would further negotiations need to be conducted under the provisions of Article 218? How would that be different from what happens under Article 50?
Stephen Barclay: The difference in legal structure is around how it is signed off. As a senior lawyer, you are very well acquainted with that. It relates to the point we touched on earlier, in answer to Mr Bone. That is that in the event of no deal, in my view, that is not a stationary position. We will then need to look at what can be agreed and the timescales for that.
Q4771 Mr Djanogly: We are coming back to this idea of side deals. Does that take out your Department? Who would be the UK’s interlocutors for side deals? From the European perspective, if they have abolished their negotiating team, would they be doing it on a departmental or agency basis, and would we be? How would the whole thing be managed?
Stephen Barclay: As you said, I cannot speak for the next Government, so it is not for me to determine the architecture of government that a new Prime Minister may wish. The post of chief negotiator for the EU continues until 1 November, so key personnel will still be in post.
Q4772 Mr Djanogly: They have abolished the team, have they not?
Stephen Barclay: No, some staff have transferred. Sabine, for example, has moved to DG Trade, but Stéphanie Riso, for example, and other key members of that team are still in place. Key personnel are still there.
Q4773 Mr Djanogly: There are people to talk to centrally, so you do not think that, in the event of no deal, it is all going to break down. There will be central teams for your Department, and the EU will have the same.
Stephen Barclay: You will need central teams for a number of reasons, first for the Commission negotiation. Again, it is for the new Prime Minister, but you will need that. You will need a central grip of no-deal preparation and co-ordination. You will have to discuss with member states alongside the Commission about the impacts within those member states. Also, if you are in a situation of no deal and have bilateral arrangements, such as on health or security, you will have to discuss what those arrangements will be.
Q4774 Mr Djanogly: It does not sound like this has been given much planning.
Stephen Barclay: I am trying to draw a distinction between me appearing as a member of the current Government and speculating over what the next Government will want, albeit it is only a short period of time until the next Government. That is the distinction I am trying to draw. I can assure you that there is a huge amount of civil service focus on these issues so, if I am not articulating them, as a fellow Cambridgeshire MP, as effectively as I might, it is not because there is not a huge amount of work going on on these issues. There is.
Q4775 Mr Djanogly: Finally, if the new Government decided to take the position of retaining some of the financial settlement on which negotiations have been based, the £39 billion, would the UK be reneging on anything? What would the practical implications of that be, from what you have heard from Europe?
Stephen Barclay: That is a question of law and an issue for the Attorney-General. It is not for me to speculate on legal advice. The Commission itself has publicly said that nothing is agreed until everything is agreed. That was a statement the Commission itself made. Clearly, as I touched on earlier, there would be questions on things like bottom-of-the-range tariffs. I suspect there would then be a sliding scale around other aspects, such as when notification was given and where commitments are, and some of the wider debates, such as our shareholding in the European Investment Bank and some of these issues. Those are issues for the Attorney-General to lead on.
Q4776 Mr McFadden: Good morning, Secretary of State. I want to ask you a few questions on what the future might look like. We will have a new Prime Minister next week. We think we know who it will be but, whoever it is, he is going to try to renegotiate and come up with an amended agreement compared to the one that the current Prime Minister negotiated in November last year. Is it your understanding that the likely future relationship between the UK and the EU, envisaged in that renegotiation, will be closer to a Canada-type free trade agreement than was envisaged under the Chequers plan, let alone a Norway-type EEA agreement? Is that what we should be expecting?
Stephen Barclay: First, we do not know who the new Prime Minister will be and, secondly, it will be for that Prime Minister to appoint a Cabinet and agree a position. One of the early issues for the incoming Cabinet will be to review the current Cabinet’s positions on some issues, and whether to reaffirm or change that stance. I need to be clear about the terms of my appearance before the Committee: I am here as a member of the current Government. It is not for me to speak for the next Cabinet.
Q4777 Mr McFadden: It is hardly likely that the new Prime Minister will argue that the future relationship should be closer to the EU than the one that Theresa May envisaged. That is not very likely, is it?
Stephen Barclay: It sounds like you are answering your own question, Mr McFadden. The wider point that I have always been keen to focus on is the longer term relationship between the UK and the EU. While we are leaving the EU institutions—and I gave a speech in Sibiu to reinforce this point—we are still a country within Europe and we still share European values. If you look at the longer term challenges that the Commission has set out on climate change, migration and security, we share these challenges, and the UK is well placed to work effectively with the European Union on them. There is scope for a very close trading relationship, but it is for the new Prime Minister to set out the terms of that.
Q4778 Mr McFadden: Let me try a different tack with you, if you do not want to be drawn, which is your own Department’s view of the meaningful vote obligations. In your most recent departmental report, there is no mention of this obligation, so there is some speculation as to whether that is a significant omission or something to which we should not pay much attention. Is it your view as the Secretary of State and leader of that Department that the obligation to have a meaningful vote on a withdrawal agreement has been fulfilled through the votes that have already happened, or should we expect a meaningful vote on any amended agreement that the next Prime Minister may negotiate?
Stephen Barclay: The honest answer is that I would have to go back and check what exactly was in the Grieve amendment. My understanding—and I will happily write to you, Mr McFadden, if it is helpful—of the original Grieve amendment was that a vote on the withdrawal agreement required a vote of the House, under the terms that we had previously. My understanding is aligned with yours, but I am happy to go and check that.
Q4779 Jeremy Lefroy: I want first to consider the trade agreements with other countries not within the EU. BMW announced this week that it is stopping production in the UK of engines for South Africa, because those engines are exported to South Africa and then returned to Europe for sale, within the EU, of vehicles that are made in South Africa. BMW says that comes as a result of problems with rules of origin in the EU-South Africa trade agreement. How many other such agreements are you aware of where we might have complications over rules of origins because, until now, the UK has been part of the EU? Therefore, as part of EU manufacture, we are going to see our manufacturers suffer as a result of the withdrawal of that manufacture, because it will no longer count as part of EU manufacturing rules of origin.
Stephen Barclay: The Department for International Trade has done a huge amount of work on the trade continuity elements. I think, Mr Lefroy, you are driving at where the EU has an agreement and whether it is going to be rolled over.
Jeremy Lefroy: Yes, there are elements of that. Rules of origin, in particular, are often much more important than tariffs.
Stephen Barclay: In March, in terms of trade continuity, 28% of trade by value was covered. That has now increased to 63%.
Q4780 Jeremy Lefroy: Was South Africa one of those? I think it was.
Stephen Barclay: No, I do not think South Africa is one of the ones we have covered. Again, I can drop you a note. Actually eastern and South Africa are, yes.
Q4781 Jeremy Lefroy: The point I am making is that, despite us having a roll-over agreement, it is having a negative effect because of the implications of rules of origin. I want your assessment of how many other such agreements are going to find problems with the legislation around rules of origin in respect of our manufacturers here.
Stephen Barclay: We cannot manage all of these issues within DExEU, because they are led by the relevant Departments. This issue is led through the Department for International Trade and the Department for Business. Part of my role is to challenge Departments as to whether we are getting the agreements in place in a timely fashion and what the impediments are across Government. I cannot give you a definitive answer in terms of the specifics within a sector or, within a sector, a particular manufacturer where there are issues.
I can reassure you that there has been significant work on trade continuity agreements and a lot of progress has been made. Where we do not have those in place, we are actively looking at what other approaches we can take, such as around memorandums of understanding. A huge amount of work has been done on that. Does that mean there will not be anywhere a particular industry and, within that industry, a firm that takes a view? No, but that applies to normal business as well, because companies are always looking at different issues within how they structure their operations. The issue is how we mitigate any of those related to Brexit.
Q4782 Jeremy Lefroy: It would be good for the House to have information on the impact of potential rules of origin problems, in respect of those agreements that we have already signed and are being rolled over. The implication has been that, once an agreement is rolled over, that is fine; there are no problems; things will continue as before. This may be an isolated case—I hope it is—but it would be good if your Department would liaise with DIT.
Stephen Barclay: I will liaise with DIT.
Q4783 Jeremy Lefroy: Thank you very much. Secondly, I want to raise the length of the temporary agreements. I think the air travel one is nine months. Is that the case?
Stephen Barclay: It is to March.
Q4784 Jeremy Lefroy: That is less than nine months now. Is that a definite end date or was there any indication in the agreement that it could be extended by mutual agreement?
Stephen Barclay: The air one is to March 2020, but the principles that underpin it would then apply, which are that it is in both sides’ interest; that is why the agreement has been reached in the first place. That will be one of the areas of discussion with the Commission under the new Government: as we get closer to those deadlines because of the extension, to what extent is there an appetite to extend them?
Q4785 Jeremy Lefroy: You have quite rightly mentioned the reciprocal aspect of some of the arrangements. The Government have already stated that we will not impose any tariffs on goods from the Republic of Ireland, although we understand that that has not been reciprocated. We have also said that UK firms would be free to send information to Europe without a problem, even though that may not be reciprocated. Does this not put us in an extremely weak position, if, on every issue, we simply say, “We are prepared to do anything to keep things going, even if you do not do it to us”?
Stephen Barclay: No, it does not. It is a fair question and I can reassure you on that. Take tariffs, for example. On 87% of areas we have said that we will not apply tariffs, but we have reserved tariffs in respect of 13%. They largely centre on agriculture and the automobile industries; that is because it is in our interests, but it is a balance.
It comes back to the start of the session: with no deal, there is a balance between the action you take that protects producers, so our farming sector, and action that you take that is in the interest of consumers in terms of prices. There is a balance to be struck there and we need to be candid with ourselves in respect of that. We have not said it is 100% tariff-free. We have applied it with 13% tariffs in a specific sector. My meeting later today relates to the sugar industry and how to set tariffs in a particularly targeted way that respects the UK sugar beet industry, as opposed to the 22% imports of sugar from the beet industry. You set the tariffs in a carefully designed way.
Q4786 Jeremy Lefroy: My final question is over the politics and relationships of this with our EU and European neighbours. We have to consider—and obviously I am 100% opposed to no deal—that if there is, by any misfortune, a no-deal situation, there will be various flashpoints. Other colleagues have already referred to those. The Government are proactive about lamb, for instance, and I hope will be able to mitigate that. There is also the area of medicines, but I believe there are some that seem to have the potential to be much more serious, such as fish. Presumably, if there were no deal, we would be out of the CFP on 1 November and that would have all sorts of implications. Has there been a roll-over agreement of the CFP in the case of no deal, for quotas and so on? I am not aware of one.
Stephen Barclay: The quotas are set for the year ahead. From memory—and again it is a Defra lead—it is November/December for the year to come. You are right about a no-deal scenario. For example, the entire Belgian fishing fleet uses UK waters. I talk about these reciprocal impacts and that has a particular regional focus in terms of its impact within Belgium.
Q4787 Jeremy Lefroy: This is a very serious point. I am old enough to remember the cod wars with Iceland, which became extremely serious and were a major international problem. We are not just talking about Iceland here, but several countries. From 1 November, if there is no official roll-over of quotas and the CFP, many boats will be fishing illegally in UK waters and vice versa.
Stephen Barclay: That would set all sorts of hares running and that is not the position. The arrangements will continue for this year, in terms of the arrangements until the end of December. There are two aspects to fishing. There is one in terms of access to waters and quotas, and then there is access to markets. Particularly in areas such as shellfish and salmon, the UK fishing fleet sells significant sums to the European market. That is a more nuanced debate that Defra has been leading.
Q4788 Jeremy Lefroy: Presumably, if there were no deal on 1 November, we would not be in the common fisheries policy and the quotas would not apply, even if they had been agreed until the end of December. They would certainly not thereafter. Is there a transitional or standstill arrangement on fisheries to ensure, at least for the next few months after the end of October, that things could continue in a roughly normal way, without some serious confrontations up and down the North Sea and the Channel?
Stephen Barclay: There is, and it is actually a broader issue than fishing as well. There is, and I will happily ask Defra to write to you with a further update on that. The reason it is a wider point is that, for example, if you went to a confrontational scenario, you could have disruption to the short straits from Calais, which would then have a read-across to our flow of goods, which again is something that we are actively seeking to avoid. It is part of a broader debate than one purely on fishing, and it is one where, again, there is a strong reciprocal interest in reaching sensible outcomes.
Q4789 Jeremy Lefroy: Where Britain is part of EU missions—for instance we are part of the EU mission in Georgia—I understand from a letter I wrote and an answer given in the past that, as soon as we are out, we are no longer part of that security mission, in which the UK plays a vital part. Presumably the UK would immediately fall out of the anti-piracy patrols in the Red Sea as well, without any kind of continuity arrangements, which I have not heard exist. I have been told there is no such continuity for Georgia.
Stephen Barclay: This all points to the wider theme that we have been drawing out through this session, which is that there has been a focus on securing a deal. That remains the Government’s policy. If a no-deal situation becomes more likely, in a number of areas including those you have touched on, Mr Lefroy, such as fishing, the EU has a strong interest—not just Belgians, but the French and there are specific fishing issues in Ireland, in terms of the interplay. There is quite a bit of data there. Also, there is security and the missions. We also have 800 troops in eastern Europe, for example, I think in Estonia. There is a significant interest within Europe in the continuation of those arrangements, and we will have those discussions in the run-up to the 31 October outcome.
Q4790 Andrea Jenkyns: Secretary of State, sadly this could be your swansong today.
Stephen Barclay: You may know something I do not, Andrea.
Andrea Jenkyns: You could use it as an opportunity to demonstrate to the next Prime Minister that you are the right person for this job. What lessons do you feel we have learned in these last three years and what could we do differently in negotiations under the next Prime Minister? If you are still in post, what would you do differently, and what would you do differently with your Department?
Stephen Barclay: I would draw attention to three particular areas. I hope I have tried to do this in my time. The first is how we engage with Parliament. The more open we can be with Parliament, the better. There was a lot of misunderstanding around the withdrawal agreement. I appreciate some colleagues still have ongoing concerns about it, but that document was misunderstood in certain areas. Thinking about how we work with Parliament is one area.
Q4791 Andrea Jenkyns: Would you like to see the withdrawal agreement brought back?
Stephen Barclay: I would like to leave with a deal and I supported the deal three times. The question is whether the House is ready to vote through the withdrawal agreement in its current form or if there is an amended form available that it would accept.
The second area—it is a shame that Joanna has just gone—is the devolved Administrations and how we work with them. There has been a lot of quantity of JMCs, but this is about how we work with the Welsh and Scottish Governments moving forward, particularly in phase two, where there are very strong regional interests and expertise. For example, having a constructive relationship with Jeremy, who represents the Welsh Government, is extremely important, so I am keen to think about the union implications as we go through Brexit.
Q4792 Andrea Jenkyns: What about the approach to the negotiations under a new Prime Minister?
Stephen Barclay: I was just coming on to answer the first question, then will go on to the next one. The third area is how we engage with those parts of the community who feel left behind, both regionally, where we use Brexit as a catalyst for change, but also within different groups. I have been reaching out to ethnic minority groups, for example, and did a roundtable with charities. It is how we move from some fairly cumbersome approaches in the EU, for example on the shared prosperity fund, where there is a big regional variance and a huge amount of bureaucracy in the way schemes are administered, and design something that is more bespoke and tailored to the needs of our civic society, charities and social impact investment. We can use Brexit as a catalyst for those parts of the country that feel left behind.
Q4793 Andrea Jenkyns: What do you think should be done differently in your approach to negotiations with the EU, in hindsight?
Stephen Barclay: It is difficult for me to answer that.
Q4794 Andrea Jenkyns: Imagine you are still in post and given a free rein.
Stephen Barclay: You are asking what I would have done differently. The negotiation was pretty much concluded before I was appointed in mid-November.
Andrea Jenkyns: This could be an opportunity for you to say what you would have done differently.
Stephen Barclay: That is extremely kind of you. First, it depends on whether we are leaving on a no-deal basis or with a revised deal. Then you are into a phase-two negotiation. We have done a huge amount of work in the Department and across Whitehall to prepare for that phase. Actually, this is a chance to thank officials for the work they have done to prepare. Clearly it will be shaped by whether we are in a deal or no-deal situation.
Q4795 Andrea Jenkyns: My last few questions will be short. Ursula von der Leyen was elected yesterday with such a low margin, with the support of Eurosceptic parties, such as the Italian Five Star Movement. What impact could this have on Brexit negotiations?
Stephen Barclay: One area the Commission President-elect has always recognised in her previous role as German Defence Minister was the importance of the UK from a security perspective. That is something positive on which we can build, in recognising that the UK has an important role to play as a neighbour, rather than a traditional third country.
Q4796 Andrea Jenkyns: I am sure you will be pleased that this is my final question. You have been here nearly two hours, so well done. Considering Ursula in post and a new Prime Minister, can we finally make progress and get a deal that is palatable to the British public, so we can finally deliver Brexit?
Stephen Barclay: As someone who did not vote for the deal, it is for you to tell me what you would find palatable to vote for it.
Andrea Jenkyns: You can see this as an opportunity now. We will have a new Prime Minister and this lady is now in post.
Stephen Barclay: First, on both sides there is a recognition that no deal is undesirable and so there is a desire for a deal. Both sides recognise that. A change of Prime Minister and of personnel within the Commission, notwithstanding that some of the key figures will still be there in the coming months, is a fresh opportunity. I look forward to it.
Q4797 Chair: There are a couple of final things, Secretary of State. I come back to the point that was raised with you by Jeremy Lefroy—fisheries. I understood you to have said that the arrangements being reached will carry on until the end of the calendar year. I am looking at a document on a Government website, “The fisheries sector and preparing for Brexit”, last updated on 24 June, by Defra. It is headed, “If the UK leaves the EU without a deal, there may be changes that affect your fisheries business”. It says, “Non-UK vessels, including EU registered EEA or Switzerland vessels, will no longer have the automatic right to fish in UK waters” in the event of no deal. That does not square with what you said earlier, when you appeared to suggest that the current arrangements, both ways, would carry on until December. Is this something that has happened since?
Stephen Barclay: I will happily write to the Committee to set this out. I was drawing attention, first, to the quotas and arrangements usually set in November/December for the year ahead. They will be running through. Secondly, I was pointing to the wider interplay beyond fishing. As you will know, the fishing relationships are led through Defra, but there is a wider interest for me, because there is an interplay in terms of what happens at Calais and how we ensure that there are no protests or issues in the flow of goods. There is an interplay between the two, so a difference in what the legal position is and what we would seek to arrange.
Q4798 Chair: Is that a way of saying that there may be protests in France if French fishing vessels cannot access UK waters? The document from Defra also says, “The UK Government will control and manage access to fish in UK waters”. This is all about no deal. Is it the Government’s policy that, on 1 November in the event of a no-deal Brexit, French fishing vessels will not be permitted to fish in UK waters?
Stephen Barclay: What I was setting out is that, legally, in the event of no deal, the UK Government will take control of UK waters.
Q4799 Chair: What will the policy be on 1 November?
Stephen Barclay: The policy will be to seek a continuity approach, but I will happily set it out in more detail for you.
Q4800 Chair: The policy will be to seek a continuity approach but, in the absence of that, French fishing vessels will not have access to UK waters. Is that correct?
Stephen Barclay: That is the legal position in the event of no deal, but it is in our mutual interest to come to reciprocal arrangements.
Q4801 Chair: Sure, but in the event of there not being a continuity agreement, will the British Government’s policy be to carry on?
Stephen Barclay: As I say, I will set it out in more detail, but it is a reciprocal arrangement.
Q4802 Chair: You will write to us about that; that is helpful. On your point about businesses not preparing for no deal, if one of the candidates who may become Prime Minister next week says there is a 1 million to one chance against there being no deal, they might listen to that and say, “Why should I bother to prepare for no deal?” The guy we think is going to win says it is basically not going to happen. Is that not a communications challenge?
Stephen Barclay: We covered that in some detail in the earlier exchange. As I have consistently said, the legal default is for no deal. It is for individual Members of Parliament to determine whether they think the House will pass a revised deal. It is the Government’s priority to seek a deal, but it will be for Parliament as to whether we are able to pass a deal or not.
Q4803 Chair: The BBC reported at the beginning of this month that: “Up to three-quarters of civil servants [who were] shifted to emergency Brexit preparation duties before the original 29 March deadline have since been stood down”. Is that accurate?
Stephen Barclay: There was a surge in the run-up to March, which was co-ordinated through the Cabinet Office, moving officials into particular Departments. That will be scaled back up, subject to a decision by the new Cabinet, as we go close to 31 October. For example, if you move staff to run a call centre and do not then leave, you do not need to keep those staff in place for the call centre that is not being called. Yes, we moved staff across in the run-up to March to get them ready operationally, but it does not make sense to keep them all. Some of them have remained in post and others have been stood down, but will be reactivated in due course.
Q4804 Chair: There has been a certain amount of turnover at a senior level in your Department. Are you worried that institutional memory for this very specific task of preparing for the possibility of a no-deal Brexit will still be there, if and when you have to stand people up again?
Stephen Barclay: It is a fair point. On the one hand, as part of people’s careers, they want a natural period in post. After March, a number of staff will move, quite understandably, which is a reasonable and expected part of business. Alongside that you need to have continuity and to mitigate that to the best of one’s ability. There is a balance. I am confident. We have discussed this within Whitehall and I am very confident that Cabinet Office colleagues in particular, who have oversight of that aspect, are aware of the risk. There is still a huge amount of continuity within the system.
Q4805 Sammy Wilson: Since the Irish Government have now decided that it is feasible to collect tariffs along the Irish border for trade moving north-south, is there a case for the UK Government to consider imposing the same tariffs on goods travelling from the south to Northern Ireland?
Stephen Barclay: That is not the position the UK Government have set out. Obviously it is a statement of fact that it is for any new Cabinet coming in to review policy decisions and take a view, but the Government’s position has been clear that, for a temporary period, we are not putting in tariffs.
Q4806 Chair: Thank you very much for coming. The final thing I was going to say does not require an answer, though you are going to give one. Given that things may move quickly, we hope very much that you—or if it is not you, your successor, and I make no assumptions whatever—return to the Committee in the autumn. If things are moving, we will be keen to hear about the new direction of policy, certainly before the European Council meets. I leave that request with you.
Stephen Barclay: I have appeared far more frequently than perhaps was the traditional approach.
Chair: We recognise and genuinely appreciate that, Secretary of State. Thank you for coming.