European Union (Implications of Withdrawal) Bill [HL]

My Lords, I congratulate the noble Lord, Lord Pearson, whom I still like to regard as my noble friend, on introducing the Bill. I would not normally be in your Lordships' House on a Friday afternoon unless I were required to do duty on the Front Bench, but I am here today, on our Back Benches, because I believe that the issues raised by the Bill are very important and I am pleased to take part in the debate. I share many of the noble Lord’s frustrations with all that emanates from the European Union. Our membership of the European Union has created and will continue to create many problems for our country, but I am not convinced, as the noble Lord, Lord Pearson, is, that withdrawal is the only solution. We should search for ways in which to make our membership of the EU more flexible and focused on the trading relationships that are beneficial to us and our trading partners. I believe that we should extract our country from those elements that are driving towards a federalist future for Europe and excessive involvement in the daily life of our citizens. We should focus on those elements of our relationships with our European neighbours which are genuinely beneficial to us. That said, the differences between the noble Lord, Lord Pearson, and me on the endgame do not stop me supporting the thrust behind his Bill. The Bill requires in effect a regulatory impact assessment of our membership of the EU. We did not carry out one in 1972, when the initial Act supporting our membership was passed, or in 1975, when a referendum was held because in those days we did not do regulatory impact assessments. But even if one had been done, it could not have predicted what has actually happened in terms of our membership. Then we talked about a common market and free-trade issues. Today, free trade is an issue but one thatis more about global than local trade. More importantly, we never imagined how intrusive and costly our involvement with the EU would be. The Bill is phrased in terms of withdrawal, and there may be some impact solely related to the process and fact of withdrawal. But the main effects of our membership of the EU, both positive and negative, will be evaluated from the fact of our membership rather than withdrawal. To that extent, this Bill offers a helpful way forward. I do not understand why the Government resist the idea of a comprehensive and neutral analysis of the effects of our membership. I had always thought that it was the duty of a Government not just to make new policies but to examine critically whether existing policies continue to deliver value for citizens. I wish that I could detect this quest after the truth in the actions of the current Government. As a general principle, the Treasury has been preaching the benefits of cost-benefit analysis for as long as I can remember and there is a well developed framework set out in its Green Book. The framework was designed for new policies and projects but it is quite flexible enough to accommodate the analysis of what happens if we do not carry on doing what we currently do. The Green Book requires an economic, financial, social and environmental analysis and a cost-benefit analysis, which includes items for which the market does not provide a satisfactory measure of economic value. It also gives guidance on the evaluation of social and economic dimensions for which there are no prices, using various other techniques of evaluation. This is exactly what we need for analysing our membership of the EU. The Minister will be aware of the fact, to which the noble Lord, Lord Pearson, has already referred, that several cost-benefit analyses have been carried out in recent years. Organisations such as the Institute of Economic Affairs and the National Institute for Economic and Social Research found that at bestthe economic benefit to the UK of continued membership is marginal. But these analyses were undertaken before some major costs were known about. To give just one example, the Financial Services Action Plan will impose costs which some estimate at up to £24 billion over the next three years. More recent studies have found a significant disbenefit from our membership of the EU. In the past, Ministers have dismissed such studies, saying that they did not recognise the analysis or that the analysis did not provide a comprehensive answer. That is surely an argument for the Government being fully engaged in the analysis, to tease out the areas of difference and to make a case for those elements that they believe have been ignored. Ministers have similarly been dismissive of the rigorous analysis carried out in Switzerland, which shows conclusively that membership of the EU would not benefit the Swiss economy. Is it not time that the Government started to engage in discussions of the cost and benefits, rather than ignore them? Ministers usually say that membership of the EU is good for business and good for employment, and sometimes cite a figure of 3 million or more jobs that are dependent on the EU. There is a belief that we need to be members of the EU in order to trade with it. However, Switzerland is a very clear example of membership not being necessary; the Swiss economy is even more dependent on trade with Europe than our own. Indeed, it is very likely that the rest of the EU needs the UK more for trade than we need it. The balance of trade between the UK and the rest ofthe EU has been negative for some time, and reached a deficit of £32 billion in 2005. For several years, our exports outside the EU have been growing faster than those within the EU, which we should celebrate, because demographic trends show that EU growth is largely static compared with growth practically everywhere else. The EU’s long-term trading interests belong outside Europe. The costs of EU membership are very great. In simple terms, we paid an average of £3 billion in the 10 years to 2006 through the net cash transfer to the EU budget, but that is set to double by 2011 to nearly £6.5 billion, largely as a result of the Prime Minister’s largesse with our rebate. On top of the direct cash flow into the EU coffers, most of our regulatory burdens come out of Brussels and add at least£6 billion a year to the cost of our business sector. That is the Government’s estimate; other people’s estimate is as high as £20 billion a year. There are also opportunity costs. The noble Lord, Lord Pearson, referred to the Treasury paper Global Europe: Full-Employment Europe, which basically said that the EU was costing anything up to 28 per cent of GDP in protectionism and the opportunity costs of not being competitive. If it is only a fraction of that amount, it is a massive drain on the UK. A careful and balanced study could conclude only that the economic costs of our membership currently outweigh the economic benefits of our membership. That leaves the possibility of other benefits, although I have never heard a clear articulation of what those might be and how much value they deliver. In answer to a recent Oral Question from the noble Lord, Lord Pearson, the noble Lord, Lord Davies of Oldham, described the benefits as being, "““in a wider political context””.—[Official Report, 23/5/07;col. 645.]" When challenged about what that meant, the Minister said that it included such things as, "““leverage on the Russian Federation””.—[Official Report, 23/5/07; col. 647.]" in relation to energy supplies. I hope that the Minister today will not claim that Britain needs Europe to conduct its relationships with other Governments, because that really would be a very sad admission. I conclude by recording one reservation about the Bill: the formation of a committee. The noble Lord, Lord Pearson, will expect me to say this, as I am usually the Opposition’s Treasury spokesman. Committees can be very expensive, and can go on for a very long time. They attract large secretariats and produce tons of material. It would be nice to think that the committee specified in the Bill could be streamlined and cost-effective. Perhaps the noble Lord, Lord Pearson, would consider a time limit for its work, and a cost limit on its endeavours. I do not doubt the benefit of the analysis proposed in the Bill. It would have my wholehearted support if the noble Lord, Lord Pearson, could find a way of ensuring that the Bill’s direct public expenditure implications were indeed modest.