Brexit: Domestic and International — House of Lords, 2016-10-27
Topic: Macroeconomics
James Lupton (Conservative, Centre-right): My Lords, I am sure that the House will agree with me that that was a powerful maiden speech by my long-standing and now noble friend Lord Gadhia. It drew on his displaced, almost nomadic, early life and on the debt which he palpably feels to this country, which took his family in. He is, however, too modest to highlight the notable success he has had in the London-based financial services industry, nor did he refer to his active and consistent track record of public service—either as a trustee of Guy’s and St Thomas’s hospitals, or as a board member of NESTA, UK Financial Investments or UK Government Investments—or his philanthropic activities. I am, therefore, pleased to speak after him, since I shall allow myself just a little reflected glory for spotting the talent and recruiting him as a fresh-faced graduate in 1991 to my former firm, perhaps creating the foundation for his future success. He will make an important, enlightened contribution to this House and I congratulate him on his maiden speech While I admire the conviction your Lordships bring to this debate on the opportunities and benefits that the UK can now reap post-referendum, it is still a little too early to be entirely confident about predicting a positive result—from whatever route we choose. Having said that, there are some pointers. We could use history as a guide; my noble friend Lord Leigh of Hurley has already referred to the corn laws. The economist James Wilson described them at the time as, "laws passed by the seller to compel the buyer to give him more for his article than it is worth. They are laws enacted by the noble shopkeepers who rule us, to compel the nation to deal at their shop alone" Indeed, Wilson dismissed tariffs, saying they were unnecessary "swaddling" against an economy as mature as Britain’s in the 19th century On the other hand, we know that opening up our economies to global competition, as we would be doing outside the EU—which currently has significant external tariffs to protect EU industry—carries risks. For example, after China joined the WTO, the US lost 6 million manufacturing jobs between 1999 and 2011 Another pointer is economic research. Consumers in closed countries have a lot less purchasing power, and the effect is progressive. Academics at Columbia University suggest that in an average country, if trade borders were closed, citizens on higher incomes would lose 28% of their purchasing power but the poorest 10% would lose a horrifying 63%—something the leader of the Opposition should note carefully. Free trade adds to growth. Trade with the EU, since we joined in 1973, has increased Britain’s GDP by 10% So at this stage we should be careful about what we wish for. There are conflicting economic and political forces at work, the latter pushing for immigration control of our borders outside a customs union, the former less clear-cut, although I lean towards leaving the EU customs union My second point is a simple one. Britain is a major economic force in the world. We are an inventive nation, we are pioneers. While it is sensible to allow history to inform our decisions, as I have already done in this speech, it concerns me that we hear in the debate about Brexit too much about this or that established model for leaving—there is no model for leaving, no country has ever done it. The rhetoric should embrace the concept of an innovative and, above all, bespoke solution being devised, which forges a new path for the UK while being acceptable to our European partners My final point echoes a speech I made in this Chamber a few weeks ago about the feeling of disfranchisement among the working poorly skilled and educated, who are of such concern to this Government. We must of course back British exporters more. We have world-leading capabilities in, for example, advanced manufacturing, pharmaceuticals, financial services, and emerging technologies such as artificial intelligence. A modern industrial strategy must support British business to reach beyond the EU to new markets, but we must be open to helping those who could suffer as a result of our economy being more open Academics at the LSE have found that areas of the country such as Northampton, Blackburn and Port Talbot, which are more exposed to Chinese imports, for example, have a higher rate of unemployment. The UK has something called the rapid response service, which is meant to help the economically displaced, but its activities are frankly unclear and in 2008, when the other place investigated it, it had a budget of a paltry £6 million. It is clear that we will need our own adjustment fund with a much bigger budget and much clearer strategic, industrial purpose It is not enough to say that the UK overall will benefit from more openness to trade. We will have to identify where people are not benefiting and support them to develop new economic activities, just as we did in the north-east of England a generation ago, when the closure of the coal mines left an industrial vacuum so successfully filled by our becoming a highly efficient car manufacturer, as again demonstrated by Nissan today.