Lord Lilley (Con)

My Lords, it is always a great and nostalgic pleasure to follow the noble Lord, Lord Liddle, whose enthusiasm for rejoining the European Union reminds me of the remarks of Samuel Johnson about a friend of his who was contemplating a second marriage—that it was a triumph of hope over experience. No experience or facts will dint the hope and enthusiasm of the noble Lord, Lord Liddle. But we all make mistakes—we predict things which do not happen and advocate policies which do not work—and there is no great shame in it. Indeed, I am sure the right reverend Prelate would accept that as long as we acknowledge our mistakes and repent of them, we will be forgiven. I certainly made mistakes. Indeed, I made the same mistake as this Government are making and which lies behind their policy on the reset. The Government actually believe that, in the words of the Business Secretary, the single market is “where the magic happens”, and that rejoining it or aligning with it will make our exports grow and our GDP likewise. As the Trade and Industry Secretary responsible for preparing this country for participation in the single market and overseeing the process, I made similar speeches. I did not invoke magic, but I did say that membership of the single market would boost our exports to the EU and with it our growth. I said it would do so even more powerfully than the Uruguay round, which we were simultaneously negotiating and which halved tariffs worldwide and created the WTO. For many years thereafter I assumed that that had happened, but eventually I was confronted with the facts and they showed that I was wrong. Throughout our more than a quarter of a century of membership of the single market, our exports of goods to our fellow founding partners of the single market had stagnated. They grew at less than 1% a year for 28 years. At the same time, our exports to countries worldwide with which we had no trade agreements had grown four times as much, by 87%. Our services exports within the single market grew more slowly than all but two other rather minor countries in the single market. The single market magic, whatever it is, failed for Britain. Why do the Government not recognise that? Why do they still believe—I am sure they are sincere in their belief and are not just lying to us—that the single market will magically boost our exports? They are not alone. Most of the commentariat also assume that the single market was good for us. Indeed, how many noble Lords who are going to speak in favour of a reset today were aware that the single market was such a failure in terms of our goods exports to the EU? I think half a noble Lord was aware of it; the others were not. There is a reason for that. I have been thinking about why this view is so prevalent. The reason why the facts are so little known is that the single market was the aspect of European membership which commanded near universal support. Free-market Conservatives like me hoped that it would unleash market forces and make us all richer. Eurosceptics put aside any reservations because Mrs Thatcher was a great advocate of it. On the other side of the political spectrum, Jacques Delors persuaded an initially very sceptical Trades Union Congress, and with that the Labour Party, much of which had been opposed to membership of the European community, that the single market would enable it to control and regulate markets in the public interest. What was more, it could do so from a European level without the need to win an election in Britain, which eluded it for 18 years. None of us ever doubted that it was a good thing and nobody queried it. I googled to find out what studies had been made by academics and politicians of how much the single market had benefited British goods exports, or not, during our membership. There were almost none during that period. Eventually, some studies were made and the facts are incontrovertible. Our goods exports to the EU grew at a snail’s pace and our service exports did little better. We can respond to those effects by adjusting our predictions and policies accordingly—that is what we should do—or we can react like Hegel, who claimed he could derive all the theories of natural science from his first principles and his dialectic method. His disciples went out and came back and said, “But master, the facts contradict your theories”, to which he replied, “So much the worse for the facts”. That seems to be the Government’s attitude as far as the facts of our past experience in the single market are concerned. There is a lesson from that experience: what drives trade is not trade deals. Trade deals can bring some benefits if they are not off-set by the greater burden of regulation which one imports with them, but it is only a second order benefit. The noble Lord, Lord Liddle, is right to say that trade deals with the rest of the world are not going to be an elixir. What drives trade is producing goods and services that other people want to buy, going out and selling them, preferably in fast-growing markets, and not allowing yourself to be encumbered by unnecessary burdens and protection from Europe, which have made Europe the slowest-growing continent in the world. Sadly, that is not what we have been doing. We have stopped producing things. We have been introducing policies which make it more difficult to produce things, and you cannot export what you do not produce. The Government have a policy of stopping all new exploration and development in the North Sea, but our exports of oil and gas to Europe were considerable. As a result, we have closed down one-third of our refineries and our export of our important refined products. That has undermined our chemicals industry, and with that we have lost production of fertiliser and ammonia. It is not just in oil and gas related industries; anything dependent on energy has been undermined by the fact that we have the highest energy prices in the OECD. That has meant that we have lost much of our aluminium industry and processes. We saw that happen in the steel industry, as mentioned in the brilliant speech from noble Lord, Lord Hunt, and we are losing production in all energy-intensive industries: ceramics, bricks, cement and so on. It is a self-inflicted wound. We cannot export what we do not produce. I urge noble Lords to read an excellent report by Catherine McBride and others called Premeditated Industrial Destruction? She is one of our leading trade analysts, and it paints a very grim picture of what is happening to our trade and why. It is nothing to do with trade deals—if you do not produce, you cannot export. The obsession with tweaking our trade arrangements with the EU is a displacement activity for those who will not face up to the damage that our domestic policies are inflicting on industry after industry.