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George Bridges: Fingers crossed is not enough as we run out of road on Brexit

Clouds over the City: many Europeans see the UK's wish to keep financial services' access to the EU as the strongest card in Brussels' hand. They will only play it at the last minute and want something valuable in return: Getty Images
Clouds over the City: many Europeans see the UK's wish to keep financial services' access to the EU as the strongest card in Brussels' hand. They will only play it at the last minute and want something valuable in return: Getty Images

Like most Londoners, I voted to Remain in the EU. My side lost. To make Brexit a success, the Government’s plans must be built on the truth and an honest assessment of the facts. If ministers are not honest with themselves, their plans will rest on sand. The Government will lose credibility in the eyes of voters, who look to it for leadership at a time of change.

Those plans need to answer a simple question: in our new relationship with the European Union, what matters more — control of our affairs or access to European markets?

The Government wants to take back control of our laws, borders and our money — stopping the current large contributions we make to the EU each year. That’s pretty clear. It insists that we leave the Customs Union and single market, which requires a new trade agreement. But what sort of agreement? There are still plenty of questions to answer.

Far from giving us more freedom, a restrictive deal might hold back our ability to compete in the digital era. Finance, pharma, hi-tech manufacturing, broadcasting, learning: these are the geese that will lay the golden eggs in the future. But how will ministers’ proposals for a trade agreement help these key sectors? Without clarity, the danger is that we will end up with an analogue, not a digital deal.

Financial services are the jewel in our economic crown. Ministers want a comprehensive financial services agreement to preserve the benefits of EU membership, while giving the Government the ability to diverge from EU regulations in the future. But why would the EU agree? In their eyes, isn’t the City of London’s loss the EU’s gain? And why would they give the Government the ability to take any decision that could make the City more attractive in the future?

Any such deal on financial services is likely to require the UK to remain almost completely aligned with future EU regulations. So in the future, we would face a choice: do we accept an EU rule, made in Brussels but not in our interests — or do we say “no” and lose market access? Would it be acceptable for the EU to retain this level of control? If our financial services are to win in a digital world, where innovation is fast outstripping the regulators, doesn’t the Government need as much control as possible?

Many Europeans see the UK’s wish to keep financial services’ access to the EU as the strongest card in Brussels’ hand. They will only play it at the last minute and want something valuable in return.

Agreement is unlikely until the very end of the negotiations. By then, many City firms might have moved their operations out of the UK. Would such a deal lure them back?

And what price would the EU extract from the UK for such a deal? The EU wants to stop the UK from gaining “unfair competitive advantages” by deregulating in areas such as tax and the environment. I don’t want a bonfire of social regulation. But if the UK voted to “take back control”, UK politicians should control these policies. Does the Government agree?

Yes, the agreement must include a chapter on services that, for example, allows us to share data; recognises professional qualifications; gives legal certainty to contracts written in the EU and UK. But given the politics and the needs of our economy, ministers should ask themselves whether it is worth bothering to negotiate an all-singing, all-dancing deal for financial services in the first place.

Far from giving us more freedom, a limited and restrictive deal might hold back our present ability to compete

Lord Bridges

Next, the Government wants to deliver “free and frictionless trade”. Friction comes from having to fill in forms to show that UK goods comply with EU standards and regulations, and vice-versa. But if the UK set its own standards post-Brexit, how many UK manufacturers will make goods just for the UK market? Won’t they continue to make televisions, say, that comply with EU standards so they can sell them everywhere?

How does having two sets of standards help UK businesses compete and export to Europe? Would it not be better to recognise EU standards, stay aligned to them (as we are now), but create a system so we can “diverge” by mutual agreement?

As for “free trade”, the Government wants to keep tariffs at zero for EU-UK trade, while pulling out of the Customs Union — which would allow the UK to forge trade agreements, and set tariffs on goods imported from outside the EU. Some promise this will mean cheaper food and clothes: great for consumers — but it raises questions. What tariffs will we set on imports? Some argue to cut all tariffs to zero, others want to cut tariffs on certain imports: which is it? And if we allow in, say, cheaper Argentinian beef, what support would Somerset farmers get? Any, none, some? Finally, when are we likely to see the benefits?

It’s not surprising so many people are reserving judgment on this issues. Half of Leave supporters think Britain should limit imports in order to protect its national economy. These voters need persuading that Brexit could benefit them by delivering more, not less, free trade. They need answers too.

The Government should obviously not reveal its entire negotiating position. But clarity is needed if ministers are to agree with the EU on a clear heads of terms of our future relationship by the time we leave the EU in March 2019. I said some weeks ago that if we don’t agree on such terms, the transition period will not be a bridge to a clear destination but a gang plank into thin air. Precious days have passed, but the fog has not lifted. If we are to leave in stable and orderly way, clarity on these basic questions is needed. Fingers crossed is not enough.

Lord Bridges of Headley resigned as a Brexit minister in June 2017. He writes in a personal capacity.