In the APPG for Best Brexit’s first session, CBI Director-General Carolyn Fairbairn and TUC General Secretary Frances O’Grady gave evidence. MPs were struck by the large degree of common ground between the two organisations in terms of their priorities for the ‘Best Brexit’. Both organisations agreed:
- on the need to protect, in full, the rights of workers which stem from the EU;
- on the need to fix productivity gaps and achieve barrier-free access, without tariff and non-tariff barriers, to the single market;
- on the need to work with the CBI and TUC’s sister organisations in EU27 countries to show political leaders that local jobs and wealth could be damaged by an outcome driven by politics and ideology, but safeguarded by a pragmatic one instead;
- on the need to avoid a ‘cliff-edge’ at the end of the Article 50 process if a deal on our future relationship has not yet been concluded, through a transition deal if necessary; and
- that, whilst they and most of their members favoured a remain vote, the result must be respected and we must make sure we achieve the ‘Best Brexit’ possible.
A full record of the meeting is detailed below.
Witnesses:
Carolyn Fairbairn, Director General of the CBI
Frances O’Grady, General Secretary of the TUC.
John Penrose MP welcomed attendees to the inaugural meeting of the group, saying that he hoped they would find the meetings useful in helping them to identify problems and opportunities as they sought to discover the best Brexit that can be negotiated by the UK government. He thanked the SMF who he said would be assisting the group by publishing proceedings and conclusion, among other things.
Emma Reynolds MP said that she hoped that the groups would try to find common ground between MPs of different political parties. She thanked the leaders of the CBI and TUC for accepting the invitation to speak to the group.
CBI director Carolyn Fairbairn thanked the group for the invitation to join them, and said that the CBI was speaking to a wide range of groups on the subject of Brexit. She said that it was no secret that many of the CBI’s members and many businesses in general had not wanted Brexit but that since the result, she had not had one single conversation in which a business talked about reversing or not accepting the result. Very quickly, conversations had moved to how we get the best Brexit and she said that she wanted to reaffirm the commitment of the CBI and business to make it work. She cited the Chancellor’s comment, that in the referendum, no-one voted to be poorer.
Carolyn noted the UK’s strong economic performance so far and the fact that consumer demand had held up but said that uncertainty was bad for business and that business does need to take decisions, for instance on investment.
She outlined a number of principles which would guide the CBI’s approach to Brexit.
The first was barrier-free access to the single market, adding that talking about the concept of being ‘in’ the single market at this stage didn’t provide clarity.
The second was access to the right skills and labour so British business can succeed.
The third was the importance of keeping global trade open, given the social and economic benefits that it generated.
She warned about the danger of a ‘sudden move’ to WTO trading rules at the end of a two-year negotiation period. This would be bad for business and should be avoided.
Carolyn said that some kind of transitional arrangement between the UK and the EU would be a good idea, due to the relatively short period of time between triggering Article 50 and the UK leaving the EU.
Carolyn said that the CBI was there to provide a ‘whole economy view’, taking broad issues of trade and investment into consideration. She said that it was important to bring the other European business organisations together, as they had a common interest in a ‘free trade outcome’.
She said that the CBI valued its relationship with the TUC, there was a lot of common ground between them on Brexit-related matters, and they wanted to work closely with the government for the best possible outcome.
Frances O’Grady thanked the group for the invitation. She said that the TUC had campaigned to stay in and 6/10 trade unionists had voted to remain but their side had lost.
Frances said that the TUC accepted the decision of the electorate but speaking as a negotiator, if she had a ballot which was 17 million votes on one side versus 16 million on the other, she might be sensitive to the views of the country when seeking an outcome to negotiations. She said that the government ought to be pragmatic and try to heal divisions in the country rather than deepen them.
She said that the TUC believed that working people should not pay the price for brexit. She said that she wanted, instead, a new deal for working people.
Frances added that the TUC had established a convenors panel drawn from a range of companies to get the sense behind what was happening in relation to Brexit – such as orders, jobs, confidence and hiring. This would help them to distinguish between ‘real’ Brexit concerns of businesses and ‘opportunistic’ hits on jobs and pay being undertaken under the cover of Brexit.
Frances outlined a number of the TUC’s ‘bottom lines’.
The first was workers’ rights. She welcomed the comments by the Prime Minister, David Davis and Greg Clark about protecting workers rights, adding that while she likes promises, she prefers guarantees.
She said she was worried by talk of reducing rights for workers in small businesses and said she wanted clarity on that. She agreed with Carolyn Fairbairn that a transitional deal between the UK and the UK would be helpful.
The second was a guarantee that the UK would abide by EU employment standards, now and in the future. She said that there was a lot of insecurity around, and that no-one voted leave to scrap workers’ rights, such as maternity pay and sick pay, adding that it was not just a matter of rights in place today but also about future rights. This was important to stop the UK being seen as a place which undercuts other countries.
The third was investment – it is important that the government takes a clear view about which jobs and sectors are particularly vulnerable because of Brexit. She stressed that, as a country, we need to protect manufacturing jobs which are good, well-paid jobs. She said that there was a risk of protectionism and that it was important that the UK had the ability to trade in the single market.
Frances said that immigration was a big issue but it was not the only issue, and she wanted to ‘get under the skin’ of concerns about it. She said that she was not clear whether the government’s position was to cut immigration or simply to limit the number of immigrants. It was important to provide relief where there was pressure on public services.
Frances said that the border between Northern Ireland and the Republic of Ireland was an important issue and that the Good Friday Agreement and the ‘invisible border’ had to be protected.
She said that it was important that citizens of other states had the right to remain here and that it was not just a question of morality – British workers abroad were scared too.
Bringing her remarks to a conclusion, Frances said that the TUC wanted the negotiation to be an open process and as transparent as possible. First ministers, city mayors, business and trade unions should be involved in the process. We are pragmatic, she said, and we want the best outcome
John Penrose replied, thanking both speakers for their contributions. He asked Carolyn Fairbairn whether here was any scope for the CBI to use its relationships with its sister organisations in the EU to persuade their own governments that their own businesses and workers would be hit by a ‘bad Brexit’.
Carolyn replied that there was scope and that the CBI had weekly conversations with its counterparts. Those counterparts’ – and their countries – also had relationships with major car and pharmaceutical companies, like the UK, whereas the UK, she said, probably had a different position in relation to financial services, where the UK was in a strong position. But even here, European governments would realise that they benefited from the UK’s deep capital markets, and a big, sudden change in relation to that would be harmful to them.
She raised one caveat – that there are four important elections in Europe next year and all eyes in Europe were on those elections. The CBI’s sister organisations were very concerned, and as a result it might better for the CBI to dial up the conversations about other countries’ potential losses from Brexit in 2018. not 2017.
Frances O’Grady said that the TUC played an important role in the European TUC (ETUC) and that they had come over to the UK shortly after the referendum vote. She said that they shared the same interests and that some sister affiliates to the ETUC had taken her to meet representatives of their governments.
She said that she understood the concerns of European countries, that a country could leave the EU, maybe pay some money, but not play by its rules and yet still enjoy the benefits of membership – there were pressures there and real concerns that a post-Brexit UK could seek to undercut the EU on labour standards.
Helen Goodman MP said she was struck my the overlap of the two speakers and their focus on the importance of manufacturing and barrier-free access to the single market. She said it was easy to forget that we expert more in goods than in services, including to the EU and that the UK should look into the benefits of remaining in a customs union with the EU.
Carolyn Fairbairn said that the CBI was doing a lot work on the customs union issue. She said that not being in a customs union did mean that we could negotiate our own trade deals. She said that she was in China and India recently and there was an appetite for deals with the UK and CBI members saw the benefits of those deals.
However, the upside to the customs union was also clear. The CBI was taking evidence, and had a roundtable coming up with government at which it would be discussed. The pros and cons differed by sector. Manufacturing was worried by leaving the customs union, whereas other sectors might prefer it.
Frances O’Grady said that we needed an open debate on the pros and cons of remaining in a customs union with the EU. Some said that staying in the single market was impossible because of limits on freedom of movement but that we should look into the options. She said that people should ask what a so-called ‘clean break’ from the EU would mean – what jobs and investment could that put at risk?
Peter Lilley MP said that he agreed with what the Prime Minister and others had said about workers’ rights. He said that the UK should take as many decisions as it could before the negotiations began, which would limit the uncertainty in any negotiation. He also said that it was important for our European partners to believe that we would walk away and revert to WTO terms of trade, otherwise we would not get a good deal in negotiations. He said that, realistically, there were two options: tariff-free trade or WTO terms and if we said we wouldn’t accept the latter, we wouldn’t be able to negotiate the former. He said that we couldn’t negotiate a deal, we had to persuade our partners that a good deal for Britain was in their interests too. He also advised the CBI and the TUC to raise this with their European partners before the forthcoming elections in Europe not afterwards, so that the negative effects of a trade war could be made clear before those elections.
Carolyn Fairbairn said that business understood the concept of not being afraid to walk away from a bad deal but she emphasised that there would be consequences of a ‘cliff-edge’ situation, where we reverted to WTO terms after two years. She said that the UK’s negotiating position had to be credible.
She said that some of the negative consequences of a bad deal such as an end to the open skies deal for people and airlines. She said that the government had to understand where the balance lies and said that she wanted more analysis of the risks of those ‘cliff-edges’. Some would be assymetrical, such as financial services and others. In all, the cliff edge options needs analysis if we are to say we are going to consider it.
Frances O’Grady said that she was hearing the argument that the Brexit negotiations were akin to a commercial negotiation. They were not taking place in a commercial context but in a democratic context. Speaking as a negotiator, she said that there are two ways of negotiating – you can bang tables or you can be more mature and put yourself in the other person’s shoes.
She said that it is important to recognise that there is a real fear in the EU of an end of the EU and of a rise of xenophobic and far-right politics (which people also feared in the UK). She said that we needed to be more mature and recognise the common interests between us and our European partners, rather than seeing it in terms of winners and losers.
Adrian Bailey said that he was sure that if the Brexit negotiations could be one by the business and trade union organisations in the UK and EU, we would end up with a more rational outcome. He said that business should have done a better job of persuading people to vote to ty in the EU during the referendum and it needed to accept that it had not influenced the debate and the electorate. He asked the CBI and the TUC what role they could play in encouraging their counterparts to pressure their governments to seek an outcome which was in everyone’s best interests.
Frances O’Grady said that there had been years of falling real wages and public service cuts – those were the real reasons why people were angry. She was very concerned that the hard right would now make political capital. It was necessary to look deeper into the reasons why people were unhappy.
Carolyn Fairbairn said that all elements of the remain campaign had failed in some way. She said that business in the Uk and the EU and the US was asking why the economy wasn’t working for everyone.
A series of MPs then asked questions and made observations.
Graham Evans MP said that in his seat of Weaver Vale, there were lots of good jobs in energy-intensive businesses such as those in the chemical industry. These were well-paid energy-intensive industries. He said we have had fracking for shale gas in the north Sea for 50 years. Did the CBI and TUC think that we would revive the North, and the North Wets by permitting fracking, as parts of the US had done? He added that he saw Brexit as an opportunity to close the prosperity gap between north and south.
Jack Dromey MP said that he had met the EEF last week and they had said that 1 in 4 of their member firms were holding back investment decisions. He said that it was crucial that British businesses had access to skilled labour and that there was a balance to be stuck on freedom of movement – we had to forge a consensus on how we debate it as a nation, we must not have it dated irresponsibly.
He said that the SMMT had also said that they needed access to skilled labour. He agreed that there must be not just ‘day one’ guarantees of workers rights but also rights being passed down. He said that good people had voted for Brexit, in good faith, and they were afraid that they were going to get ‘shafted’.
John Redwood MP said that he agreed with what others had said about workers’ rights, northern Ireland and Eu citizens who already lived here retaining the right to remain in the UK. He said that while one might prefer barrier free trade with Europe, we do more trade outside the EU than with it and that given the advantages we have of the English language and common law, we would be OK if we had to move to WTO rules. He said that the ‘high-level ask’ should be barrier-free trade with the EU but we must be prepared for negotiations on that. He said that government ministers have said that, if workers have talent and skills we need, that come to the UK. We would clearly need some kind of permit system. On the question of the custom market, he said that once we leave the single market, it ceases to exist for us. We would want decent access to it. With regards to negotiations, he said that business had a vital role to play but one did not share one’s stance with those with whom one was negotiating, saying that when he negotiated with his employers in business, he played hardball, making a top-level offer and making clear that he was willing to walk away.
Mike Gapes MP asked Carolyn Fairbairn whether, given the problems that an EU-Canada trade agreement had run into with the Walloon assembly, concluding trade agreements might not be that smooth. Carolyn Fairbairn said that barrier-free trade with the EU was the preferred option. She said that it was optimistic to say we could conclude a good deal with the EU within two years.
Mike Gapes said that the foreign affairs select committee was looking into what the consequences would be of ‘no deal’ for trade, police co-operation etc.
Nigel Mills MP said that if we treat the negotiations like a business negotiations we can win because we hold the cards – more British tourists visit France than French tourists visit the UK, for instance. It makes more sense for us to shame them by being transparent.
Paul Blomfield MP said that people seem to think that we will be OK if we join the WTO but if we do end up reverting to the WTO, we will join as a new member and we will need to consent of existing members, and asked whether the speakers felt that there might be an issue with that. He also asked whether, on the Prime Minister’s recent trip to India, any references had been made to linking free movement of workers with a trade agreement.
In response to the points made by the previous six MPs, Frances O’Grady said that the TUC had argued for a transitional agreement and protection of workers’ rights. In relation to negotiating styles, she questioned the value of the UK ‘keeping its cards close to its chest’ – the TUC would find out from other countries what the UK’s position is. She said that she appreciated that the UK government would ideally want to control the process but if the government holds its cards too close, its position will leak anyway. It’s best that the government tells the people what its position is, rather than the TUC doing so. She said that she was optimistic that the UK could get a good deal but said that there was a danger of delusion about our strengths and weaknesses – after all, you can get any deal you like if you are willing to sell your own granny.
Frances said that it all comes back to the need to balance our economy, between north and south, focusing on small towns and elsewhere. We need a consensus about investment, an industrial strategy and how to tackle inequality. She said that she was worried that we were not seeking solutions commensurate with the challenges we face as a nation. She said that people feel that they don’t have rights or have a voice and that as a result, there will be scapegoating of immigrants.
Carolyn Fairbairn said that there were four pints she wanted to make. The first was that she understood the argument of playing one’s cards close to one’s chest but the stakes are high – other countries will make assumptions about our position.
Secondly, the government should consider a transitional agreement – the CBI and TUC could say that together.
Thirdly, we are being watched globally in relation to our position on immigration and free movement, we need an educated debate.
Fourthly, the CBI is totally aligned with the TUC on the issue of productivity gaps. We need answers on the future for skills, transport clusters between northern cities and innovation. We need big solutions, and the silver lining of Brexit was the appetite to find them.
John Penrose thanked the speakers and remarked on the surprising amount of overlap between what they had said. He told attendees that there would be a formal meeting of the APPG next Monday.