David Cameron “could and should have spent more time trying to get a better deal” with the EU, before holding the referendum. After all, “Margaret Thatcher quite often took several attempts to get European deals and negotiations right”.
So declared Chris Philp, who was the first Conservative MP from the 2015 intake to be elected to the Treasury Select Committee.
Philp, who voted Remain, is “annoyed” with Cameron for failing to achieve a better renegotiation, but “delighted and relieved and pleasantly surprised” to find the immediate effects of the Brexit vote much less severe than the Remainers predicted.
Like other MPs, he wishes the Government to be far more forthcoming about its aims in the Brexit negotiation, in order to prevent, in the next six to nine months, “any precipitate or premature movement of staff out of the UK” by banks worried about the possible loss of passporting rights.
He also called on the Government to “run a campaign” on the continent of Europe to get businesses and members of the public there to realise they need a free trade deal just as much as the UK does, and to put pressure on their national governments and the European Commission to refrain from “inflicting a punishment beating on the UK”.
Before entering Parliament, Philp accumulated “real world business experience” by setting up several businesses. In 2010, he failed by 42 votes to win Hampstead and Kilburn from the sitting Labour MP, Glenda Jackson.
Philip rejected ConHome’s suggestion that this was “valuable experience”, and instead called it “character-building”. In 2015, he held Croydon South with a majority of 17,410.
ConHome: “How much of a risk does Brexit pose to the City?”
Philp: “Well there certainly is a risk, both to the City and to business more widely, because we do obviously have unfettered access and unfettered membership of the world’s largest single market, with 500 million consumers.
“And banks, particularly international banks, American banks especially but also Asian banks, use London as their gateway to Europe, and clearly they rely on the passporting scheme to do business across Europe.
“I think for European banks, where they’ve got a footprint in Europe already, it’s not nearly so much of an issue, but for international banks which use London as a gateway it definitely is.
“And I said to the Chancellor in the Treasury Select Committee last week that the European chief executive of a very large, top ten global bank, an American bank, thinks that if we don’t get some form of either passporting or mutual recognition, or some form of regulatory access to Europe, he thinks about ten per cent of his staff will have to get moved into the European Union.
“So you know, it’s not a complete collapse, but ten per cent across the City is still pretty material, and it’s something the Government should be trying very hard to avoid.
“And even if we don’t start with full passporting, some form of mutual arrangement, mutual recognition of regulatory equivalence, strikes me as a good starting point while we try to figure out something longer term.
“People criticise the mutual equivalence thing as being discretionary, so at any time the European Commission could say, ‘We’ve now decided, this Tuesday morning, that you’re no longer equivalent.’
“So it’s not as secure, but at least it’s a start. And clearly on Day Exit Plus One, because we’ve obviously been complying with EU rules for the last 40 years, our regulatory regime is equivalent. Providing we don’t change it too dramatically, it will continue to be equivalent in the eyes of any reasonable person for a long time to come.
“So I think that is important. If we don’t have that, these figures of ten per cent could well come to pass.”
Philip endorsed the argument, recently made on ConHome by Xavier Rolet, CEO of the London Stock Exchange, that “the reason London is so effective is that it’s got not just all the people and the infrastructure here, and the professional support, it’s also got the liquidity.
“And that means you can net off people’s liabilities to each other. They call it concertina-ing. And you need a very deep market, a very liquid market to do that.
“And the only other markets that have that are places like New York and Tokyo and possibly Hong Kong. And Paris, Frankfurt, Amsterdam, Dublin don’t have that ability. If the Europeans decide to punish us by shutting London down then it doesn’t necessarily follow that all the business is going to go to continental Europe.
“More generally, at the moment the single market clearly does help people not just selling in, but the supply chain…If suddenly there are tariffs on the components you import as well as the car you export, that clearly complicates the whole thing.
“So getting this sorted out should be an integral part of our negotiation. And it does ultimately serve the Europeans’ interest as well.
“I think one of the things we must do is run a campaign in Europe, a political campaign, to say to business groups and members of the public in Europe that they should not let the European Commission or their own national leaders cause damage to their own economy and cause German or French or Italian jobs to be lost, simply in the cause of inflicting a punishment beating on the UK for daring to leave the European Union.
“So we need German car manufacturers and French farmers to be saying to their governments and to the Commission, ‘We need a free trade deal as much as the UK does.’
“In terms of our rhetoric domestically, we clearly do need to reassure banks and companies generally that this will be a priority. Clearly we’ve done that in a very direct way with Nissan in the last few days.
“But the problem about people thinking about leaving the UK and moving some of their staff is that it takes one and a half to two years to effect the move.
“It’s no good saying to them, ‘We’ll get back to you in two years’ time, when the deal’s done.’ For them, that’s too late. The banks in particular will take these decisions about whether to move ten per cent of their staff wherever in the next six to nine months.
“So we need to be reassuring them now. I put this point to David Davis in the House during Brexit questions a couple of weeks ago and he said, ‘Well, there’s not much we can say, we can’t commit ourselves to the result of negotiation when it depends on the other party.’
“But what we can say is that it’s our intention to give this a high priority. Philip Hammond said it’s our hope and expectation that there’ll be a free trade deal… We can make clear it’s our intention and objective to achieve that, without, you know, showing our hand and all the rest of it.”
Philp said of the Nissan deal: “That sort of approach on a slightly wider and slightly more public scale both the City and business in general would find reassuring.” It would thereby “prevent any precipitate or premature movement of staff out of the UK”.
ConHome: “Andrew Tyrie suggested on Monday in the Financial Times that the Government’s reluctance to reveal its hand was more because ministers haven’t reached agreement among themselves than because they don’t want to weaken their negotiating position. Would you endorse what the chairman of your committee has said?”
Philp: “I’m not sure I’d put it in that kind of way. But I think there is scope to give public reassurance of the kind which clearly Nissan received in private. It worked for Nissan. I’m sure it would work more widely as well.”
ConHome: “Why were you a Remainer? Was it because you were worried about the effect on business?”
Philp: “Yes. I was a reluctant Remainer… I was willing to put up with all the rubbish that goes on in Europe in order to get single market access and in the hope that further reform was possible.
“I was annoyed with David Cameron that he didn’t get a better deal. He didn’t have to hold the referendum as early as he did. He had another year and a half. He could have held it as late as December ’17. I think he could and should have spent more time trying to get a better deal.
“I think Europe is itself going to want to reform because different kinds of people, particularly in eastern Europe, aren’t happy with the way Europe’s working… We could have probably pushed that reform from the inside.”
ConHome: ‘The people who are trying to make the euro work know it won’t in the end work without some kind of federalism. The true believers in Brussels are in a terrible position.”
Philp: “They should give up. The high water mark of federalism has been reached and it’s now receding. Federalism is not going to happen.”
ConHome: “Does that mean they should get rid of the euro?”
Philp: “Well that’s up to them. Personally, I think it’s very hard to see how a single currency can work unless you have a single body politic backing it up with fiscal transfers. So I think the Eurozone was destined to suffer massive internal tension right from the outset.
“What David Cameron could and should have done last year is say, ‘Well if the core, essentially Eurozone members, want to federalise, good luck, get on with it, and please accept there’s going to be an outer tier, of associate members, who essentially just want associate membership, which is basically just about free trade, not about integration, not about a euro.’
“I think there was scope for a more ambitious renegotiation and I think it was a shame…”
ConHome: “Could Cameron have got that?”
Philp: “We don’t really know, because he didn’t try that hard. His negotiation sort of started some time around about September 2015 and ended around about February 2016 so the whole thing lasted four or five months.
“And he had from January 2013, the Bloomberg speech, to December 2017. Of a five-year period, he only took four to five months. So it’s difficult to say what could have been achieved, had he taken more of the time available.”
ConHome: “Did you think the consequences of a No vote would be very bad?”
Philp: “Yes, I thought the immediate consequences would be worse than they have been, absolutely, yes. I’m delighted and relieved and pleasantly surprised.”
ConHome: “What did you think was going to happen?”
Philp: “Well I thought there was going to be an immediate evaporation of confidence. And I guess in terms of sterling there has been. But consumer confidence is still very high, the economy’s still creating jobs, the housing market’s generally held up.
“If a multinational is thinking about where in Europe to make an investment in the next three to six months, we need to make sure we still get people coming here.”
ConHome: “One can see why Cameron didn’t want to take longer, because then he’d be getting into mid-term.”
Philp: “I think he also felt it was distracting him from other priorities. But clearly it was a first-order issue, you’ve got to get it right, and Margaret Thatcher quite often took several attempts to get European deals and negotiations right.”