Before I call the Minister to make his statement, can I say how disappointing it was to see details of the India trade deal released to the media a few hours ago, before the Minister came to this House?
I wish to make a statement on the progress that this Government have made towards a UK-India trade deal. I am delighted to inform the House that we have now concluded negotiations on a comprehensive, modern agreement with the fastest-growing economy in the G20.
Hon. Members will no doubt be aware that India is expected to be the third-largest economy in the world by 2028. By the end of this decade, it will be home to an estimated 60 million middle-class consumers, and with trade between the United Kingdom and India already standing at north of £43 billion, we know that this powerhouse economy is and will remain a hugely important market for British businesses. While past Governments have failed to negotiate a deal with India, this Government have today succeeded. We have brokered the most generous trade deal ever agreed by India in its history.
From day one of this deal coming into force, it will make trade between our countries cheaper, easier and quicker. UK exporters will benefit from much lower tariffs across a whole host of sectors, including those that we are prioritising in our industrial strategy. It means simplified customs processes for businesses in advanced manufacturing and aerospace, in the food and beverage sector, and in the creative sector, which will benefit from improved copyright protection.
For our world-leading financial and professional services companies, this deal locks in access to India’s fast-growing market. It will ensure that UK banks and finance companies are placed on an equal footing with Indian suppliers, and it encourages the recognition of professional qualifications, so that UK and Indian firms can access the right talent at the right time, whether they are in Mumbai or Manchester. This deal will unlock new opportunities for businesses in every part of the United Kingdom, including our advanced manufacturing companies in the north-east, our iconic Scottish whisky brands and our car plants in the west midlands. In all, we will have secured over £400 million in tariff reductions in the first year alone, doubling to around £900 million after just 10 years.
I thank the Minister for advance sight of his statement. This deal marks a landmark moment for the UK and its global trading relationships because it is the largest trade deal secured by this country. I was therefore shocked that the Minister did not acknowledge that progression of the deal was possible only thanks to our Brexit freedoms. After all, the European Union does not have a free trade agreement with India—something the Minister must bear in mind as he follows the orders of the Prime Minister on the EU reset.
We have not seen the minutiae of the detail in the agreement that the Government are announcing today, so we will reserve our full judgment on the deal until we have had the opportunity to scrutinise it at length. However, I will take this opportunity to highlight some questions. First, what concessions did the Government make that their predecessors were not willing to make to get the deal over the line?
Secondly, I was shocked that a very significant piece of information was left out of the Minister’s statement today—one that we only found out from the Indian Government’s statement. Why did Indian Prime Minister Narendra Modi make a point of announcing the agreement of a double contribution convention between India and the UK, while the Minister has not even made a passing reference to it today in his statement or his press release? A double contribution convention will come at a significant cost to the British taxpayer and British businesses. Workers who enter the UK under such conventions are eligible to only pay national insurance contributions in their home country—in this case, India.
Again, we only know from the Indian Government’s press release that the exemption for national insurance contributions for Indian workers will be for three years. Does that mean that Indian workers currently in Britain will get a refund from His Majesty’s Revenue and Customs, or does it mean that new Indian workers will not pay any contributions in the first place? Did the Exchequer effectively give away a massive subsidy to get this trade deal over the line? Will it really be 20% cheaper for businesses in the UK to hire Indian workers than British workers? Will the convention apply only to seconded employees of Indian companies, or will it apply more broadly to all Indian workers in the UK, and if so, from when? How many additional work visas will be issued to Indian workers under this agreement? Will the convention really mean that, for example, an Indian-owned restaurant chain in the UK could pay no national insurance here for its chef, while the British pub next door pays full national insurance for its curry chef?
I thank the hon. Lady for her recognition that this is a landmark deal, although I have to say that it was not her most generous welcome of a deal that the previous Government worked for many months to try to secure—it is right to recognise that, albeit they did not manage to close the most difficult remaining issues. I seem to remember that it was a former leader of the Conservative party, the former Member for Witney, who promised that his party would stop “banging on about Europe”. Alas, that advice does not seem to have been taken in the Conservatives’ approach to today’s landmark agreement with India.
The hon. Lady inquired how we got the deal done when our predecessors failed to do so. Respectfully, I would say that it was through a process of patient, pragmatic and painstaking work—a very different approach from the kind of Instagram diplomacy that all too often characterised the approach of past Trade Secretaries and Trade Ministers. That allowed us, with the political leadership shown by the Secretary of State, to close significant chapters on goods and services. It allowed us to then reach a considered judgment that meant that, with stability of political leadership and clarity of ministerial direction, we could secure concessions from the Indians and conclude the agreement in a way that eluded our predecessors.
The hon. Lady asked specifically about the double contribution convention. I can assure her that that reciprocal agreement will benefit UK workers and their employers as the opportunity within India expands. India will have one of the world’s largest middle classes in the coming decades. The agreement will cover only a specific and limited group of Indian businesspeople for a period of three years. It is worth recognising that the Indians have other arrangements in place that extend longer than that. The workers will be required to pay their immigration health surcharge to the national health service, so the convention does not affect NHS funding.
The conclusion of the negotiations on this free trade agreement is a major win for Scotland’s economy and for my Livingston constituency in particular, given that we bottle Glenmorangie whisky and bake Paterson’s shortbread. We also have a strong and growing digital services sector, particularly with small and medium-sized enterprises. Can the Minister say a bit more about how this deal will help those businesses, too?
I thank my hon. Friend and fellow Scottish Member of Parliament. One of the commitments that we made when we were both elected—in my case, re-elected—to the House back in July was that we would seek to ensure a Labour Government delivering for Scotland. The cut that we have secured in whisky tariffs for the huge and significant market in India is a clear and tangible example of the difference we are making. He does not need to take my word for it. These are the words of Mark Kent, the chief executive of the Scotch Whisky Association:
“The UK-India free trade agreement is a once in a generation deal and a landmark moment for Scotch Whisky exports to the world’s largest whisky market. It shows that the UK government is making significant progress towards achieving its growth mission, and the Scotch Whisky industry looks forward to working with the UK and Indian governments in the months ahead to implement the deal”.
I thank the Minister for advance sight of his statement. At a time when Donald Trump is fuelling global instability through protectionism, international co-operation is more important than ever. A UK-India trade deal is a positive step, and we look forward to seeing the detail of the deal. Parliament must be able to scrutinise the details carefully, especially the proposed changes to national insurance contributions. When Labour was in opposition, it agreed with the Liberal Democrats that there should be a vote on trade deals. Both my right hon. Friend the Member for Kingston and Surbiton (Ed Davey) and I have made the Lib Dem position clear: there should be proper scrutiny and a vote on a trade deal.
The Government’s own export Minister, the hon. Member for Harrow West (Gareth Thomas), said that the current ratification process is “not fit for purpose”, and he is right. Does the Minister of State agree that denying a vote not only contradicts Labour party policy, but sets a dangerous precedent, especially ahead of any future US deal? Can he explain the Government’s massive U-turn since entering government? Finally, will the Government push for a new UK-EU customs union—the fastest way to boost our economy—at this month’s political summit?
The hon. Gentleman has referred to our attempt to reset our trading relationship with Europe. The red lines that were set out in our manifesto are very clear, but within those red lines we are endeavouring to broaden and deepen an important trading relationship that represents about 46% of the UK’s trade. As for the hon. Gentleman’s broader observation that the agreement we have reached today is, as it were, a pretty bright-shining light in what is a somewhat dark sky for international trade, I agree with him. It is, hopefully, a sign of further deals to come and of a commitment to taking forward deals that are mutually beneficial, in this case for the Indians and also for the United Kingdom.
When it comes to the wider question of how the deal will be scrutinised, the hon. Gentleman is right to recognise that today’s telephone conversation with Prime Minister Modi was just the start of the process. A press release has been published, along with a list of the top benefits, but we hope to publish a paper today setting out in more detail what has been agreed—the conclusion summary paper—and there will then be a process moving towards signature and a legal scrub of the text. However, as the Prime Minister made clear a few days ago, we will follow the process set out in the Constitutional Reform and Governance Act 2010.
Last week I had the pleasure of meeting representatives of the Federation of Indian Chambers of Commerce and Industry when they came here with my old friend Piyush Goyal. I congratulate the Minister and his officials, as well as FICCI and the India Global Forum—under the leadership of Manoj Ladwa—and, indeed, everyone who has spent so many years laying the groundwork for this agreement.
The Minister recognised the doubling of India’s service and IT exports over the last decade and the benefits that we can gain from engagement and co-operation in respect of the service and knowledge economy, but I think it important for him to outline further what the benefits of the double contribution convention on national insurance will be, and how they will facilitate that engagement and co-operation for our workers in India.
I thank my hon. Friend for his generous words of congratulation. I know that the bilateral relationship between the United Kingdom and India has been a constant feature of his long service in the House, and a particular focus of his parliamentary work. He is right to recognise, in the context of both digital services and the services sector more widely, the huge potential mutual benefits for the United Kingdom and for India working together, and he is right to recognise the broad and deep relationship between our two countries—as I have said, 1.9 million people with Indian heritage live in the United Kingdom—but, as his question suggested, it is also right to recognise quite how dynamic the Indian economy is today. It has the highest growth rate in the G20, which is expected to remain above 6% over at least the next five years. Given that ours is a largely services-based economy, notwithstanding our excellence in advanced manufacturing, the opportunities for UK service exporters are huge and growing.
I welcome the Indian trade deal, but will the Minister now switch his attention to the other side of the Atlantic, and ask Lord Mandelson to explain to the United States Administration that tariffs on films are unworkable and impossible to implement, and would do real damage to the film industry not just in the UK but in the United States?
I pay tribute to the right hon. Gentleman’s long-standing interest in matters relating to culture, media and sport and to the creative industries more generally. We are grateful for the expertise and experience that he brings to the House on these issues.
It would be one of the first occasions on which I told Lord Mandelson to do anything in many decades of our working together, but I will ensure that that is duly registered, not only in the record of this House but directly to our distinguished ambassador in Washington. It should also be placed on record that the film sector is a key part of the UK’s world-class creative industries—and we are absolutely committed to ensuring that those sectors continue to thrive and create good jobs—and that the UK has a strong and balanced trading relationship with the United States, worth £315 billion.
I am grateful to the right hon. Gentleman for his challenge to me to reach out directly to Lord Mandelson in respect of what we have read in the newspapers in the last couple of days, and I give him my word that I will ensure that Lord Mandelson is fully aware of the issue.
Amid much fanfare as usual, the former Prime Minister, Boris Johnson, announced that he would have a UK-India trade deal signed “by Diwali”—but very cunningly, he never mentioned which Diwali, so we were left waiting for years. Other Conservative Prime Ministers made similarly empty promises, which is why I particularly commend the Minister, the Business and Trade Secretary, their officials and the Labour Government for having finally concluded this free trade agreement. I look forward to this mutually beneficial agreement being formally signed. Can the Minister confirm that this landmark UK-India FTA will increase bilateral trade by £26 billion, increase UK GDP by £4.8 billion, boost wages by £2 billion year in, year out, and lead to many jobs in my Slough constituency and for people across both nations?
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Crucially, the deal we have negotiated will provide bespoke support for small and medium-sized enterprises to enter the Indian market, alongside a firm commitment from India to address the trade barriers that those businesses face. Since taking office, we have committed to hardwiring the views and interests of small businesses into everything we do, and the deal we have negotiated is evidence of that. For the very first time, British businesses will have guaranteed access to India’s vast procurement market, covering goods, services and construction. They will be able to bid for approximately 40,000 tenders worth at least £38 billion a year.
The deal that we have just got over the line is further proof that this Government are using the power of international trade and investment to raise living standards here at home. Indeed, experts predict that it will boost our bilateral trade by some £25.5 billion. It is also projected to increase UK wages by £2.2 billion each year, while adding nearly £5 billion to our GDP over the long run.
We have done all that while defending stoutly the UK’s national interest. We have brokered a deal that protects our NHS and upholds our high food standards. It ensures that our points-based immigration system remains unaffected. The deal demonstrates our commitment to both workers and businesses, staying true to our Labour values while contributing to our primary mission of economic growth.
I recognise that this House will need time to scrutinise the deal before the ratification process. My Department will follow the process set out in the Constitutional Reform and Governance Act 2010 in sharing the finalised treaty text with hon. Members. The House will, of course, have the opportunity to scrutinise any legislation associated with its implementation.
This deal sends a powerful message about the UK and India’s shared commitment to free, fair and open trade. The UK-India relationship has deep, enduring roots, exemplified by the living bridge of 1.9 million people of Indian heritage living in the United Kingdom. While I do not personally lament that the right hon. Member for Richmond and Northallerton (Rishi Sunak) is no longer the UK’s Prime Minister, it would be wholly wrong of me not to acknowledge his significant achievement as the first British-Indian Prime Minister, which is a testament not just to his own ability but to the close bonds that unite our two nations.
The Government are proud to back open markets and free trade. We recognise that Britain has always been an open, outward-looking trading nation, and we believe that open markets and free trade are fundamental building blocks with which the UK can secure its opportunities and prosperity at home and abroad. Through our upcoming trade strategy, we will set out our ambitions to engage with more industrial giants, like India, to ramp up trade and investment over the coming months and years.
Today, though, as close trading partners and as friends, I am proud that we have secured this deal with India. It is a deal that affords UK businesses certainty and stability during a time of global uncertainty and instability, and a deal that will give British businesses access to one of our biggest markets abroad, while raising wages and driving growth here at home. That is what this deal delivers, and I commend this statement to the House.
Will this deal reduce the incentive for the Indian millionaires who are currently fleeing the UK for tax reasons—a subset of the many millionaires who are doing the same—to do so? Can the Minister outline what the cost of this agreement is to the Treasury? How many British nationals do the Government anticipate will make use of the reciprocal rights in India? I fear that when it comes to British workers, we have gone from two-tier Keir to two-tier-taxes Keir. This Government are literally putting up taxes for British workers while cutting them for Indian workers.
I am aware that India has expressed concerns about the UK becoming a rule-taker to the EU, so will the Minister confirm what commitments and assurances he made on that matter during the negotiations? While Conservative Members will never talk down the benefits of free trade, agreements such as this one have to be made on fair terms for both parties. As it stands, this deal looks like it is subsidising Indian labour while undercutting British workers. Will the Government back our domestic market by scrapping their jobs tax?
I look forward to hearing from the Minister a reply that actually answers these questions. If he chooses—as he sometimes does—to bat away genuine questions from the Dispatch Box, could he follow up in writing?
The DCC that we have agreed is reciprocal and will benefit UK workers in India as well. India is home to the fastest growth rate in the G20, so the opportunity here for the United Kingdom is only likely to grow over time. The agreement was made in the context of the wider deal, which will bring billions into the UK economy. I can assure the hon. Lady that the United Kingdom already has social security agreements in place with a range of countries and trading blocs, including the European Union and the United States.
On the broader immigration issue that the hon. Lady raised, I can assure her that the deal does not affect the points-based system. The points-based system is not affected by the agreement that we struck today. The deal only covers business mobility, which is different from immigration, as it is about travel for specific and temporary business purposes. As a result, UK businesses will benefit from additional business mobility routes supporting them as they expand into India. Student visas remained off the table.
I hope that that gives some clarity to the hon. Lady. I am grateful for her recognition that it is a landmark deal. It is right to recognise that the Conservatives sought to secure this deal, and I hope that in the course of the conversations that we will have across this Dispatch Box today, we will be able to recognise that this represents a very significant win for the United Kingdom in very challenging times for trade.