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Grayling Brexit Unit - 2 June 2017

2nd June 2017


The BREXIT Bulletin: Returning MEPs could be put to good use


With the UK election just one week away, prospective MPs are busy knocking on doors and trudging the campaign trail.
 
Included within these hopefuls this year are a number of current British MEPs, who in time-honoured fashion are ditching Brussels and Strasbourg for the shining lights of Westminster.
 
MEPs are usually derided as being unimportant and lacking influence – very much junior to actual MPs, even though EU legislation is thought to make up more than half of all UK legislation at the current time.
 
There are some high-profile and respected MEPs hoping for a seat in the UK Parliament.
 
Vicky Ford, who is campaigning in the safe Tory seat of Chelmsford, as well as former Liberal Democrat MEP Bill Newton Dunn (father of The Sun’s Political Editor no less) and former President of the Liberal group in the Parliament Sir Graham Watson, both of whom will have a tough time to depose shadow Chancellor John McDonnell and International Trade Secretary Liam Fox respectively.
 
Elsewhere, MEP Molly Scott Cato is hoping to become the second Green MP in Westminster in Bristol West, and the Conservative MEP Ian Duncan will challenge the SNP in Perth and North Perthshire.
 
For all the snide comments about MEPs, some are very high calibre and could provide much needed guidance to the next Government.
 
Vicky Ford, the Conservative Chair of the hugely influential Committee on the Internal Market and Consumer Protection, is one of the most respected and powerful MEPs in the European Parliament and has considerable knowledge of all the intricacies of the internal market – the very market the UK now wants to leave.
 
Who best, then, to guide the next Government, or to scrutinise it from the Brexit Select Committee, as the UK winds way through the Brexit maze to an alternative to Single Market and Customs Union membership? 
 
If you have any suggestions about the Brexit Bulletin or want to find out more about a specific aspect of Brexit, please do let us know. Please visit the Grayling Brussels website, follow us on Twitter @TheEULobby, and don't forget to check out our Brexit Papers and Timeline.



This weeks contents:

Sectoral Insight - 

UK Highlights -

EU Highlights - 

Highlights from the Member States -

Highlights from the Rest of the World - 

 



Sectoral Insight: Opportunities and risks for the UK Health Service

The National Health Service (NHS) is always at the centre of British politics in any electoral cycle. Add in Brexit, and you have a fiery mix.

The Nuffield Trust, a respected healthcare charity, published a report on 31 May arguing that there may be an opportunity to provide extra funding to the health services post-Brexit, on the assumption that the current net payments to the EU are funneled into the healthcare sector.

However, this would depend on many things going right in the negotiations and for health spending being made a priority.

The report also highlights the possibility of losing 70,000 EU care workers from the UK system and 22,000 nurses, the UK having to accommodate British pensioners returning from the EU (possibly 190,000- at a minimum annual cost of £500m), and that the UK economy may suffer post Brexit, thereby lowering the funding available for health services.

The report cites additional risks: the NHS may no longer have access to as wide a supply of medicines at as good a price if the UK leaves the EU’s medicine licensing system. The extra cost could exceed £100 million.

The Grayling View
It is unlikely that all the worst case impacts happen or happen at once, but it is significant that such a respected voice as Nuffield is making this intervention in the heat of the election campaign.

For observers from business, it is a further indication that the hard realities of the process have barely been addressed by the UK Government or the European institutions. It underlines the need for every industry to build stronger coalitions to present a united set of negotiating demands - or risk the process either blowing up or simply grinding to a halt due to lack of expertise or ideas.

 


 

The highlights from the UK:

The debates - a week of sound and fury. Signifying...
The UK’s political week has been dominated by a number of set piece debates which were broadcast on terrestrial TV. Polling has shown that as the Conservative lead narrows, public interest in the election has risen sharply. Viewing figures for Monday’s and Wednesday’s debates were high.
 
Monday’s debate saw Labour Party Leader, Jeremy Corbyn, and Conservative Prime Minister, Theresa May, face questions first from a studio audience and then from veteran interviewer Jeremy Paxman. Despite being in the studio building at the same time, the two party leaders faced their questions separately. Corbyn gave what has been widely described as his strongest media performance to date. Conversely, May struggled when defending her record on a number of issues but rallied when it came to debating Brexit. The media consensus is that both survived Monday unscathed but without landing substantial blows on their respective opponents.  Paxman has been widely pilloried for a belligerent interviewing style which was ineffective at extracting answers from the leaders.
 
Wednesday’s debate was given the title of a “Leaders Debate”, however, neither the Conservatives nor the SNP sent their leaders to attend. Corbyn, buoyed by his successes on Monday evening, made a surprise announcement, only hours before, that he would attend. The seven way debate format, squeezed into 90 minutes, minimised the chances for those attending to develop any arguments as they fought to speak over one-another. The most notable element was Theresa May’s non-attendance and during the prelude and the debate, all parties rounded on May for failing to attend.
 
The Grayling View

Neither debate saw a major change in policy from those announced in the respective parties’ manifestos. Nor did either debate see a clear winner or a clear loser. The steady increase in Labour support over the past weeks and Corbyn’s excellent presentational performance during the debates are, however, indicative of momentum building behind the Labour Party. By contrast, the Conservative campaign is coming under increased scrutiny for its lethargy and presidential style. There have been too many presentational issues with the Conservative campaign, including, but certainly not limited to, a manifesto which lacked a real offer to voters, policy u-turns and a failure to drive the election narrative.

 
It is always more difficult defending a record of Government compared to promoting a vision for change. In a quasi-presidential election, Corbyn also has the added benefit of never having held any position of political responsibility. His personal record is, however, regarded by many to be more problematic – for example his links to the IRA and qualified support for national security policies such as armed policing, drone strikes, and Trident. The consensus is that he should be damaged by this record, and yet polling indicates he is avoiding any damage.

 
May should still win but at present the Conservative campaign tactics are not working. Damage has been done to her reputation and that of her team. It remains to be seen whether this damage will affect her ability to implement policies or force her to broaden her small cadre of advisers. But in the short term, something needs to change if May is to gain the mandate she has requested from the electorate.


 

 
The highlights from Brussels:

Draft EU position papers on Article 50 negotiations 
Following the adoption of the European Commission’s negotiating Directives on 22 May, the Commission published Draft position papers on Article 50 negotiations on citizens’ rights and on the financial settlement. The two papers were discussed at this week’s Article 50 Working Group chaired by Didier Seeuws, head of the Council’s Brexit Task force. The aim of this discussion was to prepare the EU’s position ahead of the first round of negotiations.
 
Both EU citizens’ rights and the financial settlement are priority issues identified for Phase 1 of the negotiations. The more significant of the two relates to citizens’ rights. The Commission said citizens in the process of acquiring EU rights (such as permanent residency in another country in the bloc) should be allowed to finish doing so and has specified that it does not trust the UK, on a case-by-case basis, to uphold EU rights on the day of Brexit. Instead, it argues that “all citizens’ rights set out in the Withdrawal Agreement should be granted as directly enforceable vested rights in both the UK and in EU-27.”
 
A big financial issue for the British Government could be the capital it has paid to the European Investment Bank. The UK is a 16% shareholder and has €39.2 billion locked up in the institution, which often funds projects with 20 to 30-year timelines. The UK’s liabilities should be “decreased in line with the amortization of the EIB portfolio outstanding at the time of United Kingdom withdrawal,” the Commission has stated.

Overall, the Commission’s position could see the UK paying around €100 billion, according to an estimate by the Financial Times.
 
The Grayling view

The papers confirm the maximalist and ambitious approach the EU will adopt on both issues. They are not particularly contentious among Member States, since they build on an already detailed mandate for negotiations on these issues. The first round of negotiations is expected to take place on the week of 19 June, with the 20 June General Affairs ‘Article 50’ Council scheduled prior to the 22/23 June European Council. Discussions will probably not enter into details, but will aim at structuring the overall working arrangements of the negotiations.  


Budgeting for the Future of Europe in the shadow of Brexit
Günther Oettinger, the EU’s recently appointed Budget Commissioner, acknowledged on 30 May that Brexit is weighing heavily on the draft Budget for 2018. In its current form, the Budget for 2018 contains €161 billion in commitments, funds earmarked to be spent in subsequent years, and €145.4 billion in payments, funds to be spent over the course of the budgetary year. Oettinger has denied any correlation between the 8.1% increase in payments in 2018 and the looming departure of the UK.

With the UK currently blocking the midterm review of the Multi-annual Financial Framework (MFF) – because decisions of political significance cannot be taken during the General Election campaign – Oettinger has stated that preparatory work for the 2021-2027 MFF should be postponed until the UK has departed.

The Grayling View

EU officials have made settling the financial details of Brexit a key priority for Phase 1 of the negotiations. However, with some figures in the UK Government continuing to suggest that the UK doesn’t owe a penny, it cannot be a coincidence that the 2018 Budget seeks to increase payments. Paying more now reduces the sum the UK may have to pay later.


Expediting the ‘Brexit Bill’ will not solve the politics of the EU’s budget. Nor will delaying work on the next MFF. Instead, budgeting successfully for the Future of Europe requires focus and time now. As with the EU’s wider legislative agenda, Brexit cannot be allowed to detract from the EU-27’s future.
 



Highlights from the Rest of the World:

Germany ready for trade with India
Angela Merkel was quoted this week as suggesting that “Germany will make a massive effort in Brussels” to re-invigorate negotiations between the EU and India on a trade deal. The Chancellor’s sudden interest in trade with India comes as MEPs on the European Parliament’s International Trade Committee published a report suggesting that Brexit could remove some of the UK-specific stumbling blocks that have kept negotiations idling for the past four years. These UK-specific obstacles relate to the fear that visa liberalisation could see a wave of Indian professionals migrate to the former colonial and English-speaking motherland, and the demand that India lowers its high tariffs on foreign alcohol.

Renewed interest in a deal with India has been supported by analysis conducted by the German Institute for Economic Research (IfO). The report estimates that tackling tariffs and non-tariff barriers could more than double EU exports to the sub-continent, whilst in turn raising Indian exports to the EU by 87%. While the UK remains the top destination for Indian investment into Europe, due to cultural and linguistic ties, Germany sits in second place, a ranking that Shobana Kamineni of the Confederation of Indian Industry believes could alter due to Brexit.

The Grayling View

Trade negotiations between markets of the size of the EU and India are in essence defined by the offensive and defensive interests of the players. When these are generally in balance negotiations tend to be slightly easier, with the parties able to trade concessions on a defensive interest for progress on an offensive preference. 


Removing the UK’s defensive interests could make an EU-India agreement easier to conclude for the EU. For the UK on the other hand its defensive interests will persist; with less market access to offer, the UK would either be forced to capitulate or hold its ground and wait in hope. For these reasons, in contrast to the IfO, the UK’s Institute for Government (IfG) suggests that the UK steer well clear of negotiations with India.

 


Dates for your diary
8 June 2017 - UK General Election
19 June 2017
- Queen's Speech - Great Repeal Bill + 15 other Brexit Related Bills
11 June - 18 June 2017
- French Legislative Elections
1 July 2017 - Estonian Presidency of the Council
24 September 2017 - German Federal elections
End of October 2018 - Negotiations expected to end
Autumn 2018 - Spring 2019 - Likely Scottish independence referendum
March 2019 - UK expected to leave EU

 


 

Grayling Brexit Unit

Our Grayling Brexit Unit brings together the very best consultants from across the Grayling network and includes those who have direct experience of working alongside the leading political figures charged with negotiating Brexit in London and Brussels.

The Grayling Brexit Unit is here to support, guide and inform the success of your business and identify how the political dynamics will change as a result of Brexit in both London and Brussels. We are your Brexit experts.

No task is too big, too complex, or too ambitious - please contact Robert Francis Tel +32 2739 47 34 (robert.francis@grayling.com) in our Brussels team or Jonathan Curtis (Jonathan.Curtis@grayling.com) in London for more information, and check out our brochure.


 


 

 

 #Brexit Papers 


Brexit Organigram
The 'Great Repeal Bill'
Brits working in the EU institutions

Article 50

Sir Julian King - The Last UK Commissioner
David Davis – UK Brexit Secretary.
Sir Keir Starmer
– Shadow Brexit Secretary.
Sir Tim Barrow
– UK Permanent Representative.
Michel Barnier
– EU Chief Negotiator.
Sabine Weyand – Barnier’s Deputy.
Guy Verhofstadt – EP Brexit Lead

Updated Timeline

 

Robert Francis

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