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Grayling's Brexit Bulletin - 31 October 2018

31st October 2018


 

The BREXIT Bulletin: The secrets of contingency planning

 

On 23 October the European Commission published the last Work Programme of the 2014-2019 mandate.
 
The Work Programme, which details the legislative initiatives that the European Commission plans to pursue in the coming year, includes two legislative initiatives on Brexit preparedness, namely the visa status of UK citizens and the adjustment of the EU’s energy efficiency targets to account for the UK’s departure.
 
The Work Programme marks the completion of the legislative Brexit-proofing that the European Commission has been willing so far to sign-post. Indeed, the two proposals are the last of eight legislative initiatives that were initially deemed necessary to prepare EU law to accommodate the UK’s withdrawal irrespective of the outcome of the negotiations.
 
In addition, the Work Programme states that the European Commission intends to adopt a number of implementing and delegated acts on Brexit preparedness prior to the end of 2018.
 
The Commission says that further measures will be proposed if necessary as the negotiations evolve and with a view to ensuring that measures that require the full legislative process are provided with sufficient time for due process.
 
As ever, the Commission’s work on preparedness/contingency planning is shrouded in secrecy. A secrecy that is increasingly being criticised by stakeholders, including most prominently the Association for Financial Markets in Europe (AFME) in a letter to Vice-President Dombrovskis.
 
Whilst other sectors are yet to make their concerns in public, it is understood that they are doing so in private with the European Commission’s Brexit Preparedness Group, which in classic Commission fashion is refusing to provide detailed guidance even behind closed doors.
 
Of course, as we have previously discussed, preparedness and contingency planning represent a tight-rope for the Commission to walk between the technical necessity of having measures in place and the usual milieu of EU political calculations across the EU-27.
 
Whilst not relevant directly relevant to most sectors, it is the proposal to reallocate the energy efficiency targets, which is due to be published in November 2018, that is likely to best illustrate this.
 
Reallocating the UK’s share of the target among the EU-27 is likely to be extremely politically sensitive. How the European Commission handles this process and the extent of the fight in the Council will be a precursor to how tumultuous a ride any ‘No-deal’ contingency measures may be given.  

 



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


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This week's content:

The view from Brussels

The view from the UK

 

 

Dates for your Diary 

Panel Discussion on the Impact of Brexit on the Agri-Food Sector, 
Tuesday 6 November 2018 from 12:00 - 14:00, at our offices (Avenue des Arts 46).
Confirmed speakers include FoodDrinkEurope and the UK Perm Rep.
To register please contact emily.ritchey@grayling.com
 

Brexit Club with Kent County Council, focusing on the impact of Brexit on the ports of South East England
13 November, Grayling Offices, from midday to 2pm
Please contact Alexander.Rowlatt@grayling.com 

Brexit Club with iBanFirst - focusing on financial services
29 November, Grayling Offices, from midday to 2pm
Please contact Alexander.Rowlatt@grayling.com 

 

The view from Brussels

Brexit & Migration – a politically sensitive question?
The European Parliament’s Committee on Civil Liberties, Justice and Home Affairs (LIBE) has published a study produced at its request by the European Parliament’s Policy Department for Citizens’ Rights and Constitutional Affairs into Brexit and Migration. The study explores the effects of the UK’s withdrawal from the EU with regard to the future movement of both EU citizens and UK nationals between the EU and UK.
 
The four key issues, central to the report, are the UK’s existing participation in EU measures on migration and mobility; EU and UK citizens’ rights to movement; models for future cooperation between the EU and the UK in the field of migration and mobility; and the role of the Court of Justice of the European Union (CJEU).
 
Charting the UK’s record with regard to participation in migration and mobility policy, the report notes how increasingly divergent the UK’s policies have become from those of the EU. However, the report notes that the UK is bound by other third country agreements to which the EU had acceded and which include reciprocal migration and mobility rights.
 
On EU and UK citizens’ rights, the report explains how the Withdrawal Agreement is fundamental in ensuring the protection of free movement for UK and EU citizens, with implementation to be ensured by the CJEU. The report argues as a first priority that the rights of EU citizens and UK nationals who have exercised free movement rights must be secured, with the Withdrawal Agreement’s provisions on citizens’ rights considered a good basis for this.
 
On future cooperation, the study outlines differing existing models with third countries. As ever, any agreement which is acceptable to both the EU and UK, will depend on the degree of reciprocity to which the parties are willing to commit.
 
The Grayling View
This non-binding report provides supporting analysis on the topic of Brexit and migration policy. It will inform the overall position taken by MEPs on the question of citizens’ rights, against the context of the Withdrawal Agreement and on mobility in respect to the future relationship.
 
Where the recently published UK Migration Advisory Committee (MAC) report explored the effects and benefits of migration for the UK economy, this report takes a more neutral standpoint, highlighting the existing models. It focuses on the need to secure the rights of UK and EU nationals to free movement.
 
Whilst the UK will need to re-evaluate its migration policy, a politically sensitive question which sparked the referendum in the first place, the priority for the EU will remain protecting EU and UK citizens’ rights across Europe. Once again, this provides more reasons why the Withdrawal Agreement is vital.

 



The view from the UK

May hangs on, as options narrow
Prime Minister Theresa May faced the Conservative backbench 1922 Committee last week. Despite speculation in advance, reports of the meeting suggest that talk of an imminent leadership challenge has been somewhat overplayed. For many months, rebellious MPs have briefed that the 48-letter limit needed to automatically trigger a contest could be nearing, though as of yet, there is limited evidence to back up the claims.
 
Most Tory MPs, while not particularly happy with Chequers, recognise the bind the Prime Minister and her negotiators find themselves in, and are not enamoured with the alternative proposed by the Brexiteer European Research Group and its advocates. Counter-intuitively, No. 10 has also benefited from vitriolic anonymous lobby briefings that suggested it was time to “knife” the Prime Minister, with colleagues on all sides of the House rallying to defend May from personal attacks. In a week when she needed it most, the comments have elicited just enough sympathy for May to dissuade backbenchers who may have been considering moving against the PM.
 
Reports from this week’s Cabinet suggest that there is increasing openness among ministers to opt for “Canada via Norway” as a means of settling uncertainty – at least in the short term – over Ireland and the backstop. This would see the UK remain in the EEA on a temporary basis to allow sufficient time for a comprehensive Canada-style FTA to be struck. But this proposal is unlikely to gain a huge amount of traction, for two principle reasons:
 
Firstly, the EU-27 has little incentive to grant the UK ‘Norway’ status on a temporary basis, as this might be seen to damage the integrity of the Single Market, while ultimately deferring the need to resolve the question of the Irish border. The UK would be seen to be extracting the benefits of Single Market membership with little commitment to its long term prosperity and success.
 
Secondly, and related, it would incentivise the EU to try and frustrate a later attempt to leave the Single Market, something Tory leavers recognise, fueling their worst fears of the UK remaining ‘stuck’ in an indefinite transition. On the home front, it would also open the door to further calls for a referendum on leaving the EEA. Brexiteers consider, probably correctly, that if the process of leaving is drawn out and deconstructed, the opportunities to thwart Brexit, or major aspects of it, increase dramatically.

 



Budget Briefing
Yesterday’s Budget was always going to be judged against Theresa May’s bold claim earlier this month that “austerity is over”. The question was not only how far and fast the Budget might move towards this goal, but how it would be paid for.

The mood music from the Prime Minister and Chancellor Philip Hammond had been that taxes would need to rise.  Recent news, however, had given him more room for manoeuvre. Tax revenues have been better than expected and spending lower, delivering over £11bn more headroom as a result of reduced public borrowing. Rather than add to his Brexit contingency fund, Hammond decided to use this to strike an optimistic tone, increasing government spending and accelerating tax cuts.

Two of the biggest spending announcements had already been made by the Prime Minister ahead of today – an additional £20bn over 5 years for the NHS, plus freezing fuel duty for another year costing over £800m. Other key announcements were designed to address issues of pressing political concern.  More money to manage the transition to Universal Credit should serve to keep anxious Conservative backbenchers onside. A package of measures, including further business rate relief, was aimed at supporting small high street retailers as they manage the change towards a more digital economy, alongside a move towards introducing a new digital services tax targeted at large tech companies.

With more money for potholes, a new tax on plastic packaging, further freezes on drink duty and earlier than planned income tax changes to leave people with more money in their pocket, the Chancellor will be hoping yesterday’s statement will achieve cut through with the public.  Combined with total public investment expected to grow 30% over the next five years, he will hope his key message, that “austerity is coming to an end, but discipline will remain”, will hit home and reap political dividends.

The Grayling View
Brought forward to avoid clashing with the expected final negotiations on Brexit - and perhaps to minimise the possible withdrawal of DUP support for key tax raising measures - this Budget was significantly more ambitious than many expected. But it also comes with a massive caveat. Unless a good deal with the EU is reached, the Chancellor will need to revisit his spreadsheets. Growth is also forecast to remain stubbornly well below 2% a year and the productivity challenge facing the country is significant. Income from taxes has also been volatile. Even without the uncertainties of Brexit, it is unclear how sustainable this shift in direction will be. All in all, though, this was another confident performance from a Chancellor who has survived beyond many pundits’ expectations.

 



Dates for your diary

17-18 November 2018 - Possible EU Summit to finalise the Withdrawal Agreement (TBC) 
13-14 December 2018 - EU Summit (confirmed!)
1 January 2019 - Romanian Presidency of the Council
29 March 2019 - UK expected to leave EU
31 December 2020 - Expected end of transition

 


 

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.

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 Negotiating Documents
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
No-deal – Concrete impact


Grayling Team

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