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Grayling's Brexit Bulletin - 4 May 2018

4th May 2018

The BREXIT Bulletin: EU budget proposal forces both sides to confront changing realities


All the talk this week in Brussels has been about money.

The proposal for the next EU budget - known as the Multiannual Financial Framework, or MFF - doesn't come around very often, but when it does you can guarantee that no-one will like it.

The departure of the UK will leave a financial hole of between €10-15 billion a year - indeed, the UK was one of the EU's "net contributors", meaning that it gave to the EU more than it got back, even after its much maligned "rebate".

So, all things being equal, the EU needs to find some money from somewhere, which is why it has proposed increasing the budget to 1.11% of the EU's GDP from the roughly 1% today.

Unfortunately for the EU, all things are not equal.

Brexit is just one element which requires extra funding from the Member States.

If the EU is to properly police its external borders and manage immigration from the east and south, it needs more money. Indeed, if it merely wants to remain competitive globally, it needs to increase funds for research & development, for which - you guessed it - it needs more money.

The budget discussion in Brussels forces the remaining Member States to plan for a future without the UK and some will have to dig deeper into their pockets as a result of Brexit.

Meanwhile across the Channel, UK scientists must be looking on in envy as the EU's research pot gets a substantial increase (and a change of name from "Horizon 2020" to "Horizon Europe").

It's important to stress that this week's proposal does not affect the UK's financial commitment to pay what it owes when it leaves, since this relates to financial commitments made during the present budgeting period, not the next.

A final irony is that agricultural funding - so long the bugbear of the UK - will be reduced as part of the next EU budget. So just as the UK leaves, the EU takes a step along the path to reform - just a little too late.

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

This week's contents:

The highlights from the UK

The highlights from Brussels

The highlights from the UK

A week of ups and downs for the Government
This has been another week of ups and downs for the Conservative Government. On Wednesday the Cabinet Brexit sub-committee met in an attempt to iron out the issue of the UK Government’s proposed ‘customs partnership’ with the EU. Reports from those in the room suggested that Theresa May was stunned to find that the previous majority in favour of the partnership model had evaporated with the loss of Amber Rudd from Cabinet last weekend following the Windrush debacle. Sajid Javid, her replacement as Home Secretary who campaigned for Remain, is said to be of the view that the UK must now take full advantage of leaving, meaning that it must retain full flexibility when it comes to negotiating free trade deals with the rest of the world.
On Thursday, it emerged that Julian Smith, Chief Whip, had informed the Prime Minister that she lacked the votes to push two key pieces of Brexit legislation – the Trade and Customs Bills – through Parliament,  and that No. 10 is reportedly looking to delay the votes until the autumn, after these issues will have been discussed at June’s European Council Summit. Successful passage of continuity trade and customs legislation is vital to avoiding a legal and economic cliff edge on the day after Brexit. The Prime Minister will be hoping that successful negotiations in June will chivvy backbenchers to fall in line, but with the Commission insisting that the proposed customs partnership model is inviable and the House of Lords rejecting the Government’s position on a customs union, this remains a high-stakes strategy.
Thursday’s English local elections provided something of a turn up for the books for the Government. Labour’s hopes that it could win control of a number of flagship Conservative London boroughs failed to materialise, while the Conservatives consolidated support in Leave-voting areas across the rest of the country. The real story of the night was the bounce-back of the Liberal Democrats in London, regaining control of Richmond Council from the Conservatives. The Lib Dems have made no secret of their attempts to target EU citizens (who have a vote in local elections) in these largely pro-Remain areas. The relatively solid Conservative performance also means that Theresa May’s position is safe for the time being, with some Conservative backbenchers reportedly preparing to launch fresh challenges to her leadership in the event of a disastrous night in London.
The Grayling View
After weeks of negative headlines over Windrush and reports of damaging divisions over Brexit both on the Conservative benches and within Cabinet, the better-than-expected local elections results must be read as a positive for the Government. But any feel-good factor can only be short-lived, as the business of Brexit continues and June’s European Council summit nears at an alarming pace. When it comes to the crunch issue of customs, time and again, May’s strategy is to discuss and then delay -  perhaps in the hope that the simple passage of time will increase the sense of urgency to unite on a position. However, the hard reality remains that May is attempting to produce agreement on an outcome that the EU has repeatedly dismissed. The Prime Minister is clearly hopeful that come June’s summit, diplomatic pragmatism will prevail as has been the case before. Parliament, she hopes, will follow suit, but that depends hugely on how far Conservative ‘remain-rebels’ are willing to push the Government when the Commons considers the wealth of Lords amendments to the Withdrawal Bill later this month.


The highlights from Brussels

A room with a view? 
On 25 April the European Parliament’s Transport and Tourism (TRAN) Committee’s Tourism Taskforce held a public hearing on the implications of Brexit for the tourism industry. Topics covered by the panel of experts ranged from the maintenance of the Aviation and Open Skies agreements, to the mobility of talent and the ease of flow of tourists across borders.
The participants universally echoed requests for the detail on what the future relationship will look like for travel, aviation and mobility would be greatly appreciated.
The Grayling View
As we have previously reported, detail on the vision for the future relationship is unlikely before the June European Council, with the European Commission having elected to focus on Brexit preparedness rather than revealing details of its positions.
The intense internal wrangling in the UK Cabinet over customs means that the first indications of the direction of travel are unlikely to emanate from London any time soon. The longer that we wait for this detail, the more likely it is that the political agreement on the future relationship will disappoint in its comprehensiveness.
In respect to the TRAN Committee’s hearing, the most interesting point raised was on maintaining consumer confidence and consumer rights related to the industry, for instance on the abolition of mobile roaming charges. An illustration yet again that sectoral approaches to Brexit are incompatible with the interconnectedness of policies in the Single Market. 


EU exposes the cracks in the UK’s EU citizen registration system 
On behalf of the European Parliament’s Brexit Steering Group, MEP Guy Verhofstadt, European Parliament Brexit Coordinator, sent a letter to the newly appointed UK Home Secretary, Sajid Javid MP, in which he expressed concern over the proposed system to register the 3.5 million EU citizen’s living in the UK and thus ensure their rights before Brexit.

This followed a presentation given by the UK Home Office to the European Parliament Brexit Steering Group along with five committees in charge of citizens' rights (constitutional affairs, civil liberties, employment and social affairs, legal affairs and petitions). The Home Office outlined the online application system being developed in the UK to register EU citizens, ahead of Brexit.

Using his letter to put forward the MEPs’ comments on the UK’s proposed system, Verhofstadt stressed most importantly the need to ensure the protection of vulnerable groups as well as those who may have difficulty using the application system, may have lost documentation having arrived in the UK a long time ago or may be unaware of the new system and their need to comply with it. In the wake of the Windrush crisis, Verhofstadt explained they want assurance EU citizens living in the UK will not be treated in such a way.

Turning to some more specific issues with the registration process, the letter outlines some key faults in the software. Those without a biometric passport will have to post their documentation to the Home Office rather than scanning it online, whilst the software is not supported by IOS and therefore only available on android.

Moreover they argue one family should be able to submit one registration form, rather than individually and call for applicants to receive a response within two days. Finally, they request more information on the independent authority overseeing the system, the systems for redress that will be available and the communication campaign to accompany the system.
The Grayling View
This is one of the first items on the agenda for Sajid Javid in his new position as UK Home Secretary, having taken on the role after Amber Rudd’s resignation. Despite hopes he may bring a new approach to UK immigration policy, so far he seems to be following in Rudd’s footsteps.

It thus remains to be seen how he will react to Verhofstadt’s feedback. However, for a system which is boasted to utilize high level technology, with a streamlined and user-friendly interface, the response that users would need to borrow an android device, should they own an iPhone, to complete their application casts doubt on the system’s capabilities.

Finally, under the current political withdrawal agreement, an agreement on citizens’ rights has been reached. However, an agreement on governance has yet to be reached, which would inherently affect the question of citizens’ rights. As always, nothing is agreed until everything is agreed, and thus should a no-deal scenario arise, the provisions governing citizen’s rights would be null and void. 


Dates for your diary

28-29 June 2018 - EU Summit, and informal deadline for agreement on Irish border
1 July 2018 - Austrian Presidency of the Council
18-19 October 2018 - EU Summit and deadline for negotiations on Withdrawal Agreement 
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 ( in our Brussels team or Jonathan Curtis ( 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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