Brexit Update – 18th November

By November 18, 2016UK

 Top 3 Developments

Leaked memo hints at Brexit chaos: A Deloitte memo leaked this week hinted at a huge lack of resource in the civil service to deal with Brexit, suggesting that Whitehall may need to recruit up to 30,000 new staff to deal with the workload. Whilst this figure was vehemently denied by Downing Street, comments from Head of the Civil Service John Manzoni that they were doing 30% too much to do it all well gave the memo some credence.

The Lady is not for hurrying: Comments from Supreme Court Deputy President Lady Hale hit the headlines this week as she suggested Government may need to comprehensively replace the 1972 European Communities Act before they can trigger Article 50, which would make May’s self-imposed March 2017 deadline virtually unachievable.

Prosecco problems: Boris Johnson was criticised this week by Italian Ministers, following his assertions that Italy would lose out on prosecco exports if the UK was not offered tariff free trade. Elsewhere, Johnson faced further criticism for his comments in a Czech newspaper interview that freedom of movement as a founding principle of the EU was nonsense.

 

UK Update

Great Brexpectations

A leaked Deloitte memo this week said that Whitehall is currently working on more than 500 Brexit-related projects and may need to recruit as many as 30,000 extra civil servants. The memo also claimed the Cabinet splits mean that the Government could take another six months to agree on a Brexit negotiating stance. Downing Street immediately sought to distance itself from the memo labelling it an “unsolicited document that has had nothing to do with the government at all”. The claims, however, were given extra credence after John Manzoni, CEO of the civil service said that that Whitehall already had too many objectives before the referendum vote. All of this underlines the difficulty of managing Brexit and adhering to the end of March deadline that the Prime Minister has set for triggering Article 50.

Meanwhile, the Government is focused on their forthcoming Supreme Court appeal which will decide whether Parliament will be consulted before triggering Article 50. If the Government fails, they will reportedly introduce a short three-line Bill, which would be difficult for critical MPs to amend. Supreme Court Deputy President Lady Hale, however, said that the upcoming appeal raised “difficult and delicate issues” about the relationship between government and parliament; suggesting that the Government may be forced to comprehensively replace the 1972 European Communities Act before triggering Article 50, significantly delaying the process.

No quickie divorce say academics

The Exiting the EU Select Committee held its first session this week, taking evidence from two academics and a former Permanent Under-secretary at the Foreign Office as part of its inquiry into the UK’s negotiating objectives. The witnesses warned that, despite the suggestions of Committee member and leading Brexiteer Michael Gove, Brexit will not be a pain free “quickie divorce”. They also stated that  it was “inevitable” that the a transitional agreement would be needed following the UK’s withdrawal in 2019 which could see the UK having to continue to pay into the EU budget and accepting some level of freedom of movement. The Committee’s next evidence session is taking place on 23rd November.

Carney fights back as more surprising economic data is published

The Governor of the Bank of England, Mark Carney, used his appearance in front of the Treasury Select Committee to criticise those who claim that loose monetary policy has resulted in an increase in inequality. In comments which have been interpreted as a criticism of President-elect Trump and Theresa May, Carney explained that low global interest rates and rising inequality were driven by “much more fundamental factors” and stated that those who excessively focus on monetary policy are engaged in a “massive blame deflection exercise”. May criticised low interest rates in her speech at Conservative party conference as benefiting the rich whilst making savers poorer. The comments have prompted debate over the independence of the Bank of England, with Ed Balls taking a break from strictly to voice his opinion that whilst the Bank should remain independent, there was also a need for accountability and possibly a new Board.

Meanwhile, further economic data emerged this week suggesting that the impact of Brexit on employment and inflation was yet to be felt fully. On Tuesday, the ONS revealed that October’s inflation rate had fallen to 0.9% from 1% in September. Additionally, ONS data from Wednesday showed that unemployment has fallen to an 11 year low as the jobless total fell 37,000 in the period from July to September to stand at 1.6 million (4.8%).  However, economists have warned that inflation is set to rise considerably in 2017-18 as the effects of the devaluation of sterling are felt in retailers’ supply chains. It is also likely that Chancellor Philip Hammond will admit to a £100 billion budget deficit in the next five years in next week’s Autumn Statement. Slower growth and lower-than-expected investment will hit tax revenues, supporting the Treasury’s pre-referendum warnings that the long-term economic costs of Brexit are high.

 

European Update

Brexiteers lost in translation

Brexit supporting papers and politicians were enthusiastically endorsing a speech by Angela Merkel this week in which she apparently softened her stance on freedom of movement and migration controls. Unfortunately, the supposedly finer details of Merkel’s message got lost in translation. While the German Chancellor did express a willingness to discuss the rules around freedom of movement, she explicitly stated that the four freedoms of the EU could not be picked apart. In fact, Merkel’s actual offer of compromise looks rather similar to the deal that was offered to David Cameron ahead of the referendum.

For our German readers, Merkel’s speech can be found here

Boris’s prosecco headache

The Foreign Secretary endeared himself to the Italians this week by telling Italian Ministers they should support the UK’s quest to retain single market access without freedom of movement in order ‘to avoid losing prosecco exports’. Boris has been busy this week telling a Czech newspaper that the idea of freedom of movement as a founding principle of the EU was “nonsense” leading to wide criticism, including from Guy Verhofstadt, the European Parliament’s chief Brexit negotiator who wrote on Twitter: ‘Can’t wait to negotiate with Boris Johnson, so that I can read him Article 3 of the Treaty of Rome.’

Brexit divorce deal could cost £50bn

The EU could seek £50bn from the UK to pay for future spending commitments as part of the Brexit terms. The ‘Brexit bill’ will undoubtedly anger Downing Street and has caused concern among Member States who don’t want demands for money to poison negotiations. The same source also revealed Brexit will take place mid-2019, with a scaled withdrawal over a period of years and that Barnier and the institutions will be firm on immigration.

UKIP to boost EU budget (with a fine)

The UKIP led European Parliament Group ‘Alliance of Direct Democracy in Europe’ faces a fine of £150,000 for misspending public funds. Money designed to be used in Brussels was apparently used by UKIP to conduct polling in target constituencies ahead of the 2015 General Election, in contravention of EU rules that stop MEP funds from being used in national elections.

 

Timeline

·         23 November Chancellor to give the Autumn Statement

·         23 November Brexit Committee hold second evidence session

·         5 December Article 50 ruling appeal starts

·         15 December Next EU Council Summit

·         March 2017 Article 50 to be triggered