Top 3 developments
- Government looks set to avoid parliamentary rebellion over Brexit date
- EU toughens its stance and sets transition deadline of 31 December 2020
- Cabinet discusses ‘end-state’ scenario
UK Update
Brexit Date TBC?
The EU (Withdrawal) Bill reaches its final day of Committee stage debate today, with a score of amendments set to be debated. Following last week’s loss over the commons having a ‘meaningful vote’ on the Brexit deal, the headline announcement is that Government is keen to compromise with Tory rebels over the prospective exit date being written into legislation. Theresa May will water down plans to enshrine the date, which was to be set as 29 March 2019. By accepting a compromise amendment tabled by Oliver Letwin, Ministers will be able to vary the Brexit date, with the EU’s consent, to allow for due scrutiny of the final deal in Parliament.
Talking of dates, documents published today show that the EU wants the ‘transition period’ after the UK leaves the EU to not continue beyond 31 December 2020. Michel Barnier has said this would be a logical time for the transition to end, as it also marks the last day of the EU’s current seven-year budget. Barnier confirmed that during the transition the UK would have to apply all EU laws, including new ones agreed after 2019, without any input from British ministers or MEPs.
Bespoke Cabinet Arrangement
The Cabinet met for their last meeting of the year on Tuesday to discuss the Government’s preferred ‘end state’ relationship with the EU. The same issue was debated at the Brexit Cabinet meeting of 25 ministers on Monday, where it was agreed that the UK would seek a ‘bespoke’ arrangement. Brexit Secretary, David Davis, last week called for a ‘Canada plus-plus-plus’ deal but other Cabinet ministers, including the Chancellor, are more sceptical of being able to strike an effective balance between ‘taking back control’ and losing access to the single market.
EU-banks sparring
According to the BBC, the Bank of England is likely to unveil plans which will allow European banks offering wholesale finance to continue to operate under existing rules post-Brexit. This will mean that EU banks will be able to continue to operate without having to create UK subsidiaries – a process which is expensive and time-consuming and was feared would push some banks to reduce their presence in London. The move has been interpreted as the Bank of England rolling out the red carpet to the financial services sector, and an attempt to retain both the tens of thousands of jobs of those working for the EU banks and the significant tax revenues that they bring to the exchequer.
However, the European Commission has continued to play hardball on financial services with chief negotiator Michel Barnier suggesting that there is no possibility of financial services being included in a trade deal with his comments ‘There is no place (for financial services). There is not a single trade agreement that is open to financial services. It doesn’t exist. In leaving the single market, they lose the financial services passport.’
Between a rock and a hard place
According to reports, Spain, who have already secured a veto on any post-Brexit UK-EU trade deal and its impact on Gibraltar, are pushing for a veto on any transition period. The UK do not want to bring Gibraltar into the exit talks and thought that there was a need to treat the UK and its overseas territories as one during the transition period and after withdrawal. The Spanish Prime Minister, Mariano Rajoy, is calling for their veto to also apply to Gibraltar, something Barnier today seemed to acknowledge. At Prime Minister’s Questions, the Prime Minister reemphasised Government’s position saying “We are clear that Gibraltar is covered by the withdrawal agreement and Article 50 exit negotiations.” This sensitive issue could be one of the key battle lines in the new year.
Spook Spooked
The former head of MI6, Sir John Sawers has warned that Brexit will result in a loss of UK influence on the world stage comparable to the decline seen in the 1970s. Speaking in front of the House of Commons Foreign Affairs Committee, Sawers warned that the country may ‘go through a repeat of the 1970s where the UK went progressively downhill compared to our national partners’. He also added that Brexit would result in a ‘double loss’ of influence at the UN, highlighting that the UK would no longer be able to shape the common EU policy in New York and also that it would no longer be able to rely on EU support at the UN general assembly.
Unsurprisingly, some members of the Committee criticised Sawers for only providing ‘doom and gloom’, to which he responded by claiming that Brexit was already damaging the economy and that the UK Government will have to ‘work out how to rebuild our economy and our influence in the world’ once the withdrawal process is complete.
European Update
Barnier’s Hard Talk
Michael Barnier has quashed hopes for a ‘bespoke’ deal for the financial services sector, stating that by leaving the Single Market, it was unavoidable that financial firms would lose the passporting rights that allow them to operate freely across the region. His comments have fuelled concerns that Brussels plan to take a hard line Brexit trade talks. He told The Guardian, ‘there is not a single trade agreement that is open to financial services. It doesn’t exist’.
His comments have been poorly-received by city bosses, with chief executive of Square Mile lobby group TheCity UK, Miles Celic, arguing that ‘just because financial services have not been encompassed in free trade agreements to date, that is no reason to dismiss them for a future UK/EU free trade agreement’.
Timeline
- 20th December – EU (Withdrawal) Bill final day in Commons Committee Stage.
- 5th January – Christmas recess ends.
- 22nd – 23rd March – EU Council Summit.
