Brexit Update 22nd September 2017

By October 5, 2017 Brexit Updates

Top 3 developments

  1. Prime Minister delivers her much-anticipated Florence speech.
  2. Foreign Secretary creates Brexit furore after undermining May in a Telegraph article.
  3. UK’s most senior Brexit official moves from Department for Exiting the EU to the Cabinet Office, as May tightens her grip on intensifying negotiations.

UK Update

“May I have the bill please?”

In her much-anticipated speech in Florence, the Prime Minister has offered more details of her Government’s Brexit plan. The Prime Minister’s speech, her first major intervention in the Brexit process since triggering Article 50, is an attempt to break the deadlock on Brexit negotiations, and covered future cooperation in security, the economy, citizens’ rights and judicial oversight. However, the speech has been widely criticised for lacking detail on what the final Brexit deal will actually look like, despite being billed as “open and generous offer”. Thus far the Government has offered few substantive indications of direction on any post-transition period deal (much to the frustration of Brussels).

On the future economic partnership between the UK and EU, the Prime Minister ruled out arrangements based on membership of the EEA, and a Canadian-style model. Instead, she said “we can do so much better than that”, and argued that that there is no need to implement tariffs where they do not currently exist. However, she did not go as far as to outline what sort of partnership model could work, and instead urged EU leaders to be “imaginative and creative” about finding one; in doing so, she attempts to disguise the fact that her cabinet is still divided on the ultimate Brexit destination. She added that the EU should feel a “profound sense of responsibility to make this change work smoothly and sensibly”. She argued that a “strong and appropriate dispute resolution” mechanism will need to be created to settle trade disagreements.

May also used her speech to vow to strengthen legal protections for EU citizens living in the UK. Nonetheless, she remained adamant that the rights of EU citizens living in the UK will be protected by UK courts – which will have to take into consideration EU court rulings. Arguably this isn’t far from the current arrangement. On defence and security, May urged “a bold new strategic agreement… a treaty between the UK and the EU”, which would maintain the current level of cooperation.

Finally, whilst the Prime Minister did not offer a figure on the UK’s financial obligations, she said that no member state will have to pay more into the EU budget or receive less money from because of Brexit. This implies that that the UK will have to pay at least €20bn over the course of a two-year transition period – which is a long way off the €100 figure circulating in Brussels. She did, however, concede that a 2-year transition period would be necessary to prevent a cliff-edge Brexit. During this period, free movement will continue, but EU visitors will be required to register in the UK (as is currently standard in many EU countries).

The Prime Minister’s intervention comes as negotiations have reached something of a stalemate; Brussels has insisted that talks cannot progress to post-Brexit terms of trade until “sufficient” progress is made on the terms of divorce. With Brexit Secretary David Davis adamant that no figure will be released until the end of negotiations, senior figures in Brussels have warned that trade talks could be delayed until as late as the New Year. EU officials are said to be frustrated and alarmed at the internal political strife in Westminster.

Despite her insistence that she still believes her “no deal is better than a bad deal” mantra, the Prime Minister’s speech signalled otherwise. She veered towards the status quo in the short term, but a harder-than-expected Brexit in the long term. Cabinet ministers previewed the speech in a longer-than-usual 2 and a half hour Cabinet meeting yesterday; the Foreign Secretary flew back from a curtailed UN visit to attend the meeting, as May attempted to invoke unity amongst her cabinet on Brexit. Nonetheless, reports suggesting the Cabinet remains divided persist; the only thing the Cabinet appear to agree on is that Brexit should have a transition period. Beyond that, ministers remain divided on whether to maintain a close relationship to the bloc, or have a clean break. May is attempting to forge a midway between these positions: arguing that Brexit does not have to be a “binary choice”, and that the UK can achieve a “bespoke” deal.

But the longer May dithers on her desired Brexit destination, the more frustrated Brussels becomes. Indeed, her speech comes after chief EU negotiator Michel Barnier warned on Thursday that the UK has just one year left to agree a deal. Barnier said May’s offer must be detailed and substantial enough for talks to progress, saying, “to make progress, we are waiting for clear commitments from the UK on these precise issues”. It remains to be seen whether May’s offer is deemed “satisfactory” enough to push forward with negotiations.

BoJo tests May’s MoJo

Boris Johnson has been at the centre of a furore this week after publishing an article in the Telegraph which appeared to undermine the Prime Minister’s authority on Brexit. The Foreign Secretary set out his own vision of hard Brexit, under which the UK would have the freedom to deregulate. He also revived the Leave campaign’s widely discredited claim that £350m is sent to the EU each week. In the article (which was not cleared by Downing Street), Johnson outlined his own vision for a post-Brexit Britain, and claimed that “we will take back control of roughly £350m per week”. Amber Rudd accused Johnson of “backseat driving”, whilst the Prime Minister was forced to dismiss Johnson’s claim, and assert that “this Government is driven from the front, and we’re all going to the same destination”. The Foreign Secretary’s revival of the £350m figure also incurred the wrath of UK Statistics Authority head, Sir David Norgrove, who accused the Foreign Secretary of a “clear issue of official statistics”.

However, two important concessions were largely ignored amid the outrage over the £350m figure and Boris’ undermining of May. Contrary to his long-standing position on Brexit, the Foreign Secretary conceded that the UK will have to pay its way out of the EU – after previously saying Brussels can “go whistle”. Secondly, he conceded that the UK might have to continue contributing to the EU budget during a transition phase. Johnson used the media focus on his article challenging May’s authority to soften his stance on Brexit and, ironically, bring his position more in line with hers. Despite persisting reports of rifts in the Cabinet, on Monday afternoon Johnson accepted that “there is one driver in this car. It’s Theresa”, and both put on a united front at the UN General Assembly meeting on Wednesday.

Robbins moves into the Maymobile

The Government’s top Brexit official, Oliver Robbins, has been transferred from the Department for Exiting the European Union (DExEU) to the Cabinet Office, as Theresa May seeks to strengthen her grip on the Brexit process. A Government spokesperson said the transfer would “strengthen cross-government co-ordination of the next phase of negotiations with the European Union”. However, the move has widely been seen as undermining the role of Brexit Secretary David Davis, and follows reports of tension between Number 10 and DExEU. Davis is said to be frozen out of decision making as the Prime Minister prefers the counsel of Robbins. Meanwhile, Philip Rycroft will succeed Robbins as Permanent Secretary.

Scottish and Welsh leaders propose Withdrawal Bill amendments

The Scottish and Welsh Governments have published their proposals for changing the EU Withdrawal Bill. In a letter to Downing Street, Scottish and Welsh First Ministers Nicola Sturgeon and Carwyn Jones said the EU Withdrawal Bill needs to be “substantially amended” before their parties accept it. The leaders set out 38 proposed amendments which they say should be received as “a constructive contribution by the devolved administrations”. The amendments cover powers relating to agriculture, fishing and the environment – which have been necessarily exercised by Brussels, despite being devolved to Edinburgh and Cardiff in 1999. Jones and Sturgeons’ amendments dictate that ministers in Westminster cannot unilaterally decide whether laws are repatriated to Westminster or the devolved administrations in areas covered by devolution agreements. In response to the calls for a greater say in the Brexit process from the devolved administrations, ministers have signalled that there could be room for compromise on how powers are repatriated.

Davis banks on deregulation

David Davis has told the financial services industry that the UK will seek to develop a distinct regulatory framework from the EU after Brexit. During a meeting last week attended by numerous industry heads (including RBS, Morgan Stanley, EY, LSE, and Legal & General execs), Davis said the sector would be damaged by maintaining regulatory equivalence without having a say in how those regulations are formed. Although Davis seems to have fallen in line behind Chancellor Philip Hammond and agreed that maintaining the status quo for a transition period would be beneficial, he also believes that, in order to maintain a long-term competitive advantage, the industry needs to distance itself from some EU regulation. However, the plan has led to some concern that the UK could enter a “race to the bottom” by abandoning regulatory equivalence.

The Lib Dems watch Cable

At the Liberal Democrat annual conference, party leader Sir Vince Cable said the British public should have the final say on the negotiated Brexit deal. The leader said the public would be better placed to make a final decision once negotiations have concluded, and once it is clear what citizens would be voting for – a so-called “first referendum on the facts”, rather than a rerun of the 2016 vote. Cable said “no-one has come up with a plausible explanation about how leaving will make us better off than we are inside”, whilst also insisting the party could do more to get across their message that they are “the party of remain”. The liberal leader ended the conference with a message of optimism, saying it is “perfectly plausible” that he could be the next Prime Minister, if his party offers a mix of “hope and realism”.

Government publishes Brexit security paper

The Government has published proposals for post-Brexit security co-operation between the UK and EU. The plans reject the idea of negotiating a number of separate agreements covering each area of law enforcement, and opts instead for an overarching treaty agreement with Europol which offers the same benefits as now. The paper also says the new security treaty would need to be underpinned by a new legal agreement since the UK would leave the ECJ. Ministers are said to be confident that the plans will be agreed, despite Brussels’ insistence that ECJ jurisdiction over UK-EU matters is a red line. Liberal Democrat Shadow Home Secretary Ed Davey called the paper “delusional”, and said that Theresa May’s red line of accepting the ECJ’s jurisdiction was “ridiculous”. Labour have attacked the proposals on similar grounds, with Yvette Cooper claiming the paper fails to “answer the crucial question” of what could replace the European Court. Michel Barnier complicated matters by publishing an article in the French newspaper Le Monde saying that the UK will cease to be a member of Europol after Brexit; he wrote, “the British defence minister will no longer be able to sit at the council of defence ministers, London will leave the European Defence Agency and Europol”. Although some other non-EU countries have agreements with Europol (such as Denmark) – these countries allow freedom of movement (which the Prime Minister has unequivocally ruled out).

European Update

Verhofstadt places the onus on UK

European Parliament Brexit chief Guy Verhofstadt has said it is the UK’s responsibility to find a solution to the post-Brexit Irish border question. Speaking during a visit to Stormont, Verhofstadt said “the resurrection of the border problem is the consequence of the decision of Britain to leave the union, so it is their responsibility to come forward with solutions”. However, he did concede that allowing Ireland to retain access to the single market and customs union after the rest of the UK leaves might be a way to avoid a hard border. His comments come after he dismissed the UK’s proposals for its future customs relationship as “a fantasy” last month.

Timeline

    • 24th – 27th September – Labour Party Conference
    • 25th September – Expected start of fourth round of Brexit negotiation talks
    • 26th September – Donald Tusk visits the UK
    • 29th September – Theresa May to meet EU27 leaders in Estonia
    • 1st – 4th October – Conservative Party Conference
    • 9th October – Expected start of fifth round of Brexit negotiation talks
    • 10th October – EU (Withdrawal) Bill Committee Stage expected
    • 19th October – EU Summit