Brexit Update 23rd November 2017

By December 7, 2017 Brexit Updates

Top 3 developments  

  1. Government agrees to double Brexit divorce bill offer in an attempt to break negotiation impasse.
  2. Chancellor announces £3bn of additional Brexit spending in Autumn Budget.
  3. Committee stage of the EU (Withdrawal) Bill continues, with Government majority on key amendments shrinking.

UK Update

Government agrees to double Brexit divorce bill offer

Ministers are understood to have given Theresa May approval to offer Brussels an additional £20bn as part of the Brexit divorce bill. On Monday May met with her EU Exit and Trade Cabinet Sub-Committee to agree the €40bn figure. The sum looks set to be offered to EU Council President Donald Tusk this Friday, in an attempt to convince the EU27 to progress to trade talks in December. Included amongst the Cabinet Sub-committee’s members are the ‘Three Brexiteers’ Boris Johnson, Michael Gove, and Liam Fox; all three approved the increase, subject to the strict condition that talks progress. This approval comes despite Johnson saying in July that Brussels could “go whistle” for demanding such high figures.

The Cabinet Sub-Committee also discussed post-Brexit trade dispute resolution, and is also rumoured to have agreed to allow the ECJ to continue overseeing the rights of the 3m EU citizens in Britain post Brexit, in a move which is likely to infuriate hard-line Leavers on the Tory benches. The reports have caused some confusion, with Downing Street spokesperson quickly clarifying “I’d make the distinction between the implementation period and post-Brexit… when it comes to post-Brexit, we’ve been clear that the jurisdiction of the European Court of Justice will end”. Earlier in the week Ministers conceded that ECJ jurisdiction over EU nationals in the UK will continue throughout the transition period. It appears ECJ jurisdiction post-Brexit remains an issue for the negotiations.

£3bn Brexit boost in the Budget

The Chancellor of the Exchequer has set aside £3bn over the next two years for Brexit planning – in addition to the £700m already spent. Announcing his Budget in the Commons, Hammond said, “I stand ready to allocate further sums if and when needed… No one should doubt our resolve!” The hefty sum shows a marked departure from his previous tendency to drip feed money into Whitehall as and when need has arisen. It is not yet clear what the additional funding will be spent on, as departments will have to vie for the cash from the start of next year. A significant portion will be spent on new personnel and computer systems for customs and immigration management post-Brexit. Despite the sizeable allocation, the fine-print shows that departments will have to wait until early 2018 to find out if they will benefit from any additional funds. Hammond added a further caveat that further money will only be released “when there is more certainty on the status of our future relationship with the EU”.

Government’s majority on Brexit legislation shrinks

The Government’s crucial Brexit legislation – the EU (Withdrawal) Bill – passed its third day in Committee on Tuesday, during which the Government’s majority on key amendments fell to as few as ten MPs. The Government avoided an embarrassing defeat on an amendment tabled by former Attorney General, Dominic Grieve, which would have committed the UK to the EU Charter of Fundamental Rights. However, Grieve withdrew his amendment after winning assurances that the Government would look again at his demands. The biggest test for the Government came when MPs voted on a near-identical Labour amendment, and was defeated by just 10 votes — the narrowest Government win so far. Day four of Committee stage is expected on 4th December.

Labour MPs ordered to oppose remaining in Customs Union

On Tuesday, Labour Remainers were infuriated by a party leadership decision to Whip MPs to vote against a backbench effort to keep the UK in the Customs Union. Edinburgh South MP Ian Murray tabled an amendment to the Taxation (Cross Border Trade) Bill, which would have prevented taxes being charged on imports to the UK after it leaves the EU, a move that, owing to WTO rules, would effectively have kept the UK in the Customs Union. The amendment was defeated by 311 votes to 76, with Murray voting against his own party whip. The party leadership has since weathered the backlash from its MPs. Backbench Labour member Wes Streeting tweeted on Tuesday that he would have supported the amendment and was “not happy” because MPs had been “told that we could go home because [there were] no important votes”. SNP International Affairs Spokesperson Stephen Gethins MP said that Labour had failed to stand against “hardcore Tory Brexiteers”, and described the decision as “utterly unbelievable and quite shocking”.

Government publishes Brexit Customs bill

The Government has published its Brexit Customs Bill, which allows the UK to set and collect customs duty on imported goods including preferential or additional duties post-Brexit. It will also allow the UK to arrange its own standalone cross border VAT and excise legislation once EU legislation no longer applies. Since the exact nature of the UK’s future customs relationship with the EU will depend on the outcome of the ongoing negotiations, the Bill does not outline any specific customs regime; rather, it allows the Government to implement whatever customs arrangement is agreed with the EU through secondary legislation (which, as opposed to primary legislation, does not require full parliamentary scrutiny). The Bill does, however, allow for VAT to be charged on goods imported from the EU, which is not currently the case.

Irish Government threatens to block Brexit progress

The Irish Government has this week continued its threats to block a move to trade talks unless the UK gives a formal written guarantee that there will be no hard border with Northern Ireland. Speaking last week, Irish PM Leo Varadkar said, “we’ve been given assurances that there will be no hard border in Ireland, that there won’t be any physical infrastructure, that we won’t go back to the borders of the past… We want that written down in practical terms in the conclusions of phase one”. Speaking to the Evening Standard on Wednesday, Irish Foreign Minister Simon Coveney reiterated that this remains the case, despite May’s increased offer. He said, “anybody who thinks that just because the financial settlement issue gets resolved… that somehow Ireland will have a hand put on the shoulder and be told, ‘Look, it’s time to move on.’ Well, we’re not going to move on”.

Electoral Commission relaunches investigation into referendum campaign funding

The Electoral Commission has reopened an investigation into the spending of the Vote Leave campaign during last year’s EU referendum. The potential spending violation relates to Vote Leave paying university student Darren Grimes £625,000 to clear debts relating to “outreach” on behalf of the campaign. The Electoral Commission initially accepted Vote Leave’s explanation for the payment during an investigation earlier this year, but has this week reopened its enquiry after receiving new information. The watchdog said it has “reasonable grounds to suspect an offence may have been committed”, and that it would also examine if the Boris Johnson and Michael Gove-fronted campaign had filed its returns correctly. The Commission’s announcement comes after the Good Law Project began legal proceedings against the regulator for failing to investigate the claims of improper spending properly during the first investigation.

Study shows Brexit costs rising

The UK in a Changing EU think tank has published a report claiming that the UK’s decision to leave the EU is costing households an additional £7.74 per week (or £404 per year). This week the Food Foundation also released their own report claiming that the five-a-day eating target for fruit and vegetables could become unaffordable for low-income families because of Brexit-related food price increases.

European Update

Barnier restarts the rebate debate

The EU’s chief Brexit negotiator, Michel Barnier is considering abolishing the UK’s EU budget rebate as part of any Brexit transition deal. The rebate – secured by Margaret Thatcher in 1984 – is worth £9bn each year to the UK. In his public statements since early this year, Barnier has calculated the UK’s obligations at 14% of the bloc’s budget, instead of the 12.5-13% figure which accounts for the £9bn rebate. If Barnier’s position is adopted, the UK could potentially have to pay a further £9bn (in addition to the £40bn being offered) to secure a Brexit transition deal. Such a move would enrage Brexiteers, and could risk undermining the negotiations at a critical stage.

German coalition talks collapse

Coalition talks in Germany collapsed this week, meaning the country is unlikely to have a stable government for months and throwing Angela Merkel’s ability to stay in office into doubt in the long-term. Though a minority government supported by the far-right AfD is possible, another general election currently looks more likely. Either way, the collapse of talks makes swiftly securing a Brexit deal more difficult. The deadlock in Germany could mean months of dithering from Brussels; indeed, some have called into question the ability of Brussels to agree anything with Germany in crisis. On the other hand, Germany’s domestic political concerns could make it less likely that Berlin is willing to risk potential damage to its industry by imposing tariffs on its exports.

Transition deal unlikely until October 2018

Documents prepared by Michel Barnier show that a transition deal between the UK and EU will not be formalised until October 2018. Even if the EU leaders decide next month that sufficient progress has been made, the document’s “tentative timeline” dictates that transition negotiations will not begin until February 2018. They would then proceed in parallel with “preliminary and preparatory discussions” on Britain’s future relationship with the bloc, culminating in a deal to be finalised at the October 2018 European Council summit with a “political declaration on future relationship”. The document does not stipulate how long a transition deal would last, but it does state that an extension would only be granted if it was “necessary, legally feasible, and in the Union’s interest”.

Brussels begins calculating Brexit impact

The European Commission has begun assessing the economic impact Brexit will have on the next EU budget plan. Taking into consideration the loss of the UK’s budget contribution post-Brexit, the Commission says it will have to halve funding for Western European countries from the EU’s regional aid programme. Under such a scenario, the EU would be able to provide “support for less developed regions only”, according to a leaked impact assessment. As such, only the poorest countries in Europe will continue to receive EU funding, whilst “support for Germany and mainland France would be discontinued”.

Irish Government brand UK’s Brexit approach “chaotic”

Documents leaked from the Irish Government, obtained by broadcaster RTÉ, reveal scathing assessment of Theresa May’s cabinet – including Brexit Secretary David Davis. The documents claim that Brexit was barely mentioned during a meeting on 23 October between Mr Davis and the French Foreign Minister and Minister for European Affairs: “despite having billed this in the media in advance as a meeting to ‘unblock’ French resistance, Davis hardly mentioned Brexit at all during the meeting, much to French surprise, focusing instead on foreign policy issues,” the paper states. Meanwhile, Czech Deputy Minister for Foreign Affairs, Jakub Durr, told officials he felt “sorry for British ambassadors around the EU trying to communicate a coherent message when there is political confusion at home”. The Irish Government have thus far refused to comment on the leak.

EMA and EBA relocation

The European Banking Authority and Medical Agency (EBA and EMA) are to be relocated to Paris and Amsterdam after Brexit, following a lengthy bidding process which saw the EU27 countries make their case to grab one of the bodies. The EU Council made the decisions on Monday. Paris won the race to take the European Banking Authority from London, beating Dublin in the final, after the favourite Frankfurt was knocked out in the second round. Amsterdam beat competition from 18 cities ranging from fancied contenders such as Copenhagen and Bratislava to outsiders such as Bucharest and Sofia. The relocation is arguably the first major shift of people and industry from the UK to the continent following the outcome of last year’s referendum.

Barnier refuses to compromise on European laws

Michel Barnier has insisted the EU will not compromise on its European-style laws in any post-Brexit trade deal. Speaking at the Centre for European Reform, Barnier said the UK now needs to decide if it wants to stay “close to the European model”, or “gradually move away from it”. This decision will be “decisive” for the negotiations, he added, claiming that the EU is ready to offer the UK the “most ambitious” partnership on trade, but that the bloc would not compromise its fair competition, tax, labour, environmental and food safety laws in order to achieve this.

Timeline

  • 4th December – Fourth day of EU (Withdrawal) Bill Committee Stage.
  • 4th December – Prime Minister to meet with Jean-Claude Juncker for Brexit Dinner.
  • 14th – 15th December – EU Council Summit.
  • 17th December – Christmas recess begins.
  • 5th January – Christmas recess ends.
  • 22nd – 23rd March – EU Council Summit.

 

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