Background briefing on the UK Government’s Brexit White Paper

  • Today the Government’s released its White Paper, ‘The United Kingdom’s exit from and new partnership with the European Union’. This amounts to little less than a blueprint for hard Brexit.
  • The Government has made a choice to abandon the Single Market and to let immigration policy dictate economic policy, running the risk of damaging our economy for generations to come and of leaving people poorer.
  • This document has key omissions, not least over immigration policy, but confirms that the UK will not be able to deliver the “exact same benefits” as being in the Single Market and Customs Union outside of them. 
  • There are key questions Ministers must answer over customs controls, the Northern lreland-Ireland border, transitional arrangements and the implications of leaving with no deal at all.
  • The Government must not be given a blank cheque for hard Brexit. It is now vital that Parliament is given a meaningful vote at the end of the Article 50 process that amounts to more than bad deal or no deal.

Background notes

1.     There is still no meaningful Parliamentary vote at the end of the Article 50 process – amendments in Committee stage are more important than ever 

  • The Government have failed to commit to Parliament having a meaningful vote at the end of negotiations: “We will, however, ensure that the UK Parliament receives at least as much information as that received by members of the European Parliament…The Government will then put the final deal that is agreed between the UK and the EU to a vote in both Houses of Parliament.”
  • Amendments in Committee stage of Brexit legislation are more important than ever and it is essential that the Government commits to:

-        Seeking to extend Article 50 negotiations if Parliament rejects the deal, in order to rule out a WTO ‘cliff edge’. 

-        Presenting the draft Agreement to both Houses at the same time as it is presented to the European Parliament (likely to be October 2018), which will provide enough time for scrutiny and further negotiation if required.

-        Ensuring Parliament is regularly informed of the progress of negotiations with genuine opportunities to scrutinise, debate and feed-in to the Government’s negotiating objectives. Such a process is in the Government’s interests as it increases the chances of Parliamentary approval for the outcome of negotiations. 

2.     The Government is aiming to cherry pick sectors within the single market and replicate existing arrangements, but this is a damaging approach our European partners will reject

  • The White Paper aims for an agreement that “may take in elements of current Single Market arrangements in certain areas as it makes no sense to start again from scratch when the UK and the remaining Member States have adhered to the same rules for so many years. Such an arrangement would be on a fully reciprocal basis and in our mutual interests.” 
  • A report commissioned by Open Britain has shown that “every major sector is linked to the EU Single Market and could be harmed’ by opting for a sector-by-sector FTA that prioritises certain sectors over others”; a sector-by-sector approach to pick winners “cannot be achieved without the risk of creating losers”; and that “cherry-picking would be made difficult because ‘there is considerable linkage between the sectors.”[1]
  • Across the EU there has been carte blanche opposition to the UK being able to cherry pick aspects of membership and leaders have been clear that the UK will not be able to cherry pick access to specific sectors within the single market.[2]

3.     Leaving the EU single market puts our access to key sectors at risk

  • The White Paper outlines in detail the benefits of our having access to the EU’s energy markets, which “ensure lower prices and improved security of supply”; harmonised rules in the transport sector, which has helped deliver “affordable and accessible air transport”; and access to communications sectors, not least the audio-visual sector. This is all now at risk as a direct consequence of the Government’s decision to leave the Single Market.
  • The Government cannot guarantee that we will have the same degree of access and same arrangements from which we currently benefit in future. The UK could have limited access and any access will be based on our following the EU regulatory framework, which Leave campaigners have demonised as ‘red tape’ and which, in future, we will have no influence over, turning us in to rule-takers not rule-makers. 

4.     The Government have provided no detail on immigration policy, despite this driving our economic policy, and there is no mention of tens of thousands migration target

  • The Government has decided that immigration policy will take precedence over economic policy. The White Paper gives no details of the migration policy the Government will pursue and makes no mention of the ‘tens of thousands’ migration target: “We are considering very carefully the options that are open to us to gain control of the numbers of people coming to the UK from the EU.”
  • Given migration policy is determining economic policy, the Government must urgently set out what their migration policy is and whether their target remains in place. This is more important given the Government decided to reject staying in the Single Market without seeking to reform of free movement even though this may have been possible.

5.     Migration policy is based on myths: the Government must provide evidence to back up their claims

  • The Government has continued to allow myths on migration to determine our economic policy: “However, in the last decade or so, we have seen record levels of long term net migration in the UK, and that sheer volume has given rise to public concern about pressure on public services, like schools and our infrastructure, especially housing, as well as placing downward pressure on wages for people on the lowest incomes.” 
  • There is no evidence for this. Indeed, this has been refuted:

-        Some claim that the Bank of England says immigration has had a downward pressure on wages. This is untrue. The Bank, in the very study cited by the Leave campaign, has said that the impact has been “tiny”.[3]

-        Economists at the LSE have said: “There is a huge amount of research examining the effect of immigration on jobs and wages…The conclusion of this research is that the large increase in immigration in the UK has not significantly harmed the job and wage prospects of UK-born workers.”[4]

-        A report from NIESR highlights how “real wages would bear the brunt” of leaving the EU, with real consumer wages forecast to be up to 7% lower than they otherwise would be.[5] 

  • The Government must urgently provide evidence to support these claims. 

6.     Pursuing a ‘Comprehensive Free Trade Agreement’ will not deliver the “exact same benefits” as being in the Single Market and Customs Union

  • The Government has confirmed again that they will pursue a Comprehensive Free Trade Agreement with the EU. This runs directly against the Secretary of State for Exiting the EU’s comments that the UK will be able to negotiate “exactly the same”[6] benefits as being in the single market and customs outside. The EU-Canada Agreement (CETA) is cited throughout the White Paper. This example underlines the potential economic damage the UK will face.

-        Years of uncertainty. The EU-Canada Agreement took seven years to negotiate from scoping and has only just been ratified. While it is true that a UK-EU Agreement would likely be easier to agree, it remains hugely complex and would be unlikely to be completed within two years. Pascal Lammy, former Director General of the WTO, said a new UK-EU FTA could take 5-7 years.

-        Less access to the free trade Single Market. Canada has only partial access to the EU Single Market, including for financial services, audio visual services and air transport. There is no EU FTA which gives the same access to EU markets in services as being in the single market.

-        More red-tape for businesses. Canadian manufacturers, such as car-makers, must comply with Rules of Origin, requiring that a proportion of the product is made in Canada in order to qualify for preferential tariffs in trade with the EU. Leaving the Customs Union will mean the UK will face this additional bureaucratic cost.

-        Giving up a say over the rules. Firms that export to the EU have to comply with EU product standards and technical requirements. For Canada, the EU has recognised Canadian assessments in only a minority of product categories. This leaves many Canadian products, such as medical equipment, dependent on approval by EU authorities before they can be sold in the Single Market. If the UK were to trade with the EU on similar terms, this would place many of our companies at a disadvantage.

-        Quotas and tariffs. Canada is outside the Customs Union and quotas remain in place for key agricultural exports. For the UK this could mean, for example, a 12 per cent tariff on a large share of the UK’s beef exports to the EU. It is hugely unlikely that the UK will negotiate zero tariffs on all goods.

7.     The UK is leaving the Customs Union and businesses will face increased costs as a result

  • The Government confirms again that we will leave the Customs Union completely, which is the natural consequence of leaving the Common External Tariff or participate in the Common Commercial Policy: “We will not be bound by the EU’s Common External Tariff or participate in the Common Commercial Policy. But we do want to ensure that cross-border trade with the EU is as frictionless and seamless as possible.” 
  • The Government provides zero detail of how they will deliver trade that is as “frictionless as possible” apart from a brief mention of “the use of digital technologies”. This is not good enough. Once certainty that UK exporters would face additional costs from Rules of Origin regulations, which compel exporters to determine where a product originated. Research from Open Britain has previously shown that this could cost UK businesses £12.7bn.[7] Open Britain has also shown that this could increase red tape.[8]

 8.     Warm words on workers’ rights are not strong enough 

  • The White Paper states that “in general…the preserved law should continue to be interpreted in the same way as it is at the moment”. This is welcome. However, it also states that “there will also be a programme of secondary legislation under the Great Repeal Bill to address deficiencies in the preserved law”.
  • Some workers’ rights enjoyed by British workers have been created not by British statute law, or by European Union directives and regulations, but by decisions of the European Court of Justice. These include the awarding of annual holidays during long-term sick leave, the banning of so-called rolled up holiday pay, and favourable holiday pay calculations.[9]
  • The Government has to be clear that this does not imply that Parliament could effectively scrap workers’ rights delivered by the ECJ. All of these rights should be translated into UK law as part of the Great Repeal Bill process.

9.     The UK will still make payments to the EU and there will be no £350m a week for the NHS

  • The UK Government makes clear that we will make contributions to certain European programmes in order to participate within them: “There may be European programmes in which we might want to participate. If so, it is reasonable that we should make an appropriate contribution.” This means two key Leave pledges will not be met: we will still be paying in to the EU and there will be no £350m a week for the NHS. Indeed, £350m does not appear in the White Paper. 

10.  The Government champions open trade but undermines its own strategy by relying on the false promise of new markets 

  • The Government is mistakenly placing the emphasis of its trade strategy on new trading partners, stating, “Increasingly, we are trading with the key emerging markets of the world in Asia and the Americas”.
  • This is a mistake. First, trade with the EU dwarfs our trade with other markets. In 2014 our exports to the BRIC countries was just 7.2% of our total - meaning that if we increased by six-fold our exports to the BRIC countries it would still lag behind our exports to the EU.[10]  Second, being in the EU’s structures (Single Market and Customs Union) is essential to maintaining EU trade: The HM Treasury analysis, which is in line with academic research, shows that EU membership increases trade with EU members by around three quarters.[11] The Government is squandering this on the false promise of new trade links.

11.  There is no detail on transitional arrangements  

  • It is welcome that the Government has committed to “avoid a disruptive cliff-edge”. The White Paper commits to a “phased process of implementation, in which the UK, the EU institutions and Member States prepare for the new arrangements that will exist between us, will be in our mutual interest.” The Government has raised the possibility that new migration controls will not come in in 2019, saying that transition may “be about our immigration controls, customs systems or the way in which we cooperate on criminal and civil justice matters”.
  • It is essential that the UK maintains maximum stability during transition and agrees quickly what transitional arrangements will be in order to allow trade negotiations to proceed. This suggests staying in the European Economic Area, which Open Britain advocates.

12.  Questions remain over a hard border between Northern Ireland and Ireland 

  • The Government has provided no detail whatsoever about new arrangements between Northern Ireland and Ireland and have admitted that their stance on the Customs Union and freedom of movement of people will risk creating ‘friction’. 
  • The White Paper says, “We recognise that for the people of Northern Ireland and Ireland, the ability to move freely across the border is an essential part of daily life. When the UK leaves the EU we aim to have as seamless and frictionless a border as possible between Northern Ireland and Ireland, so that we can continue to see the trade and everyday movements we have seen up to now.” This means that the new arrangements will minimise friction, rather than eradicate it as at present. 

13.  Despite the Prime Minister’s overheated rhetoric, the White Paper makes clear that the UK is and has always been a sovereign country while a member of the EU

  • The Prime Minister announced at Conservative Party Conference that “We are going to be a fully-independent, sovereign country” when we leave the EU. This is fundamentally undermined by the White Paper which admits, “The sovereignty of Parliament is a fundamental principle of the UK constitution. Whilst Parliament has remained sovereign throughout our membership of the EU, it has not always felt like that.” The UK has therefore apparently decided to pursue a hard Brexit because some people do not ‘feel’ sovereign enough.

14.  Government is planning contingency over WTO scenario, raising questions over ‘no deal’ strategy

  • The White Paper admits that it is planning to make contingency arrangements should the UK leave with ‘no deal’: “the Government is clear that no deal for the UK is better than a bad deal for the UK. In any eventuality we will ensure that our economic and other functions can continue, including by passing legislation as necessary to mitigate the effects of failing to reach a deal.”
  • The Government will now be having to make projections of the fallout of leaving with no deal in order to plan ‘legislation as necessary to mitigate the effects’ of such an outcome: these must be made public. Furthermore, given that the Government has admitted action is going to need to be taken to mitigate effects and this does not apply if we get a deal with the EU, this is tantamount to an admission that no deal is the worst option on the table.

15.  Funding blackhole

  • The Government only promises to honour funding for projects signed after the Autumn Statement 2016 “if they provide strong value for money and are in line with domestic strategic priorities”. This means billions of pounds in funding could be denied to beneficiaries from the following funds (which are not covered by HMG guarantees):

-        the European Regional Development Fund

-        the European Social Fund

-        the Youth Employment Initiative

-        the European Agricultural Fund for Rural Development

-        the European Maritime & Fisheries Fund

-        the European Regional Development Fund (CAP Pillar 2)

16.  Secondary legislation could lead to a power grab by Ministers

  • The Government has committed to “a programme of secondary legislation under the Great Repeal Bill to address deficiencies in the preserved law, which will be subject to parliamentary oversight.” This gives rise to the danger of Ministers using Statutory Instruments widely, which are subject to less Parliamentary scrutiny than Bills.[12]  Rather than increasing Parliamentary authority, this would increase the power of the executive.

[11] HM Treasury, April 2016, link