The process for exiting the European Union and the Government's negotiating objectives Contents

Conclusions

What the Government needs to do before triggering Article 50

1.Coordinating the policy analysis, putting in place the staff required and ensuring necessary coordination to support the UK’s negotiations to exit the EU and managing and implementing the decisions required to prepare the public service for life outside the EU represent a significant challenge for the civil service. The work required to “deliver Brexit” will be the highest priority across the civil service for some years and it must be properly resourced and structured by Ministers. (Paragraph 21)

2.We welcome early reports of the strength of the team assembled at the Department for Exiting the European Union and the work clearly being undertaken. We also note the resignation of Sir Ivan Rogers from his key role as UK Permanent Representative to the EU. We wish his successor, Sir Tim Barrow, well in his challenging new role. We will wish to take evidence on the issues raised in Sir Ivan’s letter. (Paragraph 22)

3.We note that evidence has emerged of the strain that preparation for exiting the EU is placing on Government, not just on the Department for Exiting the EU but on other Departments with responsibilities in “delivering Brexit”. It is essential that all those involved are clear about the objectives. This will be a matter which we, and our counterpart committees, will continue to keep under close watch. (Paragraph 23)

4.It is not yet clear what the long term impact of Brexit will be on civil service headcount, but the additional burden of delivering Brexit and the new functions that the public service will need to take on may well require, at least in the short to medium term, an increase in numbers of civil servants. The Government should also identify where the gaps in the knowledge and experience of the civil service lie and consider bringing in people from a range of backgrounds to ensure that it is up to the task at hand. (Paragraph 24)

5.A common request from witnesses has been for greater clarity from the Government about its plans for exiting the EU so that those affected can plan accordingly. We welcome the Prime Minister’s commitment to set out more detail on the UK’s objectives in January and we look forward to publication of the Government’s plan. Article 50 envisages two years for negotiation and ratification of any agreement on exit. There is no timescale that limits negotiations on a new relationship between the UK and the EU. If the latter negotiations are not concluded within the two years envisaged by Article 50 then the UK would leave the EU without a new relationship in place. (Paragraph 32)

6.We welcome the Prime Minister’s assurance that Parliament will have the opportunity to scrutinise the Government’s negotiating plan, but in order to do that the plan must be published in sufficient time before the triggering of Article 50. We therefore expect to see the plan by the middle of February 2017 at the very latest. It should be published in the form of a White Paper given its huge significance, and we will call the Secretary of State to give evidence on it. When the Government does produce its plan, it should declare its position in relation to membership of the Single Market and Customs Union. (Paragraph 38)

7.The Government has pledged to hold a series of debates in the run up to the triggering of Article 50. However, it has given no advance indication of when future debates will take place. A great deal of work is going on in the Committees of both Houses to identify opportunities and risks arising from Brexit which should be taken into account in preparing the Government’s negotiating plan. The Government should now publish a timetable of the further debates that it will be scheduling. This will help the Committees of both Houses to time their work to help to inform these debates. (Paragraph 39)

8.Once the negotiations begin, Parliament will need to be kept fully informed about progress. We welcome the Government’s stated commitment to ensuring that the UK Parliament is kept as well-informed throughout the negotiation process as the European Parliament will be. We ask the Secretary of State to set out exactly how the Government intends to meet this commitment. (Paragraph 40)

9.While it is clear that no part of the UK has a veto over the outcome of the negotiations, it is essential that all the devolved governments, and the different regions of England, are duly involved in the process and have their views taken into account. (Paragraph 52)

The Article 50 negotiation: what will it cover?

10.The UK’s future relationship with the EU should be negotiated in parallel with the Article 50 negotiation so that there is clarity about both the divorce settlement and the new relationship at the moment we formally leave the EU. This would appear to be the intention of the wording of Article 50 and it would be in the best interests of both the UK and the EU-27 were this to be the case. However, this will not be in the Government’s gift to deliver; the sequencing of negotiations in this way will require the agreement of both sides in the negotiations. (Paragraph 58)

11.The key differences between an agreement made under the procedure laid down by Article 50 and one using the procedure set out in Article 218 TFEU (which would apply to a separate agreement on future arrangements between the UK and the EU) are that, as EU law and practice currently stands, the latter requires each Member State’s agreement (rather than a Qualified Majority) and also the possible agreement of up to 34 national and regional parliaments. However, if the Article 50 agreement were to be a “mixed agreement” its procedure would, in practical terms, be the same as for Article 218 TFEU agreement. (Paragraph 66)

12.As these procedural considerations may well affect the outcome of the negotiations, we consider it important for the Government to provide early clarification of its expectations on whether or not the Article 50 agreement is likely to be mixed, the respective scope of an Article 50 agreement and a future arrangements agreement made under Article 218, and the room for flexibility in the choice between the two: If the expectation is that it is a mixed agreement, the Government should put plans in place at that time to engage with other regional and national bodies throughout the EU in order to ensure safe passage of the agreement. (Paragraph 67)

13.The Great Repeal Bill will introduce the legislation that ought to provide legal certainty in the UK on the day after Brexit day. EU legislation will be incorporated into UK law and can then be either retained or repealed. Given the significance of the repatriation of legislative competences to the UK for the constitutional make-up of the UK, the Bill will also have implications for the devolution settlement. The Secretary of State must publish this Bill in draft to enable the fullest scrutiny to take place. The Great Repeal Bill, and the procedure with which it is dealt, will need to be consistent with the existing devolution settlement. (Paragraph 71)

14.The UK’s relationship with the EU is deep and complex, not least in terms of the legal rights of parties in both the UK and the EU-27. It would be unsatisfactory and potentially damaging to both sides were the UK to leave the EU with no agreement having been reached. (Paragraph 76)

15.It will be essential to provide clarity as soon as possible, and certainly by the time the UK leaves the EU, about the Government’s preferred option for the UK’s future participation in EU regulatory bodies. If it is decided, however, not to seek to maintain membership of these bodies then the Government must set out the new arrangements it proposes to put in place to ensure that these functions are carried out in future. (Paragraph 83)

16.It is clearly in everyone’s interests to resolve the position of EU nationals currently in the UK and of UK nationals in other EU member states as quickly as possible so as to provide certainty and reassurance to the individuals, their families and the businesses and services that rely on them. We were struck by the fact that witnesses who were on either side of the referendum debate were unanimous, when asked, in expressing their opinion that EU nationals working in the UK should have their status assured. This must be an early priority for the negotiations. (Paragraph 87)

17.It is essential that closer UK–Irish relations and stability in Northern Ireland and the Good Friday Agreement are not jeopardised by the UK’s exit from the EU. The Executive and the Assembly in Northern Ireland should be duly involved at every stage in the process. In the light of current developments in Northern Ireland, a way will have to be found to make this happen. (Paragraph 92)

18.It will be essential to maintain cooperation with the other 27 member states on defence, foreign policy, security, financial crime and the fight against terrorism after the UK has left the EU. It is clearly in the UK’s and EU-27’s mutual interests to do so and the negotiations should ensure that it happens. (Paragraph 99)

19.The negotiations that the UK is about to embark upon will not be easy and they will certainly not be completed in six months. There will be an enormous amount of ground to be covered in what may be a period of as little as 18 months in order to provide time for any deal to be properly scrutinised by member states and their parliaments, the European Parliament and, of course, the UK parliament and the devolved national parliaments. (Paragraph 101)

20.The Government has stated that it will be looking for the best deal that it can secure in respect of continued access to European markets without tariffs or other obstacles. It should look to secure a mutually beneficial relationship in other areas where the UK currently cooperates with other Member States and also seek a future relationship with the EU based on continuing close cooperation in Justice and Home Affairs, Security, Foreign Affairs and Defence Policy. (Paragraph 102)

21.No one can predict how negotiations will unfold once Article 50 is triggered. However, as a bare minimum, by the time that the UK exits the EU, it is essential that clarity has been provided around:

Negotiating the future relationship

22.The Government will undoubtedly be undertaking economic assessments of the different options for market access and trade looking both at risks and opportunities. In the interests of transparency, these should be published alongside the Government’s plan in so far as it does not compromise the Government’s negotiating hand. The UK Government’s negotiating plan should outline its position in relation to membership of the Single Market and the Customs Union. (Paragraph 123)

23.A return to tariffs and other regulatory and bureaucratic impediments to trade would not be in the interests of UK businesses and therefore the Government should strive to ensure that this does not happen. (Paragraph 136)

24.It will also be important for the Government to set out clearly its policy on membership of the Customs Union as part of its plan for the negotiations. (Paragraph 137)

25.Given the importance of the financial services industry to the UK economy in terms of jobs and tax revenues, the Government should seek to ensure continued access to EU markets in financial services for UK providers whether by way of a continuation of passporting or mutual recognition of regulatory equivalence or some other means. What will be important is that the industry has confidence that any new arrangements will enable them to carry on doing business. Both the UK and the EU-27 benefit from the presence in London of a world class financial services hub and ensuring that there is minimal disruption to services from Brexit will be important for broader European financial stability. (Paragraph 143)

26.In deciding on a new system for controlling EU migration, the Government will need to take full account of the importance of workers from the EU, including the highly skilled, and the ability to undertake intra-company transfers to a large number of sectors of the UK economy. (Paragraph 152)

27.The Secretary of State has said that he wants to secure the best possible access for goods and services to the European market. The Prime Minister has made it clear that she places top priority on controlling the UK’s borders and extricating the UK from the jurisdiction of the European Court of Justice. The pronouncements of the EU’s chief negotiators on the indivisibility of the four freedoms seem to indicate that achieving all these objectives will be difficult. (Paragraph 162)

28.A “cliff edge” change in circumstances could be extremely disruptive in some sectors to businesses both in the UK and in the EU 27, whether it be the need to adjust to new provisions for regulatory approval, new customs requirements, or the need to adjust to new costs or restrictions in employing EU workers. The risk of a cliff edge – ie the absence of transitional arrangements – might also push some businesses to pre-empt the result of negotiations and minimise the risks to their business. For some, this could involve re-locating out of the UK or investing elsewhere in future. A period of transition, or adjustment, is a factor in most trade agreements. The Government must make clear from the outset that a period of adjustment to any change in trading arrangements or access to EU markets for UK service industries will be sought as part of the negotiations. (Paragraph 163)

29.If final agreement is not possible by the time that the UK leaves the EU, it would be in the interests of both sides of the negotiations for an outline framework, with appropriate transitional arrangements, for the UK’s future relationship with the EU to be agreed in respect of access to the Single Market for goods and services and future trade policy. (Paragraph 164)

30.In addition to the economic aspects of the relationship, it is essential that cooperation in defence, foreign policy, security and the fight against terrorism, which is of benefit to both the UK and the EU-27, is not lost when the UK exits the EU. If it is not possible to conclude an agreement on all areas of cooperation in Justice and Home Affairs and Common Foreign and Security Policy before the UK leaves the EU, transitional arrangements to ensure that mutually beneficial cooperation is not brought to an abrupt end by Brexit will be needed. (Paragraph 165)

31.Although the Constitutional Reform and Governance Act 2010 provides the House of Commons with powers to withhold ratification of Treaties, this is not a satisfactory way of dealing with such an important Treaty. We therefore call on the Government to make it clear now that Parliament will have a vote on the Treaty and that the timetable for this vote will allow for proper consideration of any deal that is negotiated. (Paragraph 168)



13 January 2017