Minutes of a conference on how to achieve a friendly and speedy Brexit

Minutes of Brexit Seminar, All Souls College, Oxford 9 September 2016
I am grateful to the College for hosting this event. The College was of course neutral on the issues raised and gave a platform to people of varying views about Brexit to participate.
Ministers and officials who attended kept to stated official public government positions. The minutes draw together the main strands of the discussion and explain where the non government people present found consensus or general agreement.

Main conclusions

The Conference concluded that the government should now act with due speed with sending an Article 50 letter and introducing a Repeal Bill for the 1972 European Communities Act. The country and business wishes to reduce the uncertainties. The Conference was swayed by a survey of larger businesses and by the business debate into seeing the need for speed, and the opportunities that flow from exit.

The Conference was persuaded that leaving the EU is primarily a UK Parliamentary process, repealing the 1972 Act and renewing EU law as UK law to ensure continuity. There was general agreement that this is best done by means of a short general principles and powers Bill, mirroring exactly the short legislation of the 1972 Act to impose the EU legal authority in the first place.

There were mixed opinions on the timing of the Article 50 letter given present court cases, but general agreement that subject to the legal position an early letter is the best approach. There was a general view that the government will win the court case anyway, and that the government could also win a vote in Parliament given the stance of the Leader of the Opposition to put the matter beyond doubt and pre-empt the court proceedings. The best course could be to pass a Commons motion in support of a letter and to send it as soon as possible, whatever the state of the legal proceedings.

The Conference was sympathetic to the view that the trade negotiations can be short and simple. The UK can offer either to carry forward current tariff free trade with service sector passports, or to fall back on the WTO standard tariff trade. The UK would recommend the former, but could live with the latter. Rather than negotiate it is just a question of which the rest of the EU will choose. Whilst the EU Commission is likely to threaten WTO, the member states are likely to opt for the status quo of tariff free trade given business lobbies in their own countries. The balance of trade and tariff rates under WTO rules is more damaging to the rest of the EU than to the UK, given the UK’s bias to services which are all tariff free, and given the devaluation of the pound which has already made rest of the EU products less price competitive without extra tariffs.

The UK government has ruled out belonging to the EEA or copying Norway or Switzerland. The UK government should not negotiate over taking back control of borders, laws and taxes. The UK should not be willing to negotiate its future sovereignty with the rest of the EU.

The referendum said Leave. The government and both campaigns clearly stated this outcome would be implemented. The ballot paper did not suggest a renegotiation or partial membership as options, so the government has rightly ruled these out.

The Conference saw various opportunities for improvement out of the EU. It thought the UK could become the world leader for free trade once it has the right to negotiate its own trade deals. Being an open economy with a high proportion of service business is ideal to pioneer free trade. University representatives thought the UK could do better in various scientific and technological areas like medicine and agriculture when we can set our own regulatory framework, as the EU is often cramping for new ideas. The University also sought reassurance and more work on EU funding schemes and collaborative research.

Overview of the negotiations.

John Redwood led the discussion on the overall picture. He reminded the Conference that Vote Leave had throughout campaigned “to take back control”. It had mainly illustrated this by urging taking back control of the money, but had also talked about taking back control of laws, taxes and borders. It had recommended abolition of VAT on domestic fuel and green products, spending more on the NHS, introducing a work permit based system of controlling migrant numbers from the EU, and negotiating free trade deals with the many countries in the world that the EU does not have special arrangements with. These were clearly not government policy, but are important background to why so many people voted to leave.

He proposed an early launch of a Repeal Bill for the 1972 Act, and a parallel Article 50 letter. He supplied a draft letter, and reminded Conference that Article 50 confers a right on a member state to withdraw from the Treaty using its own constitutional arrangements. In the case of the UK this will be an Act of Parliament.

He argued that the rest of the EU is likely to agree to tariff free trade and to reject the Commission’s wish to punish the UK, given the large commercial interests on the continent in keeping their export trade with us – their largest market. He stressed that as leave means taking back control of our own laws and decisions, this cannot be negotiated or brokered with the rest of the EU. There may need to be negotiations over trade and other arrangements where the EU has a right to a view as do we, but not over the resumption of our control over our own laws, taxes, borders and budgets.

He pointed out that the Article 50 2 year period is a maximum period for negotiations – unless all 28 states want to take longer – but there is no reason why it need take anything that long. It is in both sides’ interest to reach an earlier agreement to reduce business uncertainty. If there is break down or no likelihood of agreement then the UK should withdraw and after the 2 year period the UK will be formally out. Trade will revert to WTO rules.

Some expressed concern about the court case over whether the government has power to send an Article 50 letter without Parliamentary approval. John Redwood pointed out that the Commons probably supports sending the letter by a large majority, as any such vote would be supported by a Conservative 3 line whip and also has the support of the Leader of the Opposition and his followers.
There will be implied consent if the Commons does not demand a vote on the letter – which it could always do – or the government could table a suitable motion. The courts are likely to see the absurdity of their seeking to dictate to Parliament what it debates and votes on, given Parliament’s ability to debate and vote on anything it wishes. The issue could be removed by tabling and passing a suitable motion.

Trade

Peter Lilley led the debate on how to conduct trade negotiations with the EU and in due course the rest of the world. He explained that it is much easier than many have argued. There are only two realistic outcomes. Either the UK and the rest of the EU continue with tariff free trade as at present, or they revert to WTO MFN status trade with tariffs averaging about 4% on our exports to the EU.

He argued that the member states influenced by strong business lobbies are likely to opt for a continuation of tariff free trade. German cars, for example, are already 12% less competitive than last year thanks to the devaluation of the pound. They would not want to be another 10% dearer thanks to a 10% tariff. UK cars in contrast are currently 12% more competitive, and would still be 2% more competitive even with a 10% tariff. France and Spain would be very worried about the possible high tariffs that can be imposed on their substantial agricultural exports, whereas the UK’s service exports and aerospace products will continue to be tariff free under WTO rules. He argued that we should reach a decision on trade before the French and German elections to maximise business pressure on their governments.

Peter Lilley argued that once out of the EU, the UK could negotiate the most worthwhile trade deals, which are with the fast growing but protected markets of Asia, Africa and Latin America. The two largest countries in the world – China and India – are unlikely to reach any agreement with the EU but could with the UK. In addition, the UK could set an example to the world by using trade to promote development by offering better access to our markets to developing country agricultural and manufacturing businesses. And we could become a leader for free trade worldwide.

During a productive discussion world trade experts confirmed there were substantial gains to be had from pursuing a freer trade agenda with developing countries, with the UK as a natural free trade leader. It was also confirmed that the UK remains a member of the WTO, and that we could inherit the existing EU external tariff arrangements registered with the WTO and either apply that to EU trade or continue de facto to trade tariff free with the rest of the EU. What takes time in international trade is negotiating a new deal between two countries with substantial barriers, which is the opposite of the case of the UK/EU where all tariff barriers have been removed.

Migration and benefits

Iain Duncan Smith introduced this topic. He proposed that the UK should say in future no EU migrant (or non EU) to the UK should be eligible for in work or out of work benefits for the first five years of their stay. This is a development of the Cameron government’s wish to have a four year period when the migrant pays National Insurance and taxes before being able to claim. Mr Cameron had not been able to negotiate this right with the EU. Most EU migrants do come here to work, and most benefit considerably from in work benefits and allied social provision.

He also proposed that the government introduce a work permit and cap system to control the numbers of EU migrants coming to the UK in future, just as we have controls on non EU numbers today. With such a system it would be possible to insist that people entering the UK should already have a job to go to. He argued that students, people with their own money, people coming to work for multinationals that already employ them, Scientists and people with highly valued qualifications such as software engineers, should be freer to come, (subject to the existing checks on students and sham marriages).

Other people seeking lower paid and lesser qualified work would not get permits, unless there was a skills or labour shortage where the government judged appropriate migration was the best short term answer. Areas such as farming where there may be a need for seasonal workers will be best covered by the ‘Seasonal Workers Scheme, (SAWS).

He also urged the government to reassure all EU citizens already legally here under current rules that they can stay. He was strongly supported in this request by Peter Lilley and John Redwood. He proposed a cut-off date, probably the date of the Article 50 letter, saying that anyone coming after that date will be subject to new rules.

In the discussion some businesses sought reassurances that skills and labour needs they had will be met under a new system. The University also supported freer movement for students and faculty members, and they made it clear that such a regime would reassure higher education in the UK and abroad. The issue of the border with Ireland was also raised, with reassurance proposed that a work permit and cap system does not require new border controls on the Irish border for enforcement, as Irish passport holders would be entitled to the same rights as UK citizens.

Competition Law

Sir John Vickers led the discussion on cross border competition law. His presentation is attached. He has helped set up and chairs an expert group looking into how the UK out of the EU could best handle the outstanding n cross border issues, which will be reporting next year.

He pointed out that current UK law is derived from and fully compatible with EU law on mergers and unfair trade practises. There will be issues over the adjudication of larger cross border mergers and Europe wide abuses of market position where the UK will need to decide how much it wishes to settle these things for itself, with double jeopardy for the businesses involved, and how far the UK wishes to go in finding some basis for international decision. The UK will need to legislate over any changes to the jurisdiction and criteria for competition which it wishes to introduce.

The UK constitution and the 1972 Act

Sir William Cash set out how he has drafted a short Repeal Bill. A Government Repeal Bill drafted by Parliamentary Counsel will repeal the 1972 Act, and will need to cancel the powers of the ECJ and Commission in the UK, and will carry over into UK law the full body of EU law and decisions that are not already in UK Statute. It will also provide UK appeal and competence where matters are currently subject to the jurisdiction of EU organisations and the Commission.

He explained the official Conservative party’s opposition to the Nice, Amsterdam and Lisbon Treaties as a whole, on the grounds that they transferred too much power to the EU, and his own similar disagreement with the Single European Act of 1986 and also the Maastricht Treaty in the early 1990’s, which split the Conservative party in office.

He advised that the Repeal Bill should be short, based on main principles and introduced early into Parliament. This is because, as Sir William said, it is impossible for us to be outside the single market and to have our own trade policy or to bring in our own immigration laws or any laws relating to EU jurisdiction without the Repeal Bill having been enacted. It should mirror in style the 1972 Act itself, which was also short and general.

He also confirmed his view that Article 50 was a prerogative act for the Government and that it was not for the judges to tell Parliament what to do about invoking or voting on Article 50.

In the discussion it was pointed out the Bill would need to tidy up jurisdictional issues where UK matters are currently referred to EU institutions for decisions.

Higher Education

Professor Ian Walmsley spoke of the importance of universities in the UK, their collaborative work with similar institutions on the continent, and their use of EU money for research. He wanted reassurances that there would continue to be similar levels of funding as today, that they would still be able to attract and recruit continental talent and students, and would not be cold shouldered out of European projects. He reported that there are already some research grant applications and joint projects where the UK is not wanted for fear of it harming access to funds.

In the discussion several stressed the desirability of the UK government guaranteeing to pay all the money that would otherwise come from EU sources out of the saved contributions we make to the EU. The government has gone some way in making such a promise up to 2020. The government explained that 2020 was the date, both because the EU itself had to make new budget decisions for post 2020 in due course, and because 2020 would see a General election where parties and electors would make new decisions on spending levels and priorities.

Some of the collaborative projects and funding sources that are pan European are not EU specific. Israel also joins in some EU schemes. There was a general welcome for the idea that the UK should be willing to participate in many research projects and funding schemes without being an EU member. The chairman asked the University to produce a schedule of the main sources of European funds, and a commentary on which we might wish to stay in and which the government should fund instead. All agreed that the HE sector is most important and a UK success story which needs to be properly supported and assisted.

Identity and Accountability

The Conference had a break from the detail of Brexit, and heard a very thoughtful talk by Sheila Lawlor on why the UK voters voted for leave and how their decision was in keeping with UK traditions of democracy.

She reminded the audience that the UK came early to giving rights and freedoms to every man. By the early twentieth century these rights has been spread to all women and included the mass franchise.

For a hundred years UK voters have taken pride in their domestic democracy. It was not disrupted by the evil ideologies of Nazism and communism which took over large parts of the continent. The UK eschewed revolution and illegal seizure of office. Electors cut their governments some slack, but dismissed them if they failed or got too far out of line with the popular mood. A realistic people do not expect their governments or politicians to always get thigs right or to behave perfectly, but the people can use their power to fire them when they judge it necessary.

The decision to take back control was a decision that reflected the romantic view of the relative success of UK democratic discourse and supervision of public policy. It should be contrasted with the lack of accountability of the Euro scheme to national electorates, which is now destroying the older large parties on the continent. It is undermining political stability in many countries from Greece to Spain and now spreading into France and Germany with the rise of the AFD and the Front National.

Business opportunities post Brexit

Shanker Singham talked about the details of WTO procedures and the opportunities for more free trade deals once the UK is able to make its own deals.

Business Forum

Mark Gallagher of Pagefield introduced the topic by reporting details of a survey of 400 larger companies conducted recently after the summer break. 80% of the companies had been officially neutral, 15% declared for Remain and 5% for leave. In practice the big majority wanted a Remain outcome. He told us that business has largely got over the initial shock of the vote, where they had not wanted the result. Now a majority wish to get on with implementing the decision. There is a strong feeling that the uncertainties can best be reduced by a faster pace of change to get the UK into a new relationship more quickly. More also now see advantages in exit, eyeing the scope to reduce and improve the substantial regulatory burden the EU has imposed on business. They also want the UK to do more to improve education and infrastructure. They anticipate gains from more free trade deals with the rest of the world. Some are still nervous about market access within the EU and about their future ability to recruit migrant labour.

During the course of a wide ranging debate and discussion, it was argued that EU controls over clinical trials, stem cell research, Genomics and data analytics was holding back UK universities and deterring worldwide investors and researchers attempting these areas within any EU country. The UK could assist its scientific development if it had a more permissive regime, as the USA and others do.

This was echoed by Owen Paterson who pointed out UK farming was held back by EU controls over the use of technology in agriculture. He also reminded us that the UK had lost its vote and voice on many important global regulatory and standards bodies. Once out of the EU the UK will have more influence by being around the table over issues like environmental and food safety standards. Instead of having to try to influence the EU negotiating position, and then accepting the way the EU implements the world decisions, the UK will be able to directly influence world standards and undertake her own implementation. We have a unique opportunity to tailor a new rural policy specifically to our own industry and environment. He saw great potential for a much improved UK fishing industry, again designed for our marine environment without the crude EU discards policies. The UK will need to negotiate new limits, quotas and arrangements with Iceland, Norway and various EU countries, but it should be able to end up with a much better working fishery policy like Norway’s.

The issue of passports was explored again. It was pointed out financial passports are two way – the rest of the EU needs them to get special access to the big London markets, just as London based businesses can use them for access to the continent. Is it likely the rest of the EU will want to lose this benefit?

Others thought the importance of passports was greatly exaggerated. There are few examples of large scale successful passported products. Where there is, as with UCITs, they are almost wholly established in Luxembourg or Dublin for tax reasons, so London is not the place of registration. London does contract work for the funds, which would continue with them as EU entities once we have left. Soon MIFID II will grant passports to companies in jurisdictions with equivalent regulation, which must apply to the UK as we have identical regulation at the moment.

When asked which regulations could most profitably and easily be got rid of once out, the two favourites mentioned were various VAT impositions which the UK could scrap, and the fishing regulations which have done so much damage to a whole industry. John Redwood stressed that the Leave campaign had recommended no dilution of any employment rights offered by EU legislation, and he expected the government to confirm that approach. It was also confirmed that big business is not lobbying to dilute workers’ rights.

SUMMARY

The Conference had considered detailed plans for a smooth and speedy Brexit. There was general buy in to the idea that both an Article 50 letter and short Repeal Bill are needed quickly to get the process underway. It was also thought that more work is needed on the changes and opportunities that can follow a speedy exit.