In Depth

Brexit: Lords force Theresa May to give MPs single market vote

Brexit strategy for May and Corbyn both ‘blown apart’ in the past 24 hours

The government experienced a shock defeat in the House of Lords last night after a rebel Labour amendment was pushed through, guaranteeing that MPs will have a vote on remaining in the European Economic Area – effectively a vote on the single market.

The Guardian says the result of the vote means the “Brexit strategy of both Theresa May and Jeremy Corbyn has been blown apart in the past 24 hours”.

Despite calls from Corbyn for his peers to abstain, 83 Labour peers broke ranks to vote on the EEA amendment, which was passed by the Lords by 245 votes to 218. A further 17 Conservative Lords also backed the amendment.

“The customs union only will benefit our European neighbours in their imports and without an EEA equivalent it will damage our profitable export business,” Labour Lord Waheed Alli told the house.

The Times says the result means that ministers “must now decide whether to undo 14 amendments to the European Union (Withdrawal) Bill when the legislation returns to the Commons”. That could take place as early as next week.

21 March

Michael Gove tries to calm fishing fears

The Environment Secretary, Michael Gove, has sought to reassure angry Brexiteers over the transition agreement with the EU which effectively keeps Britain’s fishing policy unchanged until 2021.

The UK’s fishing sector has been one of the most vocal supporters of Brexit, in the belief repeatedly stoked by Leave campaigners and Theresa May’s government that it would gain full control of UK waters the moment Britain left the EU in March next year.

An opinion poll before the referendum suggested 92% of fishermen would vote to leave the EU, in a bid to take the UK out of the much-maligned Common Fisheries Policy (CFP).

However, the agreement struck on Monday keeps British fishermen in the CFP, and promises only that the Government will be “consulted” on the allocation of EU fishing quotas during a 21-month Brexit transition period.

Fishing communities and coastal MPs reacted to the news angrily.

Lib Dem MP Alistair Carmichael said “the mood in fishing communities is one of palpable anger - this is not what they were promised”, while former Tory Minister, John Redwood, called the deal “unacceptable”.

The most vociferous condemnation came from politicians north of the border. Scotland’s First Minister and SNP leader, Nicola Sturgeon, claimed the concession was “shaping up to be a massive sell-out of the Scottish fishing industry by the Tories”.

Glasgow-based national newspaper The Herald has been told 13 Scottish Tory MPs could vote against the final EU bill and effectively bring down Theresa May’s government if she reneges on a “fundamental pledge” to give Britain’s fishermen full sovereignty over UK waters.

With 13 members, the group of Scottish Conservatives is larger than the 10 Democratic Unionists, who are propping up the Government.

In a bid to calm tensions, Gove told MPs he understood the fishing industry’s grave disappointment but issued a coded warning to rebellious Tories to keep their “eyes on the prize”.

He admitted that the UK had not got what it wanted from the negotiations but said control of fishing waters had been delayed, not abandoned.

Inadvertently, the Government cave-in on fishing rights during the transition has managed to achieve the impossible – to unite the Tories.

Pro-Remain Scottish Tories have banded together with arch Remainers. Prominent Tory backbencher and arch-Brexiteer Jacob Rees-Mogg is so incensed at the “sell out” on fisheries that he will board a fishing boat this morning and sail down the Thames in protest.

The big worry for both sides is that British waters will be used as a bargaining chip in the negotiations.

“It makes economic sense for the government to trade away fishing quotas and rights over territorial waters in order to get a good deal on financial services” says Sky News.

20 March

Brexit tariff cuts unlikely to lower UK prices, says think tank

Scrapping EU trade tariffs on foreign imports when the UK leaves the European Union would do little to cut prices in British shops, a new report warns.

The research by the Institute for Fiscal Studies (IFS) contradicts Brexiteers’ claims “that leaving the EU could lower the price of food on the shelves”, says The Guardian.

According to the think tank, current European charges on goods consumed in Britain are “not particularly high”, with average tariffs of 4.6% on UK imports from countries that do not have a trade agreement with the EU.

“Complete abolition of tariffs would reduce consumer prices by at most 1.2%, a figure which is not large when compared with the estimated 2% increase in prices due to the sterling depreciation that followed the referendum result,”

IFS economist Peter Levell, who co-authored the study.

“In addition, the costs of goods imported from outside the EU make up only a relatively small fraction of UK household spending,” Levell added.

The report “is likely to reignite debate over the shape of Britain’s post-Brexit trade policy”, says The Guardian. Labour has urged the Government to stay in a customs union with the EU, while Brexit supporters including International Trade Secretary Liam Fox want to strike new deals with the rest of the world.

The IFS’s calculations have been questioned by Jacob Rees-Mogg, chairman of the European Research Group, made up of pro-Brexit Conservatives. He told The Times: “It only takes into account tariffs, and not non-tariff barriers, which could be significantly reduced through trade deals.

“It also only looks directly at the impacts of tariffs on consumer items and not areas like chemicals that contribute to total costs of products.”

But according to the newspaper, research has also shown that “more than a third of UK businesses with European suppliers intend to raise prices because of Brexit”.

20 March

UK may lose trade with around 40 countries on Brexit day, MPs warned

The chief civil servant at Liam Fox’s Department for International Trade has acknowledged that Britain could suffer a “loss of trade” with around 40 countries on Brexit day.  

Antonia Romeo’s warning to MPs comes in the wake of a gloomy government assessment of Brexit’s economic impact. Romeo said that even if the UK and the EU agree a two-year transition deal, “agreements enjoyed as part of the membership of the bloc may not be successfully rolled over”, reports the Daily Mirror.

Asked if she feared Britain might suffer a loss of trade with those third countries, the permanent secretary replied: “We are working to ensure that we are not in that position.”

Speaking at the annual conference of the British Chambers of Commerce in London, Trade Minister Fox tried to shrug off Romeo’s words, outlining what he described as a “bright future” for Britain outside the EU, reports the FT.

Fox said the Government was clear about Britain’s outward vision, adding: “We want to instil our values into the international stage.”

The news comes as the Commons Brexit committee published material from the Government’s Brexit impact assessment. The confidential document, leaked to Buzzfeed News earlier this year, was released in response to a motion by the Commons in January.

The 27-page document “projects that the UK will be worse off in every scenario after Brexit”, says Politico.

“Allowing this information to be considered in its full context, rather than selectively quoted, will help properly to inform public debate about how the figures were arrived at and what the economic effects of Brexit might be,” said committee chair Hilary Benn.

“The analysis suggests that there will be an adverse effect on the economy of the UK and all its regions, and that the degree of impact will depend on the outcome achieved in the negotiations,” he added.

Perhaps most strikingly, the report says the UK won’t get the much-trumpeted “Brexit dividend” because “borrowing will rise”.

“It has to be said that the Government does not accept this analysis,” says The Guardian’s Andrew Sparrow.

“It says the report is flawed because it does not take into account the Brexit trade deal it hopes to achieve.”

07 March

Hammond calls for post-Brexit financial services deal

Philip Hammond is to tell European leaders that it is in the “mutual interest” of the UK and the EU to include financial services in a free trade agreement.

The Chancellor “gets his moment in the sun today” with an address “taking aim at European politicians who insist financial services cannot be part of a future trade deal”, says Politico’s Jack Blanchard.

In the last of a series of “Road to Brexit” speeches by senior cabinet ministers, Hammond will say: “It is time to address the skeptics who say a trade deal including financial services cannot be done because it has never been done before.

“To them I say, ‘Every trade deal the EU has ever done has been unique.’”

According to HuffPost’s Paul Waugh, Hammond will also make a “pointed” jibe about Europe’s role in the now-defunct Transatlantic Trade and Investment Partnership, saying: “The EU itself pursued ambitious financial services cooperation in its proposals for TTIP.”

Hammond is “arguing that if the EU tried it before with a nation which doesn’t have regulatory alignment on financial services - America - then surely it can do so with a country that it at present does - the UK”, says the BBC’s Kamal Ahmed.

But there is no sign as yet that Brussels is backing down on its insistence that financial services can’t be part of the FTA.

Ahead of the publication of the EU’s draft guidelines for a future trade agreement, Theresa May offered a “comprehensive system of mutual recognition” of EU and UK regulations - but that is seen by many in Brussels as impossible.

Indeed, the offer misses the whole point of the EU’s internal market and institutions, argues Stephen Weatherill, a professor of European law at Oxford University.

“When May appeals for ‘a comprehensive system of mutual recognition’, she is not asking for something that applies within the EU,” says Weatherill.

“She is asking for something that even EU Member States do not expect of each other. A ‘comprehensive system of mutual recognition’ is not found within the EU. May is asking that the UK be treated better than a Member State of the EU.”

May’s intransigence on the rule of the European Court of Justice also scuppers those hopes, says ITV’s Robert Peston.

There is “simply not the faintest chance that EU government heads will waiver from what, for them, is the sacred principle that when it comes to interpreting their law, their court has to be supreme”, Peston argues.

01 March

Brexit: MPs issue stark warning about car industry

Hundreds of thousands of jobs in the car industry would be threatened if Britain leaves the EU without a trade deal, MPs have warned.

There are “no advantages to be gained” from Brexit for the automotive industry for the foreseeable future, according to a report from the business, energy and industrial strategy select committee.

It warned that trade barriers would leave the sector unable to compete with its European rivals, and called on the government to maintain the closest possible regulatory alignment with the EU.

“Regulatory consistency and friction-free trade benefits car companies, consumers and car-workers,” said committee chair and Labour MP Rachel Reeves.

The car industry is a major contributor to the UK economy, accounting for nearly 10% of manufacturing output and employing 170,000 people in production, and 800,000 in related areas.

MPs warned that the sector is hugely dependent on access to the EU market for exports and components used in UK-made cars, the Financial Times reports.

“The Government should acknowledge this and be pragmatic in seeking for the sector as close as possible a relationship with the existing EU regulatory and trading framework to provide volume car making - one of our great manufacturing success stories - a hopeful future,” the report concluded.

The verdict “will come as more bad news for Theresa May” whose latest approach to Brexit – so-called managed divergence - was mocked by Jeremy Corbyn during Prime Minister’s Questions on Wednesday, says The Independent.

27 February 

Brexit: Liam Fox takes aim at Tory customs union rebels

Liam Fox reaffirmed the government’s post-Brexit trade strategy today, claiming in a speech that staying in any customs union with the EU would be “a complete sell-out” of Britain’s interests.

Even if the UK left the existing arrangement and negotiated a similar replacement, it would mean accepting EU rules on trade without any say on how they are made, the International Trade Secretary said.

But the prominent Brexiteer’s “upbeat speech” is at risk of being undermined by a former top official in his own department, says the Financial Times.

Martin Donnelly, former permanent secretary at the Department for International Trade, said giving up access to the EU market and its existing trade agreements was “rather like rejecting a three-course meal now in favour of the promise of a packet of crisps later”.  

Warning shot

Fox’s speech comes a day after Jeremy Corbyn announced a shift in Labour’s stance on Brexit, calling for the UK to sign “a new and comprehensive” customs union treaty with the EU.

The Trade Secretary’s comments will be aimed at Conservative backbenchers who are rallying behind an amendment that would force the UK to stay in a customs union, says The Independent political editor.  

The rebellion has support from Tory and Labour Remainers alike. Senior Conservative backbencher Sarah Wollaston claimed yesterday that those opposing a customs union didn’t have the votes to win tomorrow. 

“The simple reality is this: there isn’t a parliamentary majority for a hard Brexit,” she said.

It appears she may be right, with Bloomberg reporting this afternoon that eight Conservative MPs have now publicly confirmed their willingness - at least in principle - to defy the government on the issue.

“It is now theoretically enough to wipe out Theresa May’s majority in the House of Commons,” Bloomberg says.

02 February

Brexit: EU seeks to prevent ‘low tax, low regulation’ UK

The EU is looking at ways to ensure that the UK doesn’t lure companies to its shores after Brexit by dramatically reducing the cost of doing business.

Documents distributed by the executive European Commission to EU diplomats, which have been seen by Reuters, set out plans to use the UK-EU trade deal to keep Britain on a “level playing field”.

The British government has made no secret of its desire to make the UK a free-trade global player after Brexit, and the EU fears this will lead to a bonfire of regulations, a “race-to-the-bottom” on labour and environmental restrictions, the use of state subsidies currently banned by the bloc, and a competitive tax policy. 

There is also concern the recent US tax reforms will increase competitive pressure on Britain to lower business rates, effectively making it a ‘Singapore-light’ offshore tax haven.

It remains unclear what measures the EU could adopt to prevent this from happening, but one option would be to include a non-regression clause, prohibiting any relaxation of labour and environmental regulations, in the trade agreement with Britain. There are similar clauses in the EU’s trade agreements with Japan and Canada.

To make sure Britain abided by the agreement, Reuters says, “the EU and Britain would have to agree on a way to resolve disputes and also on enforcing the deal, including various sanctions”.

A more drastic option would be for the EU to “blacklist” Britain as a non-cooperative jurisdiction on tax matters, although this would have serious financial consequences for the rest of the bloc and is seen as a last resort.

11 January

Brexit: May to spell out plans for UK finance sector

Theresa May will meet financial service leaders later today to give them a clearer idea of what leaving the EU will mean for their sector.

The Prime Minister will seek to address concerns that London could lose its status as the financial capital of Europe after Brexit and allay fears that major banks are preparing to move thousands of jobs to the continent to preserve their access to the EU’s single market.

“The stand-off between Britain and the EU over the future access to single market for London’s vast financial services industry is shaping up to be one of the key Brexit battlegrounds before Britain is due to leave the bloc in March 2019,” says Reuters.

EU chief Brexit negotiator Michel Barnier, who met pro-Brexit politicians in Brussels yesterday, has repeatedly said there can be no special deal on financial services, which account for more than 10% of UK GDP.

Britain’s financial sector is the country’s largest exporter, employs some 2.2 million people and accounts for 12% of the Treasury’s total tax revenue. Because of this, industry leaders have said a deal that preserves the UK’s financial sector must be a priority in the upcoming round of Brexit negotiations.

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