ICAS Brexit answers: Bridging the policy gap

brexit_answers_2
By ICAS

19 July 2016

After the UK voted to leave the EU, ICAS posed 20 Questions for the UK Government as it begins planning for Brexit. In this series of articles, the ICAS Technical Team attempts to provide answers to those questions, and also provide additional context and background to the key issues.*

In the second of these articles, we examine government policy issues.

1. Under Article 50 of the Lisbon Treaty, when will the UK Government formally notify the European Council of the UK’s intention to withdraw?

This is a matter for the UK Government to decide. Article 50 of the Treaty on European Union clearly states that it requires to be invoked by the Member State that wishes to leave. Until that is done formally (by letter or formal announcement in an EU Meeting/Summit) the two-year clock does not start. 

Brexit Secretary David Davis said the UK should be in a position to formally trigger the process "before or by the start" of 2017. New Prime Minister Theresa May has previously said she would not trigger Article 50 before the end of 2016.

In the days following the referendum it was clear that many leaders in the EU favoured the process starting immediately. However, those in the “Leave” campaign have not been in any hurry to do so, with continued access to the single marlet and free movement of people key negotiating points. Notably, the German Chancellor has been more sympathetic in her views towards the UK in terms of timing but has also made it clear that the process cannot be allowed to drag on indefinitely. In relation to informal talks there is nothing which requires that the EU enters into these.

2. On what date does the UK Government think that Britain will no longer be a member of the European Union?

If Article 50 of the Treaty on European Union is invoked by the UK in late 2016 or early 2017 as hoped for by Brexit Secretary David Davis, then Mr Davis believes that the process could be concluded by December 2018. Although it should be emphasised at this stage that there is no provisional timetable for an exit as yet.

All that is certain, is that once Article 50 is invoked that the UK must leave the EU within a two-year period subject to a possible extension in the duration of this period with the agreement of all 27 other EU member states.

3. How will the transition process work in practice and what will Government do to minimise its impact on business and the economy during this transition period?

At this stage it is not possible to comment on how the transition process will work in practice. In relation to seeking to minimise the impact on business and the economy please refer to the response to question 1 in the Brexit Answers: business and trade article.

4. How will the UK Parliament pass the necessary legislation to facilitate a departure from the EU, when the majority of MPs seem to favour staying in the EU?

There have been claims that the UK Government will not be allowed to invoke Article 50 - the mechanism for leaving the European Union - unless an Act of Parliament authorises it to do so.  

It is not yet clear whether the UK Government will be able to invoke Article 50 without an Act of Parliament. Momentum appears to be gathering behind the view that an Act of Parliament will be required before Article 50 can be invoked. However, regardless of the legalities it would appear almost certain that Parliament will respect the result of the recent referendum. The new PM has stated that “Brexit means Brexit”.

5. How does the UK Government intend to address further constitutional uncertainty which is almost certain to now emerge as regards the position of Scotland within the UK?

The referendum result has raised new constitutional questions, with nationalist parties in Northern Ireland and Scotland - where majorities voted in favour of Remain - calling for the right to determine their own relationships with the EU.

One of new Prime Minister Theresa May's first official engagements was a meeting with Scotland's First Minister Nicola Sturgeon on 15 July. Mrs May said she was committed to building a consensus on the way forward, and for the Scottish Government to be "fully engaged" in Brexit talks. Ms Sturgeon said she was focused on "protecting Scotland's interests" and that she is "open to examining all options". The first minister said she would consider a second referendum on independence if Scotland's interests were not protected in Brexit negotiations.

6. How would the repatriation of powers from Brussels be handled between Westminster and the devolved Governments?  Will the recently agreed Fiscal Framework need to be amended to fund the exercise of such new powers cascading from the EU back to the UK and devolved Governments?

Repatriation of powers would need to be examined to consider whether they relate to matters that are reserved or devolved. So, for example, agriculture and fishing under the terms of the Scotland Act, would be devolved to the Scottish Parliament.

7. What will the UK Government do with its new-found freedom from EU legislation and regulation? What new policies would it follow?

Firstly, the UK Government needs to decide what form of relationship it wishes to have with the EU. The form of the relationship will influence the extent to which the UK would still need to comply with certain aspects of EU Legislation.  If, for example, the UK was to pursue the Norwegian model i.e. membership of the European Economic Area (EEA) then the UK would still need to comply with many of the rules of the EU and still make a contribution to its funding. 

The EEA Agreement provides for the inclusion of EU legislation in all policy areas of the Single Market. This covers the four freedoms, i.e. the free movement of goods, services, persons and capital, as well as competition and state aid rules, but also the following horizontal policies: consumer protection, company law, environment, social policy, statistics.  

In addition, the EEA Agreement provides for cooperation in several flanking policies such as research and technological development, education, training and youth, employment, tourism, culture, civil protection, enterprise, entrepreneurship and small and medium-sized enterprises.

* Given the fluid nature of this new political reality and rapidly unfolding developments, we are updating this page and related pages with new information as it becomes available.

Brexit Insights: Share your views

We are looking for CAs to contribute their views and analysis on Brexit as part of our new Brexit Insights series, to help shape the future of business and accountancy in the UK.

Get in touch with the ICAS Brexit team if you would like to be involved.

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