All bad things must come to an end and so it is for the Ficus benjamina – the rented weeping figs – of Portcullis House. Expensive, prone to create allergic reactions and subsidence they were never the right trees for the heart of the British Parliament but their felling creates an amazing opportunity that should be grasped.
Portcullis House is an interesting space. Temperate, light and warm all year round it could host a variety of interesting plants and small trees. So why not use this space to highlight two issues at once? The importance of biodiversity and the UK’s responsibilities for British Overseas Territories and their unique plant species.
The UK’s overseas territories contain most of the UK’s biodiversity but are little known about
The British overseas territories represent 94% of UK biodiversity, they represent numerous climatic zones from the tropics to Antarctica and much in between. Would it be possible to find a suitable plant from each territory to grow in PCH?
Firstly we could start with the home nations, the English oak, Welsh oak, Scots pine and Irish yew might fit the bill.
Further afield. Gibraltar has three endemic plants. Cerastium gibraltaricum might fit the bill.
Montserrat, a volcano-blighted island in the Caribbean has three endemic plants of which Xylosma serratum, a member of the willow family would be a good representative.
Xylosma serratum endemic to Montserrat
The British Virgin Islands in the sub tropical Caribbean has a number of endemic plants including the Vachellia anegadensis
The vachellia anegadensis endemic to the BVI
St Helena could be represented by the endamic St Helena Cabbage tree
Anguilla in the Caribbean
The Rondeletia anguillensis found only in the UK Overseas territory of Anguilla.
The St Helena Cabbage Tree
The Cayman Islands has 21 endemic plant species
Even the tiny Pitcain islands group has nine endemic species including the yellow Abutilon pitcairnense.
Even the tiny Pitcain islands group has nine endemic species including the yellow Abutilon pitcairnense.
Bermuda’s endemic Juniperus bermudiana
Cyprus Bosea endemic to Cyprus and found in the British Sovereign Base areas.
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There are two types of immigration: Illegal immigration and legal immigration. Illegal immigration is very visible, it often involves boats from France landing on the South Coast and the accompanying headlines. There is a near consensus that illegal migration should be discouraged and the Government has a plan to deal with it: Removing the magnetic pull to the UK by sending illegal entrants to Rwanda. Once fully up and running this plan should work.
Legal migration is very different. It is the product of UK policy decisions (or often the lack of policy decisions). Whereas pre-Brexit the UK had no control over EU/EEA migration and so no control over overall numbers coming in it can now decide exactly who can come via the Points Based System (PBS).
The UK has decided to use the PBS to run one of the most liberal immigration systems in the world which unsurprisingly is delivering record immigration.
The UK’s immigration flows are made up of different cohorts:
There is a large cohort of skilled workers. Skilled jobs earning over £25,600 (or less in some sectors like the NHS/care sector) are open to the entire world. This equates to roughly 60% of all jobs.
The Conservative Government has decided to be exceptionally generous to the UK universities. Student visas are now uncapped, and all students get a two-year post-graduate visa in which they can work in skilled or unskilled work before transitioning to a skilled visa (if they chose).
We are also very generous to dependants of skilled visa and other visa holders such as post-graduate students. They can bring their families, who often work in unskilled jobs.
On top of this we then have other ‘special interests’ lobbied for by various Government departments. Seasonal workers for agriculture, the NHS and care worker visas at a special low wage and others responding to different pressures, news stories or lobbying.
Add in policy decisions emanating from the FCDO and MOD on visas for Afghan, Ukrainian and British Hong Kong passport holders and the picture is one of record immigration.
We have no actual net immigration figure (that is due from the ONS in November 2022 for the year to June 2022) but we can get feel for what is in store from the recent Home Office visa statistics.
As you can see following a dip for Covid both student and work visas have risen sharply. This is not a net figure as we cannot be clear yet who has left the country. The two year graduate visa is also new, so we can not know how many will take advantage and stay at the end of their studies, but it is likely to be a high percentage. The applicants for student/graduate visas have also changed, China has now in 2nd place topped by 117,965 grants to Indian nationals in 2022 an increase of 80,569, Nigeria is also growing as an origin.
On the worker route, we see a large growth in visas for the NHS and care system (50% of the total) as well as to skilled jobs generally. The visas also cover dependents.
The one area that has potentially seen a drop is that of ‘unskilled’ workers once allowed under free movement.
In general, therefore Brexit and policy decisions made by the Conservative Government have led to a decrease in unskilled migration (although dependants and graduates can work in these fields) and a large increase in ‘skilled’ migration – that being the top c.60% of the labour market.
As this is the ‘controlled’ legal part of our immigration system this is a policy choice. The question, therefore, is whether this is the right decision?
Well firstly, was this a decision? Yes, to an extent. With Brexit there was political pressure to reduce migration into lower skilled jobs suffering from wage compression. This was done (and was popular). There was then a separate decision to allow uncapped migration into the rest of the labour market. This was most likely driven by classic Treasury thinking based on working out the salary at which the average migrant is a fiscal benefit. The Treasury likes economic growth but is less keen on the necessary accompanying infrastructure – more people using the existing infrastructure spreads the cost.
At the time £25,600 was decided upon as the appropriate salary for a skilled visa but this has not been up-rated since. Add in some special pleading for a lower salary for the NHS and massive lobbying by universities for a work visa to encourage the sale of their courses and we have the outlines of our immigration policy.
The outcome of this is the largest surge in immigration for decades and one that if left unchecked will form the backdrop to the next election.
Are we pursuing the right policy?
The decision to switch migration from the unskilled to the skilled has created some perverse effects. We now reserve the bottom of the labour market for UK school leavers and graduates while opening up the top to the world. Not only will this create more demand for unskilled labour that cannot be met, it also raises questions of fairness for UK school leavers and graduates.
To gain a ‘skilled’ job in the UK you will now have to compete against the world’s graduates. This means that jobs that were once open to school leavers will be closed, continuing a trend started by the expansion of university education domestically. A school leaver today is therefore forced to take on debt to go to a university they may not wish to attend and would not have had to a generation ago in order to compete for jobs. Many debt-laden UK graduates then go on to work in non-graduate jobs, and/or ‘graduate jobs’ that used not to require graduates. And all the time these ‘graduate’ jobs are open to global competition.
Secondly, the numbers as you can see are climbing dramatically. This raises obvious questions regarding house building, house prices and the provision of public services. Is it sensible for a country that can build at most 200,000 houses a year to grant over a million work and study visas? Is this fair to first-time buyers already struggling with graduate debt? Is it conducive of a country where people can afford to start families if they wish?
Thirdly, the question of wage compression. It was generally accepted that wages in the lower end of the job market had been held down by EU migration, now the numbers are flowing into the top half of the job market it is likely that we will see wage compression in traditionally more middle class jobs, particularly those that are not protected by particular qualifications or localised skills, (lawyers and media figures are safe). But we are also seeing wage compression and bad practices lower down the wage scales. We may have seen wage compression in building and lorry driving, maybe we will see it in accounting and clerical work next?
The care sector is a particular case. Due to recruitment problems the NHS and care homes have been granted special dispensations to recruit abroad at 25% below the generalised market rate because the sector is badly paid. This is a peculiar quirk of the system that means that sectors that cannot recruit locally (due to poor pay) are rewarded by access to cheap labour abroad. This is an absurdity that has closed off the care sector to UK workers, denying many UK workers careers in care or the NHS.
But access to cheap labour creates more bad habits as the emerging scandal of ‘bonded labour’ in care homes and agricultural seasonal workers attests. No wonder they have labour shortages if their workers so poorly paid and treated.
So what should a UK immigration system look like?
Firstly, it should be entirely there for the benefit of the UK population. We should focus on GDP gains per capita and not chase arbitrary economic growth for the sake of it.
Secondly, we should take a long-term view of population growth. Migrants age, arguments based on aging demographics are a Ponzi scheme peddled by economists who prize economic growth over all else. The only way to keep an aging population artificially young is exponential population growth based on young immigrants, which is an absurdity. We need to address ageing populations and low birth rates rather than seek to avoid it.
Thirdly, our system should be fair to UK school leavers. There is no reason to put them up against the whole world’s graduates for a limited number of skilled jobs. That is unfair to them and makes little sense – why reserve the lowest-paid jobs for your domestic population?
Fourthly, we should sort out the question of recruitment into the NHS and care sector. Why do we cap UK school leavers wishing to train as doctors while importing doctors from the world? Why do we allow uncapped foreign students into medical training when we deny the same to the UK’s students? Why do we insist on recruiting care workers from the world’s poorest states at below the UK market rate rather than recruit and train domestic workers currently out of the labour market? We are outsourcing our training costs to states that can ill afford it.
Fifthly, we should look to our domestic unemployed, inactive and more difficult to employ first. While businesses have found the ability to employ from overseas attractive as these workers are often young, educated and with fewer costs are able to work for less than domestic workers. All the time however we have had persistently high levels of unemployment and economic inactivity. This stands at c.9m. While businesses gained the benefit of immigration the taxpayer often shouldered the wider social costs. The provision of infrastructure, schools, public services and houses. The difficulty faced by more difficult to employ workers re-entering the workplace. If instead of looking abroad employers (including the state) had to work with the DWP to train and skill a harder to employ domestic worker then the benefits would be manyfold. There would be no new housing and infrastructure cost and benefits would be saved.
Sixthly, does our system really make the best use of new technologies to increase our workers’ productivity or seeking cheaper labour from abroad to save on training and investment?
These are some of the questions that need considering but we do not currently have the Governmental mechanism to consider the various trade-offs.
Too often an individual department (say DHSC, DEFRA etc) having failed to train and recruit will lobby for an exemption to recruit abroad. Our migration policy then becomes the sum total of various pieces of lobbying. Creating distortions and side effects.
What we need is a nationally agreed migration strategy that takes in all of the relevant factors. Infrastructure, house-building, domestic education provision, skills, the state of the labour market as well as our foreign commitments.
This should be agreed and held to in the face of lobbying. We would then have to train our own doctors and give the opportunity of a medical career to our own school leavers rather than outsource the benefit it to other states. We could balance population growth with housing, creating a stable housing market that can be accessed by the young. We could concentrate on investment and productivity increases and how to cope with demographic change brought about increasing longevity. We should create a national migration strategy agreed by a national migration council.
The good news is that if such a policy were adopted, we have the mechanisms in place to change our levels of immigration. Under the points-based system we have control. We can increase the salary threshold to whatever figure we chose, we could reduce dependants’ rights, stop various visa types or insist on additional qualifications or change the balance from skilled to unskilled. The system put the UK back in control, the question is what type of control we want to apply.
Which brings us to the politics. We have net migration figures in November each year based on the previous year to June. This year’s figures are already baked in, and next years are getting warm. We don’t now when the next election might be but it may come after the delivery of record net immigration.
For the Conservative Party this would produce certain frictions. Whereas the ‘Redwall’ was perhaps most concerned about wage pressures in the unskilled sector the Blue wall middle class south has seen its fair share of moaning that wage rates are rising for services they consume. Add to that the political pressure on planning from population growth in Blue seats and you have a perfect storm. All the political downside of immigration with no upside for middle class voters (cheap services). The offset of support in the Redwall may not compensate.
So what does the party say in the next election? In the absence of a change in policy the picture is confused. On a political level there are those who argue that the existence of control is enough to reassure voters. Others would argue that numbers are the key issue and control has always meant numbers. One thing that is certain is that if no control is exercised the next election will be fought on the basis of delivering record immigration. Maybe, some would say, a good thing but that would also need a coherent narrative to explain which would make a thought-out national migration strategy a political necessity.
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The UK’s first encounter with space technology came out of the blue on 8th September 1944 in the shape of a V2 rocket that exploded killing three people in Chiswick. This was the beginning of a curious tale on show in our museums that hints at an intriguing history and a tragic lost opportunity.
First on display in British museums is the German V2, the Vergeltungswaffe 2 (Retribution 2) – an amazing piece of space technology whose designer Werner von Braun famously went on to mastermind the USA’s Apollo manned space programme. Tragic though his early successes were for London, the V2 fortunately had little impact on the course of the war. Beyond, as space pioneer Professor Freeman Dyson (who was with the RAF in London at the time) argued, diverting critical German resources from their fighter plane programme to the benefit of the allied war effort.
Eagle front page from 1964. (Photo by Universal History Archive/Universal Images Group via Getty Images)
The second space rocket we can see is in many ways the V2’s direct heir: the UK’s Black Arrow, which in October 1971 delivered a UK satellite into orbit from the Australian range at Woomera. This rocket has the dubious distinction of being the UK’s only space craft to deliver a satellite into orbit. Showing its European heritage, this unique piece of technology was one of the only space rockets powered by high-test peroxide (HTP), the same fuel that powered the Messerschmitt Me 163 Komet rocket plane, a piece of German technology also on display in Britain’s museums.
These craft tell a tale that started in the ruins of the Germany in 1945. The UK, the USA and the Soviet Union all embarked on a rush to take control of German’s advanced rocket science. The UK took control of V2 missiles and with their German technicians set about studying them and getting them to work. It was this technology allied to the UK’s impressive aeronautic industry that led to the UK’s first steps towards space. Sadly, the UK missile programme ultimately came to naught. The Royal Navy under Lord Mountbatten was aghast that the UK’s nuclear strike capability might be sited on missiles launched from land rather than from its submarines and this contributed inside Whitehall to the rockets’ civilian satellite launch capabilities being sadly overlooked. In addition, already they were having to compete for public funding with the looming financial white elephant that became Concorde.
The final nail in Britain’s space craft industry came in the midst of the UK’s entry to the EEC, Heath having cancelled the project before even its maiden flight. The French, who were a relative newcomer to space technology and advanced aeronautics, having been otherwise occupied during the 1940s technological race, became the driving force of the European Space Agency with their Ariane rockets based in French Guyana. It’s ironic that Ken Clarke, as Science Minister in 1987, and perhaps cognisant of the history, refused to back the Ariane 5 rocket. Declaring that the UK taxpayer would not subsidise putting “Frenchmen in Space”. France’s Ariane went on to become a commercial success, benefitting from the ever-expanding demand for satellites, while ground breaking UK technology such as the HOTOL space plane failed to get ESA backing.
Missile test rig at the needles
Britain, which had set out after WWII as one of only three potential space powers, has become one of a select band of major economies not to have its own domestic space launch capability. Not only was this a major historical and commercial mistake it is something that should and is now being set right. In this the UK has a number of major advantages.
Despite the failure of the UK to develop its own space launch system the UK has managed to grow a highly successful space satellite industry worth nearly £15bn a year. This industry in turn fosters other high technology industries and drives innovation. Space is big business.
The cost of space launch capabilities has come down dramatically in the last few decades. The technology developed back in the 60s has been improved upon – what was once the preserve of major states is now within the grasp of private companies. The UK has recently put in place legislation to open up commercial space flight in the UK and companies such as Orbex operating out of Sutherland Space port may soon launch the second UK satellite after a gap of fifty years. Others, such as Virgin Galactic, as a part of a taxpayer bailed out conglomerate, may also feel it is now time to come home to the UK. We should seek to encourage these and other pioneers to our shores.
Post Brexit the UK will be uniquely placed. A member of the European Space Agency, able to develop its own projects free of the political pressures of EU membership and in addition able cooperate with North America and Commonwealth states. These strengths should be built on. Space science is a cooperative enterprise and the UK should be in the lead.
But space is more than just a commercial opportunity for private companies and an international scientific endeavour: there is a strategic case for an active British presence in space.
The UK, as with other states, relies on satellite communications to sustain its economy and its defence capabilities. Currently the UK has to rely on others to launch its most sensitive satellites, something that works well in normal times. However, we have seen states, such as China, experiment with satellite destruction. With the current COVID pandemic we have also seen the limitations of relying on overseas supply chains for critical technologies in times of crisis – the UK should arm itself with strategic independence. We have already seen this with the general EU and specifically French attempts to block the UK from accessing the sensitive parts of the Galileo global positioning satellite system. This exposes the dangers of strategic dependence and furthers the case for a reliable UK-led system based on ground stations based on British Overseas Territories and closely allied, dependable states. And for bringing home to European actors their physical limitations in this regard.
Space, however, is not just about strategic independence, it has always been more than that. This is the human desire to explore and push back our frontiers, and it has outlived our mapping of this globe. As far back as 1640 Dr John Wilkins set out a detailed thesis for the ‘Discovery of a World in the Moone’ for English colonisation of space complete with designs for a winged ‘space chariot’. He may even have attempted to fly this contraption out of Wadham College Oxford. And why not, England had recently started to colonise one New World, everything was possible. Four hundred years later and Wilkins’ ideas are no longer a fringe academic heresy but within the grasp of even limited state budgets. Now is the time for the UK should re-join the space race.
The UK should put the force of the state behind its amazing array of scientific space talent. We should develop the next generation of reusable space vehicles capable of horizontal take off. Alan Bond spent decades on minimal budgets attempting to bring his HOTOL dream to life, this should be brought rapidly to fruition. The prospect here is being in the commercial vanguard of the next generation of supersonic airliners. Additionally, the UK should set up a version of the US Jet Propulsion Laboratory and regional centres of space science and materials with an active space programme harnessed for the benefit of wider UK industry.
A cheap method for entry into space has always been the key that opens up many worlds of opportunity. There is no reason why the UK should watch others land on the Moon and Mars any more than Wilkins’ contemporaries felt it right to leave the New World to the Spanish. Space has commercial opportunities aplenty, from communications to asteroids made of precious metals but these will only be exploited by British companies if the UK puts itself back in the game.
Previous generations of Britons grew up in an age of British aeronautic excellence watching in the postwar years the country turn out amazing and world beating aircraft. ‘Made in Britain’ meant high technology adding to the value of all our exports. It encouraged students into science and engineering – what could be a better advert for British engineering than a new domestic space plane taking British satellites and landers into orbit, the moon and beyond? We can talk about wanting children to sign up to STEM subjects, but there’s no surer way to achieve that worthy goal than them taking pride in their actions. A British space project will add booster rockets to science’s credibility with British youth. Why wouldn’t it? It has everywhere else.
Future generations visiting British museums would find it bizarre if the Black Arrow missile from 1971 was the last exhibit in displays charting Britain’s ambitions in space. The UK has a unique opportunity, an amazing space heritage and should now re-join the elite club of spacefaring nations.
In this important study Dr Martin Holmes, an Oxford lecturer and prolific writer on European subjects, examines the history of the post-war Franco-German friendship.
In December 1998 Tony Blair stated in the Times, “There are real debates in Europe. Do we want economic reform or corporatism? Do we want a Europe which is building bridges or barriers to the US?… And there is a genuine debate about the European Social Model”. However, Holmes does not see how Britain will ever be in a position to take part in or even influence this debate. Barring the way is the special relationship that has developed between successive French and German governments which has become the driving force behind the destination of a federal Europe, one with which Britain will feel less and less at ease.
The origins of this friendship lay in the genuine desire of France and Germany to bury the hatchet in the post 1945 era. France’s main concern was to bind Germany into a peaceful Europe while the Germans, fuelled by a desire to distance themselves from the Hitlerzeit, sought to use integration as a means of atonement. The first stage of this reached its height in France under the leadership of de Gaulle who saw an opportunity to build Europe into a power independent of the USA and the USSR. This he saw could be under the political leadership of France and based on economic policies mid way between the Anglo-Saxon and Soviet models.
To this end de Gaulle vetoed Britain’s entry as it would both upset France’s ability to lead Germany and introduce foreign “Anglo-Saxon” economic policies replacing his favoured model of “Rhineland capitalism”. De Gaulle was not anti-British but believed that “England’s very situation differs profoundly from those of the continentals”. Germany’s continuous desire to distance herself from the Third Reich enmeshed her in ever deepening integration. German unification has only heightened the desire for integration as she seeks again to prove her “user friendly” nature. France similarly responded to unification with a fresh impetus towards integration lest Germany change her mind and pursue an independent policy in the East. Holmes sees this as a tragedy, for in the process Germany has disregarded the twin pillars of her post war success and stability; the D Mark and its well-designed political system, both of which are being replaced by undemocratic European institutions.
For Holmes peace has sprung from a “Germany that is prosperous and democratic, rather than the German pursuit of European integration”. Integration has been the by-product of rather than the cause of peace. This leaves Blair’s assertion that, “it is our destiny to lead in Europe” looking rather hollow. Europe does not need or want new leadership and rejects the destiny Britain might wish to lead it to. France and Germany have known for many years where they are going and will not be moved off course by Britain’s new overture. It is Britain’s inability to understand or accept the aims of France and Germany that have led to her continued Euro angst. Incidentally, Holmes concludes that de Gaulle was consciously acting in Britain’s best interest when he vetoed Britain’s membership. He knew that “England’s situation was different” and that her membership would become a marriage made in hell.
The novelty of this book is that it explains to a British audience something that has been known in France and Germany for at least 30 years, namely that the destination of Europe has always been towards political integration. The British people imagined they were joining a purely economic trade zone – though the political élite had, and still have, no illusions about the end-point: a single European state. To this central point Holmes adds some very perceptive comments on the unique nature of the Franco-German relations making this paper essential reading for anyone who takes more than a casual interest in the direction of European integration.
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Christopher Howarth: Submission to the Commons’ select Committee on Leasehold reform
Background: Prior to 1993, the owners of flats had virtually no rights. They could not extend their leases, nor could they collectively buy out their landlord: they had an asset with an expiry date and one they had little control over. John Major took the first step to rebalance this system, introducing rights to lease extensions and collective enfranchisement, now if 50% leaseholders in a block could agree to buy out the landlord, they can.
Nearly a quarter of a century later, leasehold is in rude health. There are perhaps four million leasehold properties in the UK. 70% of them are flats, and 57% are owner-occupied. In large areas of the country, for those lucky enough to afford it, owning a leasehold flat is the closest they can come to owning their own property.
Some flats are in blocks which now come with a share of freehold, many are not. For these “homeowners”, being a leaseholder is little more than being a glorified tenant, with little influence over their property’s management or with any legal redress against spiralling costs and bad, or even corrupt, landowners and managing agents.
Yet while in the UK the idea of leaseholders and freeholders are as ubiquitous as flat owner’s complaints about their managing agents, it is worth considering that most of the world, including other common-law jurisdictions, either have never had leasehold property, or have since got rid of it. Yet in the UK leasehold is expanding. Ninety per cent of all new properties in London are leasehold, and 40% in England and Wales). 43% of new properties sole are leasehold.[1] These new “owners” form a miserable third tier in terms of property rights, below that of freeholder and Social Housing Tenants, but above renters, who as a consolation can at lease move without paying both their estate agents and the landlords agents fees and taxes.
Preventing service charge disputes. At present a determined landlord can manage leaseholders properties as they feel fit, releasing little information, paying no regards to costs, keeping all moneys from multiple properties in one bank account while not providing statements or even accounts. They can do all this either within the law or because they have no fear from the residential property tribunal or any other regulatory body.
Nobody wishes to see leaseholders in dispute with Landlords. The way to prevent disputes is to improve the standard of management. This requires two factors. Firstly transparency of information regarding charges and services and secondly real enforcement mechanisms so that Landlords are forced to improve their practices and thus prevent disputes.
Transparency of information:
Service charge transparency. There is no reason why a leaseholder should not see key documents relating to the management of their property – for instance, those relating to tendering of services, the management contract and other contracts, so they can provide alternative quotes. Without transparency regarding accounts, bank statements and individual statements and contracts lessees have no idea what their money has been spent on, what services have been contracted and the ability to go to the Residential Tribunal is practically worthless.
Lessees’ ability to gain redress against a fraudulent landlord is severely hampered by the ability of the Landlord to withhold information and use their control of information in the Residential Property Tribunal. With complex and partial information disclosed, a leaseholder will never be able to prove a case – a fact landlords are well aware of.
In order for Lessees to understand what they are being charged for they require some basic information that currently it is almost impossible to compel a Landlord to produce. The basic information that should be available should include.
Timely accounts. On large estates where agents pool expenditure items this will require disclosure of accounts of all related units to ensure there is no double charging.
Receipts for expenditure. These should be easily available for inspection and be timely.
The % split of expenditure. To ensure that lessees are not being charge collectively more than 100% of the service charge. If the landlord has their own properties on the freehold title they should also pay service charge and this payment should be transparently available in the accounts.
At present none of these items of basic pieces of information are possible to come by in the face of a determined landlord. This would severely hamper any lessee seeking redress.
The case for a ‘Leaseholders House’ to hold key account details. Companies House hold accounts of all UK companies. There is no equivalent for service charge accounts. If a body were created that could hold all yearly service charge accounts in the form prescribed by law it would provide automatic enforcement of timely accounts.In addition to holding audited accounts the Leaseholders House should make the following information publicly available:· Bank statements of Leaseholders service charge and sinking fund accounts.· All LEP1 information, accounts major works. This would reduce the cost of conveyancing as sellers would not need to apply to the Landlord and pay a fee.· All contracts so Leaseholders know what they are paying for.· Tender documentation so Leaseholders can provide alternative quotes.· The % payable be each leaseholder and the freeholder’s flats so leaseholders know that they are paying 100% and the Landlord is contribution.
· Leaseholders addresses so that leaseholders can contact other leaseholders for the purpose of enfranchisement and challenging service charges without paying large sums to the Land Registry.
Timely accounts: Section 21 of the Landlord and Tenant Act 1985.
S.21 governs what information a Landlord should provide to the Lessees. Unfortunately it has three versions that give Lessees differing rights and it is not clear which one is current.
1. As last amended by Schedule 1 of the Housing Grants, Construction and Regeneration Act 1996
2. As proposed by Section 152 of the Commonhold and Leasehold Reform Act 2002
3. As proposed in Schedule 12 of the Housing and Regeneration Act 2008
Putting that on one side Lessees are probably entitled within 6 months of the end of the 12 month accounting period a summary of the costs incurred for the last service charge account period of 12 months. Or if not forthcoming following service of written request under S. 21 within 1 month.
In addition a qualified account is required to certify that the summary represents a fair representation of the required information and that the summary is sufficiently supported by the accounts, bank account statements and receipts and other documents presented to the accountant.[2] Currently it can be argued by Landlords that they need not disclose bank statements (of their collective accounts).
Problems with enforcement of accounts
While there are many ways a Landlord can seek to avoid disclosing information while complying with s.21 the real disadvantage to Lessees come with enforcement. This is covered by s.22 of the Landlord and Tenant Act 1985. Under section 22 the lessee is entitled to see all the documents and receipts to back up the accounts and s.25 of the Landlord and Tenant Act 1985 makes failure to comply a summary offence theoretically subject to a £2,500 fine.[3]
Unfortunately this sanction does not work in practice. The only authority able to bring prosecutions are local authorities who have no interests or resources to bring actions against landlords and since the Act specifies a sanction the Courts have bared tenants from going to Court to seek their own redress under s.21-23. The reasoning for this was set out in Morshead Mansions Ltd v Di Marco where the Court of Appeal specifically ruled that the Lessee could not go to Court to compel the Lessee to disclose accounts. And without accounts and receipts the Lessee has no chance of bringing a successful action for service charge.[4]
A lessee that suspects a Landlord is not accounting for funds have few legal remedies to gain information and a motivated Landlord can frustrate even a determined Lessee.
Parliament under the Commonhold and Leasehold Reform Act 2002, Section 153 did propose to give tenants the right to withhold service charge if accounts etc. were not forthcoming, but alas never brought that provision into force.
Proposals:
Lessees (in addition to the local authorities) are given a right to go to Court to seek audited accounts and the receipts (not invoices) that underlies the accounts.
S. 153 of theCommonhold and Leasehold Reform Act 2002 regarding non-payment of service charge if no accounts are produced is brought into force.
Landlords must lodge all service charge accounts with a Landlords’ equivalent of Companies House that automatically places them on line for all to see and automatically fines them if they are not produced.
Accounts must include every flats % payment and include the payments made by the Landlord from any freehold flats they own in the block. (They should be legally liable to pay their fair share).
Lessees should be given receipts not invoices.
Service Charge Accounts and supporting documentation. Service charge accounts, sinking funds and reserve accounts often lack key information and do not set out a true picture of what Lessees are being billed. Problems include:
Accounts for a block do not set out who is contributing allowing the Landlord to obscure the fact that the % charged to leaseholders adds up to more than 100%. This is often the case where new flats are created in a block pushing the % contributed over 100%. In schemes running to 100s or even 1000s of properties downloading the leases from the Land Registry at £7 a property is prohibitive.
Landlords often justify expenditure with invoices, often from their own subsidiaries or their agents firms. Invoices are not proof of actual payment.
Landlords often come back months later and after the accounts have been delivered with new charges necessitating ‘balancing charges’. This obscures what is actually been spent.
Service charge accounts are prepared for the benefit of the Landlord relying on the Landlord’s (or agent’s) documentation. They usually include wide disclaimers reducing their value.
Landlords with multiple overlapping management areas and schemes need only provide small snapshots to Lessees. Landlords have no duty to explain if they contribute for their own flats or the % charged to other lessees. Landords can make it practically impossible to inspect receipts. Landlords have no fear of being take to Court by local authorities and the fines may not be a deterrent in the case of large landlords. Landlords may then place fines on the service charge!
Even if Leaseholder’s moneys spent is receipted it is often difficult to tell what has been commissioned without disclosure of the actual underlying contracts. For instance a management contract between the Landlord and his agent may include clauses relating to management of the Landlord’s remaining freehold properties in the block. These could include the obligation of the agent to manage them at reduced rates and to use the service charges collected for the maintenance of these flats. The Landlord is under no obligation to disclose this management agreement and in many cases may redact the controversial parts.
Proposal:
Service charge accounts should include the name of all flats contributing to the charge, the % of each property and the name and address of the owner.
All expenditure must be covered by receipts and not invoices.
Landlords should not be able to ‘find’ invoices after the end of the accounting year and add balancing charges.
Service Charge accounts should be for the benefit of the Lessees and Landlords and liability should not be excluded. Accountants should therefore have a contractual relationship with the Lessees under which Lessees can sue for inaccuracies. (Relying on third party rights is too high a bar).
All tender documents and actual contracts, in particular management contracts should be disclosed. These documents could also be available on the internet.
Major works transparency (s.20 consultations). Landlords have different priorities than their leaseholders with regards to major contracts and will not select on price alone. Under current legislation Leaseholders may nominate a contractor, but without disclosure of the exact specifications the Landlord is contracting for the lessees’ contractor has no chance of success. Even if Leaseholders were given the specification and so could quote on the identical grounds the Landlord could narrow the terms to suit their candidate (i.e levels of insurance, ability to manage their whole estate etc). Even if the Leaseholder had the specification, found a contractor that did not think it was a waste of time quoting and came up best. The Landlord can still dismiss it with little or no reasoning.
Lessees under s.20 Landlord and Tennant Act 1985 are supposed to be consulted if a work undertaken will exceed £250 for any one leaseholder. The process for consultations were laid down in the Service Charges (Consultation Requirements) (England) Regulations 2003 (schedules 2&4).[5]
Under Schedule 4 the Landlord in some circumstances should invite Lessees to nominate a proposed contractor in competition to the Landlords. Is they do they should ask that contractor for a quote and under Schedule 4 (6) “state his reasons for awarding the contract or specify the place and hours at which a statement of those reasons may be inspected”. In practice like many consultations these are mere formalities.
Proposal:
The Landlord should disclose the tender documents so Leaseholders can find comparable quotes.
The choice should be made on price and not by the Landlord or the Landlord’s s.20 surveyor.
Separate Trust bank accounts. Leaseholders should to have the money for their sinking fund and expenses kept in a separate bank account to which they are allowed to see the statements. This would reduce the scope for money moving between properties, cross-subsidising a landlord’s properties or simply disappearing. This was passed by Parliament in 2002 (Leasehold Reform Act 2002 Section 156) but for some reason was never brought into force
Enforcement
The Problem: Lack of legal redress to leaseholders. If a landlord or his managing agents take liberties with their leaseholders, a leaseholder has no practical recourse to law. This may sound like an odd statement, given there is a whole Residential Property Tribunal dedicated to solving these disputes, but in practice the tribunal should be avoided like the plague, for a number of reasons:
The Tribunal is not a Court. It does not have the time or interest for long and complex cases, does not take evidence on oath and is easily swayed by the legal firepower at the disposal of large landlords. It’s a small legal world, and the money and careers (of tribunal judges) are made defending landlords, not small leaseholders.
If a leaseholders wins (or loses), he may have to pay the landlord’s costs. This may seem odd, considering that if the leaseholder wins the tribunal has no power to award costs in his favour, but it stems from the fact that the majority of leases stipulate the leaseholder will pay all legal costs. This is a very serious and real danger to a leaseholder. There are cases where leaseholders collectively have had to pay £300,000 in costs but, if an individual takes a case to the Tribunal, they may get hit with the whole whack – £76,000 in one case, allowing the Landlord to take possession of the flat. In another particularly bad case notified to MPs, the Wellcome Trust (a large London Landlord) charged a Leaseholder £94,905 for having partially won a case relating to a few thousand pounds of spiralling annual service charge bill – again threatening to force the leaseholder out of her flat (The landlord had argued it was reasonable to spend £1/4 million a year for a 5 acre garden). And of course if you challenge the legal cost as unreasonable you, will get another bill. That leaves the only alternative as paying up, something case law has held is acceptance of the charge.
Leaseholders are trapped. If you cannot challenge an extortionate service charge, a wrongly calculated charge or shoddy management in the Tribunal, what happens if you refuse to pay the Bill? This, again, is a road to nowhere. A landlord can be assured of getting paid. They can threaten to take the property back (forfeiture) or – a common practice if the leaseholder has a mortgage – tell the leaseholder’s bank, who will then pay them directly and add it to their mortgage. With of course another legal fee added.
Existing rights do not work. While opportunities for abuse are legion, leaseholders current rights are not sufficient. A leaseholder acting with half of his neighbours cab go to a court and buy the landlord out. They can also apply to take on the management. However, this is often not possible. Tracking leaseholders who are often not resident and gaining approval is often impossible, especially when commercial landlords decide to use to law to obstruct it, or indeed own leasehold flats (and votes) themselves.
S.131 Housing and Planning Act 2016: “Limitation of administration charges: costs of proceedings”S.131 of the Housing and Planning Act[6] will not provide any effective redress for leaseholders facing attempts by freeholders to recover the costs of their legal fees at the residential tribunal nor will it motivate freeholder’s or their agents to improve the standard of their management or solve leaseholders’ complaints before they come to the tribunal or at all. The only solution is for the Tribunal to go back to what was originally intended and be No Costs.It remains an unequal system. Under the current system the freeholder can in most cases claim back his legal costs from a Leaseholder by way of the service charge or an administrative charge. However a Leaseholder will not be able to claim their expenses from the Landlord. This will lead to a huge miss-match in legal firepower this means the Leaseholder will always be at a disadvantage.The Tribunal has a poor record in preventing Landlords free spending on legal costs S.131 places the question of costs back with the Tribunal stating “The relevant court or tribunal may make whatever order on the application it considers to be just and equitable.” This would seem to be little improved from the previous system, where a Leaseholder could challenge an unreasonable charge by way of another application. As with s.131 an application for “unreasonableness” would create another potential cost from the Landlord and so another bill for the Leaseholder. There is a large amount of case law on “reasonableness” in service charges and “administrative charges” which invariably allow for their recovery, placing the question with The Tribunal will simply copy existing practice.To give a real and recent example (regarding The Welcome Trust) a c.£94,000 legal cost incurred by a landlord in defending a service charge bill of c.£6,000 might still be judged to be “just and equitable” by the Tribunal if evidence of expenditure was forthcoming. Perhaps it might be reduced by 10% even 50% but that would still be enough to force the Leaseholder out of their flat and dissuade any other Leaseholder from challenging a service charge or its administration. With bills of this kind it is highly likely the remainder will be written off by the law firm making it very unlikely the freeholder will be left paying the difference.In this case the Tribunal decided that as the Leaseholder had lost the majority, but not all, of the points under s.20C it was “reasonable” to allow recovery before the Tribunal knew the scale of the costs. The £94,000 service charge bill arrived 4 months later, challenging that would risk a similar further bill and on and on ultimately leading to the landlord forfeiting the lease. It is worth remembering that as the Freeholder and its agents hold all the documents and can in a Tribunal, avoid disclosure and have overwhelming legal firepower, winning any part of a case for an individual leaseholder representing themselves is a surprising victory.
Mediation: Mediation, whether informal or imposed by the Tribunal should be the preferred way of resolving disputes. However, as long as a freeholder and its agents have a risk and cost free Tribunal there is no incentive to attempt settlement. In the Wellcome Trust case the Tribunal decided not to impose mediation as there was no chance of settlement as the freeholder saw litigation as beneficial.
Time limits: As there is no costs hearing in the Tribunal, the Landlord’s claim via the service charge will come many weeks or months later, it is unclear at what point the Leaseholder has to apply to reduce the claim, potentially before they have seen it. In the case of a claim spread over many leaseholders the £200 to the tribunal application may reduce any of the benefit of the application, especially as it may cascade new claims from the freeholder for the challenge to their costs.
Proposals
It should be recognised that the interests of the Freeholder and Leaseholder are not aligned. The Freeholder and its agents have little interest in cost effective management and if all legal costs can be recovered there is an incentive for the managing agents to use litigation to defend their management costs rather than seek mediation or solve complaints.
The current system is designed to encourage freeholders their agents and lawyers to rely on litigation as their complaints procedure of choice. For them it is penalty free for the Leaseholder there is the risk they may lose their home.
The tribunal claimed to be a low cost or cost free environment in which small claims and disputes could be settled without recourse to large law firms and barristers. The Tribunal for this reason does not award its own costs – it should not allow freeholders to help themselves. S131 does nothing to prevent this.
Reform the Tribunal costs system. Landlords should not be able to recover their legal costs in the Tribunal by designating them as administrative costs, and adding them to the service charge of an individual or property. A reformed Tribunal should either be costs-neutral, or allow both sides to claim costs. This would change the behaviour of landlords, and increase the chances of settlements or the solving problems pre litigation
No cost environment. If the policy goal of the Tribunal is to encourage better standards of management by Freeholders and their agents there should be encouragement to improve standards, reduce Leaseholder complaints and deal with them pre litigation then the tribunal should be a no costs environment.
Proposals for the Future Stop the creation of new leaseholds. While the existing leaseholds are a problem, there is no good reason to create more. Legislate that all flats should be ‘share of freehold’ from the off. The proliferation of Government schemes for shared ownership has if anything made matters worse: this should stop.
End existing leaseholds. While it would not be equitable to turn leaseholds into share of freeholds without compensating the landlords it would be possible to end this practice over time. The simplest would be to convert all 90 year statutory lease extensions into 999 year extensions therefore ending leasehold over c.20 to 30 years. The difference between a 90 year and a 999 year lease extension would be nominal.
Enhance the chances of enfranchisement and the right to manage. A lower threshold for enfranchisement should be adopted particularly in cases where the leaseholders in a block are difficult to trace, or are in fact the landlord.
Place the RICS code for managing agents on a statutory footing. While managing agents are supposed to follow best practice there is little to force them and no recourse if they don’t. The RICS code has many sensible suggestions, separate bank accounts, fixed fees over % fees etc but no power to enforce it. Placing it into legislation would have a positive effect on managing agents and Landlords.
Ending Landlords rights to manage property. Along with turning all leaseholders into 999 year leaseholders legislation could require that once a % of a block are on 999 year leases they automatically gain a share of freehold and the right or obligation to manage the property. This would immediately improve the standard of management from agents hoping to retain the work from the new owners.
Leaseholders should pay a fair amount to extend leases. Another example of the way in which the Tribunal services the interests of landlords can be gleaned from the recent “Parthenia (Mundy) Case”. A calculation for the extension of the leases (favourable to landlords) was originally put forward by the Grosvenor estate in 1996 and was accepted by the Tribunal. A challenge to it in 2016 pitted three individual leaseholders and their new model against a range of property interests including the Wellcome Trust, relying (amusingly) on the evidence from Professor Colin Lizieri, Grosvenor Professor of Real Estate Finance. You may imagine the outcome: the cost of lease extensions has gone up.So dramatic was the reversal in leaseholders fortunes springing from this one judgement that Peter Bottomley argued in Parliament that “I hope that the appeal succeeds, and that the Government will make sure that if it does not, the decision in the Mundy case will be reversed by statute.”A part of giving leaseholders security is to prevent vagaries in the Tribunal system leading to huge swings in the cost to extending their leases. The Mundy case should be overridden by Parliament.
Estate management schemes (EMS) Leaseholders that have been able to enfranchise and buy their freeholds are not necessarily free from their historic Landlords due to the imposition of ‘Estate Management Schemes’ over a former estate as sanctioned by the Courts. This can involve the Leaseholder having to pay annual fees to landlords as well as additional fees and costs of their lawyers to undertake works that already have planning permission.[7]These schemes were either made under Section 19 of the Leasehold Reform Act 1967, (or under Chapter 4 or S. 93 of the Leasehold Reform, Housing and Urban Development Act 1993).[8]
While it is possible to argue the pros and cons of EMS to enhance a local area they have in many instances become a way (by lawyers and landlords) to extract fees and costs over a far wider area than that owned by a landlord. In some cases enfranchised ‘leaseholders’ can be charged many thousands of pounds by historic estate owners for items such as painting a house.
Proposal
All EMS should be converted into planning requirements as new ‘conservation areas’ with enforcement given to the local authority.
Reducing the cost of selling a Leasehold property. As a result of the complexity of Leasehold property and service charge accounting Landlords and agents can charge significant sums (c.£500 in some cases) for ‘buyers packs’ or the LEP1 form. These charges come despite the fact that information relating to accounts, the state of the building, impending repairs is information the Leaseholder is entitled to in any event. Proposal
All accounts should be uploaded to the website of an organisation similar to ‘Companies House’ that ensures that these accounts are in a suitable format.
All LEP1 information should also be uploaded to the same website.
Conveyancers and buyers can therefore access the information from the LEP1 without the costly and time consuming business of sellers requesting information from the Landlord.
Communal gardens and other assets. Many leases include rights to use communal assets – such as gardens, access roads, storage areas, garages etc – owned by the freeholder. Enfranchisement however only extends to the dwelling and not any communal assets leaving leaseholders in an ambiguous position as to their continued use of these assets – often on a licence. There is a question as to what happens when all leasehold property is enfranchised, can the freeholder cancel the licences and take back the communal gardens for development? There is also a question of management, the landlord costs for managing communal assets can be just as bad as that of a residential block and will be subject to even less oversight.
Proposal:
The right to enfranchise is extended to ‘communal gardens’ or roadways.
The Kensington Improvement Act 1851, which allows residents committees to run gardens in Kensington via the council tax, is amended to extend it geographically to all of England and Wales and allow for cases where the majority of residents wish to take control even if the freeholder does not.[9]
Christopher Howarth is a senior researcher working in the House of Commons. Prior to this he worked for Open Europe, as a Conservative Foreign Affairs Adviser and senior researcher to a Shadow Europe Minister.
A version of this article can be found on ConservativeHome here
While in the UK a dwindling band of those unreconciled to the inevitability of Brexit marched on Parliament and were promptly lost amongst tourist crowds, in Brussels there is still a strong belief that the UK will never actually leave the EU. This is a dangerous belief as it may lead to the conclusion that a refusal to negotiate will lead to a change of heart in the UK, a Parliamentary vote, a second referendum and ultimately Bremain.
This would be a costly misjudgement, Brexit would still go ahead, but without negotiation it could lead to a needless disruption of UK/EU trade and good will. That is why the Prime Minister is right to reiterate that “Brexit means Brexit”. The message is beginning to get through in the EU capitals.
So, accepting the inevitability of the end point, how do we get there?
Our way or the Article 50 way?
Legally there are a number of ways to leave the EU. The UK is bound to the EU in international law by way of Treaty. The most obvious route to leave the Treaty is the one prescribed in the Treaty itself – Article 50 of the Treaty on European Union. This prescribes a two year period between notification and leaving[1]. The advantage is certainty, but it may take time. There are however other ways to leave.
The second way to leave is by using the Vienna Convention on the Law of Treaties to withdraw immediately and without negotiation. The Vienna Convention (Article 62) allows a state to withdraw from a Treaty if there has been a ‘fundamental change of circumstances. In this case the Brexit vote and the issues that arise from it could well allow the UK to argue it can unilaterally end its participation, so avoiding the Article 50 route.
The third way to leave the EU is by Parliamentary vote. The UK, unlike some other states, is a dualist country where international treaties do not form part of the domestic law. Parliamentary sovereignty would allow MPs to repeal the 1972 Act without going through and external procedure.
The Article 50 route will be the first method to be used.
Does the UK Parliament get a vote on Article 50? (No)
Article 50 sets out that the withdrawing state “shall notify the European Council” in line with its “constitutional requirements”. In the UK the power to make (and unmake) Treaties has long been a Royal Prerogative exercised by the Prime Minister. It is true that treaties that require domestic law changes need domestic legislation and thus parliamentary approval, but activating Article 50 does not.
There is an ongoing legal challenge by the law firm Mishcon de Reya that seeks to claim that Article 50 would cut across Parliament’s right to repeal legislation (i.e the 1972 EC Act) and so could not be exercised by the Prime Minister alone – it is highly likely to fail (see Article 50 note). There will not be a parliamentary vote before Article 50 is triggered and no UK or EU Court could injunct the Prime Minister from notifying the Council.
Will Parliament get any other votes on Brexit?
While Parliament will not vote on triggering Article 50 it will have to vote on a number of other issues. Prior to Brexit, the Government may wish to place existing EU laws into UK law, or at least have the legislation passed and ready if not in force and EU citizens already within the UK will need legislation to secure their rights. Additionally Parliament may wish to institute emergency or preparatory legislation in areas such as migration in contravention of EU law prior to leaving.
The Government may ultimately also wish to repeal the 1972 European Communities Act, although in case of opposition even that may not be strictly necessary as after a legal Brexit the Treaties to which the Act gives force will not bind the UK, making the Act as relevant in the UK as say placing the US/Mexican border treaty into UK law.
What Parliament will certainly vote on will be on any new UK/EU free trade agreement, but by then voting it down will not derail Brexit, just UK/EU trade. Given how little actual legislation is required, the chances of unreconciled EUphiles rebels mounting Parliamentary rebellions in the Commons or Lords are dramatically reduced.
How long will the Article 50 exit process take?
Article 50 specifies a period of two years for negotiations. Agreement could be reached before that, it could also be extended (with the EU27’s agreement) but if there is no agreement then the UK leaves at the end of the two year period. The length of time the process will take will depend on what the two sides are willing to negotiate and agree.
If the UK is seeking a complex, all-encompassing UK/EU agreement then two years could be a short time frame. Although, to reverse Parkinson’s law, the length of time needed for trade negotiations are capable of contraction as well as expansion to fit the time available. (Interestingly, in an emergency the EU took less than two months from conception to implementation to agree a tariff waiver for Ukraine.)
If the UK decides to seek an agreement more akin to those the EU has negotiated with Canada and South Korea, then given the UK already has implemented 100 per cent of EU law, the time needed to agree should be easily able to fit the two year window.
However, there are those within the EU that state they do not wish to a negotiate trade with the UK at all until it has left the EU and certainly not before the Article 50 process has started. If such an inflexible attitude is taken the UK may conclude there is little point in waiting for the full two years under Article 50 to fail to agree comparatively minor matters such as final budgetary issues, EU staff pensions and agencies etc. At that point the UK may seek to speed up the process by legislating domestically or resorting to the Vienna Convention to speed up the process and move onto the trade negotiations, but there is no sign that will be necessary.
Is Article 50 reversible?
There is a legal view, expressed by former EU legal adviser Jean-Claude Piris, that once the UK has embarked upon Article 50 it could at any point withdraw its “intention” and stop the clock running. Whether all the EU27 would accept the legality of a UK U-turn is debatable, but even the possibility of a reversal could create a danger for the UK’s negotiations. If the EU27 believe that the UK will at some point change its mind or hold a second referendum on the outcome of the negotiations then there would be no incentive for them to conclude a mutually beneficial agreement.
Who is in charge of the process: the FCO, the Brexit Department, the Prime Minister, or the Department for International Trade?
It is the Prime Minister who initiates the Article 50 process but there will be a whole range of UK departments and parliamentary procedures involved. We will have a Brexit department and select committee, an International Trade Department and committee and the FCO. In addition all existing departments will have to develop policy and identify UK interests for the EU and non-EU trade negotiations. Many of the policies are interlocking so co-ordination will be vital. On the EU side responsibility is again split: the member states have the lead role in negotiations but the Commission and European Parliament will also get a say.
Does Scotland have to give consent to Brexit?
Although the SNP administration is seeking to make political capital out of Brexit there is little they can do beyond sounding indignant. It is true legislative consent motions are required in some circumstances, but not for Brexit for the simple reason there will be no relevant legislation on Article 50. Although s.29 of the Scotland Act binds Scotland to obey EU law, it does not guarantee EU law’s existence – Brexit will if anything give more power to Holyrood, not less.
Will the Northern Irish border be affected?
At present there are no Customs or Passport requirements on the Northern Irish border. The reason for the passport free zone is that on independence in 1921 it was agreed to create a Common Travel Area, in effect a mini Schengen, between Ireland the UK.[7]
The Norther Irish border lost its final customs function not on entry to the EEC but in 1992 with the Single European Act. Whether customs will need to be reapplied will depend on the future EU/UK agreement, but it is noted that the Swedish/Norwegian border is a customs border but in practice is well organized with a bilateral agreement allowing both states to do reciprocal customs eliminating the need for two sets of officials.
How many sets of negotiations will there be?
There are a number of separate negotiations which the UK will have to undertake during the process of leaving the EU. Here are the main ones:
The formal exit from the EU. This would involve minor issues such as final EU budgetary contributions and shares of EU assets, unwinding UK membership of EU agencies, pensions for UK EU civil servants. The expectation is that this negotiation would have to be done under Article 50 (if that route is taken), and if no agreement is reached within the two years then there will be no agreement. In fact if the EU is insisting on a large final budgetary contribution no agreement may not be a bad outcome, making this part of the negotiation relatively simple.
A new UK/EU agreement. This is the most important negotiation and complicated negotiation as it will govern the UK’s trade and with the EU going forward. This could be agreed as one package or as a series of individual chapters over a period of time. The nature of this agreement will be the main topic of discussion during the Brexit process.
It is probable the formal exit and trade agreements will be negotiated together.
The wording of Article 50 is ambiguous, it states that in the exit negotiations should take into account the “future relationship” between the EU and the departing state. It is also the case that the EU is bound by other articles to conclude agreements with its neighbours. That should be interpreted as allowing trade negotiations if the partners wished to and as we know the ECJ is a political court. However some within the EU machine are keen to argue that Article 50 can only settle the legalities of EU exit and that only once the UK has left can a trade negotiation be started. This seems unlikely to happen for strong political and economic reasons.
The UK would have little interest to agree an exit deal that does not include at least a basic trade agreement and agreements on pressing issues such as aviation and data protection. If the EU does not wish to engage in trade negotiations then there would be a gap which would cause economic dislocation for both sides. It seems highly probable both sides would wish to avoid this circumstance and that negotiations will lead to an agreement in place ready to go once the UK has left.
Additional UK/EU agreements on other areas?It is quite possible that the main UK/EU trade agreement on issues such as tariffs and mutual recognition of regulations will not cover other sensitive areas such as Crime and Policing cooperation and potentially Defence and other Foreign policy cooperation. These could well be agreed in a series of separate bilateral agreements negotiated concurrently with the main agreement but may need to be done under Article 50 in as far as they relate to existing EU agencies.
Full membership of the WTO. In order to strike WTO-compliant trade agreements the UK will have to become a fully functioning member. The UK is a member of the WTO, but as a member of the EU it does not have its own ‘certified’ schedule of tariffs registered at the organisation. Other WTO states would have to agree to certification, but there is nothing to prevent the UK trading on an uncertified schedule.
This would be helped if the UK seeks to continue with the existing EU schedule of tariffs. The UK could always decide to reduce them later; increasing them is more problematic.
While setting a Schedule may not be difficult, agreeing a an anti-dumping mechanism may incite opposition and the UK and EU will have to agree to carve up existing WTO approved import and export quotas.
A further EEA renegotiation? It would seem unlikely that the UK would wish to remain in the EEA. As David Cameron explained in the referendum campaign, it has many of the disadvantages of the EU without any influence. It also appears that the Prime Minister has ruled out this option, intimating a “unique” bespoke deal. However, were the UK minded to join the EEA it seems unlikely we would accept it as it is, designed as an EU anteroom for Norway and Switzerland. If we did seek to adapt aspects of this agreement, it would involve negotiations with the EU and the other EEA states.
New non-EU free trade agreements. The EU has a number of its own non-EU free trade agreements and some that are in process or concluded awaiting ratification (i.e Canada). The UK will want to strike its own deals with these states, to avoid gaps, and conclude new agreements with others (Australia seems to be the first out of the traps). While a member of the EU, the UK cannot sign or implement new agreements but there is nothing to prevent all the preliminary work being done. This would also help ensure actors within the EU conclude that Brexit is inevitable.
One politically sensitive trade agreement that would need to be done would be to replicate the EU’s agreements for preferential access for developing states. While the UK could (and probably should) reduce its external tariff on sugar, if this is done within the context of the WTO’s MFN schedule it would preclude the UK giving a separate deal to the Caribbean. It would have to give the same terms to say Brazil.
Some action points:
Capacity: The Department of International trade will need a new UK investigating authority to establish trade remedies, it will also need amongst others experts in WTO dispute settlement, negotiators and analysts, statisticians, and intellectual property specialists etc.
Identify UK interests. The UK will need to identify what tariffs various industries require on imported goods. From the UK can identify its own offensive and defensive interests, taking into account potential changes in supply chains.
Non EU FTAs. Identify whether non-EU states are willing to carry over the EU 3rd party trade agreements. If they are an adaption by the EU may be required to be agreed under Article 50.
Create schedules for the WTO. These will be needed for tariffs and the Generalised Agreement on the Trade in Services (GATS).
Become a signatory on current EU trade agreements. The UK should try and ensure the UK is a signatory on the WTO Trade In Services Agreement, (TISA) soon to be agreed. If the EU is the only signatory it would make it more difficult to join on Brexit. The same will go for other EU agreements currently under negotiation.
Ensure as much as possible of the negotiations are done between the UK and the member states on the European Council. The Treaties specify that the Council sets the parameters of the agreement and at that point the Commission and eventually the Parliament have a say. As Mr Juncker, Barnier, Schultz and now the arch federalist Liberal Mr Verhofstadt – the Parliament’s new “negotiator” – are likely to be less helpful and more legalistic it is better to present them with a near complete
There should be no surprise that the SNP claim (falsely) that Scottish opinion on the EU is dramatically different than English opinion. They are after all Scottish nationalists and need to constantly demonstrate Scottish exceptionalism or pack up shop.
It is also unsurprising that the SNP have tried to use the referendum on the UK’s EU membership to renew their failed bid for Scottish Independence – if the UK votes to leave the EU and Scotland does not, they claim there is a case for a second Scottish independence referendum. Of course they do, that and any other excuse. More surprising is that some Unionists (in the UK and EU sense) now say they agree with the SNP and are also arguing that a vote (in England at least) for the EU exit could put our 300 old union at risk.
For the most part this is opportunism by pro-EU campaigners. Finding it hard to create an emotional appeal for the EU institutions, they have decided to reverse the SNP ‘logic’ and experiment with playing the Unionist card. A bootlegger/Baptist coalition of the SNP and EUphiles opportunists both claiming the UK is at risk!
We might leave it there were it not for the fact that one serious Conservative politician has also decided to play the Unionist card in the EU debate – the Rt. Hon Lord Hague of Richmond. Writing in the Telegraph he cites that the preservation of the UK as his primary reason for supporting the EU. Now, Lord Hague has impeccable Unionist credentials and before he joined the FCO, could not be described as a EUphile, as party leader he called for a referendum on the Amsterdam Treaty, to ‘keep the £’ and he was no guileless EU state builder when I worked with him on opposing the Lisbon Treaty – indeed he promised to ‘not let matters rest there’.
Lord Hague’s central contention is that a vote to leave the EU will put the UK at risk because it would increase the chances of a new Scottish referendum and Scots might vote to leave. This is based on a number of assumptions:
That Scots would still value joining the EU even if the rest of the UK has left the EU.
Scots themselves agree with the SNP’s case for another referendum and see themselves as more EUphile than the rest of the UK.
that the SNP will not call for referendum if the UK votes to stay in the EU.
Scots will not themselves vote for Brexit.
All these assumptions are faulty.
Firstly, if the UK voted to leave the EU and Scots did not, which in a tight vote is a possible outcome, Scotland would find itself in a new situation. Whereas for now the SNP may see the EU as a convenient enabler of independence for small states (experience in Greece and Ireland notwithstanding) things would change if the UK left the EU.
No longer would the EU govern the free flow of goods and services over the Scots/English border. If the UK was out of the EU the SNP would be asking the Scots people to choose to join an EU that accounts for 16% of its exports and leave the UK that accounts for 65%. For Scotland, as much as for England the UK is the Single Market that matters most.
The SNP’s problems do not stop there, an application to join the EU would require the negotiation of Schengen and Euro opt outs in order to retain passport free travel with the rUK and allow them to create their own currency. There is also the issue of losing the UK budget rebate – we know achieving meaningful concessions in the EU is not easy.
Even if you believe Scots are pro EU, it would take a tough sell by the SNP to claim after the UK left the EU that EU membership still held such value and was so preferable to UK membership that it was a reason to leave the UK. At that point the political geography will have changed.
Secondly, Scots themselves do not see the argument for a second referendum if the UK votes to leave the EU. A study by Edinburgh University Academy of Government shows that by 55% to 45%, Scots believe the EU referendum should be decided on a UK-wide basis.
Nor is it clear that Scots are particular outliers on EU membership (or any other issue). YouGov collating data over a number of polls come up with a 60/40 Scottish split in favour of the EU, with Wales 53/47 and London 55/45 – by contrast East Anglia is 53/47 in favour of leaving. So marginally more pro EU but given the large number of excluded ‘don’t knows’ it is hard to make an argument for Scots exceptionalism – and amusingly the analysis shows 38% of SNP voters themselves support Brexit, which given the SNP’s roots in the fishing community is perhaps not surprising. So much for EUphile Scots nationalism. Indeed it might be worth the SNP pondering that while 44.7% of Scots voted for independence at least 40% of Scots back Brexit, presumably a large number are the same people?
Lastly, making a tactical argument that the best way to avoid breaking up the UK is to avoid a repeat Scottish referendum is both undemocratic and spectacularly misses the main point.
The truth is the best way to avoid Scottish independence is to prove the value of the UK to Scotland. It is to create a renewed pride in the UK, to demonstrate the benefits of our 300 year old Union, the amazing achievements we have done together in the past and more importantly what we can do together in the future.
The UK is a uniquely successful political arrangement, perhaps the most successful the world has seen. Rather than seek to avoid a Scottish referendum we should, Brexit or not, build on the UK’s achievements, renew its sense of purpose and Scotland’s invaluable part in it. Self-confidence is contagious, if we renew the strength of our conviction in the benefits of the UK, British civilization and its future Scottish nationalism will evaporate like the morning mist.
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Estimating the % of UK law that comes from the EU is an old game that is bound to come up as the UK edges closer to its referendum.
In essence those advocating EU membership such as Nick Clegg and Hugo Dixon use an absurdly low 7% figure in an attempt to down play the impact of EU legislation on the UK, – while simultaneously saying it is so important the UK must stay in to have “influence”. On the other side the “Leave” campaign will seek to highlight the full extent of EU law’s impact and come up with a much higher figure – such as 64.7% quoted by Business for Britain. So who is right?
Starting with the lowest figure it is possible to come up with.
Low Figure: 7% If you only count the % of UK primary law (Acts of Parliament) that come direct from Brussels you can get a low figure, as Nick Clegg quoted in the Nigel v Nick debate. This of course leaves out all EU regulations and Statutory Instruments, i.e all the red tape businesses complain about, so is unlikely to give a fair picture of EU influence. As the House of Commons Research the 7% figure is based on notes:
“To exclude EU regulations from the calculation is likely to be an under-estimation of the proportion of EU-based national laws”
Medium range: 50% – 64.7% A more realistic figure was ironically used by Nick Clegg in 2003 when he believed that 50%+ of UK law emanated from Brussels (he was trying to prove a different point at the time). A similar estimate to the 2003 Nick Clegg is that of Business for Britain which in a study counted all EU regulations and UK statutes that are EU influenced – 64.7% of UK law. Fullfact has also come up with a similar 2/3 of law.
High figure: 70 – 80% If you wanted to justify a higher figure than that ironically the highest credible estimate comes from the then European Commissioner Viviane Reding who has argued the % was between 70% and 80%, although she latter half qualified the statement. Hans-Gert Pöttering a former President of the European Parliament has also claimed the % was 75%.
Of course the % of UK law coming from the EU is not a good measure of the degree of UK involvement in the EU, some laws are vastly more important than others, may relate to relatively minor aspects of trade standards, the CAP etc while others (say on criminal justice, VAT etc) have huge implications for sovereignty. However it does give a useful pointer to the constraints placed on our own Parliament.
Given that in exactitude there are a number of other different ways of counting EU laws – you can, perhaps more accurately also count the ‘burden’ of EU law to UK business as a proportion of all ‘burdens’ and get a high figure. The British Chambers of Commerce used to publish a “Burden’s Barometer” that identified the source of costly UK laws. This can be done using the designation on the Impact Assessments which helpfully state whether they are EU or UK. Alternatively Open Europe in a piece of research found that the 100 most costly EU regulations cost £27.4bn a year.
Whichever way you look at it the impact of EU law on the UK is large and despite efforts to rein it in still growing. This debate curiously mirrors the debate in Norway where Inners want to use a high figure (75%) and Outers a low figure (9%), read my post here for more.
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With the election campaign underway and the opinion polls too close to call the fate of the Conservatives’ EU referendum will depend on parliamentary arithmetic. We have a look at how things stand.
When Parliament returns after the election we will have a new crop of MPs and potentially a new government of an as yet unknown complexion. The chances of the UK holding an in/out referendum will as always depend entirely on the Parliamentary arithmetic and the commitments made by the party leaders both before the election and in any subsequent coalition negotiations. Lyndon B Johnson’s first rule of politics: Its “practitioners need to be able to count.”
Given that, the announcements today by Ed Miliband, Nick Clegg and Nigel Farage and yesterday’s by the SNP’s deputy leader Stewart Hosie are all potentially significant. Here is a recap on where the parties all now stand on the referendum.
The Conservatives
The Conservatives’ policy on an EU in/out referendum is clear – they want one. This left some initial doubt as to whether David Cameron would negotiate away the referendum in any continuity Coalition negotiations with the Liberal Democrats. It is now inconceivable that David Cameron could or would stop his own MPs voting for an EU referendum in a new Parliament. What is less clear is whether he could or would be able to force the Liberal Democrats to also sign up to the referendum if their support is needed for a Coalition.
The Liberal Democrats
The Lib Dem leader Nick Clegg told BBC Radio 4 Today’s programme this morning that, “Of course there should be a [in/out] referendum …when we need to make a decision on transfer of new powers… If you want a referendum in all circumstances, then clearly don’t vote Liberal Democrat.” This statement needs a little interpretation. Firstly the Liberal Democrats voted for the “Referendum Lock” which would provide for a referendum if (in the unlikely event) the government proposed transferring more powers to the EU – but only on the new powers, not an in/out referendum. The statement that they would make this an in/out referendum is therefore an addition to what is already legislated for. For the historians among you , the party was against a referendum on the 2009 Lisbon Treaty and at that time also voted against an in/out referendum in the House of Lords.
Given that background it is an open question as to what the party would do if the Conservatives made re-newing of the Coalition conditional on Lib Dem support for an in/out referendum. What, however, is clear is that a minority Conservative Government is unlikely to have the Lib Dem MPs on side.
Labour
The Labour Party’s position on a referendum is more straight forward. Ed Miliband restated his opposition this morning, writing that, “This is a recipe for two years of uncertainty and chaos, when inward investors will hold off, businesses will be held back from planning for the future.” That is a clear ‘No’. Like the Liberal Democrats the Labour party have supported the “Referendum Lock” on further transfers of power and have also said that this should also trigger an in/out referendum, but with honourable frankness added it was “unlikely” they would agree to a transfer of power.
Minor Parties
The SNP Deputy Leader Stewart Hosie set out on Sunday that his party “will oppose an in/out referendum on Europe. And if there is one – we will campaign to stay in. And as Nicola [Sturgeon] has said, we will insist on a ‘Double Lock’ – so that Scotland cannot be dragged out of the EU against her will.” That looks like a firm no, although they have bigger fish they would ideally like to fry – as we pointed out here.
UKIP may also have a number of MPs and are keen to be seen to be even more in favour of a referendum than the Conservatives. UKIP leader Nigel Farage told Good Morning Britain today that: “I don’t want this to be kicked into the long grass until, say, the end of 2017… I think it should be before the end of this year. We’ve got loads of time, I mean, goodness me, we’re still in March. There’s plenty of time to do this.” Given that even with the best will in the world the legislation may take some time to pass through the Lords it is fair to say that is mostly rhetoric.
The other significant player in the Commons after the election will be Northern Ireland’s DUP. They have in the past been in favour of a referendum and had eight MPs this term.
So will there be a referendum – it’s all about the numbers
If there is a Conservative majority there will be an in/out referendum. If the Conservatives are just short, UKIP, the DUP, and a few Labour and Lib Dem rebels will ensure that the EU referendum legislation gets through the Commons.
If however the Conservatives fall a long way short and seek to rely on Lib Dem help, it is not clear whether they would get support for a referendum in return. If the agreement the Conservatives make with the Lib Dems is not an official Coalition agreement the Lib Dems will not feel compelled to support a Conservative policy, if it is an official Coalition policy they will have to vote for it. For all three parties there is the added uncertainty of how a potential defeat could alter current policy. Would a new Labour leader still oppose a referendum if it was believed to have been a contributory factor in their electoral defeat? Could the Lib Dems change direction under a new leader? And lastly, would a new Conservative opposition leader campaign for ‘Out’. We can not tell for certain.
What we can tell though is that if there is a Labour minority Government supported by the SNP or a labour majority government there is very little chance of a referendum. As Lyndon B Johnson said you will have to learn how to count.
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One of the more depressing statistics to come out of the Scottish independence referendum campaign was that 42 per cent of Scots said they would change their allegiance from the UK to independence for £1,000 a year. What price would you put on your national identity? Or alternatively, what price would you, or your fellow voters, pay to be in or out of the European Union?
Firstly, what would the economic cost or benefit of leaving the EU be? Determining a precise cost will never be an exact science, but using a powerful trade modelling tool, one used in fact by the European Commission – The Global Trade Analysis Project (GTAP) – Open Europe has run the numbers for a number of different scenarios.
A worst case, where the UK leaves the EU and does not agree a continuity deal;
Two scenarios where the UK agrees a continuity deal but in one uses its new freedom to deregulate and reduce trade protectionism and one where it does not;
A ‘best’ case scenario where the UK strikes a good deal with the EU, deregulates, reduces protectionism opening up to cheaper imports from around the world, unilateral free trade.
Here are the results:
So what do the results mean? Well the Guardian and FT and even the Telegraph focused exclusively on the worst case scenario – it made a better headline. There were however four Brexit scenarios, two of which could be positive for the UK, surprisingly these gained less coverage. Here is how the model came to its results:
It is undeniable that leaving the EU would have a cost, but it also has potential benefits. The initial cost is highest in the ‘worst case’ scenario – (-2.76 per cent of GDP) – mostly because it is assumed that our current trading arrangement with the EU would not be replaced by any continuity trade deal.
Next, the EU budget saving on Brexit may not be the same in all scenarios; it could be less in the case of the two EU Free Trade Agreement, since it is assumed there could be a cost to EU market access in the way Switzerland and Norway are asked to contribute.
As well as the initial cost, the GTAP model also captures the potential upside to the UK having the freedom to reduce its import tariffs; cheaper food, textiles and components for UK companies would all make us more competitive. This upside to this comes in at 0.75 per cent of UK GDP (potentially higher if the UK secures preferential access to markets such as the US). In addition to the benefit of trade liberalisation the UK could also use its freedom to deregulate, removing costly EU regulation. In a maximalist position this could give a 1.3 per cent GDP boost, but the reality would undoubtedly be lower.
What is clear is that contrary to the doomsayers dire predictions, leaving the EU will not bring down a rain of frogs, but it will present tough choices. Freeing up trade would benefit the economy as a whole but could negatively affect protected sectors – agriculture and textiles for instance. Other sectors such as wholesale finance might lose out if a new deal does not include full access for banks to trade across borders. We looked at a number of major UK sectors in the report and found that each sector could react differently.
There is no definitive answer but assuming a mid-case scenario, where there is no dramatic shift to economic liberalism/deregulation, it is clear that it is possible to come close to a breakeven point. Is the answer zero?
Having come up with 42 as the answer “to life the universe and everything” Douglas Adams’ Deep Thought computer then had to reconsider the question? We should do likewise.
If your motive for leaving the EU is to push through large scale deregulation and trade liberalisation, it is probable the UK economy could do better than the current EU status quo. But that begs the question: will advocates of exit be able to win a domestic argument for deregulation and trade liberalisation having failed to do so within the EU. A Conservative Prime Minister Sir Robert Peel’s repeal of the corn laws in 1846 split the party in the process. Repealing the EU’s version of the corn laws would be less traumatic, but still a brave (if correct) choice.
The challenge to those who wish to make an economic argument for Brexit is not that it does not exist, but that it involves some difficult decisions. Deregulation and a reduction in trade protectionisms are not universally popular, or even universally popular among advocates of Brexit. Given that, will liberal advocates of Brexit dare to make the case?
If, however, your motivations are not economic but the desire to return decision making to the UK then the costs or benefits should not be an issue, it should be a matter of principle, but this group is not large enough to swing a referendum. So what price freedom?. In Scotland, it was £1,000.
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The following article was published on Conservative Home here
Predicting the outcome of the next election is a mug’s game. But I will go as far as saying there is a chance it could be close and if the electorate decides to hang parliament then the SNP could be in a powerful position – the kingmaker.
Having the SNP holding the balance of power would be a recipe for instability, not least because creating instability at a UK level would serve the SNP’s core purpose. Chaos and argument could range across the whole gamut of Government, including defence, finance, constitutional issues – and the question of whether to hold an EU referendum.
The SNP’s position on an EU referendum is opaque: they voted for a referendum on the Lisbon treaty and obviously have no objections to referendums in principle, but conversely were not going to offer the Scottish people the choice of whether an independent Scotland should apply to join the EU.
If the Conservatives were to attempt to govern as a minority it should be assumed they would attempt to push on with an EU referendum. For that, SNP votes in Westminster could be crucial – but would they back it? So far, in order to square their advocacy for a Scottish referendum with opposition to an EU referendum, we have heard that the SNP would wish to argue that the referendum could only pass if all four parts of the UK voted to leave – a Scottish veto. I doubt this is the last word on the subject – after all, the SNP is far more interested in independence than the EU.
Scotland is not much less Eurosceptic than the rest of the UK. It is also true that having decided to remain in the UK, the question of EU membership is obviously something that the UK takes as a collective whole. The SNP disagree but what they would ideally like is another crack at an independence referendum, and a vote to leave the EU might be just the excuse they need. If the UK votes to leave, and Scotland votes to stay in the EU then instead of attempting to veto Brexit for the whole UK the SNP could settle for another referendum.
And this leads to an intriguing proposition: the SNP could back the Conservatives’ EU referendum on the basis they get another independence referendum should the UK vote to leave and Scotland votes to stay. But is it wise for a unionist Conservative party to offer the SNP a second independence referendum under these circumstances?
Playing out the scenario, the UK votes to leave the EU in 2017, but within the overall vote Scotland votes to stay. Scotland then gets the chance to vote either stay in the newly non-EU UK or leave the UK in order to apply to join the EU on its own. The SNP would be left arguing that EU membership was so important it was worth leaving the UK to go it alone.
This plan would face all manner of complications, which undoubtedly the unionist cause could explain. If the UK was not in the EU and Scotland was, there would potentially be customs and tariffs at the border. Scotland as a new state would have to join the EU from scratch and potentially be forced to join the Euro and Schengen, reinforcing the new customs wall with passport controls.
Added to that the currency question would re-emerge – would the EU allow Scotland to share a currency with a non-EU state, even if England willed it? Answer: No.
So Scotland would be left with many reasons to vote to remain as the only way to keep its relations with the UK. This would expose the fact that the SNP’s support for the EU was always based on the hope that both Scotland and the rUK would be members, making independence viable – if rUK upset that by leaving the EU then the calculation would have to change.
So it is quite probable that the SNP could back the Conservatives’ EU referendum, and then two referendums later remain within the UK but outside of the EU. Is it worth the risk? Perhaps.
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Is an EU Referendum in 2016 really such a good idea?
Instilling fear, uncertainty and doubt is one of the most powerful marketing ploys used to persuade customers to stick with the known product. Some business leaders exhibit all these reactions when confronted with the probability of an EU referendum. The fear is largely driven by uncertainty. Some business leaders seek comfort by attempting to share their fears, for others the solution is to play the ostrich and seek to avoid the referendum altogether.
The Director General of the British Chambers of Commerce John Longworth has another strategy telling The Financial Times that companies would actually welcome a referendum – but an early one – in 2016 rather than 2017. Less time, less uncertainty, but it is a mistaken strategy and one that would frustrate his members’ main aim. A survey of the membership of the BCC shows 64% say they wish to remain in the EU but with specific powers returned to the UK. For that the Government needs time.
Far from reducing uncertainty a 2016 referendum could create all manner of new uncertainties. In 2016 we may not know the full potential of EU reform nor know in which direction the crisis hit Eurozone will lurch. We also can also not tell for certain what terms the UK would part on. A vote in 2016 could be a choice between two uncertain outcomes. Under those circumstances if the result was close it would not solve the question.
A more definite prospect would be to give time for both EU reform and the Eurozone crisis to run their course, creating a stable choice. For that 2017 itself leaves little time but is a more certain bet than 2016.
Businesses are not afraid of risk, they cannot operate without risk, it is an everyday occurrence, that can be planned for, analysed and if need be insured against. Uncertainty is a different and unsettling beast – something with an unknown probability or outcome. Business and financial markets have traditionally craved certainty and quantifiable risks.
But perhaps instead of an early referendum business leaders who fear uncertainty would be better served with a Labour victory as a way to avoid giving the vote altogether? Some in Labour would hope so, but this strategy is also misplaced. Longworth it right to recognise the danger, a Labour victory would not end chances of a referendum, mealy postpone it for a few years. In the meantime the Conservative Party may elect an ‘Outist’ leader. The chance of a referendum preceded by EU reform would be lost and the chances of an exit, preceded by years of uncertainty, would increase.
Recognising that a referendum is inevitable should lead business to another conclusion – seek to ascertain what a potential UK exit from the EU would mean for their specific businesses – to misquote FDR, if the fear some business leaders have is the fear of the fear of uncertainty, why not quantify it? Some sectors of the economy would be unaffected by an EU exit, some could benefit and some could be damaged – let’s find out what the practical problems are so they can be planned for and mitigated, reducing uncertainty and the fear of uncertainty.
British business should be optimistic; EU reform can happen and would provide economic opportunities while reducing the chance of exit. But in case it should fail, business should plan now for other eventualities. Business should think now how to maximise the opportunities presented by a UK exit and plan for the threats.
We do not know which way the Eurozone will go or for certain whether EU reform will succeed, but by pushing for EU reform and planning for all eventualities British business can genuinely reduce uncertainty. In order to go about it effectively the Government will need time – 2016 is not enough.
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Conservative MPs minds are invarably turn to Regicide and Europe
9 February 2015
Spring is around the corner, an election is in the air and the minds of Tory MPs are invariably turning to one thought – Regicide.
Lord Kilmuir once believed “loyalty is the secret weapon of the Conservative party,” unfortunately it has been left rusting in a warehouse alongside other army surplus equipment unloved and unrewarded in modern politics, by contrast the Conservatives’ other secret weapon – the ability to ruthlessly dispatch a defeated leader – is in full battle order.
That is not to say Tory MPs are not capable of concurrent activity, while earnestly and sincerely wishing David Cameron wins the election they can also think about what will happen if he does not. And when they do, and thoughts drift to other potential leaders, a pavlovian reaction occurs, they start saying out loud “what does Bloggins think about Europe.”
Well Bloggins is also interested in Europe, and is also keen to let MPs know what he/she thinks before time. A significant minority of Conservative MPs will be looking to back an MP who explicitly says they will campaign to leave the EU and under the Conservative leadership rules MPs will select the two candidates that go forward to a poll of Conservative members – the majority of whom support leaving the EU. Europe could once again decide who leads the Conservative party.
1. Boris Johnson
2. Theresa May
3. Sajid Javid 4. Liam Fox
5. George Osborne 6. Owen Paterson 7. David Davis 8. Michael Gove 9. Philip Hammond 10. Chris Grayling
“Outists” or “potential outists”
Out of these potential leaders of the Conservative party six have either supported Brexit, or have come close, (Liam Fox, Owen Paterson, David Davis, Michael Gove, Philip Hammond and Chris Grayling). One, Cabinet Member Sajid Javid, recently stirred speculation that he was entering the race by stating exit “is not something anyone should be frightened of” and another front runner Boris Johnson has also joined the club by letting it be known he thinks Brexit “wouldn’t be disastrous.”
That leaves Theresa May as one of the most senior potential ‘Big Beast’ candidates in the ring not to make a major intervention on Europe. Although May has pledged to renegotiate the European Court’s power over Crime and Policing, she has showed little enthusiasm for making it happen, indeed she went along with taking the UK into a new EU crime and policing system. That leaves May as the potential candidate for the Conservative pro-EU group and the most likely Pro-EU potential finalist in any leadership race. However, it seems unlikely the Conservative membership will vote for a leader seen as having handed away powers to the EU if they were given another, more Eurosceptical, choice.
That leads to another potential finalist, George Osborne. The Chancellor has made his own European interventions once telling Die Welt “I very much hope that Britain remains a member of the EU. But in order that we can remain in the European Union, the EU must change” and then setting out his case for EU reform in a speech to Open Europe’s EU reform conference in January 2014. But as radical as these sounded at the time they now places him on the moderate wing of the Conservative party.
If Osborne were to become a finalist alongside May we could see a “Better Off In” duo being presented to Conservative party members. All other potential combinations would lead to Conservative party members being given at least one “Outist” choice and therefore a significant chance of the Conservative party as the official opposition arguing for an EU exit.
Norway is not in the EU but is within the European Economic Area (EEA). The EEA, is an agreement between the EFTA states (minus Switzerland) and the EU, giving Norway access to the Single Market. The EEA however differs from most free trade agreements in that it is a ‘living agreement’ into which new EU laws can be inserted as they are made. Norway therefore adopts EU law in many areas (including in areas the UK is not involved in, such as Schengen). However, Norway does not have to adopt EU laws relating to the CAP, CFP and external trade agreements, making the EEA in the eyes of many Norwegians preferable to joining the EU.
In Norway, which has voted not to join the EU, there remains a smouldering IN/Out debate. When it comes to estimating the influence of EU law the ‘lets remain OUT’ campaigners argue that the EEA forces them to enact only 9% of EU legislative acts – thus leaving Norway largely free to pursue its own policies. The Norwegian ‘IN’ campaigners by contrast argue the figure is closer to 75%, making their point that as Norway already has to adopt most of the law they may as well join to gain more influence on how they are made. Naturally, those in the UK who advocate leaving the EU and joining an EEA-type agreement are keen to highlight the 9% figure to argue the UK ‘could be like Norway’, – escaping a large proportion of the laws while retaining access to the Single Market.
How is it possible to argue it is both 9% and 75%?
Firstly, the 9% figure: This comes from the Norwegian No campaign and is based on a study by Morten Harper that, based on a Eur-Lex search, compared all EU Directives, Regulations and legislative acts (a depressing 52,183 from 2000-2013) with the number enacted in the EEA agreement – 4,724. Making the proportion of EU legislative enacted in Norway 9.05%.
The 75% figure comes from a study commissioned by the Norwegian Government into the impact of the EEA “Outside and Inside”. This study, rather than counting the number of EU laws, tried to estimate the effect of the laws in Norway. It concluded “approximately three quarters of substantive EU law and policy” in the EEA comes from the EU. [This study is of EU laws enacted, not the proportion of Norwegian laws that come from the EU]
There is no full-proof way of estimating the proportion of EU law enacted. Counting one for one is one method, but that leads to the problem that one ‘Working Time Directive’ is valued at the same impact as one regulation on, say, blue cheese. Another is subjective, assigning importance to different laws as with the case in the Norwegian Government’s study. And then there are various ways in between.
There are also a range of caveats here. First, many EU measures are temporary and therefore don’t make it into EEA legislation. This is however likely to be an underestimate as pointed out on the EUreferendum blog counting those in force, rather than enacted gets you to 17%. The external trade policy also give rise to a disproportional number of rules as every tariff line is an effective EU measure.
There are a number of interesting things about this debate in Norway – one being that it mirrors the debate in the UK, but with the roles reversed: the “Remain Out” camp wants to talk down the share of national laws coming from the EU, whereas the “In” side wants to talk it up. Nick Clegg, earlier this year claimed that only 7% of all law in the UK came from the EU, by selecting only UK Acts of Parliament rather than the much higher proportion of all UK legislation (though Clegg once claimed it was 50% to argue a different point). The truth is that if the UK joined the EEA, it would have to enact less EU regulation than at present, how much less is definitely open for discussion.
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What effect do the different potential UK election outcomes have on the chances of an EU referendum.
The May UK election will be one of the most uncertain in modern history. All options are on the table from majority Labour or Conservative governments to any combination of smaller parties in between. Here are some of the more or less likely outcomes and a suggestion as to whether they would pass an EU referendum ranging from 96% to 10%!
Probability of referendum
Conservative majority
95%
Parliament act used in Lords if Salisbury convention ignored. 1-2 Conservative MPs would vote against.
Conservative / Lib Dem Coalition
90%
It would be a deal breaker for Conservative support, if it failed it may lead to fresh elections.
Minority Conservative Government
60%-80%
Depending on the arithmetic, the DUP would support, some Labour MPs would support, SNP could however demand a Scottish threshold in return for support
Labour minority
15%
A referendum would only happen if a Conservative back bench Bill made it through with the help of Labour and Lib Dem rebels
Labour Lib Dem Coalition
10%
Both parties would seek to avoid a referendum unless other states demand treaty change.
Labour Majority
10%
Labour would seek to avoid a referendum and the Lib Dems would not back a Conservative private members Bill
Conservative / DUP / UKIP Coalition
96%
DUP and UKIP would back a referendum
Labour / SNP / Lib Dem Coalition
10% probability of a pseudo referendum
A referendum with a separate qualification for Scotland could be a remote possibility.
When the UK signed the Lisbon treaty it signed up to the juristiction of the European Court of Justice over EU Crime and Policing, subject to a block opt-out. The problem being once activated (as it was) the UK could then either opt back in under the Court or stay outside al together and lose potentialy useful measures.
I have long argued that the UK should have taken the oportunity to negotiate a new deal to stay in the measures without the Court – the terms hat had worked previously. But did the Home Office attempt to do this?
Well my attempts to ask the Home Office under the Freedom of Information Act to disclose whether they tried to renegociate or not have been met with an infuriating “we remain unable to confirm or deny at this time whether we hold any information relevant to your request.”
So which one is it? Did the Home Office try a renegotiation and fail or not attempt a renegotiation at all? This is of more than academic interest as, if you believe the Home Secretary, the juristiction of the Court remains a conservative aim in any eventual EU renegotiation. So did they attempt to discuss this with their EU counterparts before opting back in? I suspect I know the answer but will we find out.
UK to contribute €1.6 billion to EIB capital increase Open Europe’s Christopher Howarth is quoted in the Times, Telegraph and Mail as saying, “This feels an awful lot like spending for the sake of spending without doing anything to solve the eurozone crisis. We fear this won’t be good use of taxpayers’ cash.” MailTelegraphTimes Howarth 28 Jun 2012
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UK exports to rest of the world exceed those to EU for first time since 1970s Following the news that the UK is exporting more to the rest of the world than to the EU for the first time since the 1970s, Open Europe’s Christopher Howarth is quoted in the Express and Telegraph as saying that “It is good news that British business is taking advantage of opportunities in the fast-growing emerging countries outside the EU. However, the EU remains an important market for the UK. Therefore as well as looking to new opportunities we still need to focus on reforming the EU and reducing its costs.” ExpressTelegraph Howarth 19 Jul 2012
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What could independence mean for Scotland’s future in the EU? In an interview with Spanish daily La Razón, Open Europe’s Senior Analyst Christopher Howarth discusses the potential implications of Scotland’s independence for its future membership of the EU.
La Razón: Howarth 11 October 2012
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Tweets by Christopher Howarth
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