Former Member of the European Parliament

EUROPEAN PARLIAMENT TO CAMPUS PROGRAMME

Mariela Baeva

Former Member of the European Parliament,

Economic and Monetary Affairs Committee

Understanding Brexit

Short Story

Scene 2

Although Brexit will mark the European Union, it is not a sign of existential crisis. It is an alarm bell.

In my comments, I’ll touch briefly on Brexit effects on the EU budget; UK’s growth and people’s wellbeing: we’ll discuss excerpts from a CASE STUDY about BIRKENHEAD; and finally, I’ll refer to other interested parties in the Brexit process such as Scotland, Northern Ireland and Japan. How would the UK exiting the EU affect the EU budget? The UK’s net contribution is on average €5 billion a year. Whether it would be lost depends on the specific form of relations between UK and the EU. The immediate financial effect of Brexit looks somewhat unclear yet. An analysis suggests a €20bn (£18bn) “Brexit divorce bill”. In fact, UK’s payment liabilities should be addressed when exiting the EU. The European Commission declined to comment on the €20bn figure. The projected cost, however, is in euros –if the pound continues to fall, the bill will increase. Commitments have been made to sustain agricultural subsidies until 2020. UK economy recorded 2.2 percent growth in 2015, higher than the EU and G7 averages. However, success at a macroeconomic level has not translated into a better economic situation at a grassroots level for many communities.

Poverty remains a major problem in Britain. In 2015, the Centre for Social Justice published its report Breakthrough Britain 2015, which found that 1.6 million children grew up in households in which no one worked.

Next, as we are well aware, while London, Scotland and Northern Ireland voted overwhelmingly to remain a member of the EU (by a margin of approximately 60 to 40), the rest of England and Wales voted Leave. This divide extended beyond geographical differences and included socio-cultural specifics. Around 80 percent of Leave voters view multiculturalism, immigration, and social liberalism as “forces for ill”, while just below 80 percent of Remain votes view these three issues as “forces for good”. The evidence is clear that British society has split along socio-cultural lines.

As I could already underline, on 23 June, those who were most likely to face housing insecurity, who mostly rely on public services like the National Health System (NHS), and who are most dissatisfied with their education choices raised their voices to hit the establishment and the status quo. It was a vote against global and European institutions; against “mainstream thinking”. This was, in every respect, an event of seismic nature in British political history. In response, it looks like the current government must listen to the concerns of the people and address them with substantial policy changes. Concern about immigration is a function of both pressure (perceived and real) on public services and poor levels of integration in deprived communities. Supporting public services and rebuilding civil society in each of these communities is a must for the government.

Case Study: BIRKENHEAD (please see the excerpt of the case study)

------

Scene 3

Meanwhile, what do other interested parties in the Brexit process consider?

Scottish voters backed remaining in the EU by a margin of 62% to 38% in the referendum. Scotland’s first minister, Nicola Sturgeon, listed five key priorities for protecting Scottish interests during the coming Brexit negotiations. That happened during a speech to business leaders, public sector organisations, etc.

The prorities refer to:

. Democratic interests: Scotland's voice heard and respected.

. Economic interests like free movement of labour; access to the single market; funding for the farmers and universities.

. Social protection of workers; wider range of human rights.

. Solidarity with global goals like tackling crime and terrorism; climate change, etc.

. Having a say in shaping the rules of the single market.

The Scottish economy is showing slower growth than the UK’s as a whole. A university study warns of tens of thousands of jobs disappearing over the next decade.

The first minister has recently announced plans for a permanent trade base in Berlin. The Scottish Development International, an agency that promotes exports and investment deals overseas, will double their staffing to speed up the activities. That will be matched by a new board of trade representatives and a new network of trade envoys using prominent Scottish business people. Building stronger independent Scottish trade links with the EU is considered as vital for the economy.

By mid-October, Sturgeon stated the Scottish government would consider a second referendum on independence from the UK by 2020 or another timing. That might happen when the UK government would grant a Section 30 order to allow the vote to take place.

Note: As the legal authority to hold a referendum resides with the UK parliament, Section 30 order is a legal step to transfer temporarily this authority to the Scottish Parliament.

Furthermore, a draft bill was published on a second independence referendum. It would be based on yes/no question: “Should Scotland be an independent country?” Two groups of people would have a voice denied to them in the recent referendum on EU membership: 16-year-olds and citizens of EU countries who have settled in Scotland. The Scottish people insisted on being able to reconsider independence in light of the British vote to exit the European Union.

The Scottish Labour and Conservatives, however, have expressed objections to the draft bill referring to the Scottish economy being in trouble and the need for avoiding further uncertainty for employers.

Scotland’s deputy first minister has recently focused on EU students and their continuing of receiving free tuition at Scottish universities after Brexit. UK ministers, however, have not yet guaranteed that EU students will be granted visas to allow them to stay for the full duration of their courses, which can last up to five years. He has added that EU students should also have access to post-study work visas.

Northern Ireland voted strongly, too, to remain in the EU, putting pressure on May not to negotiate a Brexit that simply suits English interests.

It is critical to the country’s economy to retain competitiveness of both domestic and foreign direct investment companies. Trade with EU member states is equally important as is access to labour. Businesses, private and public sectors are highly dependent on EU and other migrant labour.

Since 1994, Northern Ireland has benefited from €13bn (£11bn) of EU funding and is hoping to draw on a further €3bn by 2020. Funds and absence of EU programmes in the future is a matter of real concern to a range of sectors. Northern Ireland’s agricultural sector, for ex., is dependent on common agricultural funds. It is also vulnerable both to the loss of EU funding and to potential tariff and non-tariff barriers to trade.

Referring to the border with Ireland, the region is unique because it is the only part of the UK with a land border shared with an EU member state. There has also been a huge rise in Britons applying for Irish citizenship, with the London embassy handling more cases in a month than in the whole of 2015.

The Welsh first minister, Carwyn Jones – although Wales voted for exiting the EU - has proposed any planned negotiating package be subject to a vote in all four UK parliaments and assemblies. The so-called flexible Brexit is favoured in Scotland, Wales and Northern Ireland. The joint ministerial committee (JMC) of the UK’s three smaller nations was hosted by May in October. The committee would work in a “direct line” to David Davis. It is supposed to meet at least twice before the end of the year. From a formal point of view, the UK parliament remains sovereign and could legally ignore these views.

In early September, Japan –as one of the biggest overseas investors in the UK- has issued a challenge to Theresa May to negotiate a very "soft" British exit from the EU or she may risk seeing Japanese banks and other companies leave the country.

In mid-October, the chief executive of Nissan was sufficiently alarmed at the prospect of tariffs on car exports to seek a personal meeting with May. She assured him the company would not be penalised by Brexit, not adding any detail on how that might be avoided. The agreement with the government is supposed to safeguard the future of more than 7,000 jobs. That will be perceived as a major boost to the economy following the referendum. Some examples of areas of concern for other Japanese companies include validity of the passporting rights, the free movement of skilled workers between the UK and EU and whether the continuation of the current environment of uncertainty will lead the Japanese companies to postpone further investment decisions. The European Commission, however, started to examine the terms of the UK's deal with Nissan in November. Abuse with state aid is in the core of the analysis.

In more cheering news, however, a campaign has been launched by MPs, former ministers and a senior former aide to the Queen to use the royal yacht Britannia to secure post-Brexit international trade deals. The UK's number 1 attraction had brought £ 3 billion of commercial trade deals to the UK in the 1990s. The government has ruled out plans in that respect. A debate in Parliament will examine the option, however.

20.11.-27.11.2016