Parliamentary scrutiny highlights continuing Brexit uncertainty for business and citizens in Britain and Northern Ireland

Michael Gove, MP – in his role of the Government Minister with overall responsibility for delivering a smooth Brexit on 31 December 2020 – was the sole witness to be interviewed in a two-hour meeting of Parliament’s European Union Select Committee last week.

This scrutiny session addressed the outcomes of ongoing negotiations between the UK and EU on the relationship from 1 January 2021, together with outcomes of the first formal meeting between the UK and EU focussed on the unique position of Northern Ireland.

Throughout the meeting, Gove made it clear that he was ‘not in a position’ to give definitive answers to the questions posed – peppering his responses with phrases such as “it is to be hoped…”, and “we can expect…” – a point picked up and criticised, politely but firmly, by the Committee towards the end of the meeting.

His overall message was the UK would need to concede to the EU ‘red-lines’ on a number of issues in order to secure a Brexit ‘deal’, such as: “we seek zero tariffs and zero quotas – but if we pay small number of tariffs, ‘there you go’.”

He also – as we forecast in our recent insight posting – confirmed that the price of a Brexit deal will mean that Northern Ireland becomes a separate trading area from the remainder of the United Kingdom – with different rules and reporting, and restrictions to the free movement of goods between Northern Ireland and mainland Britain.

Gove on Northern Ireland under a Brexit ‘deal’

Under the Northern Ireland Protocol, the province will effectively operate travel and trade as if were to remain in EU membership – following all the EU rules, regulations and operating procedures laid down in Brussels.

Questioned on Boris Johnson’s often repeated promise that Northern Ireland remains an integral part of the UK – with “unfettered access for goods” travelling between Great Britain and the province – Gove anticipates that ‘unfettered’ will not mean ‘free’ movement of goods.

All businesses – British and Northern Irish – trading into or out of the province will need to register on order to continue to trade. There will be reporting and physical checks – especially on animals and animal products – so called SPS checks – before or during shipment, or on arrival. Tariffs will be payable on any and all tariff-rated goods landed in Britain or Northern Ireland that originate from, or the end-destination is – or could be – Ireland.

Gove “hopes” that there will be a “light touch” in these new protocols – but that the: “proof of the pudding, is in the talking”. He was unable to say when guidelines for any new arrangements – or the new infrastructure for reporting of goods movements – will be available in order to for businesses to prepare. He committed to: “close engagement” and a public information campaign for business and citizens in Northern Ireland.

Gove was “not able to say” how Government might deal with increases to the cost of living in Northern Ireland. The NI Protocol is subject to agreement – and so the UK now finds itself: “waiting for agreement with the EU”.

Gove on EU and UK relationship under a Brexit ‘deal’

A number of Committee members addressed concerns that had been raised by EU chief negotiator, Michel Barnier’s statement at the end of the second round of EU-UK Brexit negotiations between officials. The suspicion in Brussels appears to be that the UK is ‘selectively negotiating’ – dragging its heels and refusing to engage in areas where it doesn’t want to compromise – such as access to UK fishing grounds and maintaining a ‘level playing field’ in future regulations on competition.

Gove confirmed the EU perspective and agreed that: “fisheries, the level playing field, governance, and Northern Ireland remain areas of dispute”.

Gove was closely questioned on whether the UK would apply for an extension to the Brexit ‘transition period’ – as allowed for in Article 218 of the EU Treaty – given that political leaders across Europe are fully focussed on dealing with coronavirus at the moment, and likely to be so until the end of Brexit transition at midnight on 31 December 2020.

When asked: “what if EU asks for extension due to Covid”, Gove said he: “cannot imagine anything but us saying no.” He explained the difference between a “real-time pandemic that is developing every day, compared to choosing a scenario from those already in place, for example, between the EU and the rest-of-the-World”.

He referred to the clause included in the Withdrawal Act that sets “in law” the end date of transition as 31 December 2020. Gove commented that: “deadlines concentrate minds” and that to: “perpetuate negotiations and maintain transition, means we [continue to] pay into the EU.” Furthermore: “as Europe exits the Covid, we will want UK to go its own way.”

The Committee expressed its disappointment at the Government’s intention of sticking to the date come what may – especially as Parliament granted exceptional powers to deal with Covid-19 – and felt that the Government should not dismiss ways of mitigating a “second overlay shock” for businesses and citizens.

Should the negotiations fail to reach agreement on a Brexit ‘deal’, Gove remains: “confident that business will be prepared” – as they are: “already dealing with and adjusting supply chains” due to the Covid crisis. Further, there is a: “strong incentive for EU to maintain an open flow” of goods and services. He views ‘no-deal’ as “no jeopardy” with “no let or hinderance to, for example, pharmaceuticals and essentials – and we’re building capacity now”.

The UK Government is concerned that should the UK continues in transition – and, thus, under EU jurisdiction it would be subject to the next 6-year ‘Multi-annual Financial Framework’ – the next medium-term budget-round that comes into effect on 1 January. The UK would have “no voice” and, thus: “no idea of what the bill would be – and no say over it.”

Furthermore, the UK would have no say in how EU might change its laws in order to deal with outcomes of Covid-19 – but would “be bound to follow it” – cutting down the UK’s freedom to respond in any way we might need.

Although there had been some discussion about an ‘assembly’ to oversee future relationship, the UK Government would not accept this – preferring to have a number of ‘committees’ instead.

On the issue of safeguarding the rights of UK citizens living and working and across the EU, Gove anticipates that the European Commission will: “talk to member states” and it will be raised by the UK as an open issue at next joint committee.

Addressing concerns raised by a number of business sectors about the shape of a potential Brexit ‘deal’, Gove said that the UK was: “not looking for a bespoke arrangement – rather a series of off-the-shelf arrangements – for instance, Canada-EU for trade; Norway-EU for fisheries” and so forth.

Fisheries is where, said Gove, the: EU’s ask is most ambitious”. The EU cannot continue to access as they do under the common fisheries policy – which, in any event: “hasn’t been successful” in addressing either “economic or environment” issues. The UK will now be free to: “do something that addresses both issues – as an independent coastal state”.

With or without a ‘deal, the issue of ‘internal security’: “may not have fully concluded by 31 December – it now depends on EU.” It is, said Gove within the “EU’s gift on Schengen – but only if we bow to the European Court of Justice”. He hopes that we can conclude arrangements for mutual data exchange – but that this is a decision for the EU.

The Banking and Insurance financial sector – key to the UK economy – has been asked for open access to continue to work and trade with Europe. To do so UK regulation and standards for the industry must be equal to – or higher than – EU requirements. EU law allows countries to be granted ‘equivalence’. Asked whether the EU will grant ‘equivalence to the UK by 31 December” Gove thinks that: “It should do”. He sees it as “relatively straight-forward” given that the we are starting from the same position today. If not granted, he commented that the: “EU lose access to UK capital market and its interest rates” which he considers would be an ”own goal.” He acknowledged that it would be “sub-optimal” for the UK. However, he is confident that the UK can manage future divergence in the finance sector that is: “used to adapting”. For instance, the UK did not enter the euro – which was: “thought by some to be a mistake – but proved not to be so – due to the alchemy” of the City.

Gove feels the: “chances are small” that the UK will share a common set of rules with the EU on ‘state aid’ – rather that: “we will be WTO compliant. We will not accept EU supervision of our state aid. We retain right to intervene – witness what we did regarding Covid.”

Asked about why the UK had requested that the existing EU Office in Belfast be closed, he said that as an independent state, it now fell to the UK alone to govern.

As the UK becomes a ‘third country’ on 1 January, policing and justice will increasingly be “different to the EU” and it was inappropriate to continue using the EU ‘off-the-peg’ model. Gove accepted the challenge of the Committee and acknowledged that we are in a short time scale but assured them that “we are making provisions” to protect UK and its citizens.

Gove was challenged on his repeated use of: “I would hope so…” on so many areas. He was asked that mitigation was planned if there were no agreement – and reminded that safety of citizens is crucial. “We do not want a no-deal cliff edge…it is not good enough to ‘hope’ and ‘use best endeavours’. He noted that the border-force may need to be: “stepped up”.

Further, that had already been: “some exchanges outside EU structures”, for example, on Anti-Money-Laundering where the UK relies on both EU and wider international information exchange.

Asked about progress on ‘third country trade deals’, Gove said that: “given goodwill, there is no reason not to expect a good outcome – for example, the US ‘agri-food’ industry needs to export to UK.”

Drawing the meeting to a close, Gove was questioned on who the Government was accountable to – and specifically on how Parliament was going to be able to scrutinise them in the restricted timescale of the negotiations and decision making, Mr Gove committed to providing progress updates. He acknowledged that statements are not scrutiny, and said that the process was: “inevitably imperfect!”

Key Dates:

  • 11-15 May: Third round of UK/EU negotiations on the future relationship.
  • 1-4 June: Fourth – and final – round of UK/EU negotiations on the future relationship.
  • June: UK and EU high level conference to take stock of the progress of the future relationship negotiations.
  • 1 July: Deadline for the Joint Committee to decide if the transition period should be extended.
  • 31 December 2020: Date in law for the end of the transition period.