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04/12/2016

Leaked memo: UK government has no Brexit strategy

UK & Europe

Leaked memo: UK government has no Brexit strategy

British Prime Minister Theresa May at last night's Lord Mayor's Banquet in the City of London, where she promised Britain would be a world leader in free trade.

[10 Downing Street]

The British government has no Brexit strategy, and may not have one before triggering Article 50 in March 2017, according to a leaked memo published by The Times today (15 November).

The document also suggests that up to 30,000 extra civil servants may be needed to cope with the administrative burden of Brexit.

The memo – dated 7 November –  plays into fears that behind the official mantra of ‘Brexit means Brexit’ and a refusal to disclose the government’s so-called “negotiating hand”, little concrete strategy exists between the three key Brexit ministers.

David Cameron’s government famously ordered that no contingency Brexit planning be done by Whitehall ahead of the 23 June referendum, for fears of leaks, and giving the Leave campaign gravity.

Instead, the government lost the referendum 52-48%, and Cameron resigned the next morning.

Today Downing Street rushed to disown the memo, whilst not denying its existence – saying it was provided by external consultants.

The document is from last week and titled “Brexit update”. It says “no common strategy has emerged” for leaving the European Union, despite lengthy debate among senior officials.

French presidential election?

It could take another six months for the British government to agree on its priorities for Brexit, the memo, also seen by the BBC, suggests. That would take until April 2017, past the March cutoff date promised by Theresa May to EU leaders to trigger Article 50, and into the French presidential election campaign.

Although each government department has developed plans to cope with the departure, “this falls considerably short of having a ‘government plan for Brexit’ because it has no prioritisation and no link to the overall negotiation strategy,” the memo reportedly states.

It criticises May’s approach, accusing her of “drawing in decisions and details to settle matters herself”.

The three lead Brexit ministers are Foreign Secretary Boris Johnson – who along with Nigel Farage was the ‘face’ of the Leave campaign – Minister for Brexit David Davis, and Minister for International Trade Liam Fox.

May herself was in India last week for pre-Brexit trade talks, which were largely viewed as unsuccessful.

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Today Downing Street said it did not commission the report – which others have reported as being written by external consultants Deloitte.

“This is not a government report and we don’t recognise the claims made in it,” a spokesman for May’s office said.

“We are focused on getting on with the job of delivering Brexit and making a success of it,” he said.

Although each government department has developed plans to cope with the departure, “this falls considerably short of having a ‘Government plan for Brexit’ because it has no prioritisation and no link to the overall negotiation strategy,” the memo reportedly states.

It criticises May’s approach, accusing her of “drawing in decisions and details to settle matters herself”.

Nissan

The other major talking point of the memo is its criticism of the bespoke – and largely secret – deal the government has done with Nissan, reassuring it over future export tariffs to the EU after it mulled pulling out of the UK.

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The leaked memo also says big businesses are expected to “point a gun at the government’s head” after the government assured carmaker Nissan that it would not lose out on investment after Britain leaves the EU.

May used a key address in the City of London late Monday (14 November) to say that Britain will seize on Brexit to become a global leader on free trade and “forge new and dynamic trading agreements”.

Background

This is the text of the memo in full, as reported by The Times:

 

THE MEMO

Brexit update as of 7th November 2016

This note summarises the current state of play on Brexit issues in Whitehall in the critical inter-related domains of politics, government and industry.

THE POLITICAL DOMAIN

The Prime Minister's over-riding objective has been to keep her party from repeating its history of splitting 4 times in the past 200 years over global trade - each time being out of power for 15-30 years. The public stance of Government is orientated primarily to its own supporters, with industry in particular barely being on the radarscreen - yet.

The Government's appeal to the Supreme Court has to be seen in this light - it is about avoiding any more public debate than necessary because it will expose splits within the predominantly "remain" Conservative MPs and intensify the pressure from predominantly "leave" constituency parties. A General Election is only a last resort for 3 reasons - boundary changes (that favour the Conservatives) will not be effective until 2019; the Fixed Term Parliaments Act obstructs Prime Ministerial freedom to call an election at will; and it may suit major decision makers to slowly shift away from more difficult aspects of Brexit on the grounds that Parliament has forced them to do so.

The divisions within the Cabinet are between the 3 Brexiteers on one side and Philip Hammond/Greg Clark on the other side. The Prime Minister is rapidly acquiring the reputation of drawing in decisions and details to settle matters herself - which is unlikely to be sustainable. Overall, it appears best to judge who is winning the debate by assuming that the noisiest individuals have lost the intra-Government debate and are stirring up external supporters.

The Supreme Court appears likely to delay its ruling until early January and, assuming it sustains the High Court, a short enabling bill will then be submitted to Parliament, permitting the Government to invoke Article 50 in March as planned. The Government will probably be able to face down wrecking amendments, but the debate in Parliament will certainly shift expectations of what will be achieved/sellable in Brexit negotiations. Remain supporters can be expected to reserve their fire until winners and losers emerge from negotiation and the political atmosphere allows more sophisticated assessment of choices.

THE GOVERNMENT DOMAIN

Individual Departments have been busily developing their projects to implement Brexit, resulting in well over 500 projects, which are beyond the capacity and capability of Government to execute quickly. One Department estimates that it needs a 40% increase in staff to cope with its Brexit projects. In other words, every Department has developed a "bottom up" plan of what the impact of Brexit could be - and its plan to cope with the "worst case". Although necessary, this falls considerably short of having a "Government plan for Brexit" because it has no prioritisation and no link to the overall negotiation strategy.

However, it may be 6 months before there is a view on priorities/negotiation strategy as the political situation in the UK and the EU evolves. Despite extended debate among Permanent Secretaries, no common strategy has emerged, in part because the potential scope and negotiating positions have to be curtailed before realistic planning can happen, in part because of the divisions within the Cabinet. It is likely that the senior ranks in the Civil Service will feel compelled to present potential high level plan(s) to avoid further drift.

Departments are struggling to come up to speed on the potential Brexit effects on industry. This is due to starting from a relatively low base of insight and also due to fragmentation - Treasury "owning" financial services, DH-BEIS both covering life sciences, DCMS for telecoms, BEIS most other industries, DIT building parallel capability focussed on trade etc.

Capability-building is making slow progress, partly through deliberate control by the Cabinet Office and partly from Treasury's opening negotiating position that Departments will meet Brexit costs from existing settlements - although no one is treating that position as sustainable. Expectations of increased headcount are in the 10-30,000 range. Initiatives to build capability are getting off the ground - the Diplomatic Academy is providing trade training programmes, Cabinet Office is discussing system-wide capability programmes.

The Autumn Statement on 23rd November is expected to provide some headlines in terms of infrastructure investment, making the UK fit for growth and the inclusive economy. It will not provide resources for the Civil Service to grow its Brexit capacity and capability. In fact, we are more likely to see a further squeeze on Departmental operating costs to compensate for new spending.

THE INDUSTRY DOMAIN

Government expects lobbying on 3 levels to continue:

  1. Company-specific decisions - the Nissan investment decision is a prime example. These are viewed as major opportunities/threats for Government. Other major players can be expected to, similar to Nissan, point a gun at the Government's head.
  2. Industry insights - the major challenge for industry and Government are "the unknown unknowns" where industry has to educate Government fast on the most important negotiating issues - e.g., they think they know about talent, but know they know little about data.
  3. Overall business concerns - the province of CBI and largely dealt with as a PR issue.

Industry has 2 unpleasant realisations - first, that the Government's priority remains its political survival, not the economy - second, that there will be no clear economic-Brexit strategy any time soon because it is being developed on a case-by-case basis as specific decisions are forced on Government."

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