Response to the vote on the Withdrawal Agreement and Political Declaration: Assessing the Options Contents

2No deal

8.If no withdrawal agreement is ratified under the terms of Article 50 before 29 March 2019 and there is no extension or revocation of the process, the UK will leave the EU without a deal at 11pm on that day and will be treated as a third country from that point onwards. This is the default scenario.4 The UK’s trading relationship with the remaining EU27 Member States will move from the arrangements of the Customs Union and the Single Market to that of the WTO at that moment. Other elements of the UK’s current relationship with the EU will also come to an end, including security co-operation and exchanges in research and education. Such an outcome was described by Chris Heaton-Harris MP, the Parliamentary Under Secretary of State responsible for contingency planning, as “suboptimal.”5 The extent to which, as a third country, the UK can maintain arrangements in areas of mutual interest is unknown.

The Government’s preparations for exiting without a deal

Co-ordination across Whitehall

9.The Department for Exiting the EU has overall responsibility for co-ordination of preparations for “no deal” across government.6 Other government departments have also been preparing for exit and have been subjected to the scrutiny of other Select Committees of the House.

10.A key challenge to no deal planning has been a lack of direction and transparency in Whitehall. According to the Institute for Government, the “political climate has created a culture of extraordinary secrecy, which is incompatible with a task that is so dependent on co-ordination.”7 They noted that the flow of information across departments and public bodies had been stifled by extraordinarily high levels of security clearance and limited engagement. Secrecy had made it difficult for departments to align plans and there was a lack of clarity following the March 2018 agreement in principle on transition about what that meant for contingency planning.8 Sir Amyas Morse, Comptroller and Auditor General, repeated this message, telling us that the changes in urgency for no deal planning had been disorientating for departments,9 having found that the Department for Environment, Food & Rural Affairs (Defra) had paused its no deal preparations after the March agreement.10 Sir Amyas Morse had also been aware of civil servants using NAO reports to find out what was happening with EU exit preparations across Whitehall which, he added, was not “a good state of affairs.”11 He told us that the secrecy and withholding of information had all been “taken a bit too far, frankly.”12

11.Sir Amyas Morse believed that the arguments for not revealing information which might damage the UK’s negotiating position would “decay” as the Article 50 deadline approached. He told us in October that “the sense of urgency generated by the approach of the March date [had] led to more openness, clearer messages and clearer prioritisation.”13 He used HM Revenue & Customs (HMRC) and Defra as examples of departments which had successfully reprioritised their programme of work to allow for greater focus on preparations for both a deal and no deal. Although, as we heard from the Minister, Whitehall had only belatedly been able to focus on no-deal planning as Government had spent “so much time, energy and effort on trying to get a deal, and as the sole focus of everybody in Government—not sole focus, but the priority focus—has been trying to get the deal over the line.”14

12.Notwithstanding this delay to no-deal preparations, according to the Institute for Government there has been insufficient time for more than “temporary sticking plasters, attempting to limit disruption where possible with work needing to continue long beyond Brexit.”15 Mike Thompson from the Association of the British Pharmaceutical Industry (ABPI) told us that the scale of what the UK is trying to do by the end of March 2019 means that some things will go wrong.16 Sir Amyas Morse agreed, saying:

There is so much concentrated risk. If you think about it, if you pardon me saying, you would not start from here. A lot of things are going forward with very short timescales and, generally speaking, the civil service is putting a terrific effort behind this, but because of the large number of unresolved risks that will be there in March, some are bound to come to reality. Rather than saying it will fall apart like a chocolate orange, what will happen is there will be points of failure.17

13.Jon Thompson, Chief Executive and Permanent Secretary, HMRC, argued that the risks with no deal are compounded by the unknowns. Looking particularly at the border, he told us:

We cannot give you or Ministers any assurances whatsoever of what will actually happen in the event that there is no deal, or what will happen between the point when you reach that and 31 March. We do not know. We can plan—we would need to swiftly engage, have a conversation and see whether we could practically navigate our way around these issues—but we do not know, I cannot speculate and we also cannot talk. There are multiple problems here. I cannot say it will all be fine. I absolutely cannot tell you that.18

Legislation

14.A further aspect of the Government’s preparedness for leaving the EU without a deal concerns the statute book. The Government has so far managed to pass six exit-related bills - the EU (Notification of Withdrawal) Act, the EU (Withdrawal) Act and four other Acts covering nuclear safeguards, international sanctions, road haulage and customs. The Minister confirmed to us the list of primary legislation currently before Parliament which would need to be passed by the end of March:

We have the Trade Bill, the Fisheries Bill, the Agriculture Bill, the Financial Services (Implementation of Legislation) Bill especially for no deal, the Healthcare (International Arrangements) Bill, the Immigration and Social Security Co-ordination (EU Withdrawal) Bill and the EU (Withdrawal [Agreement]) Bill itself, introduced when Parliament has approved the final deal [ … ] The inflight financial services Bill makes sure there is certainty for pieces of legislation that are currently on track.19

15.In terms of secondary legislation, the Minister suggested in October that around 100–150 Statutory Instruments (SIs) would be laid in each of December and January, and 10–50 in each of February and March.20 In his evidence to us in January, the Minister told us he anticipated 600 SIs, of which 304 had already been laid. He said he was confident that the remainder would be passed in time, having undergone the proper scrutiny, and without the need to cancel the February recess.21 By contrast, Jill Rutter, Programme Director, Institute for Government, expressed concerns about the amount of work Parliament would face if the SIs did not come through in an even flow and the demand this was placing on legislation and drafting capacity in Government. She argued that the number of SIs would have implications for the “quality of scrutiny” in Parliament.22

16.A lack of transparency and a lack of time have hampered Whitehall’s preparations for a no deal exit. The scale of the task and the short timeframe in which to put new processes and systems in place and to prepare the statute book raise significant risks—risks to the quality of scrutiny, risks to the quality of the solutions and most importantly risks that there will be points of failure for which we will not have prepared.

Government expenditure

17.In a speech in August the then Secretary of State for Exiting the EU, Rt. Hon. Dominic Raab MP, outlined the Government’s preparations for no-deal. He noted the need to establish the legislative framework for a no-deal exit and the need to recruit additional staff—there were 7000 civil servants currently working on Brexit with funding for an additional 9000 to be recruited. The Government was also working on bolstering the UK’s institutional capacity and ensuring that the UK was able to continue with international agreements.23 In the November 2017 Budget the Chancellor made £3 billion of funding available for departments and the devolved administrations over the next two years to implement plans for various exit scenarios, including no deal. There was a subsequent increase by £0.5 billion in the 2018 Budget.24

18.In December, the Cabinet approved the allocation of £2 billion of those funds on preparations for a no-deal exit.25 It was reported that £480 million been allocated to the Home Office to employ more border force officers and “boost national security”, DEFRA would receive £410 million and HMRC would receive £375 million allowing for the recruitment of 3,000 new staff to deal with increased customs activities and to invest in new IT.

19.However, the Chancellor of the Exchequer has apparently expressed concerns that only one third of the £1.5 billion previously allocated has been spent.26 This raises concerns about the capacity of the Government to effectively absorb extra spending in a matter of weeks before exit. John Manzoni, Permanent Secretary for the Cabinet Office, told the Public Administration and Constitutional Affairs Committee in December that, ultimately, he expected even more money to be required.27

Government engagement with business

20.In order to assist businesses in their contingency planning, Government departments have been publishing guidance in the form of technical notices covering a number of areas; over 100 have been published so far.28 These have been complimented by Partnership Packs detailing changes at the border.29 The Institute for Government has highlighted that the technical notices outline an ambitious agenda for the Government which, in the event of no deal, intends to negotiate agreements with the EU/EU Member States; negotiate other international agreements; pass further legislation; establish new systems and processes; and create new or expand the capacity of existing UK bodies. The recommendations for UK businesses include reregistering/re-authorising products or services in the EU; changing processes to maintain EU market access; establishing an EU presence; complying with different UK processes; and seeking professional advice.30 Much of this advice is predicated on a degree of continuing co-operation with the EU in the event of a no deal exit; we consider the validity of this assumption further at the end of this chapter.

21.Richard Burnett, Chief Executive of the Road Haulage Association, told us in October:

It was not really until the early part of this year—maybe February or March—that we had the first detailed conversations [with Government] to say, “You are not engaging enough with business to understand what the practical handshakes are that would need to be undertaken at that point in time in order to make sure that we are protecting the flow of goods.”31

22.Martin McTague, Policy and Advocacy Chair of the Federation of Small Businesses (FSB), cautioned that many FSB members have “tuned out” of the Brexit process. He warned that 86% of small businesses had made no preparations at all for a no-deal scenario32 and that virtually every small business has taken it for granted that they currently have “completely frictionless trade.”33 He added that it will come as a “pretty rude shock if they are faced with a lot of additional time constraints and bureaucracy that they were not prepared for.”34

23.Jon Thompson from HMRC admitted that his department’s biggest concern about business customers is regarding “readiness and awareness for day one of no deal.” He told us that there has been “limited engagement” with the 145,000 intra-EU traders. Additionally, he believed that there are a further 100,000 intra-EU traders who HMRC are not aware of because they have not informed HMRC that they conduct intra-EU trade.35 These include many small and medium-sized enterprises that are below the VAT threshold but are trading within the EU.

24.Julian Jessop, Chief Economist, Institute of Economic Affairs, described the degree of uncertainty among businesses as “clearly very high.” However, he believed that businesses “will deal with whatever they are given. If that is an increase in frictions that is what businesses do; they can deal with frictions.”36

25.Our predecessor Committee warned back in January 2017 that:

A “cliff edge” change in circumstances could be extremely disruptive in some sectors to businesses both in the UK and in the EU27, whether it be the need to adjust to new provisions for regulatory approval, new customs requirements, or the need to adjust to new costs or restrictions in employing EU workers.37

26.We are deeply concerned about the readiness of business, particularly small businesses, for a no-deal exit. Brexit was always going to lead to change for business with a range of new challenges but also opportunities. However, businesses have had no certainty about what to prepare for and, in the event of a no-deal exit would face an abrupt change in trading circumstances which would represent a cliff edge for many—an abrupt change which concerned our predecessor Committee two years ago for which, it is clear, many businesses have not prepared. The Government’s belated efforts to engage with business and provide some form of guidance is unlikely to be sufficient to mitigate the worst effects of a no-deal exit for businesses because it is being provided so late in the day, many smaller businesses do not have the capacity to fully engage with what is required and because so much of that guidance is based on assumptions about how the EU might respond in a no-deal scenario which could turn out to be unjustified.

The implications for trade

27.The Economists for Free Trade have pointed out that “far from being a leap into the unknown, trading with the EU under WTO rules would be a leap into the familiar.”38 Pascal Lamy, former Director General of the WTO and former EU Commissioner, explained to us that:

If you look at trade on the planet, seen from the moon, you have four leagues. You have league number one, which is the domestic system and the Internal Market. League number two is for bilateral trade agreements. League number three is the WTO regime. League number four is for countries who are not members of the WTO—basically, North Korea, Algeria and a few others.39

28.The Single Market is based on the free movement of goods, people, services and capital, and aims to make trade between Member States easier through the removal of barriers to trade, and harmonisation of national rules. Without a deal in place ahead of 29 March 2019, businesses will have to adapt to trading in services and goods on World Trade Organisation (WTO) terms. The UK in a Changing Europe has pointed out that trading on WTO terms alone is the default position for WTO members, but in practice no member does so without additional agreements. Although many trade barriers have been lowered through WTO membership, all countries seek even less friction. All 164 WTO members have better access to at least one market either through a free trade agreement or duty-free preferences, which are often offered to developing countries. In fact, most have several deals. For example, the US, Brazil, China and India all have trade agreements with their closest neighbours. Even as it stands, the UK does not trade merely on WTO terms with many countries outside the EU. With the US, for instance—the UK’s biggest non-EU trade partner—trade is regulated by over 100 sectoral agreements, derived from EU membership, that go well beyond WTO provisions.40

Services

29.Services make up the majority of the UK economy and around 80% of UK jobs. Around half of the UK’s trade in services is with the EU.41 Pascal Lamy acknowledged to us that the Single Market is still imperfect in services,42 however, the House of Lords EU Committee in the last Parliament noted that “it would be a mistake to conclude that it is unimportant. In fact, the Single Market remains the most integrated regime for services trade in the world.”43 Trading on WTO terms in a no-deal exit would mean the UK would rely only upon its commitments made on services in the General Agreement on Trade in Services (GATS) in its trade with the EU. The Treasury Committee in the last Parliament noted that, under GATS, countries choose which sectors they are prepared to liberalise and the time scale over which they wish to do so. The principle of non-discrimination applies, meaning that any restrictions on market access must be applied equally across all countries. However, there is no presumed right of market access, nor any means of tackling non-discriminatory barriers. The Treasury Committee noted that “the WTO has made virtually no progress whatsoever in breaking down barriers to the trade in services” and that, compared to the Single Market, it “offers a much more limited freedom to provide services … on equal terms with domestic service providers.”44

30.Trade in services inside the Single Market is facilitated by the recognition of some professional qualifications. Under a no-deal exit, the recognition of professional qualifications of UK nationals in an EU-27 Member State will be governed by the national policies and rules of each Member State, rather than by the EU framework. The recognition of professional qualifications is particularly important for the accounting and audit professions,45 as well as for legal services.46 We were told that the larger firms were likely to be able to find solutions but small or medium-sized businesses “just do not have the bandwidth to do anything other than business as usual.”47

Financial services

31.The Single Market for financial services is highly integrated, underpinned by common rules and standards, and extensive supervisory co-operation between regulatory authorities at an EU and Member State level. Firms, financial market infrastructure, and funds authorised in any EEA country can carry out many activities in any other EEA country through a process known as “passporting”, as a direct result of their EU authorisation without requiring authorisation or supervision from the local regulator. Furthermore, some types of financial services entities operating in the UK are currently supervised by EU agencies. The Government has highlighted that it is preparing a series of unilateral measures to minimise disruption to the continuity of financial services provision, to protect the existing rights of UK consumers, and to ensure financial stability.48

32.We heard concerns about the risks in particular for the continuity of contracts for derivatives and insurance once the passporting system falls away.49 The European Commission has stated that over-the-counter derivatives will, in principle, remain valid and executable until maturity. As regards cleared derivatives, the Commission believes that existing systems of equivalence provide appropriate tools, which can be swiftly deployed. Should the Commission need to act, it has said that it will adopt temporary and conditional equivalence decisions to ensure that there will be no disruption.50 Mark Carney, Governor of the Bank of England, has confirmed that “a few” necessary SIs to enable the Bank of England to deal with these matters with regards to firms that are being wound up are outstanding. He added that the Bank is in “regular discussions” with the Treasury about ensuring that the minimum authorities are given to make sure that the market runs smoothly.51

33.We were told in April that there was a “good” working relationship between UK and EU regulators.52 The Bank of England and the European Central Bank have convened a technical working group, focusing on risk management in the period around exit.53 The Commission has encouraged the European Supervisory Authorities to prepare co-operation arrangements with UK supervisors to ensure that exchange of information is possible immediately after the withdrawal date in the case of a no deal scenario.54

34.The Commission has noted that many EU financial services firms have prepared for a scenario in which the UK is no longer part of the Single Market, for example by adjusting their contracts or relocating capacities and activities to the EU-27. The Commission has called on this work to be accelerated, but has cautioned that it will not be possible to complete it in time in all areas. While this could cause risks to financial stability in the EU, the Commission believes the risks to the EU financial services sector linked to a no-deal scenario have diminished significantly.

Data

35.We have commented previously on the value of the UK maintaining high standards in data protection and ensuring that data can continue to be transferred across borders as it is now.55 The EU’s data protection framework has been implemented into UK domestic law.56 In its response to our report on data, the Government noted that: “data flows envelop all trade in goods and services as well as other business and personal relations. They are critical for both sides in a modern trading relationship.”57 With regard to law enforcement, the Government also said that being able to transfer data within the EU and with third countries was “crucial in our efforts to fight cross border crime and prevent terrorism.”58

36.The preferred solution for the UK would be for the Commission to make an adequacy decision and so enable data to continue to be transferred on a legal basis after the UK has left. However, the adequacy process will not start before the UK leaves the EU and the current assumption in Government is for this process to take place during the 21-month transition period.59 The Political Declaration states that the Commission will endeavour to adopt a decision by the end of 2020.60 The value of being able to move data, and the need to secure an adequacy agreement, was raised with us not just in respect of the digital industries, but across a range of sectors from medical research to financial services. For example, Huw Evans, Director General, Association of British Insurers, told us:

The agreement on the transition allows enough time to negotiate an adequacy agreement that could then come into force at the point the transition period ends. It is vital it does. Nobody knows how you would possibly manage any form of gap. Data transfers are absolutely central to how all our businesses work and how individuals and businesses are served.61

37.There are other legal frameworks that could allow personal data to be transferred, other than an adequacy decision.62 However, the alternatives are cumbersome, time consuming and would place a bureaucratic burden on individual businesses. In the event of a no deal exit, with no arrangement on data in place, those wishing to transfer personal data between the EU and the UK would have to explore such alternatives.63 The UK has said that it would allow personal data to move from the UK to the EU—this would be a UK decision and kept under review.64 The EU position is that when the UK leaves, it becomes a third country and is subject to the rules for data transfers to a non-Member State.65 In its November Communication on contingency planning for the UK leaving the EU without an agreement,66 the Commission notes that different methods are used to transfer data between the EU and third countries that do not have an adequacy agreement, adding that:

The adoption of an adequacy decision is not part of the Commission’s contingency planning.67

Trade in Goods

38.The UK has submitted its own tariff schedules to the WTO, because it needs to separate its commitments ahead of exit from those that have been agreed for the EU as a whole. Although some WTO members have objected to these schedules (which effectively continue the tariff rates of the Common External Tariff applied by the EU), and full certification of the UK’s schedules may take time, this is not expected to be an obstacle to the UK trading on WTO terms and the submitted schedule will still form the basis of the UK’s trade policy.68

39.Jon Thompson from HMRC told us his assumption was that the EU would apply its Common External Tariff under a no-deal exit to UK exports to the EU.69 Whilst the average tariff rate is only 3.2%, the tariffs on some goods are much higher, for example, tariff rates on one in ten agricultural imports to the EU exceed 25%, with the equivalent of 189% on some dairy products being the highest.70 Michael Gove, the Environment Secretary, has pointed out that “nobody can be blithe or blasé about the real impact on food producers of leaving without a deal.”71 Mike Thompson from the ABPI told us that if tariffs on UK medicinal exports were higher than in the EU-27 it would be harder for UK manufacturers to compete.72

40.The European Commission has stated that UK authorisations for goods and services will not be accepted in the Single Market. Furthermore, UK goods will be subject to the full range of EU regulatory and customs checks.73 The Government has stated that businesses exporting goods to the EU “will be required to follow customs procedures in the same way that they currently do when exporting goods to a non-EU country.”74

41.The Government has stated that, in the event of no deal, for goods entering the UK from the EU “an import declaration will be required, customs checks may be carried out and any customs duties must be paid.”75 It is unclear at this stage whether Government has the capacity to collect tariffs. Moreover, additional checks both to imports into the UK and on exports of UK goods to the EU are expected to create a greater obstacle to trade than the tariffs themselves.

42.Tariffs under the WTO system follow the principle of non-discrimination (the most-favoured nation principle, or MFN). If the UK wanted to remove all tariffs and checks on goods arriving from the EU, it would have to do the same for every other WTO member.76 We noted in our Fourth Report that the UK could choose to offer zero tariffs on goods between the EU and the UK, outside of a trade deal and would be able to use a ten-year exemption before offering the same tariff rates to other nations if the UK were negotiating a trade deal with the EU at that time. After this period, if the UK did so, it would have to offer the same zero tariff to all its trading partners.77 Others have also suggested applying the ten-year exemption, contained in Article 24 of the General Agreement on Tariffs and Trade (GATT). However, the Prime Minister has said that it is not that simple.78 Article 24 contains detailed conditions.79 Any application in the form of an interim agreement would require the consent of the EU.80 In the meantime, there could be a risk of challenges at the WTO to any perceived breach of MFN provisions.81

43.The Government has not indicated whether it will set a zero-tariff policy. If it did so, the UK would lose the ability to offer tariff reductions or removal in trade negotiations, and would therefore have less leverage in future trade deals. The UK could unilaterally decide to reduce tariffs on selected goods such as those where there is no UK production, such as oranges. The Economists for Free Trade have highlighted that if the UK did decide to impose tariffs on imports from the EU, possibly causing UK prices to rise, it would be open to the UK Treasury to take offsetting action to counteract the rise in inflation and maintain consumer real incomes. Alternatively, the Treasury could announce a temporary cut in VAT, funded by the new tariffs.82

44.Julian Jessop told us that the challenge will be to minimise the increase in trade frictions with the EU as a result of exiting in such a way that does not also limit the potential upsides from leaving.83 Jon Thompson from HMRC warned us that at least 145,000 UK companies trade only within the EU. For these businesses, customs processes would represent a completely new administrative burden.84 He also told us that the current UK customs system, the Customs Handling of Import & Export Freight (CHIEF), would have to be scaled up until a new system, the Customs Declaration Service (CDS), is running. This was meant to be implemented in 2020, then brought forward to 2019 to prepare for exit, but has now been “slightly moved back.”85 He stated that CDS will be ready to cope with the increased transactions, but he was doubtful that traders will be ready to submit that many.86

45.Martin McTague from the FSB warned us that if exports to neighbouring markets were shut off then it would damage productivity in the long run.87 He told us that “a lot of small businesses” would react to a loss of exporting to neighbouring countries by shrinking their business rather than exporting to countries that they had not considered before.88

46.A further dimension to UK exports beyond tariffs is the issue of approvals, standards and licensing. Bernadette Kelly, Permanent Secretary, Department for Transport, told us that her department is working towards ensuring there is continuity in areas such as vehicle type approvals, aviation security and maritime security.89 She suggested that UK vehicle manufacturers could go to an EU type-approval agency to have their type approvals recognised.90 She confirmed that the proposed plan is for the UK to recognise EU type-approvals, even if they do not recognise the UK’s.91 As regards aviation exports, she confirmed that the fall-back in the absence of EU recognition would be to grant the Civil Aviation Authority responsibility for type-approvals.92

47.The UK in a Changing Europe has pointed out that the WTO’s enforcement procedures are very different from the EU’s. Citizens and companies can only access its dispute settlement procedures via their governments, which means that they must persuade their governments to bring a claim on their behalf. Given how expensive, complex and political WTO litigation is, governments filter complaints and only a very small number of them are brought before the WTO’s panels. Furthermore, because claims can only be brought against states, if a breach of trade rules is committed by a competitor company, the WTO dispute resolution system is generally of no help.93

Continuing application of EU agreements with non-EU countries

48.A further consideration for exporters is that the continuing application of EU agreements with non-EU countries will fall in the event of no-deal. Jill Rutter from the Institute for Government said that third countries will have their own ratification processes to go through and they may seek to change the terms of the deals. She warned that there will “inevitably be businesses, transactions and those types of things that fall through those gaps, however much effort we put into all of those. It will be messy, bumpy and uncomfortable.”94 The International Trade Committee concluded in its Report on the matter that:

The Government would risk appearing naïve if it assumed that assent-in-principle to roll over an agreement constitutes a guarantee that roll-over is actually certain to occur at the point of Brexit. It must be realistic about the steps that are necessary to get new agreements in place—and have contingency plans for the eventuality that the third countries concerned change their minds. This must include the pursuit of bilateral arrangements with each party with whom the UK currently has arrangements by virtue of its membership of the EU.95

49.The Minister admitted that a large number of agreements “are not at the stage when we can initialise agreements and put them on the Floor of the House for the CRAG process to take place.”96 He told us that not all of the EU agreements need to be rolled-over, because some have been superseded, some are not applicable to the UK and some have been signed by the UK in its own right in a multilateral context. He stated that ten aviation and five nuclear agreements with important markets are ready.97 He also stated that an agreement was announced in December with Switzerland.98 However, the International Trade Committee have raised concerns over the scope of any agreement, given the large number of bilateral agreements between the EU and Switzerland.99 The Financial Times recently reported on a leaked internal Whitehall memorandum that apparently states that the UK has failed to finalise most trade deals needed to replace the EU’s 40 existing trade agreements with leading global economies and will not be close to doing so by 29 March, meaning most will lapse without a transition period.100 Even with a transition period, the rolling-over of the EU’s agreements with third countries would still require the consent of the other party.

50.Moving from trading with the EU as a member of the Single Market and the Customs Union to trading on WTO terms would be likely to mean a move from trading with zero tariffs with the EU to trade at tariff rates set in line with the EU’s current Most Favoured Nation schedule at the WTO. Whilst the average tariff rate that would apply on goods is relatively low, the rates applicable to cars are 10% and for some agricultural goods are very much higher. Tariff rates alone would have a very significant impact on the competitiveness of certain UK exports, in particular agricultural exports.

51.The UK could decide to set a zero-tariff policy towards all its WTO partners. If it did so, the UK would lose the ability to offer tariff reductions or removal in trade negotiations, and would therefore have less leverage in future trade deals. We have previously suggested that the UK could apply a ten-year exemption within the WTO to allow it to continue to apply zero-tariffs to EU imports as part of an interim agreement. However, this is not a simple solution and, in any event, would require the EU’s consent. In the meantime, there could be a risk of challenges at the WTO to any perceived breach of MFN provisions.

52.However, more significant for most UK exporters would be the non-tariff barriers that would be faced by exporters of goods under WTO rules, including increased product standard checks and checks on rules of origin. These would all increase the cost and reduce the competitiveness of UK exports to the EU. Many UK goods exporters, including a large number of SMEs, have no experience of customs processes and, without significant preparation and support, are likely to simply withdraw from these markets. Some will be able to find other markets but others will not. We have seen scant evidence of preparations being made by business or sufficient support being provided by Government.

53.A no-deal exit would also lead to an abrupt change in circumstances for those exporting services, half of which go to the EU. For many, barriers to trade will not be mere frictions, but a loss of authorisation to conduct business. Some larger operators have been able to prepare for a no deal outcome, in part by moving operations to the EU. Smaller operators may not have had the capacity to take such steps.

54.The absence of any agreement on the transfer of data will be particularly significant, as the Government has acknowledged, and will create a substantial and costly burden for many businesses. The fact that UK data protection provisions will be aligned with those of the EU on exit day will not be sufficient. Without either a comprehensive agreement or an adequacy decision from the Commission, it will be illegal to transfer personal data from the EU to the UK without separate contractual arrangements. This is essential in a range of services, from sales of financial products to the management of client data in all aspects of the digital economy. Solutions may be possible but they will be burdensome and costly compared to the current position and will have a significant, as the Government has acknowledged, impact on the competitiveness of UK businesses involved.

55.The rules of the Single Market and the Customs Union are enforced by the European Commission under the jurisdiction of the Court of Justice of the European Union. Any trade agreement will include dispute resolution provisions. The dispute resolution provisions of the WTO are not comparable—any dispute could take years to resolve, with the only remedy available for the UK to impose punitive tariffs on EU imports, a measure that would increase costs for UK consumers. In practice, a reversion to WTO rules would leave UK trade reliant on continuing goodwill with the EU.

The implications for the UK’s border

56.We visited Dover in October 2017 and in our Second Report we noted the quantity of trade that passes through the port each day and the efficiency of the processes at both Dover and Calais in minimising the time taken. We noted that these processes had:

introduced a predictability to the delivery timetable that is important for sectors with time sensitive supply chains, such as the automotive sector, and the agri-food sector. The current processes - involving roll on roll off ferries and short turnaround times - have developed while the UK has been in the Customs Union and the Single Market [ … ] A no deal scenario, especially if it was before any of the necessary adjustments had been made in areas such as IT systems, infrastructure, recruitment and training of staff, would cause major disruption.101

57.The Port of Dover informed us on our visit that an additional two-minute delay per freight vehicle (the Port handles 2.6 million annually) in the Ferry Terminal would cause 17 miles of queues on the motorway in Kent.102 We were also informed that Calais would be severely affected. The Port’s President has said that it might have to shut in the event of a no deal.103 Bernadette Kelly informed us in October 2018 that there are arrangements in place to deal with any traffic disruption in Kent.104 Operation Brock would entail arrangements to stack lorries on a section of the M20, to have a holding space for lorries on the M26, and to hold lorries in Manston Airport. Trials at Manston Airport featuring over 80 Heavy Goods Vehicle took place on 7 January.105 The Minister described them as a success in terms of measuring traffic flow,106 although the Road Haulage Association has pointed out that the exercise cannot duplicate the reality of 4,000 trucks being held at Manston airport in the event of no-deal.107

58.It was recently reported that the Government has awarded contracts for extra ferry services in the event of trade disruption at Dover. One of the firms, Seaborne Freight, has come under scrutiny for its suitability as a ferry service provider because it has not previously run ferry services, does not apparently own any ships and has used website terms and conditions that appear to be intended for a takeaway food firm.108 We questioned the Minister on the award of contracts to operate ferry services between the UK and the EU as part of the Government’s contingency planning.109 He pointed out that a range of operators were invited to tender, including new entrants into the market and longstanding providers; Seaborne was one of the three to be awarded contracts.110

59.Sir Amyas Morse, Comptroller and Auditor General, told us that it was “inevitable that the areas that will be under most stress will be at the border.”111 Jon Thompson from HMRC raised the possibility of avoiding delays and queues through the application of technology. He cited the possibility of an inventory linking system and use of inland pre-clearance.112 However, he cautioned that it would take between two and three years for a system to be up and running. He suspected that businesses “would be smart enough to change their behaviours” to reduce some of their costs.113 He also told us there was some scope for reducing the customs burden if the UK was to diverge from the EU’s Customs Code, but this was primarily in terms of reducing the number of data fields in the customs declaration.114

60.Jon Thompson also emphasised that it was unclear how Calais might respond to a no deal outcome. Any kind of delay or queue in Calais would lead to delays and queues in Dover.115 He told us that there were plans to engage with the French authorities in the event of no-deal to work through the problem.116 The Minister informed us that the Government “have had plenty of discussions at a technical level with various people in Calais,”117 as well as with Ostend, Rotterdam and Zeebrugge.118 Technical discussions have also taken place with the French no-deal co-ordinator.119 He said that the French authorities would be increasing the number of border checkpoints in Calais from two to ten and had committed to set up a border inspection point to process phytosanitary and animal checks. However, his subsequent answer to a written parliamentary question suggested that the position at Calais was less certain than that.120 They also have planning permission for a site south of Calais for consignments on lorries that might not have the correct paperwork to move away from the port itself and ensure flow-through.121 Jon Thompson said HMRC did not know if the UK’s other neighbours might be “reasonable or legalistic” either.122 He told us it is “extremely difficult” to have bilateral conversations with any of the EU-27 or with any of the individual ports, although there have been some “limited conversations” with Calais, Zeebrugge, and Rotterdam.123 He stated the impact on northern France, Belgium, Ireland, and the Netherlands would be “dramatic.”124

61.The Mayor of Calais has insisted that under no-deal “trucks will be passing as they are doing today.”125 However, the Minister told us that the European Commission can insist on checks being carried out at the EU border, although France could apply for a waiver.126 Dr Holger Hestermeyer, Shell Reader in International Dispute Resolution at King’s College London, suggested there are “certainly” business deals that ports can arrange with each other, but “there are limits to what they can do because of the way that nations are structured.”127 Sam Lowe, Research Fellow at the Centre for European Reform, suggested that any such emergency provisions could be “fine” in the WTO, but that they would only happen “because of EU choices in different areas, and it can only ever last for a short period of time, because after a while [the EU] will be obliged to treat the UK as they do any other third country with which they do not have a preferential arrangement.”128

62.Government departments told us that they have been putting in place contingency planning to reduce trade frictions at the border for some time.129 Jon Thompson said the UK will have “a functioning border but it will be suboptimal.”130 He stated that if the UK did not want to “feel any impact of no-deal,” then action should have been taken “a long time ago.”131

Supply chains

63.The Business, Energy and Industrial Strategy Committee noted in its 16th Report that “potential border delays could seriously undermine just-in-time supply chains.” Many of the businesses they took evidence from operate just-in-time, international supply chains, where goods cross multiple borders before final product assembly, and are often sent back and forth between UK and EU partners for processing before reaching consumers. Adding just 15 minutes of delays at key border points could cost millions of pounds for the biggest manufacturers.132

64.We took evidence in October on the supply of food and medicine, two of the sectors most vulnerable to delays in trade flows caused by trade frictions. We heard about the challenges of supplying fruits and vegetables ahead of peak consumption over Easter and the lack of seasonal UK produce.133 79% to 80% of food imports come from the EU. Food from non-EU sources face specialist procedures when they come in to the UK.134 We were told that switching supply chains is “not something that any supermarket is going to look to do lightly.”135

65.We heard concerns that Calais was a “real pinch-point” for retailers136 and that any delay within the supply chain would have a knock-on effect on the ability of the road haulage industry to move products137 and incur costs on already tight margins.138 However, Julian Jessop described suggestions that food would run out by August 2019 as “clearly ludicrous.”139

66.As regards the supply of medicines, the Government has asked the pharmaceutical industry to stockpile an additional six weeks supply on top of their normal stock levels.140 The Government has stated the UK would continue to accept batch testing of human medicines carried out in the EU, EEA or other third countries with whom the EU has a Mutual Recognition Agreement.141 Mike Thompson from the ABPI explained that because the EU have not reciprocated, GSK and AstraZeneca have had to spend money to replicate batch-testing facilities in the EU-27.142

67.Supply could be disrupted by border frictions and, although the majority of medicines are held in ambient temperature warehousing, some require temperature control of between two to eight degrees celsius. We were also told that there is not enough cold-chain warehousing available to build the stockpile the industry is being asked to hold.143 Air freight was not an option for those medicines that could not be x-rayed.144 Mike Thompson told us that pharmaceutical companies have probably already collectively spent, “hundreds of millions of pounds to prepare.”145

Road haulage permits

68.The EU Community licence for road haulage facilitates the physical movement of goods into the UK. The UK road haulage industry will lose the right to a Community licence upon exiting without a deal. The only contingency in place are permits under the European Conference of Ministers of Transport (ECMT) scheme. However, we heard that there are 1,224 of those ECMT permits, whereas there are currently 38,000 trucks that are licensed to operate in the EU.146 The only other fall-back position would be bilateral agreements or bilateral permits. The Government has stated that ECMT permits allocated after exit will take account of a haulier’s role in the economy and use an element of random allocation.147 The European Commission has proposed that UK hauliers be allowed to carry goods into the EU for a nine-month period, if the UK reciprocates.148

69.There is scope for major disruption at the UK’s borders from a no-deal exit. Changes to trading arrangements, requiring increased checks, could lead to very significant delays, creating serious disruption to supply chains, particularly those that are time critical—fresh produce; pharmaceuticals; and components in just-in-time manufacturing processes. We are not convinced that the steps being taken by the Government to mitigate the worst effects of this disruption will be sufficient. Equally importantly, the avoidance of disruption will be dependent on steps that are taken in Calais and other cross-channel ports to prepare for any increased checks. However successful the Government’s preparations are on this side of Channel, they will not avoid major disruption if reciprocal effective steps are not taken by EU Member States to ensure that trade continues smoothly.

The implications for Northern Ireland

The border with the Republic of Ireland

70.Northern Ireland is the only part of the UK with a land border with the EU. The Joint Report, agreed by both the UK and the EU in December 2017, recalled the commitment of the UK “to the avoidance of a hard border, including any physical infrastructure or related checks and controls.”149 In a speech on 2 March 2018, the Prime Minister said:

We have ruled out any physical infrastructure at the border, or any related checks and controls. But it is not good enough to say, ‘We won’t introduce a hard border; if the EU forces Ireland to do it, that’s down to them’. We chose to leave; we have a responsibility to help find a solution. But we can’t do it on our own. It is for all of us to work together. And the Taoiseach and I agreed when we met recently that our teams and the Commission should now do just that.150

71.At the launch of the Irish Government’s contingency plans in the event of a no deal, on 21 December 2018, the Taoiseach Leo Varadkar, said:

We are not preparing for a hard border between Northern Ireland and Ireland. [ … ] We have made no preparations whatsoever for physical infrastructure or anything like that. We certainly do not want it to become a self-fulfilling prophecy.151

72.However, in the event of no-deal, maintaining an open border would be problematic. We were told that both sides would be obliged to enforce a border under international law and the EU would expect the Republic of Ireland to enforce its external customs border.152 Sabine Weyand, the European Commission’s Deputy Chief Negotiator, cited the examples of the need for checks in respect of food safety, anti-dumping and VAT on goods crossing between the EU and the UK.153 Dr David Shiels, Policy Analyst at Open Europe, suggested that a breach of WTO rules on enforcing borders “might be okay in the short term,” but there was a possibility of another country bringing remedial action in the WTO, although this was likely to be a slow process154.

73.Karen Bradley MP, Secretary of State for Northern Ireland, told the Northern Ireland Affairs Committee in November 2018, that while she understood the Irish Government would not want a hard border:

I think what the Taoiseach said was that he did not want to see one and he would work hard to avoid one, but there would be pressures from the European Union. That is because, in the event of no deal, we would have two separate customs territories: a separate customs territory for the United Kingdom and a separate customs territory for the EU, and the Irish are part of the EU customs arrangement. From a WTO perspective, the negotiations for Ireland are conducted by the European Union, as they are for the United Kingdom today. The WTO rules are clear that there needs to be, between two separate customs territories, the possibility of checks, and contemporaneous forms need to be filed to ensure that, when goods are passing across the border, the right tariff has been applied, they meet the country of origin test, the [sanitary and phytosanitary] tests are correct, and health and safety and everything else has been complied with.155

74.Maintaining an open border would be problematic in the long-term for making new trade deals as there would be a lack of clarity about border arrangements and access to UK markets for goods from other countries. It would also exacerbate the risk of smuggling, where differences applied in relation to tariff rates and regulatory standards.156 Dishonest businesses and criminal gangs would look to exploit any opportunities.157 In Northern Ireland, smuggling operations have been associated for some time with paramilitary organisations.

Impact on business in Northern Ireland

75.The Government’s technical notices are applicable to Northern Ireland. Stephen Kelly, Chief Executive, Manufacturing NI, said that the UK’s notices for no deal originally suggested that businesses in Northern Ireland might contact the Irish Government for advice. He said that businesses were looking for guidance and support to help them through the process, but the notices were doing the opposite.158

76.Representatives from Northern Ireland business organisations told us that they did not want a no deal. Declan Billington, Vice-Chair of the Northern Ireland Food and Drink Association, described no deal as “devastating to our industry” and said that there was “a strong fear of the consequences of leaving Europe on 29 March without a deal or without a transition, and that we are facing the tariff wars.”159 Aodhan Connolly, Director, Northern Ireland Retail Consortium, said “Let me be clear about this: no deal is not an option for us in Northern Ireland.” He told us that MFN tariffs with the WTO could lead to consumers paying 37% more for beef, 43% more for cheese, and 8% more for tomatoes.160 We also heard about the nature of trade both on the island of Ireland and between Northern Ireland, Ireland and Britain. Mr Connolly gave examples of a cow slaughtered in Northern Ireland, transported through Ireland to England, where it is processed, to be transported back to be further processed in Northern Ireland or Ireland, and by the end the cow has “crossed the border twice before it eventually gets on the shelves.”161 Seamus Leheny, Policy Manager, at the Freight Transport Association, said:

We have 4.6 million commercial vehicles crossing the Irish border every year. The big conundrum for us is the sanitary checks. A third of that traffic is agri-food, so we would probably be looking at in the region of 4,000 commercial vehicle movements daily that would have to stop for documentary ID checks, and then a proportion of that—up to 50%—actually having to have the physical inspection. The costs and the delays of that mean we would have to completely reinvent the supply chain for the movement of these goods on the island of Ireland, and even going over to GB.162

77.We heard that some businesses were investing in facilities in the Republic of Ireland and in warehousing for buffer stock, but this may not be feasible for smaller businesses, who were adopting a “wait and see” approach.163 It was argued that, with perhaps five years notice, cheese producers, for example, could have adapted and replicated facilities to avoid barriers to moving milk over the border, but it would have risked being an unjustifiable investment if a deal was reached.164 It was recognised that there were opportunities to export to third country markets around the world, but it was argued that it takes time to get into those markets and to get veterinary agreements.165 We also heard about the lack of resources and capacity to handle customs declarations for future cross-border trade.166

Healthcare

78.Healthcare is a devolved matter and arrangements with the Republic of Ireland predate EU membership.167 We were told that there was a lot of movement across the border to access healthcare and because of its importance, “everyone will be sensible and want people to go on living their lives as they do.”168 We were told that some cross border health initiatives work in the context of EU membership, such as data protection.169 The UK Government’s own technical note on the joint UK-EU mapping exercise on North-South co-operation refers to EU law on the recognition of professional qualifications and the supply of medicines and medical devices across the border, as part of the All Island Congenital Heart Disease Network.170

79.The UK Government accepted the need to avoid a hard land border in Ireland in December 2017, committing to no new infrastructure and no related checks and controls. We supported that commitment and continue to do so. It is clear that the Republic of Ireland and the EU also have no desire to re-create a border. However, a no-deal outcome poses questions as to whether it would be possible to maintain an open border. Given the EU’s expressed concerns about maintaining the integrity of the Single Market and the Customs Union, it is difficult to see the EU, in the long-term, accepting a soft land border in Ireland whilst the UK maintained an independent regulatory policy and independent trade policy.

The implications beyond the trading relationship

Security and Law enforcement

80.Rob Wainwright, the former Executive Director of Europol, told us that the current security co-operation between the UK and EU was “the most integrated and probably the most successful cross-border police mechanism of any region in the world.”171 The UK benefits in various ways from this relationship through membership or participation with: Europol which co-ordinates police co-operation across Europe; the European Arrest Warrant which allows for the rapid extradition of individuals in one Member State to another for a serious crime; Eurojust which co-ordinates cross-border investigations and prosecutions; and various EU criminal justice databases, such as the Schengen Information System (people and objects of interest, such as missing people, terrorists, or stolen vehicles), Prüm databases (DNA and fingerprint data), ECRIS (EU nationals that have committed criminal offences in another EU Member State), and Passenger Name Records (names and details of air passengers).172 The ability of the UK to benefit from information exchange and practical co-operation using law enforcement databases is possible because the UK follows the EU data protection regime. The EU allows personal data to be shared between Member States, or countries outside the EU but who are in Schengen, because there is a legal basis, and the EU is satisfied that those countries will be fully compliant with all aspects of EU data protection laws.173

81.The UK Government would like to preserve as much of this co-operation as possible. It has said that, if the UK was to leave the EU without a deal, it would no longer be part of, or able to access EU databases, systems and networks; no longer participate in, have access to, or form agreements with EU agencies, bodies or institutions of the EU; and the restrictions on the exchange of personal data would reduce co-operation between UK and EU data protection authorities. It has also noted that without a deal, there would not be an implementation period, and that:

any operational cooperation that relies on EU tools and instruments at the point of exit, would stop. This would create immediate legal and operational uncertainty with the risk of operational disruption and potential security implications.174

82.This would include losing use of the European Arrest Warrant and making it more difficult to apprehend people who have committed a crime in the UK and fled abroad.175 Several countries have constitutional bans on extraditing their own nationals. Due to the European Arrest Warrant, every single Member State is bound to extradite its own nationals to other Member States. That does not happen outside the EU for legal and jurisdictional reasons.176 Leaving without a deal would reduce the speed at which front line police officers will be able to check whether an individual is a person of interest on EU wide databases and get an automatic response.177 Cressida Dick, the Metropolitan Police Commissioner, has said that no deal would have to replace such mechanisms with others that are “costly, slower and potentially put [the] public at risk [ … ] There is no doubt about that.”178 In October 2017, the then Home Secretary told the Home Affairs Committee that it would be unthinkable for the UK to leave the EU with no comprehensive security agreement.179 The Minister told us that if we left the EU and had to replace mechanisms such as the European Arrest Warrant:

there is a host of things we could do; it just would not be as good as the current system we have.180

Policing

83.In November, the Home Office approved funding of £2.4 million as part of a ‘no deal safety net’ unit after asking the National Crime Agency and National Police Chiefs’ Council (NPCC) in September to draft plans for a ‘no deal, no implementation period’.181 The PSNI has benefitted from £16.5 million in Brexit funding from the Treasury to recruit an extra 308 officers and staff by April 2020.182 This followed news that the PSNI were drawing up a business case for extra resources in May 2018.183 The Minister told us that recent media reports of preparations for a no-deal scenario that involved requests for police from parts of England and Scotland preparing to be deployed in Northern Ireland was in anticipation of the marching season in July, rather than in anticipation of a no-deal Brexit at the end of March.184 Requests for mutual aid from other forces during the marching season has happened in previous years, but Mr George Hamilton, Assistant Chief Constable, PSNI, is reported as saying he does not “have any reason to believe we will need to request mutual aid during 2019.” At the same time, additional resources will be available from 29 March in line with national contingency planning.185

Regulatory databases

84.The UK would also lose access to other databases in the event of no-deal. These include the EU scheme for food and feed safety alerts (RASFF), which provides for access to information on potential food health incidents186 and the transfer of information between the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) and the European Medicines Agency (EMA).187 Concerns have been raised that the files of medicines that are going through the process of being licensed will not be available to the MHRA; this could lead to delay in medicines coming to patients in the UK. The UK contributes 38% of all public health safety signals that are picked up for the whole of the EU and therefore there would be mutual interest in reaching a constructive agreement.188 We were told that relying on the World Health Organization (WHO) would not be equivalent.

Research, technology and higher education

85.We have taken evidence from a range of voices in the sciences, research, innovation and higher education sector. Several witnesses talked about the closeness of the UK to the EU regulatory regime189 and the importance of migration within the EU for students and staff.190 When we visited the life sciences sector in Cambridge, we were told about the importance of the relationship with the EMA,191 and the importance of participation in the EU intellectual environment and the EU clinical environment.192 The value of EU funding through the European Research Council and Horizon 2020 was also emphasised.193 We have heard about the important role the UK plays in European bodies to set the policy agenda, such as in the Galileo and Copernicus space programmes,194 and Horizon Europe—the successor to Horizon 2020.195

86.Outside an agreement with the EU, there is no transition period to negotiate the future relationship or to adapt to a change in the regulatory or immigration regime. Universities UK have raised concerns around what no deal would mean for freedom of movement and the UK’s future immigration system, and the lack of certainty over the UK’s future participation in Horizon 2020 and Erasmus+.196 A recent open letter to MPs from several higher education providers said that the risk of no deal was creating “significant uncertainty” for the 50,000 EU staff and 130,000 EU students in the UK, plus 15,000 UK students studying in Europe. They argued that without cast-iron assurances, “world-leading academics and researchers may leave for countries where access to ERC funding is not at risk.”197 In the private sector, Tech UK has said “Put simply, No Deal doesn’t work for tech” and that the consequences of no deal, including the impact on attracting talent and being able to service contracts in the EU, are “incredibly concerning.”198

Travel arrangements

87.Bernadette Kelly, Permanent Secretary, Department for Transport, told us that passengers who have booked to fly from the UK to an EU country, or within the EU on a UK airline, will be able to do so.199 It was suggested that there is a “very strong mutual interest” in the EU in ensuring that people can fly to and from the UK and that the European Commission have indicated that it would consider a “barebones agreement” would be appropriate to ensure the continuity of flights.200 In its December Communication, the European Commission has proposed that in a no-deal exit UK carriers would continue to perform existing direct flights for 12 months after 29 March. But they will not be able to add new schedules nor fly between EU airports.201 We were informed that discussions with the French authorities have already begun on continuity of rail services through the Channel Tunnel.202 Furthermore, the Commission has proposed that UK citizens be allowed for the time being to visit (for up to 90 days in a 180 day-period) the Schengen area after exit without the need for visas.203

88.Co-operation in policing and law enforcement are of vital importance for the security of the UK and highly valued by the police and law enforcement bodies. An aspiration to maintain many of the advantages of the current arrangements, or mitigate the effects of their ending, has been included in the non-binding Political Declaration. However, were the UK to leave the EU without an arrangement in place, there is a risk that the UK would lose both the current arrangements for cooperation and exchange of information and the trust that has accrued over decades. Alternative and mitigating measures would be more difficult to negotiate following such an exit and this could risk harming the security of both the EU and the UK.

89.In the event of a no-deal exit, it is possible that solutions could be worked out to maintain co-operation on security and other matters which would be in the interests of both the EU and the UK, from exchanges of information on food health to educational exchanges. However, there is no guarantee that, in an acrimonious separation these arrangements could be established in the short to medium term. Even in a relatively harmonious no-deal separation, it may take time to establish the legal structures necessary to reconstruct these arrangements.

The implications for the rights of citizens

90.On 6 December 2018, the Department for Exiting the EU published a policy paper on citizens’ rights giving details of what the UK will do in the event of no deal. The paper said that “the reciprocal deal with the EU, as set out in the Withdrawal Agreement, is the only way to protect the rights of both UK nationals in the EU and EU citizens in the UK.”204 The UK has already taken steps to implement aspects of the Withdrawal Agreement to protect EU citizens in the UK, but in its paper acknowledged that “The UK cannot act unilaterally to protect the rights of UK nationals in the EU”205 and repeated calls on Member States “to uphold their commitments to citizens and to protect the rights of UK nationals in the EU in the event of a ‘no deal’ scenario.”206

EU citizens in the UK and Settled status

91.If the Withdrawal Agreement was agreed, free movement would continue in UK law until the UK changes EU retained law.207 In addition, the UK is introducing a Settled Status scheme which enables EU citizens to apply for the equivalent of indefinite leave to remain. In order to do so, they will need to meet the qualifying criteria—being legally resident, submitting proof of identity, and passing a criminal check. On 21 January, the Prime Minister announced that the Government will waive the fee for EU citizens to apply for settled status in the UK.208 We welcome this decision. In the event of a no deal scenario, and therefore without the Withdrawal Agreement and no transition period, the qualifying date for when an EU citizen would have to be legally resident in the UK to apply for Settled Status moves forward to 29 March 2019 (the Withdrawal Agreement would allow until 31 December 2020).209 EU citizens would still have the 21 months until 31 December 2020 to apply for Settled Status. The UK’s policy paper of 6 December said that:

Until this time [31 December 2020] EU citizens will continue to be able to rely on their passport (as a British citizen may) or national identity card if they are asked to evidence their right to reside in the UK when, for example, applying for a job, as they do currently.

92.In a no deal scenario, EU citizens granted Settled Status would still be able to leave the UK for up to five years without losing their right to return.210 EU citizens with Settled Status will be able to bring close family members to join them by 29 March 2022, as long as the relationship existed by 29 March 2019. For future spouses where the relationship started after 29 March 2019, EU citizens with Settled Status will be able to be joined with their spouse in the UK until 31 December 2020.211 In the event of a Settled Status application being refused, there will be a right to challenge the decision “in line with the remedies generally available to non-EEA nationals refused leave to remain”, i.e. administrative review and judicial review. There would be no independent monitoring body or reference procedure to the Court of Justice of the EU (CJEU).212

93.The Immigration Minister, Caroline Nokes MP, told the Home Affairs Committee in October that, in a no deal scenario, there would be no additional checks for EU citizens at the border and acknowledged that it will be “impossible to differentiate between somebody who has been here and not yet applied for Settled Status and somebody who has just arrived.”213 The Exiting the EU policy paper said that EU identity cards will remain valid for entry into the UK ‘initially’ but it will not be guaranteed after the new immigration system will be introduced from 1 January 2021. On 19 December 2018, the Home Secretary said that there would be no changes to the checks employers might be asked to carry out for EU citizens before the new immigration system comes in, i.e. 1 January 2021.214

94.A recent letter from the3million and British in Europe to Donald Tusk concerning the consequences of no deal for EU in the UK said:

As things stand, on Brexit day their rights derived from EU law will ‘fall away’ and they will have to apply for the less protected ‘settled status’ under UK immigration law [ … ] In the event of a no deal, their status will be further diminished215

95.The negotiated Withdrawal Agreement provides for a transition period of 21 months, during which EU citizens in the UK will be able to make an application for Settled Status and free movement of people will continue. If the UK leaves without the agreement, the Government has said there would be a 21 month period for EU citizens in the UK to apply for Settled Status, but it is not clear when the rules on free movement will end—the UK does not expect its new immigration system to be in place before 1 January 2021. At the same time, there is no way of knowing, with any confidence, how quickly the 3 million EU citizens in the UK will be able to apply and receive Settled Status. In a no deal, there will be large numbers of EU citizens in the UK with no certainty as to their legal status nor evidence to prove it. There is a clear risk that EU citizens in the UK could face a hostile environment—where immigration law is applied by the landlord, the employer, or the service provider—because there would be confusion as to how they demonstrated their legal status, and landlords, employers or service providers may not know what would be required of them.

UK citizens in the EU and preparations across the EU27

96.The European Commission has published three Communications on its contingency planning in case the UK leaves the EU without an agreement: in August 2018, November 2018 and December 2018.216 In the latest Communication, it pointed out that without an agreement:

UK nationals in the European Union would be subject, as of the withdrawal date, to the general rules that apply to third country nationals in the EU. This would have an impact on their right to stay and work where they currently live as well as on the social security protection they benefit from.217

97.A Third Country National (TCN) is any person who is not a citizen of the EU and who is not a person enjoying the EU right to free movement. The British in Europe have raised concerns about the third country national status. Jane Golding, Chair British in Europe, told us in June that: “the conditions are far more stringent and in no way compare with being an EU citizen”218 and in response to the November Communication from the Commission, British in Europe said TCN status would be insufficient for many of the UK nationals in the EU, as it is not automatic and requires the applicant to be legally resident. There are conditions to qualify for TCN status which all UK nationals in the EU will not satisfy and Member States would need a transition period to enable applications to be processed. They said the rights conferred on TCNs compared to EU citizens are more limited on family reunion, more limited on mobility compared to free movement, and there are some limitations on how equal treatment applies in areas such as employment. As such, the rights conferred as a TCNs “fall well short of the rights” which the UK in the EU currently have as EU citizens.219

98.In its latest Communication, the Commission has called on Member States to consider UK residents on their territory on 29 March 2019 as legal residents, and be ready to issue residence permits as evidence of their legal right to stay and right to work. In particular, it said that where there are large UK populations, Member States should be ready to issue temporary residence documents until ‘definitive residence permits’ can be issued, preferably by the end of 2019. It further called on Member States “to take a generous approach to UK nationals who are already resident in their territory.” This includes asking that those UK third country nationals, who have been a legal resident in a Member State for five years-and that calculation should include years spent resident in the EU27 before the withdrawal date—be given long-term residence status.220 The Long Term Resident Directive states that a person who holds a long-term residence permit, “should be granted in that Member State a set of uniform rights which are as near as possible to those enjoyed by citizens of the European Union.”221

99.Several Member States have announced intentions or produced legislative proposals to cater for the UK nationals on their territory.222 We are aware of proposals in Italy,223 Germany,224 France,225 Poland,226 the Netherlands, Belgium,227 the Czech Republic,228 Estonia,229 Sweden,230 and Portugal.231 On 9 January 2019, the Minister told us that the Government in Spain—the Member State with the largest population of UK nationals—had not yet published its proposals. The Spanish have since published their proposed contingency plans for UK nationals in Spain in terms of residence, healthcare and social security. In addition, Spain and the UK have signed a reciprocal agreement on voting rights in local elections.232 In France, British nationals have been encouraged to apply for a Carte de Sejour residency card (usually a voluntary process), which they will be able to exchange for a residency permit after the UK has left. However, the French Government has said that the measures they take for the British in France “will take into account” the status the UK grants to French nationals in the UK.233 It remains unclear whether UK nationals would continue to have access to healthcare.234 The German Government have said that, whatever happens, British citizens will need some proof of their right of residency in order to stay in Germany. In the event of a ‘disorderly Brexit’ they plan an initial three-month period for British citizens in Germany to register and complete an online form with their local Foreigners Registration Office. From April, the authorities will contact them and consider their application for a form of residency. The applicant can continue to reside and work in Germany until a decision has been taken on the application.235

100.Generally, of the proposals that have been made public, they follow the pattern of providing a transition period after 29 March 2019—the length of which varies from the three months in Germany to 15 months in the Netherlands—to allow time for UK citizens to apply for an interim permit, followed by a long-term residence permit.236

101.We welcome the Commission Communication encouraging Member States to be ready to issue temporary residence permits in the event of a no deal, and to take a generous view as to whether UK nationals in their territory could be given long term residence status, and the public proposals that several Member States have put forward to give UK nationals a legal status. If giving these proposals legal effect requires legislation in each Member State, then it will take time, may lead to inconsistency between different countries, and there are strong indications from some EU Member States that they are waiting to see how the UK will manage EU citizens in the UK in the event of no deal before deciding on the rules that they will apply to UK nationals on their territory. The UK is asking EU citizens in the UK to make an application for Settled Status, which can be refused. In a no deal scenario, there will be considerable confusion as to the legal status of EU citizens in the UK before they all have secured Settled Status.

102.We recommend that the Government provide to this Committee a written summary setting out the healthcare provision for UK nationals currently resident in each EU27 Member State, in the event of the UK leaving the EU without a Withdrawal Agreement.

Social security co-ordination

103.The UK has said that EU citizens in the UK would “retain entitlement” to health, education, benefits, social housing, and be able to access benefits and services on “broadly” the same terms as now. However, it has acknowledged that reciprocal healthcare, social security and pension co-ordination, as negotiated and agreed in the Withdrawal Agreement,237 “require reciprocity from the EU or individual Member States and cannot be protected unilaterally”,238 and that the UK is “exploring options” to protect past social security contributions made anywhere in the EU, and reciprocal healthcare arrangements in the event of a no deal.239

104.The UK has introduced the Immigration and Social Security Co-ordination (EU Withdrawal) Bill which will repeal the relevant EU law on free movement and amend retained EU law governing social security co-ordination,240 the Healthcare (International Arrangements) Bill which will enables the UK to give effect to healthcare agreements between the UK and other countries including those in the EU,241 and secondary legislation to correct deficiencies in EU retained law relating to the operation of the social security co-ordination in a no-deal scenario.242 The explanatory notes for the Social Security Statutory Instruments state that the “whole system” of social security co-ordination relies on co-operation and reciprocity, and this cannot be relied upon after the UK has left. Without the obligations to exchange data, e.g. to establish which Member State is responsible for payment of benefits, the SIs will enable the UK:

to ask claimants to provide (within reasonable time) the relevant data to determine competence in cases where the relevant EU MS does not do so, if asked. However, in the event that the information provided by the claimant is insufficient, the UK will no longer be required to fulfil any obligation under the Coordination regulations.243

105.The December Communication from the Commission also pointed out that Union law provides common rules on social security of EU citizens who have moved to another Member State, that this co-ordination covers rights derived from national law linked to “sickness, maternity and paternity, pensions, invalidity, unemployment, family benefits, accidents at work and occupational diseases”, and that “previous periods of insurance, work or residence in other Member States are taken into account when authorities determine a person’s eligibility for a benefit.” The Commission has exclusive competence on social security co-ordination “for facts and events that occurred before the withdrawal date.” Without the Withdrawal Agreement, EU rules on social security co-ordination will no longer apply to the UK. The Commission called on Member States to inform their citizens that they should keep appropriate documentation to show evidence of work in the UK before 30 March 2019.

106.The Minister told us that UK nationals living abroad would be able to continue to receive pensions.244 The UK has said that it will continue to pay an uprated UK state pension to eligible UK nationals living in the EU, but this would be “subject to reciprocity.”245 We note that the Public Accounts Committee reported in 2017 that the UK paid for 190,000 UK state pensioners living abroad, mainly in Spain, France and Ireland, but there were only 5,500 state pensioners from Europe living in the UK.246 This comparison was most unbalanced between about 70,000 British pensioners living in Spain but only 62 Spanish pensioners living in the UK.247

107.The aggregation of contributions made in more than one Member State and the ability to draw on benefits in another as a result is a benefit of free movement enjoyed by many UK and EU citizens, and clearly for many pensioners. Such co-operation would continue, for those citizens covered by the Withdrawal Agreement, in the event of a deal. In the event of leaving without a deal, this co-operation would be lost.

UK nationals returning to the UK

108.The UK has said that it would act “where possible” to support UK nationals but that:

If [ … ] UK nationals were unable to continue to live their lives as they do now in a ‘no deal’ scenario and returned to the UK to live, there are a number of steps the Government would consider to address concerns that have been raised.248

109.The concerns raised by UK nationals who might return to the UK listed in the policy paper include the ability to access employment, NHS healthcare, social security and pensions, housing, education, and be able to register and vote in local and national elections on return.249 The paper also recognised that there were concerns about the right to be able to bring EU and non-EU citizen family members into the UK.250 The Minister provisionally told us that UK nationals returning to the UK would have to satisfy the Habitual Residence Test. This could delay access to the social security system for UK nationals returning to the UK.251

110.The Government states that some UK nationals may be forced to return to the UK in the event of a no deal depending on the approach taken by their current host EU country. This would raise a number of questions around access to services, especially healthcare, but also how quickly they could access housing and social security. In the absence of the reciprocal arrangements that enable contributions in one Member State to be aggregated and relied upon in another State, there is a clear risk that the onus for providing documentary evidence of contributions in another Member State will fall on the individual.

Ring-fencing rights

111.In March 2017, our predecessor Committee said “It would be unconscionable for EU citizens in the UK and UK citizens in the EU not to have clarity about their status for another two years.”252 Ministers in the UK Government have made several public statements that EU citizens in the UK will be able to stay and their rights will be protected, even in the event of no deal.253 We have welcomed such positive statements and called on EU Member States to make similar public commitments to assure all UK citizens living in their territory.254 While some Member States have initiated legislation to protect British citizens in their territory, it is evident from the no deal planning in the UK and across the EU that it is not possible to mitigate a no deal outcome unilaterally. Ring fencing of citizens’ rights involves lifting out the relevant sections of the Withdrawal Agreement that apply to citizens’ rights and agreeing them separately because the UK and the EU cannot agree the other requirements of withdrawal. It has been argued that this could be done as a separate Treaty under Article 50.255

112.The 3million and British in Europe joint letter to Donald Tusk said:

We ask the EU and the UK to sign and implement under Article 50 the citizens’ rights part of the Withdrawal Agreement now, or at least to commit now unequivocally in a joint political statement that this will be done prior to Brexit coming into force.256

113.Both the UK and the EU have said that resolving the issue of citizens’ rights were priorities for the withdrawal negotiations and are contained in the Withdrawal Agreement text. The importance placed on how EU citizens are treated in the UK will not change. The UK leaving the EU without a deal would cause real anxiety both for UK citizens living in the EU and EU citizens in the UK.

114.In the event of the UK leaving the EU without a deal, the UK should offer to the EU that it is ready to ring-fence the citizens’ rights contained in the Withdrawal Agreement, and agree the relevant sections as a separate Treaty under Article 50. It should call on other Member States to respond positively to this proposal.

A “managed no deal”

115.Jill Rutter estimated that roughly a quarter of the technical notices issued by the Government indicate the need to negotiate some form of agreement with the EU and/or EU Member States in the event of withdrawal from the EU without an overall deal on the terms of exit or therefore a transition period.257 Sir Ian Cheshire, Government Lead Non-Executive Director, told us that the assumption inside Government has been that the UK “would have to have a series of departmental” and “geographic specific” deals.258 He admitted that they “will not necessarily provide the longer-term answer, but the immediate issue is to deal with the urgent and highly impactful issues.”259

116.However, the EU’s Chief Negotiator, Michel Barnier told us in September that:

if there is a no deal there is no more discussion. There is no more negotiation. It is over and each side will take its own unilateral contingency measures, and we will take them in such areas as aviation, but this does not mean mini-deals in the case of a no deal.260

This position was reiterated in the European Commission’s latest Communications which emphasise that Member States should refrain from bilateral agreements with the UK, which would undermine EU unity.261

117.Sir Simon Fraser, Deputy Chairman, Chatham House, pointed out that “Michel Barnier is not going to say, while he is negotiating a deal, that if we do not get the deal we will do something else.” He also believed that there would be “very big pressure” on the EU side to reach “pragmatic arrangements”. However, he concluded that the EU’s approach to side-deals “would be quite limited [and] focused on areas of their principal concern, not ours.”262 Holger Hestermeyer felt that some of the mini-deals might be designed to “become regular deals”. However, any deals would likely require a dispute settlement mechanism, which had been a problem with the negotiations thus far.263

118.The “time consuming” nature of the EU’s legislative process was also pointed out to us. European Parliament elections will take place in May 2019 and the EU will not be “mobilised at all in this period to deal with urgency.”264 A new Commission will also be established in autumn 2019 and this will absorb much of the focus of the new Parliament.

119.Sir Amyas Morse emphasised that any mini-deals “require mutual good will to put them in place.”265 Jill Rutter felt that “at the point at which there is no withdrawal agreement,” the atmosphere “could be quite acrimonious.”266 Julian Jessop suggested that if the UK made “a good offer on citizens’ rights, which it has effectively already done,” if it confirmed it would pay “at least some” of the financial settlement,267 and if there was “a satisfactory backstop on Northern Ireland” that would maintain goodwill. Furthermore, “if the economic imperative is there, all of these problems, however complicated and numerous they may be, are fixable.”268

120.The idea of some form of ‘managed no-deal’, with side arrangements mitigating the effects of leaving the EU without a deal, was met with scepticism by our panel of witnesses on 19 December. Professor Catherine Barnard, Professor of European Union Law, University of Cambridge, said that “a managed no deal requires bilateral agreements, and the EU has come out very clearly and said, ‘No bilateral agreements. We will do unilateral decisionmaking, which helps the EU27’”; Sam Lowe described the term as “a political slogan of no substantive worth”. Henry Newman, Director of Open Europe, said that:

There are some substantive things the UK can do unilaterally to mitigate the effects of no deal in certain areas. That is indisputable, but overall, unless you can agree side agreements, there will be very significant disruption.269

121.The Minister told us he did not use the phrase ‘managed no deal’.270 However, he insisted the UK would not be “crashing out” of the EU in the absence of a deal; a “huge amount of preparation” has gone on.271

122.The Government’s no-deal technical notices place significant weight on assumptions about how the EU will respond in the event of no-deal. This is at odds with the assumptions of most of our witnesses that the scope for side deals will be quite limited and will focus on areas of the EU’s greatest interest rather than the interests of the UK. It is also clear that any side deals also require the maintenance of a degree of goodwill between both sides. This will require some settlement of financial obligations and a generous guarantee of the rights of EU citizens. It is also difficult to see goodwill being maintained without an indication of the path that can be followed to ensure that a hard border in Ireland can be maintained while the UK maintains the right to establish an independent trade policy and pursue policies that may entail regulatory divergence.


7 Institute for Government, Preparing Brexit: How ready is Whitehall? June 2018, p4

8 Ibid

10 National Audit Office, Department for Environment, Food and Rural Affairs: Progress in Implementing EU Exit, HC 1498, 12 September 2018, para 3

15 Institute for Government, Brexit: six months to go, September 2018, p3

20 Secondary Legislation Scrutiny Committee, Forty Second Report, Letter from Mr Chris Heaton-Harris MP, Parliamentary Under Secretary of State for Exiting the European Union, 25 October 2018

24 Commons Library, What if there’s no Brexit deal?, 28 December 2018

30 Institute for Government, The UK still isn’t ready for a no deal Brexit, 28 September 2018

37 First Report of Session 2016–17, HC815, para 163

38 Economists for Free Trade, No Deal is the Best Deal for Britain, 13 January 2019

40 The UK in a Changing Europe, What would trading on WTO terms mean?, 6 December 2018

41 UK Government, EU Exit: Long-term economic analysis, November 2018

42 Committee on Exiting the EU, The future UK-EU relationship, Fourth Report of Session 2017–19, HC 935, 4 April 2018

43 Lords European Union Committee, Brexit: trade in nonfinancial services, 18th Report of Session 2016–17, HL 135, 22 March 2017

49 Qs 1311 and 1340–4

55 Seventh Report of Session 2017–19, HC 1564

56 The Data Protection Act 2018 provides the legal basis for data protection in the UK. The legislation ensures compliance with the General Data Protection Regulation (GDPR) and transposed the Law Enforcement Directive. This regime permits the transfer of personal data within the European Economic Area (EEA)—28 EU Member States plus Norway, Iceland and Liechtenstein.

57 The progress of the UK’s negotiations on EU withdrawal: Data: Government Response to the Committee’s Seventh Report, Sixth Special Report of Session 2017–2019, HC 1564

58 The progress of the UK’s negotiations on EU withdrawal: Data: Government Response to the Committee’s Seventh Report, Sixth Special Report of Session 2017–2019, HC 1564

60 Political Declaration setting out the framework for the future relationship between the EU and the UK, para 8

62 Commission document on data protection: Standard data protection clauses, Binding corporate rules, Approved Codes of Conduct, or Approved certification mechanisms

63 Committee report on Data, paras 52–57

66 European Commission, Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan, COM/2018/880 final, 13 November 2018

67 European Commission, Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan, COM/2018/880 final, 13 November 2018

70 The UK in a Changing Europe, What would trading on WTO terms mean?, 6 December 2018

73 European Commission, Brexit: preparedness notices

74 HM Revenue and Customs, Trading with the EU if there’s no Brexit deal, 23 August 2018

75 HM Revenue and Customs, Trading with the EU if there’s no Brexit deal, 23 August 2018

76 The UK in a Changing Europe, What would trading on WTO terms mean?, 6 December 2018

77 Fourth Report of Session 2017–19, HC935, para 144

78 HC Debate 21 January 2019 Col 42

80 Lorand Alexander Bartels, ‘Interim agreements’ under Article XXIV GATT, April 2009

81 HC Debate 21 January 2019 Col 48

82 Economists for Free Trade, No Deal is the Best Deal for Britain, 13 January 2019

93 The UK in a Changing Europe, What would trading on WTO terms mean?, 6 December 2018

95 International Trade Committee, Continuing application of EU trade agreements after Brexit, First Report of Session 2017–19, HC 520, 7 March 2018

101 Second Report of Session 2017–19, HC 372, para 121

103 Second Report of Session 2017–19, HC 372, para 121

104 Q2856 and Q2858 and Committee on Exiting the EU, Letter from Bernadette Kelly to Chair Hilary Benn, 26 October 2018

109 Qq3666–3677.

110 Q3671. See also HC Deb 8 January 2019 cols 189–203.

120 In his answer to WPQ 206715 on 16 January 2019, the Minister said the UK was aware that the French were planning for ‘border control posts’ that would be ‘able to process products of animal origin at the ports of entry for the Channel’ but did not specify Calais. The Minister also said that the UK would ‘continue to monitor the situation in Calais and until any such border inspection post is operational’. (There is currently no Border Inspection Post at Calais. We note that there is a Border Inspection Post at Dunkerque.)

132 Business, Energy and Industrial Strategy Committee, The response from business to the Withdrawal Agreement and Political Declaration, Sixteenth Report of Session 2017–19, HC 384, 10 December 2018

133 Qs2771 and 2802

138 Qs 2794 and 2844

141 Department of Health and Social Care, Batch testing medicines if there’s no Brexit deal, 23 August 2018

148 European Commission, Communication, “Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: Implementing the Commission’s Contingency Action Plan”, 19 December 2018; this provision is only for bilateral carriage, a journey from the UK to a single destination in the EU and then back to the UK rather than for multiple stops.

149 Joint report from the negotiators of the European Union and the United Kingdom Government on progress during phase 1 of negotiations under Article 50 TEU on the United Kingdom’s orderly withdrawal from the European Union, 8 December 2017

150 PM speech on our future economic partnership with the European Union, 2 March 2018

154 Q3014

155 NIAC oral evidence, Karen Bradley 21 November 2018, Q373, see also Q334.

167 Qs 2915 and 2917

169 See Qs 2996–7 and 3004–5 See also written evidence from the British Medical Association (BDR0031); the House of Lords EU Committee, Oral evidence: Brexit: Reciprocal Healthcare, Wednesday 15 November 2017

170 TECHNICAL EXPLANATORY NOTE: NORTH-SOUTH COOPERATION MAPPING EXERCISE, The six areas of co-operation agreed by the North-South Ministerial Council, under Strand II of the GFA are: agriculture, environment, transport, health, tourism, and education.

172 CER, Plugging in the British Completing the Circuit, June 2018

174 UK Government, EU Exit Assessment of the security partnership, 25 November 2018, para 2.1.2

176 Qs3252 and Q3262. See also Qq3238–40 for the Norway/Iceland extradition agreement with the EU

177 Lynne Owens, Director General of the National Crime Agency, Oral evidence before the Home Affairs Committee, 30 October 2018

178 BBC Today programme, 27 December 2018

179 Home Affairs Committee, Oral evidence: The work of the Home Secretary, 17 October 2017, Q12; and Home Affairs Committee, 4th Report of 2017–19, UK-EU security cooperation after Brexit, HC 635 para 132, para 139

192 Q670

193 Q646 and Q1750

194 Q634, Q662

195 Q1719

197 The letter was signed by representatives of Universities UK, the Russell Group, Guild HE, Million Plus and University Alliance. Universities UK, University leaders warn against No Deal as vital research comes under threat, 4 Jan 2018

198 TechUK, How would a No Deal Brexit impact tech? Monday 14 January 2019

203 European Commission, Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 539/2001 listing the third countries whose nationals must be in possession of visas when crossing the external borders and those whose nationals are exempt from that requirement, as regards the withdrawal of the United Kingdom from the Union, COM (2018) 745, 13 November 2018. Also to note: A new system, European Travel Information and Authorisation System (ETIAS), will eventually replace the visa-free scheme. Once fully implemented from 2022, UK visitors will have to register online and pay €7 for a three-year visa.

204 Department for Exiting the EU, Citizens’ Rights – EU citizens in the UK and UK nationals in the EU Policy Paper, 6 December 2018, para 2

207 HM Government, The UK’s future skills-based immigration system, December 2018. At the same time, the UK has introduced the Immigration and Social Security Co-ordination (EU Withdrawal) Bill, which will make provision to end free movement under retained EU law.

208 Home Office, EU Settlement Scheme: Statement of Intent, 21 June 2018, para 3.3 and HC Deb 21 Jan col 27 and col 36

209 The UK Government No Deal technical notices came out in tranches on 23 August 2018, 13 September 2018, 14 September 2018, 24 September 2018, 12 October 2018, 19 October 2018, 22 October 2018, and 29 October 2018, and did not include a No Deal technical note for citizens. The Citizens’ rights – EU citizens in the UK and UK nationals in the UK. Policy Paper was published on 6 December 2018

212 See the Government’s response to the Committee’s report: The progress of the UK’s negotiations on EU Withdrawal: The rights of UK and EU citizens, HC 1872

213 Home Affairs Committee, Oral evidence: Government Preparations for Brexit: Border and Security Operations, HC 1674, 30 October 2018, Q15

214 HC Deb 19 December 2018, col 814

215 Letter from the 3million and British in Europe to the President of the European Council Donald Tusk, 16 January 2019

218 Q1978; British in Europe, Where does the March Agreement Leave Me? March 2018. See also British in Europe NEG0021 paras 23–35; and MPI report, Next Steps, pp.22–25

219 British in Europe, No Deal Brexit preparedness--why the Commission’s proposal does not work, December 2018

221 Directive 2003/109/EC of 25 November 2003 concerning the status of third-country nationals who are long-term residents

222 Q3611. The 3million and British in Europe letter to Donald Tusk of 16 January said, “To date, some EU27 countries have set out what they propose to do, but legislation will need to be put in place to implement these proposals.”

226 Polish Government Legislative Process, Projekt ustawy o zasadach pobytu na terytorium Rzeczypospolitej Polskiej obywateli Zjednoczonego Królestwa Wielkiej Brytanii i Irlandii Północnej oraz członków ich rodzin oraz świadczeniach z zabezpieczenia społecznego w związku z wystąpieniem tego państwa z Unii Europejskiej i Europejskiej Wspólnoty Energii Atomowej, 11 January 2019, and British Embassy Warsaw, Translation of the Polish government’s consultation draft on rules of stay for UK citizens in a no deal scenario

233 EU Exit: what you need to know, updated 11 January 2019, www.gov.uk; ‘We must ensure Britons can stay in France’-minister, The Connexion, 3 October 2018; No-deal Brexit: What France’s draft law means for Brits in France, The local, 17 October 2018

234 WPQ 209279 answered on 21 Jan 2019 included “We have informally approached other Member States and are prioritising those that are the major pensioner, worker and tourist destinations. We will shortly be writing to all EU Member States, along with the EU Commission, formally outlining our generous offer on reciprocal healthcare. This will be subject to ongoing discussions.

242 The Social Security Coordination (Regulation (EC) No 883/2004, EEA Agreement and Swiss Agreement) (Amendment)(EU Exit) Regulations 2018; The Social Security Coordination (Regulation (EC) No. 987/2009)(Amendment)(EU Exit) Regulations 2018, The Social Security Coordination (Council Regulation (EEC) No 1408/71 And Council Regulation (EC) No 859/2003)(Amendment)(EU Exit) Regulations 2018; and The Social Security Coordination (Council Regulation (EEC) No 574/72)(Amendment)(EU Exit) Regulations 2018. “These instruments make amendments to the retained Coordination regulations, principally to remedy deficiencies that arise as a result of provisions that do not apply to the UK, confer functions on EU entities that no longer have functions in relation to the UK and make provision for, and in connection with, reciprocal arrangements between the UK and EU MS.”

244 Q3616

246 NHS treatment for overseas patients, Thirty-seventh Report of Session 2016–17, HC 771, para 12 (EEA and Switzerland).

251 Qq3617–3618. Ibid, para 24. We note that the Government paper recognised that the concern over access to benefits and housing was described as “quickly”

252 Second Report of Session 2016–17, The Government’s negotiating objectives: the rights of UK and EU citizens, HC 1071, para 49

254 Eighth Report of Session 2017–19, The progress of the UK’s negotiations on EU withdrawal: the rights of UK and EU citizens, 23 July 2018, HC 1439

256 Letter from 3million and British in Europe, 16 January 2019

261 See the Communications of 13 November 2018 and 19 December 2018

267 Chris Heaton-Harris told us that some of the financial settlement would have to be paid, “because there are legal obligations that we have. We have had thousands of civil servants working in Europe over a long period, so there is lots of pension liability that resides there, but it would be nowhere near [£39 billion]” Q3556




Published: 28 January 2019