Brexit: devolution Contents

Summary of conclusions and recommendations

Devolution, the UK and the EU

1.The devolution settlements affecting Northern Ireland, Wales and Scotland have developed incrementally and asymmetrically since 1997, as increasing powers have been conferred upon the devolved institutions over time. In the absence of any over-arching concept of ‘shared competence’, or of ‘subsidiarity’, as these are understood at EU level, these changes have been set out in a piecemeal series of Acts of Parliament, each amending its predecessors. This has led the House of Lords Constitution Committee to warn of the increasing complexity of “overlapping and shared competences”. (Paragraph 35)

2.Against this backdrop, the European Union has been, in effect, part of the glue holding the United Kingdom together since 1997. The supremacy of EU law, and the interpretation of that law by the Court of Justice of the EU, have in many areas ensured consistency of legal and regulatory standards across the UK, including in devolved policy areas, such as environment, agriculture and fisheries. In practice, the UK internal market has been upheld by the rules of the EU internal market. (Paragraph 36)

3.Brexit therefore presents a risk that the complex overlapping competences within the UK could become increasingly unstable. It is not for the European Union Committee to recommend answers to these essentially domestic constitutional questions. We note, however, that the UK Government, in its pre-election published statements on Brexit and on the Repeal Bill, did not address the fundamental constitutional challenges now facing the whole United Kingdom. The new Government must now do so, working in a spirit of partnership and cooperation with the devolved legislatures and governments. (Paragraph 37)

Northern Ireland

4.Northern Ireland’s distinctive geographical, historical, political, and (in the context of the 1998 Belfast/Good Friday Agreement) constitutional circumstances mean that it will be profoundly affected by Brexit. There will be a significant impact, including on cross-border trade, the agri-food sector, energy, transport, fisheries, access to EU labour, healthcare provision, tourism, and police and security cooperation. (Paragraph 93)

5.It also appears that the Brexit debate has undermined political stability and exacerbated cross-community divisions, contributing to the collapse of the Northern Ireland Executive and the calling of an early Assembly election. At the time of writing, the power-sharing institutions have yet to be restored. This, together with the appointment of a new Irish Taoiseach, the Conservative-DUP confidence and supply agreement at Westminster, and the fact that no nationalist MPs have taken their seats in the new Parliament, has created new uncertainty, underlining the fragility of the political settlement in Northern Ireland. (Paragraph 94)

6.The Belfast/Good Friday Agreement established a delicate equilibrium, encapsulated in the power-sharing institutions, and the mechanisms for enhanced North-South and East-West cooperation. It is imperative that Brexit does not weaken this equilibrium or the commitment and confidence of both unionist and nationalist communities in the political process. While the agreement between the Conservative Government and the DUP provides an opportunity for Northern Ireland’s interests to gain attention and prominence, the Government must also take account of the interests of the nationalist community, in order to maintain its confidence. Political stability in Northern Ireland must not be allowed to become ‘collateral damage’ of Brexit. (Paragraph 95)

7.Our December 2016 report on Brexit: UK-Irish relations called for all parties to the negotiations to give official recognition to the special, unique nature of UK-Irish relations in their entirety, including the position of Northern Ireland, and the North-South and East-West structure and institutions established under the Belfast/Good Friday Agreement. (Paragraph 96)

8.We are therefore heartened by the statements by the Prime Minister, the Irish Government, the European Council and the European Parliament, all expressing a commitment to protect the achievements of the peace process and to seek to avoid the imposition of a hard border on the island of Ireland. We also welcome the European Council’s statement that “the Union should also recognise existing bilateral agreements and arrangements between the United Kingdom and Ireland which are compatible with EU law” as an indicator that it will not stand in the way of retention of the Common Travel Area, which predates either UK or Irish EU membership and which benefits all communities across these islands. (Paragraph 97)

9.‘Special status’ is a politically contentious term in Northern Ireland, and we acknowledge the unionist community’s concerns that no aspect of the Brexit negotiations should undermine Northern Ireland’s ties to the rest of the UK. Yet at the same time, the specific circumstances in Northern Ireland give rise to unique issues that will need to be addressed during the Brexit negotiations. (Paragraph 98)

10.As we concluded in our December 2016 report, the unique nature of UK-Irish relations necessitates a unique solution. We welcome the European Council’s commitment to seek “flexible and imaginative solutions”, and call on the UK Government to work with the EU negotiators to identify and outline such solutions as a matter of priority. (Paragraph 99)

Wales

11.Wales could be profoundly affected by Brexit. The Welsh economy is highly reliant on membership of the EU Single Market, in particular in the fields of manufacturing (which is a proportionately larger sector of the Welsh economy than in other parts of the UK, and where a small number of exporting companies in the automotive and aerospace industries are principal economic drivers) and agriculture. Two-thirds of Welsh exports go to the EU, and Single Market membership has been an important driver of foreign direct investment. The Welsh economy is therefore particularly vulnerable to the effects of any diminution in the UK’s unfettered access to and ability to trade freely with the Single Market. (Paragraph 138)

12.Welsh farming is particularly at risk. Eighty per cent of Welsh land is designated as an EU Less Favoured Area, and Wales’ topography and climate means that Welsh farming is dominated by hill farming and sheep farming—sectors that are particularly dependent on EU funding, through the Common Agricultural Policy, and EU markets. The rural communities that rely on the farming sector, which make an important contribution to Welsh culture and language, are also at risk. (Paragraph 139)

13.Overall, Wales is a substantial net beneficiary of EU funds, including via Common Agricultural Policy payments and EU structural funds. This places it in a vulnerable position, and we note the strong arguments put to us that Wales should not lose out financially as a result of Brexit. In particular, we note widespread concern that the Barnett Formula is ill-suited to recompensing Welsh communities for the loss of needs-based EU funding. (Paragraph 140)

14.While the numbers of EU workers in Wales are comparatively low, the NHS, agriculture, tourism and some parts of the manufacturing sectors are heavily dependent on EU labour. Restrictions upon the free movement of EU workers could place these sectors under strain. (Paragraph 141)

15.But while Brexit presents major challenges to Wales, it appears to have less leverage over the UK Government than either Northern Ireland or Scotland. We heard general concern that, because of its size, because the situation in Wales does not give rise to such complex political and constitutional questions as in Scotland and Northern Ireland, and because, unlike the other devolved jurisdictions, most votes cast in Wales were in favour of leaving the EU, the interests of Wales may be overlooked in the Brexit negotiations. The UK Government needs to take action to assuage these fears. (Paragraph 142)

16.The Welsh Government has made clear that it wishes to work constructively with the UK Government to ensure that Wales’ interests and priorities are reflected in the terms of a UK-wide Brexit agreement. The UK Government needs to reciprocate this good faith and to seek to protect Wales’ interests in the Brexit negotiations. If this does not prove possible, then the case for identifying other means by which Wales’ particular interests can be defended may become more compelling. (Paragraph 143)

Scotland

17.We note the Scottish Government’s earlier stated aim that a newly independent Scotland should remain an EU Member State. We also note the First Minister’s announcement on 27 June that any independence referendum would be delayed until after UK withdrawal in 2019. It is not for this Committee to comment substantively on the Scottish Government’s policy, but we note the European Commission’s consistent view that, under EU law, an independent Scotland would be treated as a third country, and would have to apply for accession to the EU. (Paragraph 201)

18.We also note the Scottish Government’s preference, should Scotland remain part of the UK, for the whole UK to continue within the EU Single Market as part of the European Economic Area. This option was ruled out by the previous Government, and it is now for the new Government, and Parliament, to decide whether this remains the position. (Paragraph 202)

19.We conclude, on the basis of the weight of evidence submitted to this inquiry, that the Scottish Government’s further proposal, for continued Scottish membership of the Single Market, through the European Economic Area, while the rest of the UK leaves the Single Market, is politically impracticable, legally highly complex and economically potentially disruptive to the functioning of the UK single market. (Paragraph 203)

20.Nevertheless, we urge the Government to respect the particular circumstances in Scotland. While we acknowledge that the referendum was a UK-wide vote, giving a UK-wide result, the Government needs to recognise the fact that the vote to remain in Scotland, at 62%, was the largest and most decisive (either in favour of remaining or leaving) in any nation of the UK. (Paragraph 204)

21.We therefore consider that, in the event that the UK Government does not secure a UK-wide agreement that adequately reflects Scotland’s specific needs, there is a strong political and economic case for making differentiated arrangements for Scotland. (Paragraph 205)

22.The Scottish economy has particularly pressing needs, including its reliance on access to EU labour, which is acute in sectors such as health and social care, agriculture, food and drink, and hospitality. We also note Scotland’s demographic needs, and its reliance upon EU migration to enable its population (and in particular, that of working age) to grow. Scotland’s more sparsely populated regions are disproportionately reliant both on EU migration and EU funding. Many of our witnesses argued that the most pressing case, in view of Scotland’s economic and demographic circumstances, would be for a standalone approach to immigration policy. We address this issue in the next chapter. (Paragraph 206)

23.Our witnesses have also suggested that differentiated arrangements could be reached in fields such as energy policy, justice and home affairs cooperation, participation in Europol, access to EU structural or research funds, participation in such programmes as Horizon 2020 or Erasmus, reciprocal healthcare provision, workers’ rights and working hours, and agriculture and fisheries. (Paragraph 207)

24.The uncertainty over the outcome of the Brexit negotiations means that it is not possible at this stage to reach definitive conclusions about the feasibility or desirability of achieving differentiated arrangements across all these various policy areas. Many (for instance, continuing cooperation on justice and home affairs) raise difficult issues of EU law, which we have addressed in separate reports. Moreover, we note that several of these policy areas are already devolved competences, while others are reserved. (Paragraph 208)

25.We note further that achieving differentiated arrangements in some of these areas would depend upon the Scottish Government securing legal personality for Scotland, thus enabling Scotland to negotiate its own agreements with the EU or with third countries in areas of devolved competence. We agree with evidence suggesting that such a development would have profound and unpredictable constitutional and political consequences. (Paragraph 209)

26.Finally, we reiterate that maintenance of the integrity and efficient operation of the UK single market must be an over-arching objective for the whole United Kingdom. But that objective does not preclude differentiated arrangements for Scotland in some areas, and nor does it justify excluding the Scottish Government from the Brexit process. Close cooperation between the UK and Scottish Governments is paramount: it is incumbent on both Governments to set aside their differences and work constructively together to protect the interests of the citizens of Scotland in the final Brexit deal. (Paragraph 210)

A new devolution settlement?

27.We heard much evidence both on existing devolved competences that should remain with the devolved legislatures, but the exercise of which needed to be coordinated at UK level, and on new competences that could potentially be devolved post-Brexit. In this context, we recall the words of the House of Lords Constitution Committee, in its report on The Union and Devolution, that hitherto “There has been no guiding strategy or framework of principles to ensure that devolution develops in a coherent or consistent manner and in ways which do not harm the Union.” Thanks to Brexit, it is now more important than ever that reform of the devolution settlements should be underpinned by a clear and agreed framework of guiding principles. (Paragraph 236)

28.We note also that the Acts of Parliament establishing the devolution settlements set out in full those competences that are in each case either reserved or devolved. On the day of Brexit, competences currently exercised at EU level will, by default, be exercised in accordance with these pre-existing statutory provisions. It follows that without any change in UK law, Brexit will lead to a significant increase in the powers and responsibilities of the devolved institutions. (Paragraph 237)

29.Any attempt to amend the devolution settlements ahead of Brexit would be complex and politically controversial, and we doubt that either the UK Government or Parliament has the capacity to undertake such a task at the same time as achieving a successful Brexit. On balance, we therefore conclude that, for the duration of the Brexit process, the statutory balance of competences between the UK Parliament and the devolved legislatures should as far as possible be unchanged. This is not the time to embark on controversial domestic constitutional reform, either by conferring additional competences upon the devolved institutions or by ‘re-reserving’ competences previously devolved. (Paragraph 238)

30.But while we do not recommend devolving additional competences upon the devolved institutions, we endorse the weight of evidence heard in this inquiry, that the specific labour market and demographic needs of the devolved nations should be accommodated in the context of Brexit. We therefore call on the UK Government, in bringing forward its forthcoming Immigration Bill, to look for opportunities to enhance the role of the devolved institutions in managing EU migration. Local and regional economic and demographic needs, rather than central targets, should drive decision-making. There is already differentiation in respect of non-EU migration, for instance in the provision of Tier 2 visas to meet sectoral requirements, and we urge the Government, in devising a post-Brexit immigration policy for EU nationals, to ensure that maximum flexibility is granted to the UK’s nations and regions. (Paragraph 239)

31.The issue of powers and competences is inextricably bound up with the allocation of funding. We welcome, as far as it goes, HM Treasury’s assurance that existing EU funding commitments (including structural and agricultural funding) made under the current Multiannual Financial Framework until 2020 will be met from domestic funds. But at the same time we note that each of the devolved jurisdictions receives significantly more EU funding per capita than England. This has led to acute concern from across the UK that in the longer term farmers and deprived regions in the devolved jurisdictions would lose heavily were needs-based EU funding to be replaced by UK subsidies granted in accordance with the population-based Barnett Formula. (Paragraph 240)

32.We therefore reiterate the central conclusion of the 2009 Select Committee on the Barnett Formula: “A new system which allocates resources to the devolved administrations based on an explicit assessment of their relative needs should be introduced.” This will be a complex task, but the prospect of Brexit means that reform of the Barnett Formula can be delayed no longer. (Paragraph 241)

33.We agree with the Prime Minister’s statement, in her speech on 17 January, that certain “common standards and frameworks” will be needed to maintain the integrity of the UK internal market post-Brexit. It is regrettable that the Government has hitherto failed to explain clearly and coherently how it will work with the devolved governments to achieve this desired outcome. (Paragraph 267)

34.Any durable solution will need the consent of all the nations of the United Kingdom, and of their elected representatives. We are encouraged by the openness to dialogue and to compromise of the Welsh Government and, while the current political crisis in Northern Ireland is a grave concern, we hope, as we outlined in our report on Brexit: UK-Irish relations, that the over-riding need to preserve the peace process, and to defend the economic and social interests of communities on both sides of the land border, will contribute to achieving an outcome commanding cross-community consent. (Paragraph 268)

35.We are concerned by the apparent deterioration of relations between the UK and Scottish Governments. Statements by Ministers, and in the Government’s White Paper on Legislating for the United Kingdom’s withdrawal from the European Union, seem to imply that the UK Government is considering a top-down approach to establishing the necessary frameworks and standards in law at UK level. (Paragraph 269)

36.The Scottish Government, in contrast, is seeking substantial additional powers post-Brexit, including powers that the Smith Commission, established after the 2014 independence referendum, concluded should continue to be reserved. It seeks these powers with a view to implementing its preferred approach to Brexit for Scotland, which would involve continuing membership of the EU Single Market. In the absence of any agreement on this approach, it holds out the possibility of a further independence referendum. (Paragraph 270)

37.We call on the UK Government and the devolved Governments to work together to put in place the frameworks needed to ensure consistency at UK level, thereby preserving the integrity of the UK single market, while respecting national, regional and local diversity, and the autonomy of the devolved institutions. We note the suggestion of some witnesses that, in the long term, some form of impartial internal arbitration between the constituent parts of the United Kingdom may be required to ensure the integrity of the UK single market. (Paragraph 271)

38.A successful settlement cannot be imposed by the UK Government: it must be developed in partnership with the devolved Governments. We welcome the Secretary of State’s belated confirmation that the legislative consent of the devolved legislatures will be sought in respect of the Repeal Bill. The political and constitutional consequences, were legislative consent to be withheld, while unclear, are likely to be serious. We therefore call on the UK Government and the devolved governments to engage positively in developing solutions that work for the whole of the UK and all its constituent nations and territories. (Paragraph 272)

39.The Brexit process, and the new powers and responsibilities to be exercised by the devolved institutions post-Brexit, will place extra demands on their time and resources. We call on the UK Government and the devolved administrations to work together to ensure that the devolved institutions are properly resourced and equipped for this vital work. This should include more regular interchange between civil servants in the devolved administrations and Whitehall. (Paragraph 273)

Engagement with the devolved institutions

40.We have called on all the Governments of the UK to work together to develop a common approach to Brexit. If this is to happen, they will need a forum within which ideas can be shared and common positions agreed. (Paragraph 290)

41.The Joint Ministerial Committee has been re-energised by Brexit, and we also welcome the establishment of the Joint Ministerial Committee (European Negotiations). We note, however, the concerns expressed by the Scottish and Welsh Ministers that the JMC (EN) is not fulfilling its terms of reference, and it is clear that at a basic level its meetings are not being treated with respect or organised efficiently. This needs to change: if the UK Government wishes the JMC (EN) to make a useful contribution, it must give it appropriate support, both in political and resource terms. (Paragraph 291)

42.More generally, we note that the JMC and the JMC (EN) are not decision-making bodies, and that there is a perception in some quarters that they are used to manage disagreements, rather than to engage with issues and find solutions. This is exacerbated by the perception that the participants are not doing so on equal terms. (Paragraph 292)

43.We therefore endorse the view of most of our witnesses that the UK Government needs to raise its game to make the JMC (EN) effective. This means better preparation, including bilateral discussions ahead of meetings, a structured work programme, greater transparency, and a willingness to accept that the JMC (EN), even if not a formal decision-making body, is more than a talking-shop—that it should be authorised to agree common positions on key matters affecting devolved competences in time to inform the UK Government’s negotiating position. (Paragraph 293)

44.Given the four-week negotiating cycle structure announced for the Brexit negotiations, we further recommend that a long-term programme of meetings of the JMC (EN) should be adopted, with the meetings coinciding with the fourth week in each cycle. This would enable the Government both to report on progress in the preceding cycle, and to identify and agree common positions on devolved issues arising in the forthcoming cycle. (Paragraph 294)

45.We note the suggestion by the Governments of Wales and Scotland that they should have a seat at the negotiating table with the EU when devolved matters are being discussed, and that they should be ‘in the room’ throughout. We call on the UK Government to respond to this suggestion as a matter of urgency, and at all events before the negotiations turn to the future relationship between the UK and the EU, where issues of strong devolved interest, such as fisheries, are likely to arise. (Paragraph 295)

46.The devolved governments, and some of our witnesses, have also argued that fundamental reform is needed to give the devolved institutions a more formal role in UK decision-making post-Brexit, analogous to that of regions and states in federal systems. While there may be merit in such proposals, this would be a far-reaching constitutional reform, which falls outside the scope of this report and the remit of this Committee. (Paragraph 296)

47.We recommend that the structures for interparliamentary dialogue and cooperation be strengthened, and invite the House to consider how this might be achieved. In the short term, the priority is to engage in closer interparliamentary dialogue regarding the Brexit negotiations themselves and the accompanying domestic legislation. We will therefore seek to develop and broaden our well-established mechanisms for collaboration with our colleagues in the devolved legislatures. Working in conjunction with other Committees of the House, we will propose more regular joint meetings with members of cognate Committees with responsibility for Brexit-related issues in the Scottish Parliament, National Assembly for Wales and Northern Ireland Assembly, and in the House of Commons, for the duration of the Brexit negotiations. These joint meetings could provide an opportunity to hear informally from UK and devolved Government Ministers, and to discuss issues of mutual interest and concern. (Paragraph 297)

48.In the longer term, we also see a need for a strengthened forum for interparliamentary dialogue within the post-Brexit United Kingdom. The resourcing of this forum, and its relationship with existing bodies (notably the British-Irish Interparliamentary Assembly) will require careful consideration by the House and more widely. We hope to contribute to that consideration in coming months. (Paragraph 298)





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