How will Brexit impact Wales?

(Pic : BBC Wales)

After 6 months of evidence-taking, the Assembly's External Affairs Committee recently published its report on the implications of Brexit (pdf). It's not light reading, but whether you voted for Brexit or not you deserve to be told what's happening behind the scenes.

I've written on this before (Brexit: What could it mean for Wales?) while John Dixon/Borthlas did a series of posts over the last fortnight - but this has a much stronger evidence base. It could be one of the most important committee inquiries of the Fifth Assembly as we head towards the UK Prime Minister's target date for starting the Brexit process.

The Committee recommended, in summary, that the Welsh Government:

• Publish the evidence base used to determine its position in the recently-released white paper Securing Wales' Future (pdf).
• Provide a detailed assessment of administrative changes made as a direct consequence of the referendum result.
• Provide a register of risk, outlining where Brexit will impact its activities.
• Set out steps taken to maximise the use of EU funding since the referendum.
• Press the UK Government for full involvement in shaping its negotiating position and direct participation in negotiations involving devolved policy areas.

The report was split into two parts: 1. themes emerging from Brexit and 2. scrutiny of how the Welsh Government and others are responding/should respond.

Emerging Issues

(Pic : shippingcontainersuk.com)

Post-Brexit trade with the European Union – Ensuring tariff-free access to the EU single market is said to be "crucial"; in 2014, EU exports were worth £5billion (43% of the Welsh total), while EU-headquartered firms employ 50,000 people. Manufacturing is proportionally more important to the Welsh economy (16% of GVA) than the UK (10.1%), with big companies having supply chains that stretch across the continent. Tariffs of anywhere between 3-18% (up to 34% for agricultural products) will have an impact. It could even require a complete realignment of Welsh economic policy away from attracting inward investment towards boosting domestic business. Post-Brexit EU trade negotiations – particular for agriculture – could be difficult due to historically protracted negotiations with countries like New Zealand.

Free movement of people – There are estimated to be 64,000 EU nationals living in Wales. A number of business groups emphasised the need to continue free movement; about 29% of the UK's food and drink workforce are EU nationals. However, the First Minister told the committee that immigration was less of a priority for him than accessing the single market – likely to be contrary to how people voted in the referendum (Why did Wales vote Leave?).

Education, research and skills – The status of EU nationals working in higher education, and their qualifications, will need to be clarified. It was argued EU nationals already working or studying at Welsh universities, benefiting the economy by £47million a year, should be allowed to stay on the same terms they do now. Also, the UK receives more money back in research funding (such as Horizon 2020, or via the European Investment Bank) than we currently pay in – a gap that will need to be filled.

Environment, agriculture and fisheries – Wales receives a vastly-higher proportion of EU agricultural funds  per head of population (between 8-14% depending on which Pillar) than the rest of the UK, so if it's "Barnettised" by the UK Government post-Brexit, Welsh farmers could lose tens of millions of pounds in direct payments. As agriculture is devolved, there are demands Wales be solely responsible for policy post-Brexit, and for the Welsh Government to ring-fence/protect any additional money from Westminster designated for it. There are also a number of concerns that environmental regulations could be weakened - particularly when it comes to climate change and conservation – because the relatively straightforward European Commission enforcement mechanisms will cease to apply. The Welsh fisheries industry is too small to be directly impacted by EU policy, but there'll be an impact on marine conservation (for reasons stated earlier).

Health and social care – Like higher education there's uncertainty about EU nationals working here; about 8.8% of nurses and 20% of care workers are from the EU. EU measures for cross-border disease control and monitoring will have to be replaced or strengthened, while health bodies expressed grave concerns about the loss of advice/access to the pan-EU European Medicines Agency (which regulates medicines and drug licenses). Another big concern is access to free health care in other EU member states (European Health Insurance Card) and access for UK citizens to EU-wide clinical trials.

Equalities and community cohesion – There's resistance to any weakening of equalities regulations/legislation, particularly when it comes to women's rights (equal pay, maternity leave), and some groups are worried the proposed UK "Great Repeal Bill" will roll them back. A 42% increase in recorded racially-motivated hate crimes since the referendum has since receded (though remains higher than pre-referendum).

EU structural funding/regional aid – £2billion in EU structural funds will be provided to Wales between 2014-2020, and in 2014 Wales received £245million more back from the EU than we payed in. This will end come Brexit, and although there are Westminster promises to maintain EU funds until 2020 (if Brexit happens before then), the post-Brexit regional development policy for the UK is yet to be revealed.

Preparedness of public services – Short answer is public services in Wales are unprepared, and the Welsh Government will need to address this as a matter of urgency. However, Brexit shouldn't be used as an excuse not to address challenges currently facing Wales on poverty, education, health etc. Brexit is expected to lead to more public spending cuts due to a forecast £122billion increase in public borrowing over the next five years.

Scrutiny of the Brexit Response

You've got to say the verdict on the UK Government
response doesn't make good reading. At all.
(Pic : ITV Wales)

Welsh Government

• They've established a Brexit sub-committee and have outlined key priorities:
• Playing a full part in Brexit negotiations.
• Access to the single market.
• Continued participation in major programmes like the Common Agricultural Policy (CAP) and Objective One.
• Revising the Barnett Formula to take into account relative need.
• A "new footing" for relations between the UK nations.
• "Access to the single market" means: no tariffs, no regulatory barriers and no sector-by-sector access/deals.
• The Committee believe the Welsh Government could've outlined their position earlier, but understand the UK Government's "hesitancy" will have made things difficult.

UK Government

• There's a distinct lack of information and the UK Government only made their position clear as late as Theresa May's speech on January 17^th. The First Minister accused them of having a "confusing and mixed message". They have, coincidentally, released their own white paper today.
  
• Emyr Jones-Parry said any suggestion the UK Government doesn't want to make its position clear so it doesn't give away negotiating power was "one of the most ridiculous arguments I've heard". The lack of information is down to them not knowing what their policy is.
• The UK Government haven't engaged with the Committee in its work and have been slow to respond to requests.

Wales's Role in Brexit Negotiations

• The key elements of the withdrawal process include: the withdrawal agreement itself, post-Brexit arrangements with the EU, transitional arrangements plus internal agreements on how Brexit will impact the UK itself.
• All indications are the UK Government will negotiate Brexit entirely by themselves. The First Minister argued Wales doesn't "need to be in the room" but an agreed position – with Welsh input - should be outlined before negotiations start.
• The First Minister insisted the final negotiating position should be agreed by the four UK governments and ratified by the four UK legislatures (the latter won't happen following the Supreme Court ruling on Article 50).
• Finance & Local Government Minister, Mark Drakeford (Lab, Cardiff West), represents Wales on the Brexit Joint Ministerial Committee (JMC). The JMC itself is seen as a "weak mechanism/talking shop" dominated by the UK Government.
• It took UK Brexit Minister, David Davis MP, three months to respond to the Committee's request for information on how Whitehall is representing Welsh interests.

The UK Constitution

• Some areas of policy - fisheries, agriculture, animal health, environment – may benefit from a post-Brexit pan-UK framework, but the First Minister is adamant they should be developed in consultation with the devolved administrations.
• The First Minister believes current EU rules affecting devolved areas should be enshrined in UK law.
• Mechanisms for inter-government co-operation are "lacking", and there were suggestions the UK should move to a system of shared competence (ironically) similar to the EU. This could include the devolved nations having a say in trade agreements – similar to Canada and Belgium.
• Prof. Roger Scully on Welsh influence in negotiations following our leave vote: "There's an old saying, 'speak softly and carry a big stick'....I think we're going to have to speak softly because everyone knows we don't have a stick."

The Role of the Senedd

• Inter-parliamentary relations in the UK are poorly-developed and there's no parliamentary equivalent of the JMC. However, in contrast, the National Assembly has successfully represented Welsh views at the European Parliament.
• There are question marks over where power to repeal EU laws will reside, particularly in devolved areas. The "Repeal Bill" may require Assembly consent; if not it could undermine the devolution settlement.
• Due to the Supreme Court's Article 50 judgement that the Sewel Convention/Legislative Consent Motions are a convention/courtesy - not legally binding - no legal consequences will result if the UK Government acted unilaterally (though there would be political consequences).
• The prospect is raised of the Senedd passing a "Continuation Bill" to maintain EU laws in devolved areas, but this presents challenges as UK parliamentary sovereignty means Westminster could simply repeal it.

Conclusions

There you have it – the first substantive piece of work on Brexit from the Senedd.

Regardless of how you voted last June, "sending a message to the out-of-touch elite" and "taking back control" comes with practical consequences which have now been outlined for Wales.

It's dull stuff, but light years ahead of what's come out of London to date. Combined with Securing Wales' Future you can argue Wales is/was a few steps ahead of Whitehall on Brexit until today....but at the same time it means absolutely nothing because the process will be led almost entirely from London.

On that Westminster issue, the above infographic gives you an idea of the "democratic legitimacy" of MPs going against the grain of their parties and voting for or against the Article 50/Brexit Bill yesterday, based on estimates from the University of East Anglia for how their constituents voted last June.

Ignoring the areas we already knew voted Remain like Cardiff; Pontypridd voted Remain as did, somewhat surprisingly, Bridgend (by the slimmest of margins) and Swansea West. Everyone in Bridgend county south of the M4 (and Pyle/Kenfig Hill too) can become a card-carrying member of the metropolitan liberal elite now. My keffiyeh's in the post and I'm working on my smuggly dissatisfied facial expression, plus Madeline Moon did join the Labour rebels in voting against.

Having said that, it's not as if David TC Davies would've voted against starting Brexit in line with his constituents, is it? So maybe the argument there was over-egged.

Nonetheless, after yesterday there's no turning back.