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July 5, 2016

ICAS research: Everything you always wanted to know about Brexit* (*but Brexiters were too afraid to answer before the referendum) — government policy issues

The technical team of the Institute of Chartered Accountants of Scotland (ICAS) has come up with a number of questions and answers about the implications of the Brexit.

The following are ICAS questions and answers on government policy issues, which we reproduce with permission:

#1. Under Article 50 of the Lisbon Treaty, when will the UK Government formally notify the European Council of the UK’s intention to withdraw?

This is a matter for the UK Government to decide. Article 50 of the Treaty on European Union clearly states that it requires to be invoked by the Member State that wishes to leave. Until that is done formally (by letter or formal announcement in an EU Meeting/Summit) the two-year clock does not start.

In the days following the referendum it was clear that many other leaders in the EU favour the process starting immediately. However, those in the "Leave" campaign do not appear to be in any hurry to do so and may favour informal talks taking place beforehand. Notably, the German Chancellor has been more sympathetic in her views towards the UK in terms of timing but has also made it clear that the process cannot be allowed to drag on indefinitely. In relation to informal talks there is nothing which requires that the EU enters into these.

#2. On what date does the UK Government think that Britain will no longer be a member of the European Union?

At this moment Article 50 of the Treaty on European Union has not been invoked. Therefore, no provisional timetable for an exit has been made available.

All that is certain, is that once Article 50 is invoked that the UK must leave the EU within a two-year period subject to a possible extension in the duration of this period with the agreement of all 27 other EU member states.

#3. How will the transition process work in practice and what will Government do to minimise its impact on business and the economy during this transition period?

At this stage it is not possible to comment on how the transition process will work in practice. In relation to seeking to minimise the impact on business and the economy please refer to the response to question 1 above.

#4. How will the UK Parliament pass the necessary legislation to facilitate a departure from the EU, when the majority of MPs seem to favour staying in the EU?

Following the referendum (advisory vote), the UK Government can invoke Article 50 without requiring the approval of Parliament. The withdrawal process would then commence.

Assuming that a withdrawal agreement is agreed between the UK and the EU then this would require ratification by both the EU Parliament and the UK Parliament. The possibility exists that either the House of Commons or House of Lords, or indeed both, could refuse to ratify such a deal. This is however seen as unlikely, as political parties are likely to dictate to their respective MPs which way they should vote and party whips will apply normal enforcement procedures.

If, however, there is a General Election before any withdrawal agreement is ratified then the possibility exists that the newly elected Government could be formed by a party/coalition of parties that have campaigned on a "remain in the EU" ticket. In such a scenario the Government could revoke the UK’s earlier decision to involve Article 50 and the UK would remain a member of the EU under its existing terms. Of course adopting this course of action may have political ramifications for the UK in its relationship with the other EU member states.

#5. How does the UK Government intend to address further constitutional uncertainty which is almost certain to now emerge as regards the position of Scotland within the UK?

This is similar to constitutional issues that could arise in Northern Ireland: both sit at the heart of our union and constitutional questions add to the sense of economic uncertainty.

This is therefore a matter that will need to be considered by the Government but may be delayed until the new Prime Minister is in position. The First Minister of Scotland has already stated that "a second referendum must be on the table, and it is on the table".

#6. How would the repatriation of powers from Brussels be handled between Westminster and the devolved Governments? Will the recently agreed Fiscal Framework need to be amended to fund the exercise of such new powers cascading from the EU back to the UK and devolved Governments?

Repatriation of powers would need to be examined to consider whether they relate to matters that are reserved or devolved. So, for example, agriculture and fishing under the terms of the Scotland Act, would be devolved to the Scottish Parliament.

#7. What will the UK Government do with its new-found freedom from EU legislation and regulation? What new policies would it follow?

Firstly, the UK Government needs to decide what form of relationship it wishes to have with the EU. The form of the relationship will influence the extent to which the UK would still need to comply with certain aspects of EU Legislation. If, for example, the UK was to pursue the Norwegian model i.e. membership of the European Economic Area (EEA) then the UK would still need to comply with many of the rules of the EU and still make a contribution to its funding.

The EEA Agreement provides for the inclusion of EU legislation in all policy areas of the Single Market. This covers the four freedoms, i.e. the free movement of goods, services, persons and capital, as well as competition and state aid rules, but also the following horizontal policies: consumer protection, company law, environment, social policy, statistics.

In addition, the EEA Agreement provides for cooperation in several flanking policies such as research and technological development, education, training and youth, employment, tourism, culture, civil protection, enterprise, entrepreneurship and small and medium-sized enterprises.


*Note: ICAS noted that given the very fluid political situation, it recognises that answers may change over time. ICAS said its aim is to inform debate and discussion. The title of this piece is not the original one published by ICAS.

 

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