Never mind the economic forecast – key Government departments won’t be ready for Brexit

Whilst the 2 economic forecasts published yesterday captured the headlines, no less than three key reports to Parliament - also published yesterday, 28 November 2018 – paint a worrying picture about just how ready the country is to continue to function.

And these are just three of dozens of bodies charged with due diligence and scrutiny of the hundreds of “workstreams” guiding the work of thousands of civil servants now deployed to Brexit preparations.

 Brexit Partners have been monitoring the framework of over 100 “no-deal Technical Notices” and the scrutiny reports from the Parliamentary Select Committees.

So to yesterday’s publications:

Public Accounts Committee report on the Department for Transport's implementation of Brexit – with the headline that: “There is a risk that the Department for Transport will not be ready in the event of the UK departing the EU without a negotiated deal”;

Foreign Affairs Committee report on Delivering Global Britain – with the headline that: “The Foreign Office faces 'considerable challenge' to ensure it has the skills required for European diplomacy post Brexit”; and

Commons Library research briefing: “Looking at funding received by the UK from the EU and considering the implications of Brexit on the EU as a source of funding.”

Department for Transport's implementation of Brexit

There is a real risk that the Department for Transport will not be ready in the event of the UK departing the EU without a negotiated deal - and this risk is increasing as time runs out to deliver what is needed.

No significant difference to its previous reports on: border preparations, customs, Department for Environment, Food and Rural Affairs and the Department for Business, Energy and Industrial Strategy.  “We are concerned about how well Government is prepared.”

There is a real prospect of major disruption at our ports.  The slow progress and poor communication around work to avoid this through schemes such as Project Brock concerns us.

The lack of detailed information provided to businesses to help them prepare and the secrecy surrounding discussions through the use of non-disclosure agreements is hampering businesses’ ability to plan.

The Department has an uphill task to pass the necessary legislation in time - the majority of which the Department sees as essential for Brexit – and insufficient time for proper scrutiny of this.

The Committee is worried that: “we are seeing these same concerns again and again with little progress being made.  Even if a deal is agreed, the Department faces a challenging workload during the proposed transition period.”

Public Accounts Committee Chair, Meg Hillier MP, said that “The future of road, rail, maritime and air access to Europe after Brexit remains unclear and the Department for Transport has a critical role in ensuring the UK is prepared.

With so little time remaining, there is still much to do.  The risks associated with no-deal are severe, yet plans for avoiding disruption around major ports in particular are worryingly under-developed.”

The Department of Transport plans to spend £30-35 million this year on Project Brock, intended to manage traffic and lorry-queuing at Dover.  With 2 months to go until Brexit, it is still to carry out proposed desk-based testing of the system and engagement with businesses has been poor.

Hillier: “The secrecy around the Department’s preparations, and the shortcomings in assurance on its progress, are a potentially toxic combination.”

Government risks damaging the image and prestige of Foreign and Commonwealth Office

the Foreign Affairs Committee Report published yesterday, 28 November 2018, concludes that the Government risks the prestige of the Foreign and Commonwealth Office as an employer by failing to clarify the purpose and role of the department in Government.

It is struggling to prioritise and foster the range of skills needed for modern diplomacy - and failing to pay comparable salaries across government departments, resulting in the loss of experienced staff.  This as the UK has to build a stand-alone service from scratch having been a contributing member of the consolidated EU bloc.  It now needs to rediscover and rebuild the broad skills required to deliver diplomacy in a changing world.  The Committee set out measures the department should take to get up to speed.

The challenges facing the FCO are significant - and in many ways, unprecedented, says the Committee.  The machinery of Government has changed over the last two decades leaving foreign policy responsibilities fragmented.  Work must be delivered against shifting contexts: leaving the EU, the evolving roles of China and Russia, and the impact of new technology.

The FCO is not being helped by uncertainty over its purpose in Government.  The Government needs to properly define ‘Global Britain’ - and the FCO’s role in delivering it.  Without a clear sense of what the Foreign Office exists to do, the Report concludes, a proper assessment of the skills it needs is impossible.

Chair of Committee, Tom Tugendhat MP, said: "Britain’s diplomats and Foreign Office have been among the best in the world and one of the jewels in the crown of the British civil service.  Recently, the Committee has had cause to question that.”

The Committee Reports have documented a lack of clarity about the Government’s flagship policy, “Global Britain”; concerns about levels of staffing across EU member states; and specific failures of diplomacy such as the 2017 elections to the International Court of Justice.

Tugendhat: "To maintain and strengthen our place in Europe and the wider world as we prepare to leave the EU, we need an agile and experienced Foreign Office and that means hiring and keeping the best staff.  The prestige of the Foreign Office as an employer hangs in the balance.”

UK funding from the EU

Public and private sector organisations in the UK receive funding from the EU through various channels – the UK received a total of €6.3 billion (about £5.5 billion) in 2017.

The majority of EU funding is administered in partnership with national and regional authorities in Member States, though a share of it is directly administered by the European Commission.

The two most significant funding channels for the UK are the European Structural and Investment (ESI) funds; and the European Agricultural Guarantee Fund.  For the current funding period (2014-20), the UK has been allocated €17.2 billion and €22.5 billion through these funds respectively.

The ESI Funds are the EU’s instrument for reducing disparities in the level of development of its various regions and for helping less developed regions to catch up. The bulk of UK funding via this channel comes through the European Regional Development Fund (ERDF), which has been allocated €5.8 billion of EU funds, and the European Social Fund (ESF) with an allocation of €4.9 billion.

Different regions within the UK have been allocated varying levels of funding, with less developed areas (particularly in West Wales and the South West of England) receiving more per person than other areas. The largest single allocation of 2014-2020 ESI funding in England is for the National Offender Management Service (NOMS) to fund activities that support the reintegration of prisoners back into the work force. 53% of the cost of this £247 million project will be funded by the ESF, with the remainder met through national co-financing.

The European Agricultural Guarantee Fund (EAGF) is the primary financial mechanism used for the implementation of the EU’s Common Agricultural Policy (CAP). The EAGF consists of direct payments to farmers to stabilise their revenues and market measures to tackle specific market situations, and the UK has been allocated €22.5 billion for the period 2014-20.

Organisations in the UK can also apply directly to the European Commission for funding from various other streams, often on a competitive basis following calls for applications.  The UK is one of the leading Member States in securing funding for research and innovation and various other projects, with around 14% of funds allocated from the Horizon 2020 programme going to the UK, and British universities are in the top four higher education recipients to date.  The typical aggregate value of direct funding is around £1-1.5 billion per year.

In addition, projects in the UK can be supported by EU institutions with funding from outside the EU Budget.  Most notably, the European Investment Bank (EIB) – which borrows money on capital markets and lends it on favourable terms to projects that support EU objectives – committed an average of €5.4 billion to UK projects each year between 2011 and 2017.  Many of these were major infrastructure projects, as well as some supporting growth and employment.

Post Brexit, as a ‘third country’ the UK will have access as a ‘Non-Member State’ to certain streams of EU funding.  Countries that are closely aligned with the EU and participate in programmes alongside Member States typically have to make payments into the EU Budget, generally relative to the size of their economy.  Other funding streams are available for countries seeking accession to the EU or sharing a border with it, and some aid funding also goes to developing countries through instruments such as the European Development Fund.

The UK Government has guaranteed all funding from the EU until the end of 2020, regardless of whether it concludes a deal with the EU.  The UK has said that it wishes to continue to participate in some EU programmes, but the exact form that this will take (and domestic replacements for funding) will be a subject of further negotiations and policy-making.

The full text of the Reports are available from Brexit Partners, along with considered view on the impact on business.  Contact us in the first instance at enquiries@brexit-partners.com

 Further details from the reports

Department for Transport - Extracts

Preparations for a ‘no deal’ exit

The Department is required to report to the Department for Exiting the European Union (DExEU) on the progress of its work streams.  At the time of our evidence session, the Department rated three of the its work streams as not ‘on track’ for delivery by 29 March 2019

The work streams not on track included bilateral discussions about cross-border rail services, the negotiation of air service agreements with the EU, and the Department’s plans for issuing International Driving Permits.

International Driving Permits.  The Department has reported to us that it has signed a contract with the Post Office for the issue of International Driving Permits, which the Department said was the action needed to bring the work stream back on track.  However, the Department also told us that training for Post Office staff and printing of documents had not yet begun.  Communication with the public was also not yet underway.

Trailer registration.  The Department told us it had “no reason to suppose that the Driver and Vehicle Licencing Agency (DVLA) is unable to deliver” the customer interface it is putting to allow people to register their trailers.  Even though there were only eight weeks left for delivery, the Department told us that testing was still taking place.

Haulage permits.  The Department said that the legislation had been put in place in the Summer, and it expected the Driver and Vehicle Standards Agency (DVSA) to be able to accept the first set of applications by the end of November 2018 - but was unable to provide any more detail about the development of the new system.

Maritime databases.  The Department has identified four systems it needs to put in place to replace functions currently carried out by the European Maritime Safety Agency.  The Department told us that it was on track to deliver all four by March 2019, but only the two off-the-shelf systems are currently being implemented.  A third, which will allow seafarers to notify the department of oil spills, is still being designed.  The fourth, which will hold maritime safety information, is still waiting for HM Treasury funding approval before it begins development.  The Committee noted the Department’s description of the systems under development as “very simple”.

Foreign Affairs Committee Report published 28 November 2018 – key recommendations

Salaries: Drawing on data from the Cabinet Office, the FCO revealed it pays the lowest median of any Government Department for policy officers and middle management officers.  Seventy percent of those leaving the FCO cite poor pay as the main reason.

The Committee urged the Government to look at options for improving the pay offer at the FCO, both for centrally contracted staff and for local hires abroad.  The Report calls for an external review to keep the reward package of officials doing similar jobs at FCO and the Department for International Development in line.

Defining priority skills.  The FCO lacks systematic data on the existing skills of its staff and the extent to which they are meeting skills-development targets. The Report recommends that the Department carries out a skills audit no later than the end of 2019 and that by 2020, the FCO reboots its Priority Skills Statement. This should take account of best practices adopted by other diplomatic services.

The Committee calls for the FCO to set out its assessment of the new skills it will need for European diplomacy post-Brexit, including future plans for the UK Representation to the EU in Brussels.  It also questions whether targets to train 240 cross-government staff to expert level in trade policy and negotiations by March 2019 will be met and asks for the FCO’s plans to meet any shortfall.

Senior appointments.  Tentative steps have been taken but the FCO needs to go ‘further, faster’, to have the fullest range of talent at its disposal.  The Foreign Secretary’s announcement that Ambassadorial appointments will be open to external competition is not a major departure from existing policy.  Extending open competition to more roles and taking practical steps to make them as accessible as possible to external candidates, could demonstrate more ambition about seeking high-quality external candidates to complement high calibre existing staff.

Language skills.  FCO language skills are improving, but the Committee reports that existing targets for language attainment will be challenging to reach.  While there is relatively high attainment in Mandarin, the Committee is concerned about lower figures for Russian and Arabic.  The Committee warns that the Foreign Secretary’s ambitious plans for expanding language skills will require considerable extra resources which have not yet been put in place.

 
John ShuttleworthComment