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The Cambridge Brexit Report


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The Cambridge Brexit Report Chief Editors: Davide Martino Jun Pang



In collaboration with:

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Cambridge for Europe


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FOREWORD Cambridge is an extraordinary city, home to forward-looking institutions, businesses, and people. Its diverse local community is a place of encounter for ideas, projects, and individuals from across the globe. The ‘Cambridge phenomenon’ is admired and emulated by industry leaders and policy makers from the UK and beyond. The rates of economic and population growth are testament to the success of the whole Greater Cambridge area. In many ways, this Report mirrors the local community. It was written by teams of residents, students, activists, and academics working co-operatively over several months. Through online surveys and in-depth interviews, in addition to extensive research and data-collection, the views, concerns, and hopes of an even larger sector of the local community were included in this Report. On 24 February 2017 editors and writers came together with local opinion leaders to present and discuss their work in progress during a half-day conference at the Cambridge Guildhall, attended by well over a hundred people. Roundtable discussions among members of the audience were organised on each chapter, and their output has been integrated in the editing process. Finally, the Report was submitted for thorough review by Cambridge academics and residents with expertise in the relevant fields. This six-month-long project was spearheaded by the Cambridge University European Society, The Wilberforce Society, and Cambridge for Europe. At various times, the Cambridge Leave Campaign and Cambridge Stays all participated in the process. Cambridge as a constituency overwhelmingly voted to Remain in the EU Referendum; many of its neighbouring constituencies did not. From the outset, then, the Report was envisioned to be a bipartisan endeavour, a way of moving beyond the Remain/Leave cleavage created by the EU Referendum last year. As elected representatives and politicians within the local community, we have supported the project despite our political differences, and are now proud to introduce the present Report. Its recommendations do not look backwards but forwards, demonstrating Cambridge’s continued commitment to constructing our common future.

The Lord Balfe

Alex Mayer

President of Cambridge Conservative Association

MEP for the East of England

Vicky Ford

Stuart Tuckwood

MEP for the East of England

Cambridge Greens, UNISON Addenbrooke’s

Dr Julian Huppert

Daniel Zeichner

Former MP for Cambridge

MP for Cambridge

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ACKNOWLEDGEMENTS The Chief Editors would like to extend their thanks to all who were involved in the project. We are grateful in particular to all the Editors, Writers, and Reviewers: Georgi Rusinov, Nora Kalinskij, Lucia Keijer-Palau, Simon Percelay, Colby Smith, Fawz Kazzazi, Cleo Pollard, Paul Tern, Alejandro Ayuso Garcia, Jack Gillespie, Inesa Rozenman, Bianca Schor, Alexis Wagner, Rebecca Davies, Olivia Elder, Rowena Bermingham, Friedrich Gôtz, Roemer Sijmons, Ariel Yardeni, Alexandra Bulat, Damiano Sogaro, Alex Conway, Fred Kratt, Noah Froud, Zoe Alipranti, Sophie McVea, Yen Jean Wee, Glen Tay, Frank Wilson, Theophilus Kwek, Thomas Bennett, Stuart Tuckwood, Esther Luigi, Carol Wright, Robert Lowson, Dr. Victoria Bateman, Dr. Stuart Wallace, Niall O’Connor, and Trustees of The Wilberforce Society – thank you! We would also like to thank Daniel Zeichner MP for commissioning several chapters of the Report, and Alex Mayer MEP for her support in launching the Report in Brussels on 13 June 2017. The help of their assistants Peter and Christian was invaluable in organising the Brussels launch. We are very grateful to the three organisations who supported the project from beginning to end – Cambridge for Europe, the Cambridge University European Society, and The Wilberforce Society – and their collaborators, including Polygeia and Cambridge Stays. Without the support and participation of leaders and members of these organisations, the Project would not have been possible. Through its generous sponsorship, NW Brown made it possible to organise our Conference on 24 February 2017. That Conference would not have happened without the support of the Cambridge City Council and its leader, Cllr Lewis Herbert, and without the kind assistance of Sophie and her colleagues at Cambridge Live. Yoshe and her colleagues at Cam FM worked together with James from Cambridge Live to record the Conference proceedings. Finally, Carol Wright, Cahir O’Kane, Chris Powers, Paul Browne, Chia Jeng Yang, Hattie Stacey, Matteo Mirolo, Alice Anders, Léonie de Jonge, and many others shared the administration load that inevitably comes with a project like this. To them, to everyone else mentioned here, and to the many others we cannot cite, goes our gratitude, and the credit for making this Report what it is.

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TABLE OF CONTENTS Foreword

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Introduction

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Executive Summary

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I The Economy

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II Trade & Business

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III The Pharmaceutical Industry

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IV Creative Industries

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V Agricultural Policy

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VI Students & Universities

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VII EU Immigration

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VIII The UK Constitution

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IX Devolution and the Regions

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X Human Rights

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XI The Environment & Climate Change XII The NHS

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INTRODUCTION The Cambridge Brexit Report is the second part of a project that began with a Conference on 24 February 2017, entitled “Cambridge & Brexit: Discussing our Future”. In the wake of the 2016 EU Referendum, this Conference sought to bring together community members from across the political spectrum. Through a series of presentations and discussions about the implications of Brexit for various sectors, Conference attendees were encouraged to work together in mapping the UK’s way forward through productive and constructive dialogue. This Report integrates findings and contributions from the Conference and is the culmination of several months’ worth of research and writing by teams of volunteer editors and writers from Cambridge for Europe (Cambridge's pro-European campaign group), the Cambridge University European Society, The Wilberforce Society (a student-run public policy think tank based in the University of Cambridge), and Polygeia (a student-run global health think tank). The breadth of coverage of the Report is comprehensive, but it cannot and does not claim to be exhaustive: the United Kingdom’s departure from the European Union will affect our economy and society in many more ways than those explored here, arguably more than it is even possible to fully comprehend as yet. It should be noted that most, if not all, of the details found in the twelve chapters that make up this Report are time-sensitive, meaning that new developments and decisions are likely to clarify, contradict, correct, and change the information we work with. Given that the writing, reviewing, and editing process has stretched over several months, we have regularly refreshed all time-sensitive information, and we can only apologise if we have missed something. The Report was completed on 30 March 2017 (i.e. it does not address the White Paper on the Great Repeal Bill, nor the recent announcement about the upcoming General Election). This is a Report about Brexit written in Cambridge by members of the local community. It offers some local perspectives on the national themes surveyed, and it formulates some policy recommendations for local government and other local stakeholders to consider – it does not, however, focus solely on Cambridge, Cambridgeshire, or East Anglia. It is the ‘Cambridge’ Brexit Report because it mirrors the local community in at least three ways: It looks forward, not backwards Cambridge as a constituency overwhelmingly voted Remain in the EU Referendum; many of its neighbouring constituencies did not. From the outset, then, the Report was envisioned to be a bipartisan endeavour, a way of moving beyond the Remain/Leave cleavage created by the EU Referendum last year. We have sought answers to the crucial question ‘where do we go from here?’. We hope the Report inspires others to come up with ideas to build our common future.

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It builds on diversity and plurality The Report was written, reviewed, and edited by teams of students, residents, academics, and activists. All volunteered their time and energy to the project, and received no form of compensation. This project is thus a testament to the vibrancy and generosity of the local community. The diversity of the authors is reflected in the variety of approaches they have chosen to tackle their topics. Some teams, working under The Wilberforce Society guidelines, have produced multi-faceted chapters dealing with a variety of issues under a broad heading; other chapters have adopted a more specific focus, approaching the theme at hand from a particular angle. It has local roots and global horizons The Report’s chapters each analyse a broad sector of our social and economic lives likely to be affected by Brexit, and they look to the implications at the local (Greater Cambridge area), national (the UK), and European level. The Report’s recommendations are addressed mainly at the UK Government, but they also contain ideas for the local community and its academic institutions, and for the UK’s continental partners, including the EU. It is our hope that this Report will make a meaningful contribution to current social, political, and economic debates surrounding Brexit and the UK. Above all, we wish that the project’s ethos - engaging local communities in discussing and acting upon issues of national and international importance - may be taken up by decision makers as they take the country in its next steps forward.

The Chief Editors Jun Pang Davide Martino

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EXECUTIVE SUMMARY The Cambridge Brexit Report consists of twelve chapters; each has its own approach, structure, and conclusions. Salient points, key findings, and recommendations from each chapter have been summarised here, for ease of consultation; for more detail, the reader should always refer to the relevant chapter.

GENERAL RECOMMENDATIONS These two recommendations cut across all chapters, and are worth restating here: 1.! The vote to leave the European Union has created uncertainty as to the United Kingdom’s future; all should be done to dispel such uncertainty as soon as possible, for it proves damaging to business, investment plans, research projects, life decisions, etc. 2.! Brexit will be a momentous transition for the United Kingdom, opening up a range of opportunities in a number of fields. This Report puts forward the concerns, hopes, and recommendations of the Greater Cambridge community; other communities across the country should be offered a similar opportunity to have their say. What was achieved by a team of volunteers in Cambridge could easily be achieved by local and central government on a larger scale; we therefore recommend that the Government launch public consultations in cities and towns all over the UK, and rely on the resulting reports to inform its Brexit negotiations and policies.

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CHAPTER I – THE ECONOMY Chapter I “The Economy” was co-authored by Georgi Rusinov (Editor), Nora Kalinskij, Lucia Keijer-Palau, and Simon Percelay. It begins by discussing the choice which post-Brexit UK will need to make in pursuing its future economic program: better to prioritize trade in goods and services, or the attraction of foreign capital investment? It subsequently discusses the importance of London’s position as a financial centre, particularly for university students and young graduates in search of future employment opportunities. One key area of the economy which will be undoubtedly subject to much future scrutiny is the dynamics of the pound, which will be significantly shaped by Britain’s ability to secure favourable trade terms with large, increasingly nationalistic economic partners. In terms of socioeconomic impact, the fall in the value of the pound that has started and that is likely to continue during the period of uncertainty surrounding Brexit may result in rising inflation as the cost of imported goods increases; as a result, households may experience different changes in the prices of living. Finally, the chapter evaluates the potential effects of the expected repatriation of the UK’s annual contribution to the budget of the EU, as well as the end of the EU’s funding of British regional development, through an elucidation of the structural funds that currently exist. This chapter concludes that Brexit will pose an unprecedented administrative and political challenge, to the UK. Accordingly, it makes four policy recommendations to the Government: 1.! To preserve as much of the existing trading relationship with the EU as accords with the Government’s pledge to leave the European Single Market. 2.! To prioritize the protection of young mobile graduates and the sectors which predominantly account for Britain’s economic prosperity in the fields of finance, professional services, and technology. 3.! To prioritize higher growth rather than inflation control in a post-Brexit economy, insofar as it does not disproportionately affect the poorest households and communities. 4.! To continue political and fiscal devolution to the regions, by using the funds it repatriates from the EU to continue support for communities which have been beneficiaries of EU regional development funds.

CHAPTER II – TRADE & BUSINESS Chapter II “Trade & Business” was co-authored by Davide Martino and Colby Smith. After surveying the current state of the UK’s international trade, and explaining why trade is a crucial component of the national economy, Chapter II outlines several 12! !


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scenarios for future development as the UK leaves the EU, including continued membership of the Single Market, Customs’ Union membership, a new trade deal, and World Trade Organisations (WTO) rules. Differences between the scenarios are exemplified by reference to the bicycle industry, which is particularly relevant to Cambridge, where a large proportion of owners rely on bikes for daily transport. As part of an explanation of how trade negotiations work and why they are so complex, this Chapter notes that the EU publishes impact assessments of new trade deals, differentiated by member states, in the course of its trade negotiations. Drawing on a roundtable discussion on trade, which took place during the ‘Cambridge & Brexit’ event on 24 February 2017, Chapter II also points out that Cambridge residents are particularly concerned about the impact of import duties on inflation. This Chapter accordingly makes four policy recommendations to the Government: 1.! To consider that for Cambridge, the best outcome of trade negotiations with the EU would be retaining membership of the Single Market. Failing that, the Government’s preferred approach (a bespoke Free Trade Agreement) is the most viable option. 2.! To conduct and release economic, social, and environmental impact assessments of its new trade deal with the EU; these assessments ought to be differentiated by region, offering the devolved administrations of Scotland, Wales, and Northern Ireland, and the English regions an opportunity to contribute to the national debate on our new trading relationship with the EU. 3.! To make special efforts to limit as much as possible a rise in import prices, which would affect negatively the purchasing power of people in Cambridge and across the UK. 4.! To end as soon as possible the current uncertainty as to our future trading relationship with the EU which, more than anything else, has been hampering business, investment plans, and consumer confidence.

CHAPTER III – THE PHARMACEUTICAL INDUSTRY Chapter III “The Pharmaceutical Industry” was co-authored by Fawz Kazzazi (Corresponding Editor), Cleo Pollard (Senior Editor), Paul Tern, Alejandro Ayuso Garcia, Jack Gillespie, and Inesa Rozenman. It was coordinated by Polygeia, a global health student think tank, and includes an interview with Professor Mads Krogsgaard Thomsen, Chief Science Officer of Novo Nordisk. The Chapter highlights the complex regulatory, funding, and research structures that currently underpin the UK’s pharmaceutical industry. It evaluates the extent to which the industry depends on the EU as an export market, and for high-skilled labour and collaborative R&D networks. It also elucidates the way in which the EU is dependent on the UK as a major location 13! !


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for clinical trials and for venture financing of pharmaceutical companies. The losses that may be incurred upon leaving the EU include diminished innovation as a result of loss of funding from the Framework Programmes and possible relocation of the European Medicines Agency (EMA), the loss of global research leader status, the deterioration of funding pipelines, and reduced rates in commercial trade as a function of disruption, added costs, and the introduction of new national regulatory mechanisms. In terms of social impact, there may also be the widespread endangerment of accessibility and safety of medical technologies for citizens in UK. Conversely, some contend that Brexit may provide the occasion for a major streamlining of the relationship between the national government and the pharmaceutical industry. This chapter concludes that it is in the UK’s best interests to seek a model for the pharmaceutical industry that is largely continuous with its current structure. It will be difficult, however, to balance demands for curbing immigration and regaining border control with the pharmaceutical industry’s need to retain free movement of medicinal products and of persons for the purposes of R&D and trade. Moving forward, the chapter makes four main recommendations to the UK Government: 1.! To negotiate an ‘associated country’ status in the EU’s research funding programmes. 2.! To negotiate bilaterally favourable trade agreements for drugs and medical devices with the EU. 3.! To mirror with its medicines regulatory approval process that of the European Medicines Agency, with the domestic Medicines and Healthcare products Regulatory Agency retaining the capacity to intervene. 4.! To guarantee the free movement of high-skilled professionals across UK-EU borders.

CHAPTER IV – CREATIVE INDUSTRIES Chapter IV “Creative Industries” takes the form of two parallel interviews, which were conducted on 2 December 2016 by Bianca Schor with James Calver, Concerts Director at the Chamber Orchestra Britten Sinfonia, and Jack Toye, Marketing Manager at Cambridge Arts Picturehouse. Calver’s and Toye’s answers offer insights into the importance of the EU and the Single Market in the music and film scene, and they highlight the concerns of two major cultural institutions within the Greater Cambridge area. Calver and Toye are also asked to reflect on some opportunities which Brexit might open up, and they respectively stress that British orchestras have already become cheaper for continental theatres and festivals to host, and that the Arts Picturehouse might choose to show more films from the rest of the world. Although the parallel interviews do not offer specific policy recommendations, both Calver and Toye 14! !


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mention the current climate of uncertainty and its deleterious effect on business. Many other Chapters of this Report recommend an end to uncertainty as soon as possible, and Chapter IV makes clear that this would benefit the Creative Industries as well.

CHAPTER V – AGRICULTURAL POLICY Chapter V “Agricultural Policy” was co-authored by Alexis Wagner (Editor) and Rebecca Davies. It elucidates the historical context and current situation of the policy areas of trade, labour, and regulatory policies and their interaction with agricultural markets and farm income between the UK and the EU, with particular reference to the EU’s Common Agricultural Policy (CAP). It explains how the current focus of CAP support is on direct payments to the producer, with market intervention in times of crisis; the two pillars of the Policy comprise income support and environmental management. The chapter argues that Brexit provides an unequivocal opportunity for the UK to remould its agricultural policies to better suit UK preferences and circumstances. While the Government could decide to maintain the status-quo and keep the Pillar I and Pillar II schemes of the existing CAP, which will keep UK farmers at a level playing field with the rest of the EU, Brexit may prove to be an opportunity to apply an ecosystems approach to agricultural policy, or to refocus the expenditure of public funding towards public goods. This Chapter makes four main policy recommendations to the UK Government: 1.! If direct income support remains, to help active farmers most in need rather than those owning the most land. Area-supports should taper as farms increase in size to account for economies of scale. 2.! To motivate a high percentage of farmers to commit to additional long-term good management of the most socially valuable landscapes, through the appropriate sizing up of the share of total funding for public benefits. 3.! To foster collaboration with farmers and overcome hostility towards government intervention through the streamlining of funding structures. 4.! To acknowledge multifunctional farming, such that released EU budget contributions are redeployed as necessary in the UK; to recognize the special characteristics and multiple roles of farming which produces food and also stewards a high proportion of the British natural environment. The chapter subsequently explores the implications of Brexit on agricultural trade. The question mark next to the UK’s membership of the European Single Market is particularly significant in the areas of technical standards and regulations related to GMOs, animal welfare, and food safety. In any case, with high potential impacts from trade deals on the agricultural sector, the UK landscape and the environment, policy makers ought to follow the following recommendations: 15! !


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1.! To carefully prioritize the niches and agricultural sectors within the UK that will require protection in the advent of liberalised global trade, and to consider developing a mitigation plan through agricultural supports, domestic market growth, and third party trade agreements. 2.! To negotiate an FTA with the EU that places the UK outside of the EAA, Single Market, and customs union for agricultural goods, with reciprocal rights and responsibilities. 3.! To secure the continuation of the UK’s position as an independent signatory on existing EU FTAs with third countries, including Canada, Mexico, South Africa, Korea, and Turkey. Focus additional efforts on negotiating new FTAs with the USA, Australia, Brazil, and BRIC economies, particularly China and Russia. 4.! To provide services to producers to help navigate the changing tariff and nontariff barriers to aid in the selection of the most optimal practices and markets for their goods.

CHAPTER VI – STUDENTS & UNIVERSITIES Chapter VI “Students & Universities” was co-authored by Olivia Elder (Editor), Rowena Bermingham, Friedrich Götz, Roemer Sijmons, and Ariel Yardeni. It examines the potential impact of Brexit on the tertiary education sector, particularly in the four key areas of fees and financing of education; migration and mobility of students; research funding, collaboration, and recruitment; and perception and reputation of UK universities. In addition to drawing from existing data sources and models, this Chapter also incorporates original quantitative and qualitative findings from a sample group of 331 students, graduates, and applicants. It highlights the way in which changes to levels of tuition fees and provision of financial support may disincentive EU students from deciding to attend UK universities, thereby damaging the UK’s financial competitiveness. It discusses the significance of the EU in both inward and outward student mobility patterns, and assesses the merits and drawbacks of the UK’s single net migration figure. It explains the way in which the UK currently benefits from EU research funding, as well as its contributions to research abroad; it elucidates the risks to funding, collaboration, and recruitment of personnel in light of departure from the EU. Finally, Chapter VI explores current and possible future perceptions of UK universities and their reputations. This Chapter makes the following policy recommendations to the UK Government (and UK universities): 1.! To exclude students from UK net migration figures; to work with universities to ensure a fair, transparent and rigorous student visa process and find ways to 16! !


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understand and accurately measure the numbers of students leaving at the end of their degree. 2.! To consider the value of international staff to universities and to their teaching and research, and reform the current immigration system such that it encourages and promotes international collaboration. 3.! To prioritize access to Horizon 2020 and future European Framework Programmes during the Brexit negotiations. 4.! To prioritize meeting or surpassing a target of dedicating 3% of GDP to research by 2020, to ensure that the UK does not fall behind its research competitors within the EU. 5.! To increase the outward mobility of UK students; to strive to retain access to the Erasmus student exchange programme, and other such frameworks (e.g. the Marie Skłodowska-Curie Action for post-doctoral researchers); to review current spending on Arts and Humanities in order to guarantee continued support and funding. 6.! To reassure researchers that the funding being used to underwrite Horizon 2020 and ESIF funding is new money and is not merely a reallocation of existing ring-fenced funding allocations for research. 7.! To guarantee the status of EU students and staff already here as early as possible, and communicate the relevant information in a timely manner; to clearly communicate to students and universities any relevant transitional arrangements made as part of the Article 50 process. Universities should support these students and staff and assist them with the process of applying for permanent residence where possible. 8.! Both the Government and universities should strategize how to continue attracting students from the EU and beyond, and ensure that UK universities continue to be perceived as welcoming places for international students. 9.! UK Universities should consider lowering all international student fees, rather than just bringing EU student fees up to meet existing international fees.

CHAPTER VII – EU IMMIGRATION Chapter VII “EU Immigration” was written by Alexandra Bulat. Starting from a detailed analysis of the current state of EU migration, and its place during the 2016 EU Referendum campaign, this Chapter notes the change in atmosphere following the vote to leave the EU, with a rise in hate crimes and incidents. This has had repercussions 17! !


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abroad, where the image of the UK as a tolerant, open, and welcoming society has been tainted by recent events. Chapter VII goes on to focus on Cambridge, where over 10% of local residents (roughly three times the national average) are EU nationals, drawing in particular on the conclusions of a roundtable discussion on immigration, which took place during the ‘Cambridge & Brexit’ event on 24 February 2017. Noting the key contribution they make to the local community, this Chapter makes the following recommendations to the Government (and to the Greater Cambridge community): 1.! To protect the status of EU nationals who are already living in the UK, for example by simplifying procedures to apply for Permanent Residence. 2.! To exclude students from UK net migration figures. 3.! The universities and other academic institutions of Cambridge should encourage applications from international students from a wide range of backgrounds, thereby contributing to restoring the UK’s positive image abroad. 4.! The Greater Cambridge community as a whole should do more to champion the positive effects of migration, given that such a stance has been lacking in political debates before and after the EU Referendum.

CHAPTER VIII – THE UK CONSITUTION Chapter VIII “The UK Constitution” was written by Damiano Sogaro. After explaining how EU law has intersected with the UK legal system and the bundle of laws, rules, and practices known as the UK Constitution, this Chapter delves into the technical aspects of Article 50 and the Great Repeal Bill. The transitional period during which the work of integrating EU Directives and regulations into UK law will be in progress is scrutinised in detail, flagging up the probable sticking points by means of examples. Next, this Chapter deals with the rights of EU nationals residing in the UK, and UK nationals residing in the rest of the EU, including their right to participate, both as voters and as candidates, in local elections in their country of residence. Finally, Chapter VIII considers the importance of EU structures, such as Europol, mutual recognition measures (e.g. the European Arrest Warrant), or cooperation in the fight against terrorism (e.g. sharing air passengers’ data), to UK law enforcement and our domestic criminal law. This Chapter accordingly makes five main recommendations to the Government: 1.! To safeguard parliamentary sovereignty by sharing the task to translate current EU Directives and regulations into UK law between the executive and the legislative.

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2.! To make provision for the situations in which present EU law refers to EU agencies or to the European Court of Justice, in the Great Repeal Bill or elsewhere. 3.! To issue basic communication referring to the loss of enforceability of some rights previously guaranteed by EU law. 4.! To devise a legal framework for EU nationals residing in the UK and UK nationals residing in the EU as soon as possible, to allow these citizens to continue planning their lives. Such framework should include provisions regarding their participation in local elections. 5.! To conduct and release a sector-specific plan of negotiations, so as to lessen the uncertainty surrounding the future of pan-European co-operation in the sector of law enforcement, fight against terrorism, and criminal justice.

CHAPTER IX – DEVOLUTION AND THE REGIONS Chapter IX: “Devolution and the Regions” was co-authored by Alex Conway (CoEditor), Fred Kratt (Co-Editor), Noah Froud, Zoe Alipranti, and Sophie McVea. It provides a broad overview of the potential impact of Brexit on England & Wales (outside London), Greater London, Scotland, and Northern Ireland, in light of the UK’s unique system of devolved governance. It argues that the Government, in negotiating its Brexit deal, should seek to achieve the best possible compromise between the regions of the UK; this will require a multifaceted deal that comprehensively considers the diversity and wishes of the different regions. Specifically, it explores the need for the replacement of regional funding and the reconsideration of the role of local government in England & Wales (excluding London), particularly in under-developed regions; the potential effects of the reorientation of the UK’s economy and greater immigration controls on London, given its position as a cosmopolitan and international hub; the implications of Scotland voting in favour of remaining in the European Union; and the political, economic, and constitutional issues of cross-border relations and the Border itself with regard to Northern Ireland. The chapter concludes that in light of Parliament’s adhesion to the “will of the people” and its consent to the Government’s White Paper and rulings which negate the right of devolved assemblies to vote on Brexit, it is imperative that a careful and critical eye is cast onto what a Brexit Britain will look like. This approach demands difficult compromises and concessions by all parties and an equal voice in the upcoming negotiations; as such, this Chapter recommends: 1.! To maintain the current structural funding arrangements for underdeveloped regions across the United Kingdom, and to ensure that these subventions are

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regularised and standardised, not subject to the arbitrary whims of a distant central government. 2.! To take into account the concerns of London as the financial engine of the UK economy, perhaps through a special arrangement for the financial services sector. 3.! To tackle the centralisation and dominance of Westminster over the UK political system, potentially through greater regional and civic political devolution. 4.! To give Scotland more of a voice in its internal affairs; devolution ought to continue if Westminster wishes to keep Scotland within the Union. 5.! To find a sui generis solution for the unique situation of Northern Ireland, working in a constructive manner with the EU to ensure the best possible situation for all the inhabitants of Northern Ireland.

CHAPTER X – HUMAN RIGHTS Chapter X “Human Rights” was co-authored by Yen Jean Wee (Editor), Glen Tay, Frank Wilson, Theophilus Kwek, and Thomas Bennet. It analyses the impact of Brexit on the legal protection of human rights, workers, citizens, and refugees, in relation to the current societal and political climate. Currently, the protection of human rights derived from the EU level in the UK depends on the doctrines of direct effect and primacy. In light of Brexit, there is the possibility that those rights protected by the Charter of Fundamental Rights, some of which extend beyond those guaranteed by the Human Rights Act 1998, may be removed or diluted by the current or future governments. The chapter subsequently explores how current EU employment legislation provides a minimum standard below which domestic UK law cannot fall. After Brexit, significant changes may be made to EU-derived employment rights as they are domestically transposed, to the benefit and detriment of different parties; the Working Time Directive 2003 and the Temporary Agency Work Directive 2008 constitute two such sites of potential contestation. Any discussion of the effects of Brexit on human rights must consider its impact on refugees and asylum-seekers, particularly given the volume of public discontent surrounding immigration in the Leave campaign and its aftermath. The UK has long retained an opt-out for most EU asylum policies, however, its participation in the third iteration of the Dublin Regulation means that it will have to reconsider how it may most efficiently handle issues of registration and resettlement upon its departure from the existing system. Misinformation and widespread misreporting about immigration and refugees has fuelled public disapproval of the way in which such issues are dealt with by the national government.

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Chapter X concludes that the debate about human rights protection after Brexit will necessarily take place within a much broader debate about the concept of human rights in the UK. In line with its four foci, this Chapter makes five main policy recommendations, 1.! To clarify what the status of, and level of protection received by, fundamental rights after Brexit will be, particularly pertaining to domestic legal concepts which are derived from, or reflect similar concepts in, EU law. 2.! To preserve and domesticate the rights enshrined in the Working Time Directive and the Temporary Agency Work Directive, and to raise awareness of these protections among workers. 3.! To preserve the rights of individual UK citizens through the adoption of a form of ‘associate citizenship’ of the EU. 4.! To transpose the EU’s current protections of refugee rights into UK law; to appoint an independent commission to oversee the UK’s domestic asylum system and investigate human rights infringements; to negotiate an opt-in to the Dublin framework, the EURODAC system, or both, in addition to pursuing a regional burden-sharing solution that goes beyond Dublin III’s limited aims. 5.! To promote and encourage journalistic integrity in the media, in order to combat the falsified way in which debate over human rights and Britain’s relationship with Europe has been conducted in the press and political spheres.

CHAPTER XI – THE ENVIRONMENT & CLIMATE CHANGE Chapter XI ‘The Environment & Climate Change’ was co-authored by Davide Martino and Stuart Tuckwood. It reviews the EU’s role in promoting and shaping environmental policies and climate change action, noting a mixed but overall positive record. In particular, it highlights the shortcomings of the EU’s Common Agricultural Policy (CAP) and Common Fisheries Policy (CFP) from an environmental point of view, while stressing the importance of the EU’s contribution to climate change action. This Chapter presents Brexit very much like an open door, which the UK Government will step through to find itself confronted with a wide range of options, without being constrained by EU Directives and regulations anymore. It argues that both the local Cambridge community as a whole and the young generation, which is one of its key components, will benefit in the long run from green policies even more ambitious than the current ones. This is confirmed by the conclusions of a roundtable discussion on the environment, which took place during the ‘Cambridge & Brexit’ event on 24 February 2017; in particular, discussion participants were concerned that future trade negotiations may lead to watering down some environmental standards and safeguards. Finally, Chapter XI turns to the issue of ‘green research’, noting the importance of EU 21! !


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funding and cooperation networks to the work of Cambridge-based academic institutions in such fields as conservation of biodiversity and climate change action. In turn, this research can inform evidence-based policy, and is therefore vital to the shaping of future environmental policies. This Chapter accordingly makes the following recommendations to the Government: 1.! To confirm current environmental standards and commitments, enshrining them in UK law. 2.! To launch consultations with relevant actors in sectors such as fishing or agriculture, with the aim of replacing current EU Directives and regulations with national legislation setting higher environmental standards and commitments. 3.! The watering down of green policies and safeguards should not be on the table of any future trade deals. 4.! To continue engaging in transnational and global efforts to tackle climate change, pollution, and the reduction of biodiversity, through such instances as the United Nations Framework Convention on Climate Change (UNFCCC). 5.! To offer certainty as soon as possible on the way research funding and international cooperation will work in the future, so as to ensure academic institutions can continue their work as seamlessly as possible.

CHAPTER XII – THE NHS Chapter XII ‘The NHS’ was written by Esther Luigi. Starting from the controversies surrounding the NHS and its funding which raged during the EU Referendum campaign last year, it considers some of the key implications of Brexit for our health service. No direct impact can be foreseen, as the NHS has always been managed largely by Westminster and will continue to be; indirect impact, however, might be far reaching, given that as many as 130,000 EU nationals work in health and social care in the UK. In particular, up to 12% of staff at Cambridge University Hospitals (CUH) are EU nationals, about three times the national average. There have been signs that many of these EU doctors and nurses are already relocating to the continent; whilst Chapter XII recommends that certainty ought to be offered as soon as possible as to their status in Brexit Britain, it also notes that departures are likely to continue. Together with the impact of Brexit on cross-border trials, cooperation, and medical research, the diminution of EU personnel will profoundly affect the NHS. As this Chapter notes, Brexit might offer the UK Government an occasion to redesign our health system, changing the way medical personnel is trained and recruited and the avenues through which funding is distributed; it is as of yet unclear in which direction the change will go. 22! !


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CHAPTER I

The Economy Writers: Georgi Rusinov (Editor) Nora Kalinskij Lucia Keijer-Palau Simon Percelay

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EXECUTIVE SUMMARY This paper aims to present the different ways in which the British economy will have to adapt to Brexit, both as a political process and as a series of events with legal and social significance. It seeks to trace the connections between a number of pillars that comprise Britain’s political economy, and how leaving the European Union presents both a challenge and an opportunity for the future of each of those pillars. The paper opens with a broader discussion of Brexit not as a unique accident of political development, but as part of the broader process of shifting frameworks which mark the transition from industrial, welfare capitalism to a heretofore unknown form of political economy. This shift promises to reshape intergenerational economic relationships, a topic explored in the second section of the paper. Brexit will also change the international financial standing of the United Kingdom and is likely to disproportionately affect the places and social groups which were most supportive of the UK exiting the EU. In the short term, inflation is likely to rise, and countermeasures by the Bank of England are likely to be muted as it will prioritise growth over strict price stability. The final subsection of the paper is devoted to analysing the regional and local impact of Brexit in Britain, with specific reference to the loss of European regional development funding for poorer recipient regions, and the limited ability of the UK government to supplant this loss.

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ACKNOWLEDGEMENTS The authors would like to thank the Wilberforce Society and the Cambridge University European Society for their unwavering support in the writing and editing process and for their leadership and motivation by inspirational example. We are particularly grateful to our referees for providing insightful comments and recommendations throughout the editing process, encouraging us to face the analytical challenges of the task, and being unwaveringly committed to supporting our efforts. Our warmest gratitude goes to our academic lodestars: Dr Victoria Bateman, Fellow of Gonville & Caius College, Cambridge, and Mr Michael Campbell, Trustee of the Wilberforce Society. We would also like to thank Ms Jun Pang and Mr Davide Martino for their hard work and commitment to this policy paper and for their encouragement, resourcefulness, and organisational brilliance.

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TABLE OF CONTENTS I.!

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The political economy of Brexit and the conceptual crisis of modern capitalism Brexit, London’s economy, and students

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Brexit, the British pound, and the cost of living in the United Kingdom

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Brexit and British regional development

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Conclusion: Policy Recommendations

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I. THE POLITICAL ECONOMY OF BREXIT AND THE CONCEPTUAL CRISIS OF MODERN CAPITALISM Restarting the growth of the British economy is necessary to forestall a decline in corporate income, which will lead to rising unemployment, diminishing household income to spend on consumer goods, and a decline in corporate income. This represents a vicious cycle. A number of policy options can, and have been previously applied to stimulate growth. The British government could opt for stimulating demand by increasing welfare payments and cutting taxes. However, such policies are unlikely, as concerns about public debt insolvency were amongst the reasons that led to the adoption of austerity in the UK in the aftermath of the 2008-9 financial crisis. The core aims of austerity are to curb the growth of public debt and in the long-term, to create confidence amongst investors and attract their capital. Since 2010, the British GDP growth rate has stagnated between 1 percent and -0.5 percent1: austerity policies do not so far appear to have been particularly effective in galvanising economic growth. Another way to stimulate economic growth is quantitative easing: the central bank purchases government securities to lower interest rates and simultaneously injects money in the economy, at the expense of a rise in government debt. Quantitative easing aims to stimulate lending to businesses and to consumers, in order to kickstart economic growth. With lower interest rates, households may borrow money for consumption and for servicing their existing debt. Quantitative easing is, however, unlikely to be successful in stimulating economic growth in Britain in the long-run: The Bank of England’s interest rate was cut to 0.25 percent in August 20161. With such a low interest rate, lowering it further to stimulate lending is hardly a viable long-term solution to restarting economic growth. To understand the current economic crisis, which has not only hit Britain, but the global economic system at large, we must begin by analysing the economic crisis of the 1970s. The real sector of the economy developed through greater division of labour. For greater division of labour to be profitable, consumer demand must be rising. Without a rising demand, capital invested in the real sector will in the long term lose its productiveness. As Adam Smith wrote, ‘the extent of this division [of labour] must always be limited (...) by the extent of the market.’2 There is an inbuilt crisis in the global economic system, which will occur upon saturation of markets (with the consequences of falling consumer demand). Such a saturation of markets in the non-Communist world was one of the key causes of economic crisis in the 1970s. In the globalised world of today, with its numerous free trade agreements, a similar issue arises: there is little room left for market expansion

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1 Chad Bray, ‘Bank of England Cuts Interest Rate to Historic Low, Citing Economic Pressures’, The New York Times, 4 August 2016, https://www.nytimes.com/2016/08/05/business/dealbook/bank-ofengland-interest-rates-brexit.html. 2 Adam Smith, ‘Chapter 3: That the Division of Labour Is Limited by the Extent of the Market’, in An Inquiry into the Nature and Causes of the Wealth of Nations, vol. I (Metalibri, 2007), 31, http://www.ibiblio.org/ml/libri/s/SmithA_WealthNations_p.pdf.

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for trade in goods and services. Many areas of the world need investment for development, but it will be a long while until they acquire the purchasing power to consume high-added value products from more technologically advanced states, such as Britain. A solution to the crisis of the 1970s was to create ‘artificial’ demand by encouraging credit. This strategy was adopted by President Ronald Reagan of the United States in his economic reforms, known as ’Reaganomics’. There is an issue in the long-term viability of this strategy: there is a finite debt load that any household can service before it defaults on its debt. This ‘debt ceiling’ depends on the household’s monthly income, which determines the maximum sum of loan repayments a household can make in a month. ‘Reaganomics’ introduced a way around this ‘debt ceiling’ through a decrease in interest rates of new loans. Former consumer loans could be repaid through new loans with a lower interest rate, spread over a longer period of time. Because the interest rate was lower, there was no sizeable increase in monthly repayments after the new loan was taken out. Because the second loan was larger than the first, after having covered the first loan, money was left for additional consumption. Led by Margaret Thatcher, Western European governments adopted this means to stimulate the economy from the 1980s onwards. This ‘artificial stimulation’ of consumption, however, is also finite. It depends perhaps no longer on the household’s monthly income but is limited by the average duration of an individual’s work-life, that is about 40 years. Even if interest rates keep decreasing, it is unlikely that a loan will be issued to an individual to be repaid over a period longer than 40 years — the total amount of the loan is then simply unlikely to be repaid. Stimulating economic growth through credit is not a viable alternative to restart economic growth in Britain today because first, the Bank of England’s interest rate can hardly be lowered further, and second, we are today reaching the saturation of the ‘artificial’ demand stimulation cycle begun in the 1980s. Restarting the British economy necessitates consumer demand, which, in the current situation cannot effectively be stimulated by quantitative easing and government stimulus programs, let alone by austerity and by the strategy of ‘artificial’ demand stimulation through credit introduced in the 1980s. From a long term-perspective, restarting the British economy could be achieved if this structural crisis of the contemporary economy is solved. A new economic model is the solution to the systemic crisis we are facing today, which spreads wealth more equally between economic classes, whose foretold disappearance never quite materialised, and regions of the country. Britain voted to Leave the EU, so while research is conducted to find viable long-term means to restart British economic growth, Britain must address the immediate strategic issue of what type of economic power it aspires to be in the 21st century. ‘In 2015, 44% of the UK’s goods and services were exported to the EU, while 53% of […] imports came to the UK from the EU’1, making the EU the UK’s largest trading partner. It is therefore important for Britain to negotiate favourable terms of trade with the EU once article 50 is triggered. However, exit from the EU may be the opportunity for Britain to become a geopolitical and global economic centre, which serves its own independent interests. Britain’s traditional economic and diplomatic ties, such as its position within 28! !


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the Commonwealth or its economic links with the US and China, could be capitalised to serve its role as a global power in the 21st century. To build a program of post-Brexit economic policies, the UK must determine which strategic priorities to set for economic development in the near future: will the focus lie on trade in goods and services, or on the attraction of foreign capital investment? Though both are certainly not mutually exclusive, prioritising one or the other will engender mutually exclusive economic and monetary policies. Trade and attraction of foreign capital cannot be simultaneously equally successful. There follows an outline of the policies one and the other order of priority entails. Model 1: Trading and Industrial Power If the UK choses to capitalise on trade in goods and services, it must work to boost its industrial potential in the following sectors, which already constitute the bulk of its exports: -! Automobile industry (9.7% of 2014 exports)3 -! Packaged medicine (4.2% of 2014 exports)4 There should be a focus on increasing the competitiveness of British products: exports can be competitive on the global market either because of their low price or because of their quality. It is unrealistic to assume that British workers will accept to work in similar conditions of deprivation as workers in emerging economies. The conditions of British labour is regulated for example by the National Minimum Wage, which came into effect 1 April 1999, with a rate of 3.60GBP5. Any attempts to deny British workers social security and other work benefits would likely result in dangerous social upheaval. As a result, the UK cannot compete with other exporting states based on the cheapness of its products. With its globally leading universities and research centres, however, the UK can compete on the international market in terms of the quality and innovation of its products. The UK must invest heavily in Research and Development in order to maximise its global trade competitiveness. The UK balance of trade has been negative for the past decade6. The UK particularly depends on foreign imports in machines, engines, pumps (13.3 percent of 2015 imports) and vehicles (12.3 percent of 2015 imports)7. In 2014, 49 percent of imported cars8 and

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3 Alexander Simoes, ‘Products Exported by the United Kingdom (2014)’, The Observatory of Economic Complexity, accessed 14 January 2017, http://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/gbr/all/show/2014/. 4 Alexander Simoes, ‘Products Exported by the United Kingdom (2014)’, The Observatory of Economic Complexity, accessed 14 January 2017, http://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/gbr/all/show/2014/. 5 PK Edwards, ‘The UK’s First National Minimum Wage’, Eurofound, 27 April 1999, http://www.eurofound.europa.eu/observatories/eurwork/articles/the-uks-first-national-minimum-wage. 6 Trading Economics, ‘United Kingdom Balance of Trade, 1955-2017’, Trading Economics, accessed 14 January 2017, http://www.tradingeconomics.com/united-kingdom/balance-of-trade. 7 Daniel Workman, ‘United Kingdom’s Top 10 Imports’, World’s Top Exports, 5 November 2016, http://www.worldstopexports.com/united-kingdoms-top-10-imports/. 8 Alexander Simoes, ‘Import Origins of Cars to the United Kingdom (2014)’, The Observatory of Economic Complexity, accessed 14 January 2017, http://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/gbr/show/8703/2014/.

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! 35 percent of engine parts9 came from Germany alone. Boosting domestic manufacturing industries will render the UK less dependent on imports, notably from the EU, and therefore more resilient to foreign economic (and political) pressures. With this in mind, one of the main aims for post-Brexit Britain is to render its trade balance positive. If trade in goods and services is set as the priority target for British economic development, then the pound sterling should be devalued compared to other currencies such as the US dollar and the yuan to increase the competitiveness of British products on the global market. To develop trade in goods and services, negotiating favourable trade agreements with the EU, China and the USA, which are among the UK’s main trading partners, is essential. Britain may capitalise its international networks of Commonwealth States based on historic ties to diversify its trading partners and to facilitate favourable trade negotiations. Free trade agreements should be approached with caution in the immediacy of Brexit if the UK aims to develop certain areas of its economy and render them more competitive. In such cases tariffs and non-tariff barriers may prove an asset to protect burgeoning areas of the economy from external competition during the period of time necessary for them to reach international competitiveness. There should be a strong focus on developing trade links with China. According to Chancellor of the Exchequer Philip Hammond, Britain is first among European countries in terms of foreign investment it receives from China. Britain may be of interest to Chinese investors in due to its booming financial services sector and for infrastructural investments. Strengthening trade ties with Hong Kong may be particularly promising, due to its the long-standing history of relations with London. The first freight service connecting London and China was launched in early 201710. By railroad, goods from Yiwu, China, can be transported to London faster and cheaper than by sea and by air respectively. This project is part of China’s New Silk Route initiative. In view of developing stronger economic ties with China, this railroad is certainly a valuable opportunity for the UK. This railroad crosses a number of states, including Britain – exemplifying the importance of diplomacy and international relations to the forging of Britain’s future trade role. Britain’s foreign policy, including its military investment decisions, will have to be closely linked to the protection and furthering of its commercial interests. The UK is already looking to increase investment from China in British infrastructure. In December 2016, the UK-China Infrastructure Academy was inaugurated. This week-

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9 Alexander Simoes, ‘Import Origins of Engine Parts to the United Kingdom (2014)’, The Observatory of Economic Complexity, accessed 14 January 2017, http://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/gbr/show/8409/2014/. 10 Kamal Ahmed, ‘‘China Freight Train’ in First Trip to Barking’, BBC News, 3 January 2017, sec. Business, http://www.bbc.com/news/business-38497997.

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long training course is designed for ‘delegates from Chinese companies and government departments [who] will receive training on the policy, financial, planning and legal frameworks governing the UK’s infrastructure environment.’ 11 In model 1 of post-Brexit development, this initiative should be strongly encouraged. In order to strengthen the goods and services section of the British economy, British companies should prioritise investment in goods and services at home rather than in financial bonds. The creation of new jobs in national industry should be encouraged and the flow of capital and labour out of the country discouraged, in particular through media pressure. The media must be mobilised to encourage consumers to buy products from those British firms that are actively investing the British economy. Those firms that mainly outsource their capital and labour should be painted negatively in the media. Media campaigns are crucial to gain public support for and participation in the successful implementation of the UK's post-Brexit economic strategy. Pressure (media, informal, through incentives such as tax breaks) should be exercised on foreign investors to invest in the ‘real economy’ of goods and services, rather than in financial market speculation in the City. Other means of stimulating consumption could be a more lenient fiscal policy in the form of lower Value Added Taxation, or even selective application of the Value-Added Tax in accordance with the product’s origin. Such protectionism might aid Britain in reducing its current-account deficit, but is likely to be met with stark resistance from Britain’s European trading partners. Model 1: Financial Power In model 2, the target for post-Brexit British economic development is set to be development by attracting foreign capital to British financial institutions. For the success of model 2, the British pound sterling must be revalued compared to other main currencies such as the US dollar or the yuan. If the pound is revalued, keeping capital in British banks, in particular in the City of London, will become more attractive to foreign investors than storing capital in their own, or other currencies. British banks may use this inflow of capital for foreign direct investment worldwide. The strategy of model 2 is likely to engender the following side effects, if the pound is revalued: -! An increase in public debt because the absolute value of interests to pay for yearly borrowing will increase as the value of the pound increases. -! Revaluation of the pound will discourage borrowing from British banks to invest in British industry because the interests to be repaid will be worth more in absolute terms than if the capital was borrowed in another currency. -! It will also discourage foreign direct investment into the production of British goods and services because the amount of capital that must be invested to bring

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 11 Department for International Trade, ‘UK-China Infrastructure Academy Opens Its Doors and Welcomes First Students’, Gov.uk, 12 August 2016, https://www.gov.uk/government/news/uk-chinainfrastructure-academy-opens-its-doors-and-welcomes-first-students.

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a product to market will be higher in absolute terms in the UK than in other states, where a ‘cheaper’ currency is used. Additionally, a revalued pound will decrease the competitiveness of British goods and services internationally. In this scenario, the British financial sector will boom more or less at the expense of the other sectors of the economy. A number of goods and services produced in and formerly exported by the UK will no longer be competitive on the global market: their production will decrease as demand decreases. As the production of these goods and services decreases, unemployment is likely to increase. The national debt is likely to also increase, as it becomes necessary to import goods and services whose domestic production is no longer profitable. A ‘tax-friendly’ environment, colloquially known as ‘Singapore-on-Thames’. To attract foreign capital, the British government could choose to adopt an aggressively competitive fiscal policy and introduce substantial reductions to corporate taxation and labour law, so as to stem the outflows of capital that are likely to follow Brexit and to boost the long-term competitiveness of the British economy. This is largely considered a ‘nuclear’ policy option, with vast consequences for the British welfare state and the need for a major reconsideration of the current fiscal obligations of the British state, including the popular and treasured National Health Service.

It can be noted that most of these outcomes contradict the interests of trade in British goods and services.

Conclusion The central question that the UK needs to answer post-Brexit is the following: does it aspire to be primarily a trading and industrial power, or a financial power in the global economy of the 21st century? Certainly, efforts will be made to maximise gains in both trade and finance. A priority must nonetheless be set, as certain policies that are beneficial for trade are not for finance and vis versa. In order to determine which economic policies Britain must follow post-Brexit, the Kingdom’s strategic aims first need to be determined. The ends must be set before the means can be concretely chosen.

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II. BREXIT, LONDON’S ECONOMY, AND STUDENTS Despite Theresa May’s recent commitment to ‘provide as much certainty and clarity as we can at every stage’12 Brexit discussions so far have been marked by uncertainty. This is very much the case with regard to the future of the City of London. London is the financial centre of Europe, if not the world. It is also an important destination for Cambridge graduates when beginning their careers. This section of the paper will consider the implications for London in those two regards, both as separate and as intertwined issues. It will outline how London can retain its preeminence and not lose young graduates to other European (and further afield) cities. Brexit, London, and Finance Theresa May has recently made it clear that the UK will be leaving the single market.13 As such, the passporting regime that currently underpins the rights of companies based in London to sell products and services throughout the European Economic Area is likely to be no longer viable. 14 The alternative currently being sought by the main lobby group for the City of London (TheCityUK) and suggested as a preference by legal financial experts such as Barnabas Reynolds is that of equivalence.15 The principle of Equivalence is the mutual recognition of regulatory regimes: when two regulatory regimes are so similar that they are recognised as equivalent, allowing corporations to work across them fluidly. In this case, it would rely on the EU recognising the UK’s regulatory system (which is currently identical to it) as so similar that it will allow a company regulated in the UK to operate in the EU as if they were EU-regulated. A bespoke deal would have to be arranged for this, including, as Reynolds writes, a ‘procedural framework for establishing, maintaining and withdrawing equivalence for the future’ as this would give certainty to both the UK and the EU and, importantly, to financial markets. TheCityUK has stressed, too, that it does not want basic equivalence but a bespoke deal, including transitional arrangements to minimise disruptions for the City of London. 16 Transitional arrangements to avoid too much uncertainty for the City of London were

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‘Theresa May's Brexit speech in full: Prime Minister outlines her 12 objectives for negotiations’ Independent, 17 January 2017. http://www.independent.co.uk/news/uk/home-news/full-text-theresamay-brexit-speech-global-britain-eu-european-union-latest-a7531361.html 13 Ibid. 14 Finch, Gavin. ‘Brexit Future Hinges on Passporting Rights: QuickTake Q&A’. Bloomberg, 19 October 2016. https://www.bloomberg.com/news/articles/2016-10-19/u-k-banks-brexit-hopes-boil-down-toone-word-quicktake-q-a 15 Reynolds, Barnabas. ‘A Blueprint for Brexit : The Future of Global Financial Services and Markets in the UK’. Politeia, 2016. http://www.politeia.co.uk/wp-content/uploads/2016/11/Barnabas-Reynolds-ABlueprint-for-Brexit-2.pdf 16 TheCityUK. ‘Brexit and UK-Based Financial and Related Professional Services’. TheCityUK, 2017. https://www.thecityuk.com/assets/2017/Reports-PDF/Brexit-and-UK-based-financial-and-relatedprofessional-services.pdf

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! also recently supported by Lord Hague.17 Smoothness of transition is essential to avoid too much disruption. Such transitional agreements will take time to be negotiated with the EU, and thus uncertainty is likely to last for another year if not more, before the details of the City’s future ability to sell its products across the EU becomes clearer. It is in London’s interest to retain its financial dominance. It is in the interest of many large banks too. Relocation is both expensive and disruptive. London is well suited as a global financial centre given its time-zone, language, and ability to attract the highest calibre of human capital from Britain and beyond. The future of the UK’s immigration policy will thus be extremely important. Theresa May’s speech promised that highlyskilled immigrants would still be welcome, yet the shape of the UK’s future immigration policy still remains to be determined. In many ways, London’s status as a financial centre supports many of the city’s other industries, especially its nascent status as a European technology hub. This characteristic is shared by other booming urban economic centres like Cambridge, which are crucially dependent on both Britain’s openness to foreign capital and to migrants. One issue concomitant with leaving the EU is London’s loss of access to the European Investment Fund (EIF) which provides funding to Venture Capital and Private Equity Firms who are key investors in start-ups. In the period from 2011 to 2015 the EIF committed €2.3 billion to 144 UK-based funds and, in doing so, indirectly supported over 27,000 UK companies, especially many young tech firms.18 Indeed, London’s place at the top of the European Digital City Index in 2016 is in no small way supported by the EU and London’s business environment19. An equivalence deal which helps preserve, and even improve, London’s status would help bolster the future of technology in the city. The recent decision of Snap, the company responsible for the Snapchat social media app, to base its non-US office in London is a promising sign.20 However, a commitment from the UK government to fill the potential gap caused by loss of access to the EIF could add much more certainty to those looking to set up new technology companies and help avoid their movement to an EU country. In summary: -! A bespoke equivalence based deal is the best possible outcome for the City of London as it would keep much as it currently is and, even, could give some scope to remove some EU regulations that are cumbersome. This could happen under the condition that this is not expressly excluded by the final UK-EU bilateral relationships deal. -!

Uncertainty will persist, but there are some measures that can be taken to ease

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‘William Hague backs work visas for EU citizens after Brexit’, Financial Times, 12 January 2017. https://www.ft.com/content/9114eeb0-d91c-11e6-944b-e7eb37a6aa8e 18 Patel, Oliver. ‘What will Brexit mean for London’s tech industry and digital entrepreneurs?’, openDemocracy, 16 December 2016. https://www.opendemocracy.net/brexitdivisions/oliverpatel/what-will-brexit-mean-for-london-s-tech-industry-and-digital-entreprene 19 European Digital City Index, 2017. https://digitalcityindex.eu 20 ‘Snapchat sets up international office in London’. BBC News. 10 January 2017, http://www.bbc.co.uk/news/business-38567898

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Reassurance that there will be a transitional arrangement for the financial sector. Reassurance that skilled immigrants to work in sectors such as finance and technology will still be welcome. Reassurance that the government will make sure alternatives are found when access to EU based funding is withdrawn.

London and starting a career: For this section of the paper a survey was conducted of 100 students, mostly Cambridge undergraduates.21 They were overwhelmingly ‘Remain’ voters. Nation-wide, 75% of 18-24 year olds voted to remain in the European Union whereas 85% of those surveyed voted to remain.22 Brexit will have profound implications upon the lives of a generation who did not wish for it and thus their voices in the debate for a post-Brexit settlement are extremely important. The clear majority of respondents, some 58%, still intended to work in London upon graduation. Students that indicated a preference to work or current employment elsewhere in the UK tended to do so for a specific reason. For example, Exeter and Newcastle were chosen due to the fact that they were the respondents’ hometown. One person simply stipulated ‘somewhere rural’. Within the ‘elsewhere in the world’ category, the alternatives respondents gave can be broadly split into the USA or Europe, examples including the very specific ‘Massachusetts Hospital’ to the more general ‘basically anywhere in Europe that’s not England’. Where students were asked for their preferred European cities answers ranged from Berlin to Amsterdam with no one city in particular drawing a particular degree of attention, especially in comparison to London. With regard to careers, uncertainty was once again a predominant theme. Only 37% of respondents seemed sure that Brexit would not affect their career plans whereas the rest were either sure that it would or were uncertain. Two strands of comment particularly stood out. The first was students, particularly language students, who had wished to pursue a career in EU diplomacy but no longer felt this was viable. The second was those who wished to pursue a career in finance but were finding it harder to get internship and job offers due to the uncertainty that pervades the sector. As discussed above, a transitional deal and then a bespoke equivalence arrangement pose an attractive solution to this issue. Most respondents believed that Brexit would have a negative impact on London as a financial centre but this does not have to be the case. London remains, and can remain, the preeminent destination for bright young graduates to begin their careers.

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There were 10 recent Cambridge graduates and 2 non-Cambridge undergraduates. Cresci, Elena and Guardian readers. ‘Meet the 75%: the young people who voted to remain in the EU’, The Guardian, 24 June 2016, https://www.theguardian.com/politics/2016/jun/24/meetthe-75-young-people-who-voted-to- remain-in-eu

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III. BREXIT, THE BRITISH POUND, AND THE COST OF LIVING IN THE UNITED KINGDOM Introduction The political divorce of the United Kingdom and the European Union will have major effects on the trade balance and capital account balance of the United Kingdom, one of the main determinants of the value of the British pound with respect to other world currencies, and especially to the US dollar and the Euro. Moreover, decreased opportunity for businesses investing in the United Kingdom in the form of reduced access to the European Single Market, the largest common trade area in the world, is likely to have adverse consequences on investment inflows into the United Kingdom, which could put additional downward pressures on the value of the British pound. Whilst a cheaper pound could be seen by some as beneficial to British exporters, the positive effects on the competitiveness of British exporters might be offset by the prospect of paying tariffs to access the European Single Market. As the UK has a highly globalised, export-oriented economy with a substantial chronic current-account deficit (-5.6% of GDP, according to the Economist Intelligence Unit), a fall in the value of the pound with respect to the currencies of Britain’s biggest trading partners, the Eurozone and the United States, is likely to accelerate inflation and lead to a decrease in the real wage for British workers, as inflation is likely to rise faster than nominal wages. The extent to which inflation could accelerate as a consequence of the cheaper pound crucially depends on the trade relationship the UK will establish with its main trading partners in the aftermath of Brexit, as well as on the ability of the British economy to export-substitute and the likely change in the British consumer’s propensity to consume imported goods. It is clear that while voters supported Brexit as a political move to restore democratic sovereignty to British political institutions and to control migration, they did not vote in favour of falling living standards and might not be prepared to pay the full cost of a radical disentanglement of the British economy from the European Single Market. Therefore, the British government should seek to conclude a trade agreement which preserves flexible access of British exporters to the Single Market, offset the likely damage on the attractiveness of the British economy as an investment destination, and seek to protect the currency from excessive devaluation in conjunction with the Bank of England, whose independence should be guaranteed as both the best way to ensure the pound is managed prudently and that Britain preserves its status as a trustworthy, rules-based economy with one of the leading global currencies. 1.! The relative value of the British pound and inflation in a historical perspective The British pound has experienced a continuous devalutionary trend in the post-WorldWar-II era. With respect to the US dollar, the pound was pegged at an exchange rate of $4.03 per £1 in the Bretton Woods era; as it became clear that the post-war British economy could not sustain the export prowess needed for this exchange rate, the rate was revised downwards on numerous occasions: in 1949, it was devalued by over 30% to $2.80, and in 1967 it was devalued by another 14% to achieve a new fixed rate of $2.40 per £1. Those devaluations, carried out within the jurisdiction of the ‘pseudo36! !


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Gold Standard’ regime of the Bretton Woods system, were supposed to reflect economic realities of the financial relationship between the British and the US economies, marked by the substantial wartime debt Britain had incurred in US dollars and the dominance of the US economy as leading world exporter until the 1970s. After the ‘Nixon shock’ in 1971, the British pound’s fixed convertibility to the US dollar was in effect suspended, and the modern, free-floating pound was created. It continued its downward trend with respect to the US dollar, from a high of $2.44 in 1980 to a low of $1.05 per pound in 1985. The pound kept fluctuating between $1 and $1.5 between the early 1990s and 2001, reaching $1.38 in June 2001. The events of September 2001 and the decision of the Federal Reserve to keep its funds rates at the historical low of 1% initiated a steady period of dollar devaluation: starting in June 2002, the pound started climbing with respect to the dollar, a process initiated by the first symptoms of the American subprime mortgage crisis. In August 2007, the pound broke the $2 barrier, and in November of the same year it reached a local maximum of $2.11. This trend was not to last, however, and as it became clear that the British financial system would also come under substantial pressure from the meltdown of US property markets and their derivate financial products, coupled with the returned confidence in the ability of US policy-makers to contain the crisis after the take-over of the Obama administration in 2009 and its package of stimulus measures and bank bailouts as part of TARP – the Troubled Asset Relief Programme of the US Treasury, the pound started a precipitous fall: by the end of 2008, the pound had hit a low of $1.44. When recession hit the UK economy in 2009, the pound fell to $1.37 on March 12th, a 25-year low for the British currency. The victory of the Conservative Party in the 2010 General Election and the ensuing policy of fiscal austerity, coupled with the policy of bank bailouts of Lloyds and the Royal Bank of Scotland, returned confidence in the determination of UK policy-makers to return stability to the UK financial system. By the end of 2013, a combination of reasons pushed the pound up on a path of steady and sustained rise. The consensus view is that the main supporting factors were the policies of fiscal austerity and monetary prudency and the continued poll results in support of the preservation of the union between Scotland and the United Kingdom in the lead-up to the Independence Referendum of September 2014. Thus, the negative vote in the referendum had little effect on the value of the pound with respect to the dollar, as markets were fairly confident in this outcome and had already priced it in. However, slow recovery trends (slower than those in the US, whose economy experience a strong rebound in 2014-15) and the fact the Bank of England chose not to increase interest rates and use nonconventional monetary policy tools in the shape of quantitative easing, ushered in another trend in the direction of a weaker pound. As the Federal Reserve started a cycle of monetary tightening, raising its base interest rate by 25 basis points in December 2015, the first since 2006, the pound came under increasing pressures. The year 2016 began with the pound at its lowest level in 7 years, at only $1.42, and the February announcement of a referendum on the UK's continued membership of the EU added additional fuel to the sentiment of uncertainty that was dampening the value of sterling. Polls indicating that the referendum vote would favour the Remain side were able to dull the fall in the pound in the months before the plebiscite. As the unexpected referendum result washed through markets in the days after, the pound dropped from $1.47 to $1.29 over the duration of a single week. Although this was fall of about 12% was considerable by the standards of the pound-dollar exchange, it was considerably 37! !


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smaller than some analysts predicted and compared to the 26% fall in 2008 or the 25% drop over 2 months in 1992, when the Bank was forced to take the pound out of the European Exchange Rate Mechanism. By mid-August 2016, the pound had stabilised at around $1.32. The announcement of the Brexit timetable in early October, however, added further downward pressure, and a new stable rate $1.22 was reached in the middle of that month. As the Recession hit the United States and then Britain in 2008-9, the British economy experienced inflationary pressures which exhibited substantial correlation with the movement of the GBP-USD exchange rate. Annual CPI growth rate reached a preRecession high of 3.11% in 2008, which fell to 2.83% in 2009 as recession took its toll on the American economy and pushed the pound higher with respect to the dollar. The weaker pound of 2009-2011 helped push inflation to 3.73% in 2010 and 4.20% in 2011. As the austerity policies of the Cameron cabinet started to have broader effects on the economy and as the pound recovered some of its lost ground against the dollar, inflation slowed down to 2.71% in 2012, 1.99% in 2013, and 0.50% in 2014. 2015 saw the lowest CPI growth since the late 1950s, at 0.20%. This near-deflationary situation was brought about by fiscal austerity, the vote of confidence in the Union between Scotland and the United Kingdom, and the expectation of markets that the EU referendum would produce a vote in favour of Britain remaining in the European Union. 2.! The relative value of the British pound and inflation in the aftermath of the EU referendum The pricing in of the outcome of the EU referendum by currency markets consisted of a rapid adjustment of the value of the pound with respect to the US dollar. On June 23rd, the day before the referendum, the pound had reached a 2016 high of $1.49, as pollsters were confident that British voters would support Remain. Between June 24th and July 7th, the pound fell by 14%, to $1.28. This fall was perceived as overadjustment by anxious markets, which at that time had next to nothing in terms of information regarding the plans of the UK government for their Brexit negotiating position and their intent to either pursue a ‘hard’ Brexit (leaving the Single Market and the customs union), a ‘soft’ Brexit (retaining membership of the Single Market and, crucially, passporting for financial firms), or a combination of the two. This uncertainty gave rise to cautious optimism that Theresa May’s government would support economic preservation over ‘clean’ Brexit at all costs, especially as her choice for Chancellor of the Exchequer, Philip Hammond, seemed to show preference for economic well-being first and foremost. On the wings of this optimism, the pound recovered to $1.34 by September 6th. This was short-lived, however: as Theresa May made it clear on October 2nd that she intends to trigger Article 50, the legal means of exiting the European Union, by March 2017 as the beginning of a two-year divorce process, the pound found itself under renewed downward pressure, as markets fretted about the ability of the UK government to negotiate a satisfactory trade deal with the European Union within the substantially-limited two-year timeframe, an administrative feat which would take a major toll on a public service already weakened by the austerity policies of David Cameron’s government. Between October 2016 and January 2017, the dollar-pound exchange rate was marked by frequent fluctuations as the political 38! !


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landscape was further complicated by the uncertainty created by the election of Donald Trump to the US presidency; an anti-establishment candidate, Mr Trump’s positions created further lack of clarity over the course of geopolitical relationships and the likely negotiating stance of the British government with respect to Brexit. On January 17th, Mrs May responded to criticism over the perceived ‘wavering’ of her government on its Brexit negotiation strategy by promising a ‘clean’ Brexit with a very likely exit from the European Single Market to achieve complete control over borders. Mrs May’s meeting with Donald Trump a week later demonstrated the UK government’s desire to pursue comprehensive trade deals with non-EU markets, which added further indication to the likely exit of Britain from the European Single Market. It is not clear, however, that Britain could achieve favourable trade terms on its own, as the economies it seeks to negotiate with are far larger and could therefore rely on larger leverage to dictate terms. The future dynamics of the pound will crucially depend on Britain’s ability to secure favourable trade terms with large, increasingly nationalistic economic partners. According to the National Office of Statistics, inflation accelerated to 1.60% year-onyear in 2016, a substantial speeding up compared to the 2015 rate of 0.20%. This acceleration is a clear sign that the British economy, with its openness, reliance on exports and imports and substantial current-account deficits, is strongly pricedependent on the value of its currency with respect to other major world currencies. 3.! How would the price depreciation affect inflation in the UK economy? A weaker pound makes imported goods and services more expensive to the British consumer as it decreases the purchasing power in terms of foreign goods that a British salary denominated in pounds can buy. Whilst the immediate effects of a cheaper pound on inflation are unlikely to be major or lasting because most of the imports to the UK happen under fixed contract terms which cover at least a few months in advance, the real problem for UK consumers would be a chronic lower stable value of the pound with respect to the currencies of Britain’s key trading partners, the Eurozone (around 50% of imports), the United States (6.7%), and China (9.4%)23. Monthly inflation in August 2016 stood at 0.6%, unchanged from July, the month after the EU referendum. However, there is substantial reason to believe that the eventual pass-through of a weaker pound to an increase in the consumer-price index could be significant. The specific pass-through parameter of an economy is a complex variable and depends on a multitude of factors related to its dependence on exports and imports, its size, its level of development, its credit conditions, its sectoral structure, and the propensity of its economic agents to consume imports. The UK economy has experienced an increase in the proportion of its Gross Domestic Product which is spent on imports: in the 1980s, Britain’s bill for imports was worth 25% of GDP. In 2016, it stood at 31%. This means that a greater proportion of the goods and services that are sold in Britain are made up of imports, which means that the strength with which a weaker currency translates into higher inflation has increased. It is important to note that while temporary fluctuations

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The Observatory of Economic Complexity, Massachusetts Institute of Technology

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in currency levels have little to no effect on inflation, annual average exchange rates and lower equilibrium trend rates are an important determinant of inflation; thus, if Brexit leads to a lower equilibrium exchange rate of the pound with respect to the Euro and the US dollar, it is highly likely that this will translate into accelerating inflation. The pound is influenced by many ‘shocks’, including monetary policy, changes in productivity and events in the world economy24. The shocks that caused the depreciation of sterling in 1992 were essentially different from those that caused the depreciation after the Great Recession. This explains the different ways in which the UK economy absorbed those exchange rate shocks in terms of inflation rates: after late1992, inflation decelerated due to weaker consumer confidence and lower spending in the real economy, whilst in mid-2008 inflation increased as the negative developments in the financial systems had not yet propagated to consumers and dampened their wages and thus consumer demand. The Brexit vote represents a shock to domestic supply. Uncertainty created by the negotiations with the EU is likely to harm investment sentiment and thus hamper the medium-term tendencies for productivity growth, which has been very weak over the past decade, even by the standard of rich developed economies. The fall in the value of the British pound with respect to the currencies of Britain’s major trading partners will cause import prices to rise. If productivity growth is weak, firms will struggle to absorb extra costs related to obtaining the goods and services they import, as higher prices could substantially squeeze margins and even make them negative. Thus, the only solution for many firms faced with stagnating or even decreasing productivity and higher input costs could be to pass on higher costs to their customers in the shape of higher output prices. British consumers could support and accelerate this process by maintaining current levels of consumption with the help of credit or savings: recent retail figures have shown resilience in the face of the Brexit uncertainty. In October 2016, retail sales volumes were up by 7.4% on a year earlier, which was the strongest monthly year-on-year growth since 2002 and substantially overshot a forecast by Reuters economists of 5.3% growth25. This suggests that consumers may currently be willing to pay higher prices to preserve their levels of consumption, funding this pattern either through less savings or through credit, which is likely to exert a downward pressure on their ability to consume in half a year to two years’ time. The Bank of England’s inflation report26 from its Monetary Policy Committee (MPC) meeting in November already suggests that in 2017 inflation will be well above the 2% target (at 2.7%), as commodity prices, most importantly the price of crude oil, stop falling as the downturn after the latest commodity super-cycle tapers off. The Bank has declared that raising its base interest rate to quell inflation is unlikely, as the MPC believes that higher rates could hamper the fragile recovery and push the economy into

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Kristin Forbes, ‘Much ado about something important: How do exchange rate movements affect inflation?’, 47th Money, Macro and Finance Research Group Annual Conference, Cardiff 25 26

Office for National Statistics, Retail Sales in Great Britain: Oct 2016 (Statistical Bulletin) Bank of England, Monetary Policy Summary and Minutes, 2 November 2016

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a ‘Brexit recession’. The Bank’s willingness to tolerate higher inflation rates at the price of keeping economic growth afloat is a clear indicator that inflation is likely to not only increase as compared to the previous five years, when it reached record lows, but to overshoot the Bank’s inflation target of 2%. Higher inflation, coupled with stagnating productivity, is likely to have substantial effects on the standard of living in the United Kingdom, and is likely to disproportionately affect the most vulnerable groups of British society. 4.! The effects of higher inflation on standards of living in the United Kingdom The fall in the value of the pound will result in rising inflation as the cost of imported goods increases. Different households are likely to experience a change in their living standards differently, depended on their consumption patterns, their reliance on imported goods, and the industries in which they are employed. The basket of goods and services that is used to calculate Britain’s official Consumer Price Index (CPI) is often misleading as to the price increases characterising most consumption choices of Britons. The CPI is based on aggregate consumption of different goods, so it could be likely to exhibit a bias towards the consumption choices of more affluent households, who tend to consume more than less-well-off ones. The Bank of England and the Office for National Statistics recognise this shortcoming of the Consumer Price Index and review the constituent goods of the index every year to reflect changing consumption patterns and make sure the index is as representative of the price changes experienced by the average British household as is methodologically possible27. Thus, a given level of CPI increase, for example the 2.7% increase forecast by the Bank of England for 2017, has different impact on the standards of living of different socioeconomic strata of British households. Poor households tend to devote a greater proportion of their spending to imported goods as their limited financial means force them to consume cheap consumer products, usually produced in currently industrialising countries such as China, which compete with domestically-produced goods through their low prices. A family which does its daily groceries at Aldi is likely to buy Polish apples and tomatoes, Italian canned fish, a Chinese vacuum-cleaner, and Spanish wine, and is therefore likely to be affected more strongly by inflation induced by post-Brexit pound devaluation, as opposed to a family which relies on Waitrose for its daily purchases and could expect to buy English apples, fish, and meat. The average household in the bottom income decile spends approximately 18% of its income (after covering housing expenditure) on food, which is twice the proportion spent on food by the richest decile28. Of all spending on food, over half is on imported items: 68% in the case of fish consumption, for example, and 76% in the case of oils and fats29. The dispute over the importing of the yeasty spread Marmite between the supermarket chain Tesco and the Dutch food producer Unilever is a useful example of the supply-chain pressures faced by importers, retailers, and

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Gooding, Philip. ‘Consumer Price Inflation: The 2016 Basket of Goods and Services’. ONS Family Spending: 2015 (Compendium). Office for National Statistics. 29 Food Statistics Pocketbook 2016. HM Government. 28

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consumers stemming from the weaker pound, and the public debate about the costs of Brexit and which party should cover them. As the cost of such essential consumer goods goes up, less-well-off households’ inflation rate is likely to be above the official CPI rate, just as the subjective inflation rate experienced by richer households is likely to be below CPI rates. In addition, more affluent households tend to spend a higher proportion of their incomes on services, which are not traded internationally (an example would be restaurant dinners, haircuts, opera and theatre tickets) and whose price is therefore unlikely to be affected by the exchange rate of the pound in the short term. In the longer term, however, services which depend on immigration from the European Union might face labour shortages, which would mean higher wages, as well as higher price on ‘intermediate inputs’, such as the goods consumed by the people who provide those services. Both factors are likely to raise prices for the end consumer of the service, although this process is likely to take time. More affluent households spend 6% of their income on education, largely in the form of private-school fees, compared with just 1% among those in the bottom income decile30. Overall, about 31% of disposable spending of the richest decile goes on imports, compared with an average of 34% for the rest, official statistics suggest.31 These differences in consumption patterns between richer and poorer households means that the rich are likely to be affected in a less pronounced way by the fall in the value of the pound. Their household inflation rates are likely to rise by less than the official CPI, whilst those of households from lower income deciles are likely to experience inflation that is higher than the one given by the CPI. 5.! Conclusions and Policy Recommendations The impact of the United Kingdom leaving the European Union would depend on the new relationship between the UK and the EU. The models for a future relationship at the extremes in terms of proximity to the EU are unlikely to materialise. The Norwegian model, involving membership of the European Economic Area, would not give the UK the political flexibility that was a central argument in favour of Brexit during the prereferendum campaign. By contrast, a much looser model in which the UK trades with the EU on a most-favoured nation basis and WTO rules would provide the UK with the desired measure of flexibility, but would seriously jeopardise trade and investment between the UK and the EU. The most likely model, considering recent statements made by Theresa May’s government, is a comprehensive free-trade agreement. This model would still require a long negotiation process, politically unpalatable compromises, and sizeable expenditure in terms of administrative time, capacity, and resource. A lack of clarity over what would replace EU membership is just one reason why the path to Brexit would be uncertain, giving rise to expected fluctuations in the value of the sterling which are unlikely to settle at a new equilibrium rate in the next decade. The impact of Brexit through the trade and investment channels is likely to

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Family Spending: 2015 (Compendium). Office for National Statistics. Ibid.

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affect trade volumes, make imports more expensive and exports harder, and reduce the attractiveness of the UK for investment. All of this will exert downward pressure on the value of the pound with respect to the US dollar and the Euro, which will lead to higher inflation in the United Kingdom in the coming five to ten years. As the Bank of England has indicated that it is unlikely to jeopardise growth prospects in the name of controlling inflation at such a critical juncture for the British economy, inflation could be expected to comfortably overshoot the Bank’s inflation target of 2%. This is likely to exceed productivity and wage growth and thus decrease the standard of living of British households compared to the scenario of Britain remaining in the EU. Moreover, poorer households are likely to be disproportionately hurt by the new economic realities, as their consumption pattern is more reliant on cheap imports than the consumption pattern of more affluent ones. To avoid continued economic struggle for those families, the UK government needs to address stagnating productivity in the British economy as a matter of urgency. It should also pursue the least disrupting trade regime with the EU, which would ensure that the damage of pulling out of the Single Market could be limited as much as possible, given the political aims of controlling migration that the Government has set itself. Preserving passporting for financial services, which are one of Britain’s most powerful export industries and are the heart of an economic ecosystem of jobs and supporting businesses, should be pursued as an essential priority in the new trade deal with the European Union. Brexit is likely to be a long and protracted administrative process, which will negatively affect the value of the pound and push up inflation in Britain; the best long-term strategy to overcome the anticipated fall in living standards is to focus on productivity-enhancing policies and high-value-adding economic sectors. Whilst some economic suffering seems almost unavoidable in the short and mid-term, the long-term success of Brexit will crucially depend on the productivity and global competitiveness of the British economy.

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IV. BREXIT AND BRITISH REGIONAL DEVELOPMENT Introduction: The Challenge of Regional Development A regional policy for the European Economic Community was not put in place until the first enlargement and the economic crises of the 1970s32: it appeared that economic integration could aggravate the situation of the originally backward and peripheral regions of the Community, meaning that a regional policy at the European level would be needed to tackle the issue adequately. When it joined the European Economic Community in 1973, the United Kingdom had made the creation of a regional fund one of its requests33. The European Regional Development Fund was thus created at the Paris summit of 1972, and it started operating in 1975. The European Social Fund (ESF), dedicated to promoting economic and social cohesion and set up under the Treaty of Rome in 1957, started gaining speed as well. The Single European Act of 1992 consecrated the inclusion of the Cohesion Policy within the common policies of the European Community. Regional development is the provision of funding for regions that are less economically developed. In order to target less developed regions more efficiently, the EU has drawn its own nomenclature of regions on three separate levels: NUTS1, NUTS2 and NUTS3. Those levels are determined by population size: for example, Scotland is a NUTS1 regions; it contains four NUT2 regions, and 23 NUTS3 regions. In the context of the EU’s Cohesion Policy, the name for the EU Regional Development Programme, NUTS2 regions are the point of reference and classified into three categories depending on their GDP per capita: less developed regions have a GDP per capita below 75% of the EU average, transition regions are between 75% and 90% of the EU average, and the more developed regions are above 90%. British regions are unequally developed: while the South, South-East, Greater London, East Anglia and the Scottish Lowlands generally fall into the last category, there are a number of ‘transition’ regions, such as the North-West, Lincolnshire, Northern Ireland, Devon and the Scottish Highlands. More importantly, two regions fall within the less developed’ category: West Wales and the Valleys, and Cornwall and the Isles of Scilly. Following the 2014-2020 budget plan, the UK’s annual contribution to the EU budget was €16,586m (£12,918m) in 201534, including Traditional Own Resources – import duties raised by member states in the name of the EU on goods brought into the EU – as well as the UK Rebate – a financial mechanism reducing the UK’s net contribution by approximately 66%. In 2015, the EU has spent €63,905.6m35 on the budget categories covering the structural and cohesion funds (‘Competitiveness for growth and

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Kengyel, Akos. ‘Evaluating the Added Value of EU-Level Regional Policy,’ Society and Economy, vol. 30, no. 2 (December 2008), pp. 303-322. 33 George, Stephen (1990). An Awkward Partner: Britain in the European Community. Oxford University Press. pp. 56–67. ISBN 0-19-827563-3. 34 ‘European Union Finances 2015: statement on the 2015 EU budget and measures to counter fraud and financial mismanagement,’ HM Treasury (December 2015). 35 ‘EU expenditure and revenue 2014-2020,’ European Commission (available at: http://ec.europa.eu/budget/figures/interactive/index_en.cfm). Retrieved 03 February 2017.

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jobs’ and ‘Economic, social and territorial cohesion’), out of which €3,372m were spent in the UK. Regardless of whether a ‘hard’ or a ‘soft’ Brexit will come as the result of the undergoing negotiations, the UK’s official departure of the European Union will mean the repatriation of the UK’s annual contribution to the budget of the EU, as well as the end of the EU funding for British regional development. This is likely, but by no means certain. For a start, the UK is likely to be asked to continue funding any programme to which it has already agreed within the framework of the current budget (2014-20); second, the UK may choose to continue minor contributions to the EU budget, to retain access to such schemes as Erasmus+. This paper will focus on explaining the Structural Funds of the EU and on providing ideas for a future regional development policy for an independent UK. 1. Approaches to regional policy implementation A – The national/local approach Development policies have been implemented through different methods. The national-local approach has been the dominant model for regional development in the 2nd half of the 20th century. It operates on a bilateral basis, the local authority addressing its needs to the State, and the State – usually through an administrative authority – analyses the economic situation of the region, and provides funds accordingly. In recent years, this centralised approach to regional development has been criticised for its rigidity and its small-scale, individualised actions36. Additionally, regardless of the qualities of the national-local approach, it is no longer applicable: the devolution of various responsibilities from the central government to local authorities, and the multiplication of local political actors require development policies to be adopted on a regional level. The EU’s Cohesion policy provides a direct framework between local actors and the EU, the latter simply coordinating funds and development programmes for local actors within NUTS2 regions to use. B – The core cities/hinterland approach Another approach towards regional development is based on the analysis of the interaction of cities and their hinterland; it is a local extension of the ‘core and peripheries’ model. This approach has grown more popular in recent years, and the ongoing urbanisation of European societies has further emphasised its importance. It argues that economic activity and regional development need to be seen in the context of areas of urban economic influence. In one of her works, Alicja Szajnowska-Wysocka writes: ‘The centre with capital, authority and knowledge potential, and high cultural standards dominates over the peripheral regions not only in the technological but

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Gore, Tony. ‘Collaborative governance and territorial rescaling in the UK: a comparative study of two EU Structural Funds programmes,’ GeoJournal, vol. 72, no. 1/2 (2008), p. 69.

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also in the political and cultural spheres. The peripheries are hierarchically subordinated to the centre in technological, economic, political, cultural and service terms. The relations between the core and the peripheries are neither balanced nor equal’37. Cities are nodes of trade, innovation and research, as well as attractive environments of employment and cultural and social activity. As the relation between the city and its hinterland is unequal, the latter should rely on the former in order to develop itself. This leads to a model of conurban economic regions, where the periphery profits from the centre’s innovation and attractive nature. In terms of regional development, this approach is based on the cooperation and coordination of local actors on a conurban level. Although having administrative divisions reflect the urban makeup of a country is practical, perfect accuracy should nevertheless not be sought: demographic compositions are fluid and dynamic, and cooperation between the relevant local authorities should be enough to circumvent the inadequacies of slightly outdated or inadequate administrative delimitations. Several suggestions for reforming administrative units around city/hinterland have been made in different countries in the past few years: The French territorial reform of 2015 was such an occasion, and the ‘American Megaregions’ project has pointed the economic importance of such groupings38. As the economic prevalence of cities is set to keep growing in the future, the city/hinterland approach has become essential to regional development. As rural areas are rarely dynamic on their own, attaching them to a close urban centre and letting them profit from the available workforce and local innovation is the best course of action to help them modernise and develop. Reversely, this allows for the cities to benefit from the specialisation of their hinterland and develop their productive comparative advantages through closer cooperation. C – Polycentric approach As efficient as the core city/hinterland approach may be, it has its limits in two situations. First, it does not apply adequately for any periphery situated within a larger megalopolis: regions such as North England or the Midlands have dispersed and important economic activity on a limited local level. The second case applies to any region where a strong core is lacking, such as the Scottish Highlands, North and West Wales, or Cornwall. In this situation, economic peripheries should adopt a ‘polycentric’ approach, aiming at cooperating with all surrounding economic centres. Tony Gore, for instance highlights the importance for South Yorkshire to cooperate not only with

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Szajnowska-Wysocka, Alicja. ‘Theories of Regional and Local Development – Abridged Review,’ Bulletin of Geography, no. 12 (2009), p.78. 38 ‘About Us - America 2050’. America2050. USA: Regional Plan Association. Retrieved October 1, 2014.

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! Sheffield but also with Wakefield and Leeds39 in order to diversify economic opportunities and avoid dependence on a single economic core. In the case of rural regions with few to no major economic cores, peripheries should aim to develop polycentric networks with the few small surrounding urban centres, themselves connected to larger economic hubs. Hence, small-scale development would be privileged over extensive networks of direct reliance on a major economic centre.

2. The Funds and Programmes of the EU Cohesion Policy A – European Regional Development Fund (ERDF) According to the 2014-2020 agenda, the ERDF provides for a variety of projects, focusing mainly on investing in 4 categories: ‘Innovation and Research’, ‘The Digital Agenda’, ‘Support for Small and Medium-Sized Enterprises (SMEs)’ and ‘The Low-Carbon Economy’40. Funding priorities include modernising economic structures, creating sustainable jobs and economic growth, research and innovation, environmental protection and risk prevention. Investment in infrastructure also retains an important role, especially in the least-developed regions. The ERDF, while leading policies of its own, is also responsible for the funding of Interreg programmes. B – European Social Fund (ESF) The European Social Fund is meant for supporting employment and promoting economic and social cohesion in the member states of the European Union. The objectives of the ESF are defined by the Europe 2020 strategy, aiming towards ‘smart, sustainable, inclusive growth’41. Whereas the ERDF is more focused on developing infrastructure, the ESF is geared towards improving competitiveness, the levels of employment and the quality of jobs. C – Interreg programmes European Territorial Cooperation (ETC), better known as Interreg, is a series of five programmes aiming to improve cooperation between regions in the EU. One of its main targets is to diminish the influence of national borders in favour of equal economic, social and cultural development across countries. The current programme is Interreg V 2014-2020, focusing on the same priorities as the ERDF programme, but on a cross-border basis. The UK is currently involved in 14 Interreg programmes, 9 of which involve England. Some examples include the Two Seas Programme focused on the North Sea and the Channel, the North West

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Gore, Tony. ‘Collaborative governance and territorial rescaling in the UK: a comparative study of two EU Structural Funds programmes,’ GeoJournal, vol. 72, no. 1/2 (2008), pp. 59-73. 40 ‘European Regional Development Fund’, European Commission (available at: http://ec.europa.eu/regional_policy/en/funding/erdf/). Accessed 03 February 2017. 41 ‘Europe 2020: Commission proposes new economic strategy’, European Commission. Archived 6 March 2010 at the Wayback Machine. Retrieved 5 March 2010.

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Europe Programme, the Atlantic Area Programme or the Interreg Europe Programme42. The Interreg programmes are fairly young, and past projects have not been as successful as they could have been. However, the EU has been strongly investing in them in order to develop a true European economic project. Some of these projects are important to encourage cooperation on cross-border infrastructural and environmental issues that would be unlikely to be addressed on a national level. 3. Regional Classification NUTS 2 Regions are divided into three categories of development depending on the level of their GDP per capita. ‘Less developed regions’ include European regions whose GDP per capita is less than 75% of the EU average. Funding for less developed regions (often referred to as ‘Objective 1’ or ‘Convergence Objective’) aims to allow the regions affected to catch up with the EU's more prosperous regions, thereby reducing economic disparity within the European Union. Examples of types of projects funded under this objective include improving basic infrastructure, helping businesses, building or modernising waste and water treatment facilities, and improving access to high-speed Internet connections. In the 2014-2020 Cohesion Policy agenda, there are only two NUTS2 regions that qualify as less developed: West Wales and Central Valleys, and Cornwall and Isles of Scilly. Out of the 2014-2020 Cohesion Policy funds allocated to the United Kingdom, roughly 25% go to these two regions.43 ‘Transition regions’ are those whose GDP per capita falls between 75 and 90 percent of the EU average. As such, they receive less funding than the less developed regions but more funding than the more developed regions. In the UK, such regions include Cumbria, Devon, East Yorkshire and Northern Lincolnshire, Highlands and Islands, Lancashire, Lincolnshire, Merseyside, Northern Ireland, Shropshire and Staffordshire, South Yorkshire, and Tees Valley and Durham. ‘More developed regions’ are the ones that have a GDP per capita above 90 percent of the EU average. The main aim of funding for these regions is to create jobs by promoting competitiveness and making the regions concerned more attractive to businesses and investors. Possible projects include developing clean transport, supporting research centres, universities, small businesses and start-ups, providing training, and creating jobs. Funding is managed through either the ERDF or the ESF. It covers all of London, South East England, and the East of England, plus Dorset, Somerset, Gloucestershire, Wiltshire, Herefordshire, Worcestershire, Warwickshire,

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‘European territorial cooperation programmes,’ Department for Communities and Local Government – gov.uk (available at: https://www.gov.uk/guidance/european-territorial-cooperation-programmes). Retrieved 03 February 2017. 43 ‘European Structural and Cohesion Funds: Data,’ European Commission (available at: https://cohesiondata.ec.europa.eu/dataset/Total-allocations-of-Cohesion-Policy-2014-2020-Bre/r8zkjjkp). Retrieved 03 February 2017.

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West Midlands, Leicestershire, Rutland, Northamptonshire, Derbyshire, Nottinghamshire, Cheshire, Greater Manchester, West Yorkshire, North Yorkshire, Tyne and Wear, Northumberland, South Western Scotland, Eastern Scotland, North Eastern Scotland and East Wales. The objective of this three-tier classification is to identify which regions require the most important investments needed to ‘catch up’ with more developed regions. Whereas the former receive development funds mainly for infrastructure building, the latter use aid to improve competitiveness and the environmental impact of economic activity. 4. Comparative Case Study: Approaches to development in South Yorkshire and the Central Valleys In a 2008 paper, Tony Gore realised a comparative case study of regional development strategies for South Yorkshire and the Central Valleys in Wales44. He addressed the ability of the two regions, both being former coalfields, to transform their economic activity by implementing European regional development policies through a core city/hinterland approach. As both case study areas qualified under Objective 1 of the 2000-2006 Cohesion Policy – providing the highest level of regional funding –, this comparison is useful in evaluating the importance of regional policy approaches and the shape of administrative structures. Gore first approaches the case of the South Yorkshire coalfield and its relation to Sheffield. When the bulk of pit closures happened in the area between the mid-1980s and the early 1990s, local regional partnerships were built to reclaim the derelict colliery sites for employment-based uses. These eventually developed into stronger and wider partnerships, eventually covering the whole of South Yorkshire. As a result, when EU development funds were made available, there was already a basic administrative structure that could coordinate their use. It appears that the relative failure of development policy in West Wales and the Valleys compared to South Yorkshire stems from three factors. First, the shape of the NUTS2 region of West Wales and the Valleys was drawn so as to qualify under the Objective 1 criterion of the Cohesion Policy – a promise made by the newly-implemented Welsh Assembly Government. Although this succeeded in securing development funds, West Wales and the Valleys is an amalgamation of various rural and deprived areas that share little economic activity between them. The combination of the Valleys, a hinterland mainly reliant on Cardiff, with West and North Wales, both rural peripheral regions, did not rely upon any pre-existing economic or sociodemographic structure. Most importantly, the separation of the Valleys from Cardiff – hence leading to the latter being classified under Objective 2 of the Cohesion Policy – created a political and financial discrepancy that was hard to bridge. Sheffield and South Yorkshire, on the other hand, had been classified under the same Objective, thus leading to a more

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Gore, Tony. ‘Collaborative governance and territorial rescaling in the UK: a comparative study of two EU Structural Funds programmes,’ GeoJournal, vol. 72, no. 1/2 (2008), pp. 59-73.

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coherent regional development policy. The allocation of funding thus relied on divisions that were very far off from the economic areas of the region. Secondly, because the design of the West Wales and Valleys region relied on financial motives rather than organic economic structures, the allocation of funds and the local implementation of the Cohesion Policy relied on a non-existing cooperative network. In South Yorkshire, the NUTS2 region corresponded to the local authority areas of South Yorkshire – Barnsley, Doncaster, Rotherham and Sheffield. As a result, the funds were provided to a region that already possessed the administrative structure to use them coherently. At the same time, the Central Valleys were part of the much larger West Wales and the Valleys area, which had no proper economic structure of cooperation prior to that. When the funds became available, the area was unprepared to use them coherently on a regional level. The third reason for the relative success of the South Yorkshire development policy over that of the Central Valleys is the larger sociodemographic and economic regions in which the two areas are located. While South Yorkshire could have adopted a polycentric approach within Yorkshire more largely – relying on Leeds or Wakefield in addition to Sheffield –, Cardiff was the only economic centre that the Central Valleys could rely on. As a result, the region’s development was disconnected from the nearby city, and drawn into a regional programme with regions that corresponded more to a rural polycentric approach. This comparative case study highlights a few elements of importance regarding the implementation of efficient development policies: pre-existing economic interaction, cooperation networks and adequate economic development agendas. 5. Policy Recommendations In a situation where Brexit will imply numerous structural changes for the British economy, stability is needed for the areas of economic policy that will simply be transferred from the EU level of governance to the British government. Therefore, the most efficient measures would involve replicating existing structures at the lower level when possible, replacing them when needed, and operating marginal changes to improve and adapt regional development policy. A – Continuing Interreg Programmes The UK should try to remain involved within Interreg Programmes, as they provide a pre-existent multilateral cooperation framework addressing cross-border issues. Switzerland and Norway, both non-EU members, still participate in Interreg Programmes affecting their geographical region; European Territorial Cooperation allows for non-EU members to pay directly the Interreg programme, while EU members pay ERDF which then transfers funds to its various programmes, including Interreg. In an article on the future of UK Regional Development, John Bachtler notes the following:

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‘A distinctive element of Structural Funds affected by Brexit is European Territorial Cooperation (ETC). With an EU allocation of £755 million, the UK is currently involved in 14 ETC programmes, primarily with neighbouring countries. These programmes are one of the accepted areas of ‘European added value’, and while their economic impact is sometimes difficult to evaluate, research indicates that they facilitate valued opportunities for regional, local and community organisations and the private sector to develop joint projects on common areas of interest, as well as providing an international dimension to regional and local development thinking and practice.’45 B – Replicating the EU structure and reforming administrative units The funds that were used by the European Union to provide development aid will be returned to the British government. Efficient regional development partnerships require both stability within the decisional structures and adaptability to the economic challenges. John Bachtler notes that unlike other European countries, the UK does not possess an official framework for regional development coordination: ‘In this context, an important issue is the lack of an institutionalised framework for the UK as a whole. The asymmetric path of devolution has left the UK without mechanisms for coordinating policy objectives and instruments for territorial imbalance across the constituent parts of the UK or even platforms and networks for sharing information and policy experiences among government authorities beyond Structural Funds. Again, this contrasts with other European countries which generally have formal or informal coordination or cooperation systems across levels of government under both federal and devolved systems.’46 Given the current level and trend in favour of devolution, returning to a national-local model of regional development would prove ineffective and inapplicable. Moreover, it would imply changing the current model on which EU regional development policies are made. The British government should thus replicate the ‘provider’ role of the EU by allocating funds based on certain needs and by identifying core developmental priorities. The core of development decisions, however, should still remain to be decided within local partnerships. As shown by the case study of the development of the Central Valleys within the 20002006 Cohesion Policy, the shape and purposes of administrative units also matter. The EU’s evaluation of region development being based on GDP per capita, it has adopted quantitative rather than qualitative criteria, resulting in development funds being allocated to generally less developed regions regardless of the adequate development strategies. NUTS2 regions should thus be redrawn to reflect the organic economic structures already in place. This reform should be made on the basis of the most adequate model: the core city/hinterland approach or the polycentric approach.

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Bachtler, John. ‘What future for UK regional development after Brexit?’ The UK in a changing Europe, 06 January 2017 (available at: http://ukandeu.ac.uk/what-future-for-uk-regional-developmentafter-brexit/). Retrieved 03 February 2017. 46 Ibid.

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C – Promoting local cooperation through regional development agencies It has been established that the national-local approach to development had faltered because of the growing importance of devolution and of the narrowness of the development solutions it provides. As a result, regional development agencies – which were abolished in March 2012 – should be reinstated not as decision-makers but as public policy mediators, by developing cooperation across local authorities, and by bringing rural conurban economic units into a larger polycentric model. Their main aim would be to help the British government with fund allocation and to strengthen local cooperation. Rather than adopt a top-down approach and impose cooperation networks on local authorities, they should be careful to identify willing local actors and work with them to ensure a smooth transition.

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CONCLUSION: POLICY RECOMMENDATIONS As an administrative and economic process, Brexit is going to pose a number of unique challenges to the UK economy. Those challenges must be met with in a strategic, coherent way, which seeks to respect the referendum result and limits possible economic damage, which could occur if ideology takes precedence over pratical economic understanding. The following is a summary of the policy approaches this paper endorses: 1.! The UK government should seek to preserve as much as possible from the existing trading relationship with the EU without compromising on its stated objective of leaving the single market to regain control of free movement. 2.! Immigration policies should be crafted so as not to penalise young mobile graduates and the sectors which predominantly account for Britain’s economic prosperity – finance, professional services, and technology. 3.! The Bank of England should prioritise higher growth rather than inflation control, but up to a certain point: while letting inflation run above the current target of 2% is recommended, inflation above 4% to 5% will start taking a disproportionate toll on the poorest households and communities, which will not be outweighed by faster growth. 4.! Regional policy should continue in the direction of political and fiscal devolution to the regions; the UK government should continue its push for a Northern Powerhouse and strive to use the funds it repatriates from the EU to continue support for communities which have been beneficiaries of EU regional development funds.

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BIBLIOGRAPHY & WORKS CITED Section 1: Ahmed, Kamal. ‘‘China Freight Train’ in First Trip to Barking’. BBC News, 3 January 2017, sec. Business. http://www.bbc.com/news/business-38497997. Bray, Chad. ‘Bank of England Cuts Interest Rate to Historic Low, Citing Economic Pressures’. The New York Times, 4 August 2016. https://www.nytimes.com/2016/08/05/business/dealbook/bank-of-englandinterest-rates-brexit.html. Department for International Trade. ‘UK-China Infrastructure Academy Opens Its Doors and Welcomes First Students’. Gov.uk, 12 August 2016. https://www.gov.uk/government/news/uk-china-infrastructure-academyopens-its-doors-and-welcomes-first-students. Edwards, PK. ‘The UK’s First National Minimum Wage’. Eurofound, 27 April 1999. http://www.eurofound.europa.eu/observatories/eurwork/articles/the-uks-firstnational-minimum-wage. HM Treasury. ‘UK-China Discuss the next Step for Economic and Trade Relations’. Gov.uk, 11 October 2016. https://www.gov.uk/government/news/uk-chinadiscuss-the-next-step-for-economic-and-trade-relations. ONS Digital. ‘UK Perspectives 2016: Trade with the EU and beyond’. Office for National Statistics, 25 May 2016. http://visual.ons.gov.uk/uk-perspectives2016-trade-with-the-eu-and-beyond/. Prime Office Space. ‘The Top Ten Industries in the UK’. Prime Find, 27 June 2014. http://www.primefind.net/latest/top-ten-industries-in-uk/. Simoes, Alexander. ‘Import Origins of Cars to the United Kingdom (2014)’. The Observatory of Economic Complexity. Accessed 14 January 2017. http://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/gbr/show/8703/ 2014/ ‘Import Origins of Engine Parts to the United Kingdom (2014)’. The Observatory of Economic Complexity. Accessed 14 January 2017. http://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/gbr/show/8409/ 2014/ ‘Products Exported by the United Kingdom (2014)’. The Observatory of Economic Complexity. Accessed 14 January 2017. http://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/gbr/all/show/20 14/.

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Smith, Adam. ‘Chapter 3: That the Division of Labour Is Limited by the Extent of the Market’. In An Inquiry into the Nature and Causes of the Wealth of Nations, I:31. Metalibri, 2007. http://www.ibiblio.org/ml/libri/s/SmithA_WealthNations_p.pdf. Trading Economics. ‘United Kingdom Balance of Trade, 1955-2017’. Trading Economics. Accessed 14 January 2017. http://www.tradingeconomics.com/united-kingdom/balance-of-trade. Wallace, Tim. ‘UK and China Meet to Talk Trade’. The Telegraph, 11 October 2016. http://www.telegraph.co.uk/business/2016/11/10/uk-and-china-meet-to-talktrade/. Workman, Daniel. ‘United Kingdom’s Top 10 Imports’. World’s Top Exports, 5 November 2016. http://www.worldstopexports.com/united-kingdoms-top-10impor Section 2: Cresci, Elena and Guardian readers. ‘Meet the 75%: the young people who voted to remain in the EU’, The Guardian, 24 June 2016, https://www.theguardian.com/politics/2016/jun/24/meet-the-75-youngpeople-who-voted-to- remain-in-eu European Digital City Index, 2017. https://digitalcityindex.eu Finch, Gavin. ‘Brexit Future Hinges on Passporting Rights: QuickTake Q&A’. Bloomberg, 19 October 2016. https://www.bloomberg.com/news/articles/2016-10-19/u-k-banks-brexithopes-boil-down-to-one-word-quicktake-q-a ‘Theresa May's Brexit speech in full: Prime Minister outlines her 12 objectives for negotiations’ Independent, 17 January 2017. http://www.independent.co.uk/news/uk/home-news/full-text-theresa-maybrexit-speech-global-britain-eu-european-union-latest-a7531361.html Reynolds, Barnabas. ‘A Blueprint for Brexit : The Future of Global Financial Services and Markets in the UK’. Politeia, 2016. http://www.politeia.co.uk/wp-content/uploads/2016/11/Barnabas-ReynoldsA-Blueprint-for-Brexit-2.pdf TheCityUK. ‘Brexit and UK-Based Financial and Related Professional Services’. TheCityUK, 2017. https://www.thecityuk.com/assets/2017/ReportsPDF/Brexit-and-UK-based-financial-and-related-professional-services.pdf Patel, Oliver. ‘What will Brexit mean for London’s tech industry and digital entrepreneurs?’, openDemocracy, 16 December 2016. 55! !


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https://www.opendemocracy.net/brexitdivisions/oliver-patel/what-will-brexitmean-for-london-s-tech-industry-and-digital-entreprene ‘Snapchat sets up international office in London’. BBC News. 10 January 2017, http://www.bbc.co.uk/news/business-38567898 ‘William Hague backs work visas for EU citizens after Brexit’, Financial Times, 12 January 2017. https://www.ft.com/content/9114eeb0-d91c-11e6-944be7eb37a6aa8e Section 3: Allen, Katie. ‘Brexit Economy: Inflation Surge Shows Impact of Vote Finally Beginning to Bite.’ Guardian Brexit Watch. Guardian News and Media, 21 December 2016. Web. 28 Jan. 2017. Bailey, David, and Leslie Budd. The Political Economy of Brexit. New York: Columbia UP, 2016. Print. Berlatsky, Noah. Inflation. Detroit, MI: Greenhaven, 2013. Print. Blanchflower, David G., and Conall MacCoille. The Formation of Inflation Expectations: An Empirical Analysis for the UK. Cambridge, MA: National Bureau of Economic Research, 2009. Print. Minford, Patrick, J. R. Shackleton, and P. Booth. Breaking up Is Hard to Do: Britain and Europe's Dysfunctional Relationship. London: IEA, Institute of Economic Affairs, 2016. Print. Rose, Gideon. ‘Brexit and Beyond.’ Foreign Affairs. Foreign Affairs, 01 Aug. 2016. Web. 28 Jan. 2017. Sinclair, David. The Pound: A Biography. London: Century, 2000. Print. The Economic Consequences of Brexit: A Taxing Decision - OECD. N.p., n.d. Web. 28 Jan. 2017. Section 4: ‘About Us - America 2050’. America 2050. USA: Regional Plan Association. Retrieved October 1, 2014. Bachtler, John. ‘What future for UK regional development after Brexit?’ The UK in a changing Europe, 06 January 2017 (available at: http://ukandeu.ac.uk/whatfuture-for-uk-regional-development-after-brexit/). Retrieved 03 February 2017.

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Baptista, Rui, Vitor Escaria and Paulo Madruga. ‘Entrepreneurship, regional development and job creation: the case of Portugal,’ Small Business Economics, vol. 30, no. 1, Special Issue on: The Effects of New Businesses on Economic Development (January 2008), pp. 49-58. ‘Chancellor Philip Hammond guarantees EU funding beyond date UK leaves the EU,’ HM Government (available at: https://www.gov.uk/government/news/chancellor-philip-hammondguarantees-eu-funding-beyond-date-uk-leaves-the-eu). Retrieved 03 February 2017. Dunford, Daniel. ‘Mapped: Where in the UK receives most EU funding and how does this compare with the rest of Europe?’ The Telegraph, 01 June 2016 (available at: http://www.telegraph.co.uk/news/2016/06/01/mapped-wherein-the-uk-receives-most-eu-funding-and-how-does-thi/). Retrieved 03 February 2017. ‘Europe 2020: Commission proposes new economic strategy’, European Commission. Archived 6 March 2010 at the Wayback Machine. Retrieved 5 March 2010. European Commission. ‘EU Budget Data 2014,’ ec.europa.eu. Retrieved 03 February 2017. European Commission Representation in the UK Website (available at: http://ec.europa.eu/unitedkingdom/). Retrieved 03 February 2017. ‘European territorial cooperation programmes,’ Department for Communities and Local Government – gov.uk (available at: https://www.gov.uk/guidance/european-territorial-cooperation-programmes). Retrieved 03 February 2017 ‘EU funds in Wales,’ Welsh Government (available at: https://www.gov.uk/government/news/chancellor-philip-hammondguarantees-eu-funding-beyond-date-uk-leaves-the-eu). Retrieved 03 February 2017. George, Stephen (1990). An Awkward Partner: Britain in the European Community. Oxford University Press. pp. 56–67. ISBN 0-19-827563-3. Gore, Tony. ‘Collaborative governance and territorial rescaling in the UK: a comparative study of two EU Structural Funds programmes,’ GeoJournal, vol. 72, no. 1/2 (2008), pp. 59-73. Harvey, Fiona. ‘Would British farmers be better off in or out of the EU?’ The Guardian, 24 February 2016, Retrieved 03 February 2017. (available at: 57! !


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https://www.theguardian.com/environment/2016/feb/24/would-britishfarmers-be-better-off-in-or-out-of-the-eu). ‘Information about the UK leaving the EU,’ Department for Exiting the European Union, gov.uk (available at: https://www.gov.uk/government/news/frequently-asked-questions). Retrieved 03 February 2017. Kengyel, Akos. ‘Evaluating the Added Value of EU-Level Regional Policy,’ Society and Economy, vol. 30, no. 2 (December 2008), pp. 303-322. Santos, Indhira. ‘Evaluating EU Structural Policy,’ Society and Economy, vol. 30, no. 2 (December 2008), pp. 195-208. Swinford, Steven. ‘Britain will cover cost of billions in EU subsidies for farming, science and deprived areas after Brexit, Chancellor announces,’ The Telegraph, 13 August 2016, retrieved 03 February 2016 (available at: http://www.telegraph.co.uk/news/2016/08/12/britain-will-cover-cost-ofbillions-in-eu-subsidies-for-farming/). Szajnowska-Wysocka, Alicja. ‘Theories of Regional and Local Development – Abridged Review,’ Bulletin of Geography, no. 12 (2009).

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CHAPTER II

Trade & Business Writers: Davide Martino Colby Smith

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TABLE OF CONTENTS Introduction I.! II.!

The Status Quo Why does trade matter?

III.!

Has anything changed since the referendum?

IV.!

What will happen once the UK leaves the EU?

V.! VI.! VII.! VIII.!

What is the most probable outcome? Understanding the negotiating process What would be the best outcome for Cambridge? The bicycle case-study The best outcome for Cambridge: remaining in the Single Market Summary of recommendations

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INTRODUCTION Trade was one of the most hotly debated topics during the EU Referendum campaign, and it still is one of the more contentious issues in the run-up to the Brexit negotiations. As a member of the European Union, the United Kingdom is currently part of the European Single Market and the EU Customs’ Union, which ensure barrier-free trade across the 28 EU Member States. As a member of the EU, the UK is also party to over 30 Free Trade Agreements which the EU has negotiated and signed on its behalf with countries around the world, such as South Korea or Mexico. As a member of the EU, finally, the UK is barred from negotiating and signing its own trade deals with other countries, given that the EU institutions have been mandated to negotiate them on behalf of all 28 EU Member States instead. This is all set to change once the UK leaves the European Union. This paper explores different ways in which the UK may choose to reforge its trade relations with Europe and the rest of the world. It also makes some suggestions as to the issues, the challenges, and the opportunities which the UK is likely to encounter in the future, or is already encountering now. It argues that the government should involve local communities in the trade negotiations to come, for example by means of a regionally differentiated assessment of the environmental, social, and economic impact of the new trade deal. With a focus on the Greater Cambridge community, this paper explores bicycle-use as an indicator of future developments. Cambridge is indeed the local authority in the UK where the highest proportion of journeys are made on a bike.47 Relying on this casestudy and other considerations, this paper concludes that the best outcome for Cambridge does not correspond to the government’s approach (securing at least partial access to the Single Market by means of a bespoke trade deal), but rather would be the UK’s continued membership of the European Single Market.

I. THE STATUS QUO As a member of the European Union, the United Kingdom is currently part of the European Single Market, which is built on the so-called ‘four freedoms’: the freedom of movement of people, capital, goods, and services. Trade within the Single Market is therefore made not just of tangible goods, but also of investments and various types of services. In order to ensure that all parties trading within the Single Market abide by the same rules, EU institutions maintain a mandate from Member States to set universal standards. The European Single Market comprises the EU’s 28 Member States plus the three European Economic Area (EEA) countries (Iceland, Norway, and Liechtenstein) and Switzerland. The EU institutions’ regulations pertaining to trade apply to all

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According to the Department for Transport’s statistics for 2015, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/536822/local-areawalking-and-cycling-in-england-2015.pdf.

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countries which are part of the Single Market, regardless of their membership of the EU.48 As a member of the EU, the UK is also party to over 30 trade agreements which the EU has negotiated and signed on its behalf with countries around the world, such as South Korea or Mexico. Some of these deals are Free Trade Agreements (FTAs), some fall under different categorizations; due to their negotiated nature, each of these deals is different from the others in its specific provisions. Trade under these deals is therefore different from trade within the European Single Market, and there may be some restrictions on trade in certain categories of goods, services, and capital. Most importantly, neither the EU nor its trading partner devolve regulatory authority to an overarching body, as is the case within the European Single Market. Instead, mutual recognition of independently set rules and some mechanisms for settling disputes are usually agreed on.49 Finally, the UK is barred from negotiating and signing its own trade deals with other countries as a member of the EU. This is because the EU institutions have been mandated to negotiate trade deals on behalf of all 28 EU Member States; they have done so successfully in over 30 instances already, and are in the process of negotiating more deals, such as the Comprehensive Economic and Trade Agreement (CETA) with Canada. This does not mean that the UK does not get a say in trade deals. Representatives of all EU Member States are consulted throughout the trade negotiations led by the EU institutions, and if the final deal touches on national competencies which go beyond the EU’s current scope, the specific terms need to be ratified by every EU Member State independently. What it does mean, however, is that the UK’s priorities are not the only ones taken into account, and that often a compromise needs to be found between them and the other EU Member States’ priorities.50

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On the Single Market, see https://ec.europa.eu/growth/single-market, and also the introduction to ‘The EU Single Market: The Value of Membership versus Access to the UK’, a report published by the Institute for Fiscal Studies in August 2016 (https://www.ifs.org.uk/uploads/publications/comms/R119%20%20The%20EU%20Single%20market%20-%20Final.pdf). 49 On the EU’s 31 trade agreements, see http://ec.europa.eu/trade/policy/countries-andregions/agreements/. 50 See ibidem - http://ec.europa.eu/trade/policy/countries-and-regions/agreements/.

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II. WHY DOES TRADE MATTER? Trade is a critical component of a nation’s economy, and measuring its weight relative to the whole is no easy exercise. Exports are usually seen as assets, given that money or other currency is paid into the national economy from abroad. In 2015, total exports of goods and services from the UK were worth £517 billion, which represented about 29% (a little under a third) of the UK’s national economy. Of these, about 44% went to other EU Member States and the remaining 56% to countries outside the EU. Exports to the EU therefore represented about 13% of the UK’s national economy in 2015, while exports to the rest of the world represented an additional 16%.51 The European Commission estimates that roughly 1 in 8 jobs in the UK are linked to the UK’s exports to countries outside the EU. Assuming an equivalent proportion in jobs per unit of value of exports, a further 1 in 10 jobs in the UK are linked to its exports to other EU Member States. Total exports would thus have been linked to 22.5% (a little under a quarter) of UK’s jobs in 2015.52 In 2015, the UK imported a total of £547 billion worth of goods and services. Of these, about 53% came from other EU Member States and the remaining 47% from the rest of the world. The impact of these imports on the national economy is hard to measure. If imports do mean that money, or other types of payments, is flowing out of the country, imports are not necessarily liabilities, and transporting, distributing, and selling them (but also insuring, packaging, or marketing them) in the UK generates income and jobs as well. The UK also re-exports a portion of its imports, sometimes after processing and transforming them, thereby increasing their value.53 Overall, the UK imports more than it exports, and it has done so continuously since 1998; in 2015, its trade deficit amounted to £30 billion.54 This is also true of trade with other EU Member States only: in 2015, UK exports to the EU were worth £220 billion, and UK imports from the EU were £290 billion.55 However, these figures are different for specific sectors: the UK service industry exports more than it imports, in particular financial services and the legal services connected to it. The UK’s service trade surplus could be equivalent to some 5% of the national economy, according to the Institute for Fiscal Studies.56 A surplus in services and associated import market is of increasing significance as it is not only an indicator of a highly sophisticated economy, but it also enhances consumer choice, which has the net benefit of keeping a cap on prices. This has further positive implications for the economy as inflation is more easily held at bay.

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These figures are extrapolated from https://fullfact.org/europe/uk-eu-trade/, and checked against data on export in the online database of the Office for National Statistics (https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/timeseries/ikbh/mret). 52 These figures are extrapolated from http://ec.europa.eu/trade/policy/in-focus/trade-and-jobs/#unitedkingdom. 53 See data on import in the online database of the Office for National Statistics (https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/timeseries/ikbi/mret). 54 See data on balance of payments in the online database of the Office for National Statistics (https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/timeseries/ikbj/mret). 55 See https://fullfact.org/europe/uk-eu-trade/. 56 See https://www.ifs.org.uk/uploads/publications/comms/R119%20%20The%20EU%20Single%20market%20-%20Final.pdf.

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In addition to exports and imports of goods and services, investments are the third component of trade, and possibly the hardest to quantify. In 2015, net earnings from direct investment abroad by UK companies (outward investment) had an estimated worth of £57 billion. Of these, about 43% were generated in Europe. The net earnings from direct investment into the UK (inward investment) had an estimated worth of £48 billion. Of these, about 47% originated from Europe.57 All of the above is particularly true for the Greater Cambridge area, with its outwardlooking economy. Both the hi-tech companies of the so-called Silicon Fen and such pharmaceutical giants as AstraZeneca export a large portion of their output from their bases in and around Cambridge. Agriculture also plays an important role in Cambridge’s economy, as the region serves as a major exporter, and Cambridgeshire residents are large consumers of agricultural imports. Furthermore, foreign investment into Cambridge is significant and often linked to knowledge (research projects, scientific laboratories, mobility of highly skilled workers), by definition more volatile than foreign investment linked to manufacturing (which requires expensive and hardly mobile machinery, and an organised supply of specific components). The broad national figure of 22.5% of jobs being linked to exports could thus be taken as a lower estimate insofar as Cambridge is concerned. Trade matters here even more than in the UK as a whole.

III. HAS ANYTHING CHANGED SINCE THE REFERENDUM? Until the UK government triggers Article 50, officially nothing has changed and the UK is still a member of the EU. However, the majority vote for Leave in the EU Referendum last June has already impacted on the UK’s trading position. The most notable factor of change has been a drop in the value of the Pound Sterling as compared to other currencies: £1 was worth about 1.4$ in June 2016, and about 1.23$ in March 2017; it was worth 1.25€ in June 2016, and about 1.15€ in March 2017.58 A weak pound makes imports more expensive, which has a knock-on effect of fuelling inflation. Conversely, it makes UK exports cheaper, and therefore more attractive, abroad. Markets have not just reacted to the EU Referendum result by selling off pounds; they have also adopted a more cautious investment style. This is impossible to measure, of course, because one never knows what investments are not happening, by definition. Anecdotal evidence, such as Nissan’s announcement of fresh investment in their Sunderland plant suggests that investors’ worries are not impassable, and that

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See the Statistical Bulletin on 2015 Foreign Direct Investment flows published by the Office for National Statistics, https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/bulletins/foreigndirectinvestment involvingukcompanies/2015. 58 Based on Bloomberg’s currency exchange trackers, at https://www.bloomberg.com/quote/GBPUSD:CUR and https://www.bloomberg.com/quote/GBPEUR:CUR.

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! reassurances from the government can do much in assuaging them.59 However, the potential for less investment in the knowledge economy, where Cambridge is particularly strong, or indeed the mobility of that investment remains a significant concern.

IV. WHAT WILL HAPPEN ONCE THE UK LEAVES THE EU? The short answer is: no one knows. This is because whatever shape the UK’s future relationship with the EU might take, it will have to be a negotiated shape, one which both parties accept. So even if the government was entirely clear on what kind of trading position it would want for the UK after Brexit—and for the time being it is not entirely—that would not be much of an answer, because one would still have to take into account the EU institutions’ and the other EU Member States’ expectations as well. The table below lists some of the possible scenarios to which the UK’s future trading relationship with the EU may resemble. It compares them according to several parameters, including the features of trade deals most frequently mentioned by politicians, voters, and the media.

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‘Nissan has confirmed it will build both the new Qashqai and the X-Trail SUV at its Sunderland plant following government "support and assurances".’ See http://www.bbc.co.uk/news/business-37787890 (published 27 Oct 2016).

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Key characteristics

A: EU membership (Status quo)

B: EEA membership (Norway model)

C: Swiss model

D: Customs’ Union (Turkish model)

E: Free Trade Agreement (FTA)

F: WTO rules model

Duty free access EU single market for goods

Yes

Yes

Yes

Mixed industrial goods only, not agricultural goods

Potentially yes 99% access (but cost from border formalities)

Access to EU single market in services, labour and capital

Yes

Yes

No

No never done before, but could be negotiated

Freedom of movement

Yes

Yes

Mixed depends on bilateral agreements Yes

No duties vary depending on the category of goods but can be significantly higher No

No

No

No

Independent policy making

Mixed EU institutions responsible (or coresponsible with national governments) only on a list of specific competences

Mixed EU institutions responsible (or coresponsible with national governments) only on a list of specific competences

Yes

Yes possibility of cooperation on regulatory matters

Yes

Financial contribution to EU budget

Yes

Yes

Mixed depends on bilateral agreements, which may impose limitations and won’t evolve with policy unless renegotiated Yes

No

No Possibility to negotiate payment and access to specific programmes, e.g. research or Erasmus

No

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! Independent international trade policy

No

Yes

Yes

No

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Yes

Yes


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V. WHAT IS THE MOST PROBABLE OUTCOME? Several members of Her Majesty’s Government, and most recently Prime Minister Theresa May in her 17th January 2017 speech, have expressed their intention to formulate a bespoke deal for the UK, rather than relying on an existing model which regulates the EU’s relationship with another country. They have also reiterated their commitment to securing the best possible deal for British businesses, all the while recovering control of UK borders in order to curb migration figures. Given that freedom of movement is one of the Single Market’s four freedoms, and that Heads of State and Government from across the EU have reiterated that they are not willing to see it questioned, any model comprising full Single Market access (models A, B, C in the table above) has to be ruled out. Model F, which would mean the UK ceases its trade deal with the EU and its trading relationship reverts to World Trade Organisation (WTO) stipulations, is advocated only by a few voices on the right and far right of the political spectrum. It would certainly present serious challenges for business, at least in the short and medium term. Despite the Prime Minister’s assertion that she does not want to imperil business, this WTO approach, which would do just that, remains the Government’s fall-back option should EU negotiations over FTAs disintegrate. What is left are models D and E, around which much of the political discussion is coalescing. May’s 17th January speech left the question mark hanging, for it was not crystal clear on the Government’s intention to seek continued membership of the Customs’ Union or not. Such membership, along the lines of Turkey’s current position (model D) would tie the UK’s hand more than a newly negotiated Free Trade Agreement (model E), particularly with regards to leading an independent trade policy. Members of the Customs’ Union, indeed, devolve their negotiating powers to the EU institutions, and agree to impose a Common External Tariff on imports from outside the Customs’ Union. An FTA between the UK and the EU might thus be considered as the most plausible outcome of Brexit negotiations on trade.60 The EU, as has been said, already has over 30 trade deals with other parties around the world. In some cases, Ukraine for example, the deal includes enhanced cooperation on regulation. The UK would probably seek to obtain something similar, with additional provisions. Because the service industry is one of its major assets, the UK will attempt to secure its export objectives and international investment horizons within any deal, though EU free trade deals have not covered services before. If the EU complied, the FTA-max thus negotiated would indeed be a bespoke deal, largely corresponding to the government’s current rhetoric. The EU, however, will not be prepared to give Theresa May’s government all that it wants, nor would it be in its interests to do so. First, none of the Heads of State and

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To understand the government’s position, an analysis of PM Theresa May’s 17 Jan 2017 speech at Lancaster House is crucial – see http://www.bbc.co.uk/news/uk-politics-38641207. On the EU’s position, see for example the remarks made by the European Commission’s chief negotiator, Michel Barnier, on 6 Dec 2016 (http://www.bbc.co.uk/news/uk-politics-38221140).

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Government will certainly want to appear to be making unwarranted gifts to the UK, lest they encourage Eurosceptic parties in their own countries and call into question the incentives of remaining in the Union. Second, some of the Continent’s financial centres, from Dublin to Frankfurt and Paris to Milan, while maintaining that the City of London is a crucial actor in enhancing Europe’s financial leverage more broadly, would quickly capitalize on the opportunity to accommodate the UK’s financial business in their home markets.61

VI. UNDERSTANDING THE NEGOTIATING PROCESS It takes two to make a trade deal, and a vast amount of preparatory work. This is particularly true of a negotiation with the EU, whose officials have a precise mandate from the Member States: unlike a national government, which has the flexibility to negotiate non-commercial aspects of the deal (e.g. visa restrictions) as well, the EU will have to stick to its competences and go no further. Furthermore, if the EU institutions have the mandate to negotiate on behalf of all Member States, each of the latter still needs to ratify the deal according to its own constitutional requirements (through a parliamentary vote, a referendum, etc.) if such deal covers areas where the EU institutions share policy competence with the Member States.62 The secrecy surrounding trade negotiations is often criticised, most recently in the case of the EU-US Transatlantic Trade and Investment Partnership (TTIP). However, this is in many ways necessary to shelter negotiating capital from the pressures of public opinion and to build trust between the negotiation teams. Not all is secret, either. The EU routinely discusses negotiation objectives publicly and releases any assessment of social, economic, or environmental impact, though it does withhold the negotiating mandate from public scrutiny. By refusing to say too much about her negotiating stance in public, Theresa May and her government are broadly remaining within established custom, even if one that looks particularly suspicious to public opinion. They would be wise to follow established custom when it comes to impact assessment, as well, and results should be made public prior to completion of the final deal.63. The UK should break down its impact assessments by region in the same way that the EU breaks its down by Member State. This would give local communities, Greater Cambridge included, an opportunity to better understand how their future will be affected; it would also answer some of the concerns of the Scottish, Welsh, and Northern Irish devolved administrations. It is important to understand that the negotiations for a new trade deal with the EU are not strictly speaking part of the Brexit negotiations. The latter concern the divorce settlement; the new trade deal will emerge after these negotiations. In other words, the

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See for example http://www.bbc.co.uk/news/business-38245646. See ‘Trade negotiations step by step’, a document published by the European Commission in September 2013, http://trade.ec.europa.eu/doclib/docs/2012/june/tradoc_149616.pdf. 63 See for example impact assessments conducted for EU trade agreements: http://ec.europa.eu/trade/policy/policy-making/analysis/sustainability-impact-assessments/. 62

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UK will need to extricate itself from its current membership of the EU and then implement a new trade deal with it. In practice, the two negotiations are likely to proceed in tandem, and the new trade deal to be approved and implemented as shortly as possible after the UK has left the EU. To cover the intervening period (between EU exit and the new trade deal entering into force), the EU and UK may opt for a phased implementation, as opposed to a transitional agreement, so that the UK will remain in the single market for a few years until the newly negotiated FTAs are enacted.64 Conducting two simultaneous negotiations will be in and of itself a huge challenge for Whitehall. After all, the UK hasn’t negotiated its own trade deals since it became a member of the EU in 1973, and its civil service lacks some of the relevant expertise to do so. This was part of the rationale behind the creation of a new Department for International Trade, headed by Secretary Liam Fox. Trade officials with an experience of EU negotiations also point to the different political cultures on either side of the Channel. Whilst in the UK a two-party system has been the norm for centuries, structuring a rather confrontational public discourse, the EU routinely operates as a multi-stakeholder organisation, where multilateral compromise is the norm. UK politicians might thus be more wedded than their counterparts to a win/lose mentality, which might not be overly helpful when attempting to reach a deal. Two further considerations need to be borne in mind when considering the UK’s and EU’s negotiating position. The relative importance of trade with the EU to the UK’s economy is quite large, as we have seen. Conversely, the EU being a much larger entity, exports to the UK represent only 3-4% of its economy. Whilst the matter is far from being clear-cut, it is likely fair to say that trade with the EU matters relatively more to the UK than trade with the UK does to the EU.65 As a consequence, time is not on the UK’s side. Article 50 stipulates that exit negotiations must be concluded within two years of their commencement, unless all Member States unanimously agree to extend them. If no agreement has been reached and no extension is granted, the UK would be forced to leave the EU with no deal, falling back by default on WTO rules (model F) as far as trade is concerned. The threat of this scenario, which would be damaging for both parties, will keep everyone working fast—but if there is anyone who ought to fear this most, it is the UK. The EU would ‘only’ see a small portion of their economy dramatically affected overnight; the UK would see a large share of its shaken.

VII. WHAT WOULD BE THE BEST OUTCOME FOR CAMBRIDGE? THE BICYCLE CASE-STUDY Cambridge is the cycling capital of the UK and its bicycles, much like their components and the people riding them, come from many different parts of the country, Europe, and the world. Under current legislation, bikes manufactured within the Single Market,

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This might correspond to PM May’s wish for a ‘phased in’ implementation of Brexit, as set out in her 17th Jan 2017 speech – see http://www.bbc.co.uk/news/uk-politics-38641207. 65 See https://fullfact.org/europe/uk-eu-trade/

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the Customs’ Union, or in countries with which the EU has a trade deal, including companies like Italo-Swedish Bianchi, are imported to the UK with no corresponding tariff. This also applies to bikes manufactured in the UK, such as London-based manufacturer Brompton. If goods like bikes were not covered by the new trading relationship which the UK will establish with the EU after it has left it, the EU would charge a 14% tariff on bicycles, and 3.7% on components, exported by the UK to the Single Market. The UK would be likely to do the same on bikes and components imported into the UK, and prices would go up accordingly. Bikes are however likely to remain tariff-free in all scenarios except one in which the UK will revert to WTO rules (model F). However, if the UK did leave the Customs’ Union, regulating instead its trading relationship with the EU by means of a bespoke FTA (model E), bike prices would still be likely to go up. The Centre for Economic Policy Research has estimated in a November 2013 report to the Government that if the UK left the Customs’ Union, ‘British firms would be exposed to a combination of administrative and compliance costs linked to rules or origin, ranging (based on existing estimates) from 4% to perhaps 15% of the cost of goods sold’.66 Beyond the increased cost of doing business, there would be an additional impact on the business model for some bike manufacturers: instead of using a ‘just-in-time’ delivery model of exporting British bikes from the UK warehouse directly for each order, the manufacturer may have to create a stock of bikes in a continental EU warehouse ready for delivery without the threat of customs delays. This business model requires a larger inventory, a secondary warehouse, all of which increases business costs and reduce competitiveness vis-à-vis other bike manufacturers. Furthermore, the UK’s current Single Market membership covers, as has been noted, the free movement of capital. Now that the UK looks set to leave the Single Market, new rules for both inward and outward foreign investments will have to be devised. The intervening period of uncertainty proves debilitating for businesses, who are unsure whether to make long-term investment plans or how to approach further foreign investment negotiations. This could harm foreign investment in UK bike manufacturing, or vice versa, UK investment in foreign bike manufacturing.

VIII. THE BEST OUTCOME FOR CAMBRIDGE: REMAINING IN THE SINGLE MARKET Bikes make for a small, but telling case-study. From the point of view of trade, there is no deal with the EU which would be better than the current deal the UK has, namely full membership of the Single Market. This is acknowledged by the Government, including Prime Minister Theresa May, who has stipulated that the reason why they want the UK to pull out of the Single Market is not because of its unsatisfactory provisions for trade—rather, they would like the new FTA to give the UK "the greatest

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See the full report at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/271784/bis-14-512-tradeand-investment-balance-of-competence-review-project-report.pdf. The quote comes from p. 56.

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possible access" to the Single Market. It is the jurisdiction of the European Court of Justice, the EU institutions’ regulatory authority, and the freedom of movement for people that come with Single Market membership which constitute the three main reasons for leaving it.67 Whether the UK will remain a member of the Single Market is thus a political decision, one that goes far beyond the UK’s trading position. The majority vote for Leave in the EU Referendum has been interpreted as a vote to ‘take back control’, and such an aim is now seen as incompatible with continued membership of the Single Market. From the point of view of trade, however, the matter is straightforward, particularly for a community as outward-looking as Greater Cambridge: the UK ought to retain membership of the Single Market. The Government’s commitment to "the greatest possible access" to such Market comes only second-best. The table below summarises some of the key differences between the best possible outcome for Cambridge (retaining Single Market membership, as in models A, B, and C) and what appears to be the Government‘s current preferred approach (negotiating a new FTA, as in model E).

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See PM May’s 17th Jan 2017 speech, where the quote comes from - http://www.bbc.co.uk/news/ukpolitics-38641207. 67

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! E: Free Trade Agreement (FTA)

A, B, C: Single Market access

Tariffs eliminated on goods and many services opened up with exceptions •" For example agricultural (beef) & fisheries 20% tariff on processed shrimp beyond quota

No restrictions on normal trade in goods (no limits, no tariffs)

Administrative formalities at customs (to check origin of goods) and higher costs (equivalent to 4-15% value of goods)

Free movement

Some ‘behind the border barriers’ tackled but not all •" For example, Canadian medical equipment has to be approved by EU authorities before being sold

Common regulations (e.g. on product safety or consumer protection) Equal treatment Mutual recognition of rules

Many services opened up between parties with exceptions •" For example financial services, audio-visual

No restrictions on normal services trade •" For example, UK benefits from full access to liberalised air services market

No movement of people (beyond limited quotas linked to provision of professional services)

Free movement of people

Agreement on investment rules (before establishment and after)

Free movement of capital

No financial contribution

Budgetary contribution (whether as a Member of EU or in Norway model)

Enforcement of rules between States (some arbitration and dispute settlement procedures)

Action possible in domestic courts (e.g. against a discriminatory practice) A country can bring a case to ECJ

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The silver lining of the Government’s approach might lie in the possibilities it will open up to embed international trade within the UK’s foreign policy. On the one hand, the Government might be able to deliver on the apparent appetite for more protection from globalisation—meaning less free trade, but also free trade with more, better rules. On the other hand, negotiating with key markets with which the UK has cultural and historical ties, such as Commonwealth members, might prove easier for the UK than for the EU as a whole, and might provide UK and Cambridge firms with new export markets. How these two possible, and largely contradictory, facets of the UK’s future trade and foreign policy will play out remains to be seen. Global tides appear to be turning against free trade, as President Trump’s denunciations of the North American Free Trade Agreement (NAFTA), the Trans-Pacific Partnership (TPP), and the Transatlantic Trade and Investment Partnership (TTIP) show; a post-Brexit UK might therefore struggle to find enough partners interested in striking new trade deals. As a community with extraordinary resilience due to the primacy of its educational and research institutions, Cambridge is in a less vulnerable position than a significant portion of the UK. However, that is not to say that Cambridge citizens do not see significant causes for concern due to Brexit. At a recent public conference, “Cambridge & Brexit: Discussing our future”, sponsored by the Cambridge University European Society (CUEUS), The Wilberforce Society, and Cambridge for Europe, members of the Cambridge community came together for a series of talks and roundtables to reflect on the Brexit vote. Participants at the roundtable on business, trade, and the economy included a member of City Council, a citizen-activist who voted “Leave,” a citizenbusinessman who voted “Remain,” and several moderators, among others. The overarching theme of the discussion centered on the significant uncertainty about what a post-Brexit future would look like for Cambridge businesses and the local knowledge economy. Participants found that a crucial starting point is how Cambridge is valued both in the UK economy and on the global stage. As a member of City Council noted, Cambridge stands apart, along with the University of Oxford, as being a critical hub for intellectual inquiry and advancement. This research focus, however, is not limited to the University. Rather, Cambridge also boasts an important technological sector to which many start-ups have flocked. This leverage, the roundtable concluded, would depend on how the freedom of movement issue was addressed, as much of the region’s skill and know-how is imported from Europe, the United States, and other parts of the world. A local entrepreneur was critically concerned about competition from Berlin and other technologically-oriented European cities that are well-positioned to fill any void left by the UK. However, this same participant mentioned that in such a globally-facing sector as IT, Brexit worries abound; however, if one were to speak to a small-business owner, whose principal line of work did not depend on the export market, loss of the Single Market or the retraction of FTAs due to Brexit did not appear to be so worrisome. However, many contributors argued that even those that operated solely within the 75! !


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national market would in fact feel significant blowback due to a depreciated pound and higher import costs. Another important point of conversation sought to situate Cambridge potential economic challenges from Brexit in a broader national context. Ultimately, it was determined that Cambridge is in a much stronger position as it retains a unique and influential brand that sets it apart from other cities across the UK. Not only does Cambridge maintain this competitive edge nationally, its prominence is recognized globally, which thereby enables the region to rival its international counterparts. However, an opposing argument asserted that Cambridge may actually have more to lose. This dovetailed with a discussion about the rise of inequality across the UK. With consensus building that Cambridge is in a much more economically viable position to weather potential disruptions ahead, much was said about the fundamental lack of competitiveness of British businesses. As compared to Germany, many participants noted that Britain never pushed an export-led model of growth; as such, its position in the global economy is much less substantial from a material standpoint. In light of this reality, a bespoke deal constructed upon FTAs was considered by the roundtable to be the most viable option. Cambridge citizens are in a unique position post-Brexit as residents of a well-endowed city of both national and global prestige. As an area which heavily subscribed to the Remain campaign, considerable misgivings linger over the current state of affairs and eventual ejection of the UK from the EU. A priority for this locality is to maintain as close of business and economic ties with the EU as possible. However, whether these aspirations will become a reality still remains unknown. SUMMARY OF RECOMMENDATIONS -!

For Cambridge, the best outcome of trade negotiations with the EU would be retaining membership of the Single Market. Failing that, the Government’s preferred approach (a bespoke FTA) is the most viable option.

-!

Special efforts should be made to limit as much as possible a rise in import prices, which would affect negatively the purchasing power of people in Cambridge and across the UK.

-!

The Government should conduct economic, social, and environmental impact assessments of the various possible Brexit scenarios. These should be differentiated by region, and their results made public, to allow the devolved administrations (Northern Ireland, Wales, Scotland) and English local authorities, including Cambridge, to join the national debate.

-!

Answers to the many questions marks still open should be offered as soon as possible, as the current climate of uncertainty is harmful for businesses and for investment plans. 76!

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CHAPTER III

The Pharmaceutical Industry Writers: Fawz Kazzazi (Corresponding Editor) Cleo Pollard (Senior Editor) Paul Tern Alejandro Ayuso Garcia Jack Gillespie Inesa Rozenman

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EXECUTIVE SUMMARY The health and life sciences industry in the United Kingdom (UK) is viewed as one of the most dynamic in Europe. Investors appreciate the fairness of the UK’s regulatory environment, which has benefited from collaborative government-industry relationships. The wider impact of Brexit can be understood by looking at the industry’s component parts. Before considering the argument, key facts underpin the negotiations: !!

Pharmaceuticals is one of the largest industries in the UK and the most research intensive component of the economy. -! It employs <70,000 people. -! It is responsible for 25% of commercial UK research. -! £4 billion was invested in Research and Development (R&D) in the life sciences in 2014, more than any other sector.

!!

The UK pharmaceutical industry is currently very well funded. -! The EU funded ~€8.8 billion between 2007 and 2013 through its Framework Programmes (FPs), >€3 billion more than contributed by the UK to this fund. -! Private investment matches government spending 70p to each £1.

!!

The UK is a pioneer in worldwide drug manufacture. -! The UK produced 25 of the top 100 most used drugs worldwide. -! 20% of publications in pharmaceuticals are from UK scientists. -! The UK controls 10% of the expanding genomic research sector.

!!

The industry is remarkably robust. -! Pharmaceuticals have experienced consistent growth productivity and employment over the last decade. -! Growth rates of 4-10% per annum were forecast. -! The sector continued to grow during 2008’s financial crisis.

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in

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TABLE OF CONTENTS INTRODUCTION 80 1.0 PRE-BREXIT FIGURES 82 1.1 INDUSTRY OVERVIEW 83 1.2 PHARMACEUTICAL MANUFACTURING 83 1.3 CLINICAL TRIALS 84 1.4 GENOMICS 85 1.5 FINANCING 85 1.6 DISTRIBUTION 86 1.7 SUMMARY 86 2.0 EFFECT OF BREXIT LEAVING THE UK ON THE PHARMACEUTICAL INDUSTRY – POST-BREXIT 87 2.1 INNOVATION 87 2.2 TRADE 89 2.3 REGULATION 91 2.4 TALENT 93 3.0 REGULATION OF MEDICINES 95 3.1 CURRENT CLIMATE 95 3.2 REGULATION OF MEDICAL DEVICES 97 3.3 MOVEMENT OF PEOPLE 97 3.4 CLINICAL TRIALS DIRECTIVE AND CLINICAL TRIALS REGULATION 98 4.0 CONSIDERATION OF POST-BREXIT MODELS 100 4.1 INITIAL OVERVIEW 100 4.2 THE PHARMACEUTICAL INDUSTRY 103 5.0 EXCLUSIVE INTERVIEW: PROFESSOR MADS KROGSGAARD THOMSEN, CHIEF SCIENCE OFFICER OF NOVO NORDISK 109 5.1 WHAT IS THE IMPACT OF BREXIT? 109 5.2 WHAT CONCERNS YOU THE MOST (EXCLUDING THE EMA)? 109 5.3 WHAT IS BREXIT DOING FOR CURRENT PROJECTS? 110 5.4 IS RESEARCH IN EARLY PHASES BEING AFFECTED? 110 5.5 DOES THE INDUSTRY HAVE A SAY IN THE NEGOTIATIONS? 110 5.6 WHAT ARE THE NEXT STEPS THAT YOU WOULD LIKE TO SEE POLICYMAKERS TAKE TO MITIGATE ANY PROBLEMS? 111 5.7 IS THERE ANYTHING POSITIVE COMING FROM THIS BREXIT NEGOTIATION? 111 5.8 DO YOU FORESEE FINANCIAL IMPLICATIONS ON YOUR COMPANY? 111 6.0 MOVING FORWARD 112 6.1 NEGOTIATE AN ‘ASSOCIATED COUNTRY’ STATUS IN THE EU’S RESEARCH FUNDING PROGRAMMES 112 6.2 NEGOTIATE BILATERALLY FAVOURABLE TRADE AGREEMENTS FOR DRUGS AND MEDICAL DEVICES WITH THE EU 112 6.3 MIRRORING THE MEDICINES REGULATORY APPROVAL PROCESS WITH THE EMA, WHILST RETAINING THE MHRA’S CAPACITY TO INTERVENE 112 6.4 ASSURANCE OF FREE MOVEMENT OF HIGH SKILLED PROFESSIONALS ACROSS UKEU BORDERS 112 7.0 CONCLUDING REMARKS 114 BIBLIOGRAPHY & WORKS CITED 115 79! !


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INTRODUCTION A glance at the stock market would suggest that the UK’s pharmaceutical sector has emerged largely unscathed from Brexit, performing comparatively much more strongly than other industries in the immediate economic uncertainty that followed the referendum result last June. As industries such as banking and insurance grappled with 68 the pound falling to its lowest level in thirty year, the pharmaceutical sector appeared to buoy calmly above the chaos and volatility. The British pharmaceutical company, GlaxoSmithKline (GSK), which is headquartered in Brentford, UK, even saw its share price rise in the immediate aftermath of the vote, highlighting the robustness of the 69 industry. These results panned out promisingly, flouting widespread speculation that the sector would be one of the worst hit. Some in the industry, whilst acknowledging the potential negative impacts of Brexit, even hailed independence from the European 70 Union (EU) as an opportunity for the UK to leverage its life science sector. Such short-term observations would make an optimistic evaluation of the impact of Brexit on the industry a seemingly straightforward one to write. However, it would likely prove short-sighted. As negotiations for a post-Brexit world take shape, the UK’s pharmaceutical industry, one of the country’s most reputable sectors, has perhaps more at stake than any other industry owing to the complex nature of its current regulatory, funding and research structures. The industry’s fate relies on much more than selling drugs and market share. The gravity of the potential disruption to the industry is reflected in the fact that the UK government has outlined science and innovation as one of the twelve ‘negotiating 71 priorities’ of Brexit. This is matched by the insistence of industry leaders that a solution be reached swiftly in order to prevent financial damage to the sector and possible risks to all those who depend on the research, products and services it delivers. For example, Steve Bates, CEO of the BioIndustry Association, has called for an early agreement on issues such as regulation of medicines and the ability of non-UK nationals to work in the UK life science ecosystem, whilst the European Federation of Pharmaceutical Industries and Associations has warned that ‘any disruption could lead 72 to delays in medicines reaching patients’. The pharmaceutical industry is being afforded attention and a sense of immediacy in these early stages of negotiation, yet the details that will determine its future post-Brexit remain unclear. This report aims to inform on the possible options available to the UK pharmaceutical sector now that its relationship with the EU faces potentially drastic changes. It is

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Roger Blitz and Leo Lewis. “Pound Tumbles to 30-Year Low as Britain Votes Brexit.” Financial Times, 2016. https://www.ft.com/content/8d8a100e-38c2-11e6-a780-b48ed7b6126f 69 Ana Nicholls. “SmartViews: Brexit - What’s next for Pharma?,” 2016. http://www.pharmatimes.com/magazine/2016/july_2016/smartviews_brexit_-_whats_next_for_pharma 70 “Surviving Brexit,” 2016. http://www.pmlive.com/pharma_news/surviving_brexit_1136772 71 “The Government’s Negotiating Objectives for Exiting the EU: PM Speech.” GOV.UK, 2017. https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eupm-speech 72 “UK Pharma Strikes Optimistic Note as Brexit Process Begins,” 2017. https://www.pmlive.com/pharma_news/uk_pharma_strikes_optimistic_note_as_brexit_process_begins_1 190435

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impossible to predict whether this new affiliation will be one of continuing partnership, lukewarm cohabitation or absolute divorce in terms of the deals reached on regulation, clinical trials, and the movement of persons and drugs (amongst other factors). It is possible, however, to shed light on the intricacies of any one these options, drawing knowledge from the EU’s current relationships with non-EU states. In this context, it is also possible to make objective suggestions in relation to the most appropriate course of action for the pharmaceutical industry as the UK negotiates a new position with its European neighbours. This report will therefore begin by outlining the current state of the sector, covering pharmaceutical manufacturers and distributors, clinical trials, research in medicine, science and innovation, and the broader health and life sciences industry. This will make it possible to contextualise any possible post-Brexit impacts and solutions within the existing frameworks and organisations that comprise and support the sector at present. The report will then turn to areas most likely to be impacted by Brexit, namely innovation, trade, regulation and talent. It will detail how these potential risks and disruptions may be mitigated, and what this presents by way of challenges and opportunities for change within the industry. The report will then consider three post-Brexit models: European Economic Area (EEA), European Free Trade Association (EFTA) and World Trade Organisation (WTO), frameworks that are already in existence. This will involve clarifying how nations such as Norway, Switzerland and Canada have forged favourable trade agreements with the EU whilst remaining independent. The report will also consider the possibility of the UK adopting ‘associated country’ status. However, it will not speculate as to whether the UK will be able to replicate any one of the options discussed. Instead, it will seek to make suggestions as to where negotiators and key players in the pharmaceutical industry may seek guidance and inspiration as they endeavour to build a workable UK-EU trade deal. This section will also detail potential ramifications for funding, focusing specifically on how Brexit is likely to impact research, science and pharmaceuticals. Lastly, the report will open up the wider debate on the difficulties faced by the UK as it seeks to balance delivering the demands of the majority of voters who backed the leave campaign with the realistic and sensible policymaking required to reach a workable and accepted solution for all parties involved. Throughout, the report will provide a comprehensive and objective account of the current climate, how it impends on the pharmaceutical industry, and what this spells for the future trajectory of the sector now that negotiations for the UK’s departure from the EU have been set in motion. The report comments on the wider implications of the current situation but with specific attention on the pharmaceutical industry.

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1.0!

PRE-BREXIT FIGURES

The pharmaceutical industry constitutes an important component of the UK economy. The UK life sciences sector contributed £30.4 billion in UK GDP, supported 482,000 73 jobs and contributed £8.6 billion in taxes in 2015, a significant portion (over half) 74 due to the pharmaceutical industry . Two of the world’s largest pharmaceutical companies, AstraZeneca and GSK, are headquartered in the UK, and almost all notable multinational pharmaceutical companies maintain a presence in the UK. The UK’s broader health and life sciences industry is viewed as one of the most dynamic in Europe and has received substantial foreign investment over the last ten 75 years . Investors appreciate the fairness and transparency of the UK’s regulatory environment, having benefited from a collaborative government-industry relationship. It is important to evaluate the current climate of the pharmaceutical industry in order to understand the potential impact and implications of any legislative or commercial change brought forth by Brexit.

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Mike Thompson, Doris-Ann Williams, Peter Ellingworth and Steve Bates. “The Economic Contribution of the UK Life Sciences Industry,” 2017 74 Lilian Anekwe. “Pharma Contributes £32 Billion to UK Economy.” Pharmafile, 2015 75 Andrew Ward. “UK Life Sciences Hit 7-Year High.” Financial Times, October 6, 2014. https://www.ft.com/content/6d0c13d6-4d55-11e4-bf60-00144feab7de

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1.1!

Industry Overview 76

The pharmaceutical sector employs approximately 70,000 people in the UK and forms part of the broader health and life sciences industry, which employs more than 170,000. The pharmaceutical sector provides jobs in a number of areas: manufacturing, distribution, clinical trials and R&D. Pharmaceutical manufacturing is one of the few components of the UK’s manufacturing sector to have experienced fairly consistent growth in output, productivity and employment over the last decade. Looking ahead, growth rates of 477 10% per annum had been forecast for the sector. The pharmaceuticals industry is also the most research intensive component of the UK economy and is responsible for 78 around 25% of all commercial R&D conducted in the UK. 1.2!

Pharmaceutical Manufacturing

The UK’s reliable legal system and strong protection of intellectual property has helped establish the country as a major centre for the manufacture of medical devices and pharmaceutical products. It is estimated that there are over 500 pharmaceutical 79 manufacturers in the UK. Products produced in the UK can either be sold there, exported within the EEA or exported to the rest of the world. The UK’s domestic market for pharmaceutical products is currently valued at round 80 £30 billion and demand for pharmaceutical products is expected to grow substantially in the future due to the pressures of an ageing population. Weak economic growth could reduce growth projections for the sector but, in general, demand for healthcare products has been resilient to economic downturns in the UK with growth of the sector remaining positive even during the 2008 financial crisis. The UK government has been focusing on cost reduction measures in recent years and this has included emphasising the use of generic drugs. Spending on generic drugs as a portion of total healthcare spending is expected to rise over the next decade. Biosimilar drugs are non-branded near-equivalents of branded biopharmaceutical products. It is possible that the government will also seek to encourage the use of

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The Association of British Pharmaceutical Industry. “Did You Know? Facts and Figures about the Pharmaceutical Industry in the UK,” 2011. http://www.abpi.org.uk/ourwork/library/industry/documents/did you know_jan11.pdf 77 Department for Business Innovation & Skill. “Growth Dashboard.” Growth Dashboard. Vol. 22, 2015. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/396740/bis-15-4growth-dashboard.pdf 78 Ben Hirschler. “Brexit Spells Upheaval for EU and UK Drug Regulation.” Reuters, June 24, 2016. http://www.reuters.com/article/us-britain-eu-corporates-pharmaceuticals-idUSKCN0ZA26J 79 Business Monitor International. “Pharmaceuticals & Healthcare Q416 Round-Up,” 2016. http://store.bmiresearch.com/pharmaceuticals-healthcare-q416-round-up.html?ito=638&itq=bf6559e03ad7-495c-8cbd-223a6d16a0ae&itx%5Bidio%5D=4118473 80 Simon Hammett, “2015 Life Sciences Outlook: United Kingdom,” 2014. https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/gx-lshc2015-life-sciences-report-united-kingdom.pdf

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biosimilars over the same period, although these drugs do not offer the same cost savings as generic drugs. Drug pricing and reimbursement is an exclusive competency of member states in the EU. Consequently, third parties can purchase branded pharmaceuticals in bulk in EEA 81 member states with lower prices and then resell them in other EU member states. This process is known as parallel importation. Parallel imports of pharmaceutical products were prohibited in Sweden until it joined the EU in 1995; evidence suggests that, since 82 then, parallel imports have reduced pharmaceutical prices . The EU remains the largest single export market for UK pharmaceutical companies. Exports to the EU have grown by around 30% over the last 10 years and further growth is expected. Germany is a crucial market due to its large and wealthy yet rapidly ageing population.12 However, due to the European debt crisis, EU countries such as Italy, Portugal and Greece are expecting very harsh austerity measures over the next decade and beyond. This could impact their ability to afford some of the innovative drugs that 83 the UK specialises in producing. The EU now represents less than half of total UK pharmaceutical exports. Exports to outside the EU more than doubled over the last ten years. Key growth markets are Asia (especially China) and the United States (US).12 1.3!

Clinical Trials

The UK’s National Institute for Healthcare Research (NIHR) is the largest funder of 84 clinical trial research in the EU. Clinical trials provide important information for academics and R&D departments, and the UK’s status as a major location for clinical trials enhances its desirability as a location for pharmaceutical development. Since 2004, the UK has been party to the EU Clinical Trials Directive (CTD), 2001/20/EC EUCTD, which has received criticism for adding red tape, whilst bringing few tangible benefits and perhaps encouraging clinical trials to take place outside the EU (to the detriment of the UK). Michael Rawlins, current chair of the Medicine and Healthcare Products Regulatory Agency (MHRA), referred to the original CTD as a 85 ‘catastrophe’. Nonetheless, with substantial changes to this directive due to be implemented in 2018, there is little support amongst the research community for leaving the EU-wide clinical trials network.

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Norton Rose Fulbright. “Impact of Brexit on Life Sciences and Healthcare,” 2016. http://www.nortonrosefulbright.com/knowledge/publications/136982/impact-of-brexit-on-life-sciencesand-healthcare 82 Mattias Ganslandt and Keith Maskus. “Parallel Imports of Pharmaceutical Products in the European Union.” Policy Research, 2001. http://apps.who.int/medicinedocs/documents/s17518en/s17518en.pdf 83 Business Monitor International. Western Europe Pharmaceuticals Industry Report January 2017. 2017. 84 Sally C. Davies, Tom Walley, Stephen Smye, Lisa Cotterill, and Christopher J. M. Whitty. “The NIHR at 10: Transforming Clinical Research.” Clinical Medicine (London, England) 16, no. 6 (December 2016): 501–2. doi:10.7861/clinmedicine.16-6-501 85 Daniel Cressey. “Overhaul complete for EU clinical trials.” Nature, June 2014. http://www.nature.com/doifinder/10.1038/nature.2014.15339

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One key issue is the increased emphasis on rare diseases and genetic research. Both rare illnesses and specific genetic markers may occur highly infrequently, making it 86 impossible to generate a sufficiently large sample in any particular EU country. This necessitates international longitudinal studies and it is feared that the UK will be unable to participate in such studies once outside the framework of the European CTD. That said, the UK is home to The 100,000 Genomes Project, a national initiative aiming to sequence the DNA of 100,000 people. This is the largest project of its kind in the 87 world. 1.4!

Genomics

Genomics refers to the study of the chemical and structural properties of DNA. Genomics provides the tools necessary to analyse an individual’s DNA and, in the future, could allow specialised treatments and a better understanding of a given individual’s predisposition towards various illnesses. Genomics research is a multistage process: first, DNA samples must be acquired, then they must be sequenced (decoded). After DNA has been sequenced, it can be analysed and perhaps used to create commercial products. The majority of UK genomic companies are start-ups focused on DNA sequencing. The UK currently controls 10% of the world genomics market with Cambridge being the main location in the UK for genomic research. Oxford and London are also important. Switzerland and Ireland are the other two main locations for genomic 88 research worldwide. 1.5!

Financing

The UK is the main location in Europe for venture financing of pharmaceutical companies, accounting for over a third of the total Venture capital (VC) raised in the 89 pharmaceutical sector in Europe. The London Stock Exchange, including its smaller sub-market, Alternative Investment Market (AIM), is an important source of funding 90 for pharmaceutical companies, although it is not dominant within Europe.

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Science and Technologies Committee. “EU Regulation of the Life Sciences,” 2016. https://www.publications.parliament.uk/pa/cm201617/cmselect/cmsctech/158/158.pdf 87 Genomics England. “The 100,000 Genomes Project | Genomics England,” 2017. https://www.genomicsengland.co.uk/the-100000-genomes-project/ 88 Mike Standing and Elizabeth Hampson. “Genomics in the UK: An Industry Study for the Office of Life Sciences,” 2015. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/464088/BIS-15-543genomics-in-the-UK.pdf 89 Steve Bates. “UK Biotech Financing and Deals in 2015/16,” 2016. 90 Julia Bradshaw. “UK Biotech Is Surging but More Support Is Needed, Industry Warns.” Telegraph, June 16, 2016. http://www.telegraph.co.uk/business/2016/06/15/uk-biotech-is-surging-but-more-supportis-needed-industry-warns/

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1.6!

Distribution

Pharmaceutical distribution is generally regulated by individual EU member states. As such, it exhibits substantial variation across Europe. In the UK, four main pharmaceutical wholesalers (Celesio, Alliance Healthcare, Phoenix and MawdsleyBrooks) control the majority of the wholesale market. They purchase products from pharmaceutical manufacturers, distribute them around the UK and sell them to 91 pharmacies. A few smaller regional wholesalers have less than 7% market share. Unlike in most EU countries, the UK does not regulate wholesaler margins. This has resulted in its wholesale margins being amongst the lowest in the EU. In recent years, ‘short-line’ wholesalers have emerged with the aim of undercutting established wholesalers by only stocking commonly prescribed generic and parallel imported drugs. ‘Short-line’ wholesalers will not stock drugs that are rarely used or expensive to store. The four main wholesalers now also appear to be entering this industry. For example, Alliance Healthcare has a subsidiary, OTC Direct, which 92 specialises in ‘short-line’ wholesaling. Pharmacies receive remuneration based on domestic UK legislation. The UK government needs to ensure that pharmaceutical products are distributed throughout the UK, even in remote areas, and needs to reduce unnecessary visits to GPs and 93 hospitals. The current remuneration scheme reflects these objectives. 1.7!

Summary

The UK has a world leading health and life sciences industry. The industry’s growth is partly fuelled by factors not directly dependent upon the EU, such as rapidly increasing demand for pharmaceutical products from China and the US. Nonetheless, the sector is also highly concentrated in London, Oxford and Cambridge, reflecting the dependency of the sector on access to high skilled labour and collaboration with world leading universities. If either of these two factors are threatened by Brexit, the sector may not perform as strongly in the future. In key growing subsectors, such as genomics, many companies rely on grants and VC funding, and focus more on intellectual property creation than revenue generation. The implications that Brexit will have on such companies is unknown and perhaps dependent on decisions taken by UK policymakers. The impact on grants, commercialisation, regulations and innovation will be discussed in detail.

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Panos Kanavos, Willemien Schurer, and Sabine Vogler. “The Pharmaceutical Distribution Chain in the European Union: Structure and Impact on Pharmaceutical Prices Report,” 2013. http://eprints.lse.ac.uk/51051/ 92 Alliance Healthcare. “What we do.”http://www.alliance-healthcare.co.uk/about-us/what-do-we-do 93 Community Care - Medicines and Pharmacy Division. “Community Pharmacy in 2016/17 and beyond Final Package,” 2016. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/561495/Community_phar macy_package_A.pdf

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2.0! EFFECT

OF BREXIT LEAVING THE UK PHARMACEUTICAL INDUSTRY – POST-BREXIT

ON

THE

This section will focus on four main areas of impact of Brexit on the Pharmaceutical industry: -! Innovation -! Trade -! -!

Regulation Talent 2.1!

Innovation

The pharmaceutical industry is one of the UK’s main motors for innovation. Investing 94 more in R&D than any other sector in the UK (£4 billion in 2014 ), the life sciences sector stimulates the creation of high skilled jobs across the UK, and the formation of partnerships and collaborations with academia and other sectors, which drives value for the UK. The UK is a global reference in the life sciences industry, having discovered and developed 25 of the top 100 prescription medicines globally.12 Nevertheless, to sustain the status of global leadership in the sector, it is essential to guarantee long-term funding, the brightest talent and the ability to collaborate at scale. Commercialisation of this research will require funding of small and medium enterprises (SMEs), from inception to sale, or Initial Public Offering (IPO). There are many potential losses of leaving the EU, which will now be discussed.

2.1.1! Diminished innovation FPs are the main EU funding mechanism for research, development and innovation, accounting for 78% of total EU research funding received by the UK between 2007 95 96 and 2013 (FP7) or 3% of the UK’s expenditure on R&D over the same period . As a result of FPs and structural funds for research and innovation activities, the UK 97 secured €8.8 billion in funding from the EU between 2007 and13, earning €3.4 billion more than contributed 31. Horizon 2020 is the current FP with a budget of €74.8 billion available for the period 98 2014 to 2020 . This amount is distributed based on criteria of scientific excellence,

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Business Monitor International. “Pharmaceuticals & Healthcare Q416 Round-Up,” 2016. Office for Life Sciences. “Life Sciences Competitiveness Indicators,” 2016 95 European Commission. “Seventh FP7 Monitoring Report 2013,” 2015. 96 Office for National Statistics. “UK Gross Domestic Expenditure on Research and Development,” 2015. 97 European Commission. “EU Expenditure and Revenue 2007-2013,” 2015. 98 Carlos Frenk, Tim Hunt, Linda Partiridge, Jane Thornton, and Terry Wyatt. “UK Research and the European Union: The Role of the EU in Funding UK Research.” The Royal Society, 2015. https://royalsociety.org/~/media/policy/projects/eu-uk-funding/uk-membership-of-eu.pdf 94

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alignment with a number of strategic objectives (‘grand challenges’), geographical and disciplinary diversity, and potential for commercialisation. Although the HM Treasury has committed to underwrite funding for approved Horizon 2020 projects applied for 99 before the UK leaves the EU, providing short-term reassurance to applicants from the UK’s research and innovation base, access to EU funding beyond Horizon 2020 is still unknown. Life sciences have a long research cycle and require long-term funding. Leaving the EU will likely result in the loss of access to EU funding, not just Horizon 2020 but other funding sources such as the European Structural and Investment Funds. This is likely to discourage scientists from conducting research at UK institutions and potentially reduce the number of UK start-ups, many of which are already 100 contemplating their options post-Brexit .

2.1.2! Loss of global research leader status Although 19% of the world’s most cited life science academic publications in 2012 were produced by the UK, 27 60% of all internationally co-authored papers are with EU 101 partners . Cross-border collaborations between EU member states are becoming increasingly paramount in achieving the scale required to make breakthrough discoveries. Loss of EU membership presents a considerable obstacle in maintaining the UK at the forefront of global research. Furthermore, if non-EU countries see European scale as indispensable to meeting their objectives, it is likely that they will target partnerships outside of the UK. In addition to this, loss of alignment with the EU on data protection could further endanger the UK’s leading position since the current UK Data Protection Act is insufficient to enable pan-European data sharing.

2.1.3! Falling R&D spending There is a positive correlation between government spending on medical research and private R&D spending, a 1% increase in the former being associated with a 0.7% 102 increase in the latter. Any reductions in public funding could result in a decline in

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Greg Clark and Jo Johnson. “Safeguarding Funding for Research and Innovation,” 2016. https://www.gov.uk/government/news/safeguarding-funding-for-research-and-innovation 100 Sam Schechner. “Europe’s Startups Reassess Britain After ‘Brexit.’” Wall Street Journal, June 26, 2016 101 Frenk, Carlos, Tim Hunt, Linda Partridge, Janet Thornton, and Terry Wyatt. “UK Research and the European Union: The Role of the EU in International Research Collaboration and Research Mobility,” 2016. https://royalsociety.org/~/media/policy/projects/eu-uk-funding/phase-2/EU-role-in-internationalresearch-collaboration-and-researcher-mobility.pdf 102 The Policy Institute [King’s College London]. “Public Medical Research Drives Private R&D Investment,” 2016. https://www.kcl.ac.uk/sspp/policy-institute/publications/SpilloversFINAL.pdf

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private R&D spending from pharmaceutical companies who, in 2014, spent 16% of 103 their European R&D budget in the UK . The benefit of increased government expenditure on research quality can be demonstrated through Singapore’s Agency for Science, Technology and Research (A*STAR), which was established in 1991. This body is credited with improving Singapore’s output to the biotechnology sector by attracting top researchers from around the globe. Its success is believed to be rooted in the lack of strict regime and stringent control of research targets; investing in the best researchers, not merely the 104 best research proposals, has led to an influx of researcher applications . In 2016, it 105 committed 19 billion Singaporean dollars (~£11 billion) to fund R&D until 2020.

2.1.4! Deterioration of funding pipelines The commercialisation and growth of SMEs rely heavily on the UK’s VC, whilst also depending greatly on funding from the European Investment Bank (EIB) and the European Investment Fund (EIF); these constitute 25-40% of VC funds and attract 106 further private investment . If the EIB/EIF funding pipeline is broken, UK SMEs will suffer and it is likely that fewer start-ups will be created. Moreover, the loss of EU passporting rights for financial institutions, the weakening of the IPO market and increasing isolation from Foreign Direct Investment are likely to paralyse initiatives aimed at funding pipelines and restrict the capacity to raise funds in Europe. 2.2!

Trade

Stability coupled with the mobility of goods and capital across borders are pillars of the global pharmaceutical industry. Supply chains commonly involve the free movement of goods across borders, a practice that is currently facilitated by a common regulatory system across the EU and the absence of border controls. The UK has particularly benefited from this as companies have been encouraged to establish bases in the UK due to the competitive fiscal structure offered. Leaving the EU could severely damage commerce with the potential introduction of custom duties, import VAT and border controls likely to incur cost, cause disruptions to established trade routes and restrict the supply of medical technology. The UK could face a rise in the drug bill of its National Health Service (NHS), reduced private

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European Federation of Pharmaceutical Industries and Associations. “The Pharmaceutical Industry in Figures,” 2016. http://www.efpia.eu/uploads/Modules/Documents/the-pharmaceutical-industry-infigures-2016.pdf 104 “Singapore’s Salad Days Are over.” Nature 468, no. 7325 (December 9, 2010): 731–731. doi:10.1038/468731a 105 Loke Kok Fai and Xabryna Kek. “Govt Commits S$19b to New 5-Year Plan for R&amp;D Initiatives RIE2020.” Channel News Asia. Accessed March 28, 2017. http://www.channelnewsasia.com/news/business/singapore/govt-commits-s-19b-to-new/2409426.html 106 Steve Bates and Mike Thompson. “Maintaining and Growing the UK’s World Leading Life Sciences Sector in the Context of Leaving the EU; “It Is Hard to Think of an Industry of Greater Strategic Importance to Britain than Its Pharmaceutical Industry”,” 2016. http://www.abpi.org.uk/ourwork/library/industry/Documents/UK-EU-Steering-Group-Report.pdf

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investment and the departure of established companies, hence Simon Stevens, Chief Executive of NHS England, announcing that Brexit could represent a ‘terrible moment’ 107 for the NHS . Now, the losses in trade that could result from the UK exiting the EU will be considered.

2.2.1! Disruption and added costs The costs of UK business trading with the EU has been greatly facilitated and minimized by the current regulatory alignment with the EU, as well as the absence of border controls and the EU Parent-Subsidiary and Interest and Royalties Directive. In 2015, life science goods accounted for £29.7 billion in imports and £29.5 billion in exports, of which 44% went to the EU alone. 39 However, this could cease being the case if the UK abandons the EU. Considerable disruption and additional costs can be expected if UK-EU trade becomes burdened with the introduction of border controls involving the declaration and inspection of goods in addition to custom duties and import VAT throughout the manufacturing and supply chain stages. In the near future, companies could therefore be deterred from investing in the UK and those currently based in the UK may consider leaving. This would have a direct impact on the number of people employed in the UK pharmaceutical industry. In addition, cash flow could be further damaged if simplifications to the UK VAT system for manufacture and supply are not implemented. Simplified custom procedures or ‘self-assessment’ are currently being explored by the 108 industry and HM Revenue & Customs, presenting some options in terms of minimising uncertainty and reducing administrative tasks. However, the most effective solution would require the creation of a streamlined, standalone customs system for UK-EU trade, an alternative likely to be unfavourable to most EU countries on grounds of cost and the principle of treating the UK no differently to other non-EU countries. Bilateral renegotiation would thus be necessary to recover, if possible, the current advantageous trade framework.

2.2.2! Endangering the accessibility and safety of medical technologies The cumulative damage caused to trade could reduce UK patients’ accessibility to medical technology and increase the NHS’s bill. Furthermore, not committing to the full implementation of the European Falsified Medicines Directive (FMD) would

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Steve Bates and Mike Thompson. “Maintaining and Growing the UK’s World Leading Life Sciences Sector in the Context of Leaving the EU; “It Is Hard to Think of an Industry of Greater Strategic Importance to Britain than Its Pharmaceutical Industry”,” 2016. 107 Siobhan Fenton. “Brexit Price Surge Could Deny Patients Life-Saving Drugs on NHS.” Independent, July 3, 2016. http://www.independent.co.uk/life-style/health-and-families/health-news/brexit-nhs-drugprices-medicine-patients-effects-what-will-happen-a7117056.html 108 Alex Barker. “UK Trade Sector Warns of Brexit Customs Disruption at Borders.” Financial Times, October 24, 2016

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deprive the UK of the EU’s efforts to prevent falsified medicines entering EU countries and thus reaching UK patients. 2.3!

Regulation

The EU’s regulatory system is highly sophisticated and robust, providing the necessary scale and certainty for the development of innovative, effective and safe medical technologies. This system has been developed over the last 50 years with the close collaboration of the UK’s MHRA, Notified Bodies, and Veterinary Medicines Directorate (VMD), providing expertise and capacity to handle part of the workload of the European Medicines Agency (EMA). Although reassembling an independent regulatory system in the UK would be possible, the expertise, resources and time required would be considerable. This would still result in the UK becoming a less relevant market, whilst disrupting trade across borders and complicating efforts to stop falsified medicines from entering the country. GSK and AstraZeneca have already expressed their disapproval for such plans, preferring that 109 the UK continues its established relationship with the EMA. There are multiple potential losses for regulation in the pharmaceutical industry following an exit from the EU.

2.3.1! Loss of certainty and scale Losing alignment with EU regulation will inevitably entail the loss of the certainty and scale that accompanies it. Currently, regulation affects how the industry researches, develops, manufactures and delivers medical technologies, and it is critical for guaranteeing the safety and reliability of these products. The Association of the British Pharmaceutical Industry (ABPI) supports the current regulatory system, which is regarded as highly effective, but has expressed its concern regarding the potential additional bureaucracy that a new, independent UK regulatory system would create. 39 Duplication of processes, increased costs and divergence of standards would make the UK an unattractive location for the development, manufacture and launch of new products. Even if this system were built upon with the aim of improving existing EU regulations, the UK would still be regarded as a ‘second priority’ market due to the 110 higher costs, delays and disruptions associated with it. It is important to note that the 111 UK represents only 3% of global pharmaceutical sales; it is not a large enough market to counterbalance the additional complications and costs.

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Steve Bates and Mike Thompson. “Maintaining and Growing the UK’s World Leading Life Sciences Sector in the Context of Leaving the EU; “It Is Hard to Think of an Industry of Greater Strategic Importance to Britain than Its Pharmaceutical Industry”,” 2016. 109 David Crow and Gonzalo Viña. “Pharma Companies Argue Against New UK Regulator.” Financial Times, November 30, 2016. https://www.ft.com/content/713b61be-b6f8-11e6-ba85-95d1533d9a62 110

[Personal Communication] “Professor Mads Krogsgaard Thomsen – Chief Science Officer of Novo Nordisk,” January 2017. 111 IMS Health. “IMS World Review Executive,” 2016.

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2.3.2! Health and Safety If the UK becomes a ‘second priority’ market, patients’ access to new medical technologies will be delayed and the availability of medical products and treatments currently in use could be threatened. An end to cooperation with the EU on matters of European pharmacovigilance (PV) and future medical device databases (EUDAMED) will diminish the ability of the UK to detect side effects and respond to safety issues. In addition, loss of access to the European Centre for Disease Prevention and Control (ECDC) could hinder the UK’s ability to produce medicines that fight pandemics, and may delay the manufacture and supply of vaccines.

2.3.3! Clinical Trials In April 2014, a new Clinical Trials Regulation (CTR), Regulation EU No. 536/2014, was adopted by the EU with the aim of full implementation by 2018.39 This CTR focuses on the simplification of current rules, streamlining applications for the conduction of clinical trials and their authorisation, and aiming to increase the 112 transparency of the data produced. Should the UK not adhere to Regulation EU No. 536/2014, innovation could be hindered as the opportunities for doctors and academics to conduct clinical trials will be restricted, and companies will begin to look elsewhere to carry out theirs.

2.3.4! Influence The MHRA has a wide range of international links and is respected worldwide as one of the leading regulatory authorities for medicines and medical devices. The MHRA has shared its regulatory expertise with Malta, Latvia and the Czech Republic in a bid to help countries that have recently joined the EU develop the systems necessary to 113 playing an active part in European regulation. The MHRA was: -! the lead regulator in granting licensing to 7 out of 10 European medical products in 2007114; -! a rapporteur in 15% of the procedures of the PV Risk Assessment Committee (PRAC) and the Committee for Medicinal Products for Human Use (CHMP) in 2015 39;

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Office Journal of the European Union. Regulation (EU) 536/2014 of the European Parliament and of the Council of April 16 2014 on clinical trials on medicinal products for human use, and repealing Directive 2001/20/EC, Office Journal of the European Union (2014). http://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=celex:32014R0536 113 Medicines and Health Regulatory Authority. “Safeguarding Public Health through the Effective Regulation of Medicines and Medical Devices,” 2008. http://www.mhra.gov.uk/home/groups/commsic/documents/websiteresources/con2031677.pdf 39 Steve Bates and Mike Thompson. “Maintaining and Growing the UK’s World Leading Life Sciences Sector in the Context of Leaving the EU; “It Is Hard to Think of an Industry of Greater Strategic Importance to Britain than Its Pharmaceutical Industry”,” 2016. 114 The Pharmaceutical Journal. “MHRA/EMEA: Rivalry or Partnership?” The Pharmaceutical Journal 279 (2007), 226. http://www.pharmaceutical-journal.com/news-and-analysis/mhra/emea-rivalry-orpartnership/10004834.article

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responsible for inspections that resulted in 25% of Good Manufacturing Practice (GMP) certificates issued in 2015 for sites outside the EU39.

The UK’s VMD has also played a notable role in regulation, acting as a Reference Member State in 43% of Mutual Recognition Procedures in 2015.39 The loss of influence in the European system could deter regulatory experts from living and working in the UK, and result in the future implementation of regulations that are less favourable to UK interests, damage that will worsen if the EMA relocates.

2.3.5! Intellectual Property (IP) The reduction or loss of protection of IP is likely to discourage investment in pharmaceutical and biotechnology innovation, a process characterised by its long duration and high cost and risk. Currently, the EU benefits from highly supportive incentives such as: -! Supplementary Protection Certificates (SPCs) that extend the protection of patented active ingredients present in pharmaceutical or plant protection products, compensating for the loss of patent term that results from long development processes; -! Regulatory Data Protection (RDP), orphan designation – a status assigned to a medicine intended for use against a rare condition to ensure protection from competition once on the market – and rewards for investigations into paediatric uses and formulations. It is also important to consider the impact on parallel trade. Despite Europe-wide harmonization, the European pharmaceutical market is divided into individual national markets, which results in the same product having different prices in different member states. Parallel traders buy the original product at low prices in EEA countries and resell it in other member states. This is only possible because patents are exhausted across the EU as soon as a product is placed on the market in any member state. In 2014, parallel imports accounted for 7.9% of UK’s pharmaceutical sales.36 If the UK does not remain part of the EU patent exhaustion zone, significant pressure will be added to NHS spending on medical products as cheap sourcing via parallel import will be eliminated as an option, accentuating price differences between the UK and EU countries. 2.4!

Talent

The UK’s privileged position at the forefront of the pharmaceutical industry is bolstered by its ability to attract, develop and retain talent, which would not be possible without pan-European collaboration and free movement across borders. This concentration of talent aids the creation of start-ups run by highly skilled individuals. They attract the interest of big pharmaceutical companies, in turn attracting more highly skilled individuals and driving a virtuous cycle.

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The next wave of medical innovation will generate new, highly skilled jobs throughout the value chain. Whether the UK can continue to be a global reference in the life sciences industry will be determined by its ability to supply qualified individuals from home and, even more so, from abroad. The development and implementation of a talent pipeline will therefore be vital if the erosion of the UK’s position is to be avoided. The potential losses for talent brought by Brexit include the following.

2.4.1! Leadership Approximately 17% of Science, Technology, Engineering and Mathematics (STEM) 115 academics in UK research institutions are non-UK EU nationals. Facilitating movement across borders is essential to ensuring the supply of talent demanded in current and emerging skill gap areas such as bioinformatics, genomics or Advanced Therapy Medicinal Product (ATMP) manufacturing. The UK’s global reference status therefore depends on removing any barriers to attracting, developing and retaining talent. This includes the current state of uncertainty regarding the UK’s future immigration policy and the unwelcoming image projected on foreign workers.

2.4.2! Headquarters The UK is home to the EMA, the European headquarters of over a dozen global pharmaceutical companies, the global headquarters for GSK and AstraZeneca, and considerable R&D and manufacturing operations for Amgen and Pfizer. This has attracted and nurtured talent across the value chain in areas such as research, development, regulation, manufacturing and commerce. GSK and AstraZeneca, for 116 example, will employ 15 and 50 university graduates respectively in 2017. Outside of the EU, the UK may see its capacity to attract talent significantly reduced, which could potentially result in the relocation of operations, causing losses in job, economic contributions and innovation capacity.

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Campaign for Science and Engineering. “Immigration: Keeping the UK at the Heart of Global Science and Engineering,” 2016. http://www.sciencecampaign.org.uk/resource/caseimmigrationreport2016.html 116 GlaxoSmithKline. “GSK Graduate Jobs,” 2017. https://www.graduate-jobs.com/scheme/gsk. Also: AstraZeneca. “Graduate Jobs & Schemes,” 2016. https://www.graduate-jobs.com/scheme/astrazeneca

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3.0!

REGULATION OF MEDICINES

This section evaluates how the regulations surrounding basic research, clinical trials, drugs development and researchers could be affected. 3.1!

Current Climate

Currently, market authorisation of new medications is regulated by the EMA which works closely with the UK’s internal regulator, the MHRA. The MHRA is thought to have considerable influence over the EMA, given the UK’s status as a net importer of medicines, its unique NHS, and strong and transparent health technology assessment systems performed by the National Institute for Health and Care Excellence (NICE). The EMA is currently headquartered in London and, as put forward in comments by the ABPI, ‘co-location with the MHRA has reinforced and further enhanced the engagement and thought-leadership that the MHRA plays in European and global 117 regulatory development’ . With Brexit, the EMA may be relocated outside of London. A decision by the EMA to move out of London will be detrimental to the market attractiveness of the UK for foreign pharmaceutical companies. Many pharmaceutical companies (such as GSK and Merck & Co.) are currently headquartered in London. However, in the words of Japan’s Ministry of Foreign Affairs, the ‘appeal of London as an environment for the development of pharmaceuticals would be lost’ if the EMA relocates, which would in 118 turn drive negative impacts on R&D. It is difficult to assess the extent to which the UK’s pharmaceutical industry will continue to be regulated by EU laws once the UK leaves the EU. A large part of this rides on whether the UK will continue to be part of the European single market and support free movement of medicinal products, a decision for both the UK and the remaining EU member states to reach. The most likely outcome is that companies seeking to launch new products will have to apply separately for regulatory approval in the UK and in the EU. This will introduce delays to the system and may be detrimental to drug launches in the UK, as companies are likely to prioritise applying for regulatory approval in the considerably larger EU market. Furthermore, whilst the MHRA has released a statement that it currently remains committed to playing a full and active role in European regulatory procedures for medicines and devices, its position beyond this interim period is unclear. Sir Michael Rawlins has expressed the MHRA’s preference for working closely with the EMA and maintaining the current regulatory system, even to the extent of contributing to the

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Bates and Thompson. “Maintaining and Growing the UK’s World Leading Life Sciences Sector in the Context of Leaving the EU. “It Is Hard to Think of an Industry of Greater Strategic Importance to Britain than Its Pharmaceutical Industry”,“ 2016. 118 Zachary Brennan. “Japan’s Ministry of Foreign Affairs: Don’t Move EMA Headquarters From London.” Regulatory Affairs Professionals Society, 2016. http://www.raps.org/RegulatoryFocus/News/2016/09/06/25773/Japan’s-Ministry-of-Foreign-Affairs-Don’t-Move-EMA-HeadquartersFrom-London/

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deliberations of the Scientific Advisory Committee . Ultimately however, the extent to which the MHRA will engage with the EMA will be determined by the UK 120 Parliament’s Scientific Advisory Body. Regardless of the UK’s path in terms of EU market access (be it an EEA, EFTA or WTO trade agreement), there will be an increased authorisation burden for the UK as drugs that have already been centrally approved by the EMA will need additional authorization in the UK. However, these problems could be circumvented by various administrative streamlining measures such as those used by Liechtenstein, Norway, Iceland and Switzerland. For example, Liechtenstein uses processes that automatically approve medicines authorised by the EMA, whilst Norway and Iceland remain under the EMA’s umbrella. If separate regulatory processes exist for the UK and the rest of the EU, companies seeking to launch new products will have to apply separately for regulatory approval in these regions, which would introduce delays to the system. This might even be detrimental to drug launches in the UK, as companies are likely to prioritise applying for regulatory approval in the considerably larger EU market; the UK makes up just 3% of the world’s market for new medicines. Sir Michael Rawlins has expressed his view: ‘One of the biggest worries I have about Brexit and standing alone as a regulator is that we are only 3% of the world market for 121 new drugs and, if we are not careful, we are going to be at the back of the queue.’ Dr David Jefferys, speaking on behalf of the ABPI and as Vice President of Eisai Co., a Japanese pharmaceutical firm, announced: ‘The early innovative medicines will be applied for in the USA, in Japan and through the European system, and the UK will be in the second, or indeed the third, wave - so UK patients may be getting medicines 12, 122 18, 24 months later than they would if we remained in the European system.’ Conversely, some scientists take a more positive view, arguing that Brexit provides an opportunity for more liberal regulatory rules that will permit drugs to be launched more 123 quickly in the UK. Supporters of this view argue that Brexit presents global pharmaceuticals companies with a simpler way of gaining approval for their drugs in the UK since a national agency could independently dictate whether medicines are safe,

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BBC World Service. “BBC World Service - World Update: Daily Commute, Brexit Watch: Public Health After Brexit,” 2017. http://www.bbc.co.uk/programmes/p04tmcp0#play, first aired 22 Feb 2017 120 BBC World Service. “BBC World Service - World Update: Daily Commute, Brexit Watch: Public Health After Brexit,” 2017. 42 Crow and Viña. “Pharma Companies Argue against New UK Regulator.” Financial Times, November 30 2016. 121 The House of Lords Science and Technology Committee. “The Impact of Brexit on Regulation and Standards,” 2017. http://www.parliament.uk/business/lords/media-centre/house-of-lords-medianotices/house-of-lords-media-notices-2017/house-of-lords-media-notices-january-2017/lords-committeeto-take-evidence-on-impact-of-brexit-on-regulation-and-standards/ 122 Rob Merrick. “Brexit Will Put UK Patients at ‘Back of Queue’ for Vital New Drugs, Health Experts Warn.” The Independent, February 10 2017 123 Megan Boxall. “Brexit and the Pharmaceutical Industry.” Investors Chronicle, November 10 2016. http://www.investorschronicle.co.uk/2016/11/10/shares/sectors/brexit-and-the-pharmaceutical-industryoZwUvT2tqnPDPCpgRBa8vI/article.html

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! effective and affordable in one single, streamlined process.42 Sir Michael Rawlins has also suggested the possibility of launching a system where new medicines are given provisional licenses, whilst collecting more real world data to ensure the UK’s market 124 attractiveness attractive for pharmaceutical companies. 3.2!

Regulation of medical devices

Much like medicines, medical devices are regulated by the EMA and the MHRA. The Medical Devices Directive (MDD) similarly attempts to apply EU-wide standards to medical devices. This means that, at present, devices licensed in one EU country can be sold throughout the EU. This ‘lowest common denominator’ system allows manufacturers to deliberately register their products in countries with lower standards. With Brexit, the MHRA is likely to impose tighter standards on medical devices, putting in place regulations that the EMA failed to install due to resistance by member states. This will benefit larger pharmaceutical companies with more sophisticated R&D and manufacturing infrastructure for ensuring products are of a high quality. Simultaneously, these regulations may create barriers to entry for new start-ups that lack the capital to produce high quality products to meet the more stringent regulations. It is also possible that, in real terms, there will be few changes. The UK, whilst representing a mere 3% of the global biomedical industry, has a reach far greater than that thanks to its renowned NICE health technology assessments, largely regarded as the ‘gold standard’. The UK’s transparency, rigorous evidence-based health technology assessments and cost containment measures demanded by the NHS mean that many countries are inclined to follow its lead in evaluating and adopting nascent health technologies. NICE, specifically the NICE Technology Appraisal Committee, is extremely influential in this area. Ultimately, the real determinant of the extent to which particular technology is adopted in the UK healthcare market is its appraisal by NICE and not its ability to cross the lower bar of regulatory approval; hence, changes to regulation of medical devices may not translate into actual impact on device sales. 3.3!

Movement of People

Present estimates show that 17% of researchers in the pharmaceutical industry are EU nationals and that 72% of UK-based researchers have spent some time honing their research skills in non-UK institutions.48 Freedom of movement of labour is a fundamental principle of the EU common market, and Brexit will almost certainly bring with it new immigration controls. The policy of free movement has been instrumental in offering many researchers the opportunity to gain education and experience working in overseas laboratories or institutions in the EU. Similarly, many pharmaceutical companies are multinational and rely on movement of research and support staff

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BBC World Service. “BBC World Service - World Update: Daily Commute, Brexit Watch: Public Health After Brexit,” 2017.

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between branches in different countries. Whilst these processes will be hindered, it is hard to quantify the full impact of Brexit in this area; much depends on the Home Office’s future policies concerning the ease of labour flow. Nevertheless, the government remains committed to ensuring researcher mobility is protected. The House of Lords concluded that researcher mobility is ‘of critical importance to the UK science community, including academia, business and charities’, and that ‘researcher mobility must be protected if UK science and research is to remain 125 world-leading’. A parliament report on the implications and outcomes for science and research concluded by stating: ‘We understand that the Government is not yet able to offer firmer guarantees regarding future immigration rules for researchers but remind them that this is essential in order to continue to attract top-quality researchers to the UK […] there is clear agreement that researcher mobility is a crucial component of the 126 UK’s successful research and science sector.’ 3.4!

Clinical Trials Directive and Clinical Trials Regulation

EU legislation aims to standardize regulation of clinical trials but, in practice, there is often inconsistent implementation of the CTD due to difficulties coordinating the 28 member states, problems with commission guidance being issued late, and a lack of clarity regarding many definitions in the legislation. These factors have led to difficulties running large multinational and multi-centre trials. The incoming CTR should mitigate these problems, although the legislation has not yet come into force. In 2014, the EU replaced the 2001 CTD with the improved CTR, which sought to rectify concerns raised by many stakeholders that complicated legislation and rules were actively impeding research. The CTR, which member states are not obliged to transpose into their national legislation until 2018, aims to introduce a single EU portal for clinical trials, allowing those in the industry to apply centrally and receive approval to conduct trials in all member states. The smaller and less lucrative UK market risks being relegated to secondary importance if applying separately to clinical trial applications there proves costly and complex. In theory, there are considerable benefits to standardising regulation across the EU. Standardisation allows pharmaceutical companies to run larger multinational trials and collect robust and comparable datasets. Should the UK have independent rules and registration processes that do not match those in the EU, pharmaceutical companies may willingly or unwillingly exclude the UK from future multinational trials. With Brexit, the UK will need to devise independent regulation for clinical trials and, whilst this poses an additional administrative burden, it also affords the UK an opportunity to draw up its own legislation, which may reduce the red tape currently

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House of Lords Science and Technology Select Committee. “EU Membership and UK Science.” https://www.publications.parliament.uk/pa/ld201516/ldselect/ldsctech/127/127.pdf 126 Roberta Blackman and Nicola Blackwood. “Leaving the EU: Implications and Opportunities for Science and Research Seventh Report of Session 2016–17.” Labour, 2016. https://www.publications.parliament.uk/pa/cm201617/cmselect/cmsctech/502/502.pdf

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associated with setting up clinical trials, and facilitate research carried out by 127 pharmaceutical companies. The EU is notoriously slow at updating its regulation (it took almost 20 years to change the CTD) and, without the need to coordinate with other parties, UK regulators may prove far more responsive to the changing research landscape. It is expected that there will still be a degree of collaboration and standardisation with the EU, but, on the whole, the future landscape looks to be one more favourable to clinical trials research. Parliament has also raised the opportunity for reform, whilst noting the need to balance this with the benefits that consistency in regulation brings.57

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Blackman and Blackwood. “Leaving the EU: Implications and Opportunities for Science and Research Seventh Report of Session 2016–17.” Labour, 2016. 127 UCL. “Written Evidence for Select Committee - UCL,” 2016. http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/science-andtechnology-committee/leaving-the-eu-implications-and-opportunities-for-science-andresearch/written/36083.html

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4.0!

CONSIDERATION OF POST-BREXIT MODELS 4.1!

Initial overview

The UK’s pharmaceutical industry incorporates twenty global pharmaceutical companies, as well as many smaller ones, which are supported by a strong bioscience 128 science industry and start-up market. The EU’s single framework for regulating and improving pharmaceutical products has contributed to a track record of patient safety and productivity, and a strong export market, 43% of which goes to the EU59. London, Cambridge and Oxford are especially crucial to the UK’s pharmaceutical industry in terms of manufacturing and R&D, London alone providing 15,000 of the 70,000 jobs 129 in this sector .

4.1.1! EMA A potential impact of Brexit will be the relocation of the headquarters of the EMA. Currently located in London, the EMA is a decentralised body responsible for protecting and promoting public and animal health. This is achieved through regulation of pharmaceutical companies across the EU. The EMA has already forecast potentially significant disruptions to its operations following Brexit but it remains unclear as to whether a relocation will take place or 130 what other changes will emerge in terms of the UK’s relationship with the EMA. The example of the EMA is telling of the wider uncertainty surrounding Brexit and the impending changes facing the pharmaceutical industry. If the EMA, one of the key organisations governing the EU pharmaceutical industry, were to physically leave the UK, it would likely be caused by or signify the legislative cutting of ties between the UK and the EU, whereby the UK pharmaceutical industry would cease to be dictated by EU legislation and likewise have no say in these laws. A consideration of the Norwegian and Swiss models can give an idea of some of the most obvious paths that the UK could take as it forges a new relationship with the EU and its pharmaceutical sector specifically.

4.1.2! Research funding The UK currently receives research funding from the EU, notably by way of Horizon 2020, the EU’s current FP for Research and Innovation, which aims to drive economic growth and create jobs through investment in scientific research. Such programmes

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HM Treasury. “HM Treasury Analysis: The Long-Term Economic Impact of EU Membership and the Alternatives,” 2016. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/517154/treasury_analysis _economic_impact_of_eu_membership_print.pdf 129 London’s Economic Plan. “London’s Pharmaceutical Industry,” 2016. http://www.uncsbrp.org/pharmaceutical.htm 130 Monika Benstetter. “EMA Management Board: Highlights of December,” 2016. http://www.ema.europa.eu/docs/en_GB/document_library/Press_release/2016/12/WC500218416.pdfs

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have enabled the EU to establish a collaborative network of research initiatives and become a world leader in scientific research ahead of both China and the US, a feat that 131 has ultimately benefitted the UK. There are three existing models that could provide a solution that would allow the UK to continue receiving this funding and benefitting from its association with EU-driven scientific research actions. These models pertain to countries that are not EU member states but are nevertheless permitted to receive EU funding and participate in the activities supported by this funding. A further, and likely, route will be that the UK negotiates its own model with the EU as it seeks to protect its current and future research funding. It should also be noted that, even if the UK were able to adopt an existing model, such as that of an ‘associated country’, additional negotiations will be 132 inevitable.

4.1.3! Associated countries These are non-EU member states that have stipulated a formal agreement on full or partial association with an EU research funding programme. It should be stressed that each programme necessitates its own separate negotiations and that ‘associated countries’ have varying relationships with these research programmes. In other words, there is no single ‘associated country’ model. To be involved in these programmes in the same manner as EU member states, these countries must pay a fee which is calculated based on their GDP and on further negotiations. It is probable that, in monetary terms, these countries can gain more than they contribute, as is exemplified by Switzerland. Nevertheless, whilst these countries can receive and benefit from EU research funding, they cannot influence the direction of these programmes as access does not grant them a voice in the European Council or European Parliament. This is the key difference between EU member states and ‘associated countries’. Since the referendum result, lobbying on the part of Universities UK (UUK) has sought to put pressure on the UK government to push negotiations for ‘associated country’ status 63. This would secure the UK’s current participation in Horizon 2020 in a similar manner to other ‘associated countries’.63 As of September 2016, there are 16 ‘associated countries’ working with EU research funding programmes. They include those inside the EEA and/or the EFTA, namely Norway and Switzerland, and those outside of them such as Israel and Turkey. 63

4.1.4! Non-associated third countries

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Mike Galsworthy and Rob Davidson. “Debunking the Myths about British Science after an EU Exit.” LSE Blogs, December 2015. http://blogs.lse.ac.uk/brexit/2015/12/05/debunking-the-myths-about-britishscience-after-an-eu-exit/ 132 John Morgan. “Brexit: Could UK Join EU Research System as ‘associated Country’?.” Times Higher Education, July 2 2016

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These are non-EU member states, such as Afghanistan and Argentina, that are not formally associated with EU research funding programmes and consequently not represented on the programmes’ management committees. However, organisations and participants from these countries can become partners with the programmes and receive funding. Non-associated third countries fall into two groups: -! Developing countries: research organisations in some 130 developing countries are automatically eligible for funding.133 -! Industrialised countries and emerging economies: participants from these countries must independently finance their actions within the programmes. For some countries, this has involved co-funding the activities of participants who have been selected to partake in Horizon 2020. -! In exceptional circumstances, industrialised and emerging economies can receive EU funding if: o! there is a bilateral agreement between the country and the EU (sometimes the case for participants from the US); o! the country is explicitly identified in the relevant programme and call for proposals as being eligible for funding; o! their participation is deemed by the European Commission to be essential for carrying out the action.

4.1.5! European Research Council and the Marie Skłodowska-Curie funding This option welcomes applications for funding from individual researchers from any country in the world providing they are seeking the opportunity to work in Europe for a certain period of their career. The initiative claims to support researchers irrespective of their career stage or nationality. This could enable the UK to continue receiving EU research funding but only from the perspective of individuals as opposed to UK organisations or the country as a whole.

4.1.6! Final points Horizon 2020 ends in 2020 when it will be succeeded by FP9. Whether and how the UK will participate in future EU research programmes after exiting the EU is unclear. The above-mentioned options are those that currently exist but this does not preclude that another model might be found. This will of course depend on the negotiations that are just beginning to take shape.

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“Horizon 2020: Work Programme 2016-2017 (General Annexes).” European Commission Decision C 6776, no. 13 (2015). http://ec.europa.eu/research/participants/data/ref/h2020/other/wp/20162017/annexes/h2020-wp1617-annex-ga_v1.0_en.pdf

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4.2!

The pharmaceutical industry

In considering the post-Brexit options for the UK pharmaceutical industry, there are three key variations to be discussed: EEA (specifically Norway), EFTA (specifically Switzerland) and WTO.

4.2.1! EEA The EEA, established on the 1st of January 1994, currently includes Norway, Iceland and Liechtenstein. These counties implement EU legislation, such as free trade (except for agriculture and fisheries in most cases) and free movement, acknowledge EU administrative decisions, contribute to the EU to help level social and economic disparities across member states, and pay custom taxes and other administrative costs. However, they cannot vote in the European Parliament and have no say in its laws.

4.2.2! Norway The EEA model can be considered as a poor deal for Norway since it is so similar to that of EU member states. However, Norway has retained some autonomy over its pharmaceutical sector. It has its own Medicines Agency (Statens legemiddelverk), which is a subsidiary to its national healthcare organisation and is responsible for marketing authorisation, classification, vigilance, pricing, reimbursement and providing information on medicines to prescribers and the public. This is not so different to the UK where there is the NHS and the MHRA responsible for marketing medicines. Although being part of the EEA means that Norway must adhere to EU regulations regarding marketing authorisations, its own Medicines Agency can influence the work 134 of the EMA as EU member states can. In addition, Norway has control over its own pricing and reimbursement, which is different for out- and in-patients, unlike for the rest of the EU.65 There are therefore subtle differences in how Norway operates compared to that of EU member states, which could make it easier to sell this as a solution to the majority who voted for Brexit. In addition, considering that the UK’s existing framework is similar to Norway’s, it is feasible to envisage the UK transitioning to this model.

4.2.3! Advantages of the EEA model for the UK135 The EEA model would likely be the easiest option for the UK pharmaceutical industry, allowing for a transition to a legal framework only slightly different to the current

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Helga Festøy and Anne Helen Ognøy. “PPRI Pharma Profile,” 2015. https://legemiddelverket.no/Documents/English/Price and reimbursement/PPRI_Pharma_Profile_Norway_20150626_final.pdf 135 Vincenzo Salvatore. “The Impact of Brexit on the Pharmaceutical Industry: Some Preliminary Considerations.” Pharmafile, 2016. http://www.pharmafile.com/news/505928/impact-brexitpharmaceutical-industry-some-preliminary-considerations

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model, whilst incentivising pharmaceutical companies to remain in the UK. An analysis of Norway suggests that the EEA model can succeed in maintaining and even attracting key players in the pharmaceutical industry; as of 2015, all major pharmaceutical companies were present in Norway with nine having production facilities there, the largest being GE, Takeda and Fresenius Kabi65.

4.2.4! Legislative/organisational If the UK does not join the EEA, it risks becoming a third party, external to the EU and the EEA where pharmaceutical companies can rely on centralised legislation and access to information. The UK will no longer be entitled to these frameworks and its pharmaceutical sector will be disrupted as a result. Without this continuity, pharmaceutical companies may be forced to seek regulatory approval from the UK and the EU separately, which would prove unfavourable to the UK since these companies will have much more to gain by appealing to the EU’s 500 million patients over the UK’s 60 million55. Adopting an EEA model would therefore protect the status quo, allowing for continued organisation and efficiency between the UK and the rest of the EU in terms of R&D, clinical trials, manufacturing, marketing, distribution etc. This model would also enable pharmaceutical companies that are only based in the UK to benefit from the new reform coming into force in 2018 which will introduce a single EU portal for clinical trials. This will ensure a harmonised process for approval of clinical trials across the EU, and enable participating nations to access and share clinical trial information on an EU 136 database.

4.2.5! Business/economic If the UK attains membership to the EEA, it effectively retains its status within the EU. This incentivises those EU pharmaceutical companies with registered offices or manufacturing sites in the UK, as well as those that conduct clinical trials in the UK, to continue their activities in much the same manner. Without this security net, these companies will have to demonstrate that their work complies with EU standards, which could prove time-consuming and expensive, possibly resulting in these companies leaving the UK. This is especially relevant to those EU pharmaceutical companies that have no offices or manufacturing plants outside of the UK. Unless the UK joins the EEA, these companies will likely relocate to EU or EEA countries in the pursuit of operational ease and business security, as it will be disruptive and time-consuming to establish new legislative practices within a changing business environment to boot. Joining the EEA

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Megan Boxall. “Brexit and the Pharmaceutical Industry.” Investors Chronicle, November 10, 2016. Privolnev, Yulia. “Brexit’s Impact On The Global Pharmaceutical Industry Future Access To The EU Common Market.” Pharmaceutical Online, 2016. https://www.pharmaceuticalonline.com/doc/brexit-simpact-on-the-global-pharmaceutical-industry-future-access-to-the-eu-common-market-0001 136

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should therefore protect the UK pharmaceutical industry from the organisational chaos and economic detriment of pharmaceutical companies leaving the UK.

4.2.6! EFTA The EFTA was formed in 1960 and, today, comprises Switzerland, Norway, Iceland and Liechtenstein. It allows for these four states to be incorporated into the EU’s single market. The EFTA is a prerequisite for joining the EEA. As Switzerland is not also a member of the EEA (the Swiss rejected the idea in 1992), it has its own bilateral agreements with the EU, which took two years to finalise and cover all areas from trade to transport. The complexities of applying a similar model to the UK would therefore engender momentous negotiations.

4.2.7! Switzerland’s model (and what it signals for the UK) ‘Switzerland may guard its political and cultural independence fiercely, but its 137 scientific sector has a strongly international flavour.’ Switzerland is a rich country and that is partly thanks to its pharmaceutical industry, which is geared towards high value exports and supported by expert research. Switzerland is home to some of the world’s most successful pharmaceutical companies, such as Novartis and Roche, and noted for its scientific and academic institutions, which attract expertise from across the world and contribute to the respect garnered by the Swiss pharmaceutical sector. Despite not being an EU member state, Switzerland has also benefitted from EU FPs, such as Horizon 2020, which offer grants for research. The UK also has a strong reputation in the areas of science and research, and has received proportionately high funds through these programme (£67 billion alone through Horizon 2020). In fact, the UK receives more funding from the European Research Council than any other EU country and has priority access to scientific facilities across Europe, putting it at risk of 138 losing a predicted £8.5 billion over the next four years . The British Prime Minister, Theresa May, has suggested that the British government will make up the potential losses in EU research funding.55 There is also the possibility 139 of non-EU countries buying into Horizon 2020 arrangements. These suggestions, however, will not come without controversy, given how clear and decisive a role austerity played in the referendum. Industry similarities and Switzerland’s economic success outside of the EU make it is unsurprisingly that many leave campaigners are championing a Swiss-inspired model

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Jo Whelan. “Switzerland’s Thriving Pharmaceutical Industry.” New Scientist, May 2006 Karen Taylor. “What Would Brexit Mean for the Pharma Industry? - Health Solutions.” Deloitte Health Solutions, 2016. http://blogs.deloitte.co.uk/health/2016/02/what-would-brexit-mean-for-thepharma-industry.html 139 Pallab Ghosh. “Paul Nurse: ‘Research Needs Free Movement to Thrive’.” BBC News, 2016. http://www.bbc.co.uk/news/science-environment-36667987 138

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as Brexit negotiations take shape. However, it seems highly unlikely that the EU will facilitate furthering these aspirations; in 2010, it was already referring to a relationship with Switzerland ‘which has become complex and unwieldy to manage and has clearly 140 reached its limits’ . In addition, leave campaigners are motivated by what they view as Switzerland’s privileged position in terms of its unique relationship with the EU, yet many of them overlook the fact that the Swiss model aligns with many EU structures, laws and values. For example, in 1999, Switzerland accepted free movement of persons. Recently, Switzerland did indeed act to reinstate quotas on foreign workers. However, it was effectively punished by the EU which froze its Horizon 2020 grants and stalled its 141 Erasmus+ student mobility scheme. This is a strong indication of the likelihood of failure if the UK attempts to negotiate entirely on its own terms.

4.2.8! WTO Debate on this subject points to a third solution for the UK post-Brexit, that of the WTO, which is in fact the model that the UK will automatically revert to on exiting the EU67. This would be the most drastic option whereby the UK would abandon its European premise and use the established trade rules and norms of the WTO to forge bilateral trade agreements with the EU, resulting in a model similar to the rest of the world (that includes tariffs on trade with the EU, customs taxes etc.).59 This option could potentially offer the UK flexibility and the clean slate that leave campaigners rooted for, but it is the most ambiguous at this stage and would likely take many years to implement. For example, the UK could theoretically follow Canada which, after seven years of negotiations, signed the EU-Canada Comprehensive Economic and Trade Agreement (CETA) in 2013 and now profits from 98% tariff-free trade with the EU. Vicky Ford (Conservative MEP and Chair of the European Parliament Committee for the Internal Market and Consumer Protection) has stated that it is ‘much more important to look at the so called “non-tariff barriers” which reflect the bureaucratic red tape faced by companies exporting into other markets and to recognise that the level of ease British companies currently have when selling into other EU markets is much, much greater than that which is now offered to Canada in 142 CETA.’

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HM Treasury. “HM Treasury Analysis: The Long-Term Economic Impact of EU Membership and the Alternatives,” 2016. 67 Privolnev. “Brexit’s Impact On The Global Pharmaceutical Industry Future Access To The EU Common Market.” Pharmaceutical Online, 2016. 140 General Affairs Council Meeting. “Council Conclusions on Eu Relations with EFTA.” Brussels, 2010. https://eeas.europa.eu/sites/eeas/files/council_iceland.pdf 141 Patrick Wintour. “EU Tells Swiss No Single Market Access If No Free Movement of Citizens.” The Guardian, July 3 2016 59 HM Treasury. “HM Treasury Analysis: The Long-Term Economic Impact of EU Membership and the Alternatives,” 2016. 142 Vicky Ford. “Vicky Ford: The Canada Deal Is Not the Model Brexit Negotiations Should Follow,” 2017. http://www.conservativehome.com/platform/2017/02/vicky-ford-the-canada-deal-is-not-themodel-brexit-negotiations-should-follow.html

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4.2.9! Final considerations With a world-class reputation for R&D, manufacturing and the trading of medicinal products, the UK is a focal point of the EU pharmaceutical industry. A business strategy that will mitigate risks to these areas and work to prevent pharmaceutical companies from abandoning the UK is needed. Ultimately therefore, it is in the UK’s interest (and, as some would argue, the rest of the EU’s) to seek a model that will ensure continuity as much as possible. This makes sense economically and should protect access to medicine and healthcare for UK citizens and others in the EU who use them. The UK government must balance seeking these negotiations with the demands of the majority of voters who favoured leaving the EU. However, it would be unwise to assume that the UK can pick and choose which EU principles and legislative structures 143 it will keep, given the EU’s response to Brexit . Inevitably, free movement of medicinal products has to come with free movement of persons, and resistant Switzerland is proof of this. Neither an EEA or an EFTA model for the UK’s pharmaceutical industry can avoid the accompaniment of free movement of persons. Since the leave campaign was bolstered on promises to curb immigration and gain 144 border control, the prerequisites that come with adopting either an EEA or an EFTA model will surely heighten the controversy and division surrounding Brexit negotiations. As John Springford, Director of Research at the Centre for European Reform, puts it, ‘We are being asked to imagine that MPs, many with UKIP at their heels, would ask their constituents to sign up to the very EU policy they had rejected 145 in the referendum.’ However, without doing so, the UK’s pharmaceutical sector and, with it, public health will be hit hard. It should also be asked: is it really appropriate to compare the UK to Norway and Switzerland when demographically and economically these are very different nations? The former has a population of 5.1 million, the latter’s is 8.2 million. The UK has a population of 64.7 million and a GDP of $2.678 trillion compared to that of Norway and Switzerland at $512.6 billion and $685.4 billion respectively. The economic impact of having to be a ‘rule taker’ as opposed to a ‘rule maker’ on issues such as free movement is therefore likely to be far greater for the UK than for Norway or Switzerland.59 This is especially relevant to the UK’s pharmaceutical sector which is currently the ninth largest in the world and was amongst the country’s five most important contributors between 2008 and 2014.60

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Tom Goodenough. “Jean-Claude Juncker Comes out Fighting over Brexit.” The Spectator, July 26 2016 144 Alan Travis. “The Leave Campaign Made Three Key Promises – Are They Keeping Them?” The Guardian, June 27 2016 59 HM Treasury. “HM Treasury Analysis: The Long-Term Economic Impact of EU Membership and the Alternatives,” 2016. 60 London’s Economic Plan. “London’s Pharmaceutical Industry,” 2016. 145 Charles Grant and John Springford. “Can the UK Join Norway in the EEA?” Policy Review, June 2016

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There is also the historical and societal context. Switzerland and Norway never voted to leave the EU because they were never member states in the first place; Switzerland rejected joining the EU in 2001 with a vote of 76.8% and Norway likewise turned down the idea on smaller margins in referendums in 1972 and 1994. Whilst the current political climate is inspiring claims that history is repeating itself through populist notions and far-right gains, Brexit set a precedent and there is no history that can guide the course of action to be taken.

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EXCLUSIVE INTERVIEW: PROFESSOR MADS KROGSGAARD THOMSEN, CHIEF SCIENCE OFFICER OF NOVO NORDISK 5.1!

What is the impact of Brexit?

The EMA has a well-functioning facility in London with 900 employees. However, 15 of their best experts have left, some before everything surrounding Brexit was confirmed, and there is fear that more will leave. In the short term, people are already predicting that they may face some geographic issues and have to move in the future. The EMA has dependents internationally and their issue is that they do not want to move to a country where they cannot attract the same high quality workforce. The UK is known for its academic credentials, institutions and pharmaceutical companies. The latter of these means that people can work for both the companies and the agency; not many countries can offer this. In the long term, much depends on whether there is a re-building of this established high quality network. It has taken twelve years to build up the EMA to where it is today. You can argue that it takes a very short time to break down structures but a very long time to build them. Whilst we hope for a smooth transition, in the worst case scenario, there will be time and quality impacts on medicines and vaccines. 5.2!

What concerns you the most (excluding the EMA)?

We have collaborated with Oxford for many years. That has led to the next step which is to build a research centre within the University. The research centre will have 100 workers and we want the best â&#x20AC;&#x201C; not only the best English, but the best in the world â&#x20AC;&#x201C; to be there. We are listening to the debate in the UK but you cannot have the cake and eat it at the same time. People do not want the influx of manual workers but then how can they expect the flip side, that of the scientists, the highly qualified workforce? Just the thought of facing a boundary when coming to the UK can be a problem in itself. The movement of staff within a company will mess with timelines. Whilst we have reassurances from Downing Street about the protection of the highly skilled workforce, we cannot assume that the EU will agree with this conditional policy. We have thought about this extensively and even considered moving elsewhere such as to Stockholm where there is also strong science. This brings me to my next risk factor: a lot of funding and many scientists are not from the UK. If this dynamic changes, then the output and the rankings can be at risk. Those people who say that Oxford and Cambridge were doing well before the EU need to understand that it was in a different era; it was before globalisation. The world of science is completely global and free-flowing. This is why I fear for UK universities. 109


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In the UK, the top level of education is very good and has always been recognized as one of the best in the world. However, if you can no longer attract the funds, then you will lose ability, resources and partners. There is also a potential loss of cross-border collaborations. Under the Innovative Medicines Initiative (IMI), our group and GSK can act as the coordinating companies for building bonds between different pharmaceutical companies. The rest of the EU has lots of countries with companies: Germany, France, Denmark etc. The Swiss have built their own â&#x20AC;&#x2DC;pharma-universeâ&#x20AC;&#x2122;, but they did so over a century and that is their own story; it is not easy to replicate. 5.3!

What is Brexit doing for current projects?

From my understanding, when it comes to current projects, what is ongoing is ongoing. We, as Danes in the EU, expect that what we are participating in will continue to the end. In general, there are a lot of uncertainties and we do not know how the UK and the EU will interact. 5.4!

Is research in early phases being affected?

Basic research will be affected if the Oxbridge and London universities start diminishing in importance due to issues in funding and recruiting (either legal or perception). If this ends up becoming a reality, then we will see a negative spiral from these extremely prestigious organisations. For instance, the Crick in London has achieved an enormous amount in a short time, partly due to EU funding. If that is disrupted, there will be even greater pressure from Asia, particularly demand for basic research. When we considered where to put our next global research centre, the UK was still one of the top three places for the reasons discussed but so was China. In Shanghai, they have a strong ability to attract international scientists, who are at least as able as in the UK, and then they can get the step ahead. Issues can therefore come to basic research or the translation of this research. 5.5!

Does the industry have a say in the negotiations?

I believe not. Andrew Witty, outgoing ex-CEO of GSK, has been sending letters to Downing Street expressing how the situation should be handled. I think the problem is that the EU has the stronger hand right now. So the best the industry can do at present is inform the politicians as best as possible. This should have happened before the vote. The least the pharmaceutical industry can do now is to inform the decision makers and the negotiators about what is at risk and how to avoid it. 5.6!

What are the next steps that you would like to see policymakers take to mitigate any problems?

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Speaking from personal experience, we need a very strong statement from Downing Street that health science and bio/pharma tech is of huge importance to future UK growth and job creation. 5.7!

Is there anything positive coming from this Brexit negotiation?

No. The only positive would be if the EMA came to Copenhagen. Even if they did come to Copenhagen, would we then think we had solved the issues and be glad for the UKâ&#x20AC;&#x2122;s departure? Not at all. 5.8!

Do you foresee financial implications on your company?

None upfront. However, the lack or loss of competence will lead to delays and then you lose time with the patent. For every year you delay a product approval, you lose one yearâ&#x20AC;&#x2122;s patent protection. The impact of this will be seen on sales. It all depends on whether the EMA can operate in this interim period. I do know that the head of the EMA (NAME) is trying to control the situation. There may be an impact that we cannot see right now, but what we do know from meticulous reporting of their actions is that the EMA functions extremely well; they are punctual with the right decisions. This cannot change.

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MOVING FORWARD

In 2011, the UK economy benefited by about £30 billion from pharmaceutical and 146 chemical exports to the EU, which is just one of many figures serving to underpin the importance of investigating the impact of Brexit on this industry. The research conducted for this report has yielded several policy recommendations that have the potential to maintain the UK’s attractiveness as a pharmaceutical hub post-Brexit. 6.1!

Negotiate an ‘associated country’ status in the EU’s research funding programmes.

This will guarantee access to the EU FPs and enable the UK to maintain its current dominance in the life sciences R&D sector. It will also sustain and encourage further collaborations between UK and European scientists, alleviating concerns over the uncertainty involved in working with UK-based partners. If the UK is to remain at the forefront of scientific innovation, it must work to preserve international collaborations. 6.2!

Negotiate bilaterally favourable trade agreements for drugs and medical devices with the EU.

The EU is an essential market for pharmaceutical companies in the UK. To prevent the exodus of pharmaceuticals companies currently based in the UK, the government must renegotiate trade conditions with the EU that are comparable to those pre-Brexit. This calls for a new streamlined customs system for UK-EU trade with low fee and administrative burden. This will also be important in preventing a sharp rise in the costs of drugs imported from the EU. 6.3!

Mirroring the medicines regulatory approval process with the EMA, whilst retaining the MHRA’s capacity to intervene.

This would bypass the need for pharmaceutical companies to seek separate product approvals in the UK. By opting to follow the EMA’s guidance, albeit with MHRA discretion for specific regulatory matters, the UK would incentivise pharmaceutical companies to remain in the country and prevent a delay in drugs reaching the UK market. 6.4!

Assurance of free movement of high skilled professionals across UKEU borders.

This will maintain the high skill level of the workforce in UK universities and the industry as a whole, whilst providing British nationals with the freedom to work, study and gain experience across the EU. This option will appeal to multinational pharmaceutical companies who wish to quickly and easily relocate staff across

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Melanie Edwards. “The Pink Book 2012,” 2012. http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/rel/bop/unitedkingdom-balance-of-payments/2012/bod-the-pink-book-2012.pdf

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international facilities. Free movement of professionals will therefore encourage foreign pharmaceutical companies to preserve their UK-based facilities. This will alleviate concerns regarding their EU staff members and their ability to attract and recruit the best in the field. Finally, such an agreement should encourage further foreign investment in the UK.

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7.0!

CONCLUDING REMARKS

Over the last 75 years, the UK has become a global leader in pharmaceutical research, science and development. The success of this industry is of utmost value to the country and millions of benefiters worldwide. The standing of UK pharma will depend on maintaining the foundations that uphold strong virtues of intellectual discovery, collaboration and regulation. The process of Brexit provides exciting opportunities to excel further in the initiation and translation of basic science research. Underpinning this however, must be incentives for institutions and industry leaders to continue their work in the country. There can be no decrease in the provisions of monetary and intellectual capital to the UK pharmaceutical industry. If this is not maintained, there may be relocation of resources to mainland Europe and Asia. In the wider scope of negotiations, the pharmaceutical industry will be impacted by decisions in medical regulation, freedom of movement, trading, custom blocs, institutional funding and intellectual property law (amongst other areas). It is not possible to predict how these will cumulatively affect progress in this field, but it is imperative that they are actively considered in negotiations with the pharmaceutical industry. On first presentation of this report, one response to concerns raised was that ‘excellence breeds excellence’; such complacency risks overlooking the fact that ‘easiness breeds excellence’ also.

Fawz Kazzazi Corresponding Author

Cleo Pollard Senior Editor

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CHAPTER IV

Creative Industries Writer: Bianca Schor

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Cambridge for Europe


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Cambridge hosts important creative industries, which have different status and more or less close connections to the European Union. On Friday 2 December 2016, James Calver, Concerts Director at the Chamber Orchestra Britten Sinfonia, and Jack Toye, Marketing Manager at Cambridge Arts Picturehouse, have kindly agreed to meet us to discuss what might be the challenges or opportunities for creative industries based in Cambridge after Brexit. All opinions expressed in these interviews are those of individuals in the context of their professions and do not represent Britten Sinfonia nor Arts Picturehouse as a whole.

To what extent do you think the European Union was affecting your company before the Referendum? What was the impact, if any, of EU regulations and of Single Market access in your profession? James Calver: Like many people in the industry, I followed the major experts who advised against voting for leaving the EU because they were too many unknowns. Britten Sinfonia is not directly funded by the EU but it is common for arts institutions dealing with international product like us to submit joint applications for EU funding. We have not received an enormous amount of money from EU-funded projects to work across Europe and establish residencies elsewhere because it is incredibly difficult to tap into these funds. Before the Referendum, European orchestras have been going through a bleak period due to the crash of the euro; some of our colleagues could not afford to host guest orchestras for example. Here in the UK we were slightly protected, although we were affected by the decreased number of invitations to play in the EU. In fact, we are indirectly beneficiary when we are invited to play by an orchestra funded by the EU. Jack Toye: In front of the entrance there is a plaque on the wall that says ‘Europa Cinemas’; we have had it for at least a decade and it means we commit to regularly show European films. We receive some money from them to program smaller European films, for example the Greek film ‘Chevalier’ (2015) by Athina Rachel Tsangari we showed this summer. It really helps us make that our programming style more arthouse. There is also Creative Europe, which funds some of our projects, but we are probably at risk of not being able to get that money after Brexit. Have you been personally involved in any particular project spanning several European countries before? If so, could you describe your experience of it? James Calver: There is a high level of risk-taking in the contemporary art scene in general but it is vital to create links: Britten Sinfonia has woven a web of vital connections in East and South England but we have been open to other projects involving EU countries. We have been part of a cultural network called Hestia, in partnership with the Orchestra of Picardie for example. A group of creative industries in the UK and France were offering 123


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a cultural package to raise the artistic offer locally and made applications for a number of ‘cultural tourism’ funding opportunities. Unfortunately, the application was not completed and since the Referendum there have been no further talks about it. Jack Toye: In February, we invited the Greek actor Kosta Nikouli to present the film ‘Xenia’ (2014) by Panos H. Koutras as part of the LGBT history month. We received funding from the BFI to do so. I had seen the film at Cannes two years before but it took ages to come out in the UK. It was lovely to show it because once we got it Picturehouse central and another location put it on; it does not happen often like that but when it does, you feel special. We had also invited the second lead actor Nikos Gelia, but unfortunately we could not get him to come over. Although he lived in Greece he was actually Albanian and by the time we realised it, it was too late to receive a visa for him. It was almost as if the film was happening in real life. This was before Brexit but it shows that in the future it might take that much more time to get people in. What does it mean for your company to be based in Cambridge in relation to the rest of the UK? James Calver: Cambridge is a cultural pot, a ‘protecting veil’ and we significantly benefit from our location in East England. Britten Sinfonia is one of the only companies of our kind in the region: we are an educational charity so we work with the less advantaged a lot. Cambridge seems very secured with its level of innovation in research, technology and sciences; it is quite reassuring. I believe it has a secondary positive effect on the arts and I do not think people will stop going to concerts in the future. We are one of the five leading chamber orchestras in the UK when some countries only have one. As such, we are a global but also unique product. I think because we have a very clear ethic and have been offering a specific product for twenty-five years people can easily identify with our work. Jack Toye: We are one of the twenty-three Picturehouses in the country. The programming team is centralized in London but there are about nine different programmers and we are particularly arthouse here in Cambridge; we do live up to our name. Historically, this place has always been very well programmed because the co-founder of the Cambridge Arts Picturehouse, Tony Jones, is also the director of the Cambridge Film Festival, with which we share the working space. Also, the University of Cambridge attracts students coming form all over Europe, and I think we benefit from this diverse community. What do you think will change once Brexit is implemented? James Calver: Until a clear Brexit strategy has been established, it is too early tell what the EU will be with a different taxation system and borders where we previously enjoyed freedom of movement. However, we have frequently worked with artists who are not necessarily EU-based. It is doable but it means potentially more work for me. Orchestra touring 124


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will be affected but the question is whether we are going to be exempt from taxation as we are now. Jack Toye: I used to be quite optimistic at the start of the year, especially after the Scottish referendum and I was in Edinburgh the day of the Brexit Referendum. There, the general atmosphere was pro-remain so I thought it might be tight but we would not leave but I was wrong. The general trend in the creative industries was pro-remain as well. With all the recent events I just have this sense that there is a whiplash after ten years of austerity; it makes me sad. Also it will be more expensive for us to travel to film festivals in Europe. These are very useful for us to see what films are out there, especially because not all of them make it into UK distribution. Then we can bring some over for example. You also increase our professional network at festivals, which allows you to build exciting projects with European partners you would not know otherwise. Could a UK without the EU and the Single Market open up new opportunities for creative industries based in Cambridge? James Calver: Actually, I am going to Paris tomorrow with the orchestra and in the recent context I expect British orchestras to become cheaper to host in the EU â&#x20AC;&#x201C; we used to be very expensive for them. Since we are paid in euro we technically gain from it too. In fact, we have had more touring invitations since Brexit. Jack Toye: We might take in more films from world cinema, but I can also see more room for America to buy their way in. The day after Brexit AMC Entertainment bought Odeon partly because the pound got significantly cheaper. We are on the London Stock Exchange and now our shares are stable but it is hard to say with the currency fluctuations. How do you see your working environment responding to these questions in the past few months? Have you had internal discussions about these issues? James Calver: We have had some discussions internally but we have not changed anything yet. We have been working with local agents for a decade in Amsterdam, Germany, Spain, and Austria and so far we have not had conversations about it with them because it has been business as usual. We want to have a positive outlook to foster international relations and we are still doing it, whether in the EU or elsewhere. That said, we are also part of the association of British Orchestras, which organizes forums about national policy and international scene. They update us about rules and all current issues relevant to our work so I would expect that in the long-term they will assist us with Brexit but as yet nothing has been said.

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Jack Toye: The day after Brexit, we all received a letter from our CEO addressing our many European colleagues, who were worried they might not be able to work in the UK anymore. Here in Cambridge we have a diverse European make-up of our team for example. She reassured us it will be fine so I guess we have to trust her it will be. We have not made any changes at the Picturehouse yet but the BFI has recently announced a five-million-pound investment to compensate for the loss of Creative Europe funding, but is it going to be enough? I have doubts about the current governments investing in the film industry and our situation, as an arthouse cinema seems less secure now.

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CHAPTER V

Agricultural Policy Writers: Alexis Wagner (Editor) Rebecca Davies

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EXECUTIVE SUMMARY Over the past 43 years, policies of the European Union have directly influenced the direction and development of agriculture in the United Kingdom. Agricultural support, trade policies, regulatory conditions, and labour flow have shaped farm businesses, the rural environment, and land use in the UK. The UK now is faced with the opportunity and challenge of designing its own national agricultural and trade policies. Currently the EU’s Common Agricultural Policy (CAP) accounts for 40% of EU spending, and constitutes over 50% of British farm income. After 2020, when the current CAP agreement period and associated subsidies will cease, changes to the national agricultural policy will have broad implications. Departure from the EU ‘single market’ will also require the UK to develop new trade policies with the EU and third-party nations. Existing membership in the EU Customs Union and associated preference for trade within the union influenced UK trade flows and food prices. Many of the stringent EU regulations imposed on agricultural production, use of genetically modified organisms, and food processing can be re-evaluated for the UK case, while recognizing that exports to the EU must still meet their standards. Finally, some sectors of UK agricultural production rely on migrant labour facilitated by membership in the EU ‘single market’. These policy areas are inherently interconnected, as trade, labour, and regulatory policies will interact with agricultural markets and farm income. Brexit provides the UK with an unequivocal opportunity to remold agricultural policy to better suit UK preferences and circumstances. Although there is vast opportunity to rework policies for the benefit of social welfare, the UK is not starting with a blank slate. The policies developed must work within the historical context, as well as political, financial, and international trade constraints. This paper analyzes the existing support for agricultural producers and the rural environment and potential policies moving forward. Rural governance is a complex issue with implications that extend beyond farmer livelihoods to food security, environmental outcomes, amenity, recreation, and national identity connected to the British countryside. This paper first reviews the historic trajectory of agricultural policy in the UK, the current EU CAP, and the impact of CAP on the agricultural sector. Potential policy scenarios for agricultural and environmental support are discussed. A revised agricultural policy should focus on paying public subsidy to farmers in return for public goods, based on national, regional and local priorities. Direct area based payments that are not tied to the provision of public goods should gradually be eliminated. The level and focus of support for public goods in the agricultural sector must be designed in light of the agricultural trade agreements drafted, and vice versa. The UK government must recognize that the aspiration of securing FTA with third-countries and frictionless trade with the EU is unlikely. Any increase in trade liberalization will have implications on farm incomes and analysis must be conducted to determine which sensitive sectors should be protected, based on their public value. The UK GMO, pesticide and animal welfare regulations must also 128


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be reevaluated in light of national preferences and future trade agreements. The UK government must also consider implementing seasonal work permits or an alternative visa to meet the demand for migrant workers in the agricultural sector.

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TABLE OF CONTENTS 1.0 BACKGROUND 2.0 HISTORY OF AGRICULTURAL POLICY 2.1 OVERVIEW 2.2 ORIGINS AND POST-WAR RESTORATION 2.3 THE MANSHOLT PLAN 1968 2.4 REFORM IN THE 1970S AND 1980S 2.5 THE MACSHARRY REFORMS 1992 2.6 AGENDA 2000 AND INTO THE TWENTY-FIRST CENTURY 2.7 BRITISH AGRICULTURAL POLICY SINCE WORLD WAR TWO 3.0 CURRENT AGRICULTURAL POLICY 3.1 OVERVIEW 3.2 PILLAR I 3.3 PILLAR II 3.4 IMPACT OF CAP ON THE AGRICULTURAL SECTOR 4.0 FARM SUPPORTS 4.1 RATIONALE OF GOVERNMENT INTERVENTION 4.1.1 INTERRELATION BETWEEN AGRICULTURE AND THE ENVIRONMENT 4.2 CURRENT POLICY 4.2.1 PILLAR I ISSUES 4.2.2 PILLAR II ISSUES 4.3 ANALYSIS 4.3.1 POTENTIAL SCENARIOS 4.3.2 RECOMMENDATIONS 5.0 AGRICULTURAL TRADE 5.1 INTRODUCTION 5.1.1 IMPLICATIONS OF AN EXIT FROM THE EU 5.1.2 GOVERNMENT STANCE ON TRADE 5.1.3 EXISTING TRADE 5.2 TRADE POLICY CONSIDERATIONS 5.2.1 GENERAL CONSIDERATIONS 5.2.2 THE SINGLE MARKET 5.2.3 THE CUSTOMS UNION 5.2.4 TARIFF RATE QUOTAS 5.2.5 TRADE WITH IRELAND 5.3 POTENTIAL OUTCOMES 5.3.1 DEFAULT WTO POSITION 5.3.2 FREE TRADE AGREEMENTS 5.3.3 UNILATERAL LIBERALIZATION 5.4 ANALYSIS 5.4.1 ECONOMIC IMPLICATIONS OF TRADE POLICIES 5.4.2 COMMENTARY ON THE CURRENT GOVERNMENTAL APPROACH 5.5 RECOMMENDATIONS 6.0 RELATED REGULATIONS 6.1 GENETICALLY MODIFIED CROPS 130

132 134 134 134 135 136 137 138 140 142 142 142 143 144 146 146 146 148 148 149 150 150 151 153 153 153 153 153 155 155 156 157 158 159 159 159 159 160 161 161 161 162 164 164


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6.2 MIGRANT LABOUR 6.3 ANIMAL WELFARE 7.0 IMPLICATIONS FOR CAMBRIDGESHIRE 8.0 CONCLUSION BIBLIOGRAPHY & WORKS CITED

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1.0!

BACKGROUND

The exit of the UK from the EU will have major impacts on the UK agriculture and food sectors, while creating opportunities and challenges for domestic policy. Agriculture was a contentious issue in the debates leading up the EU referendum, in large part due to the current Common Agricultural Policy (CAP) consuming nearly 40% of the EU budget, compounded with the fact that the UK is a net contributor to the CAP funds.147 Now outside of the EU, understanding of the interconnectivities between agricultural, environmental, and trade policy is exceedingly pertinent. Other areas including labour, health and safety are also intrinsically linked to the future of agriculture in the UK. Agriculture contributes a modest 0.7% to UK GDP, yet 70% of land is utilized for agriculture. 148 Agriculture is considered to be the greatest threat to biodiversity in the UK.149 Further the UK is a net importer of food, feed and drink from the EU, with the net trade imbalance equating to £16.7 Billion in 2014.150 These complexities present numerous opportunities to devise policies better suited to the UK context, but these opportunities are constrained by international relations and historical context, amongst other variables. The UK government must develop and rework EU policy within existing and newly imposed constraints. Many contracts that landowners entered into under the CAP’s rural development programs have obligations and compensatory funding that will extend into the future. The UK will also be under international obligations from the World Trade Organization (WTO), budget constraints, and political pressures from the EU, third countries, the devolved administrations, and stakeholders. Following ascension, the UK will no longer be bound by the CAP and will have to decide the future of its own national agricultural policy. The CAP has largely shaped agricultural policy in the UK for the past 43 years. Over time the CAP has developed from direct support for productivity to area-based payments, with an increasing focus on environmental conservation. The CAP imposes complex management requirements on landowners for receipt of funds. UK governments have been critics of the CAP, in particular of its income support policy.151 Therefore it is likely that the UK government will reduce the direct area-based payments that farmers receive under the current policy. The level of direct support given to farmers as well as the structure and composition of agro-environmental schemes must be considered. The UK has a long history of support for the provision of rural public goods, like biodiversity and habitat conservation, but many stakeholders are pushing for even greater emphasis on utilizing public money for public goods. All support to producers will have to align with the WTO rules, which may call into question the legality of the current support under the CAP. The UK will also leave the EU single market, meaning it must independently

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Richard Packer, “Brexit, Agriculture and Agricultural Policy,” Centre for Policy Studies. (London, 2017). 148 Packer, 2017. 149 F Burns et al, “Agricultural Management and Climatic Change Are the Major Drivers of Biodiversity Change in the UK,” PLoS One 11, no. 3 (2016). 150 Office for National Statistics, “Agriculture in the UK,” 2015. 151 HM Treasury and DEFRA, A Vision for the Common Agricultural Policy, December 2005.

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negotiate a trade regime between the EU and third countries, within the confines of the WTO rules. The trade negotiations will tie in pesticide, GMO, animal welfare, and labour regulations. Outside of the EU and the single market the UK has the opportunity to reevaluate regulations that constrain farming practices, but must simultaneously consider the impact of liberalization on trade relations with the EU. Farming is a unique sector deserving of special consideration because in addition to its economic value, it provides a variety of public goods. The agricultural sector directly provides £9 billion annually from food directly, while also providing inputs for the UK’s food and drink manufacturing sector, worth £100 billion.152 Farming also ties into the UK’s tourism sector, while contributing to the health and wellbeing of society by providing space for recreation and amenity. The landscapes and activities tied to British national identity are shaped agricultural practices and rural life. Many habitats, species, and the broader landscapes depend on a continuation of land management that is largely linked to historical agricultural practices. Proper land management by farmers also contributes to the preservation of soil health, water systems, and carbon storage. Farming can also cause negative externalities including soil erosion, water and air pollution, and habitat loss without proper management.

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DEFRA, British food and farming at a glance, March 2016.

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2.0!

HISTORY OF AGRICULTURAL POLICY

2.1!

Overview The CAP has undergone continual adaptation in a half-century of great political and economic change. The focus of the CAP has shifted from market intervention to promote food security, towards support for farm incomes, and eventually towards promotion of sustainable farming. The trajectory can be divided into the following periods. From 1957 to 1972 policy aimed to supporting the agricultural sector recover from impacts of World War Two, primarily through the stabilization of markets and by ensuring fair prices for both consumers and fair wages for farmers. In the decade after 1973, policy subtly shifted to focus more heavily on increasing productivity and the self-sufficiency of the sector. However, this goal was exceeded to the extent that the period from 1983 to 1994 was devoted to tackling surplus production through the introduction of mechanisms to limit production. The period from 1992 to 2005 welcomed the MacSharry reforms, shifting the focus from production support towards income support and making agricultural markets more competitive on a global stage. These aims were continued in the twenty-first century in the programme called Agenda 2000. The new millennia saw an increased focus on sustainable farming with the introduction of payments for environmental activities.

2.2!

Origins and Post-War Restoration The CAP was created in 1957 as a means of contributing to the rebuilding of the warravaged economies of the EU member states. The aims of the CAP, as outlined in the Treaty of Rome, were to ensure fair and beneficial standards for both producers and consumers.153 It aimed to increase agricultural productivity, ensure a fair living standard for the agricultural community (Article 39), to secure the food supply, to stabilise markets and to provide consumers with fair prices of goods. These aims were to be achieved by the implementation of policies.154 Production was incentivized ‘through a system of high support prices to farmers, combined with border protection and export support’.155 This support stemmed from two definitions of ‘prices’. The first was the ‘target price’ which was the minimum price for goods to be sold to allow farmers to sustain a suitable living standard. The second price was the ‘intervention price’ which was the price the CAP would pay if goods fell below the target price.156 The principal mechanism to achieve greater market stability was through the CAP acting as a ‘last resort’ buyer in purchasing surplus stock.157 In the context of post-war reconstruction, over-production was not expected to be, and initially did not prove to be, a reality, thus the primary focus was geared towards making the farmers more selfsufficient, with the CAP to serve as an effective stimulator as well as reliable safety

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European Union, Treaty Establishing the European Community (Consolidated Version), Rome Treaty, 25 March 1957. 154 Ibid. 155 “The early years: establishment of the CAP”, European Commission: Agriculture and Rural Development, http://ec.europa.eu/agriculture/cap-history/early-years/index_en.htm, (accessed 19th November 2016). 156 European Commission Directorate-General for Agriculture, The common agricultural policy: Promoting Europe's agriculture and rural areas: Continuity and change, (Luxembourg: Office for Official Publications of the European Communities, 1998), p.4. 157 Ibid., p.4.

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! net, which in turn would help stabilise the turbulent post-war market.158 Simultaneously, the Treaty of Rome also recognised the need to factor in the structural significance of agriculture both within the economies of member states but also as autonomous sectors with their widely varying and unique social structures which would better adapt them to gradual rather than drastic change. 159 Funding for CAP’s payments to farmers (paid from the European Agricultural Guarantee and Guidance Fund) was established in 1962.160 In the same period, organisation of six common agricultural markets developed, known as the ‘Common Market Organizations’ (CMOs) in cereal, pork, eggs, poultry meat, fruit and vegetables, and wine.161 In so doing, a common market for agricultural goods was established between the six member countries, Belgium, France, the Netherlands, Germany, Luxembourg, Italy. 2.3!

The Mansholt Plan 1968 The 1980 Agricultural Programme, or Mansholt Plan, emerged as part of the Commission’s drive to increase farmers’ self-sufficiency, and thereby limit the CAP expenditure.162 When the plan was announced in 1968, it was predicted that there would be a surplus of 150,000 tons of butter unless the EC subsidized conversion of the butter back into animal food, in an effort that would alone cost more than $700 million.163 The Mansholt Plan aimed to support the agricultural sector in the context of a predicted doubling of Western incomes, doubling of population, and reduction of hours in a working week. Striking a balance between ensuring a fair standard of living for farmers, while nurturing them to self-sufficiency was a continual focus of policy throughout the twentieth century. A principal problem identified in the lead-up to the Mansholt Plan was that the number of farms had not decreased proportionately with the decline of those working in agriculture. This in turn led to the increase of single-person farms.164 To amend this, Mansholt proposed the substantial reduction of the amount of land in cultivation (about 5 million hectares) as part of the effort to equalise the income of farmers within the same region. The release of this land allowed for its redistribution and consolidation into fewer but larger areas.165 This reduction would be achieved through forcing older farmers into an earlier retirement, which would be compensated by the CAP funds. To improve and sustain farmers’ self-sufficiency, it also suggested the payment over-time to act as a stimulus thereby making production most cost-effective and in turn decreasing the amount paid in ‘intervention’.166 At the same time farmers were supported by the imposition of ‘strict limits on national aids to unprofitable small-

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European Commission Directorate-General for Agriculture, p.3. Ibid., p.4. 160 European Commission Directorate-General for Agriculture, p.4. 161 “The early years: establishment of the CAP”. 162 Ibid. 163 Mansholt, “The future shape of agricultural policy,” p.6. 164 Ibid., p.9. 165 Anthony Teasdale and Timothy Bainbridge, “The Penguin Companion to European Union”, Penguin Companion, http://penguincompaniontoeu.com/additional_entries/mansholt-plan/(accessed 5th December 2016). 166 Ibid. 159

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! holdings, compensated by high degree of protection against imports’. 167 Thus it was designed to facilitate integration into the common market as well. While these measures were adopted for a time in 1972, they were in fact far less radical than Mansholt had initially envisioned largely because the original plans were highly controversial and generally opposed particularly by small farmers and those who supported them. Underlying such objections was the difficult balance CAP policy was expected to strike between pushing for a single market as well as the keeping the interests of farmers at heart. Indeed, one of the main criticisms of the CAP over the decades was that it largely benefited large farmers often at the expense of smaller ones. It was also a battle between international and regional markets. As Mansholt explained in his 1968 speech ‘this is an enormously difficult task, even though there is no need to introduce a single Community system here since we are convinced that structure policy must always suit the area concerned and must in fact be part of regional policy.168 Ultimately, despite the concessions made to ebb away the most radical measures, the policies were more or less completely abandoned within a few years.169 Furthermore, despite in the long-term achieving it aims of decreasing CAP spending (1972 was the year such spending peaked as 72% of EU budget and since then has continuously declined170), perhaps its most direct effect was the fact it did not set a particularly inspiring precedent for those wanting to conduct some reform of the CAP. 171 2.4!

Reform in the 1970s and 1980s Despite the criticism and limited progress of the Mansholt Plan, reform efforts were pursued in the 1970s. The Mansholt Plan was one of three major pushes to resolve the issues that had arisen in the first decade of the CAP’s existence. The second came in 1975 when ‘initiatives were taken to provide assistance to farmers working in difficult conditions, such as hill farmers and farmers in less favoured areas.’172 The third major reform in 1979 formed part of the continual effort to reduce over-production by imposing a ‘co-responsibility’ levy which was essentially a fine who farmers in the dairy sector who significantly over-produced.173 Though policies were successful in moving the farmers within the EU towards selfsufficiency, surpluses continued to plague production. Between 1973 and 1988, the volume of agricultural production in the Community increased by 2% a year while internal demand grew by 0.5% per year.174 The measures by which such surpluses were dealt with often proved costly and unhelpfully distorted world markets. There was also a growing concern that agricultural practices should be more environmentally

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Anthony Teasdale and Timothy Bainbridge, “The Penguin Companion to European Union”, Penguin Companion, http://penguincompaniontoeu.com/additional_entries/mansholt-plan/(accessed 5th December 2016). 168 Mansholt, p.2. 169 “The Penguin Companion to European Union”. 170 CAP Brochure, 2012, p.9. 171 “The Penguin Companion to European Union”. 172 “The Crisis Years I: The 1970s,” European Commission: Agriculture and Rural Development, http://ec.europa.eu/agriculture/cap-history/crisis-years-1970s/index_en.htm (accessed 6th December 2016). 173 Ibid. 174 European Commission Directorate-General for Agriculture, The common agricultural policy: Promoting Europe's agriculture and rural areas: Continuity and change, (Luxembourg: Office for Official Publications of the European Communities, 1998), p.5.

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! friendly.175 In response, the commission suggested future CAP refprm should be based on the following principles: a price policy based on narrowing of the gap between Community prices and competitor prices; an active export policy to ‘honour the Community’s international commitments’; greater tailoring to regional needs, and stricter discipline in the administration of aids.176 In 1984 a milk quota was introduced as yet another attempt to control and curb surplus production. A quota system was already in place for sugar.177 In 1988 budget stabilisers were introduced to act as a ceiling for the amount of goods that were guaranteed to receive support payments. These reforms also formed part of a new approach to community structural policy that promoted greater international integration as part of a global strategy for rural and less favoured areas. 2.5!

The MacSharry Reforms 1992 The overall principle of the 1992 MacSharry Reform was to move from the CAP from primarily serving as a means of market support to producer support.178 This meant cutting ‘intervention prices’ for key products like cereal crops and animal products in an attempt to align with the world market and make EU farmers more competitive.179 For example, cereal guaranteed prices were lowered by 35%, and beef prices by 15%.180 The loss of income caused by these changes was counteracted by direct payments to farmers, paid per hectare in the cereals sector, and per head in the livestock sector. 181 The 1992 reforms also prioritised environmentally sustainable farming, influenced by the 1986 Single European Act182 and the 1992 Rio Earth Summit183. Firstly, land was set-aside for use in non-food production, primarily bio-fuel, with affected farmers receiving due compensation.184 The measures put onus on individual farmers to farm responsibly, the practical implications of which were manifested in practices like crop rotation, diversification and less-intensive production.185 In addition to ‘agrienvironment’ schemes, an afforestation scheme and early retirement scheme for farmers over 55 were implemented.186

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“The Crisis Years II: The 1980s,” European Commission: Agriculture and Rural Development, http://ec.europa.eu/agriculture/cap-history/crisis-years-1980s/index_en.htm (accessed 6th December 2016). 176 “Commission Report On The Mandate of 30 May 1980,” (Luxembourg, 1981), p.13. 177 “A Common Agricultural Policy: A Story to be Continued”, (Luxembourg: Publications Office of the European Union, 2012), p.7. 178 “A Common Agricultural Policy: A Story to be Continued,” p.7. 179 European Commission Directorate-General for Agriculture, p.6. 180 “The 1992 Reform (“MacSharry Reform”), European Commission: Agriculture and Rural Development, http://ec.europa.eu/agriculture/cap-history/1992-reform/index_en.htm (accessed 7th December 2016). 181 European Commission Directorate-General for Agriculture, p.6. 182 Ibid., p.8. 183 “A Common Agricultural Policy: A Story to be Continued,” p.11. 184 European Commission Directorate-General for Agriculture, p.5. 185 “A Common Agricultural Policy: A Story to be Continued,” p.10. 186 European Commission Directorate-General for Agriculture, p.5.

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2.6!

Agenda 2000 and into the Twenty-First Century Sustainable farming and the need for a definitive purpose for farm supports fueled the implementation of Agenda 2000. The Agenda placed particular emphasis on rural development through the creation of conditions for regional actors to find solutions to local problems.187 The reform aimed to increase competitiveness, promote diversification, provide assistance for young, provide adequate training, ensure high standards of food safety and quality, stabilize agricultural incomes, and promote environmentally friendly production.188 Also, the Agenda pushed towards ‘developing the vitality of rural areas’ largely through their modernization in both structural renovation of villages and supplying such villages with effective Internet access, under what was called the LEADER initiative.189 There was a continuation and development of support for Less Favoured Areas (LFAs), like the uplands and moorlands. The reform introduced a new second pillar for rural development. This comprised of increased funding for agri-environmental schemes190. Thus, the Agenda overall was orientated towards increased diversification, modernization and environmentally responsible management. The report for the Agenda 2000 predicted an increase in production, especially for beef and cereals, yet a relatively constant demand was forecasted. Consequently, the Commission estimated intervention stocks in cereal to rise to 50-60 million tonnes by 2006, while those in the beef sector could reach 1.5 million.191 The solution the report suggested was to make the goods more competitive in the world market since it expected strong demand global.192 Accordingly, the next major reform of 2003 aimed to enhance the competitiveness of the farm sector, promoting a market-oriented, sustainable agriculture and strengthening rural development policy.193 It was one of the more radical restructurings of the CAP, firstly because it drastically altered the way farmers received aid and made environmental ‘cross-compliance’ compulsory. 194 This meant that aid would only be granted to farmers if they met national and EU guidelines, including EU directives on environmental protection.195 Aid would be cut by ‘1 % to 15 % in the case of negligence, to at least 20 % where intentional non-compliance is involved.’196 Under this scheme, ‘direct aids to farmers will be made mainly via one ‘single payment scheme’ (SPS) payment per year, replacing most existing direct aids’.197 SPS payments effectively ‘decoupled’ income support payments to farmers and removed the links between production and subsidies, as part of the effort to imbue farmers with greater

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European Commission Directorate-General for Agriculture, p.12. Ibid., p.13. 189 Ibid., p.13. 190 Ibid., pp.14-15. 191 Ibid., p.10. 192 Ibid., p.10. 193 “The 2003 Reform”, European Commission: Agriculture and Rural Development, http://ec.europa.eu/agriculture/cap-history/2003-reform/index_en.htm (accessed 7th December 2016) 194 European Commission, “Cross-compliance,” The 2003 CAP reform Information sheets, 2004, p.1. 195 Ibid., p.2. 196 European Commission, “Cross-compliance,” The 2003 CAP reform Information sheets, 2004, p.2. 197 Ibid., p.1. 188

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! independence to produce what they liked in line with market demand198, and allow this receptivity to make them competitive internationally.199 This represented policy pursued since 1992, from which time, ‘the EU had been slimming down the CAP’s traditional mechanisms for supporting agricultural prices, in favour of making direct income support payments to farmers out of the EU budget. The reform deal of 2003 essentially cut the link between these payments and production.’200 Secondly, it made policy and obligations simpler and clearer.201 Thirdly, the ‘financial discipline’ mechanism was introduced to keep CAP spending beneath a certain limit.202 Fourthly, modulation was introduced ‘to ensure the transfer of CAP funds from direct aids to farmers and market measures (Pillar 1 of the CAP) to rural development measures (Pillar 2).203 Building on the 2003 reforms, in April 2004 these reforms were introduced to cover other goods such as cotton, olive oil and tobacco. In the following years, sugar, fruit and vegetable and wines sectors received similar reforms.204 In 2009 21 sets of market rules were merged into a single set; a ‘single common market organisation’.205 This decade was also notable for the doubling of the number of EU Member states to 27 members. Yet despite this change, the CAP maintained its firm commitment to the first and second pillars and their level of support. In 2009 member states were required to spend ‘at least 25 per cent of their rural development budget on environmental measures’.206 The next five years saw a push towards a continuation of much of the same drives of previous decades. After a public debate, an outline for the next set of reforms was produced in 2010.207 The Ten-Point CAP Reform Programmes was produced by the European Commission in 2011.208 Its points pushed for in the introduction of: better targeted income support to stimulate growth and employment; tools to address crisis management which are more responsive and better suited to meet new economic challenges; a ‘Green’ payment for preserving long-term productivity and ecosystems (of at least 30% of member budgets); doubling investment in research; A more competitive and balanced food chain (to achieve this sugar quotas were not extended beyond 2015); Encouraging agri-environmental initiatives; Facilitating the establishment of young farmers (a new installation aid for farmers under 40 during first five years of their project); Stimulating rural employment and entrepreneurship (LEADER groups were strengthened, and a ‘starter kit’ created to support microenterprise projects with funding up to 70 000EUR over 5 years); additional aid to be

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European Commission, “Single payment scheme – the concept,” The 2003 CAP reform Information sheets, 2004, p.1. 199 Mariann Fischer Boel, Agricultural and rural policy under Commissioner Mariann Fischer Boel, (Luxembourg: Office for Official Publications of the European Communities), p.3. 200 Ibid., p.3. 201 European Commission, “Cross-compliance”, p.1. 202 European Commission, “Modulation and financial discipline”, p.1. 203 Ibid., p.1. 204 Mariann Fischer Boel, pp.3-6. 205 Ibid., p.14. 206 Ibid., p.7. 207 “The Common Agricultural Policy post-2013”, European Commission: Agriculture and Rural Development, http://ec.europa.eu/agriculture/cap-post-2013/index_en.htm (accessed 8th December 2016). 208 “A Common Agricultural Policy: A Story to be Continued”, (Luxembourg: Publications Office of the European Union, 2012), pp.18-19.

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given to LFAs; bureaucratic and practical simplification of CAP, particularly for small farmers who made up a third of the EU’s agricultural population. 209 In December 2013, the Council of EU Agriculture Ministers formally adopted what was known as the four Basic Regulations for the reformed CAP as well as the Transition Rules for 2014.210 The Four Basic Regulations were essentially a codification and simplification of four of the main concerns that had driven the last few decades of CAP reform. They were rural development211, ‘horizontal’ issues mainly funding and controls212, direct payments to framers213, and market measures.214 The history of CAP is one of continual adaptation both to the membership of the EU itself and to wider economic changes and political concerns. Policies, which were initially aimed at self-sufficiency in the aftermath of WWII, have since changed trajectory to curtail surplus production and compensate farmers. Over-production was the major battle of the 70s and 80s to which the EU responded by simultaneously discouraging overproduction with the setting of maximum intervention prices to make the products more competitive on a world stage, and supporting farmers more through direct aid, which was the major focus of the 1992 reform. Another principal and everincreasing concern is climate change and environmental degradation.. 2.7!

British Agricultural Policy since World War Two The first major piece of legislation relating to agriculture after the WWII was the Agriculture Act of 1947. It was produced in the aftermath of what had been a prosperous time for agriculture during the war, with gross output of British agriculture increasing by two-thirds between 1938 to 1942 and a three-fold increase in farm income.215 The Act was designed by the post-war government to gain ‘a positive balance of payments, to lower the amount of food imported into Britain from dollar countries and to promote the maximum agricultural productivity.’216 It gave farmers a guaranteed market and prices that would enable the production of required goods for the home market while retaining the quality of produce and living standards of famers. 217 This was largely to be achieved via price guarantees for eleven major products and deficiency payments (the difference between guaranteed prices and an average market price).218 The Act proved highly successful in terms of the output of agricultural farmer security.219 The Agriculture Act was followed by the Agricultural Holdings Act in 1948 which served to further increase the farmers’ sense of security by making it harder to evict tenant farmers. This negotiation for instance led to the fixing of the support price to be

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“A Common Agricultural Policy: A Story to be Continued,” 18-19. “The Common Agricultural Policy post-2013”. 211 More details: Regulation 1305/2013 212 Regulation 1306/2013 213 Regulation 1307/2013 214 Regulation 1308/2013 215 J.K. Bowers, “British Agricultural Policy Since the Second World War” Agricultural History Review 33.1 (1985), p.66. 216 Kenneth O. Morgan, Labour in Power. 1945-1951 (Oxford: Clarendon Press, 1984), p. 304. 217 Lord Williams of Barnburgh, Digging for Britain (London: Hutchinson, 1965), p. 156. 218 Bowers, “British Agricultural Policy Since the Second World War”, p.66. 219 Kenneth O. Morgan, Labour in Power. 1945-1951 (Oxford: Clarendon Press, 1984), p. 304. 210

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! paid in a series of Agriculture Acts in 1949, 1954, 1963, 1968, and 1972. 220 The Ministry of Agriculture also sponsored a great deal of research into agriculture by the Departments of Agriculture as well as the various agricultural colleges.221 One of the more significant results of such funding was through the improvement in the techniques of information dissemination through the agricultural services in the form of what is known now as the Agricultural Development and Advisory Service. 222 The 1960s saw the pursuit of a policy that looked to make agriculture self-supporting through increased productivity and efficiency, as well as international agreements to help secure the domestic market.223 However, this policy was soon abandoned and instead focus was given to making the products more competitive. This manifested in the introduction of import controls and minimum import prices224 and by 1969 there were quotas on butter, and a minimum import price scheme for eggs.225 This in turn was coupled with a drive to increase protection subtly hidden in higher prices which were justified to the public on the basis of rewarding deserving farmers.226 The National Plan 1965 aimed to transfer labour from agriculture to other industries, due to a 5% growth per annum in labour productivity.227 It is in the context of these efforts and policies that Britain entered the common market and EU in 1973 where agricultural protection was prioritised often at the expense of the consumer.228 Regardless, Britain continued to legislate on agriculture separate to the EU. The twenty-first century saw the establishment of the Department for Environment, Food and Rural Affairs by New Labour in 2001. It was forged from the merging of the Ministry of Agriculture, Fisheries and Food (MAFF) and part of the Department of Environment, Transport and the Regions (DETR) as well as a small part of the Home Office. 229 The principal aim of the department was and is ‘development which enables all people throughout the world to satisfy their basic needs and enjoy a better quality of life without compromising the quality of life of future generations’. 230 In essence, development that is sustainable. Over the last fifteen years DEFRA has worked to reduce the impact of agricultural practices on the climate, thereby in this respect working towards a common goal with the EU.

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Williams, Cardwell and Williams: Scammell and Densham's Law of Agricultural Holdings, (London: LexisNexis Butterworths, 2007), pp.9-13. 221 Ibid., p.68. For good description of the system see 1951 Review, Grand 8239, May I951 222 Bowers, “British Agricultural Policy Since the Second World War,” p.68. 223 Bowers, “British Agricultural Policy Since the Second World War,” pp.70-1. 224 Ibid., p.71. 225 Bowers, “British Agricultural Policy Since the Second World War,” p.72. 226 Ibid., p.72. 227 Ibid., p.73. 228 Ibid.,p.73. 229 Harrabin, Roger (3 October 2008). "Marrying energy demand and supply". BBC News. Retrieved 2009-05-22. 230 "Delivering the Essentials of Life: Defra’s Five Year Strategy", Annex B

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3.0!

CURRENT AGRICULTURAL POLICY

3.1!

Overview In line with the objective trends since the 1992 MacSharry reforms, the current focus of CAP support is on direct payments to the producer, with market intervention limited to times of crisis. The focuses of the two pillars are income support and environmental management respectively, though cross compliance greening measures in Pillar I partially instill a level of environmental management in the direct payments. Pillar I is financed by the EU budget, wheras Pillar II is dependent on co-financing by the UK.

3.2!

Pillar I Pillar I is legislated by Regulation 1307/2013 of the European Parliament.231 Pillar I legislates three mandatory forms of support. The first payment is area-based basic payments granted to all eligible landowners annually on May 15, with differentiated rates of compensation based on whether the land is within or outside the moorland region. Second, the greening initiative, was introduced to Pillar I as part of the 2013 reforms and accounts for 30% of national allocations.232 The objective of the greening component is to incentivize environmentally responsible farming practices. Farmers receiving the area-based payments are obligated to meet specific environmental requirements. The third support, comprising 2% of the national Pillar I allocations, are for young farmers. 233 Under Regulation (EU) 1307/2103, the Pillar I supports are restricted to active farmers, preventing non-active landowners from receiving area-based compensation.234 Member states are required to reduce any Pillar I payment a farmer receives in excess of €150,000 by at least 5%, with England applying the permitted minimum of 5%.235 Seventy percent of the direct area-based payments are non-conditional as a ‘Basic Payment Scheme’, with the remaining 30% of the payment conditional on compliance with greening requirements. The cross compliance management practices, or greening requirements, are defined at a national level, on the basis of EU framework. The UK greening conditions include maintenance of permanent grassland, crop diversification requirements stipulating that farmers whose arable land exceeds 10 hectares must cultivate at least two crops and those with more than 30 hectares must cultivate at least three crops, and maintenance of an ‘ecological focus area’. The ‘ecological focus area’ obligation requires farmers with more than 15 hectares to maintain at least 5% of their arable land uncropped in the form of field margins, hedgerows, forests, fallow land, or buffer strips.

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Regulation (EU) 1307/2013 of the European Parliament and of the Council, (2013). Grant, Wyn, Michael Cardwell, Alan Greer, et al, “The Implications of `Brexit’ for UK Agriculture -A Report for the Yorkshire Agricultural Society,” 2016. 233 Ibid. 234 Ibid. 235 Supra, 116. 232

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3.3!

Pillar II Pillar II of the CAP is legislated by Regulation (EU) 1305/2013 of the European Parliament.236 The objective of the Pillar II payments are to support rural development in alignment with six EU priorities: 1.! fostering knowledge transfer and innovation; 2.! enhancing farm viability and competitiveness of all types of agriculture in all regions and promoting innovative farm technologies; 3.! promoting processing and marketing of agricultural products, animal welfare and risk management; 4.! restoring, preserving and enhancing ecosystems; 5.! promoting resource efficiency and supporting the shift towards a low carbon and climate resilient economy in agriculture; and 6.! promoting poverty reduction and economic development in rural areas. The agri-environmental schemes (AES) that operationalize Pillar I payments are under the discretion of the UK, within the constrains of the EU priorities. UK Pillar II is expressed through regional level programs. The first generation of AES in England was the Environmentally Sensitive Area (ESA) Scheme. ESA, closed to new entrants in 2005, and was replaced by the Environmental Stewardship Scheme (ESS). By 2003, near the end of the enrollment period for the CSS and the ESA scheme, 10% of England's agricultural land was enrolled in one or the other of these schemes.237 Although ESA and ESS were specific to England, Wales had a similar program called GlasTir until 2014. Although the schemes are generally more appealing to farmers in marginal areas, farmers in productive regions like Cambridgeshire and the greater region of East Anglia also engaged in both the ESA and ESS schemes including initiatives to preserve uncropped wildlife strips, provide seed to winter birds. In 2015 ESS was retired and The Countryside Stewardship (CS) programme has since been England’s flagship Pillar II environmental stewardship program. The CS programme replaced ESS, the England Woodland Grant Scheme, and capital grants in the Catchment Sensitive Farming Programme. Administered by Natural England, the Forestry Commission, and Rural Payments Agency on behalf of Defra. Due to contract renewals under the existing schemes for 5 or 10 years, the existing ESS, ESA, and GlasTir agreements still draw £384 million in England, and £44 million in Wales annually. 238 Although the scheme remains voluntary, entry into CS is competitive with the tiered qualifications based on a scoring system. The facets of CS include Mid-Teir agreements, aimed at broadly protecting and preserving the countryside, Higher-Tier agreements, aimed at managing environmentally significant sites like common land and woodland where more complex management systems are required, and capital grants.239 The grants are offered for capital that will improve the environmental or

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Regulation (EU) 1305/2013 of the European Parliament and of the Council, (2013). Dobbs, Thomas L., and Jules Pretty, “Case Study of Agri-Environmental Payments: The United Kingdom,” Ecological Economics 65, no. 4 (2008): 765–75. 238 Supra, 86. 239 Ibid. 237

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social quality of the land including new hedgerows and boundaries, improving water quality, and creating new woodland. The CAP allows member states to transfer up to 15% of Pillar I payments to Pillar II or vice versa. Payments to farmers under 40 are also increased by up to 25%. The UK government has been continually critical of the CAP, despite the 2013 reforms. After the 2013 reforms, the UK coalition government stated: ‘Direct payments are not targeted on any particular market failure, and provide little value for money for the taxpayer. Other forms of public expenditure can usually demonstrate greater benefits than direct payments.’ 240 Impact of CAP on the Agricultural Sector Despite the lack of support for direct payments for farmers by the UK government, for many farmers the majority of their income is derived from CAP Pillar I payments. Figure 1 depicts the level of farm income derived from a variety of sources in 2015. In 2014-2015 the dairy, pork, poultry and horticulture sectors earned income from farming alone, while the cereals and grazing livestock sectors made losses. 120000 100000

Income!in!pounds

3.4!

80000 60000 40000 20000 0 "20000 "40000

Agriculture

Agri"environment!income

Diversifcation!income

CAP!pillar!1!BPS

Figure 1: UK Farm Business Income, 2015, by farm type241 In addition to the Pillar II AES schemes, the EU spends £300 million annually on targeted funding for productivity schemes, LEADER, micro-businesses, advice, collaboration, adding value, and innovation.

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Defra Evidence paper on the implementation of CAP reform in England, October 2013. Janet Dwyer, “What prospects for sustainable agriculture, in UK policies after Brexit?” Countryside and Community Research Institute. Presentation on 2 November 2016. 241

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Analysis of the current dependence on direct payments of different UK farming sectors by calculating the drop in farm business income if these payments were eliminated from one year to the next and nothing else changes show devastating results. In this scenario, farm income would depreciate from 31% for dairy farms to 112% and 137% for grazing farms in the lowlands and Less Favoured Areas respectively.242 The level of current reliance implies that compensatory measures and gradual changes should be employed to protect vulnerable farmers in the UK.

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Allan Buckwel, â&#x20AC;&#x153;Agricultural Implications of Brexit,â&#x20AC;? Worshipful Company of Farmers, (2016): 60.

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4.0! 4.1!

FARM SUPPORTS

Rationale of Government Intervention Government intervention in agricultural markets takes a multitude of forms. Government plays a key role in establishing and enforcing institutions and property rights so that market transactions can occur. Government also plays an important role in increasing the efficiency of markets and intervening when markets result in undesirable social outcomes. For these reasons, agricultural support is commonplace in developed countries and permitted by the WTO, under certain constraints. The metric of ‘producer support estimate’ (PSE) quantifies the annual amount of public funds transferred to agricultural producers, expressed as a percentage of gross farm receipts. Figure 2 depicts the various levels of PSE for OECD countries and the EU27.

Figure 2: International comparison of levels of agricultural protection amongst OECD countries.243

The design of agricultural policy by the UK government will be influenced by budgetary resources and the views of key stakeholders, and conditioned by the trade policy adopted.

4.1.1! Interrelation Between Agriculture and the Environment Environmental quality and agriculture are extensively interconnected. Figure 3 depicts the impact of the agricultural sector towards different forms of environmental degradation in 2016. The effects are cyclical, for example agricultural activity is the main cause of soil compaction, which in turn costs UK agriculture £163 Million per year, according to Defra estimates.244

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 243 244

OECD, Producer Support Estimates by Country, 2012. Defra, “Agriculture in the UK,” 2016.

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Figure 3: Impact of the Agricultural Sector in the UK.245 The direct production subsidies of existing CAP periods resulted in an overproduction of farm products and the negative externalities associated with farming. Although removal of direct production subsidies reduced the incentive to overproduce, there will continue to be an overproduction of negative externalities until the private costs of farming reflect the full social costs. From the standpoint of environmental economists, externalities are overproduced when the producer does not have to pay the full social cost. For example, a farmerâ&#x20AC;&#x2122;s private costs may include the input cost of fertilizer from the supplier but not the social cost of environmental damage of nitrates leaching into the water supply. Habitats are destroyed, carbon is emitted from tilled soil without payment for emissions, and wetlands are drained and can no longer be used as a natural flood prevention tool. The social costs of irresponsible environmental management are passed on to the greater public. Although the efficient policy would be to charge the farmer for the pollution and environmental damage they cause, in effect internalizing the cost of the externalities, in many cases this is not feasible. Pillar II of the CAP works on the reverse of the polluter-pays principle, by paying the producer for providing environmental services and responsible management of their land. Farming is also subject to special protections, concessions, and exemptions. Farmland is exempt from inheritance tax, fuel is exempt from fuel duty, planning restrictions are eased, antibiotic access is widely available for animal use. One must also consider that in addition to the negative environmental impact that overproduction resulting from these exemptions will incur, they come at great expense to the British government. The farming sector is also supported through tax concessions, advice and services, that are unparalleled in any other industry. From an economic standpoint, the farming industry is inefficient.

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Ibid.

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4.2!

Current Policy Despite an attempt to further incentivize the provision of public goods in the 2013 CAP reform, the core policies remain focused on subsidizing output. Pillar I direct payments are touted to improve farmer incomes, ensure food security, and contribute to producer resilience in the face of market volatility. The current policy has negative economic and environmental implications for the UK. Policy-driven agricultural change was the primary cause of biodiversity loss in Britain over recent decades.246 With over 70% of UK land categorized as Utilized Agricultural Area, the connections between agricultural practices, environment, biodiversity, and amenity are inseparable.247 The social value of landscapes created and maintained by agricultural activities, as exemplified by sheep rearing in the Lake District, is easy to recognize but extremely challenging to quantify. Special support for upland farming has been an integral part of UK agricultural policy since 1946, when headage payments were granted for sheep and cattle in the moorland of the Scottish Highlands, Wales, Dartmoor, Exmoor, and the Lake District.248 Public goods are defined as things that all people have access to and one person’s use of the thing does not reduce the amount available to the next person. Agricultural landscapes offer public goods such as sustainable water and soil management, flood management, wildlife habitat, carbon sequestration, amenity, recreation, genetic information, and heritage. Public goods are undersupplied in markets without government intervention. As a case study on social benefits of agriculture, the UK is distinct from generalized “new world” countries. Whereas the broad public in North America or Australia may value the aesthetic of the unfettered and rugged natural environment, UK identity is strongly tied to landscapes created by agriculture. Hedgerows, copse, and meadows created by farmers and the species of farmland birds that the agricultural practices have attracted represent most people’s idea of the English countryside and resultantly have social value.

4.2.1! Pillar I Issues The Pillar I direct payments are designed as flat-rate per hectare payments to farmers. Any payments to farmers must work within the confines of World Trade Organization (WTO) rules, which disallow market-distorting subsidies. Unlike existing headage subsidies, the current area-based CAP payments are decoupled from production to such an extent that they are allowed by the WTO, under special agreement between the EU and the WTO.249 In the UK, the majority of agricultural land is owned by a small number of farms, meaning that area-based payments benefits larger farms.250 Areabased payments increase the demand for land, thereby inflating prices, slowing land

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 246

DB Hayhow et al., “State of Nature,” The State of Nature partnership, 2016. Richard Packer, “Brexit, Agriculture, and Agricultural Policy,” Centre for Policy Studies. 2016. 248 Ibid. 247

250

Alan Matthews, “Why further reform of the CAP is needed now”, 2016, http://capreform.eu/whyfurther-reform-of-the-cap-is-needed-now (accessed 17th January 2017).

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transfer, making farming inaccessible to young farmers, and artificially reducing food prices. Land ownership in the UK is the most concentrated in Europe, with a handful of institutions and individuals owning the majority of share of UK farmland. The high capital costs of acquiring land, inflated by the area-based payments, can also prevent young people from land ownership and careers in farming, thus depriving farming of potential for sustainable growth and innovation.251 The direct payments can be seen in some ways as a perverse subsidy. Without conditions on the majority of the area-based payments, some of the money pays will go towards activities that damage the environment. The public would then bear to costs of the damage to the environment or social welfare. Future support for agriculture in the UK is constrained by WTO rules relating to ‘domestic support measures for agricultural producers’ outlined in the Agreement on Agriculture (AoA) and other WTO provisions. Under the AoA, there are three different types of domestic support measures for agricultural producers, with varying constraints applicable at each level. Measures with ‘no, or at most minimal, trade distorting effects or effects on production’ fall within the ‘Green Box’ and no expenditure limits apply.252 Pillar I type payments are categorized as ‘direct payments under production-limiting programmes’, which includes area payments, and fall within the ‘Blue Box’.253 Although there are currently no expenditure limits on ‘Blue Box’ payments, the international trade negotiations are steering towards applying limits to this category of support.254 All other support defaults to the ‘Amber Box’, which is subject to limits when in excess of specifically defined de minimus levels. Exceptions to the ‘Amber Box’ include product-specific support valued at less than 5% of the value of the product’s annual output, and non-product-specific support which is less than 5% of the country’s total agricultural production.

4.2.2! Pillar II Issues Pillar II agricultural payments currently compensate producers for the voluntary, but contractual provision of environmental land management. Payments for environmental services, including Pillar II CAP payments, must be based on the opportunity cost of the conservation activity in order to be classified as non-trade distorting by the WTO.255 In order for schemes to be classified within the ‘Green Box’ of the WTO AoA, environmental payments to farmers must compensate for ‘a clearly-defined government environmental or conservation programme… dependent on the fulfillment of specific conditions under the government programme’; and ‘payment limited to the extra costs or loss of income involved in complying with the government program’.256 Pillar II subsidies are too small in comparison to Pillar I, are not focused enough on specific environmental objectives, and lack spatial targeting. The current structure of

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Ibid. World Trade Organization, Agreement on Agriculture, 1995. 253 WTO, 1995. 254 Supra, 104. 255 House of Commons Environmental Audit Committee, “The Future of the Natural Environment after the EU Referendum,” 2017. 256 WTO, 1995. 252

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CAP is proving ineffective to protect the natural landscape. Reports continue to show that ecosystems are becoming fragmented and degraded, resulting in biodiversity loss.257 Although the income subsidies in Pillar I are conditional on elements of environmental responsibility, animal welfare, food safety, and traceability, the cross compliance conditions are weak and largely unenforced.258 4.3!

Analysis

4.3.1! Potential Scenarios The UK government could decide to maintain the status-quo and keep the same Pillar I and Pillar II schemes of the existing CAP. The main advantage of this scenario is that it keeps UK farmers at a level playing field with the rest of the EU, and is also the easiest solution to negotiate. The downsides of maintaining the pre-existing structure were discussed extensively in the previous sections. Based on the attitudes of the UK government in CAP negotiations over the past decade, it is likely that if this model was kept, there would be a migration of some Pillar I income support to Pillar II environmental support. Academics encourage using Brexit as an opportunity to apply an ecosystems approach to agricultural policy.259Using decoupled area-based payments as direct income supports for farmers is inefficient, ineffective, and inequitable. Further, the current greening schemes under Pillar I are too generalized and short-term to ensure additionality in the provision environmental services. Alternately the UK could refocus the expenditure of public funding towards public goods, as has been suggested by numerous stakeholder groups and academics.260 This approach would define the public goods provided by agriculture and the landscape and provide incentive to protect and preserve or enhance those values. For example in the Fenlands of East Anglia, a portion of the land owned by the Royal Society for the Protection of Birds must be maintained in agricultural production in order to receive payments for activities that provide public goods. A new system that treats conservation authorities, trusts, and farmers as providers of different public goods within the same locality can better deliver goods in alignment with local values and context. Some farmers in Cambridgeshire and East Anglia that farm on England’s most productive land may not reap as much public support in the absence of direct payments. Although their incomes may be affected, profitable farmers will adapt. Public funds in East Anglia could be best spent protecting the public goods that are not marketable, including the rare fenland habitats in the Broads National Park, the species unique to those habitats and the overall provision of environmental services.

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The Future of the Natural Environment, 2017. Dieter Helm, “British Agricultural Policy after Brexit,” Natural Capital Network, 2016, http://www.dieterhelm.co.uk/natural-capital/environment/agricultural-policy-after-brexit (accessed 17th January 2017). 259 2010 Declaration by Agricultural Economists: For an Ambitious Reform of the Common Agricultural Policy, http://reformthecap.eu/declaration (accessed 17th January 2017). 260 The Future of the Natural Environment, 2017. 258

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For the farming community the political acceptability of reduced Pillar 1 payments would depend in part upon the trade regime in place. If the UK drafted a free trade agreement with the EU UK farmers will likely lobby for compensation to equalize the playing field between themselves and their CAP-funded neighbors.

4.3.2! Recommendations A revised agricultural policy should focus on paying public subsidy to farmers in return for goods that are underprovided by the market, but have social value to the local population or are a national priority. Changes to the balance or division of income support must be gradual, due to producer dependence on the existing CAP payments. A gradual transition of Pillar I payments to specifically targeted payment schemes for public goods is not only feasible, but can be presented in a politically acceptable manner. Complete adoption of the principle of paying the provider from public goods provision and removal of direct payments may cause some small and vulnerable farmers to exit the market. Basic payments with no environmental requirements could be used to compensate small and vulnerable farmers, including upland and organic farmers, for the social value that they offer the UK.261 It could be expected that land prices will decrease with the abolishment of the area-based payments, opening up land to new entrants and young farmers. The payments removed from Pillar I should be redirected towards supplying the socially optimal amount of public goods. Extensive evaluation between Defra, MAFF, the National Trust, local and regional governments must be undertaken to evaluate the social value of areas where farming is not economically efficient. As a special case, marginal farmers considered socially valuable may be subsidized with direct income to supplement the payment for public goods that they provide. The end result of the policy shift towards incentivizing the provision of public goods is greater social welfare for a lower cost to the public. Continuing the status-quo, or British CAP, would further prevent sustainable growth and fail to prevent environmental degradation. The top priorities for a renewed agricultural policy should be to: 1.! If direct income support remains, it should be progressive to help active farmers most in need rather than those owning the most land. Area-supports should taper as farms increase in size to account for economies of scale. 2.! The share of total funding for public benefits must be large enough to motivate a high percentage of farmers to commit to additional long-term good management of the most socially valuable landscapes. 3.! Funding structures need to be simple and work in ways that foster collaboration with farmers and overcome hostility towards government intervention.

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Ian D Hodge, â&#x20AC;&#x153;We Need a British Ecosystem Services Policy Not a British Agricultural Policy,â&#x20AC;? CAP Reform, 2017, http://capreform.eu/we-need-a-british-ecosystem-services-policy-not-a-britishagricultural-policy/(accessed 17th January 2017).

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4.! Acknowledge multifunctional farming, in which released EU budget contributions are redeployed as necessary in the UK recognizing the special characteristics and multiple roles of farming which produces food and also stewards a high proportion of the British natural environment. In the development of a system for the public provision of public goods and the delivery of ecosystem services, should consider the permanence and sustainability of the management practices and contracts. Further effort must be taken to ensure additionality in the actions. There must be a sufficiently high reference level of expected â&#x20AC;&#x2DC;good stewardshipâ&#x20AC;&#x2122; by landowners, and public funds should be utilized to provide benefit above and beyond what would be considered responsible management. The programs and public goods schemes must be spatially specific and adapted to the local context. This ensures that the most efficient service provider delivers the right management in the right place, at the right scale. Locally based funding structures need to be simple and foster collaboration with farmers in order to overcome resistance to government intervention.

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5.0! 5.1!

Agricultural Trade

Introduction

5.1.1! Implications of an Exit from the EU With its exit from the EU, the UK will leave the ‘single market’ and customs union that includes all member states. As an individual member of the WTO, the UK must redefine and negotiation its trade relationship with the EU and all third countries. In contrast to agricultural policy, trade policy is not simply a matter of UK choice. Trade agreements are the product of negotiations, and the favourability of resulting agreements with the EU and the rest of the world will depend on numerous factors including levels of domestic agricultural support, product regulations, trade agreements with other nations, protection of sensitive sectors, and bargaining power.

5.1.2! Government Stance on Trade The Brexit White Paper indicates that the Government will take an ambitious, liberalized approach while negotiating trade agreements with the EU and beyond. The Government aims to negotiate a ‘wide reaching, bold and ambitious free trade agreement’ and a ‘mutually beneficial new customs agreement’ with the EU.262 An FTA with the EU is likely to include some form of access to the ‘single market’ with tariffs on ‘sensitive products’, tariff rate quotas, and non-tariff barriers to free trade, which will be defined and discussed further in this section. Regardless of the Government’s desire for ‘frictionless’ trade, any FTA negotiated with the EU outside of the existing ‘single market’ and customs union will undoubtedly increase the costs of trade facilitation with the EU. Further the UK will aim to negotiate ‘ambitious free trade relationships across the world’.263 According the Brexit White Paper, the aim of the Government is to ‘strike the best trade deals around the world’ while ‘protecting our common resources’.264 The liberalized approach, even if applied carefully with import quotas or tariffs for ‘sensitive products’ is likely to place some UK agricultural sectors at a competitive disadvantage. The process of analyzing and negotiating which goods will be protected and what measures to use to protect ‘sensitive products’ will be extremely complex, contentious and time consuming.

5.1.3! Existing Trade Agricultural trade between the EU and the UK is extensive. The UK is a substantial net-importer of agricultural products, with a strong reliance on EU markets for both import and export, as shown in Figure 4. Exports from the EU constitute 70% of all agri-food imports to the UK, and 62% of UK exports are destined for EU markets. 265

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HM Government, “The United Kingdom’s exit from and new partnership with the European Union,” 2017. 263 Brexit White Paper, 2017. 264 Brexit White Paper, 2017. 265 Alan Swinbank, “Brexit: The Current Status of EU-UK Agri-Food Trade,” EuroChoices, 2016, 15(2): 24–25.

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In 2015, UK exports of agri-food products to the EU were valued at £11 billion, while imports were valued at £28 billion.266

Figure 4: Origin of food consumed in the UK, 2014 (%).267 The tariffs and restrictions on trade with third countries imposed by the EU customs union has led to UK overreliance on the EU as a trading partner. Although UK trade with the rest of the world is increasing relative to trade with the EU, the independent UK is at a significant disadvantage for trade negotiations outside of the EU due to decreased bargaining power and lack of infrastructure for international trade. Sectoral reliance on the EU as a trade partner varies. Each agricultural sector will face differing threats and opportunities from restructuring and liberalizing trade agreements with the EU and third countries. Although this report is not the place for a sectorial analysis of trade by sector, as has been completed elsewhere268, generally the relative viability of and demand for UK agricultural products on the global market will depend on the added value and specialization offered by the products. Using the beef industry as an example, imports to the EU are currently subject to ad valorum tariffs of 12.8% plus a fixed tariff ranging from €1,414 to €3,041 per tonne, plus non-tariff barriers, including a ban on beef from animals treated with growth hormones.269 This protectionist policy has limited the viability of third country beef import into the EU. The pasture-based structure of the UK beef industry limits its ability to be price competitive with beef imports from intensive feed-lot cattle rearing suppliers. In developing trade policies for beef, if the market is liberalized to allow lower priced beef to freely enter the UK, domestic production would decrease. This in turn would impact

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HMRC, Trade Statistics, 2016. Trade Statistics, 2016. 268 S Van Berkum, R A Jongeneel, and J H Jager, “Implications of a UK Exit from the EU for British Agriculture Implications of a UK Exit from the EU for British Agriculture,” LEI Wageningen UR, 2016. 269 LEI Report, 2016. 267

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the landscape because a decline in the number of grazing cattle would mean the demise of habitats and landscapes that depend on agricultural activity. 5.2!

Trade Policy Considerations

5.2.1! General Considerations Leaving the EU would imply that the UK is no longer part of the EU trade commitments to third countries. These commitments are laid down in the WTO agreement and in many bilateral and regional trade agreements (FTAs and RTAs), including FTAs with Canada, Korea, and Mexico, and preferential trade agreements with developing countries (General System of Preferences, including the Everything but Arms arrangement, and arrangements with African, Caribbean and Pacific states in Economic Partnership Agreements). Bilateral agreements both with the EU and third countries have to be re-assessed, re-negotiated and ratified, which may be a complex and timeconsuming process. Although the UK is an independent signatory on many of the EU trade agreements with third countries, it must enter a negotiation process with each third country to ensure continuation or agree on the adjustment of each individual trade policy. The UK stance toward a trade agreement with the EU is a choice between remaining close to the EU single market, and therefore having to retain most EU existing regulation, or leaving the single market in order to allow some deregulation. The trading scenarios that the UK faces could be considered a sliding scale with increasing regulatory autonomy coinciding with increasing trade costs as shown in Figure 5. The models and scenarios of trade scenarios mirror the economic benefits and disadvantages of integration that filled the EU referendum debate.

Figure 5: The opposing nature of regulatory freedom and trade costs. 270

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Alan Matthews â&#x20AC;&#x153;The Potential Implications of a Brexit for Future EU Agri-Food Policies,â&#x20AC;? EuroChoices 15, no. 2 (2016): 17â&#x20AC;&#x201C;23.

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Tariffs and quotas are not the only trade negotiations that the UK must undertake. Technical standards and regulations including those related to GMOs, animal welfare, and food safety, will need to be agreed upon to secure access to the EU market. As a member of the EU, UK production is regulated by the same directives that apply to all other EU member states. This produces a level playing field across member states, so, for example, common animal welfare and food hygiene standards prevent a company undercutting its competitors by reducing standards. Under the EU system there is constant pressure to increase the stringency of regulations and replicate the stringent regulation across all member states. With exceptions, harmonization measures can be imposed on dissenting members by Qualified Majority Vote (QMV). Although any goods intended for export must comply with the regulations of the destination country, under EU ‘single market’ all goods indented for the domestic market and non-EU export are subject to the ‘single market’ regulatory burden.271 If the UK becomes a third country, through an FTA or otherwise, the approach taken to import checks into the EU is unclear but could have significant costs and implications. Currently, all third country imports must enter the EU via Border Inspection Posts (BIP), which only exist at certain ports. All non-EU imports are subject to 100% documentation checks, conditional physical checks, sampling, lab checks, and veterinary checks.272 It has been estimated that under an FTA scenario all trade between the UK and EU would incur an additional 5% trade facilitation cost.273 Hence a withdrawal of the UK from the ‘single market’ will incur additional trade facilitation costs in the form of administrative paperwork to prove country of origin sanitary and phytosanitary inspections, greater delays at ports, and the higher costs of producing for potentially divergent regulatory regimes with respect to labelling, packaging, food additive, and food composition standards. Regardless of the outcome, the trade facilitation costs with the EU will increase as compared to the current base level. The increased costs could depress UK farm prices and increase consumer costs. If the UK then liberalizes agricultural trade with the rest of the world this would also depress some UK farmer prices, but reduce consumer costs. Therefore, together, farmers might face weaker prices, whilst overall consumer food prices, may not be much affected.274

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Lawyers for Britain, “Brexit and the EU Single Market,” 2007, http://www.lawyersforbritain.org/eudeal-single-market.shtml (accessed 17th January 2017). 272 Katie Doherty, “Brexit: an opportunity to develop a better import quota system,” UKTPO: UK Trade and Policy Observatory, 2016, https://blogs.sussex.ac.uk/uktpo/2017/01/16/brexit-an-opportunity-todevelop-a-better-import-quota-system/ (accessed 17th January 2017). 273 Donner Abreu, M, “Preferential rules of origin in Regional Trade Agreements,” World Trade Organization, Economic Research and Statistics Division, 2013, https://www.wto.org/english/res_e/reser_e/ersd201305_e.pdf (accessed 17th January 2017). 274 LEI Report, 2016.

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5.2.2! The Single Market The internal market, colloquially termed the ‘single market’ is defined in the Treaty on the Functioning of the European Union (TFEU) Article 26(3) as an area ‘without internal frontiers, in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties’.275 Essentially, the ‘single market’ is the EU policy which allows for the four freedoms of movement between EU member states. The ‘single market’ is often viewed wholly positive for the UK in economic terms. It is comprised of a number of different elements which each have a varying economic impact, positive, equivocal, or negative. TFEU Article 28(1) states that the ‘Union shall comprise a customs union which shall cover all trade in foods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries’.276 Therefore, goods are not subject to tariffs when they cross borders between member states of the EU. It also implies that the UK must apply the EU common rate of customs tariffs to all goods entering them from outside the EU and prohibits independently drafting trade agreements with non-member countries. This results in the UK having to impose high tariffs on some categories of goods despite minimal domestic industry, resulting in UK consumers paying above world market prices. The Government has clearly stated that it will not be seeking membership into the ‘single market’, but will instead pursue an ‘ambitious and comprehensive FTA and customs agreement with the EU.277 Exit from the ‘single market’ will end the free movement of goods, labour, services, and capital between the UK and the EU. Aside from impacting trade of agricultural goods, this will impact the current practices of migrant labour in the UK, foreign direct investment in many agricultural industries, and utilization of EU countries for agricultural services, including abattoirs.

5.2.3! The Customs Union The customs union which includes all EU member countries is specifically defined in the WTO, as regulated by GATT Article XXIV, implying the abolition of tariff barriers and other restrictive trade regulations on ‘substantially all trade’ between constituent members, and an application of ‘substantially the same duties’ on all Third Countries.278 Aside from the EU28, Turkey, San Marino, and Andorra also have existing customs unions with the EU.279 The customs union applies these rules specifically to goods, and does not cover trade in services or labour. When a country joins a customs union, the acceding member adopts the tariff schedule of the union.280 Each member thus applies a common external tariff on imported goods, with quotas of some commodities except from tariffs under preferential access agreements. The

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European Union, Treaty on the Functioning of the European Union (Consolidated Version), 2010. Treaty on the Functioning of the EU, 2010. 277 Brexit White Paper, 2017. 278 General Agreement on Tariffs and Trade (GATT) (1993), Summary Record of the Third Meeting Held at the International Conference Centre, Geneva on Thursday, 3 December 1992 at 3.30 p.m., SR.48/3, GATT: Geneva. 279 WTO, Regional Trade International Trade Agreements Information System, 2017. 280 Alan Matthews, “WTO dimensions of a UK ‘Brexit’ and agricultural trade,” 2016. 276

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common external tariff ensures that there is no preferential point of access for third countries when exporting goods into the customs union. Members of the customs union are required to operate their customs procedures in accordance with the EU ‘Union Customs Code’. Once goods are imported into the customs union, they are in free circulation and can be transferred from state to state without further tariffs, quotas, or customs procedures, regardless of place of origin. A common external tariff applied equally by all members further restricts the ability of members to enter into separate free trade agreements with third countries. The UK Government is seeking a new customs agreement with the EU that will enable trade to continue to be ‘as frictionless as possible’.281 Although the Government states that it is in the ‘interests of both the EU and the UK to have a mutually beneficial customs arrangement’, if the UK reduces tariffs to third countries and weakens agricultural regulatory standards, the EU will not allow free movement of goods without detailed country of origin and regulatory standard compliance checks.282 It is highly unlikely that the customs procedures will be as ‘frictionless’ as the UK envisages. Further, outside of the customs union the UK will no longer be able to use large international ports, like Rotterdam, as a point of access for goods to the UK market. As a result, the UK will have to invest heavily in its trade and customs infrastructure including expansion of ports and regulatory capacity.

5.2.4! Tariff Rate Quotas As well as straightforward tariffs, an important part of each country’s agricultural WTO commitments are tariff-rate quotas (TRQ) which permit a certain quantity of produce to enter at lower or nil duties. When imports of a specific product exceed the quota amount, the tariff reverts to the standard external tariff rate. TRQs are used to strategically protect certain industries from exposure to international competition. As of 2016, the EU administered 128 TQRs on specific agri-food imports.283 For example, the duty-free TRQ on lamb carcasses from New Zealand prevented the application of a 12.8% most favoured nation (MFN) tariff plus €1,713 per tonne.284 The current EU TRQs on products imported from third countries are part of WTO commitments. TRQs are agreed upon at an overall level for the EU and subsequently divided up and allotted to exporters country by country based on historic trading. Upon exit from the ‘single market’ the UK would have to negotiate to take over a portion of the EU TRQ import or add a new TRQ import itself for each product and each trade agreement. In many cases, such as the case of New Zealand lamb, direct transfer of TQRs to the UK may not be the most optimal approach. Currently, under the EU customs union the majority of imports of competing products from third countries are outside of TRQs and subject to prohibitively high tariffs.

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Brexit White Paper, 2017. Brexit White Paper, 2017. 283 World Trade Organization, “Notification, EU’s administration of tariff quotas for calendar year 2016 and marketing year 2015/2016”, G/AG/N/EU/31, WTO: Geneva, 2016. 284 Alan Swinbank, “Brexit or Bremain? Future Options for UK Agricultural Policy and the CAP,” EuroChoices 15, no. 2 (2016): 5–10. 282

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The process of division of TRQs between the UK and the EU is uncertain. The extent to which the UK would have to assume part of the obligation to offer third country access to its market, because of existing WTO TRQ commitments is unclear.

5.2.5! Trade with Ireland One of the trade disruptions frequently discussed is agricultural trade at the Irish border. Ireland is a major exporter of livestock products to the UK, and the agri-food supply chains in the north and south heavily rely on the ‘single market’. In 2014, 49% of Ireland’s agri-food exports were destined for UK markets, and conversely UK products constituted 52% of Irelands total agri-food imports.285 Cross-border movement of labour is also a significant issue for debate, as over 14,000 people commute across the border between Northern Ireland and Ireland.286 The UK government aims to maintain the current level of trade and movement.287 Again, the ability of the UK and Ireland to retain the current level of freedom of cross-border movement is unlikely. 5.3!

Potential Outcomes

5.3.1! Default WTO Position If no agreement is reached between the EU and the UK, then both nations would have to default to the application of MFN tariffs against each other, causing considerable disruptions to existing trade flows. Under this scenario, the EU would apply its Common Customs Tariff (CCT), the EU equivalent of MFN rates, to all UK imports. Although under this trade policy, the UK could set autonomous quotas, they must be non-discriminatory for all trade partners under WTO rules. The TRQ and other preferential import regimes would no longer apply to trade between the EU and the UK and the full CCT tariff would apply on all imports. The EU CCT are product-specific and range from a 15-85% ad valorem rate plus additional fixed tariffs.288 The default position is clearly not optimal, nor is it the desired outcome for the UK or EU. Regardless, there is a chance that the negotiations would fall back to this default WTO MFN position if the UK is unable to reach an agreement with the EU. Likewise, the UK will default to the WTO MFN tariffs for trade with any third country it does not develop an independent trade agreement with at the time of exit from the EU. This would undoubtedly mean higher food prices for UK consumers.

5.3.2! Free Trade Agreements An FTA could be drafted between the UK and the EU within the 2 years allowed by Article 50 of the Treaty of the European Union. The drafting of an ambitious FTA is the stated preference of the UK Government.289 An FTA would enable tariff-free access to the EU market without the restrictions of the ‘single market’. An FTA does not require members to adopt uniform external trade tariffs with third countries and enables

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Central Statistics Office (CSO), “External Trade,” Central Statistics Office, Cork, Ireland, 2016. Ireland Central Statistics Office, “Census 2011 Ireland and Northern Ireland,” 2014. 287 Brexit White Paper 2017. 288 Alan Matthews, 2016. 289 Brexit White Paper, 2017. 286

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further drafting of independent trade agreements with other nations. In accordance with the WTO GATT Article XXIV, an FTA involves the elimination of tariffs and other restrictive regulations of commerce on ‘substantially all the trade’ in products that originate within the FTA.290 An FTA would stipulate that free trade is only permitted on goods which originate within the members of the FTA, implying that it is necessary for customs authorities between the FTA members to check the origin of the goods. This is a significant difference between membership in a customs union, which allows free flow of goods regardless of country of origin. Border controls would still be required at internal borders to differentiate between originating products and nonoriginating products, which would be subject to a duty. TRQs could be applied to sensitive agricultural products. For example, it could be assumed that the TRQ on UK sheep and lamb meat would remain at current export levels. There are numerous European and non-European states that operate versions of free trade with the EU, including Switzerland, Norway, Iceland, and Lichtenstein. The Norwegian and Swiss agreements with the EU include open access to the ‘single market’ and thus the lowest possible trade facilitation costs outside of the EU. However, this position also implies adopting most ‘single market’ regulation, with some influence but no vote on how these regulations evolve, while also contributing to the EU budget. Alternately, negotiating a bilateral FTA with the EU may free the UK from some existing regulation and prevent required contributions to the EU budget, but all trade destined for the EU will still have to respect EU regulatory standards. Outside of the ‘single market’ the UK would no longer be subject to its trade agreements with third countries. The existing EU commitments include those laid out in the EU’s WTO agreement and many bilateral and regional trade agreements, including FTAs with Canada, Korea, Mexico, and African, Caribbean, and Pacific States (in the form of Economic Partnership Agreements), and preferential trade agreements with developing countries through the General System of Preferences, including Everything But Arms agreement. The status of existing FTAs post-Brexit is uncertain, though it is clear that the Government intends to prioritize strategic negotiation of FTAs with third countries. Although the UK can only finalize and implement FTAs with third countries after full departure from the EU, the UK can start engaging in the likely length negotiation process.291 Some FTA deals that the UK might eventually strike with third countries could expose UK agriculture to tariff and quota-free access from highly competitive overseas suppliers. However, it is possible, as is the case with CETA, to exclude some vulnerable sectors from the FTA or subject or apply restrictive TRQs to limit the quantity imported at reduced tariffs. Consequently, the combination of changes to domestic agricultural support alongside the trade regime will determine the overall impact on British agriculture. The more liberal the trade regime, exposing UK farmers to external competition, the greater the lobbying will be for a continuation of financial agricultural.

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GATT Article XXIV. LEI Report, 2017.

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5.3.3! Unilateral Liberalization The UK could also take a liberalized approach to trade policy and reduce tariff rates across the board. If the UK reduced MFN tariffs, it would have to do so in a nondiscriminatory manner in order to comply with WTO rules. Trade liberalization will lead to a decline in commodity prices.292 Similarly, if the UK reduced MFN tariffs or unilaterally adopted an international free trade policy, there would be little incentive for the EU to allow the UK to gain duty-free access to the EU for its exports. Although the UK has stated its intent to support unilateral liberalization of markets alongside frictionless access to the UK, the achievement of both is highly unlikely. 5.4!

Analysis

5.4.1! Economic Implications of Trade Policies In recognition of the interconnection between trade policies and agricultural policies, a report by LEI Group for the National Farmers’ Union (NFU) attempted to quantify the effects of possible combinatory trade and agricultural support scenarios on UK agricultural production, trade, commodity prices, and producer income levels. The report found that in the FTA and WTO MFN tariff scenarios, UK prices for agricultural products would increase due to higher trade facilitation costs and loss of access to EU preferential import regimes, with resulting positive impacts of producers and negative impacts on consumers.293 Under the UK trade liberalization scenario, prices for animal products decline, and crop prices increase relative to the current baseline. The report found that the positive price impacts on farm incomes seen through both the FTA and UK WTO MFN tariff default scenarios would be more than offset by the loss of direct support payments. The loss of direct support payments would also exacerbate the negative impact seen under the UK Trade liberalization scenario. Reducing direct payments to 50% of current CAP would result in varied impact on farm incomes by sector. A major shortcoming of the paper however, is that it does not investigate a scenario that transfers Pillar I direct payments to rural development and environmental programs of Pillar II type. Instead, rural development payments are assumed to remain unchanged in all scenarios, and the scenario that removes all direct payments implies a 60% reduction in funding for the agricultural sector.

5.4.2! Commentary on the Current Governmental Approach Although it is clear that the Government will prioritize free trade with the EU and third countries, the Brexit White Paper neglects the opposition they may very well face from other nations and the WTO during negotiation. The ability of the UK to negotiate favorable trade deals should not be taken for granted as their bargaining power with third countries will be decreased as an independent entity. Affronted by the UK departure from their union, the EU will likely enter negotiations with a cautionary and

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LEI Report, 2017. Roel Jongeneel, Siemen van Berkum, and Hans Vrolijk, “Brexit: Breaking Away - Would It Pay?” EuroChoices, 2016. 15(2): 26–33.

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protectionist attitude. The UK Government will seek to adopt a trade agreement that cherry-picks the most beneficial elements from the ‘single market’ and customs union, but will likely meet critical opposition from the EU. The Government aims to use EU exit as an opportunity to negotiate FTAs with third countries. They aim to be ‘champions of free trade driving forward liberalization bilaterally, as well as in wider groupings’.294 As the importance of international trading partners grows, relative to the EU, the Government aims to strike advantageous trade deals with its most significant partners. The Government approach to trade policy will include ‘a variety of levers’ including bilateral FTAs, participation in multilateral and plurilateral negotiations, market access and dispute resolution through the WTO, import and export controls, unilateral liberalization, trade preferences, and trade for development.295 Any negotiation of an FTA outside of the ‘single market’ and customs union will increase trade facilitation costs with the EU over the current baseline. It is expected that the price effects of formation of further FTAs and unilateral trade liberalization will third countries will outweigh the overall increase in goods prices caused by increased trade costs with the EU. Despite having to abide by all EU agricultural regulations, standards, and labelling for products exported to the EU, the UK will no longer have the ability to influence the relevant regulations. Although all products not destined for export will be free to work with different nationally determined standards, differentiation in production is costly for producers and thus many producers may default to the EU regulations for all their throughput. Overall, a reduction on external import tariff levels may lead to higher levels of import from third countries, continued decline in imports from the EU, declining prices for consumers, and less domestic production. Sectoral price analyses of trade positions are available elsewhere, but it is important to note that the domestic livestock sector would be under particular threat from trade liberalization. Further note that grazing of domestic livestock serves as the perpetuator of rural landscapes in the UK and is intrinsically tied to cultural identity, tourism, and recreation. As discussed in the following section, the Government must conduct extensive analyses to determine which domestic sectors they wish to protect. The domestic market impacts of trade liberalization will not only impact consumer prices and famer livelihoods, but also environmental quality, rural land use, animal welfare, and food safety. The complexity and time associated with negotiating advantageous trade agreements must not be taken lightly. 5.5!

Recommendations The Government has already identified agricultural trade as a unique sector to be specifically evaluated and negotiated within international trade agreements. The Agriculture and Horticulture Development Board, has started work on evaluating the

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Brexit White Paper, 2017. Brexit White Paper, 2017.

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opportunities and threats towards each sector of agricultural goods.296 With high potential impacts from trade deals on the agricultural sector, and consequently the UK landscape and environment, decisions made regarding specific sectors and goods must be made holistically. Recommendations for policy makers are to: Carefully prioritize the niches and agricultural sectors within the UK that will require protection in the advent of liberalised global trade. a.! Leverage existing and independent economic analyses to forecast the sectoral market impact of liberalised trade. b.! Recognizing the social, environmental, and economic impacts of resultant expansion, retraction, or status quo due to trade liberalisation, agree on the necessary level of protection with key stakeholders. Negotiate an FTA with the EU that places the UK outside of the EAA, â&#x20AC;&#x2DC;single marketâ&#x20AC;&#x2122;, and customs union for agricultural goods. Recognize that by prioritizing frictionless trade with the EU is a trade-off, and the UK will have reduced freedom over regulations (in order to comply with non-tariff barriers) and will likely have to financially contribute to some EU programmes. Although duty-free access to the EU for agricultural products is ideal, it is also unlikely.297 Recognizing that an FTA is likely to fall short of duty-free access on agricultural products, develop a mitigation plan to protect sensitive niches through agricultural supports, domestic market growth, and third party trade agreements. Act to secure the continuation of the UK position as an independent signatory on existing EU FTAs with third countries, including Canada, Mexico, South Africa, Korea, and Turkey. Focus additional efforts on negotiating new FTAs with the USA, Australia, Brazil, and BRIC economies, particularly China and Russia. Provide services to producers to help navigate the changing tariff and non-tariff barriers to aid in the selection of the most optimal practices and markets for their goods.

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LEI Report, 2016. Existing EFTAs and EUCU agreements with Iceland, Norway, Switzerland, and Turkey exclude duty-free access for agriculture. 297

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6.0! 6.1!

RELATED REGULATIONS

Genetically Modified Crops One of the more interesting and controversial areas of agricultural policy open for debate is regulation concerning the use of Genetically Modified crops (GMCs) and Genetically-Modified Organisms (GMOs). Due to social, economic, and potential environmental concerns the potential liberation of GMO restrictions must be treated with caution and delicacy. The twentieth century saw the conception and production of using fertilizers, pesticides, and herbicides to boost agricultural production.298 The effectiveness of these chemicals has been repeatedly proven. Herbicides and pesticides created in this way effectively reduce or eliminate pests and diseases that impinge on agricultural production. For instance, glyphosate is able to wipe out weeds and neo-nicotinoids are able to destroy insect pests.299 More recent innovations in the combination of genetic engineering and targeted agrichemicals enable the elimination of all competitor species without genetic resistance to the specific herbicide or pest without resistance to the herbicide. GMO corn, soy, and rice with increased drought and pest resistance are largely used to increase yields. The EU has consistently opposed the use of GMOs in the agricultural sector. This stance, which hardened after the adoption of the CAP Pillar II, is founded on the principle of precaution towards environmental and social harm. Uncertainties about the safety of such organisms have undermined the adoption of a more relaxed policy. To date, only one GMO is permitted to be grown within the EU. This particular GM crop is a type of pest-resistant maize called MON 810.300 The resistance of many EU member states towards the introduction of GM crops on a larger scale was aptly demonstrated by the decision taken by half of the 28 Members, when the EU provided the opportunity last year, to ban entirely the cultivation of GM crops.301 By contrast, the UK has been more open towards the use of genetic modification. As recently as December 2016, the UK acted as a pioneer of genetic modification on the world stage by being the first nation to approve of the creation of a fetus that combined the genetic information of three parents.302 The EU has shown an appreciation of the UK’s diverging stance on genetically modified crops; in 2015 they passed legislation that permitted each country to decide individually whether to grow GM crops, so long as

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Dieter Helm, 2016. Dieter Helm, 2016. 300 Alexandra Sims, “Brexit: Government to review GM crop regulations in preparation for leaving EU,” The Independent, 26th October 2016, http://www.independent.co.uk/news/uk/home-news/governmentreview-gm-crop-regulations-preparation-brexit-european-union-a7381276.html (accessed 9th December 2016). 301 Alexandra Sims, 2016. 302 Sarah Knapton, “Three parent babies: IVF clinics told they can create children with two mothers,” The Telegraph, 15th December 2016, http://www.telegraph.co.uk/science/2016/12/15/three-parentbabies-ivf-clinics-told-can-create-children-two/, (accessed 28th December 2016). 299

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they complied to the standards and approval of the European Food Safety Authority (EFSA). This granted Britain a degree of independence in this matter.303 Britain has taken a relatively favourable stance on GM crops because of the strong evidence indicating their safe. Every major scientific organisation and academy in Europe, including the European Commission, has publicly endorsed their safety.304 The Independent published an article in 2016 that reported that ‘there is overwhelming scientific evidence that improving crops by molecular biotechnology techniques is safe, and the practice is widespread across the Americas and Asia’.305 In light of this, it is not surprising that many farmers who voted ‘Leave’ did so out of resentment that the EU blocked the continued implementation of the widely used herbicide glyphosphate as well as neonicotinoids despite the strong evidence in the case of the latter, that their use did not, as activists argued, contribute to the decrease in the number of bee hives.306 Farmers in the UK widely support the responsible use of pesticides, herbicides and GMOs to increase their crop yields. Similarly, Huw Jones, from the agricultural science group Rothamsted Research echoed their sentiments in arguing that the banning of GMOs ’serves to remove freedom of farmers and narrows their choice of crop varieties in the future’.307 The relatively amiable attitude to GMOs within Britain has encouraged and fostered their development in national research. The John Innes Centre is one of the bodies at the forefront of research on wheat crops ‘capable of absorbing larger amounts of atmospheric nitrogen thereby avoiding the need for nitrogen fertilizer’.308 Thus the example of GMOs is a key area in which the UK could make the most of the liberalising potential of the EU exit in forging a policy more in tune with national attitudes and the global markets. This has already been highlighted, for example by Ottoline Leyser, director of the Sainsbury Laboratory at the University of Cambridge, who told The Times that ‘the roadblock for Genetic Modification in Europe has always been the licensing for commercial use’. Professor Leyser said, ‘The system is supposed to be science and evidence based but in reality ideology has had much to do with it. It would be difficult not to argue that if the UK post-Brexit decided to develop its own system for licensing all crops that was truly science-based that would be a good thing.’ 309 Similarly, Dr. Ian Hodge wrote ‘some farmers would welcome an opportunity to wind back regulation and bureaucracy. This option has already been the focus of discussion’.310 George Eustice, the agriculture minister, revealed in a written parliament answer that ‘as part of the preparations for EU exit’ the government was

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Jon Entine & David Warmflash, “How Brexit will impact the future of farming, GMOs and gene editing in Britain and Europe,” Genetic Literacy Project, June 29th 2016, https://www.geneticliteracyproject.org/2016/06/29/brexit-will-impact-future-farming-gmos-geneediting-britain-europe/, (accessed 7th December 2016). 304 Jon Entine & David Warmflash, 2016. 305 Alexandra Sims, 2016. 306 Jon Entine & David Warmflash 2016. 307 Alexandra Sims, 2016. 308 Jon Entine & David Warmflash 2016, 309 Michael Wilkinson, “British farmers could grow GM crops after Brexit reveals minister,” The Telegraph, 26th October 2016, http://www.telegraph.co.uk/news/2016/10/26/british-farmers-could-growgm-crops-after-brexit-reveals-ministe/ (accessed 10th December 2016). 310 Ian Hodge, “Brexit: The Agricultural Issues,” The UK in a Changing Europe, 16th May 2016, http://ukandeu.ac.uk/brexit-the-agricultural-issues/ (accessed 4th December 2016).

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looking at ‘possible future arrangements for the regulation of genetically modified organisms’.311 The UK government might take a less restrictive approach to genetically modified organisms (GMOs) or pesticide regulation. Of course, it might equally decide that the regulations are justified by the risks that they reduce, such as the threat of the spread of livestock or plant disease. Brexit, freeing the UK from the need for compromise among 28 states, may be seen as an opportunity for more radical policy reform, to remove subsidy and encourage innovation and adjustment of the farm sector.’312 However, this desire to introduce GM crops on a larger and more varied scale should bear in mind the following realities. Firstly, the widespread hostility to the use of GM crops among other European nations. must be considered In spite of this hostility, several EU member states, while forbidding the production of GM crops, will import GMOs that are not intended for propagation. In fact, Europe is the world’s largest regional importer of GMO grain, which is largely used in animal feed.313 Nevertheless, should GM crops be used more in agricultural production, there is the possibility it will impact trade with at least some of these nations. This was a concern voiced by the Genetic Literacy Project after its talks with several UK scientists.314 Secondly, two of the nations opposed to the use of GM crops are Scotland and Northern Ireland. Both Scotland and Northern Ireland were among the fourteen nations that opposed the liberalization of GMO production last year. Considering the high ‘Remain’ sentiment in both of these countries, as well as simmering Scottish separatist pressure, it is likely they will oppose attempts to pass legislation permitting increased use of GMOs. There is the possibility of silencing such objections by demonstrating a majority in favour in Parliament. However, this then could provide a boost to Scottish separatist feeling if it was felt that Scotland was being subjected to the very kind of ‘tyranny’ that ‘Leave’ voters desired to escape within the EU. Should the decision be taken to pursue this policy, it would be wiser to present the decision as the result of recent and careful investigation and interrogation of the facts of the issue, rather than purely a continuation of a long-held stance. Even so, this is no guarantee that there will even be a market for GM crops within Britain itself.315 Thirdly, the official governmental stance may not reflect the concerns of British consumers and producers. The attitude of the British public would appear to be more favourable than other European neighbours. It is also one that would appear to be becoming more favourable over time. In 2003 42% of Britons surveyed believed the risks of GMOs did not outweigh the benefits. By 2011, this figure was 27%.316

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Wilkinson, “British farmers could grow GM crops after Brexit reveals minister,” The Telegraph, 26th October 2016, http://www.telegraph.co.uk/news/2016/10/26/british-farmers-could-grow-gm-crops-afterbrexit-reveals-ministe/ (accessed 10th December 2016). 312 Ian Hodge, 2016. 313 Jon Entine & David Warmflash, 2016. 314 Jon Entine & David Warmflash,, 2016. 315 Tom Bawden, “Would Brexit be good or bad for the prospect of GM crops in Britain?” iNews, 22nd June 2016, https://inews.co.uk/essentials/news/science/brexit-good-bad-prospect-gm-crops-britain/ , (accessed 6th December 2016). 316 Jon Entine & David Warmflash, 2016. 311

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However, even this suggests that around one in four of those surveyed were opposed to their use. This was a point raised by Claire Oxborrow, farming campaigner at Friends of the Earth, who highlighted that ‘Ministers will know how vital the European market is to British farmers, so any change in policy to allow GM crops to be grown here would be a devastating own goal’.317 Simultaneously, the government will have to balance this with the expectation from famers who voted ‘Leave’ that a more liberal policy would be pursued. Fourthly, it is far from clear that the uncertainty in the wake of the Brexit vote will be an optimum environment for investment in GMOs.318 Certainly, this was the underlying message of the statement released by EuropaBio which promotes the use of biotechnology to various groups: ‘While respecting the decision of British voters, EuropaBio and its members are deeply concerned with the result of the UK referendum to leave the European Union. As witnessed since this result became clear, we are entering a period of uncertainty and unpredictability for the EU economic and political system that may have effects both on the biotech industry in Europe, and on the broader European business community’.319 Moreover, they urged negotiators to prioritize ‘limiting the detrimental effects on the competitiveness and regulatory ecosystem of the biotech industry and of innovation on both sides of the Channel’.320 But is not purely the uncertain political climate that may impact the extent of research and promotion of GMOs. As has been stated, the notable hostility among EU Member States towards GMOs means funding from their scientific bodies will be unlikely. Britain has already a history in undertaking research and leaving the EU will only increase these opportunities, but these endeavors are unlikely to receive funding from Member States opposed to the use of GMOs. The EU contribution to scientific development within the UK has been well-documented and was a crucial point asserted by Remain campaigners. According to the BBC, UK-based scientists have won about a fifth of all grants from the top-tier programs run by the European Research Council, and in the period from 2007 to 2013 received €8.8 billion in research funding.321 With the loss of such a major source of funding, it is unclear whether British research into GMOs will be able to advance regardless of the support provided by legislation. Britain’s relative lack of farmland, compared to that needed for the lengthy and expensive experimentation, also leaves the UK at a significantly disadvantaged position.322 Much of the time and expense is spent on ensuring the necessity that GM crops are tailored to the environment in which they are grown. This is also why GM crops cannot be literally uprooted from other nations, for instance North or South America, and utilized in British climates.323 Penny Maplestone, chief executive of the British Society of Plant Breeders, has summarized the geographical constraints that would prevent Britain from becoming a ‘powerhouse’ in the production of GM crops

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Wilkinson, 2016. Entine & Warmflash,,2016. 319 Entine & Warmflash, 2016. 320 Entine & Warmflash, 2016. 321 Entine & Warmflash, 2016. 322 Bawden, 2016. 323 Bawden, 2016. 318

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such as soybeans, corn, and cotton that have propelled North American and South American growers. Instead, ‘our major crop here is wheat, predominately winter wheat and that is not really a GM product in the rest of the world’.324 Significant domestic development must be undertaken to tailor the foreign GMOs to the primary UK crops and growing conditions. Further, it must still be determined whether or not there will there be a market for GMO crops and products in Britain. Such a limited potential market, which in a worst-case scenario is limited to largely England itself,325 is unlikely to draw investment.326 Considering the progressive attitude of British policy makers towards GMOs and pressure from ‘Leave’ voters to liberalize strict EU agricultural regulations, it is likely that the UK will allow an increased use of GMO crops. The UK could look to the model of another nation as a model for GMO policy development. American GMO policy follows a case-by-case approach, allowing a greater flexibility to policy making.327 Nonetheless, pursuing a more liberal policy regarding GM crops will first need to distil the concerns outlined above. The most organised opposition outside of Parliament is likely to come from environmental groups. Their arguments are not to be dismissed lightly. The solution to quieting the majority of concerns can be from the widespread publicizing of expert scientific opinion that demonstrates the health and environmental safety of GMO crops. In 2015, Lord John Krebs, argued that GM crops may in fact be more sustainable than conventional crops because they can be grown without tilling in a process which releases a reduced amount of carbon dioxide into the atmosphere.328 One potential plan of action has been outlined by Dieter Helm and consists of four major steps. The first of these will be to ban exports of GMOs, thereby ‘diverting production for exports to home consumption’. This in turn would also greatly increase security of food supply. The second step would be to ‘divert land use away from crops produced for other purposes, notably biofuels, solar farms and leisure activities like game shooting, horse riding and so on’. Step three would focus on developing home production of GMOs which at this point would be vital for achieving British selfsufficiency. Step four would work towards a similar aim of self-sufficiency. In this case, it would implement taxation and other regulatory measures to reduce meat production and consumption relative to cereals and vegetarian diets. The plan would be completed by the introduction of extremely high import tariffs.329 However, the NFU does not support any of these policies, instead advocating increased self-sufficiency before exploring possibilities for trade rather than increased production for domestic markets.330 Further, such a plan of action would likely prove highly unpopular and politically contentious at each stage.

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Entine & Warmflash, 2016. Bawden, 2016. 326 Entine & Warmflash, 2016. 327 Entine & Warmflash, 2016. 328 Entine & Warmflash, 2016. 329 Dieter Helm, 2016. 330 Dieter Helm, 2016. 325

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The desire for greater regulatory autonomy was a major motivation for many farmers who voted ‘Leave’. Therefore, the government would be well-advised to provide them with the independence they desire. A priority for policy will also need to address how to encourage investment in GM crops if it is to become a viable industry. This could be worked towards by providing some sense of security to investment such as through ‘predictable and workable approval systems’. It will inevitably involve negotiation with Brussels as the viability of the European market will be essential to increasing competitiveness.331 6.2!

Migrant Labour The most sensitive issue hanging over the Brexit vote was the free movement of migrant labour across EU borders. The victory for Leave has been interpreted generally as indicating a UK desire for greater immigration control. While different groups have positioned themselves at different extremities, the general stance of Parliament is one committed to reducing or at least limiting the numbers of migrants entering the British Isles. In a 2015 letter to Donald Tusk, President of the European Council, David Cameron wrote ‘Britain has always been an open, trading nation, and we do not want to change that. But we do want to find arrangements to allow a Member State like the UK to restore a sense of fairness to our immigration system and to reduce the current very high level of population flows from within the EU into the UK’.332 Under the TFEU Article 45, the free movement of ‘workers’ is permitted within the EU single market. Controversy surrounding the article has increased since the accession of the former communist Eastern European states with their lower standards of living, leading to high migration flows into the UK. In general, the EU’s external trade agreements do not contain provisions for free movement of labour, with the exception of agreements between the four EFTA states, concluded before the rise in migration from Eastern Europe.333 The agricultural sector may prove to be the sector most impacted by a reduction in the free movement of labour. Migrants, particularly from Poland, are vital to the agricultural workforce. Polish workers form the largest proportion of foreign-born workers, with the next top two foreign-born workers also originating from EU countries.334 While EU workers form only 5% of the country’s workforce, they constitute 65% of those employed in agriculture, according to the Office for National

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HM Government, Review of the Balance of Competences between the United Kingdom and the European Union Animal Health and Welfare and Food Safety Report, July 2013, p.34. 332 Cameron, D. (2015). A New Settlement for the United Kingdom in a Reformed European Union, Letter to His Excellency Mr. Donald Tusk, 10 Downing Street, 10 November, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/475679/Donald_Tusk_lett er.pdf. (accessed 6th December 2016). 333 EU/Swiss agreement on free movement was concluded in 2002: Official Journal L 114, 30/04/2002 P. 0006 – 0072. 334 Rachel Marangozov, “Migrants Don’t ‘Take Jobs’ And Many Sectors Would Struggle Without Them,” The Huffington Post, 11th October 2016, http://www.huffingtonpost.co.uk/rachelmarangozov/immigration-uk-economy_b_12426138.html, (accessed 12th December 2016).

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! Statistics, and this figure does not even include seasonal workers.335 When the Seasonal Agricultural Workers Scheme (SAWS) scheme ended in 2012 it had assisted in the employment of 22,371 Bulgarians and Romanians within the UK.336 The fact that agriculture accounts for less than 1% of the British workforce may contribute to the under appreciation of the labour required to drive the agricultural sector. However, this is all the more reason why the EU proved so important to the sector. In 2015 the total number of British people working in agriculture was 476,000.337 Agricultural work is often more suited to the preferences of migrant workers than British workers, being temporary, flexible, mobile, and seasonal. The employment of migrant workers also appeals to British farmers as a means to decrease the costs of wages in this sector, already heavily subsidized by EU payments. “It is only the migrant labour that is keeping the food industry afloat,” said George Atwall, the regional head of the Bakers, Food and Allied Workers Union, who considered the ‘British jobs for British workers’ rhetoric of the Brexit campaign ‘a fantasy’ within this sector.338 Migrant workers are also essential to pig and poultry operations. Moreover, a survey by the Royal Association of British Dairy Farmers from 2014 found that a third employed migrant staff, with over half from Poland.339 In light of the situation the RABDF policy director Tim Brigstocke commented that the ‘RABDF believes the threat to EU-labour is not only real to dairy farming, but throughout the supply chain from abattoir workers to food processors’.340 However, Dr. Rolfe has argued that in more recent years, as EU migrants have become more skilled and their English improved, their career aspirations have extended beyond agriculture. Even before the Brexit vote in June 2016, the Migration Advisory Committee was investigating the viability of Turkey and Russia to provide temporary workers.341 Growing concerns for a migrant labour shortage within the agricultural sector have been dismissed by the Immigration Minister Robert Goodwill who highlighted that ‘the number of workers from the countries in eastern and central Europe…are also up year on year’.342 This statement was a response to a report from the National Farmers’ Union that demonstrated approximately half of the companies providing labour to the UK farms were unable to meet demand for the period July to September.343

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Jez Fredenburgh, “Analysis: Farming’s access to labour if the UK left the EU,” Farmers Weekly, 20th May 2016, http://www.fwi.co.uk/news/analysis-farmings-access-to-labour-if-the-UK-left-the-eu.htm, (accessed 14th December 2016). 336 Fredenburgh, 2016. 337 DEFRA, Farming Statistics Final crop areas, yields, livestock populations and agricultural workforce At June 2015 - United Kingdom, p.2. 338 Joshua Chaffin, “Businesses fear losing Polish migrants after Brexit,” The Financial Times, 2nd November 2016, https://www.ft.com/content/209b0f44-a036-11e6-891e-abe238dee8e2, (accessed 16th December 2016). 339 Fredenburgh, 2016. 340 Abi Kay, “Minister denies Brexit has had impact on migrant labour,” FG Insight, 2nd December 2016, https://www.fginsight.com/news/minister-denies-brexit-has-had-an-impact-on-migrant-labour-17161, (accessed 17th December 2016). 341 Fredenburgh, 2016. 342 Kay, 2016. 343 Kay, 2016. 335

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Thus Britain needs to source migrant workers in order to keep the agricultural sector afloat, whether they are from Europe or outside it. Governmental investigations into the numbers required began in December 2016, working with the Department for Environment, Food, and Rural Affairs (DEFRA) to do so.344 Even at this early stage, Ian Wright, chair of the Food and Drink Federation emphasized that it was fast becoming evident that the number of migrants required to work in the food and drink manufacturing sector ‘would run into the tens of thousands’.345 This has implications for the promises made at various points by the Conservative party to reduce net immigration. For instance, Theresa May’s intention, first announced in July 2016, to get net migration into the tens of thousands.346 A good direction for policy would be in moving towards the introduction of seasonal work permits, to meet the demand for migrant workers within agriculture. In December 2016, MPs were already considering such possibilities for instance in bringing back schemes such as SAWS. The re-introduction of SAWS is a viable policy as it is not dependent on the outcome of the ensuing trade deals. It would also be far more palatable for ardent Leave voters as well as UKIP as it would only permit temporary workers, as has been highlighted by Catherine Barnard, the Professor of EU Law and Labour at the University of Cambridge. However, Professor Barnard also raises the point that this would not solve the likely shortage in permanent labour.347 Furthermore, such plans have thus far been considered only in the context of a ‘soft’ Brexit, and therefore are likely to be affected by the attitude of the government to other issues relating to the nation’s withdrawal from the EU, especially concerning access to the single market. Already suggestions from the Brexit secretary, David Davis that Britain could continue paying the EU in exchange for single market access has been criticised by UKIP member Gerard Batten MEP who asserted ‘it is ridiculous to offer to pay to trade with the EU’ when ‘every country in the world has access to the single market’.348 Batten’s opposition highlights a significant and well-established obstacle to negotiating the acceptance of migrant labour, particularly in light of Leave sentiment, expressed most extremely in the sporadic outbursts of xenophobia. Late in 2016, a TESCO boss sparked ‘outrage’ for advocating the retention of freedom of movement. He insisted that ‘Industries like the agricultural industry, picking and packing fruit and veg, and meat, are heavily dependent on migrant workers who are here 52 weeks a year’.349 John Mann, Labour MP, responded that British workers would be willing to

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Beth Rigby, “Government working to avoid labour shortage post-Brexit,” Sky News, 16th December 2016, http://news.sky.com/story/government-working-to-avoid-labour-shortages-post-brexit-10697547, (accessed 18th December 2016). 345 Rigby, 2016. 346 “PM: Net Migration Should Be Tens of Thousands,” Sky News, 20th July 2016, http://news.sky.com/story/pm-net-migration-should-be-tens-of-thousands-10506994, (accessed 6th December 2016). 347 Fredenburgh, 2016. 348 Brendan Cole, “Ministers consider low-skilled EU migration plans to stop labour shortages postBrexit,” International Business Times, 2nd December 2016, http://www.ibtimes.co.uk/ministers-considerlow-skilled-eu-migration-plans-stop-labour-shortages-post-brexit-1594504 , (accessed 18th December 2016). 349 Harry Cole, “Every Migrant Helps: Tesco boss sparks outrage by demanding Britain keeps flow of cheap European labour despite Brexit vote,” The Sun, 25th October 2016, 344

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! do these jobs for a decent wage.350 However, considering the unlikelihood of agricultural wages improving after the withdrawal of CAP funding, this is not a state of affairs that will change soon. The controversy nevertheless highlights the need to appease and pacify the fears of some of the British public. This is even more pressing considering that the possibility of exchanging freedom of movement for trade market access, and thus sharing a similar situation to countries such as Norway and Switzerland, (the EEA and EFTA Deals respectively) has not been entirely discounted. Furthermore, such a deal may prove essential in order to allow a sufficient number of migrant agricultural workers. Another policy direction would be towards a series of bilateral trade agreements which would mean that all workers entering the UK would have to apply for visas. This would appease the Leave voters concerned with levels of immigration. However, a study by Oxford’s Migration Observatory for the Financial Times found that 96% of EU workers now employed in agriculture would fail the current visa requirement.351 More investigation is perhaps needed to ascertain why such a high percentage of workers would fail current visa requirements. The extremely high rate may suggest that such requirements are in need of updating. A solution, therefore, may be the need for an alternative visa with differing requirements tailored for agricultural workers. 6.3!

Animal Welfare Leave campaigners and members of the farming sector352 have raised the point that withdrawal from the EU would enable the United Kingdom to liberalise prescriptive EU policies. Any such decision will need to consider both the internal economic and social impact, as well as the fact that increasing divergence from EU policy will likely increase the cost of trade with the EU for importers and exporters, for instance the costs associated with meeting differing regulations, inspections, permits etc. In light of the likelihood of this reality, in some cases it is not immediately clear whether this would be advantageous or even necessary. Animal Welfare provides one of these areas. The DEFRA Minister has said that ‘We would do far better as a country if we ended the supremacy of EU law and actually shaped new, fresh thinking and created policies that would really deliver for our agriculture’.353 Yet it seems illogical to dismantle the legislation in this area both for its comprehensiveness and the likely backlash from animal rights organisations. At the moment, EU legislation protecting the rights and welfare of animals is among the most comprehensive anywhere. The regulations are outlined in the EU Animal

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Welfare Strategy 2012-2015. More specifically the Council Directive 98/58/EC covers the minimum standards for the protection of all farmed animals, for instance. There are also directives concerning the welfare of animals while travelling within the EU as well as directives on individual species from calves to pigs. In addition to this, the EU is a signatory to the European Convention for the Protection of Animals kept for farming purposes. International guidelines on risk assessments for animal welfare were laid out in January 2012 by EFSA’s Panel on Animal Health and Welfare (AHAW).354 Looking to the future, the EU has established itself as a pioneering institution regarding animal welfare; EFSA is currently undertaking research to develop scientifically measurable animal welfare indicators for their inclusion in subsequent EU recommendations. This work is innovative in placing the differing factors that can affect the welfare of animals at the centre of its analysis, rather than focusing on how animals respond to welfare.355 Other evidence of its forward-thinking is found in Article 13 of the Lisbon Treaty from 2009 which outlined a new commitment to animal welfare, and more importantly, was the first EU treaty to regard animals as ‘sentient beings’.356 This article committed signatories to upholding the highest standards of animal welfare while simultaneously respecting other legislation and cultural beliefs and rituals.357 However, leaving the EU will not throw the entirety of animal welfare legislation followed in the UK into re-assessment. There is a strand of national animal welfare legislation that will not be affected by the process of leaving. In the relevant body of legislation, animal welfare is covered in the Animal Welfare Act in England and Wales, the Animal Health and Welfare (Scotland) Act, and the Welfare of Animals Act for Northern Ireland, all passed in 2011. UK legislation is often derived from the model set at EU level requirements.358 The legislation the UK will no longer be bound by upon leaving is the European law, a cumulative body of legislation consisting of around 44 different laws. Within this, there are seventeen laws that set standards on the way that farm animals are produced, transported and slaughtered.359 Thus as with other aspects of EU legislation, there is a degree of flexibility as to possible policies. George Eustice has already begun investigating potential avenues. In February 2016 he expressed a wish ‘to see high levels of animal welfare on farms rewarded in the same way farmers are rewarded for undertaking environmental measures’. That is, essentially to include animal welfare as part of the cross-compliance

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“Animal Welfare,” European Food Safety Authority, https://www.efsa.europa.eu/en/topics/topic/animalwelfare (accessed 8th December 2016). 355 “Animal Welfare,” European Food Safety Authority, https://www.efsa.europa.eu/en/topics/topic/animalwelfare (accessed 8th December 2016). 356 Jason Gittins, “What next for animal welfare in the UK after Brexit?” August 11th 2016, http://www.adas.uk/News/what-next-for-animal-welfare-in-the-uk-after-brexit (accessed 8th December 2016). 357 Jason Gittins, 2016. 358 HM Government, Review of the Balance of Competences between the United Kingdom and the European Union Animal Health and Welfare and Food Safety Report, July 2013, p.3. 359 Pete Wedderburn, “Will Brexit damage animal welfare in the UK?” The Daily Telegraph, July 12th 2016, http://www.telegraph.co.uk/pets/news-features/will-brexit-damage-animal-welfarein-the-uk/ (accessed 7th December 2016).

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and agri-environmental schemes from the EU that he would like to see continued in the UK.360 However, there are groups who would push for the dilution of current animal welfare legislation which would be met with fierce opposition from animal welfare organisations.361 For this reason, Adas, the UK’s largest independent agricultural and environmental consultancy362, considered it ‘unlikely that current minimum animal welfare legislation will be ‘watered-down’ in the UK’. 363 With Britain likely to be seeking more trade partners outside of the EU, this has the potential to cause an increase in lower welfare imports, which is likely to upset animal welfare organisations and possibly even potential consumers. A concern for negotiation in this regard is therefore to push in negotiation for the ability of the UK to limit the amount of cheap but lower welfare goods. Withdrawal from the EU presents the opportunity equally to extend current protective legislation. This may include the stopping live animal exports, introducing compulsory CCTV in slaughterhouses, or banning the slaughter of farm animals without stunning.364 Indeed, securing such a ban may prove essential to allowing the UK to potentially extend current animal welfare legislation. This is because a major obstacle for this is the possibility of cheaper lower welfare goods undermining domestic farming.365 In any case, British consumers are unlikely to respond favourably to a greater amount of lower-welfare goods on the market. This is because numerous studies have shown British consumers have a ‘particular concern’ for the welfare of animals.366 Increasing animal welfare standards on British farms is highly likely to further endear the consuming public to ‘buy British’. A Nielsen study found that ‘a brand’s country of origin is at least as important as other purchasing criteria [59%], such as price and quality. Factors such as price, deals, familiarity and variety are more important to consumers when choosing global brands, whereas product benefits, environmentally-friendly considerations and, of course, national pride are bigger factors for them when deciding to buy local brands’.367 Over half (55%) of U.K respondents prefer buying local brands because they support local

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Johann Tasker, 2016. Philip Lymbery, “What will Brexit mean for animal welfare?” Compassion in World Farming, http://www.ciwf.org.uk/philip-lymbery/blog/2016/06/what-will-brexit-mean-for-animal-welfare, (accessed 8th December 2016). 362 ADAS, “Home”, http://www.adas.uk/ (accessed 28th December 2016). 363 Jason Gittins, “What next for animal welfare in the UK after Brexit?” August 11th 2016, http://www.adas.uk/News/what-next-for-animal-welfare-in-the-uk-after-brexit (accessed 8th December 2016). 364 Pete Wedderburn, “Will Brexit damage animal welfare in the UK?” The Daily Telegraph, July 12th 2016, http://www.telegraph.co.uk/pets/news-features/will-brexit-damage-animal-welfarein-the-uk/ (accessed 7th December 2016). 365 Philip Lymbery. 366 HM Government, Review of the Balance of Competences between the United Kingdom and the European Union Animal Health and Welfare and Food Safety Report, July 2013, p.8. 367 Nielsen, “Made in Britain? Six-in-ten UK consumers say country of origin is one of most important factors in brand choice", MAY 11TH 2016, http://www.nielsen.com/uk/en/press-room/2016/nielsenbrand-origins.html, (accessed 12th December 2016). 361

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businesses (which can help the economy), while 41% say local brands are usually more trustworthy and 36% say local brands are more attuned to their personal needs/tastes.368 Similarly, a YouGov survey of 2012 which surveyed 2110 UK adults aged above 16, found that 59% of consumers prefer to buy UK-sourced meat and poultry compared with imported meat.369Crucially, a quarter of those surveyed were happy to pay more for locally sourced products, with 34% consumers buying meat based on its national origin. One of the crucial conclusions of these various surveys is that there clearly exists a largely dormant demand for locally-grown goods that would appear to be largely unmet as well as, in the case of the last survey, a foreign market for British goods. For instance, the YouGov survey found that despite supermarkets accounting for 74% of consumers’ meat purchases and 78% of poultry purchases, 20% of those surveyed reported trying to buy meat and poultry at other supermarkets to find locally reared products. However, the value of the ‘Made in Britain’ label is not limited to the domestic market. A 2014 Article from the Centre for Economics and Business Research reporting on another YouGov survey of 7,610 consumers highlighted how ‘overseas consumers will pay premium for British branded goods, over English, Scottish or Welsh’. This survey polled consumers across eight countries (the US, Germany, France, Republic of Ireland, Brazil, South Africa, China and Qatar) and found that 64% of these consumers, particularly those in new and emerging markets were more inclined to buy a product labelled ‘Made in Britain’. This has implications for potential trade deals. This data suggests that a focus on developing, as opposed to developed markets, would be more beneficial as the former has a greater inclination towards British goods (31% of customers in emerging markets have knowingly paid a premium for British goods, as opposed to 14% for developed economies). According to the Centre for Economics and Business Research (CEBR), British exporters could unlock up to £2.1 billion by branding their products as ‘Made in Britain’: ‘the highest gains, in the order of £0.8 billion, would be obtained for exports to the USA, the market to which the UK exports the most in absolute terms, followed closely by £0.7 billion to China, a country to which UK exports have accelerated rapidly over the last decade’.370 Thus, in order to best exploit the demand from the domestic and these foreign markets, the UK would be well-advised to pursue a policy which would allow Britain to limit the amount of lower welfare imports. These studies have demonstrated that both sets of markets are willing to pay a premium for the purchase of British goods, and certainly within the UK, the knowledge that the animal products were ethically extracted would further increase their appeal. With this consideration in mind, it is worth noting that were the UK to pursue an EEA-type deal, it is unlikely that Britain would be allowed to restrict lower welfare imports.371 The situation is the same for possible trade deals

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Nielsen, 2016. Mike Stones, “Food manufacturers could exploit sourced in Britain flag more effectively”, Food Manufacture, August 22nd 2012, http://www.foodmanufacture.co.uk/Business-News/Foodmanufacturers-could-exploit-sourced-in-Britain-flag-more-effectively , (accessed 11th December 2016). 370 Centre for Economics and Business Research, “Value of ‘Made in Britain,” Centre for Economics and Business Research, 3rd October 2014, https://www.cebr.com/reports/value-of-made-in-britain/, (accessed 20th December 2016). 371 Lymbery, 2016. 369

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! with the World Trade Organization. 372 There would be greater opportunities to improve farm animal welfare in a series of bilateral trade agreements, but only if significant priority was given to the issue in negotiations, for instance, to insist on the ability of the UK to restrict lower welfare imports.373 There are several concerns that must be borne in mind when constructing a coherent stance on this matter, including the potential spread of disease. The EU measures to promote animal welfare and sanitation have not prevented the spread of viruses such as the Schmallenberg Virus. This virus first reached the UK in 2012374 and according to the Food Standards Agency Board, each year one million people in the UK suffer from a foodborne illness.375

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Lymbery, 2016. Lymbery, 2016. 374 HM Government, Review of the Balance of Competences between the United Kingdom and the European Union Animal Health and Welfare and Food Safety Report, July 2013, p.21. 375 HM Government, Review of the Balance of Competences between the United Kingdom and the European Union Animal Health and Welfare and Food Safety Report, July 2013, p.22. 373

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7.0!

IMPLICATIONS FOR CAMBRIDGESHIRE

Changes to the CAP, trade agreements, and related regulations will have direct and indirect effects on farmers and general citizens of Camrbidgeshire. The urban center of Cambridge City is surrounded by a region filled with farmland and rural communities. East Cambridgeshire has some of the richest farmland in Europe and agriculture remains an important source of local employment and economic wealth. Over 86% of the land in East Cambridgeshire is in agricultural use.376 The proximity of East Cambridgeshire to Cambridge City, combined with good road and rail network access make markets accessible to farmers. Agriculture also accounts for the vast majority of land use in Fenland, Huntingdon, and South Cambridgeshire, mostly used for field crops. One fifth of the land within Cambridge City is also under agricultural use, mainly from Green Belt land surrounding the city center.377 In many ways the dichotomy between the UK and EU is mirrored within Cambridgeshire. The population of the Cambridge City is largely urbanized with the public primarily concerned with food prices, rural amenity, wildlife conservation and public access than the rural economy. Residents value these public goods to varying degrees, in addition to the access to safe, accessible food. Although farmers are a minority, all residents are affected by the actions of farmers and the related policies that affect them. The high productivity of the land in Cambridgeshire implies that most farmers will be viable in the absence of direct payments, and the aesthetic of the landscape and land use is unlikely to vary greatly with changes in farm support. However, if Pillar II payments that support agri-environmental schemes are removed, nature reserves such as The Broads National Park will receive less support. Consumers are also likely to see an increase in the price of goods imported from the EU, such as cheese, fruit, and wine, but a decrease in the price of common goods like sugar, that will face competition from goods imported from third countries in the advent of FTAs. If the UK liberalizes its GMO, animal welfare, and pesticide regulations, precautious consumers that are opposed to the liberalized regulations will have to buy food that is certified organic, often with a price premium.

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Cambridgeshire City Council. 2010. Cambridgeshire Land Use Analysis. Ibid.

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CONCLUSION

A revised agricultural policy should focus on paying public subsidy to farmers in return for public goods, based on national, regional and local priorities. Direct area based payments that are not tied to the provision of public goods should gradually be eliminated. The level and focus of support for public goods in the agricultural sector must be designed in light of the agricultural trade agreements drafted, and vice versa. The UK government must recognize that the aspiration of securing FTA with thirdcountries and frictionless trade with the EU is unlikely. Any increase in trade liberalization will have implications on farm incomes and analysis must be conducted to determine which sensitive sectors should be protected, based on their public value. The UK GMO, pesticide and animal welfare regulations must also be reevaluated in light of national preferences and future trade agreements. The UK government must also consider implementing seasonal work permits or an alternative visa to meet the demand for migrant workers in the agricultural sector. Focus should be on the development of a sustainable approach to agriculture, in mind of the triple-bottom-line: environment, economy, and community. The approach considers the environment, protection of the resource base and its social value. Sustainable economy means enabling management by viable and successful trading businesses, while offering rewarding rural employment and livelihoods. A sustainable community implies that agriculture contributes to quality of life, identity, and culture, both locally and nationally. Brexit is an opportunity for the redirecting of UK agricultural policy. In the UK, rural landscapes are intertwined with national culture and identity. As such, it is not possible to start with a clean slate in devising the direction for post-Brexit agricultural policy. Over the past 43 years, CAP has reformed from focusing on food security and intensification to a more nationally differentiated policy, motivated by sustainability of the environment and livelihoods.

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BIBLIOGRAPHY & WORKS CITED

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CHAPTER VI

Students & Universities Writers: Olivia Elder (Editor) Rowena Bermingham Friedrich Gรถtz Roemer Sijmons Ariel Yardeni

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ABSTRACT This paper explores the impact of Brexit on tertiary students and universities. It recommends ways that UK universities can maintain and boost their competitiveness following Brexit, and suggests how the government can support them to achieve this. UK universities are an important and successful sector, attracting students from across the world, producing world-leading research and teaching, and making a significant contribution to the UKâ&#x20AC;&#x2122;s economy and society. The EU has played a vital role in supporting the success of UK universities: it has provided research funding, collaboration, and talent. Brexit is therefore perceived as a significant threat to the continued success of UK universities. At the same time, Brexit offers the opportunity to rethink university funding and policies outside of the EU framework. The government has promised to protect and promote opportunities for students, research and collaboration following Brexit. This paper examines the impact of Brexit in four key areas: fees and financing of education, migration and mobility of students (both to and from the UK), research (funding, collaboration and recruitment of academic staff), and the perception and reputation of UK universities. We analyse the pre-Brexit situation in each of these areas and identify the key risks and opportunities following Brexit. We then analyse possible outcomes and solutions, with reference to practices in other countries where appropriate. Each section concludes with a series of recommendations designed to secure and boost the strength of UK universities after Brexit. This chapter makes an important contribution within the Cambridge Brexit Report. The impact of Brexit on students, academics and the surrounding local economy are obviously key concerns in this university city.

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EXECUTIVE SUMMARY This paper concludes that: -! The EU plays a vital role in UK tertiary education. In total, 16% of research funding, 16% of academic staff, and 125,000 students come from the EU. Brexit therefore represents a significant potential threat to university budgets, research capacities and student numbers. -!

There is some evidence that Brexit is already having an effect on students and universities. The latest UCAS numbers suggest a 7% decline in the numbers of EU applicants for 2017-18. There is also anecdotal evidence of negative effects on research funding, collaboration and student perceptions that needs to be clarified and if necessary followed up on.

-!

Around 4.6% of UK universitiesâ&#x20AC;&#x2122; teaching income is directly associated with EU students. EU students also have a positive economic effect more broadly: Universities UK estimate that, in total, EU students generate ÂŁ2.2 billion for the economy.

-!

The effect of full harmonisation of EU and international student fees following Brexit would vary significantly across different clusters of institutions.

-!

The depreciation of sterling could make UK universities more financially competitive and attract more international students to come and study.

-!

Modelling of the financial effects of Brexit has so far rested on the assumption that all other factors will remain equal.

-!

In practice, maintaining student numbers at a financially sustainable level depends on maintaining a welcoming atmosphere for international students and not imposing new immigration restrictions.

-!

On balance, it makes sense to exclude students from overall net migration targets, and instead to count them separately and more accurately than at present. Counting students as part of a single headline migration figure is out of line with the UKâ&#x20AC;&#x2122;s competitors and does not reflect the (favourable) public perception of students. In addition, the current methods for assessing student numbers and in particular the numbers of students who over-stay their visas, are inadequate.

-!

Outward mobility brings significant benefits and boosts the employability of UK graduates. The UK is, however, already not fully realising these benefits, even within the structures of the EU due in part to a knowledge and action gap amongst UK students.

-!

At present, the UK is extremely internationally competitive in terms of its research impact and collaboration. 189


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The ending of EU freedom of movement is likely to impact the UKâ&#x20AC;&#x2122;s ability to recruit top academic staff.

-!

Ending access to Horizon 2020 and other European funding programmes would have a significant impact on university research funds.

-!

UK government research funding is currently low compared to international research competitors. It is below the targets set by the Organisation for Economic Cooperation and Development (OECD).

-!

There are particular concerns around Arts and Humanities funding. The UK government has so far given no guarantees about their funding similar to the guarantees given to scientific research.

-!

The reputation of universities plays a crucial role in student decisions about where to study.

-!

The role and significance of the EU varies across different disciplines and institutions. As one example of this, 20% of academic staff in the Russell Group are from the EU.

This paper recommends that: -! Students are excluded from UK net migration figures. -!

At the same time, the UK Government should work with universities to ensure a fair, transparent and rigorous student visa process and find ways to understand and accurately measure the numbers of students leaving at the end of their degree.

-!

The Government considers the value of international staff to universities and their teaching and research, and reforms the current immigration system so that it reflects the benefit of international researchers. This could take a number of forms, such as waiving visa requirements or having fast track visas for academic researchers.

-!

The Government makes continued access to Horizon 2020 and future European Framework Programmes a high priority in Brexit negotiations. If the UK does not become an Associated Country, it may still be able to access Framework Programme funding as a non-associated third country, and the Government should take steps to ensure this. The Government does need to be aware that without the UK around the table, the terms of the framework programmes and their funding may be liable to change: the UK has been particularly keen to ensure that funding is awarded on the basis of excellence. The Government needs to remain alert to these potential changes and consider how to respond. 190


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-!

The UK Government should commit itself to meeting or surpassing a target of dedicating 3% of GDP to research by 2020 to ensure that the UK does not fall behind its research competitors within the EU.

-!

UK Universities should consider lowering all international student fees (i.e. rather than just bringing EU student fees up to meet existing international fees). We, however, acknowledge the need for appropriate variation in international fee levels across different institutions.

-!

The UK Government should take steps to increase the outward mobility of UK students. This requires addressing the knowledge/action gap amongst UK students and acting early, promoting foreign language teaching in schools.

-!

The UK Government should strive to retain access to the Erasmus student exchange programme. It should also continue to support schemes such as the Marie SkĹ&#x201A;odowska-Curie Action for post-doctoral researchers.

-!

The UK Government should review current spending on Arts and Humanities and guarantee continued support and funding.

-!

The UK Government should also reassure researchers that the funding being used to underwrite Horizon 2020 and ESIF funding is new money and is not merely a reallocation of existing ring-fenced funding allocations for research.

-!

Both the Government and universities should explore alternative research networks and frameworks, within and beyond the EU, to ensure that international collaboration continues.

-!

Both the Government and universities should strategize how to continue to attract students from the EU and beyond and ensure that UK universities continue to be perceived as welcoming places to international students. Solutions might include increasing the number of scholarships for international students, and ensuring that information about fees and visa processes are clearly communicated.

-!

The Government should guarantee the status of EU students and staff already here as early as possible. Universities should support these students and staff and assist them with the process of applying for permanent residency where possible (for example by making students aware of the requirement for valid health insurance in order to obtain permanent residency).

-!

Whilst still a member of the EU, the UK should be treated as such in funding applications. The Government should take up any cases of universities and researchers who suspect discrimination.

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The Government clearly communicates to students and universities any relevant transitional arrangements made as part of the Article 50 process.

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ACKNOWLEDGEMENTS The writers and editor of this paper are extremely grateful to Davide Martino and Jun Pang, for organising the conference â&#x20AC;&#x2DC;Cambridge and Brexit: Discussing our Futureâ&#x20AC;&#x2122; at which this paper was first presented; to Professor Ian Martin, Dr Julie Smith and Harrison Carter for their insightful responses to our paper at this conference; to Robert Lowson for additional information on the European framework programmes and for giving us sight of his report on them; to all of the participants at the roundtable at the conference for giving us additional food for thought; and to Anna Stansbury (TWS Trustee) for her substantive comments on a draft of the paper.

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TABLE OF CONTENTS 1. Introduction

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2. Student Fees and Finance

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3. Migration and Mobility of Students

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4. Research: Funding, Collaboration, and Availability of Academic Personnel

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5. Perception and Reputation of UK universities

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6. Conclusion

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7. Appendix

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8. Bibliography & Works Cited

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1. INTRODUCTION 1.1 Context The UK has a world-class tertiary education sector. In the 2016-17 Times Higher Education world university rankings, Oxford was ranked as the best university in the world. Cambridge and Imperial College London were also ranked within the top 10. In total, British universities accounted for 32 of the top 200 places in the table, a number only exceeded by the USA.378 The strength of the UK’s tertiary education sector brings diverse benefits to the country at both a global and a local level: universities stimulate local economies by bringing jobs and encouraging investment, and are a crucial part of the UK’s ‘soft power’ abroad.379,380 The UK tertiary education sector faces stiff global competition, not only from traditional Anglophone rivals, the USA, Canada and Australia but, increasingly, from other European countries such as Germany and the Netherlands who offer growing numbers of courses in English.381 In order to sustain their competitiveness in the global tertiary education market, UK universities rely on international funding, access and collaboration.382 The EU has played an important role in facilitating this: it has given UK universities access to large amounts of funding and the free movement principle has made it easier to recruit top students and academics.383 Higher education institutions and students therefore perceive Brexit as a significant potential threat to the competitiveness and sustained excellence of UK universities.384 The evidence suggests that support for Britain remaining a member of the EU was

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‘World University Rankings 2016-17’, Times Higher Education, https://www.timeshighereducation.com/world-university-rankings/2017 (September 21, 2016) 379 Universities UK, ‘The Impact of Universities on the UK Economy’, http://www.universitiesuk.ac.uk/policy-and-analysis/reports/Documents/2014/the-impact-of-universitieson-the-uk-economy.pdf (April 2014) 380 The 2015 ComRes report on global ‘soft power’ identified the UK’s world-class higher education system as one significant factor behind its top spot in the rankings: ComRes, ‘The Soft Power 30’, http://comresglobal.com/wp-content/uploads/2015/07/Report_Final-published.pdf (2015) 381 Helen Warrell, ‘UK universities face more competition from European rivals’, Financial Times, https://www.ft.com/content/3dedb442-6771-11e5-a57f-21b88f7d973f (September 30 2015) 382 Universities UK, ‘International students in higher education’, http://www.universitiesuk.ac.uk/policyand-analysis/reports/Documents/2014/international-students-in-higher-education.pdf (September 2014) 383 ‘How does the EU affect universities and students?’ http://www.thecompleteuniversityguide.co.uk/international/eu-referendum-how-does-the-europeanunion-affect-universities-and-students/ (June 2016) 384 Sue Hubble David Foster, Laura Abreu, House of Commons Library, ‘Effect of exiting the EU on higher education’ http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CDP-2016-0224 (November 21, 2016)

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significantly higher amongst university students and academics than amongst the general population.385, 386 At the same time, however, Brexit provides the UK with an opportunity to rethink its migration and funding patterns and strategies outside of the EU framework. 387 The challenge lies in using this opportunity to sustain, and increase, the competitiveness and attractiveness of UK universities. 1.2 Aims of Paper In light of this situation, the aims of this paper are twofold: 1.! The paper seeks to understand what is liable to change for students and universities following Brexit. 2.! The paper will provide a set of policy recommendations for how the UK’s higher education sector can retain, and boost, its competitiveness after Brexit. Although we consider the impact of Brexit on a range of different stakeholders, both institutional and individual, this paper is particularly interested in identifying the impact of Brexit on student stakeholders. Students are a crucial, and mobile, resource in the tertiary education sector, and changes in their choices and perceptions could have a significant impact on UK universities. They are therefore a focus of all the themes that this paper addresses. Brexit does not impact all groups of students equally. This paper acknowledges that the impact and challenges of Brexit vary across different types of universities; across disciplines; between undergraduate and postgraduate students; and between British, EU and international students. 1.3 Structure and Themes of Paper The paper is divided into four sections, each of which addresses one of the themes that we have identified as key to understanding the impact of Brexit on students and, through them, universities: 1) Fees and Finance: this section examines the possible changes to the cost and financing of tertiary education after Brexit. It considers how these changes could affect student decisions about where to study and suggests strategies for how to ensure the continued financial competitiveness and sustainability of UK universities.

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G.Reid, ‘Science and Brexit’, Science, DOI: 10.1126/science.aah4245 (June 27 2016) ‘Local voting figures shed new light on EU referendum’, BBC News, http://www.bbc.co.uk/news/ukpolitics-38762034 (February 6 2017). 387 Universities UK, ‘What should be the government’s priorities for exit negotiations and policy development to maximise the contribution of british universities to a successful and global UK?’ http://www.universitiesuk.ac.uk/policy-and-analysis/reports/Documents/2017/government-brexitpriorities-universities.pdf (February 2017) 386

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2) Migration and Mobility: this section examines the impact of Brexit on both the ability of international students to come to Britain and on the ability of British students to study abroad. It also considers the transition of students into the UK job market. It assesses the benefits of inward and outward student mobility to UK society, and makes recommendations for how to retain these after Brexit. 3) Research: this section recognises that the quality of universities’ research is a vital part of their attractiveness to students. The section outlines the potential changes and challenges of Brexit on three elements of research excellence (funding, international collaboration and the mobility and recruitment of academic personnel) and provides suggestions for how to sustain these after Brexit. 4) Perception and Reputation: though less concrete and quantifiable than the aspects addressed in the other sections, perception and reputation of universities are crucial factors in students’ decisions about where to study. This section highlights the concern that the perception and reputation of UK universities may be impacted even before Brexit is implemented, and provides suggestions for how to mitigate against this. Each section begins by providing an analysis of the current, pre-Brexit, situation and identifying what is liable to change after Britain leaves the EU. We then assess possible strategies and scenarios for Britain’s future relationship with Europe, drawing on examples and models from other countries where appropriate. Each section culminates with a set of policy proposals aimed at maintaining the attractiveness and benefits of the UK’s tertiary education sector for students, and ensuring that UK universities retain their global competitiveness. 1.4 Unknowns and Uncertainties One recurring difficulty in this paper is the high level of uncertainty over Britain’s future relationship with Europe. The government published a white paper outlining its negotiating aims on 2nd February 2017, its most detailed definition of Brexit and its consequences to date.388 Two of the most significant aspects of the government’s white paper for our paper are: the ending of freedom of movement and the commitment to controlling immigration; the commitment to maintain world-leading science and research. We have attempted to take account of these aims and principles in assessing the likely impact of Brexit on students and universities and in making our policy recommendations. Even within these broad aims and principles, however, much remains uncertain. The uncertainty extends to the current, pre-Brexit, situation: in a number of places, we indicate where there is an insufficient understanding of the status quo and where further analysis and understanding would be beneficial to future policy decisions. We also stress that the uncertainty over Britain’s future relationship with Europe may have

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‘The United Kingdom’s exit from and partnership with the EU’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_King doms_exit_from_and_partnership_with_the_EU_Web.pdf (February 2 2017)

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consequences in and of itself, impacting studentsâ&#x20AC;&#x2122; decisions on where to study and universitiesâ&#x20AC;&#x2122; access to funding even before Brexit is implemented.

1.5 Methods and Sources In addition to drawing from existing data sources and models, we have also conducted our own survey of 331 students, graduates and applicants, circulated through social media and university mailing lists. The survey targeted British, EU and international students who had either studied at, applied to or graduated from a UK University in the past 5 years. The survey sought to understand both what currently drives students to apply to universities in the UK, and what students perceive the impact of Brexit will be on themselves and on higher education institutions. The list of questions from the survey is included in the Appendix, and the results are distributed across the relevant sections of the paper. Throughout this paper, a reference to EU students includes all students from the EEA and Switzerland excluding the UK.

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2. STUDENT FEES AND FINANCE 2.1 Introduction In this chapter the impact of Brexit on the costs and financing of tertiary education is explored. How will the UK leaving the European Union affect the costs and funding of tertiary education? Will studying in the UK still appeal to (non-UK) students or will they move to universities outside of the UK? Will UK universities be left financially worse off? To answer these questions, we first assess the current situation of financing tertiary education. Sources of income dependent on or influenced by the UK’s membership of the EU are identified. An assessment of Britain’s (financial) competitiveness is then given to contextualise a post-Brexit financing of education. This is followed up by an assessment of existing models of the direct and indirect consequences of Brexit on the financial situation of UK universities. The section concludes with a set of policy proposals focused around how the UK can retain financial strength and competitiveness after Brexit.

2.2 Context: current financing of education in the UK and Brexit 2.2.1 Overview of current situation UK Universities have four primary sources of income:389 -! 46.9% tuition fees and education contracts; -! 18.3% income rendered by residences, catering, and other services; -! 17.3% research grants and contracts; and -! 15.9% grants of (domestic) funding bodies -! Of this income, 7.1% is teaching-specific grants and 2.9% other teaching-oriented grants. Of this general income: 54.9% is spent on staff (30.6% on academic staff); 37.5% on other operating expenses; and 7.6% on depreciation and interest etc. 390 Figures from Universities UK show that in 2014, roughly 54% of universities’ general income was used for teaching, a total of £18.1 billion.391 Brexit makes the income from EU sources liable to change. The EU sources associated with teaching are tuition fees government grants associated with EU students.

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HESA, ‘Income of UK HE providers’, https://www.hesa.ac.uk/data-and-analysis/providers/finances. These figures are based on data from 2014-15. 390 HESA, ‘Expenditure of UK HE providers’, https://www.hesa.ac.uk/data-andanalysis/providers/finances. These figures are based on data from 2014-15. 391 Universities UK, ‘University funding explained’, http://www.universitiesuk.ac.uk/policy-andanalysis/reports/Documents/2016/university-funding-explained.pdf (July 2016)

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Of the £18.1 billion for teaching, 54% comes from undergraduate and postgraduate UK/EU fees.392 EU students account for around 6.4% of the whole UK student body. 393 . 6.4% of the 54% of universities’ income for teaching that comes from undergraduate and postgraduate UK/EU fees - around 3.5% of the £18.1 billion total income for teaching – is therefore liable to change after Brexit. The second important source of funding associated with EU students is government grants. English universities for example are given government grants specifically for teaching by the government via the Higher Education Funding Council for England (HEFCE). These grants accounted for £1418 million in 2015-16 and make up roughly 10% of universities’ total income, and 18% of their £18.1 teaching income. 394 HEFCE calculates their grants on the basis of volume of teaching, which in turn is measured based on the number of students at that institution. HEFCE considers EU students as fundable students if they are not funded by another EU public fund. In total, government grants for EU students account for 1.2% of universities’ teaching income.395 In total, c.4.6% of UK universities’ total teaching income of £18.1 billion is associated with EU sources and therefore liable to change if and when funding structures, tuition fee levels and numbers of EU students change as a result of Brexit. In 2014-15, UK universities just broke even in covering the full economic costs of teaching UK and EU undergraduate and taught postgraduate students,396 so it is crucial that a sustainable balance is maintained. These figures are necessarily rough, and conceal a number of variations in the possible level of impact of Brexit across different courses and universities. For example, the number of EU students is higher for postgraduate courses: EU students account for 10% of students on taught postgraduate courses and 15% of students on research postgraduate courses at the universities of the Russell Group. These percentages are especially high for law programs and mathematics.397

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This 54% breaks down to 47% UK and EU undergraduate fees and 7% UK and EU postgraduate fees. In addition to the 54% of teaching income from UK and EU fees, a further 23% comes from international student fees i.e. 77% of UK universities’ £18.1 billion teaching income comes from student fees. Universities UK, ‘University funding explained’, http://www.universitiesuk.ac.uk/policy-andanalysis/reports/Documents/2016/university-funding-explained.pdf (July 2016) 393 HESA, ‘Student enrolments and qualifications’ https://www.hesa.ac.uk/news/12-01-2017/sfr242student-enrolments-and-qualifications (2015-16) 394 ‘Guide to funding 2015-16: How HEFCE allocates its funds’, http://www.hefce.ac.uk/media/HEFCE,2014/Content/Pubs/2015/201504/2015_04.pdf (April 2015) 395 This was calculated by multiplying the percentage of EU students in the UK student body (6.4%) by the percentage of universities’ teaching income that comes from government grants (18%). 396 Universities UK, ‘University funding explained’, http://www.universitiesuk.ac.uk/policy-andanalysis/reports/Documents/2016/university-funding-explained.pdf (July 2016) 397 ‘Written evidence submitted by the Russell group [to committee examining impact of exiting EU on UK HE]’, http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/educationcommittee/the-impact-of-exiting-the-european-union-on-higher-education/written/42873.html (November 2016)

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Brexit could, similarly, also disproportionally impact internationally orientated, specialised, and London-based universities. For example, the London School of Economics has 18% EU students, Imperial College London 16%, and University College London 13%.398 2.2.2 Levels of tuition fees 2.2.2a EU fees The tuition fee for EU students is at present equal to the regulated fee of UK students. This is due to the EU single market’s principle of freedom of movement. The legal framework for EU students’ fee status is provided by the Education (Fees and Awards) Regulation 2007. This Regulation provides for an exception to the Equality Act of 2010, which prohibits universities from discriminating between (overseas) students (based on factors including nationality) unless regulated in secondary legislation.399 There is a fair chance that the Education (Fees and Awards) Regulation 2007 might be repealed to a certain extend after Brexit. The free movement of persons is not compatible with the government’s current ‘hard’ Brexit stance and its promises to control immigration in its recent white paper. 400 A repeal of free movement will lead to a legal obligation for universities to charge EU students and international students the same rate. Harmonising international tuition fees could result in a drop in EU applications. UCL confirmed that an increased fee for EU students could cause a sharp drop in recruitment numbers, which would precipitate sudden and significant financial implications for many UK higher education institutions.401 The University of Cambridge predicts an eventual two-thirds reduction in their admissions of EU students.402 In October 2016, UCAS figures suggested that applications by EU students to early-deadline courses (including all courses at Oxford and Cambridge) were down by 9%.403

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Chris Havergal, ‘UK fears ‘significant’ drop in EU student recruitment’, Times Higher Education, https://www.timeshighereducation.com/news/uk-fears-significant-drop-eu-student-recruitment (June 24 2016) 399 For more information on the 2010 Equality Act, see ‘Refugees, migrants and the Equality Act 2010’, http://www.edf.org.uk/blog/wp-content/uploads/2011/06/EDF-Briefing_Public-Authorities_Web_draft32.pdf (June 2011). 400 ‘The United Kingdom’s exit from and partnership with the EU’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_King doms_exit_from_and_partnership_with_the_EU_Web.pdf (February 2 2017) 401 ‘Written evidence submitted by UCL [to committee examining impact of exiting the EU on UK HE], http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/educationcommittee/the-impact-of-exiting-the-european-union-on-higher-education/written/43005.html (November 2016) 402 Written evidence submitted by University of Cambridge [to committee examining impact of exiting the EU on UK HE], http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/ education-committee/the-impact-of-exiting-the-european-union-on-higher-education/written/42742.html (November 2016) 403 ‘EU applications to UK universities down 9 per cent after Brexit vote’, Times Higher Education, https://www.timeshighereducation.com/news/eu-applications-uk-universities-down-9-cent-after-brexitvote (October 27 2016).

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The UK Government has guaranteed that fees for EU students starting courses in 2016 and 2017 will remain at Home levels throughout their degree. In addition, the Scottish government has recently extended the same guarantee to EU students starting their degree in Scotland in the academic year 2018/19.404

2.2.2b International Tuition fees for international students are unregulated and used by universities to fund high-cost teaching and research activities that would otherwise exceed their budget.405 International students are on average charged £4000 per annum more than UK/EU students for their undergraduate degrees. Tuition for medical or laboratory based courses can, however, be as high as £36,600 per year.406 If fees were harmonised, many EU students would therefore be paying nearly 50% more than what they are paying now for an undergraduate degree (£9000 plus £4000) and in some cases substantially more than this. Tuition fees for postgraduate courses for UK/EU students vary significantly across universities and courses. 2.2.2c Variations across the UK All of the fees quoted above apply to EU students studying in England and Wales. In Northern Ireland, EU students are charged £3,925/year 2016/17; this will rise to £4,030/year in 2017/18. In Scotland, EU students are currently not charged any tuition. Since education is a devolved matter for Scotland, it is up to the Scottish Parliament to act on the repeal of Education (Fees) Regulation 2011 or not. This Act, like the Education (Fees and Awards) Regulation 2007, regulates the fees of EU students at the same level as the fees of Scottish students. If the Scottish Parliament decides not to do so, it could lead to a situation in which Scottish students pay international fees in Europe whereas EU students would not pay any tuition fees in Scotland.

2.2.3 Financial support 2.2.3a Home (UK/EU) Currently, EU students are eligible for the same financial support as UK students. This can include:407 -! Low-interest loans to cover tuition; -! Maintenance loans for living costs;

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Tom Freeman, ‘EU students applying for 2018-19 courses in Scotland given fee guarantee’, https://www.holyrood.com/articles/news/eu-students-applying-2018-19-courses-scotland-given-feeguarantee (March 24 2017) 406

‘How Much Does it Cost to Study in the UK?’ http://www.topuniversities.com/student-info/studentfinance/how-much-does-it-cost-study-uk (January 10, 2017) 407 ‘EU student finance’, https://www.gov.uk/student-finance/eu-students

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-! -!

Special grants; and Financial aid by universities.

Student loans are dependent on the location of the university and the student’s household income. Many universities themselves also provide assistance for UK/EU students drawing from donation of alumni and other benefactors.

2.2.3b International International students do not have access to the same low-interest government loan schemes as UK and EU students. There are, however, many scholarships for international students at both undergraduate and postgraduate level. Scholarships for undergraduate students are nevertheless quite limited compared to the scholarship opportunities for post-graduates. The University of Cambridge has already warned of a severe pressure on the current undergraduate scholarship programs if EU students were to be categorised as international students.408 Considering the fact there is a higher percentage of post-graduate EU students, heightened competition for post-graduate scholarships also seems very likely.

2.2.4 Summary If the parliaments were to repeal the Education (Fees and Awards) Regulation 2007 (England) and Education (Fees) Regulation 2011 (Scotland) and the tuition fees for EU and other international students were consequently harmonised, Brexit could - in the most extreme scenario - triple EU students’ tuition fees with lower chances of receiving a scholarship and no access to loan schemes. This could lead to an exodus of EU students, leaving the universities with a considerable deficit: universities are not as flexible as the projected fluctuation in student numbers, and cutbacks might be slower than the speed by which applications could fall.409 A decline in EU student numbers would have a greater effect on internationally orientated universities and those that offer more postgraduate programs. This is due to their higher numbers of EU students and their relative (financial) competitiveness to other universities world-wide. This will be further explained in the following section.

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‘Written evidence submitted by University of Cambridge [to committee examining impact of exiting the EU on UK HE]’, http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/ education-committee/the-impact-of-exiting-the-european-union-on-higher-education/written/42742.html (November 2016) 409 Ross Anderson, ‘What would Brexit really mean for Cambridge?’, https://www.cl.cam.ac.uk/~rja14/Papers/brexit-and-cambridge.pdf (retrieved December 13 2016).

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2.3 UK’s financial competitiveness Below, we offer an assessment of the UK’s financial competitiveness in comparison with other competitor countries: Australia, Canada, Germany, and the USA. These countries have been selected based on their academic rankings and the likelihood of students currently studying in the UK switching there. Following from data of the International Student Survey, the British Council reported that due to Brexit there was a increase in likelihood of studying in other European and Anglophone countries, Canada (32%), Germany (21%), US (20%), and Australia (20%).410 We focus on financial competitiveness in three different areas: tuition (2.3.1), living expenses and healthcare (2.3.2) and opportunities for financial aid (2.3.3). Throughout this section costs are assessed relative to UK/EU fees outlined at 2.2.2 and 2.2.3 above.

2.3.1 Financial competitiveness: tuition fees In contrast to the UK (with the exception of Scotland), many countries in the EU either do not charge for tuition or charge very low tuition fees. Several universities in Germany will as of 2017 charge a modest tuition fee of €1500 per semester. Sweden, Denmark, and Finland also reintroduced small tuition fees for international students.411 On the face of it, the USA has much higher tuition fees than the UK. Tuition fees in the USA vary from institution to institution but an average annual fee is likely to be:412 -! Public four-year college in-state fees: £8050413 -! Public four year college out-of-state fees: £20,775 -! Private – non profit – four year college: £27,900 There is, however, a considerable difference in the US between what most students are charged and what they actually pay since most students receive more financial benefits than in the UK.414

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‘‘Written evidence submitted by the British Council [to committee examining impact of exiting the EU on UK HE]’ http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/educationcommittee/the-impact-of-exiting-the-european-union-on-higher%20education/written/43345.html#_ftn9 (November 2016) 411 http://www.topuniversities.com/student-info/university-news/tuition-fees-reintroduced-some-germanuniversities 412 These figures were converted into £ at the rate of £1:$1.25 (the exchange rate on April 3 2017). 413 Note that the ‘in-state’ fee does not apply to migrating EU students. Only EU students that are resident of that particular state can qualify for an in-state fee. 414 ‘Tuition fees reintroduced at some German universities’, https://www.topuniversities.com/studentinfo/student-finance/how-much-does-it-cost-study-us (December 14 2016)

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! In Canada, annual tuition fees ranges from £9330 to £18,650415. HSBC estimates an average of £13 720. 416 Australian fees are the highest at £19 722 average.417 UK tuition fees (outlined in section 2.2.2 above) are therefore lower than Australian and American fees, similar to Canadian fees, and higher than German fees.

2.3.2 Financial competiveness: living costs Living expenses is a combined category including accommodation, food, books, entertainment, and health care or insurance. All living expenses vary across different areas/cities within a particular country but for most universities in Germany living costs range from £522-697 per month while living costs in Berlin are well over £871 per month, totalling around £6095 to £8715 for an academic year. Living costs in the UK range from £7000 per year in Liverpool to £9750 in Oxford and an estimated £15,103 in London.418 According to an HSBC survey the average living costs in the UK was £11 214.419 These totals are therefore higher than living costs in Germany. It must, however, be noted that London-based universities attract higher numbers of EU students despite being financially less competitive in terms of living costs. Living costs in the US also vary and are influenced by whether the university provides for accommodation, whether they offer meal plans and other factors. The HSBC survey estimated the average annual living costs in the cities of the top 10 universities in the US at £9700 – cheaper than the UK.420 Expenses in Australia and the Canada were calculated at £14,735 and £9531 respectively. 421 We compare the costs of minimum or basic insurance that students must have either by law or to be eligible for enrolment at universities. EU students studying in the UK currently have full access to the NHS for free. International students coming to the UK on a Tier 4 visa are required to pay an immigration health surcharge of £150/year as

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‘Cost of studying in Canada’, http://www.universitystudy.ca/plan-for-university/what-does-it-cost-tostudy-in-canada/ 416 ‘International study is expensive: weigh costs against quality’, HSBC Camada, http://www.hsbc.ca/1/PA_ES_Content_Mgmt/content/canada4/pdfs/personal/newsroom/2014/international-education-survey-10sep14.pdf (September 10 2014). The figure was calculated by averaging the living costs of the cities of the 10 largest public universities. 417 ‘Australia the most expensive country for education’, HSBC report http://www.about.hsbc.com.au/news-and-media/australia-the-most-expensive-country-for-educationhsbc-report (September 10, 2014) 418 ‘Living Expenses UK’, http://www.internationalstudent.com/study_uk/financial_aid/living_expenses/ and ‘Living Expenses and Costs’, https://www.ucl.ac.uk/prospective-students/undergraduate/feesfunding/tuition-fees/living-expenses-and-additional-costs 419 ‘International study is expensive: weigh costs against quality’, HSBC Canada, http://www.hsbc.ca/1/PA_ES_Content_Mgmt/content/canada4/pdfs/personal/newsroom/2014/international-education-survey-10sep14.pdf (September 10 2014). Figures were calculated by averaging the living costs of the cities of the 10 largest public universities. 420 ‘International study is expensive: weigh costs against quality’, HSBC Canada, http://www.hsbc.ca/1/PA_ES_Content_Mgmt/content/canada4/pdfs/personal/newsroom/2014/international-education-survey-10sep14.pdf (September 10 2014). 421 ‘International study is expensive: weigh costs against quality’, HSBC Canada, http://www.hsbc.ca/1/PA_ES_Content_Mgmt/content/canada4/pdfs/personal/newsroom/2014/international-education-survey-10sep14.pdf (September 10 2014).

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! part of their visa application fee.422 By contrast, full public health insurance in Germany is around €80 per month for foreign students.423In principle healthcare in the US is not mandatory but many universities oblige their students to have an insurance plan. Some universities even provide insurance plans for their students. It is often also a visarequirement. Medical care in the US is very expensive and an average insurance does not cover all costs but only a percentage. Students can expect to be paying around $50 per month.424 Healthcare in Australia is around £200 per year for the mandatory Overseas Student Health Costs. Canadian insurance for international students is roughly £25 per month.

2.3.3 Financial competiveness: financial aid Tuition fees and living expenses can be funded by loans and scholarships. Germany offers EU students low-interest loans of up to €650 a month. Generally, loans are capped and amounts exceeding this capped limit will not have to be paid back. Internationals are also eligible for these loans if they resided for several years in Germany and are planning to stay there for an extended period after their studies.425 In most cases, however, students are required to be EU or German nationals in order to receive a loan from a (private) bank.

-! -!

According to the US National Center for Education Statistics, 83% of undergraduates at public four-year colleges, and 89% of undergraduates at private colleges, received financial assistance. 426 The average amount of financial aid varies between the different types of institutions and between the different types of grants: Public four-year college fees:427 Federal / State / Institutional grants: £3708 / £3005 / £4386 Student loans: £5368

-! -!

Private –non-profit - four-year college out-of-state fees: Federal / State / Institutional grants: £3836 / £3037 / £13,689 Student loans: £6507 Although financial aid is more widely available, because tuition fees are so much higher, the US is still a more expensive country in which to obtain a degree. Financial aid from the federal and state governments is also restricted to US nationals.

2.3.4 Summary of UK’s financial competitiveness

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‘Healthcare in the UK’, https://www.internationalstudents.cam.ac.uk/arriving/healthcare-uk (accessed March 3 2017) 423 ‘Organising health insurance’, https://www.daad.de/deutschland/in-deutschland/regeln/en/8839organising-health-insurance/ 424 For an example quote and discussion, see ‘International student health insurance’, http://www.internationalstudentinsurance.com/explained/international-student-health-insurance.php 425 ‘Staatsangehörigkeit’, https://www.bafög.de/de/-8-staatsangehoerigkeit-224.php 426 ‘Sources of financial aid’, https://nces.ed.gov/programs/coe/indicator_cuc.asp (May 2016) 427 These figures were converted into £ at the rate of £1:$1.25 (the exchange rate on April 3 2017).

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In conclusion the UK is, for EU students pre-Brexit, more competitive than Australia in terms of living costs and more competitive than both Australia and the US in terms of tuition. It is, however, already less competitive than Canada and Germany. Raising tuition fees and cutting financial assistance for EU students would reduce the UK’s financial competitiveness and could impair the UK’s ability to attract non-UK students. It could be an advantage for non-European international students since it is a logical option for balancing universities’ budgets to attract more non-European international students since they pay higher tuition fees. This could be done by lowering fees for international students and providing them with the places that used to be occupied by regulated tuition fee paying EU students. Country

Tuition fees

Living costs

Availability Financial aid

United States

Much higher

Lower

Higher

Australia

Higher

Higher

?

Canada

Similar

Similar

?

Germany

Much lower

Similar

?

of

Figure 1: Summary of how costs of tuition, living and financial aid compare across countries. All assessments are given relative to costs for EU students in the UK preBrexit

2.4 Modelling Brexit’s direct economic consequences With EU-applications already dropping (see section 3.2.1 below) and the University of Cambridge predicting an eventual two-thirds decline,428 a budget deficit for universities seems likely. Universities will receive fewer funds via tuition and teaching grants in particular. As mentioned earlier, harmonisation of EU and international fees (A) and a reduction of the financial aid to EU students (B) are the main (legal) consequences of Brexit regarding universities’ (teaching) financing. The Higher Education Policy Institute (HEPI), in January 2017, along with Kaplan and London Economics researched how the removal of the loan subsidy for EU-students could affect enrolment (1); and how the harmonisation of EU and international fees could affect demand (2).429 In their analysis they categorised British universities into 4 clusters based on Boliver (2015) on the basis of research activity, teaching quality,

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Ross Anderson, ‘What would Brexit really mean for Cambridge?’, https://www.cl.cam.ac.uk/~rja14/Papers/brexit-and-cambridge.pdf (retrieved December 13 2016). 429 Gavan Conlon, Rohit Ladher and Maike Halterbeck, ‘The determinants of international demand for UK higher education’, http://www.hepi.ac.uk/wp-content/uploads/2017/01/Hepi-Report-91-Screen.pdf (January 2017). This report is referred to as ‘HEPI’ throughout this section.

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! economic resources, academic selectivity and student socioeconomic mix.430 Cluster 1 only consists of the University of Cambridge and the University of Oxford. Cluster 2 includes the remainder of the Russell Group, while the old 1994 Group, University Alliance, MillionPlus, GuildHE and others are spread over Clusters 3 and 4. Note, the elasticity and flexible demand is calculated by plotting the criteria of Boliver against tuition. This is thus independent of any other relevant considerations of international students. First, HEPI modelled whether the removal of a favourable EU fee would result in a financial bonus to universities. Their hypothesis was that the remaining EU students, that would still attend university in the UK for a higher fee, would make up for the quantitative loss in students. Indeed for Cambridge and Oxford (cluster 1), there would be a quantitative decline of students, but this would be financially outweighed by the increase in tuition fees. Kaplan and London Economics assume that EU students are relatively unresponsive in the change in fees regarding their Oxbridge application. There would be an estimated 37% decline in enrolments compared to 42%-68% in other clusters. Cambridge and Oxford would gain approximately £12 million in new revenues per first year student. Cluster 2 would face a 68% decline of EU students for which the higher tuition cannot make up: there would be a total loss of £23 million across 39 institutions. 5 institutions in this cluster would make a profit but 34 would not. In cluster 3 the negative impact would amount to £23 million across 67 institutions, in which there would be a reduction of 48% in EU enrolment. Finally, cluster 4 would see a decline of 42% with a total negative impact of £5 million. These pronounced variations between clusters are an argument against full harmonisation of fees in all institutions: some would lose out as a result. It would be useful to calculate the break-even point of tuition fees at which the raised (EU) fees make up for the quantitative loss of students at each institution. Secondly, according to their model, removing the loan subsidy for EU students, according to numbers of the Department for Education on the proportion of the tuition fee that is written off due to the Resource Accounting and Budgeting charge would result in a 23% increase in tuition fees for EU students. Cluster 1 would see a drop and loss of 2% in EU applications (£0.3m), cluster 2 5%(£8.2m), cluster 3 9%(£12.9m), cluster 4 13%(£2.7m). That is a total reduction in enrolments of 4000 or 2% of nonUK students and a loss for the universities of £24.1 million in funds. It must be noted that these models only apply in a ceteris paribus manner. The model does not take into account factors such as: visa restriction and immigration caps; the loss of reputation; decline in academic excellence; decline in further research possibilities; rising xenophobia; possible other factors mentioned in other sectors of this paper.

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Vicki Boliver, ‘Are there distinctive clusters of higher and lower status universities in the UK?’ Oxford Review of Education 41.5 (2015): 608-627.

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2.5 Indirect economic consequences of Brexit We identify various possible indirect consequences of Brexit in the realm of university enrolment and finances. 2.5.1 Depreciation of sterling A major indirect consequence of the Brexit is that the sterling has dropped significantly. Within hours after the referendum result, the sterling dropped from 1.48 (GPB:USD) to 1.36 and to 1.21 in January 2017, six months after the referendum. The depreciation means international students will become relatively more affluent. That means that not only their tuition fees will be lower in their own currency, the costs of living will also become cheaper. The HEPI report calculated that a 10% depreciation of the sterling would result in an 11% increase in EU and international student enrolment amounting to a financial plus of £10 million for both institutions in cluster 1.431 In cluster 2 enrolment of EU students would rise by 11% and enrolment of international students would rise by 9%. This could be a positive financial impact of around £150 million across 39 institutions. Cluster 3 would see an increase of 9% for EU students and 8% for international students corresponding to an impact of £60 million for 67 institutions. Finally for cluster 4; the increase would be 5% and 4% for EU and international students respectively, totalling £3 million. In total, there would be an increase of 20,000 students with a total revenue of £227 million of first year students per year – equalling £831 million for a three-year undergraduate degree per year. As with the previous calculation, however, this model does not take non-economic effects into account, such as possible visa-restrictions; loss of reputation of the UK and other factors. It is not impossible that over a longer period of time the sterling will rise to its former value and it will no longer benefit financial competitiveness. 2.5.2 Tertiary education and the economy Tertiary education is a lucrative export product of the UK. Universities UK estimate that non-UK students generate an estimated £10.7 billion coming from: general expenditure non-campus (£4.9 billion); international tuition and fees (£3.2 billion); EU fee (£0.4 billion); accommodation and services (£0.7 billion); other (£0.4 billion); and non-UK visitors (£0.14 billion).432 Universities UK have estimated that EU students alone in total generate more than £2.2 billion for the UK economy and create around 19,000 jobs.433

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Gavan Conlon, Rohit Ladher and Maike Halterbeck, ‘The determinants of international demand for UK higher education’, http://www.hepi.ac.uk/wp-content/uploads/2017/01/Hepi-Report-91-Screen.pdf (January 2017) 432

Universities UK, ‘The Impact of Universities on the UK Economy’, http://www.universitiesuk.ac.uk/policy-and-analysis/reports/Documents/2014/the-impact-of-universitieson-the-uk-economy.pdf (April 2014) 433 ‘What does the Brexit mean for education?’ http://www.eliteeducationgroup.co.uk/what-does-thebrexit-mean-for-education/ (2015)

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If numbers of EU students fall, we might expect general spending, accommodation and service to fall by a similar proportion.

2.5.3 Students and the UK labour market Thirdly, after graduation, many international students stay to work in the UK and are valued by their employers. Highly educated minds contribute to the economy. Brexit’s implications for the financial competitiveness of the UK and a stricter visa-system could strike this benefit.434 Although the transition of students into the labour market is not something that this paper focuses on, it is an important aspect to bear in mind and should be considered when designing visa regimes for students following graduation. 2.6 Main findings -!

Around 4.6% of UK universities’ income for teaching comes from EU sources (tuition fees of EU students and government teaching grants for EU students).

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EU students bring about £2.2 billion in revenue per year and 19,000 jobs. An exodus of EU students will not only hurt universities, but also local economies.

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Fees for EU students would necessarily rise to the level of international student fees if (as seems likely) the respective Parliaments repeal the Education (Fees and Awards) Regulation 2007 (England) and Education (Fees) Regulation 2011 (Scotland) that regulate EU student fees at the same level as UK student fees. Undergraduate fees for international students are currently on average 50% higher per annum than fees for UK/EU students and, in some cases, they are up to three times higher. Repeal of these regulations will therefore mean a significant increase in fees for EU students.

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The Higher Education Policy Institute (HEPI) has estimated that harmonisation of EU and international student fees, combined with a removal of EU student support, would likely mean a loss of £40 million across all UK Universities due to a drop in demand amongst EU students.

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At the same time, HEPI has also estimated that a 10% drop in the value of sterling could potentially increase demand in British higher education, amounting to £227 million per academic year (£831 million for a 3 year undergraduate degree per year).

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HEPI therefore concludes that the combined effect of the depreciation of sterling and the harmonisation of EU and international student fees could potentially be financially positive, amounting to an extra £187 million for UK

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‘Written evidence submitted by the Russell group [to committee examining impact of exiting EU on UK HE]’, http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/educationcommittee/the-impact-of-exiting-the-european-union-on-higher-education/written/42873.html (November 2016)

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universitiesâ&#x20AC;&#x2122; in studentsâ&#x20AC;&#x2122; first year of study. The overall effect is, however, likely to be ambiguous since there will be a significant variation across universities. -!

Crucially, HEPIâ&#x20AC;&#x2122;s figures do not take into account other factors that may affect student demand such as caps on student numbers, loss of research funding or loss in reputation.

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Separately, UK universities have predicted a steeper drop in numbers of EU students after Brexit. The University of Cambridge, for example, has predicted an eventual two thirds decline in the number of EU students applying. UCAS figures show a 7% decrease in the number of EU applications for 2017-18, even before anything has changed following Brexit.

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Universities are not as flexible as the projected fluctuation in student numbers, and cutbacks might be slower than the speed by which applications could fall.

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The UK faces financial competition from universities in other countries. The UK is already more expensive for EU students than both Canada and Germany.

2.7 Recommendations In order to maintain and boost the financial situation of UK universities, and retain the economic benefits to society more broadly following Brexit, UK universities will need to find ways both to continue to attract a high number of international students and to ensure that they retain their financial competitiveness relative to other countries. The situation is complex, and the UK will need to balance out the effects of changes to tuition fees, grant structures, the value of sterling, and numbers of EU and non-EU students. We make the following recommendations: -!

Calculate the break-even point at which the increase in fees for EU students exactly makes up for a quantitative loss in students, for all institutions. The effects of full harmonisation of EU and international fees vary significantly across and within different clusters of universities. Calculation of this break-even point therefore provides the full financial context of the effect on fee increases for all institutions.

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Lower international student fees from current levels We recommend that, following Brexit, universities are encouraged to lower their fees for all international students rather than just bringing the fees of EU students up to the current level for international students. This would increase the global financial competitiveness of UK universities and help to attract new international students who bring financial benefit to UK universities and society. This is particularly important since, following Brexit, UK universities will likely lose the competitive advantage they currently enjoy over 211


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universities outside of the EU from the fact that EU students are charged the same fees as Home students. Reducing international student fees would provide a counterweight to the loss of this competitive advantage. We recognise that the appropriate level at which to set international student fees may vary across institutions and courses, depending on their reputation and international competitiveness. -!

Communication strategy that encourages and reassures EU and international students A clear communication strategy is crucial to reduce uncertainty over student finances and encourage EU and international students to apply to UK universities. EU applications are already dropping, even before Brexit is implemented, and there is uncertainty regarding tuition fees and other financial concerns. The UK Government’s assurances that fees for EU students starting courses in 2016 and 2017 will remain at Home levels throughout their degree is welcomed, and similar guarantees should be given into the future where they apply (the Scottish government has recently guaranteed that EU student fees will remain at Home levels for 2018/19). Any transitional arrangements agreed as part of the Article 50 process should also be communicated clearly as soon as they are known. Secondly, a new communication strategy must be set in place to reassure international students that the UK welcomes and supports them.

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Increase the availability of scholarships for international students The level of tuition fees is only part of the picture of financial competitiveness. Student access to financial support is also vital. EU students currently enjoy access to loan schemes and government grants. If access to these is reduced, we recommend that the government finds ways to increase the supply of scholarships for all international students either via public funds or by supporting a campaign to raise private funds. This would help to reduce and compensate for the loss of EU students.

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Establish a (British) International Student Investment Bank (BISIB) The government could allocate funds for low-interest loans for promising international students to finance their degree or other research-related endeavours. While different from scholarships, this fund for loans could serve as an investment bank in students. It could provide international students with low-interest loans to study in the UK in exchange for working a number of years in the UK to repay their student loans. This scheme could function as British’ ‘brain gain’ in identified areas of need.

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It is also crucial to recognise that economic factors, although modelled in isolation, in reality interact with other factors. In particular, relies on attracting more international students. Need to take account of recommendations in other chapters and weigh up political, economic, cultural factors in fee decisions and other factors. 3. MIGRATION AND MOBILITY OF STUDENTS 212


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Changes and restrictions to student migration and mobility are likely to be one of the major challenges and impacts of Brexit for tertiary students and universities. Immigration was a central issue in the referendum. Reflecting this, the UK government has committed to end the EU principle of freedom of movement. There is therefore uncertainty over how easy it will be for EU students to access UK universities in future and what visa requirements they will be subjected to. This section aims to examine the benefits and costs of student migration and mobility to UK universities and wider society. It focuses both on the movement of EU students into the UK, and the movement of UK students out to the EU. We aim to present a sustainable and successful post-Brexit model for student mobility and migration that brings maximum benefit to tertiary students, to universities and to wider British society. The section is broadly divided into three parts. It first provides an assessment of the pre-Brexit status quo, in terms of both inward (1.1) and outward (1.2) mobility. The current role and significance of the EU in these mobility patterns is highlighted (1.3). Second, the possible implications of Brexit for migration and mobility among tertiary students are examined: we consider what is known currently about the impact of Brexit (2.1), and the questions and scenarios that still need answering or clarifying (2.2). We consider established practices in other countries and draw from these lessons and examples that may be helpful to the UK in designing and implementing new policies (2.3). We also consider the evidence of public attitudes to these possible changes and scenarios (2.4). A summary of the key findings is given (3.1) before we present some concrete policy suggestions, regarding both inward (3.2) and outward (3.3) mobility and migration. 3.1 Context: Current Situation in terms of Migration and Mobility 3.1.1 Inbound mobility and migration While exact estimates differ (see discussion at section 3.2.1 below), there is broad consensus that as of 2015, approximately 125,000 non-UK EU students and 213,000 international non-EU students were studying in the UK.435436 In addition, there are presently 43,000 members of university staff from EU countries employed in the UK, accounting for 16% of the UK’s total university workforce.437 438 While inbound student mobility from EU countries is generally on the rise, witnessing a 32% increase

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‘Top ten other European Union countries of domicile in 2014/15 for HE student enrolments by location of HE provider and country of domicile 2010/11 to 2014/15 (Table 8)’, https://www.hesa.ac.uk/data-and-analysis/students/overviews?keyword=587&year=2 (retrieved December 13 2016) 436 John P.Iredale, ‘BREXIT and science, where do we go from here’. QJM, 109 (2016): 643–644. 437 John P.Iredale, ‘BREXIT and science, where do we go from here’. QJM, 109 (2016): 643–644. 438 Universities UK, ‘Higher education in facts and figures 2016’, http://www.universitiesuk.ac.uk/factsand-stats/data-and-analysis/Documents/facts-and-figures-2016.pdf (August 2016)

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! from 2004/05 to 2013/14,439 a sharp drop has been observed in 2016 (2015: 47,000; 2016: 34,000).440 This decline is discussed in more detail at 3.2.1 below. International students bring a number of economic, cultural, social and academic benefits to the UK tertiary education system and to society more broadly. The economic value of international students, both direct and indirect, has been discussed in section 2: the estimated £10.71 billion of export earnings generated by non-UK students is just one illustration of this.441 There are, however, significant benefits to international students beyond the money that they bring into the country. International students account for 50% of all students doing full-time research degrees in the UK: maintaining their access to UK tertiary education is therefore indispensable in sustaining the UK’s historically successful research output.442 (For more discussion of the importance of research, see section 3 below). The presence of international students also enables UK universities to offer specialist courses that would not otherwise be viable due to an insufficient domestic demand.443444 The ability to attract large numbers of international students is also a vital part of the UK’s ‘soft power’.445 It is key to the establishment and maintenance of fruitful, mutually beneficial international relations: countries that are important export markets and foreign policy priorities currently send lots of students to the UK (e.g., China, India, the USA). 446447 International students also enrich the overall study experiences for themselves and UK-citizens, by offering new and valuable perspectives and approaches

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Universities UK, ‘Patterns and trends in UK higher education 2015’, http://www.universitiesuk.ac.uk/policy-and-analysis/reports/Documents/2015/patterns-and-trends2015.pdf (November 2015) 440 ONS, ‘Migration statistics quarterly report: Dec 2016’ ‘https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/internationalmigratio n/bulletins/migrationstatisticsquarterlyreport/dec2016 (December 2016) 441 Universities UK, ‘The Impact of Universities on the UK Economy’, http://www.universitiesuk.ac.uk/policy-and-analysis/reports/Documents/2014/the-impact-of-universitieson-the-uk-economy.pdf (April 2014) 442 ‘Impact of international students’, http://institutions.ukcisa.org.uk/Info-for-universities-colleges-schools/Policy-research--statistics/Policy-and-lobbying/Impact-of-international-students/ (retrieved January 17 2017) 443 ‘Britain wants you! Why the UK should commit to increasing international student numbers’, http://www.ippr.org/files/images/media/files/publication/2013/11/Britain-wantsyou_Nov2013_11534.pdf?noredirect=1 (2013) 444 ‘Impact of international students’, http://institutions.ukcisa.org.uk/Info-for-universities-colleges-schools/Policy-research--statistics/Policy-and-lobbying/Impact-of-international-students/ (retrieved January 17 2017) 445 The 2015 ComRes report on global ‘soft power’ identified the UK’s world-class higher education system as one significant factor behind its top spot in the rankings. ComRes, ‘The Soft Power 30’, http://comresglobal.com/wp-content/uploads/2015/07/Report_Final-published.pdf (2015) 446 ‘Britain wants you! Why the UK should commit to increasing international student numbers’, http://www.ippr.org/files/images/media/files/publication/2013/11/Britain-wantsyou_Nov2013_11534.pdf?noredirect=1 (2013) 447 ‘Impact of international students’, http://institutions.ukcisa.org.uk/Info-for-universities-colleges-schools/Policy-research--statistics/Policy-and-lobbying/Impact-of-international-students/ (retrieved January 17 2017)

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and fostering intercultural exchange, social competencies and an open-minded, inclusive academic philosophy.448 Importantly, the current number of EU and international students do not block UK citizens’ access to higher education: the Government limits the number of places that universities can offer to UK students. Numbers of international students are, however, not included in, or restricted by, these limits.449 This was reflected in our own research, which found that UK students were even less likely to consider the reduction of EU and international student numbers an important post-Brexit priority than their EU and non-EU international counterparts. In summary, a significant decline in incoming students from the EU and beyond could threaten not only the breadth of UK universities’ course catalogues, their thriving research programmes, but also surrounding local economies and the stimulating international learning atmosphere that are standout-features of the UK higher education system.450 3.1.2 Outward mobility and migration Meanwhile, there are currently 24,000 UK residents studying abroad.451 Primarily powered by the EU-sponsored Erasmus Exchange Programme, both student and staff mobility have seen remarkable growth rates in recent years,452 resulting in an increase of 115% since 2007/08.453 At the same time, the Generation UK China campaign, launched in 2013, has been gaining momentum with over 7,300 UK students having gone to China for work or studies in 2014 (a 12% increase from 2013).454 Taken together, this results in a 5.2% overall increase in mobility from 2013/13 to 2014/15.455 The most popular destinations for UK students studying abroad are France (25%), Spain (17%), the US (12%) and Germany (9%).456

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‘Britain wants you! Why the UK should commit to increasing international student numbers’, http://www.ippr.org/files/images/media/files/publication/2013/11/Britain-wantsyou_Nov2013_11534.pdf?noredirect=1 (2013) 449 ‘Britain wants you! Why the UK should commit to increasing international student numbers’, http://www.ippr.org/files/images/media/files/publication/2013/11/Britain-wantsyou_Nov2013_11534.pdf?noredirect=1 (2013) 450 ‘UKCISA Briefing on international students’, https://institutions.ukcisa.org.uk/Info-for-universitiescolleges--schools/Publications--research/resources/94/UKCISA-Briefing-on-international-students (November 2016) 451 ONS, ‘Population briefing international student migration - what do the statistics tell us?’, http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/rel/migration1/l ong-term-international-migration/student-migration---what-do-the-statistics-tell-us-/index.html (January 2016) 452 ‘EC Erasmus Statistics 2013-14: Erasmus+ Statistics 2014 United Kingdom’, http://ec.europa.eu/dgs/education_culture/repository/education/library/statistics/2014/unitedkingdom_en.pdf (retrieved December 13 2016) 453 ‘UK students continuing to look overseas’, https://www.britishcouncil.org/organisation/press/ukstudents-continuing-look-overseas (retrieved December 13 2016) 454 ‘UK students continuing to look overseas’, https://www.britishcouncil.org/organisation/press/ukstudents-continuing-look-overseas (retrieved December 13 2016) 455 ‘HESA 2014/15 Outward Mobility Data’, http://www.go.international.ac.uk/sites/default/files/HESA%202014%20to%202015%20printable%20an alysis_2.pdf (retrieved 13 December 2016) 456 ‘Broadening horizons: the value of the overseas experience’, https://www.britishcouncil.org/sites/default/files/6.3_broadening-horizons-2015.pdf (June 2015)

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The personal and economic benefits of these steep increases in international mobility amongst British students are manifold: overseas study experience has been shown to boost students’ independence, confidence, cultural awareness, social competencies, language skills and interest in global and national political affairs.457 On average, internationally mobile students achieve better grades, earn higher salaries after graduation and are significantly less likely to be unemployed.458 Aside from promoting the UK education system on a global scale, the demand for internationally versed university graduates is an acute issue in the national job market. 55% of UK employers are unhappy with UK graduates’ foreign language skills and 47% report dissatisfaction with graduates’ cultural awareness.459 UK businesses state a great demand for the most common European languages. For example 50% of all respondents cited a demand for French followed by German (47%) and Spanish (30%).460 As it stands, language teaching at school alone will not suffice to meet that demand,461 and enhanced international student mobility may be critical to bridge the gap. Even before the challenges of Brexit are added in, there are a number of perceived barriers to increasing international mobility amongst UK students. The most prominent hurdles consist of concerns about costs, insufficient language skills, personal wellbeing, access to healthcare and being away from one’s family.462 Students also worry about their foreign degrees not being recognized, the difficulty of degree programmes abroad, potential inabilities to transfer credits earned on exchange back to one’s UK home university and incompatibilities in length of overseas courses with the British system.463 UK students seem to suffer from a significant knowledge gap with only 56% of those students that intend to study abroad feeling that they have enough information to make that decision and only 18% knowing about government-sponsored schemes for overseas study.464 An interest-action gap appears to exist as well, considering that in spite of 34% of UK students reporting to be interested in study abroad experiences,465 only a fraction of that percentage ends up going abroad.

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‘Broadening horizons: the value of the overseas experience’, https://www.britishcouncil.org/sites/default/files/6.3_broadening-horizons-2015.pdf (June 2015) 458 ‘Gone International 2016: the value of mobility’, http://go.international.ac.uk/sites/default/files/GoneInternational2016_the%20value%20of%20mobility.p df (2016) 459 ‘The right combination (CBI/ Pearson education and skills survey 2016)’ http://www.cbi.org.uk/cbiprod/assets/File/pdf/cbi-education-and-skills-survey2016.pdf (July 2016) 460 ‘The right combination (CBI/ Pearson education and skills survey 2016)’ http://www.cbi.org.uk/cbiprod/assets/File/pdf/cbi-education-and-skills-survey2016.pdf (July 2016) 461 ‘The right combination (CBI/ Pearson education and skills survey 2016)’ http://www.cbi.org.uk/cbiprod/assets/File/pdf/cbi-education-and-skills-survey2016.pdf (July 2016) 462 ‘Broadening horizons: the value of the overseas experience’, https://www.britishcouncil.org/sites/default/files/6.3_broadening-horizons-2015.pdf (June 2015) 463 ‘Broadening horizons: the value of the overseas experience’, https://www.britishcouncil.org/sites/default/files/6.3_broadening-horizons-2015.pdf (June 2015) 464 ‘Broadening horizons: the value of the overseas experience’, https://www.britishcouncil.org/sites/default/files/6.3_broadening-horizons-2015.pdf (June 2015) 465 ‘Broadening horizons: the value of the overseas experience’, https://www.britishcouncil.org/sites/default/files/6.3_broadening-horizons-2015.pdf (June 2015)

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In an attempt to address this issues, the UK Strategy for Outward Mobility was launched in 2013,466 based on several core objectives, such as (1) promoting outward mobility and its benefits, (2) tackling institutional and financial obstacles, (3) expanding participation in and access to outward mobility, (4) establishing a common mouthpiece for institutions to contribute to outward mobility policy. At the same time, the British Council introduced the Generation UK China campaign (2013) as well as the Generation UK India campaign (2014) to further spur outward mobility. Outward mobility is pivotal to educating graduates that are well-prepared to enter global job markets, foster and maintain international relations and serve as ambassadors of the UK and its education system around the world [13]. In alignment with this, our survey data demonstrates that UK-nationals conceive of both the right to study and work across the EU (m = 4.16 on the afore-mentioned five-point scale ranging from 1 = “not important at all” to 5 = “very important”) and maintaining access to exchange schemes such as Erasmus (m = 3.43) as important political goals in post-Brexit Great Britain.

3.1.2 The Role of the EU In light of the factors outlined above, it appears reasonable to conclude that international study and work experience is key to compete successfully in an intense global job market. Against this backdrop, the EU merits special attention due to its crucial role in delivering such experiences to UK students. In 2013/14 61% of all student movements originating from the UK took place within the EU.467 Further corroborating this figures, in 2014/15, 46% of all student movements originating from the UK were carried out in the frame of the Erasmus+ programme alone, equalling 11,465 people.468 Strikingly enough, consistent with the widespread knowledge gap mentioned above, our own research revealed that 17.1% of the surveyed British nationals studying and doing research at various UK universities indicated they did not know whether or not they were currently receiving funding from the EU. This lends support to the idea that people may severely underestimate the major role that the EU plays both in enabling international mobility and funding research in the UK.

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‘Gone International 2016: the value of mobility’, http://go.international.ac.uk/sites/default/files/GoneInternational2016_the%20value%20of%20mobility.p df (2016) 467 ‘Gone International 2016: the value of mobility’, http://go.international.ac.uk/sites/default/files/GoneInternational2016_the%20value%20of%20mobility.p df (2016) 468 ‘HESA 2014/15 Outward Mobility Data’, http://www.go.international.ac.uk/sites/default/files/HESA%202014%20to%202015%20printable%20an alysis_2.pdf (retrieved 13 December 2016)

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3.2 Brexit: Impact, Risks and Perceptions 3.2.1 Knowns and Unknowns Brexit has the potential to have a significant impact on the ease and freedom of future movements of tertiary students to and from the UK: continued access to schemes such as Erasmus, the continued freedom and ability of UK students to study and then work within the EU, and the continued freedom and ability of EU students to study and then work within the UK are not guaranteed. If the UK government is to achieve its goal to reduce migration to the tens of thousands, Brexit may pave the way by expanding these efforts to previously untouchable EU citizens, possibly including students.469 The abolition of free movement will, however, likely impair future recruitment of Europe’s brightest minds, whether as students, scientists, lecturers or research collaborators abroad.470 It is, however, worth bringing attention to measurement errors and inaccuracies in previous assessments of migration figures, upon which many recent UK migration policies have rested, as these may distort the perception of the current situation and need to change. Of note, the government’s policy to cap international student migration was largely based on a reported figure of 90,000 non-EU students purportedly not leaving the UK after the end of their studies that was taken from the International Passenger Survey (IPS).471472 However, due to its mode of assessment, the IPS may greatly overestimate the actual numbers of international students outstaying their visas.473 The weaknesses of sources such as the IPS are important to bear in mind if and when the government makes assessments of the numbers of EU students who have not required a visa until now, and about whom there is limited data.474 The potential financial consequences of Brexit (discussed in section 2 above and, in the specific context of research funding, section 4 below) could also have an effect on the ability and desire of students to come and study in the UK.

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‘Destination education reforming migration policy on international students to grow the UK’s vital education exports’, http://www.ippr.org/publications/destination-education (September 2016) 470 ‘Potential Implications of Admission Criteria for EU Nationals Coming to the UK’, http://www.migrationobservatory.ox.ac.uk/resources/reports/potential-implications-of-admissioncriteria-for-eu-nationals-coming-to-the-uk/ (May 2016) 471 Scott Blinder, ‘Non-European Student Migration to the UK’, http://www.migrationobservatory.ox.ac.uk/wp-content/uploads/2016/04/Briefing-NonEuropean_Student_Migration.pdf, (August 2016) 472 ‘Potential Implications of Admission Criteria for EU Nationals Coming to the UK’, http://www.migrationobservatory.ox.ac.uk/resources/reports/potential-implications-of-admissioncriteria-for-eu-nationals-coming-to-the-uk/ (May 2016) 473 ‘Potential Implications of Admission Criteria for EU Nationals Coming to the UK’, http://www.migrationobservatory.ox.ac.uk/resources/reports/potential-implications-of-admissioncriteria-for-eu-nationals-coming-to-the-uk/ (May 2016) 474 ONS, ‘Population briefing international student migration - what do the statistics tell us?’, http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/rel/migration1/l ong-term-international-migration/student-migration---what-do-the-statistics-tell-us-/index.html (January 2016)

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3.2.2 Existing data on the impact of Brexit on migration and mobility in the tertiary education sector There is some evidence that, even before it is implemented, Brexit is already having an impact on application rates and intentions. Recent UCAS data shows a 9% decrease of EU applicants for courses with deadlines in mid-October 2016, compared to the 2016 entry cycle, while non-EU international applicant quotas remain largely unaffected (+1%).475 As this is only preliminary evidence, one cannot readily conclude that the decline can be attributed to the Brexit referendum as a singular cause, but it is indicative. The application data is supported by the findings from our own survey (n=330). EU respondents were the most negative about the effects of Brexit on the likelihood of EU students applying to UK universities.476 A weaker but generally similar trend was observed when respondents were asked to rate the likelihood of international (non-EU) students applying to UK universities post-Brexit.477This data hints that, long-term, Brexit may also affect international non-EU applications rates too. Mirroring this result, the majority of respondents agreed that Brexit will have damaging effects on the attractiveness of UK universities, with EU-nationals being most pessimistic.478479 EU nationals currently studying in the UK tended to endorse the statement “If I were to apply again today, I would reconsider applying to a UK university” to a greater degree than either their UK or their non-EU international counterparts.480 3.2.3 Attitudes to migration and mobility of students Although there is pressure on the government to control immigration, it should be noted that 75% of leave voters and 77% of remain voters do not perceive students as

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‘Applicant Statistics’, https://www.ucas.com/corporate/news-and-key-documents/news/applicantnumbers-‘early-deadline’-university-courses-increase (October 2016) 476 Respondents were asked to rate the effects of Brexit on the likelihood of EU students applying to UK universities on a 5-point scale with 1 = “very negative effects”, 3 = “neutral”, 5 = “very positive effects”). The results were: m(UK-citizens) =1.74 (SD = 0.72, σx̅ = .057), m (EU-citizens)=1.56 (SD = 0.59, , σx̅ = .057), m(non-EU-international-citizens)=1.62 (SD = 0.84, σx̅ = .108). 477 Respondents were asked to rate the effects of Brexit on the likelihood of EU students applying to UK universities as follows on a 5-point scale with 1 = “very negative effects”, 3 = “neutral”, 5 = “very positive effects”). The results were: m(UK-citizens) = 2.64 (SD = 1.07, σx̅ = .082), m(EU-citizens) = 2.58 (SD = 0.83, σx̅ = .080), m(non-EU-international-citizens) = 2.49 (SD = 0.92, σx̅ = .118). 478 (5-point scale with 1 = “very negative effects”, 3 = “neutral”, 5 = “very positive effects”; m(UKcitizens) = 2.15(SD = 1.21, σx̅ = .087), m(EU-citizens) =1.78 (SD = 0.66, σx̅ = .064), m(non-EUinternational-citizens) =2.10 (SD = 0.89, σx̅ = .114)). 479 An ANOVA with Bonferroni post-hoc tests showed, that the difference between EU- and UK-student responses to this question was statistically significant (df = 2, F = 5.15, p <.01), whereas differences between UK- and non-EU-international-students and EU- and non-EU-international-students were not. 480 Respondents were asked how strongly they agreed with the statement “If I were to apply again today, I would reconsider applying to a UK university” on a scale ranging from 1 = “strongly agree” to 5 = “strongly disagree). Results: EU respondents = (m = 2.58, SD = 1.40, σx̅ = .135) , UK respondents = m = 3.43, SD = 1.99, σx̅ = .112; non-EU international respondents m = 3.39, SD = 1.36, σx̅ = .174. Again, the difference in endorsement propensity reached statistical significance (df = 2, F = 13.01) for the comparison between EU- and UK-students (p < .001), and EU- and non-EU-international-students (p<.01), respectively.

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! immigrants.481 A large majority of UK voters (91%) believes students should be able to stay and work in the UK for some time after graduation.482 These attitudes should be considered carefully when crafting new policies, perhaps with a special focus on successful alternative models that exist elsewhere at the fringes of the EU (for example in Norway, Switzerland).483

3.3 Practices in other countries/International context/How the UK compares Tertiary education is a hugely valuable sector, and the UK faces stiff global competition not only from its traditional Anglophone rivals Australia, Canada and the USA, [33], but, increasingly, from other EU countries, such as Germany and the Netherlands, who offer growing numbers of courses in English. 484 These countries will continue to retain freedom of movement within the EU and, as outlined in section 2, have competitive funding structures and costs: they must therefore be borne in mind as an important and likely growing source of competition post-Brexit. We consider how the UK compares to other countries in terms of attitudes and policies towards student mobility and migration. We focus in particular on the treatment of students in relation to net migration targets. We also look very briefly at other policies towards students and their transition into the labour market. Although this paper does not focus on this area in detail, as it is focused primarily on the impact of Brexit on students and universities, post-study work visas is an area to assess properly before designing future migration policies. Given the similarity of the pressures and challenges that confront other non-EU Anglophone countries in terms of migration and mobility, we here focus in particular on the situation in Australia, Canada and the USA. 3.3.1 Students and net migration figures The UK has a single net migration figure that includes everybody coming to the country for longer than 12 months (including students). This contrasts with the policy of the UK’s competitors Canada, Australia and the USA. Although they, like the UK, count international net migration figures and pursue ambitious targets to limit the influx of

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‘New poll – cutting international student numbers will not address public immigration concerns’, http://www.universitiesuk.ac.uk/news/Pages/New-poll-%E2%80%93-cutting-international-studentnumbers-will-not-address-public-immigration-concerns.aspx (October 13 2016) 482 This poll was conducted by ComRes for Univeristies UK, and was based on a survey of 2000 British adults. ‘New poll – cutting international student numbers will not address public immigration concerns’, http://www.universitiesuk.ac.uk/news/Pages/New-poll-%E2%80%93-cutting-international-studentnumbers-will-not-address-public-immigration-concerns.aspx (October 13 2016) 483 ‘Potential Implications of Admission Criteria for EU Nationals Coming to the UK’, http://www.migrationobservatory.ox.ac.uk/resources/reports/potential-implications-of-admissioncriteria-for-eu-nationals-coming-to-the-uk/ (May 2016) 484 Helen Warrell ‘UK universities face more competition from European rivals’, Financial Times, https://www.ft.com/content/3dedb442-6771-11e5-a57f-21b88f7d973f (September 30 2015).

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people, none of them includes international students in their target figures for permanent migration.485 Given this fundamental difference between the UK and its competitors in the treatment of students in relation to net migration figures, we assess the merits and drawbacks of the UK’s current policy. It is worth pointing out that this policy has been an important point of political debate and discussion: despite numerous calls from lobbyists and ministers, Theresa May has consistently resisted excluding students from migration totals, although it is unclear precisely why.486 There are some arguments against excluding students from UK net migration targets.487 The UK’s metric fits with the UN’s definition of a migrant.488 Secondly, there has been concern in the past about the rigour of the student visa process and about students overstaying their visas.489 As section 3.2.1 above has discussed, however, these concerns have largely been based on inaccurate data from the IPS, which has been shown to be an inadequate source for assessing student numbers. There are solutions to these concerns about student visas. The Government could 1) work with universities to ensure fairness, transparency and a suitable degree of rigour in student visa processes, and 2) take steps to find a more accurate way of measuring the numbers of students leaving the country and / or overstaying their visas. This would also enable the Government better to address any future concerns about student numbers and their impact. With these actions in place, there are good reasons to exclude students from net migration figures and targets. Although the public is concerned about controlling immigration in general, section 3.2.3 above has shown that this concern does not extend to students. It is also worth noting that post-Brexit financial modelling and suggestions for the continued financial stability and competitiveness of UK universities rely on increased numbers of international students studying in the UK, for example as a result of the depreciation of sterling. HEPI explicitly warns against the implementation of migration caps.490 Excluding students from migration figures also sends out a positive message about their being welcome in the UK: this could provide an effective counter to concerns that we

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‘Destination education reforming migration policy on international students to grow the UK’s vital education exports’, http://www.ippr.org/publications/destination-education (September 2016) 486 Michael Skapinker, ‘Theresa May’s clampdown on international students is a mystery’, Financial Times, https://www.ft.com/content/a1b695da-07e7-11e7-97d1-5e720a26771b (March 15 2017) 487 Helen Warrell, ‘Five reasons why Theresa May wants students in migration statistics’, https://www.ft.com/content/1c61c180-0a43-11e7-ac5a-903b21361b43 (March 16 2017) 488 Helen Warrell, ‘Five reasons why Theresa May wants students in migration statistics’, https://www.ft.com/content/1c61c180-0a43-11e7-ac5a-903b21361b43 (March 16 2017) 489 ‘Britain wants you! Why the UK should commit to increasing international student numbers’, http://www.ippr.org/files/images/media/files/publication/2013/11/Britain-wantsyou_Nov2013_11534.pdf?noredirect=1 (2013) 490 Gavan Conlon, Rohit Ladher and Maike Halterbeck, ‘The determinants of international demand for UK higher education’, http://www.hepi.ac.uk/wp-content/uploads/2017/01/Hepi-Report-91-Screen.pdf (January 2017)

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highlight in chapter 5. The government has already expressed the desire to continue to attract top global talent, and an exclusion of students from migration figures would be a good action in support of this stated aim. 3.3.2 Other policies around student migration The UK’s competitors have implemented other policies aimed at encouraging international students to come and study there and easing their transition into the job market so that they can continue to contribute to the country after graduation. We recognise that this is a policy area that needs more analysis. Australia has mounted great efforts to streamline and simplify its visa process. International students are considered as ‘temporary’ migrants and are therefore not listed in any of the government’s multi-category immigration targets, differentiated by migrant groups. The launch of the National Innovation and Science Agenda, that aims to retain bright minds to fuel the economy, is another push in the same direction. The programme was further consolidated in April 2016 with the introduction of the National Strategy for International Education (NSIE). The NSIE comprises a 10-year plan to build up the international education sector. It is heavily subsidized by the government, which has committed to contribute $12m towards its implementation until 2020.491 Similar developments can be observed in Canada, where the launch of the international education strategy in 2014 announced the goal to double the amount of international students from 2011 by 2022 (target figure: 450,000).492 Boosting retention rates following graduation, the post-graduation work permit program enables graduates to work in Canada for a period matching their length of study (up to a maximum of three years). This is accompanied by various programs for the transition into permanent residency (e.g., the federal skilled worker program, the provincial nominee program, and the Canadian experience class (CEC)). A review one year after the launch of the programme found that there was a rise in international student numbers from 239.000 in 2011 to 293,500 in 2013, and 35% of participants in the programme cited employment opportunities as their primary reason for studying in Canada.493 The current political situation in the USA makes it harder to assess the overall direction of their policies. In close resemblance to Canada, however, the USA has adopted a curricular practical training program which entails temporary work authorization for off-campus ‘practical training’ as part of students’ studies, including employment and internships. In the UK, graduates from outside of the EU and EEA must, apart from a very few exceptions, earn at least £25,000 per year from a home-office registered employer to be eligible for a general (Tier 2) working visa following the completion of their

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‘Destination education reforming migration policy on international students to grow the UK’s vital education exports’, http://www.ippr.org/publications/destination-education (September 2016) 492 ‘Destination education reforming migration policy on international students to grow the UK’s vital education exports’, http://www.ippr.org/publications/destination-education (September 2016) 493 McBride, K. ‘One Year Later – Progress on Canada’s international education strategy’, http://cbie.ca/one-year-later-progress-canadas-international-education-strategy/ (23 January 2015).

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! studies.494 Research has suggested that this is an insurmountable hurdle for many gifted students, and particularly for post-doctoral roles.495 ADD point from chapter 4. Students who have completed a PhD in the UK can apply for the Tier 4 (Doctoral Extension Scheme), which gives them a visa extension of 12 months to find work with a Tier 2 employer, set up as an entrepreneur, or gain work experience.

3.4 Summary of key findings Based on the data above, we conclude that there are good reasons to maintain, and indeed improve, the ease of student migration and mobility, both to and from the UK. We argue that there should be no significant change to the treatment of EU students after Brexit, and that Brexit could also be an opportunity to rethink policies towards the migration and mobility of students more broadly. The following findings are of particular note: -! The numbers of EU students are not that high to begin with. EU students make up just 16% of the overall migration from EU countries, and are easily outnumbered by non-EU international students (as of 2015, there were 125,000 EU students in the UK and 213,000 non-EU international students).496 497 -!

The situation regarding the number of international students who stay beyond graduation/overstay their visas is poorly understood due to inaccurate data. This is something that needs to be addressed.

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EU students bring money, talent and ideas to the country, drive economic innovation, research and social improvements and form global networks of alumni.498

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International university students are not generally viewed as immigrants by the British public (only 25% of leave and 23% of remain voters said they perceived them as such). The overwhelming majority of the British public (91%) thinks they should be allowed to stay and work in the UK for some time after graduation.499 UK higher education institutions themselves have clearly expressed their wish to keep EU students in the system and remain closely tied to the EU.

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‘Tier 2 (General) visa’, https://www.gov.uk/tier-2-general/eligibility (retrieved January 25 2016) ‘Destination education reforming migration policy on international students to grow the UK’s vital education exports’, http://www.ippr.org/publications/destination-education (September 2016) 496 ‘Top ten other European Union countries of domicile in 2014/15 for HE student enrolments by location of HE provider and country of domicile 2010/11 to 2014/15 (Table 8)’, https://www.hesa.ac.uk/data-and-analysis/students/overviews?keyword=587&year=2 (retrieved December 13 2016) 497 ‘Potential Implications of Admission Criteria for EU Nationals Coming to the UK’, http://www.migrationobservatory.ox.ac.uk/resources/reports/potential-implications-of-admissioncriteria-for-eu-nationals-coming-to-the-uk/ (May 2016) 498 Universities UK, ‘The UK’s competitive advantage’, http://www.universitiesuk.ac.uk/International/Pages/uk-competitive-advantage.aspx (February 2016) 499 ‘New poll – cutting international student numbers will not address public immigration concerns’, http://www.universitiesuk.ac.uk/news/Pages/New-poll-%E2%80%93-cutting-international-studentnumbers-will-not-address-public-immigration-concerns.aspx (October 13 2016) 495

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Amongst its competitors, the UK is alone in counting students in net migration targets.

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In terms of outward mobility, the UK is already underperforming even within the EU framework.

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In 2013/14 61% of all student movements originating from the UK took place within the EU.500 Further corroborating this figures, in 2014/15, 46% of all student movements originating from the UK were carried out in the frame of the Erasmus+ programme alone, equalling 11,465 people.501

3.4 Recommendations There are significant advantages to boosting student migration and mobility, both outbound and inbound, after Brexit. 3.4.1 Inbound mobility The UK could lose out to its main competitors for international students (i.e., Australia, Canada, the US) if Brexit puts additional strain on international students, especially EU students [22]. Therefore, we propose that the following policies be adopted to maintain competitiveness and yield the best outcome for the UK education system as a whole: 1.! International students should be exempt from government net migration figures and targets, as is common practice in other countries. As argued in section 3.3.1 above, there is little logic for government not doing this: excluding students from net migration figures fits with public perception and brings the UK more in line with competitors. The arguments for not doing so are largely based on inaccurate data. Excluding students from net migration targets also sends out a clear message that they are welcome in the UK. The UK Government should at the same time a) work with universities to ensure a fair, transparent and rigorous student visa process; b) find ways accurately to understand and measure the numbers of students leaving at the end of their degree/to capture data on students as they transition into the job market. 2.! Universities should support students and make clear to them the terms required for applications for permanent residency after studying. This is particularly crucial for those EU students who are here during the Article 50 process/the transition period before Brexit.

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‘Gone International 2016: the value of mobility’, http://go.international.ac.uk/sites/default/files/GoneInternational2016_the%20value%20of%20mobility.p df (2016) 501 ‘HESA 2014/15 Outward Mobility Data’, http://www.go.international.ac.uk/sites/default/files/HESA%202014%20to%202015%20printable%20an alysis_2.pdf (retrieved 13 December 2016)

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In particular, universities should make it clear that students cannot be solely reliant on the NHS if they want their years at university to count towards a permanent residency application.

3.4.2 Outward mobility Regardless of what shape Brexit takes, maintaining mobility and international exchange with the rest of Europe is crucial and beneficial for both sides. Outward mobility is an area in which the UK is currently underperforming, even with the support structures of the EU in place. We therefore suggest the following policies to improve the situation following Brexit and ensure that UK students are equipped to take advantage of opportunities to study abroad following Brexit. 1.! Ensure continued participation in the Erasmus program and similar frameworks (e.g., like other non-EU members such as Norway, Turkey, Switzerland) 2.! Act early: intensifying foreign language training at school, promoting binational exchanges, stressing the importance of language skills and intercultural competencies at an early stage in peopleâ&#x20AC;&#x2122;s educational trajectories. 3.! Raise awareness and spreading information about mobility programs to close the knowledge gap. 4.! Promote and strengthen funding opportunities, especially for underprivileged and socially disadvantaged students to close the interestaction gap. 5.! Further streamline accreditation of foreign credits, improving standards for degree recognition and easing cross-system transferability in close collaboration with the UK higher education institutions.

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4. RESEARCH: FUNDING, COLLABORATION AND AVAILABILITY OF ACADEMIC PERSONNEL 4.1 Context: Current Situation This section assesses the impact of Brexit on various aspects of universities’ research, and their relevance to students. Although research quality and provision has a less direct impact, at least on undergraduate students, than the two areas considered in the first two sections of this paper, it nonetheless plays an important role in students’ decisions on where to study and on the quality of education that universities can deliver. For postgraduate students, the importance of research funding and quality is direct and significant. Universities are ranked both nationally and internationally on their research excellence.502 World-class research improves the global reputation of UK universities and supports UK economic growth, increasing employment opportunities for graduates.503 Research also has an important role in tertiary education. For example, block grants distributed by HEFCE (Higher Education Funding Council for England) on the basis of research performance can fund support for research degrees and pay for staffing or equipment, benefitting both undergraduate and graduate students.504 Additionally, many universities adopt an approach of research-led teaching, considered by the Royal Academy to be the “best quality of teaching”505, where current research informs the content, curriculum and structure of courses. An indication of this interaction between research and teaching is the Higher Education Statistics Agency (HESA) figure that 49% of academic staff in 2014 were involved in both research and teaching.506 In our survey of over 300 current and recent university students, graduates and applicants, we asked respondents to rate how important various factors were for their decision to attend a particular university (on a 5-point Likert scale from ‘not at all important’ to ‘very important’). 84% of respondents considered the quality of research at a prospective university to be an important or very important factor in their university choice (with 97% of those applying for postgraduate research courses considering it important or very important compared to 65% applying for undergraduate courses). 90% considered the reputation of their chosen university as important or very important in deciding where to apply. Ranking in league tables were also a deciding factor with 61% considering ranking in national league tables important or very important and 66%

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Josie Gurney-Read and Javier Espinoza, ‘How to read university rankings’, http://www.telegraph.co.uk/education/2016/03/14/how-to-read-the-different-universityrankings/(September 6 2016) 503 Universities UK, ‘The Impact of Universities on the UK Economy’, http://www.universitiesuk.ac.uk/policy-and-analysis/reports/Documents/2014/the-impact-of-universitieson-the-uk-economy.pdf (April 2014) 504 ‘How we fund research’, http://www.hefce.ac.uk/rsrch/funding/ (accessed April 3 2017) 505 ‘Green Paper: Higher education: teaching excellence, social mobility and student choice’, http://www.britac.ac.uk/sites/default/files/British%20Academy%20Response%20to%20Higher%20Educ ation%20Green%20Paper%20January%202015.pdf (January 2016) 506 ‘Staff at higher education providers in the United Kingdom 2014/15’, https://www.hesa.ac.uk/news/21-01-2016/sfr225-staff (January 21 2016)

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considering ranking in international league tables to be important or very important. 29% of respondents chose reputation as the single most important reason for applying to a particular university. This was second only to attractiveness of course and teaching (at 43%). For the reasons outlined above, UK universities must continue to produce world-class research in order to maintain their reputation and attract students in the international tertiary education market. In this section we will consider three important areas for high quality research that could be affected by exiting the EU. These three areas are research funding, international collaboration and availability of academic personnel. We lay out the current situation in these areas before considering the possible impact of exiting the EU. Finally, we will make policy suggestions for how to maintain research quality outside of the EU. 4.1.1. Current Situation: Research Funding Research funding in the UK comes from a variety of sources, including: 1.! HEFC (High Education Funding Council) and the seven UK research councils507 2.! Other public bodies (e.g. Local Authorities or the NHS) 3.! Charities (national and international) 4.! Business and industry (national and international) 5.! Private individuals (national and international) 6.! The European Union (through various schemes, including the Framework Programmes and European Structural and Investment Funds discussed below) Estimating the percentage of UK universities’ research funding that comes from the EU is difficult for a number of reasons. Firstly, not all EU research funding goes to universities. For example, between 2007 and 2013, the UK received €6.9bn through the EU’s Framework Programme 7 (FP7), aimed at improving research and technology across the EU.508 The Royal Society reports that of this €6.9bn, 71% went to universities whilst the other 29% was split between other organisations involved in research and technology, such as businesses and public bodies.509 University research also benefits from European Structural and Investment Funds (ESIF), which are intended to support economic development in various areas.510 However, because these are not specifically earmarked for research, they are not included in some research funding figures. The Royal Society suggests that between 2007 and 2013, the FP7

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The seven research councils are: Arts and Humanities Research Council (AHRC), Biotechnology and Biological Sciences Research Council (BBSRC), Engineering and Physical Sciences Research Council (EPSRC), Economic and Social Research Council (ESRC), Medical Research Council (MRC), Natural Environment Research Council (NERC) and Science and Technology Facilities Council (STFC). 508 ‘How does EU research funding compare with UK domestic research funding?’, https://royalsociety.org/topics-policy/projects/uk-research-and-european-union/role-of-EU-in-fundingUK-research/how-does-eu-funding-compare-with-uk/ (December 2015) 509 ‘How does EU research funding compare with UK domestic research funding?’, https://royalsociety.org/topics-policy/projects/uk-research-and-european-union/role-of-EU-in-fundingUK-research/how-does-eu-funding-compare-with-uk/ (December 2015) 510 ‘European structural and investment funds’, http://ec.europa.eu/regional_policy/en/funding/ (accessed April 3 2017)

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accounted for 3% of research funding for UK universities (compared with 22% from HEFC and the UK Research Councils).511 However, it notes that the figure for EU funding is likely to be higher because it does not include grants from ESIF or any other miscellaneous EU funding. HESA includes EU funding from programmes other than FP7 in its figures and reports that 2.6% of UK universities’ total income in 2013/2014 came from research grants and contracts from EU sources.512 This income made up 16% of the total research funding for UK Universities. The economic impact of this funding is significant, with the Russell Group reporting that the £3.2 billion which they received through FP7 had an estimated economic impact of £35 billion through innovations, new technologies and products.513 The current round of the EU framework programme funding from the EU, running from 2014-2020, is Horizon 2020. Horizon 2020 combines research and innovation funding and has an estimated budget of €80bn, making it the largest ever EU research programme.514 The UK has submitted the highest number of applications to Horizon 2020 and has also had the highest success rate (at 14.8% compared to the EU-28 average of 13.3%).515 The value to UK universities across this period (2014-2020) is €368.4m.516

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‘How does EU research funding compare with UK domestic research funding?’, https://royalsociety.org/topics-policy/projects/uk-research-and-european-union/role-of-EU-in-fundingUK-research/how-does-eu-funding-compare-with-uk/ (December 2015) 512 ‘Income of higher education providers tops £30 billion, expenditure £29.4 billion in 2013/14’ https://www.hesa.ac.uk/news/05-03-2015/he-finances (March 5 2015) 513 ‘Russell Group universities and the European Union’, https://www.russellgroup.ac.uk/media/5417/russell-group-universities-and-the-european-union.pdf (April 16 2016) 514 ‘UK research and the European Union’, https://royalsociety.org/~/media/policy/projects/eu-ukfunding/uk-membership-of-eu.pdf (December 2015) 515 ‘UK Country Profile’, http://ec.europa.eu/research/horizon2020/pdf/countryprofiles/uk_country_profile_and_featured_projects.pdf#zoom=125&pagemode=none (accessed March 2017) 516 ‘UK Country Profile’, http://ec.europa.eu/research/horizon2020/pdf/countryprofiles/uk_country_profile_and_featured_projects.pdf#zoom=125&pagemode=none (accessed March 2017)

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Box 1. European Union Research Funding Framework Programmes for Research and Technological Development (Framework Programmes): These are funding programmes created by the EU and European Commission to encourage and support research in the European Research Area (ERA). There have been seven previous Framework Programmes (FP1-FP7) with the eighth (FP8, also known as Horizon 2020) currently underway. The first Framework Programme ran between 1984 and 1987 with a budget of €3.8bn. The last completed Framework Programme (FP7) ran between 2007 and 2013 with a budget of €50.5bn. The objectives of the Framework Programmes vary. For example, FP6 and FP7 focused on technological research whilst Horizon 2020 supports wider research and innovation (see below). The Amsterdam Treaty obliges the EU to implement such research programmes. Horizon 2020: This is the 8th of the Framework Programmes. The programme’s name has been modified to Framework Programme for Research and Innovation, with Horizon 2020’s objectives reflecting this change. Horizon 2020 will run from 2014 to 2020 with an expected budget of €80.5bn. The programme has three ‘pillars’ for research; Excellent Science, Industrial Leadership and Societal Challenges. European Research Council (ERC): The ERC was established in 2007 and is funded under the Framework Programmes. It accounts for 17% of Horizon 2020’s budget and falls under the funding pillar ‘Excellent Science’. ERC’s purpose is to fund individual researchers and teams based on scientific excellence. Funding is available in three areas; Physical Sciences and Engineering (39% of funding), Social Sciences and Humanities (17% of funding) and Life Sciences (34% of funding). It is governed by the independent Scientific Council, composed of 22 European scientists and scholars. European Structural and Investment Funds (ESIF): This fund is separate from the Framework Programmes. It is intended to support job creation and economic growth. Investment can take the form of infrastructure investment (for example, improving broadband) or skills investment (such as funding businesses or training programmes). UK universities have benefited from ESIF funds to improve their facilities, teaching and research.

Although the UK benefits from EU research funding, it also makes significant contributions; the House of Commons Library reports that the UK made the third largest net contribution to the EU budget in 2015.517 However, when the UK Government carried out a review of EU research and development in 2014, it concluded that the UK did “exceptionally well” from EU research funding initiatives. It noted that the UK received 15.4% of available EU funds from 2007-2013, second only to

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‘EU budget and the UK’s contribution’, House of Commons Research Briefing (January 30 2017)

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! Germany (16.1%).518 This percentage is higher than the UK’s share of contributions (6.9%) and its share of the EU population (12.7%).519520 The complexity and variety of EU research funding was reflected in our survey of university students and graduates. 26 respondents reported receiving research funding from an EU scheme or non-UK EU member. The most common form of funding was through an ERC grant (15 respondents). However, other grants came in the form of flagship research programmes funded through Horizon 2020 or other funding initiatives (such as the European Regional Development Fund). There were also others whose research at a UK university was funded by a specific non-UK EU member state or by a Marie Skłodowska-Curie Action (see section 4.1.3. below for more information). Box 2. Cambridge and European Funding The University of Cambridge The University of Cambridge has been the single biggest beneficiary of Horizon 2020 grants. Over the last 10 years, researchers at the university have successfully won 218 individual European Research Council grants. Some recent examples of projects funded through ERC grants include: ! Humanities: In 2014, Dr Subha Mukherji won a five-year ERC Consolidator Grant for her interdisciplinary project ‘Epistemic Intersections in Early Modern England: the Place of Literature’ which has researchers in both the Faculty of English and the Centre for Research in the Arts, Social Sciences and Humanities. ! Social Science: Professor Lorraine Tyler in the Department of Psychology has won two successive ERC Advanced Grants for her work on the neurobiological systems involved in interpreting spoken language. Her research programme, running from 2014-2020, received a grant of over £2m. ! Science: The Nitschke Group in the Department of Chemistry was awarded a €2.47m ERC Advanced Grant in 2016 to support research into functional systems of capsules. The University of Cambridge has also formed partnerships with other universities, supported through EU funding. An example is the collaborative Graphene Flagship project which was funded by the European Commission with an initial investment of €54m.

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‘Review of the Balance of Competences between the United Kingdom and the European Union Research and Development’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/279331/bis_14_592_balan ce_of_competences_review_government_reponse_to_the_call_for_evidence.pdf 519 ‘Review of the Balance of Competences between the United Kingdom and the European Union Research and Development’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/279331/bis_14_592_balan ce_of_competences_review_government_reponse_to_the_call_for_evidence.pdf 520 ‘Data for European Union and United Kingdom’, http://data.worldbank.org/?locations=EU-GB (accessed December 2016)

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Anglia Ruskin University Anglia Ruskin University recently announced its leadership of the collaborative KEEP+ programme, funded by a £9.3m ESIF grant. The three-year project aims to encourage local innovation through the creation of links between industry and academic research. The project will give local small and medium-sized enterprises (SMEs) access to expert advice, funding and support from academic researchers across eight partner institutions. Other partner institutions in the scheme include the University of Suffolk and the University of Essex. KEEP+ follows on from the Low Carbon KEEP programme, also funded by an ESIF grant, which supported over 200 SMEs in the East of England.

4.1.2. Current Situation: Collaboration International collaboration within research is considered beneficial for many reasons, including maintaining research competitiveness in the world market and making better use of global resources.521 Papers written with international collaboration tend to be more highly cited and have greater impact than those without such collaboration.522,523,524 Horizon 2020 and other EU schemes have encouraged greater international collaboration in research and have increased UK universities’ involvement in international collaborations both within and outside the EU.525. Between 1981 and 2014, the proportion of published UK research with international collaboration increased from 16% to 52%.526 The majority of these collaborations were with other EU member states, with the Russell Group stating that 80% of their internationally coauthored papers were written with EU collaborators.527 In 2013, UK research publications accounted for 11.6% of citations and 15.9% of the most highly cited scientific research articles (the highest proportion of any country in the world).528 These figures indicate that the UK is experiencing more than its expected level of success in this area, considering that it has only 4.1% of the world’s researchers and just 3.2% of

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‘Drivers of international collaboration in research’, https://ec.europa.eu/research/iscp/pdf/publications/drivers_sti.pdf (2009) 522 Wolfgang Glänzel, ‘National characteristics in international scientific co-authorship relations’, Scientometrics, 51:69 (2001): 69-115 523 ‘International partnerships of research excellence: UK-USA academic collaboration’, http://www.immagic.com/eLibrary/ARCHIVES/GENERAL/OXFORD/O060427R.pdf 524 ‘Would international collaboration be affected if the UK left the EU?’ https://royalsociety.org/topicspolicy/projects/uk-research-and-european-union/role-of-eu-researcher-collaboration-andmobility/would-international-collaboration-be-affected-if-the-UK-left-the-EU/ (May 2016) 525 ‘Would international collaboration be affected if the UK left the EU?’ https://royalsociety.org/topicspolicy/projects/uk-research-and-european-union/role-of-eu-researcher-collaboration-andmobility/would-international-collaboration-be-affected-if-the-UK-left-the-EU/ (May 2016) 526 ‘How does the EU affect universities and students?’ http://www.thecompleteuniversityguide.co.uk/international/eu-referendum-how-does-the-europeanunion-affect-universities-and-students/ (June 2016) 527 ‘Russell Group universities and the European Union’, https://www.russellgroup.ac.uk/media/5417/russell-group-universities-and-the-european-union.pdf (April 16 2016) 528 ‘International comparative performance of the UK research base – 2013’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263729/bis-13-1297international-comparative-performance-of-the-UK-research-base-2013.pdf (2013)

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! global research and development expenditure.529 In our survey, 63 respondents reported having had collaboration with another EU institution outside of their UK university, with 44% of them reporting that this collaboration was an important or very important reason in their decision to join the research project. 4.1.3. Current Situation: Academic Personnel Conducting world-class research requires world-class researchers and the UK currently attracts academic staff from across the globe, with 28% of all academic staff being nonUK nationals.530 The percentage of EU academic staff at different universities varies. Across all UK universities 12% of academic staff are non-UK EU nationals. The Russell Group reports higher rates with 20% of its academic staff being non-UK EU nationals.531,532 Some universities outside the Russell Group also have a high percentages of EU staff such as the University of Kent, which reports that over 20% of their academic staff are non-UK EU nationals.533 Furthermore, in some specialist fields the proportion is much higher. For example, at the Francis Crick Institute, Europe’s biggest biomedical research centre, 55% of the staff are non-UK EU nationals.534 HEFCE reports that non-UK EU scholars were appointed to 39.5% of all new academic posts created between 2004 and 2015.535 Without EU nationals, these positions may not have been suitably filled; HEFCE states that non-UK EU nationals (compared to UK nationals) are more likely to work in specialist areas and are more likely to have their work submitted for the Research Excellence Framework (REF) indicating a higher level of research quality.536 Similarly, the Russell Group reports that over 50% of European Research Council Consolidator Grants awarded to UK universities were won by non-UK EU academics.537

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‘International comparative performance of the UK research base – 2013’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263729/bis-13-1297international-comparative-performance-of-the-UK-research-base-2013.pdf (2013) 530 ‘Snapshot of the UK research workforce’, https://royalsociety.org/topics-policy/projects/uk-researchand-european-union/role-of-eu-researcher-collaboration-and-mobility/snapshot-of-the-UK-researchworkforce/ (May 2016) 531 ‘Snapshot of the UK research workforce’, https://royalsociety.org/topics-policy/projects/uk-researchand-european-union/role-of-eu-researcher-collaboration-and-mobility/snapshot-of-the-UK-researchworkforce/ (May 2016) 532 ‘Russell Group universities and the European Union’, https://www.russellgroup.ac.uk/media/5417/russell-group-universities-and-the-european-union.pdf (April 16 2016) 533 ‘Students, staff and Europe’, https://www.kent.ac.uk/european/students/ (November 9 2016) 534 Jon Henley, Stephanie Kirchgaessner and Philip Oltermann, ‘Brexit fears may see 15% of UK university staff leave, group warns’, The Guardian, https://www.theguardian.com/education/2016/sep/25/brexit-may-force-15-of-staff-at-uk-universities-toleave-warns-group (September 25 2016) 535 ‘EU nationals fill four in 10 new university jobs in England’, https://www.timeshighereducation.com/news/eu-nationals-fill-four-10-new-university-jobs-england (March 10 2016) 536 ‘Selection of staff for inclusion in the REF 2014’, http://www.hefce.ac.uk/media/HEFCE,2014/Content/Pubs/2015/201517/HEFCE2015_17.pdf (2015) 537 ‘Russell Group universities and the European Union’, https://www.russellgroup.ac.uk/media/5417/russell-group-universities-and-the-european-union.pdf (April 16 2016)

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The EU encourages research staff mobility as part of its commitment to free movement.538 EU nationals are able to work across the European Economic Area without visas or work permits, allowing UK universities to recruit from a larger pool without the financial and administrative burden of going through the immigration system.539 The EU also funds Marie Skłodowska-Curie Actions (MSCAs) to encourage further research staff mobility. MSCAs include funded PhD programmes, international mobility fellowships and international exchanges of research staff.540 UK-based researchers have been particularly successful in their applications for MSCAs with 3,454 UK-based researchers receiving funding between 2007 and 2014 at a total value of €1.1bn (almost 25% of all available MSCA funds in this period).541 4.2 Risks 4.2.1 Risks: Research Funding As outlined in section 4.1.1, UK universities receive an estimated 16% of their research income from EU sources (mainly Horizon 2020 and ESIF). The Chancellor confirmed in the Autumn Statement that the Government would underwrite any Horizon 2020 funding granted before the UK leaves the EU. He encouraged UK researchers to continue to apply for research funding from the EU on the basis of this guarantee. He also stated that any grants from ESIF signed before the Autumn Statement would be underwritten.542 In the UK Government’s white paper, this guarantee was extended to include any funding obtained from ESIF after the Autumn Statement and before the UK leaves the EU which provided strong value for money and were in line with “domestic strategic priorities.”543 Although these assurances mean that UK universities should be able to continue with any planned funding applications to the EU with confidence, there is anecdotal evidence of the uncertainty of future EU grants. Researchers have reported that they have been left out of research consortia since the Brexit vote, have experienced delays in applications and are concerned that their applications to EU funding schemes may be looked upon less favourably.544 Similarly,

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‘Free movement of workers’, http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_3.1.3.html (December 2016) 539 ‘Would international collaboration be affected if the UK left the EU?’ https://royalsociety.org/topicspolicy/projects/uk-research-and-european-union/role-of-eu-researcher-collaboration-andmobility/would-international-collaboration-be-affected-if-the-UK-left-the-EU/ (May 2016) 540 ‘Marie Skłodowska-Curie actions – overview’, http://ec.europa.eu/research/mariecurieactions/about_en (accessed January 2017) 541 ‘Would international collaboration be affected if the UK left the EU?’ https://royalsociety.org/topicspolicy/projects/uk-research-and-european-union/role-of-eu-researcher-collaboration-andmobility/would-international-collaboration-be-affected-if-the-UK-left-the-EU/ (May 2016) 542 Chancellor Philip Hammond guarantees EU funding beyond date UK leaves the EU’, https://www.gov.uk/government/news/chancellor-philip-hammond-guarantees-eu-funding-beyond-dateuk-leaves-the-eu (August 13 2016) 543 ‘The United Kingdom’s exit from and partnership with the EU’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_King doms_exit_from_and_partnership_with_the_EU_Web.pdf (February 2 2017) 544 ‘UK scientists dropped from EU projects because of post-Brexit funding fears’, The Guardian, https://www.theguardian.com/education/2016/jul/12/uk-scientists-dropped-from-eu-projects-because-ofpost-brexit-funding-fears (July 12 2016) and ‘Brexit Briefing: Scientists feel the effect’, Financial Times, https://www.ft.com/content/ba85f924-5e24-11e6-a72a-bd4bf1198c63 (August 9 2016)

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in our survey there were some anecdotal reports of UK researchers being sidelined by collaborators because of the uncertainty around how EU funders would view UK universities.545 Jo Johnson MP (the Minister of State for Universities, Science, Research and Innovation) has given assurances to UK researchers that he will be alert for any discrimination against UK researchers and has raised these concerns with Carlos Moedas, the European Commission’s research chief.546 As of yet, the Government has not made any assurances about access to Horizon 2020 or other EU funding schemes after the UK leaves the EU. Without any access to Horizon 2020 or a guaranteed increase in UK research funding to match previous EU funding, there will be a 16% cut in research funding once the UK exits the EU. The Prime Minister has committed to increasing research and development funding by £2bn a year by 2020.547 Over the period 2007-2013, the UK received €8.8bn for research and innovation from the EU (roughly €1.76bn annually).548 However, it is important to note that the pledged funding is for universities, research institutes and industry so the exact proportion that will come into university research budgets is unclear.549 There are also concerns regarding funding for arts and humanities. Academics criticised Horizon 2020 for underfunding humanities and social science research.550 The UK Government has not yet offered the same assurances to arts, humanities and social science as it has for science and technology. For example, in the UK Government’s white paper, the only research mentioned is around science and technology.551 Research outside of science and technology is unlikely to benefit from the promised £2bn a year. The manner in which the funds will be dispersed focuses on collaboration between industry and academia as well as supporting the commercialisation of research findings. Although this may be of benefit to scientific research, it is unlikely to support Arts and Humanities. In our survey, respondents raised concern over the future of Arts and Humanities funding and the lack of assurances made to these disciplines compared to science.

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Example quotations include: “I am also worried about the disintegration of international scientific collaborations when the UK will not be able to apply for joint funding with other EU institutions, and have already seen several British groups left out of joint funding proposals for this reason.” and “Colleagues have been sidelined in applications for large EU-funded multi-institution projects as they are increasingly viewed as liabilities.” 546 Tania Rabesandratana , ‘Science minister says he's watching out for post-Brexit 'discrimination' against U.K. researchers’, Science (June 30 2016) 547 ‘PM announces major research boost to make Britain the go-to place for innovators and investors’, https://www.gov.uk/government/news/pm-announces-a-2-billion-investment-in-research-anddevelopment (November 21 2016) 548 ‘UK research and the European Union’, https://royalsociety.org/~/media/policy/projects/eu-ukfunding/uk-membership-of-eu.pdf (December 2015) 549 ‘Autumn Statement 2016’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/571556/autumn_statement _2016_print.pdf (November 2016) 550 ‘Brexit shows need for more EU-funded social sciences research’, Times Higher Education, https://www.timeshighereducation.com/news/brexit-shows-need-for-more-european-union-eu-fundedsocial-sciences-research (July 10 2016) 551 ‘The United Kingdom’s exit from and partnership with the EU’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_King doms_exit_from_and_partnership_with_the_EU_Web.pdf (February 2 2017)

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In our survey, 79% of respondents believed that leaving the EU would have a negative or very negative effect on the availability of research funding (compared to just 3% who believed it might have a positive or very positive effect). When asked about the importance of accessing EU research funding, 71% considered it important or very important (compared to 15% who considered it not important or not at all important). 69% of respondents selected it as one of the top three policy priorities for universities on leaving the EU.552

4.2.2 Risks: Collaboration As discussed in section 4.1.2, international collaboration both within the EU and outside the EU has helped raise the status and reputation of UK research. Horizon 2020 has facilitated and encouraged fruitful collaborations between the UK and other EU countries. The UK Government stated it its white paper that it would “welcome agreement” to continue collaboration with EU partners.553 However, the Government has not yet made any statements about whether the UK will negotiate for access to Horizon 2020 after leaving the EU. There have also not been any announcements about how it might foster or encourage research collaboration outside of the EU should the UK no longer have full access to Horizon 2020. In our survey 76% of respondents believed that exiting the EU would have a negative or very negative impact on opportunities for international collaboration (compared to 3% who believed it would have a positive or very positive impact). 65% of respondents believed that effect of leaving the EU would be negative or very negative for the international reputation of UK universities (compared to 8% who believed it would be positive or very positive). A number of respondents raised concerns around how the UK would be perceived by potential international collaborators after the referendum. They suggested that the UK might be seen as “inward-looking”, “unwelcoming” and “not attractive” to international researchers looking for collaboration. One respondent noted that several research groups in their department were already looking to move to a different EU country and another commented that the UK leaving the EU would benefit other strong research countries, such as the Netherlands and Germany.

4.2.3 Risks: Academic Personnel As explored in section 4.1.3, UK universities attract an average of 12% of their academic staff from the EU, with some universities and specialist fields employing an even greater proportion from the EU. In order for UK universities to remain

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Options were: 1) Right to study and work across the UK and other EU countries, 2) Access to EU research funding, 3) Government’s ability to control allocation of funding, 4) Access to exchange schemes such as Erasmus, 5) Protection of fee status for EU students, 6) Government’s ability to control proportions of home, EU and international students and 7)Reduction of EY and international student numbers. 553 ‘The United Kingdom’s exit from and partnership with the EU’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_King doms_exit_from_and_partnership_with_the_EU_Web.pdf (February 2 2017)

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internationally competitive, they must continue to attract and retain the best researchers from around the world. There are concerns that the aftermath of withdrawing from the EU will make the UK less attractive to talented researchers due to visa restrictions and immigration targets. Anecdotal evidence suggests that EU researchers are already rejecting positions at UK universities due to these concerns.554 There is also concern for staff currently employed in UK universities due to their current uncertain status. The Government has given no clarification so far about their right to remain in the UK after it leaves the EU. Failing to retain EU researchers could lead to an academic brain drain. A survey by the University and College Union suggested that three-quarters of the EU nationals they talked to have been considering leaving the UK since the referendum.555 Lord Stern has suggested that other EU countries will benefit from this situation and ‘poach’ promising EU staff from UK universities.556 In our survey, 66% of current PhD students and recent PhD graduates said that the UK leaving the EU would reduce their likelihood of staying in the UK (compared to 4% who said it would increase their likelihood of staying and 30% who said it would have no effect).

4.2.4 Key Risks The key risks, as highlighted above, are around access to the funding, collaboration and personnel in the EU. The future of research funding in many areas is uncertain. There is a risk of a reduced funding for academic research. Without certain access to EU research projects, there is also a risk to international collaboration. For UK universities working on research projects with EU partners, there is a risk that the UK will no longer have access to these projects. This could lead to a decline in academic collaboration that would affect UK universities’ reputation. Finally, uncertainty around the future of EU nationals living in the UK means that there is a risk of a brain drain of talented EU researchers.

4.3 Policy Suggestions 4.3.1 Policy Suggestions: Research Funding Whilst the UK is still an EU Member State, it must continue to be treated as one in its funding applications to Horizon 2020, ESIF and other funding initiatives. The UK Government should continue to communicate this to other Member States and take up cases of any researchers who suspect discrimination against UK universities.

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Jon Henley, Stephanie Kirchgaessner and Philip Oltermann, ‘Brexit fears may see 15% of UK university staff leave, group warns’, The Guardian, https://www.theguardian.com/education/2016/sep/25/brexit-may-force-15-of-staff-at-uk-universities-toleave-warns-group (September 25 2016) 555 Ella Turner, ‘Universities face ‘brain drain’ after Brexit, survey reveals’, http://www.telegraph.co.uk/education/2017/01/09/universities-may-face-brain-drain-brexit-new-surveyreveals/ (January 9 2017) 556 ‘Foreign universities ‘to poach EU academics after Brexit vote’, Times Higher Education, https://www.timeshighereducation.com/news/foreign-universities-poach-eu-academics-after-brexit-vote (July 19 2016)

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If UK universities reduce the number of funding applications made to the EU before the UK leaves, the impact on research could be damaging due to reduced research budgets. The UK Government should promote EU funding opportunities to researchers and encourage them to continue to apply for funding. The underwriting of Horizon 2020 and ESIF funding obtained before the UK leaves the EU is an encouragement to UK universities. However, the UK Government should also reassure researchers that the funding being used to underwrite Horizon 2020 and ESIF funding is new money and is not coming from any existing ring-fenced funding allocations for science.557 Access to Horizon 2020 and future Framework Programmes after leaving the EU should be a priority for the UK Government. Framework Programmes are open to three groups; EU Members States, Associated Countries and non-associated third countries. Associated Countries are given the same status in applications as EU Member States and pay a percentage of GDP for access. The terms of their access vary between Associated Countries. For example, Switzerland is partially associated and Swiss researchers can apply for research funding from Horizon 2020 on the same terms as those from EU Member States. However, continued access beyond 2016 is dependent on Switzerland ratifying an agreement on free movement that includes Croatia when it joins the EU. Norway is another Associate Country. It is a member of the European Economic Area and the European Free Trade Area (meaning it has free movement of goods, people, services and capital). It has full access to Framework Programmes but, like all other Associated Countries, it has no ability to influence the direction of European research funding.558 As both Switzerland and Norway have been required to accept freedom movement of people as terms of association, it is unlikely the UK Government will wish to negotiate a similar deal. However, another Associated Country, Israel, has access without freedom of movement, although it does have an agreement on free movement of goods.559 It is important to note, however, that the EU was attracted by Israel’s world-leading innovation and technology.560 The UK does not have the technological prominence that Israel had during its negotiations to access the Framework Programmes. The UK Government must highlight and support the best aspects of UK research during their negotiations to agree on a favourable deal on access to Framework Programmes. If the UK does not become an Associated Country, it may still be able to access Framework Programme funding as a non-associated third country. Non-

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http://www.universitiesuk.ac.uk/policy-and-analysis/brexit/Pages/short-term-priorities.aspx ‘Which countries can access EU research funding?’ https://royalsociety.org/topics-policy/projects/ukresearch-and-european-union/role-of-EU-in-funding-UK-research/which-countries-can-access-euresearch-funding/ (December 2015) 559 ‘Brexit: could UK join EU research system as ‘associated country’?’, Times Higher Education, https://www.timeshighereducation.com/news/brexit-could-uk-join-european-union-eu-research-systemas-associated-country (July 2 2016) 560 ‘Secrets behind Israel’s growing competitive edge’, http://www.forbes.com/sites/realspin/2013/11/07/what-are-the-secrets-behind-israels-growinginnovative-edge/#d4def9d11728 (2013) 558

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associated third countries can apply to Framework Programmes for funding and collaborations but are not given equal status as EU Member States. Funding may come with set terms, such as an agreement for matched funding from the Government of the non-associated third country.561 If the UK does not become an Associated Country, the UK Government should commit to supporting researchers in applications as a nonassociated third country and agree to matched funding schemes. It is also worth being aware that, without the UK around the table, the terms of the framework programmes and their funding may be liable to change: the UK has been particularly keen to ensure that funding is awarded on the basis of excellence. The Government needs to remain alert to these potential changes and consider how to respond. Current Government investment in research is low compared to global competitors. When UNESCO reviewed public spending on research in March 2015, it reported that on average G8 countries spent 0.77% of their GDP on research and Eurozone countries spent on average 0.73% of their GDP. The UK spent 0.48% of GDP on research. The UK Government spends around £134 per person on research, roughly the same as Slovenia. Norway had the highest spending per person on research at £299 a year.562 With the likely reduction in access to EU funding in the future, the UK Government must invest more in research. The EU set a target for research and development spending in the Europe 2020 strategy. The target was for EU countries to commit to increasing combined public and private spending on research and development to 3% of GDP by 2020.563 The UK Government should commit itself to meeting or surpassing a target of 3% of GDP by 2020 to ensure that the UK does not fall behind its research competitors within the EU.564 As discussed in section 4.2.1, the Government has made some guarantees on funding for science and technology. However, there have not been any similar funding guarantees for Arts and Humanities research. The UK Government should review current spending on Arts and Humanities and underwrite any funding from EU sources before leaving the EU. Ensuring that UK universities continue to excel in all areas of research is vital in maintaining their global reputation. Both Jo Johnson (the Minister of State for Universities, Science, Research and Innovation) and Sir John Kingman (chairman of UK Research and Innovation) have suggested that leaving the EU is an opportunity for UK research.565 The UK Government must support these assertions with a clear strategy for how UK

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‘Which countries can access EU research funding?’ https://royalsociety.org/topics-policy/projects/ukresearch-and-european-union/role-of-EU-in-funding-UK-research/which-countries-can-access-euresearch-funding/ (December 2015) 562 ‘International comparisons’, https://scienceogram.org/in-depth/international-comparisons/ 563 ‘Communication from the Commission: Europe 2020’, http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:2020:FIN:EN:PDF 564 ‘UK Government must commit to 3% GDP target by 2020’, https://www.parliament.uk/business/committees/committees-a-z/commons-select/business-innovationand-skills/news/business-university-collaboration-report/ (December 1 2014) 565 ‘Leaving the EU: implications and opportunities for science and research’ http://www.publications.parliament.uk/pa/cm201617/cmselect/cmsctech/502/502.pdf

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research will be supported and grown during the negotiation process with the EU and after the UK leaves the EU. There should be greater clarity about where research funding comes from and a firm commitment to increased public spending on research.

4.3.2 Policy Suggestions: Collaboration If the UK becomes a non-associated third country (see above) for EU Framework Programmes then the UK Government should support matched funding deals to ensure continued collaboration with EU researchers. As discussed in section 4.2.2, some researchers have already reported feeling sidelined by EU Member States in collaborative projects. The UK Government must strengthen relations with EU Member States and assure them that the UK continues to support international collaboration. The Prime Minister has suggested that leaving the EU will make the UK more global. With this intention, it is important that the UK Government strengthens relations with other countries with strong research backgrounds. For example, encouraging collaborations within the Commonwealth of Nations, especially rising research powers such as India or Australia, would allow UK researchers to continue to produce highly cited, high quality research regardless of access to EU collaborators.

4.3.3 Policy Suggestions: Academic Personnel In evidence submitted to the House of Commons Education Committee, the University of Cambridge urged the Government to prioritise clarifying the status of EU staff working in the UK.566 Without timely reassurances for EU staff, there is the risk of these researchers leaving and prompting a brain drain that will damage UK universities.567 The House of Commons Science and Technology Committee urged the Government to exempt EU researchers from being part of Brexit negotiations.568 The UK Government in its white paper confirmed this as one of its early priorities and it should confirm that EU researchers currently working in the UK will have the right to remain after the UK leaves the EU as soon as possible.569 The University of Cambridge also suggested to the House of Commons Education Committee that the Government consider a transitional arrangement to enable UK

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Written evidence submitted by University of Cambridge [to committee examining impact of exiting the EU on UK HE], http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/ education-committee/the-impact-of-exiting-the-european-union-on-higher-education/written/42742.html (November 2016) 567 Daniel Cresssey, ‘Brexit by the numbers: the fear of brain drain’, Nature (December 2014) 568 ‘Leaving the EU: implications and opportunities for science and research’ http://www.publications.parliament.uk/pa/cm201617/cmselect/cmsctech/502/502.pdf 569 ‘The United Kingdom’s exit from and partnership with the EU’, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_King doms_exit_from_and_partnership_with_the_EU_Web.pdf (February 2 2017)

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universities to continue to employ talent from the European Economic Area and protect researcher mobility.570 The UK Government should commit to this transitional arrangement to protect universities from an employment cliff-edge after the UK leaves the EU. Universities UK has urged the Government to consider the value of international staff to research and to reform the current immigration system so that it reflects the benefit of international researchers.571 This could take a number of forms, such as waiving visa requirements or having fast track visas for academic researchers. If such measures were applied to both EU and non-EU international staff then the UK could end up being more attractive to international research talent than it has ever been before. However, if EU academic staff will be expected to apply for Tier 2 visas after the UK leaves the EU then the Government should implement two exceptions for university research staff. Firstly, the salary requirement should be lowered to reflect the starting salaries of many post-doctoral research roles. Secondly, UK universities should be exempt from the proposed £1,000 charge for each worker with a Tier 2 visa to prevent further depletion of university research funds. Initiatives such as the EU Marie Skłodowska-Curie Actions (MSCAs) have allowed EU researchers to bring research funding and skills into the UK. The UK Government should continue supporting MSCAs and promote the UK as a country open to these researchers. To encourage talent from outside the EU, the UK Government could invest in a similar scheme aimed at non-EU researchers who could be encouraged to spend an allotted period of time researching within a UK university. This would promote UK universities internationally and maintain their global research reputation.

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‘Leaving the EU: implications and opportunities for science and research’ http://www.publications.parliament.uk/pa/cm201617/cmselect/cmsctech/502/502.pdf 571 http://www.universitiesuk.ac.uk/policy-and-analysis/brexit/Pages/short-term-priorities.aspx

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5. PERCEPTION AND REPUTATION OF UK UNIVERSITIES 5.1 Introduction 5.1.1 Context This section contains an elaboration on the potential changes to the reputation of UK higher education institutions after Brexit, and explores the importance of these to students’ decisions on where to study. Reputation refers to the way that students, employers, and the general public perceive UK higher education institutions, as well as their rankings in global league tables. This section therefore assesses both institutional image and more quantifiable rankings. Reputation is becoming increasingly important as the higher education sector becomes more competitive, and reputation is not only a factor in student recruitment (Dennis et. al., 2017),572 but it can also affect aspects like funding, the research quality of academic staff, and graduate job prospects. Often, the way students perceive higher education institutions and their reputation affects their likelihood of attending these schools.573574 There is room for more related studies on university reputation and student appeal in the UK context. Higher education league tables and international ranking sites such as the Times Higher Education World University Rankings and QS Rankings can affect the way that potential students, employees, and key funding stakeholders perceive a university. It is not only specific universities that may be praised or scrutinized due to their reputation, but the reputation of a country’s tertiary education system as a whole can have an impact on the students it attracts. For example, a study shows that Chinese postgraduate students are most likely to select a country to study abroad in before they select a programme, university, or city.575 There are other studies on the push/pull factors that influence international students, and many of the more recent studies focus on Asia, as more students from this continent seek higher education in English speaking countries: in 2015-2016, China provided 91,215 of 311,980 total EU and non-EU international students studying in the UK (29%).576 At present, there is less substantial research into why EU students may travel to the UK for their

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Dennis, C., Papagiannidis, S., Alamanos, E., & Bourlakis, M. in ‘The Role of Brand Attachment and Its Antecedents in Brand Equity in Higher Education’. In Creating Marketing Magic and Innovative Future Marketing Trends, (Springer, Cham, 2017), 287-292. 573 Yang, M. ‘What attracts mainland Chinese students to Australian higher education’, Studies in Learning, Evaluation, Innovation and Development, 4(2) (2007): 1-12. 574 Martin, C. ‘Institutional Research and Student Recruitment or How do Institutions of Higher Education Know What Attracts Students to their Doors? Market research can help’. Journal of Institutional Research in Australasia, 5, (1996): 45-54. 575 Manns, Y., & Swift, J. ‘Chinese Postgraduate choices when considering a UK business and management programme’, Higher Education Quarterly, 70.1 (2016): 3-23. 576 UKCISA, ‘International student statistics: UK higher education’, https://institutions.ukcisa.org.uk/Info-for-universities-colleges--schools/Policy-research-statistics/Research--statistics/International-students-in-UK-HE/#International-(non-UK)-students-in-UKHE-in-2015-16 (January 16 2017)

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education: this is something that it would be useful better to understand as the UK prepares for Brexit. After the Brexit vote, global university rankings of UK universities have shown signs of falling.577 Students and university leaders alike have expressed fears for a bleaker future based on this drop in rankings. In rankings created by QS, a higher education think tank, 38 of the UK’s 48 universities in the top 400 have declined in the categories of academic and employer reputation.578 The QS head of research, Ben Sowter, commented, “Uncertainty over research funding, immigration rules, and the ability to hire and retain the top young talent from around the world seems to be damaging the reputation of the UK’s higher education sector.” 5.1.2 Structure of section In this section, there will first be an overview of the reputation of UK universities before Brexit, followed by an assessment of how that reputation has been changing post Brexit both in terms of rankings and rhetoric. Next, the potential for indirect impacts on society will be explored. Finally, this section will be concluded with a list of policy recommendations based upon the findings. The most crucial idea is that simply resolving the technical difficulties presented by Brexit presented by mobility, research, and funding concerns will not entirely heal the reputation of UK universities. Alongside making a push for a smooth transition to new policies and practices, the UK Government also needs to focus on university reputation and maintaining the perception of strongly performing and welcoming universities.

5.2 Reputation of UK universities before Brexit As it stands, the most competitive universities tend to be located where English is the language of study: the UK, US, Canada, and Australia.579 In the 2015-2016 QS rankings, four of the top ten universities are from the UK (University Rankings, 2017). The UK, four other Anglophone countries, France and Germany accept 50% of the global flow of students, with the UK itself being the biggest recruiter of EU students.580 In recent years, concerns have arisen that America and Britain will start losing out on competition between Anglophone countries to Australia and Canada, who are both

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The data on this is necessarily limited at present. Powell, T, ‘Brexit hits London universities' places in global rankings’, Evening Standard, http://www.standard.co.uk/news/education/world-university-rankings-201617-london-institutionstumble-amid-brexit-uncertainty-a3337611.html (September 6 2016) 579 Hemsley-Brown, J., Melewar, T. C., Nguyen, B., & Wilson, E. J. (2016). ‘Exploring brand identity, meaning, image, and reputation (BIMIR) in higher education: A special section’, Journal of Business Research 69.8 (2016): 3019-3022 580 Corbett, A. ‘Research and higher education: UK as international star and closet European?’, The Political Quarterly, 87.2 (2016):166-173. 578

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encouraging favourable immigration policies to attract students (see section 3 above). In 2014-2015, the number of students from outside of the EU attending UK universities fell by 3% when the government passed policies to tighten visa rules, raise application costs, and restrict how much students could work.581 The fear that the UK is falling behind in the international education market is not new to this decade; even in the early 2000s, scholars noted that the UK was experiencing marginal growth and declining market penetration compared with other countries that have been emerging with quality education.582 Nonetheless, the UK is still a top performer in the global education market. Reputation is particularly important to being competitive in the global market; in our survey, we asked students to rank the importance of different factors in applying to a university on a scale of 1-5 (with 5 being the highest level of importance). Students regarded the overall reputation of the university (m =4.43/5) as being more important than culture and atmosphere (m =4.26/5), unique course content or research specialism (m =4.17/5), availability of scholarships and funding (m =3.54/5), the quality of research (m =4.34/5), the quality of teaching (m =4.42/5), and ranking in international (m =3.78/5) and national league tables (m =3.63/5). The extent of the role of membership of the EU in the UK’s reputation and ranking is contested. On the one hand, EU students find UK universities attractive because they often pay lower tuition fees than international students, and they are eligible for a wider variety of loans and scholarships. Not only do EU students contribute financially, through tuition fees, research money that is brought in, and off campus expenditure, EU students also contribute to the cultural life of UK universities by increasing diversity and the opportunities for cultural learning.583 In turn, this makes UK universities more attractive. From another angle, the UK higher education system itself differs from other countries in the EU, for example, by using a credit system that differs from the European Credit Transfer and Accumulation System and offering one-year masters’ degrees in England and Wales. The Russell Group relies more on their national and global reputation, and overall the UK government’s higher education strategy tends to be framed globally and nationally, rather than in European terms.584 This perspective falls in line with the idea that the UK education system may have fared well even without EU membership.

5.3 How this reputation has been changing since the Brexit referendum

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‘Brains without borders’, The Economist, http://www.economist.com/news/international/21689540australia-and-canada-seek-attract-more-foreign-students-america-and-britain-could (January 30 2016) 582 Binsardi, A., & Ekwulugo, F, ‘International marketing of British education: research on the students’ perception and the UK market penetration’. Marketing Intelligence & Planning, 21.5, (2003): 318-327. 583 Finn, M., Husbands, C., McCormac, G., & Arthur, M. 'Insularity is not the way forward': three university vice-chancellors on Brexit’. The Conversation (June 13 2016). 584

Corbett, A. ‘Research and higher education: UK as international star and closet European?’, The Political Quarterly, 87.2 (2016):166-173.

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This next section will explore how the reputation of UK universities has been changing since the referendum, and what this may mean, both in terms of ranking and rhetoric. 5.3.1 Changes in Rank Since Brexit, UK higher education rankings have been affected in international league tables. According to QS rankings, 74% of the UK’s top-400 universities fell in the categories of both academic and employer reputation, and 58% have less international faculty members.585 Even with this drop, Cambridge, Oxford, UCL, and Imperial College London remain in the top 10 world universities. One concern is that graduate job prospects are often linked to university rankings. In a study in the UK on the effect of university attended on graduates’ labour market prospects, outcomes suggest that graduates of higher ranked universities are invited to more job interviews and start with higher entry-level salaries than those who graduate from lower ranked universities.586 If international graduates do not feel confident that they can secure a job based on the reputation of their university, it disincentivises them from attending, especially when there are other sacrifices and costs associated with leaving home for university, or when there are more secure alternatives. This may lead to UK universities attracting fewer of the best students, and they will go to places that may be more affordable, especially if fees go up while the chances of them obtaining jobs decrease. Another concern is that research funding may be affected by the drop in international rankings, as the bodies who decide where funding is allocated perceive a drop in the potential returns on their investment in terms of quality research. Previous sections discuss the risk to research funding that goes along with exiting the EU, but a drop in international rankings may compound this effect. Furthermore, international students often bring in their own funding, which may support university research activity. This impact may then affect the quality of professors and students that universities are able to attract.

5.3.2 Changes in Rhetoric More abstract than changes in ranking are the changes in rhetoric around studying in the UK that have taken place since the UK voted to leave the EU. Changes in rhetoric refer to the changes in what students say, feel, and think about studying in the UK. Two major changes have been international students feeling less welcome and the degree of uncertainty over their future status in the UK.

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‘UK University Rankings Tumble in Wake of Brexit Vote’, The Educator http://www.theeducator.com/news/uk-university-rankings-tumble-wake-brexit-vote/ (September 14 2016) 586 Drydakis, N. ‘The effect of university attended on graduates’ labour market prospects: A field study of Great Britain’. Economics of Education Review, 52, (2016): 192-208.

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One major factor in this is how welcome students feel and how open they perceive UK universities to be to international students. Since the referendum, many EU and international students, or students considering studying in the UK, have felt less welcome. For this reason, they may opt not to study in the UK or not to continue living, working, or studying in the UK after graduation. In our student survey, we asked students to respond to the statement “I feel less welcome in the UK because of Brexit” on a scale of 1 to 5 (with 1 being strongly feeling less welcome). Both EU and international students stated that they felt less welcome in the UK because of Brexit, with EU students (m =2.22/5) feeling particularly less welcome and international students (m =2.60/5) falling closely behind. This is important because not only are EU students feeling unwelcome, but the impact of Brexit is felt by international students as well. One student from the University of Leeds stated that they had experienced unpleasant comments by UK citizens in public. They also felt that the information about their status as a student was not clear, causing them to fear for their future as a student in the UK. Another wrote, My future is uncertain, I face possibly being separated from my partner, working in the UK is looking more difficult, I feel anxious, unwelcome, and scared.University of Leeds student A third commented that the impact of Brexit, has had a psychological effect. I do not feel welcome in the UK. Oxford University student A University of Manchester student comments, It is deeply concerning and distressing and puts me in a very insecure position: will I be able to stay for the rest of my degree and after my degree? What will happen to my scholarship and my fee status? Will I still feel welcome despite the fact that the Brexit referendum has legitimised a very dangerous wave of xenophobia? This reaction of uncertainty and feeling unwelcome is not unprecedented; for example, after anti-Indian attacks spiked in 2009 on Australian campuses, Australia saw a decline in international students.587 Maintaining a feeling of perceived openness in the UK is vital for UK higher education to compete internationally, because as research shows, students usually choose their target country first and then decide the universities they will apply to.588 The student quotes from our survey also reveal a degree of uncertainty surrounding their future status in the UK as students or as working professionals. Students from the EU are facing questions of uncertainty about their fee status, visa requirements, job

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‘Broader implications from a downturn in international students’, https://www.universitiesaustralia.edu.au/ArticleDocuments/210/Deloitte%20Report%20%20Broader%20Implications%20from%20a%20Downturn%20in%20International%20Students.pdf.asp x (June 2011) 588 ‘Brains without borders’, The Economist, http://www.economist.com/news/international/21689540australia-and-canada-seek-attract-more-foreign-students-america-and-britain-could (January 30 2016)

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opportunities, and general attitudes towards non-UK students for the future. Non-EU international students are also considering whether obtaining a student visa will be more difficult, and whether, after an increase in anti-immigrant sentiment being visible in some instances throughout the UK, they will feel welcome. In understanding how rankings and rhetoric affect UK higher education institutions, it is important to understand that perception plays a large role; without concrete policy steps that have been put forth, the way students perceive UK universities is important to focus on so that they see the UK as a viable and attractive place to study.

5.4 Indirect consequences on society Looking to the future, the change to university reputation in terms of rank and the rhetoric surrounding attending a UK higher education institution may correlate with and contribute to wider change in society. This section gives a few examples of where these changes may take place. It is important to note that the policies put in place during the transition out of the EU will determine the resulting influence, and these are considerations to keep in mind when formulating policy. A. Damage to the knowledge based economy in the UK Membership of the EU has provided benefits for UK universities, including research funding, access to high-quality professors from other countries, a talented diverse workforce and so forth. The UK needs to consider how the reputation of UK higher education in the EU in the wake of Brexit may affect their position and ability to benefit from being part of this knowledge economy and the knowledge and resource transfer that occurs between the UK and EU countries.589 B. Effects on UK’s soft power and educational relations The UK’s approach to soft power (in this case, specifically, educational relations) strategies may be affected as the UK higher education system is now being perceived as less welcoming to EU and international students.590 It is crucial to think about the way educational relations will be perceived and consider a short and long term strategy for framing these regional relations, as part of an overall plan for framing future UK public diplomacy. C. Change in cross-cultural interactions and experience among students, both in the EU and the UK If EU and international students are hesitant to study in the UK because of a perceived lack of openness, a drop in university rankings, or both, there will be missed opportunities for cross-cultural interactions between students. These interactions are

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Corbett, A. ‘Research and higher education: UK as international star and closet European?’, The Political Quarterly, 87.2 (2016):166-173. 590 MacDonald, S. ‘The impact of Brexit on the UK’s reputation, influence and soft power’. Cultural Trends, 25.4 (2016): 280-286.

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important for all students, as increased diversity in schooling may make students more confident in studying, working, and living abroad, and teach crucial skills in cooperation and cultural understanding, skills which the global economy and an increasingly globalizing world relies on for the future.591

5.5 Conclusions and Recommendations At present, in the uncertain period between the referendum result and before the details of the UK’s future relationship with Europe are worked out, the way information is presented or perceived plays just as important a role in the way people react as actual policy changes. According to the results of our survey, it appears that students are already perceiving the U.K. as a place where they are not welcome before any measurable policy changes have been created. Students make decisions to attend universities based on a combination of factual information and how they perceive a university to be/how the rest of the world perceives it. Therefore, it is important to focus on policies that reshape the UK’s current higher education narrative and make UK schools feel welcoming. To note, this analysis considers an isolated situation in which other global players in English-speaking education are not experiencing concurrent changes to the perception of their higher education systems. The current situation in the United States with the Trump administration’s changes toward visa and immigration policies may also play a role in determining where international students choose to attend university, but this has not been incorporated in this section’s discussion as it is beyond the direct scope of this paper.

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The creation of a singular government website where students and potential students can search their nationality and keep updated on any changes/the information they need to study in the UK. Making information accessible to students is important in a time when many students are worried about their future as students in the UK. With a unified website that lists information about fees, funding, visas, and so forth, students will be able to receive information as quickly as it is released, and there will be less confusion about their status and opportunities for the future. This will also lead to the perception of more transparency during the time when higher education policies are changing, and students may look favourably upon this transparency.

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Carlson, J. S., & Widaman, K. F. ‘The effects of study abroad during college on attitudes toward other cultures’, International journal of intercultural relations, 12.1 (1988): 1-17.

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Consideration of the creation of visa pilot programs for EU students that make obtaining a visa easier. An example of a similar scheme is the recent visa pilot programs that have been released for students at certain universities; a Tier 4 visa pilot program was created for Masterâ&#x20AC;&#x2122;s students to help simplify the visa application process by requiring the submission of fewer documents and granting additional leave on the visa after the course end date. A survey is currently being conducted by the visa office on how international students perceived the pilot program and whether this made them see studying in the UK in a more favourable light.

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The creation of new graduate schemes that include EU students and will guarantee a protected working status if they continue in that job or that industry, so EU students can perceive security in their ability to find employment in the UK. It is important for non-UK students to know that there will be job opportunities available to them if they choose to attend school in the UK, and a graduate scheme that makes it easier for them to find employment and continue living in the UK with this employment may help to do so. Furthermore, it is possible that these graduate schemes may be designed to meet demands in certain industries and fields for graduate talent.

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Consideration of prolonging the grace period for international students to search for jobs and start a working visa after their student visa expires, so that students can envision studying and then finding a job in the UK without a high level of insecurity. This recommendation would mean that either a student visa would extend past the course end date so international students could work and find jobs, or that the process of obtaining a visa to stay after a student visa expires would be simplified. Currently, EU students are able to stay in the UK after their studies, but this is liable to change. In most cases (with the exception of certain pilot programs) students need to switch to another type of visa almost immediately after their course ends, but changing this and extending the time students may look for work can enforce the idea that many opportunities exist for students attending UK universities from other countries.

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Universities, with the support of Government, should work to develop relationships with campuses worldwide to form partner programs and campuses, thus showing that the UK is open to collaborating with students worldwide and hosting them on UK campuses.

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Creation of a commission of experts to strategize how UK universities as a whole can move up in league tables, important because international students often pick country of study before any specific university.

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6. CONCLUSION The EU plays an important and varied role in UK universities. Brexit is therefore likely to impact students and universities in a number of different areas, both directly and indirectly. The UK government, in partnership with universities, needs to come up with wide-ranging and creative strategies to maintain and boost the success of UK universities after Brexit, and ensure that they can continue to compete internationally. The extent of the impact of Brexit varies across the different areas investigated in this paper. In some areas, it is possible to see where the impact of Brexit could be neutral or positive: at some institutions, for example, the numbers of EU students lost as a result of increased fees would be more than compensated for by the increased fee take from those that remained. In addition, a depreciation of sterling may encourage more students to come and study in the UK. In other areas, however, the impact is more negative. There is particular concern about the threats to research from a combination of loss of access to EU research funding and structures, and increased difficulty of collaboration and recruitment of top academics as the UK ends freedom of movement across the EU. In other areas, the impact of Brexit is harder to assess: it is for example difficult to quantify what the long-term impact of Brexit will be on the reputation of UK universities and student choices about where to study. In designing policies for the university sector after Brexit, it is also crucial to remember that the different areas and factors examined in this paper do not operate in isolation. Maintaining student numbers at a financially sustainable level for example depends on maintaining a welcoming atmosphere for international students and not imposing new immigration restrictions. Research excellence depends both on levels of funding and on structures and collaborations currently guaranteed by the EU. It is also important to remember that the impact of Brexit goes beyond the EU: it has an impact on the global attractiveness and competitiveness of UK universities and on the desire of students from right across the world to come and study there. We recognise that the effects of Brexit are likely to vary significantly across different institutions, courses and disciplines, and between postgraduate and undergraduate students. It is vital that in designing and implementing policies, more granular research is conducted to properly assess these variations and understand the different needs across the university sector. Overall, the recommendations suggested in this paper aim both to target and improve areas in which the UK is currently weaker (outward student mobility is of particular note here), and to sustain and strengthen existing areas of excellence.

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7. APPENDIX This appendix gives 1) more information on the respondents to the survey; 2) a copy of the questions asked. 1) Breakdown of respondents Student Status FREQUENCY Home (UK) EU International (Overseas) Total

162 107 61 330

PERCENT 49.1 32.4 18.5 100

Disciplines FREQUENCY Arts and Humanities Social Sciences STEM (Science, Technology, Engineering and Maths) Medicine Other Missing Total

PERCENT

117 58 136

35.5 17.6 41.2

10 6 3 330

3.0 1.8 0.9 100

Current Employment Status FREQUENCY Currently studying at a UK University Currently applying to study at a UK University Graduated from UK University within 5 last years and currently working in UK Graduated from UK University within 5 last years and currently working in EU Graduated from UK University within 5 last years and currently working outside of UK / UK Other Total

PERCENT

196

59.4

35

10.6

52

15.8

11

3.3

21

6.4

15 330

4.5 100

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University Affiliations of respondents Aberystwyth University: 1 Anglia Ruskin University: 1 Bishops Grosseteste University: 1 BPP Law School: 1 Cardiff University: 2 City University London: 1 Cortauld Institute of Art: 4 Durham University: 11 Imperial College London: 13 Kingâ&#x20AC;&#x2122;s College London: 7 Lancaster University: 1, London School of Economics: 1 London School of Theology: 1 Loughborough University: 1 Northumbria University: 2 Queen Mary, University of London: 1 Royal Agricultural University: 1 Royal College of Art, London: 2 Royal Holloway, University of London: 2 Royal Scottish Conservatoire: 1 Royal Welsh College of Music and Drama: 1 SOAS, University of London: 3 Southampton University: 1 University College London: 27 University of Aberdeen: 2 University of Bath: 4 University of Birmingham: 6 University of Bristol: 6 University of Cambridge: 204 University of Dundee: 1 University of East Anglia: 2 University of Edinburgh: 10 University of Essex: 1 University of Exeter: 11 University of Glasgow: 4 University of Kent: 2 University of Leeds: 11 University of Liverpool: 2 University of Manchester: 10 University of Newcastle: 6 University of Nottingham: 2 University of Oxford: 48 University of Reading: 1 University of Sheffield: 3 University of St. Andrews: 7 University of Surrey: 1 University of Sussex: 1 University of York: 7 Warwick University: 7

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2) Copy of Questionnaire

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CHAPTER VII

EU Immigration Writer: Alexandra Bulat

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TABLE OF CONTENTS

Introduction Argument I.! II.!

Context: why should we talk about EU immigration? Has anything changed since the referendum?

III.!

What will happen with EU immigration after Brexit?

IV.!

Challenges for EU immigration after Brexit. Case study: A conversation with Cambridge residents Concluding comments

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This chapter is based on notes from group and individual conversations with Cambridge residents and freely available datasets on different aspects of EU migration. It does not always reflect the author’s own perspectives on the issues raised.

INTRODUCTION ‘Uncontrolled’ EU immigration to the UK was one of the main themes discussed throughout the referendum campaign. The Leave side of the debate dedicated significant space to discussions about EU immigrants in the UK, emphasising the inability of the United Kingdom to control its borders. After the vote to leave the EU was announced on the 24th of June 2016, EU immigration continued to be one of the top issues raised in media and political debates. Currently, the dominant concern is the rights of residence for EU immigrants who are already living in the UK, most of whom made the UK their home before the referendum took place. This chapter offers a brief overview of EU immigration to the UK in the context of an imminent Brexit. It first describes how EU immigration is discussed nationally and underlines the importance of this issue in the upcoming negotiations. Second, it addresses some changes that happened after the EU referendum, including a rise in Permanent Residence applications, as well as an increase in the number of reported hate crimes. Third, it presents some challenges for EU immigration after Brexit and potential solutions to address those. This is based on evidence from a roundtable conversation on the topic of EU immigration (both students and workers), that the author moderated at the ‘Cambridge & Brexit: discussing our future’ conference, on the 24th of February 2017. It is also informed by some evidence from the author’s own research, which included interviews with Romanian nationals working in the Cambridge area. Finally, the chapter concludes by reflecting on the future of EU immigration in the Cambridge constituency after Brexit.

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ARGUMENT Overall, this chapter argues that the Government’s approach of significantly bringing down the number of EU immigrants arriving in the UK is not necessarily the best outcome for Cambridge. EU nationals make a crucial contribution to the wellfunctioning of the Universities in this constituency – from the intellectual diversity brought by EU academic staff and students, to the hard work that EU staff put in maintenance, administrative, catering, and other services in those educational institutions. In addition, many businesses in this area employ EU staff and are concerned about the future of recruitment after Brexit. Of concern is the national shortage of NHS staff; in this respect, Addenbrooke’s Hospital could be affected if EU staff decide to leave the UK. Even though Cambridge is unlikely to suffer because of Brexit as much as other constituencies in the UK, due to being a prosperous and wellfunded area, there will still be missed opportunities, especially research collaborations with other EU member states, where the funding has already seen cuts. On the overall impact of Brexit, two important aspects considered by this chapter are: 1.! Uncertainty The uncertainty regarding the status of EU immigrants can contribute to the decision of some EU nationals, who are already resident in Cambridge, to seek opportunities elsewhere and eventually relocate to another country. 2.! The UK’s image abroad There are already evident changes in how the UK is depicted in other EU countries, particularly in the media. Negative discourses about the UK can discourage potential migrants to seek work or apply to study in the UK. Throughout this chapter, potential ways to deal with those two issues are discussed. Although Cambridge has already hosted several meetings with EU residents, this chapter strongly recommends that local businesses who employ EU staff and EU nationals who are resident in the Cambridge area continue to be seriously consulted throughout negotiations that will affect their future.

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I. CONTEXT: WHY SHOULD WE TALK ABOUT EU IMMIGRATION? The free movement of people over EU borders is one of the four fundamental freedoms (alongside freedom of movement of goods, services and capital), upon which the EU was created. Under EU law, the UK, still a member state until Brexit negotiations are concluded, must abide by these principles. Therefore, immigration from the EU is still subject to the same laws as it was before the 23rd of June 2016. The Home Office underlines that EU nationals who reside in the UK for more than 3 months must be exercising free movement rights592. Under the Immigration (EEA) Regulations 2016, a EU national is exercising those rights if having one of the following statuses: a jobseeker, a worker, a self-employed person, a self-sufficient person or a student. EU nationals who are self-sufficient or students need to have Comprehensive Sickness Insurance to be considered ‘qualified persons’, according to EU law. The CSI requirement has created numerous debates, because many EU nationals were not made aware of this requirement by their universities or other institutions when arriving in the UK. This is because EU nationals can use the NHS in the UK, but the Home Office does not classify NHS access as CSI. This creates confusion for many EU nationals who are only told to register with a GP upon arrival in the UK593. The EU law regarding CSI did not consider the unique health system of the UK, which is different from insurance-based healthcare in other EU countries. During the referendum campaign, politicians, the media, and other commentators often underlined the negative impacts of EU immigration, both economic (e.g. the perceived lowering of wages for the local British population) and socio-cultural (e.g. immigrants concentrating in some areas, changing the population dynamics of those locations). Despite evidence that EU immigration has an overall positive fiscal effect594 on the UK economy, the Remain campaign rarely made a clear positive economic argument for EU immigration. Instead, representatives from Remain, across the political spectrum, seemed to apologise for the high net migration figures595, rather than acknowledging the reality of numbers while placing at the front of the debate the positives that EU immigrants bring to the UK. This strategy from the Remain campaign, amongst other factors, contributed to an overwhelmingly negative representation of immigration before the referendum596. Immigrants from Eastern Europe were usually the target of such negative depictions, especially in the British tabloid press. Politicians such as UKIP’s Nigel Farage, and other familiar faces on the Leave side of the debate, often

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Home Office (2017), ‘European Economic Area nationals: qualified persons’, Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/588174/EEA-qualifiedpersons-v4_0EXT.pdf. 593 For more details on the confusion created by the CSI requirement, see the ‘EU rights guide’, Available at https://www.freemovement.org.uk/wp-content/uploads/2017/01/EU-residence-rightsstudents.pdf, p. 43. 594 See, for example, Dustmann, C. and Frattini, T. (2013), ‘The Fiscal Effects of Immigration to the UK’, CReAM Discussion Paper Series, No 22/13. 595 In 2010, David Cameron, as Prime Minister in the Coalition Government, made a promise to reduce migration to the ‘tens of thousands’. He failed to deliver on this promise every year he was in Government. This brought him strong criticism and contributed towards the Leave campaign’s argument that migration from the EU cannot be controlled by the UK while still part of the Union. 596 See, for example, MEP Nigel Farage’s infamous poster titled ‘Breaking point’, showing a queue of immigrants supposedly waiting to enter the UK.

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selected Romanians and Bulgarians as examples of uncontrolled EU immigration, referring to the statistically significant increases in the size of these migrant populations. While the increase in immigration population size is factual, the way in which those immigrants were depicted (for instance, stealing British jobs, or committing crimes) perhaps contributed to further shaping a negative feeling towards EU immigration. Overestimating the number of EU immigrants planning to come to the UK was not an uncommon way to produce sensationalist titles in the press, particularly after ending work restrictions for Romanians and Bulgarians in January 2014. Nevertheless, a yearly increase in the number of EU nationals living in the UK is a fact confirmed by all population statistics institutes (see Figure 1, based on ONS data). Most estimates count EU nationals at over 3 million. In the 2011 Census, residents born in an EU country other than the UK represented 3.5% of the overall population of the UK597. This is most likely higher in 2017, with estimates usually around 5% of the total population. A part of those EU nationals settled in the UK decades ago, and many have British partners and children born in the UK. The latest data indicates that most EU immigrants arrive in the UK to work or to seek work. This contrasts with the non-EU immigrants’ case, where study and accompanying someone rank higher as reasons for migration (see Figure 2). It is also important to note that EU immigration is not always a one-way process. There are EU ‘immigrants’ in the actual sense of the word, i.e. ‘A person who comes to live permanently in a foreign country’.598 However, a part of the EU population is highly mobile, engaging in less traditional forms of migration, characterised by flexibility, temporality, and return (or even ‘double return’599) migration. Those EU nationals would be best described as ‘migrants’ (i.e. ‘A person who moves from one place to another, especially in order to find work or better living conditions’), as their move to the UK is not necessarily intended, or ends up being, permanent. Figure 1: EU born population

Figure 2: Reasons for immigration !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 597

For UK Census 2011 data, see https://public.tableau.com/profile/house.of.commons.library.statistics#!/vizhome/KS204Countryofbirth_ 0/Dataconstituency. 598 Oxford Dictionary definition. 599 See, for example, the research of White, A. (2013), ‘Double Return Migration: Failed Returns to Poland Leading to Settlement Abroad and New Transnational Strategies’, International Migration, 52(6), pp. 72-84. This is one of the scholarly works describing how Polish migrants to the UK often return to their country of birth, Poland, but later migrate back to the UK. In recent months, media reports have underlined how Polish migrants return to their country of origin in the wake of the Brexit vote.

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Figure 2: Reasons for immigration

The increasing number of EU immigrants in the UK has shaped British attitudes towards immigration. For instance, the Migration Observatory finds that approximately three quarters of the British public want reduced levels of immigration: 77% of respondents in the 2013 British Attitudes Survey endorsed reducing immigration either by ‘a little’ or ‘a lot’600. In recent years, and especially in the context of the EU referendum, immigration became even more unpopular. The overall negativity in public opinion towards immigration was sufficient for Leave campaigners to justify the need for tighter controls on all EU immigration to the UK. Attitude surveys rarely distinguish views towards different nationalities of migrants or by skill level. When they do, it is East Europeans who are the most unpopular. An item from the Citizenship Survey 2010-2011 makes a rare explicit differentiation by nationality. As a follow-up question, it asks, ‘When you said the number of immigrants coming to Britain should be reduced, from which countries in particular were you thinking of?’. Although the majority did not reply to this question, where nationality is mentioned, the results suggest the public wants immigration reduced from some countries more than from others (see Figure 3). This seems to be correlated with the immigrant group size.

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For more detail, see Blinder, S. and Allen, W. (2016), ‘UK Public Opinion toward Immigration: Overall Attitudes and Level of Concern’, Migration Observatory, Available at: http://www.migrationobservatory.ox.ac.uk/resources/briefings/uk-public-opinion-toward-immigrationoverall-attitudes-and-level-of-concern/.

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In this context of hardened public opinion, EU immigration is a paramount issue. During the Brexit negotiations, politicians will face the difficult task to ensure that voices from the over 3 million EU-born residents are considered, while not ignoring the concerns expressed by the British public. This will be a challenging task, because opinions on the immigration issue are divided across the country.

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For the dataset, see Ipsos MORI (2012), â&#x20AC;&#x2DC;Citizenship Survey, 2010-2011â&#x20AC;&#x2122;, [data collection], UK Data Service, SN: 7111, http://dx.doi.org/10.5255/UKDA-SN-7111-1.

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II. HAS ANYTHING CHANGED SINCE THE REFERENDUM? Following the referendum result, on 11 July 2017, the Cabinet Office, Home Office, Foreign & Commonwealth Office, UK Visas and Immigration, and the newly created Department for Exiting the European Union all published a statement on the status of EU nationals in the UK602. Written in eight languages (English, Russian, Spanish, Italian, Polish, Portuguese, Romanian and Slovenian), the statement underlines that ‘There has been no change to the rights and status of EU nationals in the UK, and UK nationals in the EU, as a result of the referendum’. The statement also makes clear that EU-born residents ‘do not need to register for any documentation in order to enjoy their free movement rights and responsibilities’. Despite preserving the rights and status of EU nationals, many immigrants noted the emergence of a less welcoming British society. The main issue supporting this view is the rise in the number of hate crimes and hate incidents reported by EU nationals after the referendum, confirmed by Home Office figures603. News reporting of ‘racially motivated’ graffiti on the Polish Cultural Centre in Hammersmith a few days after the referendum604 and the murder of Polish national Arkadiusz Jóźwik in Harlow605 were the most reported hate crimes that got the attention of the entire country. Hate incidents, different from hate crimes, usually take the form of racist or xenophobic comments directed to EU nationals in public spaces. In addition, EU immigrants are faced with uncertainty after Brexit, even if there has not yet been a change in their legal status. This insecurity affects how they plan their future, whether they choose to remain in the UK, return to their countries of birth, or relocate to another country. The British media has already revealed various stories of EU nationals who plan to leave because of Brexit uncertainty606. There have been pressures from a range of politicians, migrant organisations, and other institutions to offer a unilateral agreement on the rights of EU nationals in the UK to end this uncertainty. But Theresa May made it clear, in several speeches, that this is not the approach she will take. The Prime Minister stated that she aims to secure an early deal on the status of EU nationals in the UK, provided that the same guarantees apply to British citizens living in other EU member states. In consequence, the European Union (Notification of Withdrawal) Act 2017, also known as the ‘Brexit bill’, does not contain any provisions for EU nationals living in the UK. There were, however, unsuccessful attempts from both the House of Commons and the House of Lords to amend this bill

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‘Statement: the status of EU nationals in the UK’, Available at: https://www.gov.uk/government/news/statement-the-status-of-eu-nationals-in-the-uk. 603 There are many media reports on this issue, for instance, in The Guardian: https://www.theguardian.com/politics/2016/oct/13/hate-crimes-eu-referendum-home-office-figuresconfirm. Nevertheless, it is not clear from the figures whether there are more hate crimes committed, or that the EU nationals are more likely to report hate crimes after the referendum took place. 604 BBC (2016), 'Racist' graffiti on Polish cultural centre in Hammersmith, Online at: http://www.bbc.co.uk/news/uk-england-london-36634621. 605 Dodd, V. (2016), ‘Boy, 15, charged with killing of Polish man in Harlow’, The Guardian, Online at: https://www.theguardian.com/uk-news/2016/dec/01/boy-15-charged-with-killing-of-polish-man-inharlow. 606 See, for example, reports by The Guardian: https://www.theguardian.com/politics/2017/mar/14/lotsof-nurses-have-already-left-eu-workers-head-for-exit.

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and guarantee the status of EU nationals. First, it was the Commons voted on an amendment for EU citizens’ rights; Daniel Zeichner, the MP for Cambridge, supported this amendment, which however did not pass. Then, the House of Lords was successful in passing a similar amendment by 358 to 256. However, MPs could remove these changes when the Bill returned to the House of Commons. The Bill received Royal Assent on 16th March 2017, and Article 50 was triggered on 29th March, in line with the Prime Minister’s self-imposed deadline. Regarding the number of EU immigrants, statistics agencies have started to record small changes, although conclusions cannot be drawn at this early stage. Overall net migration is down by 49,000 in September 2016 compared to 2015, but the Office for National Statistics underline this is not statistically significant. This is the latest data available at the national level, which only contains three months after the referendum. Thus, a more comprehensive picture will be produced when analysing the data from next September. Nevertheless, despite this minor decrease, there were 165,000 more EU citizens coming to the UK in this year. Although EU migration witnessed a net reduction, there have been continued increases in the numbers of Romanians and Bulgarians coming to the UK607. Perhaps this is unsurprising considering that in 2015 Romanians represented 10% of all immigrants arriving that year, becoming the most common country of last residence for the first time in history608. In this complex and unpredictable scenario, one change is most evident: there is an increasing amount of applications made by EU nationals in the UK to obtain Permanent Residence or British citizenship. The backlog of applications has become difficult to manage, and recently the Home Office has announced it will employ 240 extra staff to work on those application cases609. The Home Office also introduced an online application system for Permanent Residence, to reduce the processing time of this paperwork. A European Passport return service has also been made available recently, so that applicants do not need to wait for the Home Office to return their identification documents. At the time of writing, the application costs £65 and the processing time is up to 6 months. Although improvements, such as the passport service and the online form, have been introduced, applying for Permanent Residence is not a straightforward process for those with more complicated migration cases. Particularly vulnerable groups include, but are not limited to: those who cannot provide evidence of CSI for the entire 5-year qualifying period as students or self-sufficient; those who had interruptions in their employment period and did not register as a jobseeker according to the regulations; those who had periods of absence longer than it is required to qualify for PR; and others.

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See Office for National Statistics (2017) ‘Migration Statistics Quarterly Report: Feb 2017’. Office for National Statistics (2016). ‘Migration Statistics Quarterly Report: Dec 2016’, Online at: https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/internationalmigration /bulletins/migrationstatisticsquarterlyreport/dec2016 (Accessed 5 December 2016). 609 See the media reports, for instance https://www.ft.com/content/141c8b14-0fd8-11e7-a88c50ba212dce4d. 608

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III. WHAT WILL HAPPEN WITH EU IMMIGRATION AFTER BREXIT? The consensus is that it is too early to predict the future of EU migration. Politicians tend to agree that net migration from the EU will be reduced after Brexit. However, it is unclear how this will be achieved. While some politicians, most vocally UKIP members, have argued for an Australian-style points-based immigration system, others have proposed a system where special provisions should be made for high-skilled immigration and students. At the same time, some suggested the same rules that apply to non-EU nationals currently should apply to EU citizens coming to the UK after Brexit. Currently, non-EU nationals have several routes into the UK, provided through a points-based 5 tier visa system. Tier 1 visa is dedicated to ‘high-value migrants’ such as investors and entrepreneurs. Tier 2 is for ‘skilled workers’ who hold a job offer in the UK. Tier 3 was initially designed for low-skilled workers, to fill in temporary shortages in the job market. However, the Government has so far never allocated a visa under this scheme. Tier 4 visa is for students over 16 who have been given a place at a registered educational institution. Tier 5 visa is for temporary workers in creative industries, charity, religious and sport sectors, in addition to the youth mobility scheme which enables young people to work in the UK during holidays610. Although the Leave campaign mainly advocated for a points-based system like the one that is in place for non-EEA nationals, the Prime Minister rejected this type of immigration policy just a few months after the referendum. She argued that a pointsbased model will not allow the Government to control arrivals in the best way it can. She emphasised that the British public’s vote to exit the EU was primarily about ‘taking back control’, and that includes immigration numbers. She stated: ‘I want a system where the government is able to decide who comes into the country - I think that's what the British people want. A points-based system means that people come in automatically if they just meet the criteria’611. Theresa May also suggested EU nationals could have preferential rights to live and work in the UK after the country withdraws from the Union, but it has not yet been clarified what form could this preference take, and who are exactly ‘the brightest and the best’ immigrants who would qualify for it. Although discussions on the new immigration system have been taking place since the referendum, there is no clear statement as to how this will look like or when it will be implemented. Even though predictions cannot be made based on existing data, this paper can address the concerns of Cambridge residents about the future of EU migration. This section reflects a range of themes which are relevant to the national level, supported by examples at the local level. According to 2011 Census data, the Cambridge constituency had 10.8% residents from a EU country other than the UK and Ireland (Irish immigration is a separate category in the dataset). This contrasts with the percentage for the region (East of England), 3.6%, and the national share of EU immigrants, 3.5%. Thus, Cambridge has a significantly higher percentage of EU-born residents, compared to other constituencies in the UK. Judging by national ONS data,

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For more information on the UK visa system for non-EEA nationals, see the UK Visas and Immigration website at: https://www.gov.uk/government/organisations/uk-visas-and-immigration. 611 See the Prime Minister’s declarations for the BBC, http://www.bbc.co.uk/news/uk-politics-37271420.

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this percentage is likely to be higher currently, six years from the last census data collection. Of those EU residents, many work in the thriving higher education sector. However, there are jobs to be filled outside the Universities – EU immigrants also work in local businesses, filling in a variety of jobs, from labourers on the construction site, to engineers in the ‘Silicon Fen’. The EU national population in Cambridge is diverse and perceived to bring overall economic and cultural benefits to this constituency. However, as with any immigrant population, there are associated downsides. For instance, according to Cambridge City Council, a quarter of homelessness acceptances involve non-UK nationals, most of whom come from East European households, mostly from Poland612. In the next paragraphs, the paper presents the views and concerns of Cambridge residents, expressed during a roundtable discussion on immigration. Participants in the discussion included businessmen, academics, politicians, representatives from the Cambridge Students’ Union, and other interested members of the public. IV. CHALLENGES FOR EU IMMIGRATION AFTER BREXIT. CASE STUDY: A CONVERSATION WITH CAMBRIDGE RESIDENTS Main themes and concerns First, participants discussed student immigration. Cambridge University revealed that EU student applications dropped by 17% in 2016613. This issue was referred to during the conversation on several occasions. There was agreement that students should not be counted in the overall net migration figures. All agreed students make an important contribution to Cambridge Universities. Particularly in social science disciplines, and language-based (area) studies, it is paramount to have a diversity of views and backgrounds to enable good academic dialogue and criticism. Second, the discussion focussed on EU academic staff. Almost a quarter of the University’s academic staff are non-UK EU nationals. Reflecting on the referendum result, Cambridge’s Vice-Chancellor underlined those facts in an early speech last year. He also mentioned that 17% of the University’s research income is from the EU funds. If this income is not matched by the UK Government, it could potentially discourage some research projects. Linked to both students and academics, there is the overall theme of the position of the University. Whether Cambridge positions itself as a world university or a British university impacts the demographics of future applicants. The Vice-Chancellor’s

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‘Cambridge City Council: Review of homelessness in Cambridge 2015’, Available at: https://www.cambridge.gov.uk/sites/default/files/documents/Homelessness%20Review%20FINAL_0.pd f. 613 See the media reports, for instance, Adams, R. (2016), Brexit could see EU student numbers nose dive, Cambridge warns, The Guardian, Available at: https://www.theguardian.com/education/2016/dec/08/brexit-could-see-eu-student-numbers-nose-divecambridge-warns.

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speech suggests Cambridge remains a world university after Brexit: ‘We will seek the opportunities that arise from Brexit – not least the opportunity to emphasise our vocation as an outward looking institution, engaging more widely and more intensively with the world.’614 Third, there was discussion about other types of EU immigrant workers. It was especially the businessmen at the table who raised the potential issue in recruitment. One of those participants, working in the technology sector, emphasised the high number of talented EU staff working in Cambridge-based offices and expressed concern that those workers are seriously considering leaving the UK after Brexit. Overall, the main message was that immigrants should not be fitted in even more rigid categories after Brexit. ‘They should be all treated as people’ was the view that resonated with the discussants. In addition, the Cambridge residents observed that immigration is a much more complex phenomenon than often assumed, and sometimes a EU national cannot be neatly categorised as ‘student’ or ‘worker’. Migrants’ family, social and cultural ties to the UK, as well as their prospects, should be considered in the debate. All participants disagreed with Theresa May’s decision to treat EU immigrants as ‘bargaining chips’ and not offer a unilateral guarantee on their rights of residence in the UK. The other general theme is that EU nationals feel less welcome throughout the UK, and even in Cambridge, although less so than in other parts of the country. Participants believed that racist and xenophobic comments, although present before the referendum, have been further legitimised by the Brexit result.

What can Cambridge do? Throughout the conversation, there were various suggestions about the steps Cambridge as a constituency can take to minimise the perceived negative effects of Brexit. The next paragraphs address those in more detail. First, there were recommendations made to address the decrease in EU student applications at Cambridge University. The main one was that Cambridge representatives could lobby the Government not to include student numbers in their migration target after Brexit. Some participants also commented on the techniques of student recruitment. While diversity is important and widely promoted for home students, less efforts are seen for recruiting EU students from a variety of backgrounds. If wanting to recruit more students, perhaps one strategy would be to organise more university fairs and talks in areas where such events had not taken place so far. The group discussed how Cambridge usually targets capital cities, particularly in Eastern Europe, which means that many prospective students from less prosperous areas do not have the same access to information. Speaking to those populations could lead not only to recruiting more staff and students, needed if the numbers are decreasing because of Brexit, but also encouraging a more diverse student population from outside the UK,

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See the full report at: http://www.cam.ac.uk/for-staff/features/eu-referendum-how-the-university-willmeet-the-challenges-of-brexit-0.

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particularly in terms of socio-economic background. A representative from the Students’ Union also pointed out that the SU can contribute more to promoting the image of Cambridge, and the UK generally, abroad. This was discussed in the context of an overall less prestigious image that the UK has in other EU countries after the referendum vote. Participants, reading various media in different EU languages, all observed the difference in tone when speaking about the UK. The UK was praised for its tolerance and diversity in the past, attracting many migrants though its cultural characteristics, not only through economic prospects. With the referendum, the image has shifted. The UK is now seen as a less tolerant country, and the news stories about hate crimes towards EU nationals have travelled across the English Channel and tainted Britain’s image as a welcoming country for immigrants. This was thought to discourage students too, especially when there are ‘other good universities elsewhere in Europe’, to put it in one participant’s words. Second, several points were made on the issue of insecurity in the status of EU residents in Cambridge, both students and workers. The most frequent point raised was the need for more pressure to be put on the Government to simplify the Permanent Residence application process. The need to implement a fairer system by eliminating the CSI requirement was underlined by some participants. If those who dedicated most, or all their five-year qualifying period to studying in Cambridge had an easy route to get Permanent Residence, they would be more likely to remain in Cambridge after their studies, potentially filling in academic positions or jobs in local companies. Moreover, all participants agreed that the positive case for migration has been extremely weak during the referendum campaign. They believed that Cambridge can do more to promote, using specific examples, based on facts, how EU nationals make positive contributions, both economic and cultural. This could potentially persuade key stakeholders to offer some certainty to EU-born residents. One businessman in the discussion was concerned that his business could not operate without EU workers, and he was certain that many other businesses find themselves in the same situation. The academic, health, care, and hospitality sectors were used as examples where EU workers are essential. The insecurity EU migrants face can also be addressed practically by organising more public meetings in Cambridge (such as the ones organised by the ‘3million’; useful themes would be ‘how to apply for Permanent Residence?’, or ‘what are EU nationals’ rights?’) and distributing information in the form of leaflets (potentially in different languages too). Third, participants commented at length on the attitudes of politicians on the immigration issue. There was a consensus at the table that increasing numbers of EU immigrants does not translate into a negative impact, and that politicians generally fail to deconstruct this common assumption. The ‘number obsession’ led many key figures on the Remain side to apologise about immigration numbers, or avoid the topic altogether, which, in participants’ views, only strengthened the Leave case.

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CONCLUDING COMMENTS No well-grounded predictions can be made as for who will leave and who will stay after Brexit. It is certain that freedom of movement will not stay the same, as it is currently protected by EU law. The shape of the new immigration policy for EU nationals is not known yet. Although the best outcome for Cambridge is not a reduction in EU immigrant numbers, this area, like all others in the UK, will have to do its best to face the challenges Brexit brings, but also welcome potential opportunities. Two main issues on which the voices of Cambridge residents can be heard, and local politicians can contribute to the debate are minimising uncertainty for EU nationals living in Cambridge, and trying to maintain a positive image of Cambridge abroad, as a welcoming constituency for EU workers and students, despite the Brexit vote. Future research Due to the absence of data on the contribution of EU immigrants in each constituency, it would be useful if local businesses produced some case studies of successful stories of EU nationals, to balance the negative depictions immigration at a national level. Future research should also address the potential downsides of EU migration, looking at statistics on benefit claims or criminal convictions, for instance. To the authorâ&#x20AC;&#x2122;s knowledge, such data, filtered by country of origin and constituency, is not freely available, which is why it was not used in this chapter. Lastly, more qualitative data from discussions with Cambridge residents, both British and from other EU countries, would be beneficial in making sure the interests of both parties are represented in the future negotiations that Brexit will entail.

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CHAPTER VIII

The UK Constitution Writer: Damiano Sogaro

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EXECUTIVE SUMMARY This paper concludes the following: (1)! The UK does not have a written constitution, unlike many of its closest neighbours. This has allowed EU law to integrate surprisingly well into domestic law, thereby becoming a significant crutch for private individuals to enforce rights against the State and some private organisations. In removing this ‘crutch’ without clearly demarcating which rights stem for EU law, on Brexit day, many UK nationals will unwittingly fall outside of protection that they had received beforehand. It will therefore be vital to ensure that a basic communication from the government, referring to the loss of enforceability of some rights, be issued; (2)! The ‘Great Withdrawal Bill’ will not be the panacea to the ‘black hole’ that will present itself between the UK’s exit and the UK’s Parliament rewriting the laws. This is because it will not adequately provide for the situations in which present EU law refers to EU agencies, unless it becomes too specific to be general. It is necessary to demand a solution to this referral problem before the Bill becomes Statute; (3)! More generally, when EU law is ‘frozen’ using Henry VIII powers to modify EU law once ‘frozen’ is constitutionally unsatisfying because it creates too great a distortion to the executive/legislative dichotomy. At the same time, requiring Parliament to scrutinise each and every EU law left ‘frozen’ will be practically impossible. The government must present how it will safeguard Parliamentary sovereignty in a practically possible way; (4)! Precedent is likely to create a significant issue because the status of cases decided on interpretations of EU law by the ECJ is unclear. More to the point, ECJ decisions will continue but the judiciary – without the ECA 1972 has no authority to use the ECJ as a guide to EU law. Either domestic courts will de facto mirror the ECJ, or they will be engaging in a right-creating exercise without legal basis. It is imperative that the government clarify the position of the ECJ in relation to EU law which will continue to be in force in the UK due to the ‘freeze’; (5)! Precedent has been impacted by the Supreme Court’s decision in Millar. It is a welcome recognition that the royal prerogative cannot be used in a destructive manner to withdraw the UK form a treaty which is right giving without the assent of Parliament; (6)! Constitutional States however, represent the next ‘constitutional edge’ with which Brexit may bring the UK face to face. Despite being a minority view, the idea of ‘enshrined constitutional legislation’ being harder to displace may cause contention when Parliament acts to repeal ECA 1972. This is a possibility that the government must anticipate; 283


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(7)! On the issue of acquired rights, it seems sufficiently clear that international law is insufficient to provide any meaningful access to rights currently guaranteed under EU law. At best, it might be possible for UK citizens who had exercised their right to freedom of movement to continue residing in EU countries. However, the preferential status given to EU nationals vis-Ă -vis third country nationals (but equal status to UK nationals) under much domestic law as a result of EU law might now be discriminatory in a ECHR sense. The exception to this summary are art.63 TFEU rights. The government must give more than mere assurances as to the status of UK and EU nationals residing in the EU and the UK respectively; instead a legal framework must be presented as soon as possible to allow individuals to plan their lives; (8)! We would urge the government to recognise strong areas of pro-EU sentiment by giving flexibility to EU citizens in voting for (and perhaps even standing in) local elections; (9)! Without management, the loss of current close ties to EU agencies, organisations, and data represents a significant problem for UK law enforcement â&#x20AC;&#x201C; both at the general level as at the specific counter-terrorism level. We urge the government to represent a sector-specific plan of negotiations which confirm to police forces what kind of co-operation they can expect with their continental European counterparts.

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TABLE OF CONTENTS

Introduction I.!

Why does Brexit affect the United Kingdom’s Constitution?

II.!

What is the impact of Brexit on European Union Law?

III.!

What is the impact of Brexit on the UK’s domestic law? a.! Constitutional Conventions b.! Constitutional Statutes c.! Acquired Rights d.! Representation e.! EU law and Criminal Law

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INTRODUCTION “Brexit” is the informal term given to the decision of the United Kingdom (‘UK’) to leave the European Union (‘EU’). David Cameron, then Prime Minister, made a manifesto commitment to hold a referendum on the UK’s membership of the EU. This election was held on the 23rd of June. On a 72% turnout, 52% of the UK’s eligible voters voted to leave the EU. Though this was an advisory referendum, the government has, rightfully, used this to justify the withdrawal of the UK from the EU. Following the resignation of David Cameron, who had backed the ‘Remain’ campaign, Theresa May, his successor as Prime Minister, has sought to implement the decision by triggering article 50 (‘art.’) of the Treaty of the European Union (TEU), which states as follows: “ (1) Any Member State may decide to withdraw from the Union in accordance with its constitutional requirements. (2) A member state which decided to withdraw shall notify the European Council of its intentions. In light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that state, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union… ” However, an appeal against a successful challenge brought by Millar (and others) was rejected by the Supreme Court of England and Wales, effectively ruling that the royal prerogative could not be used by the executive branch of the government to trigger art.50(1) TEU.615 The consequence has been that Brexit has become legal. The government has tabled the European Union (Notification of Withdrawal) Bill.616 This bill has one substantive clause, which is to give the Prime Minister power to notify withdrawal from the EU.617 Despite the large numbers of amendments, it is predicted to be enacted into legislation. Brexit therefore will come to mean Brexit.

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R (Miller) v Secretary of State for Exiting the European Union [2017] UKSC 5 at para.152, the leading judgement rejects the appeal. 616 Short title. The long title for reference is: “A Bill To Confer power on the Prime Minister to notify, under Article 50(2) of the Treaty on European Union, the United Kingdom’s intention to withdraw from the EU.” 617 European Union (Notification of Withdrawal) Bill s.1(1).

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I. WHY DOES BREXIT AFFECT THE UNITED KINGDOM’S CONSTITUTION? The Select Committee on the Constitution offers a working definition of the United Kingdom’s constitution: “the set of laws, rules and practices that create the basic institutions of the state, and its component and related parts, and stipulate the powers of those institutions and the relationship between the different institutions and between those institutions and the individual.” Within this category fall; the published legislative will of Parliament, the rules and practices observed in the working of the political system, and the ideas, doctrines and organising principles of English law. And of course, European Union law. Statutes are the primary law of England. They are legislative initiatives passed by the Queen-in-Parliament. A legislative initiative is a bill, presented to the House of Commons. Once this bill has received a majority vote in both the lower (House of Commons) and upper (House of Lords) houses of Parliament, it will proceed to the monarch who alone can grant Royal Asset. This tripartite “rule of recognition” is the gatekeeper to the closed circle of the statutes of “Statute”. Statutes are primary in one very important way: they are the supreme law of England and Wales. That is to say, they cannot be overwritten by anything less than a successive Statute. This is because Parliament is Sovereign. Parliamentary Sovereignty simply means that Parliament enjoys legislative supremacy over every other law maker in the United Kingdom. In the words of the progenitor of this lynch pin of UK constitution, A. V. Dicey; “The principle of Parliamentary sovereignty means neither more nor less than this, namely, that Parliament…has, under the English constitution, the right to make or unmake any law whatever; and, further, that no person or body is recognised by the law of England as having a right to override or set aside the legislation of Parliament.”618 The “unique authority” which is wielded by Parliament comes from two sources. The first, in the words of Lord Hoffman, “derives from its representative character.”619 The second, is the mere political fact that Parliament is treated as sovereign. Statutes and Sovereignty are intuitive and simple. The law of England and Wales however, would suffer if these were the only methods of creating law. This is because responding to issues only by kicking the entire legislative machine into gear can be slow. ‘Henry VIII powers’ are one way to respond to these difficulties. They are clauses written into primary legislation which enable a political actor – usually a minister – to change some element of the primary law.

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Dicey, The Law of the Constitution (1885) pp.39 – 40. Today, a pedant might point out the need for the word “Westminster” before every incidence of “Parliament”. 619 R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No.2) [2009] 1 AC 453 at [35].

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Even with these self-adjusting mechanisms Statutes can be slow and unresponsive. More to the point, they can be written in ways which render them difficult to understand and fail to provide a clear answer in borderline situations. Within the English constitution, applying Statutes is the function of the Judiciary. It is important to understand that this is a distinct function which the Courts carry out, in addition to curating the – distinct – common law of the land of England and Wales. The common law is law which deals with the areas in which Parliament has not legislated, although it is increasingly a catch all term for all the law in a country that does not follow a civil law system. Both the court’s interpretative function and their ex nihilo law-creating functions follow the rule of precedent. This is a twofold rule which states both that alike cases should be concluded alike as well as stating that a hierarchically inferior court must apply the rules of a hierarchically superior court until and unless the superior court’s decision is in turn overridden by the Supreme Court, which is the highest court in the land. In the same way as precedent binds the courts in how they are expected to act, there are constitutional conventions which define how political institutions are expected to act. These have been defined as expectations of actions with a valid reason.620 Whilst conventions are ‘duty imposing’ (they demand a method of action) prerogative powers are ‘right giving’ (they allow action which would otherwise be unlawful). Prerogative powers are powers that the Monarch holds as a relic of their absolute power, but which are exercised by the government. For example, the prerogative to declare war, and, perhaps most pertinently, the power to enter into and withdraw from, international treaties. Finally, it should be highlighted that some remain fully within the Monarch’s gift, such as the power to dissolve Parliament. These are the bricks and mortar of England’s constitutional landscape. But these bones lack the flesh of principles. And there are three principles that are vital to understanding the UK’s constitutional structure. The first, Parliamentary Sovereignty, we have touched on. The second is the principle of the separation of powers. The legislative, executive and judicial functions of state have long been divided in order to prevent an unhealthy concentration of power in the hands of a single person or entity621. Thirdly and finally, the rule of law. This is a large and complex idea, which is instantly appealing; at its simplest it demands that the law must be clear and intelligible and applied to everyone without exception. Most recently, a new source of law has emerged: the European Union. In certain areas – called “competences” – the EU has the power to make law which is binding on its Member States. In other areas, it has the power to suggest that its Member States act. Much of EU law is ‘right giving’. It intercedes into domestic law, giving individuals various rights, only where it is directly effective. It is important to understand that different types of EU law are directly effective in different situations.

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Reference Re Canada Assistance Plan (BC) [1991] 2 S.C.R. 525 Most famously outlined by Baron de Montesquieu, The Spirit of the Laws [1748].

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EU treaty provisions are vertically directly effective where they satisfy the criteria in Van Gen den Loos.622 In certain cases, they can also be horizontally directly effective.623 Equally powerful are regulations; they are deemed ‘perfect legislative acts’ and therefore are directly effective according to art.288 TFEU. Directives are legally perfect acts therefore they are directly effective only after they have been deemed to satisfy a justiciability test, the transposition period laid down for them has expired, and it does not purport to have horizontal effect.624 The ‘purport’ is important because the ECJ has routinely developed case law that overcomes this perceived ‘deficit’ of directives. Decisions are specific legal acts. They are capable of having (strictly vertical) direct effect in stations where the EU has sought to impose an obligation on a Member State.625 Though the primary addressee of the European Charter of Fundamental Human (‘ECFR’) are EU institutions, Member States are bound by the ECFR when it can ‘hook’ onto their actions because they are implementing EU law.626 Finally, in much the same way, general principles of EU law can only be relied upon when a State is acting under the auspices of EU law.627 Where direct effect provides to individuals rights, these rights can be breached by the State. In these situations EU law provides for State liability as a way for the individual to be compensated for their breached right.628 A controversial judicially-created liability, it bites when an organ of a State, breaches an obligation under EU law, and in so doing causes a breach of a directly effective right with a quantifiable harm.629 EU law also gives EU citizens the right to bring certain ‘actions’ EU institutions breach EU law.630 An action for annulment allows the substantive review of a measure put into

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Case 26/62 Van Gend en Loos [1963] ECR1: first outlined the test for justiciability as “a clear and unconditional prohibition which is not a positive but a negative obligation”. This has subsequently been broadened to such an extent that it is common to say that all sources of EU law are capable of having direct effect. The real issues are whether there is a sufficiently clear and precise provision and whether the measure is unconditional (Case 43/75 Defrenne v SABENA ECLI 1976). 623 Note the difference between vertical and horizontal direct effect. Vertical direct effect permits a claimant to rely on a law as against a State. Horizontal direct effect allows an individual to rely on it against a private individual or organisation. The leading three situations in which horizontal direct effect is found are; where an EU principle in the labour market is at stake; where an economic activity is governed by rules set down by private associations; and where treaty rules on the free movement of goods are at risk due to private association’s actions. 624 Case 148/78 Pubblico Ministero v Tullio Ratti [1979] ECLI 110: the underlying logic being that, though directives require transposition into national law, they are binding as to the effect that they are to achieve. Therefore if an individual seeks to rely on a right guaranteed to them under a directive – but cannot do so because the one body capable of granting them the right (the legislature) has failed to do so – that same body cannot then rely on non-implementation as a defence. This is sometimes known as the ‘estoppel argument’. 625 Point made in Case C-80/06 Carp [2007]. 626 Art.5(1) ECFR. 627 Case C-144/04 Mangold v Rudiger Helm [2005] ECLI 709. 628 Crucially however, there is no way to enforce the right as against the State. 629 This ‘factors’ have a distinguished lineage. First outlined in Case 6/60 Humblet v Belgium and later finessed in Brasserie du Pecheur and Factortame they remain in constant evolution. 630 Infringement – or ‘enforcement’ – proceedings are actions which can be brought against EU Member States. However, they can only be launched by the Commission or other Member States per arts. 258 – 9 TFEU so are excluded from the main analysis.

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! place by an EU institution by an applicant who has standing.631 Though the standing requirement is onerous for private citizens, it is not impossible to make out. The consequence of such an action is to make the Member State’s law void.632 There are two other possible recourses; first a plea of illegality.633 Brought for the same reasons as an action for annulment this claim alleges that the EU institution’s act falls outside EU law. It must be used against an act of general application. Secondly, an action for failure to act.634 Here, the claimant alleges that an EU institution should have acted but failed to do so. This has a tough time limit (2 months). A successful action is often coupled with an action for damages.635 Here there is no standing requirement as the claim is simply that the unlawful act of an EU institution has caused actual damage to the claimant. Brexit will therefore affect the UK’s constitution by removing a significant part of our citizen’s legal heritage. By withdrawing from the EU our legal relationship is lost; and this is deeply problematic because it removes a tool from the arsenal of both the individual and the government to ensure that measures which discriminate or damage British interests are not passed on the continent. Whilst political pressure and diplomatic discourse are important elements to ensuring a health relationship with geopolitical neighbours the lack of rights which British citizens will be able to enforce is concerning.

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Per art.263 TFEU. Per art.263 TFEU. 633 Per art.277 TFEU. 634 Per art.265 TFEU. 635 Per art.268 TFEU. 632

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II. WHAT IS THE IMPACT OF BREXIT ON EUROPEAN UNION LAW? It is not immediately obvious that leaving the European Union is a very difficult legal question. Countless news sources have hammered home the point that all it takes is the “triggering” of art.50 TEU and the UK is out faster than you can say “straight bananas”. Unfortunately, this is too simplistic an approach. This is because it fails to consider what impact Brexit will have on EU law on Brexit day. This problem arises because the UK has a dualist system of international law.636 International law therefore only applies in the UK only insofar as it has been “adopted” into the domestic legal system (through one of the pre-sources of law). Tomorrow the UK government could sign an international legal treaty with Holland. Whilst a Dutch citizen could immediately rely on the treaty – Holland having a monist system of international law - the UK citizen could only rely on the treaty only once, and only insofar as, Parliament has legislated to incorporate the treaty into domestic law. The point is made by Lord Denning: “[E]ven if a treaty is signed, it is elementary that these courts take no notice of treaties as such. We take no notice of treaties until they are embodied in laws enacted by Parliament, and then only to the extent that Parliament tells us.”637 The green light for the UK to join the EU was given in 1972, so it promptly acceded on the 1st of January 1973. To give legal effect to this change Parliament passed the European Communities Act 1972. The 1972 Act both gives effect and priority to EU law. This is encapsulated in section two, subsection 1 (s.2(1)) which states: “All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly”. Therefore, triggering art.50 of the Treaty on European Union only gets the UK so far from the EU – namely: not very far at all. It rescinds the connection between the domestic legal sphere and the source of European law. Yet the EU law which is present in the UK will still be present and will continue to be good law. Moreover, it is not even clear that merely leaving the EU is enough to stop the 1972 Act functioning as a funnel. Professor Elliot has argued that because art.2(1) ECA refers to EU laws “arising by or under the [EU’s] treaties”, as soon as the UK has left

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When it comes to treaties. The point is made by Crawford (ed), Brownlie’s Principles of Public International Law (7th ed) OUP [2012] that trying to plot a country along an axis of dualism through to monism is unhelpful. In fact, most countries have a blended approach. The UK for example, has a monistic approach to international legal custom, but has a dualist approach to international treaties. 637 Lord Denning in Blackburn v Attorney General [1971] 1 WLR 1037.

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the scope of the treaties by triggering art.50 TEU the 1972 Act will have its teeth pulled de jure.638 But this is a minority view and the government has therefore proposed a Great Repeal Act (GRA). This Act would convert all existing applicable EU law into British law, in order to prevent the chaos sudden withdrawal would cause. The idea is that the government then sifts through this frozen landscape to pick out which rules to keep, and which to bin, probably using a Henry VIII power. An important constitutional point is raised, which can only be flagged here because it falls outside the focus strictu sensu of this report; namely, if the executive has the power to comb through the entirety of the frozen landscape they will effectively be granted an extremely wide power – to rewrite vast swathes of law in whatever image they see fit. This subverts the principle of Parliamentary sovereignty. Simultaneously, it cannot seriously be proposed that Parliament sift through 30 years of accumulated EU legislation. This is a difficult political and legal bind to which no convincing answer has yet been put forward. There are two substantive problems with the ‘freezer approach’. First, many EU laws refer to EU institutions or agencies. By copying and pasting (which is the only way to ensure all EU law is carried over and no gaps are left) all EU law active on the eve of Brexit day, these references will endure. Thus, any power which EU institutions currently have will be preserved. A case study is provided by Ciarán McGonagle, who points to the field of IP protection for plant breeders.639 There are currently 41,000 registered titles of plant varieties. They are administered by the Community Plant Variety Office (CPVO). The problem postBrexit will be as follows. The EU law in force in the UK, directing a would-be plant grower to the CPVO, would be frozen as valid. What follows is that a plant grower seeking to register their plant (or obtain a licence) would have to apply to the CPVO. However, the CVPO would have no jurisdiction. So, they might turn instead to the national Plant Authority. However, EU law only gives the national authority those powers which are delegated to it by the EU authority. In short, this would be nothing because (again) CVPO would have no jurisdiction to give them any powers. Bereft of protection, Timothy has no recourse when Joe happens upon a similar plant variety and exploits it to share in Timothy’s wealth creation. Unlikely to be the root of catastrophic damage, what is more concerning are the multitude references to more important agencies and institutions.640 A second issue is that the GRA will collapse fine distinctions which arise under the present constitutional settlement. The clearest case would be in the case of judicial review. Judicial review allows a claimant to argue that the defendant (usually a public authority) has acted outside their power. When this power is a domestic one, the test is

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This point is made by Professor Mark Elliot, Public Law Everyone, “Theresa May’s ‘Great Repeal Bill’: Some Preliminary Thoughts”, https://publiclawforeveryone.com/2016/10/02/theresa-mays-greatrepeal-bill-some-preliminary-thoughts/ - Accessed 24th January 2017. 639 Ciarán McGonagle, Ciarán McGonagle, “A seed of doubt – on the practical difficulties of the ECA Repeal Act”, https://ciaranmcgonagle.com/2016/10/03/a-seed-of-doubt-on-the-practical-difficulties-ofthe-eca-repeal-act/ - Accessed 24th January 2017. 640 It should be noted that NC114 of the European Union (Notification of Withdrawal) Bill moves to include a clause making the Secretary of State to publish a report detailing the government’s approach on engagement with the CPVO.

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‘Wednesbury unreasonableness’. This is a high threshold and there are few cases where the court rules that the public authority has breached this standard. The claimant must show that the public authority has acted not just contrary to expectations but unreasonably. However, where the power derives from EU law the test is proportionality. This difference often has a significant impact.641 It is clear that before the courts use proportionality, it is necessary but not sufficient for human rights to be involved.642 An overarching problem is that of precedent. As has been noted, UK courts use the principle of precedent to determine the evolution of the law – whether it is statutory in basis or judicial. EU law is no exception. Indeed, EU law in the UK is subject to a twofold precedent system, insofar as the adjudicating national courts must pay due deference to the decision made by the ECJ which is the ultimate authority on EU law. It is here important to note that this is not a one-way relationship; the system of referral ensures that the domestic courts of Member States have large swathes of discretion over whether or not to refer matters to the ECJ.643 It is further important to underline that, even when the referral is made, the ECJ will often make a ruling on the law in the abstract. The point is made by Bingham J that there are good reasons to distinguish between the national court’s fact finding and application abilities and the ECJ’s specialist understanding of EU law.644 Thus it is abundantly clear that the domestic and European courts have engaged in an organic development of EU law. The ‘Great Repeal Bill’ will derail this, because the treaties will no longer be law in England, and therefore art.267 TFEU will no longer be a conduit for preliminary references. This will create one of two possible situations. One is that the domestic courts will ‘mirror’ the decisions and interpretations of the ECJ. If this is the case, this will make a mockery of judicial independence. Not only will the domestic courts be forced to follow a foreign judicial body, they will do so for no lawful reason. The alternative is that the domestic courts will ‘diverge’ from ECJ decisions and interpretations. This is no better. When the domestic court strike out on their own to best interpret EU law left ‘frozen’ they will do so on the basic of context and equity. Yet it will be difficult to achieve the latter. We put the following case study forward: Jane brings a claim against the State for a breach of an EU right left over as a result of the Great Repeal Bill. The domestic court

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The principle case in support of this argument is the Smith line: in R. v Ministry of Defence, ex parte Smith a soldier was dismissed because they were homosexual. On a reasonableness ground, the domestic courts accepted that this was lawful. However, once the appeal reached the European Court of Human Rights as Smith v United Kingdom a proportionality assessment was triggered, on the basis of which the public authority had acted disproportionally. 642 Original test – which has since become more diverse – given in de Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 by Lord Clyde at pg.80. 643 The ‘preliminary reference procedure’ is outlined in art.267 TFEU. Domestic courts have discretion to refer to the ECJ questions on either the interpretation of treaties or on the validity or interpretation of the acts of EU institutions. Domestic courts must refer such question however, where it arises before the court of last appeal in a Member State. 644 Customs & Excise v Samex [1983] All ER 1042: only a court with a “panoramic” view of EU law can justifiably give the ultimate interpretation of EU law.

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is not certain what the interpretation of the right is. In the first scenario, the court takes an expansive reading of the EU right, purporting to do so without paying any attention to what the ECJ would be likely to rule. When a similar case arises in a Member State and a domestic court refers the matter to the ECJ there are only two possible outcomes; either the ECJ rules in an equally expansive way, in which case the domestic court is de facto mirroring the ECJ or it rules in a restrictive way, in which the domestic court has, without good reason, created a larger right an individual can wield against the State. In the second scenario, the court takes a restrictive reading. The same analysis holds true. Either it de facto does what the ECJ would do and make any separation between the too cosmetic only, or it acts without authority to increase the rights an individual would expect to have at common law. An alternative path could be briefly considered; the choice not to interpret the EUheritage law. Unfortunately, the legal consequence of this would be to subject the subject of English law to an archaic snapshot of the law. Evolution is a fundamental part of common law and in refusing to carry out due maintenance to EU law the judiciary would be abandoning its role. Justice seems difficult to find.

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III. WHAT IS THE IMPACT OF BREXIT ON THE UK’S DOMESTIC LAW? Finer, Bogdanor and Rudden have stated that the British constitution is “indeterminate, indistinct and unentrenched”645. Unfortunately, Brexit has amplified the weaknesses of this model of the constitution such that significant areas of uncertainty have emerged. For many UK nationals, this uncertainty is potentially troubling, especially if they conduct business with, have an interest in, or wish to move to, an EU Member State. Yet the reverse side of the coin points to an equally significant problem. Uncertainty is always most damaging for those most precariously in the society in which political and social upset occurs. This fact is particularly relevant in Cambridgeshire. Cambridgeshire, according to the 2011 census, had 83,314 residents who were migrants – roughly 1 in 13.646 This is higher than the national average. Cambridge City, with 23.5%, has nearly double the national average of migrant residents.647 However, this translates to only roughly 2% of Cambridge residents being from the EU.648 This is lower in the surrounding area. Fenland has a resident population of 0.73% of EU bornmigrants residing. The other surrounding districts have less than 0.5%. Dealing with issues of domestic law thrown up by changes to the UK’s EU relationship therefore requires the utmost haste in order to continue to ensure a basic security of life that individuals deserve as a right.

A.! Constitutional Conventions One impact is on constitutional conventions. Traditionally, it has been accepted that the executive has the power to enter into, and, exit treaties. However, the unique question raised by Brexit is whether this constitutional convention extends to situations in which the international treaty has created domestic rights which UK citizens can enjoy. As recognised explicitly in para.86 of the m majority’s judgement in the case of Miller: “EU Treaties are not only concern the international relations of the United Kingdom, they are a source of domestic law, and they are a source of domestic legal rights.”649 This promises a significant pedestal on which a rights-based culture can form. It provides that, in future, the exercise of powers envisioned under royal prerogative.

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S. Finer, V. Bogdanor, B. Rudden, Comparing Constitutions (1995) pg.40. Cambridgeshire County Council, Migration in Cambridgeshire: 2011 Census, Cambridgeshire Research Group, March 2015 pg.1. 647 Cambridgeshire County Council, Migration in Cambridgeshire: 2011 Census, Cambridgeshire Research Group, March 2015 pg.1. 648 Cambridgeshire County Council, Migration in Cambridgeshire: 2011 Census, Cambridgeshire Research Group, March 2015 pg.21. 649 R (Miller) v Secretary of State for Exiting the European Union [2017] UKSC 5 at para.86. 646

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B.! Constitutional Statutes Secondly, the question of “constitutional” Statutes has been thrown into sharp relief. Under orthodox views of English public law, England has a ‘flat’ constitutional landscape. All Statutes are of equal value. This is the direct consequences of the Parliamentary Sovereignty: since Parliament has the power to make or unmake any law whatsoever all Statutes are normatively equal. However, there has been a growing jurisprudence which argues that the English constitution is instead ‘hierarchical’. Viewed in this light, “constitutional” Statutes have more normative power than others. The consequence is that they are immune to replied repeal. The leading authority for this proposition is the case of Thoburn v Sunderand District Council.650 In this case, the defendants were being prosecuted for using imperial measurements which had been outlawed under a piece of delegated legislation passed in 1994 pursuant to an EU directive directly effective under the 1972 European Communities Act. The defendants argued that the Weights and Measures Act 1985 impliedly repealed the 1972 European Communities Act because it impliedly contradicted the latter. In dismissing the defendant’s argument Justice Laws adopted an unorthodox view: the 1972 Act was worth ‘more’ than the Weights and Measures Act 1985. The idea of constitutional statutes has since developed. The orthodox view is that this analysis does not overly inform the constitutional discussion over Brexit. If an act was passed that simply triggered art.50 TEU there would be a mere implied repeal of the 1972 Act, which would be insufficient to repeal it strictu sens. However, because art.50 TEU would gut the 1972 Act regardless of the domestic consequences – by drawing up the drawbridge to the treaties after two years or an agreement – the 1972 Act would be toothless regardless. However, an argument could well be made that stated that whatever the political actions of the government – in triggering art.50 TEU – the courts would have first to bend knee to the law. As the 1972 would remain on the statute books they would have to carry on enforcing EU law until and unless a contrary (explicit) statute were passed.7

C.! Acquired Rights To what extent British citizens will retain any rights they gain under EU law, is a question of ‘acquired rights’. In this section, we are concerned with the rights that derive principally from the ‘four freedoms’ which underpin EU law. These rights apply to individuals to guarantee them the right to live and work in any EU Member State free from any discrimination and gain a permanent right of residence after residing in that State for more than 5 years.651

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[2003] QB 151 Codified in the Council Direction 2004/38/EC of the European Parliament and of the Council of 29th April 2004 on the right of citizens of the Union and their family member to move and reside freely within the territory of the Member States (the Citizens Rights’ Directive). 651

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It is prima facie clear that art.50(3) TEU destroys access to EU rights in the event that it is triggered. It is unambiguous in stating that EU law ceases to apply once the withdrawal agreement enters into force, or, where that agreement fails to be concluded, two years. In so far as this severs connection to the treaties, it will result in the loss of EU citizenship explicitly set out in art.20(1) TFEU: “Art.20(1): “Citizenship of the Union is hereby established.” We highlight that this raises far reaching questions of justice. Around the EU individuals often move with the understanding that their treatment in other Member States will be governed by shared laws and principles. This understanding extends to the UK. Therefore, to remove these rights without guaranteeing them an alternative protection in law goes against the grain of the principle of certainty. Moreover, at a substantive legal level it seems unjust that EU citizens living in the UK are deprived of access to the right (the ECA 1972) whilst the rights themselves are still extant. We turn first to whether international law provides a solution. On the international legal plane, the term ‘acquired rights’ refer to rights that are proposed by treaties and, once recognised and exercised, cannot be revoked merely by severing membership to the treaties. It appears to be the orthodox view that this doctrine is insufficient to guarantee access to EU rights post-Brexit.652 First, no EU treaty mentions these rights.653 So a source for this international legal doctrine needs must be found elsewhere. There are two principle places from which this right could be found. The first is in a treaty. Art.70 of the Vienna Convention on the Law of Treaties (VCLT) suggests that the international law proper could ensured acquired rights were exercisable. Art.70 VCLT is instructive: “1. Unless the treaty otherwise provides or the parties otherwise agree, the termination of a treaty under its provisions or in accordance with the present Convention: (a)… (b) Does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination.” It may be argued that any EU citizen currently residing in Britain – and therefore conversely any British citizen living in an EU country – has ‘executed’ their EU right of freedom of movement with the meaning of art.70(1)(b). As such, these rights would continue to play a role post-withdrawal from the EU. The practical effect would be that these individuals would be permitted to lawfully reside in the countries in which they currently live. However, as a legal argument this is problematic because there is significant agreement in the field of international law that art.70(1)(b) VCLT does not

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House of Lords, European Union Committee “Brexit: acquired rights” 10th Report of Session 2016 – 2017. 653 Sionaidh Douglas-Scott, “What happens to ‘Acquired Rights’ in the Event of a Brexit?” https://ukconstitutionallaw.org/2016/05/16/sionaidh-douglas-scott-what-happens-to-acquired-rights-inthe-event-of-a-brexit/ - Accessed 30th January 2017. 652

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! refer to individual rights but to the rights of the parties (i.e. the States).654 Moreover, it is difficult to see how this international law right would apply at a domestic law i.e. the procedural aspect of bringing it before the courts. Customary international law recognises acquired rights as well.655 However, this is usually imagined narrowly which means in situations where fundamental human rights are in play. This is evidenced in the United Nations’ Human Rights Committee’s General Comment No.26 which notes that it believes it is impossible to withdraw from obligations under the International Covenant on Civil and Political Rights. This section should be concluded with the observations of Jean-Clade Piris (former Director of the Legal Services of the Council of the EU). His argument is that, were the acquired rights argument to be successful, it would lead to absurd results. In a policy paper for the Robert Schuman Foundation, Piris notes that it would allow, for example, British citizens to be candidates for the European Parliament.656 It is true that Piris goes on to suggest that “[p]eople who had a right to permanent residence in other EU countries could probably keep it, as this right is derived from the European Convention on Human Rights”.657 But this would require a significant legal argument brought forward on the application of an international customary law. Tim Eicke QC makes the point that the ECHR will continue to protect EU nationals in the UK – by virtue of the UK’s continued membership. These rights are derived by virtue of an individual being present in the UK.658 A further point Mr. Eicke QC makes, is that the loss of a ‘special’ status to EU citizens in the UK will mean that any law which treats UK and EU citizens equally but discriminates against third country nationals will now likely be in breach of the ECHR.659 This will essentially represent a significant ‘downgrading’ in rights for EU citizens currently residing in the UK. In the alternative, Mr. Anthony Speaight QC has noted that the European Convention on Human Rights might provide a pathway for the protection of these rights. Mr. Speaight QC raises the following argument; an EU national on Brexit eve residing in the UK for more than 5 years has the right of permanent residence; post-Brexit they have no right of remaining – this is the case even if a national of any other country (who has resided in the UK for longer than 5 years) could apply for the domestic version of this right ‘indefinite leave to remain’. Thus, there might follow a convention

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Aust, A., Modern Treaty Law and Practice (3rd Ed.) 2014. Authority for this statement stretches as far back as the Certain German Interests in Polish Upper Silesia (Germ. V Pol.). 1926 PCIJ (ser.A) No. 7 [1925] case in which the Permanent Court of International Justice recognised (at para.[59]) “the principle of respect for vested rights” as (at para.[132]) a “generally accepted international law”. 656 http://www.robert-schuman.eu/en/doc/questions-d-europe/qe-355-en.pdf 657 http://www.robert-schuman.eu/en/doc/questions-d-europe/qe-355-en.pdf pg.12. 658 http://101r4q2bpyqyt92eg41tusmj.wpengine.netdna-cdn.com/wp-content/uploads/2016/04/Could-EUcitizens-living-in-the-UK-claim-acquired-rights-if-there-is-a-full-Brexit.pdf pg.3. 659 http://101r4q2bpyqyt92eg41tusmj.wpengine.netdna-cdn.com/wp-content/uploads/2016/04/Could-EUcitizens-living-in-the-UK-claim-acquired-rights-if-there-is-a-full-Brexit.pdf pg.3. 654 655

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! argument on discrimination.660 But this is likely to arise only on breach, and act as a shield to defend against attempted deportation than a sword to wield the right. Nevertheless, and contrary to Mr. Speaight QC’s suggestions it could well be that a court, presented with this argument, would instead point to the Mr. Eicke QC’s view of ‘imbalance’ – between what were EU citizens and third country nationals – and rationalise this as a readjustment. Mr. Speaight QC’s view does not, therefore, provide firm grounding on which to base a hope for post-Brexit rights manifesting in the UK. The exception to the apparent full-spectrum loss of rights will be with regard to art.63 of the Treaty on the Function of the European Union. As pointed out by Professor Catherine Barnard this will give UK citizens rights when they are in EU States (i.e. States members to TFEU) because it has an extraterritorial effect.661

D.! Representation EU citizens have the right to vote and stand for municipal elections. This right would be subject to the same analysis as all the other rights (discussed under ‘Acquired Rights’). However, Mr. Speaight, in giving oral evidence to the House of Lords Committee on Europe Union proposes the following: “a policy that it seems to me would be rather in the UK’s interests, and would be rather attractive in showing a willingness to embrace open international relations—relating to one facet of EU citizenship: the right to vote and to stand in municipal elections. It would be perfectly possible for the UK to legislate to confer on bodies such as the Scottish Parliament, the Welsh Assembly, the Greater London Assembly and so on the competence to choose, if they wished, to include EU citizens on their electoral roll. If other parts of the country did not want to do that, they would not have to. This makes perfect sense. EU citizens living in London pay council tax and receive all sorts of services, so it is perfectly reasonable that they should be involved in the local and regional election processes. If some parts of the country, such as London or Scotland, wanted to make a particular demonstration of the fact that they were very open to Europe, that is one way in which they could do so.”662 This is opportunity would be particularly promising for the Cambridgeshire area. It is no secret that a large part of those who live in Cambridgeshire are EU nationals, and that, by working in core industries which attract them to a settled life here, contribute to daily life. Supporting any initiatives allowing municipal electors to permit EU

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House of Lords, European Union Committee “Brexit: acquired rights” 10th Report of Session 2016 – 2017. 661 House of Lords, Select Committee on the European Union, Justice Sub-Committee, Corrected Oral Evidence: Brexit: acquired rights Q.33 (Evidence Session No.5) Tuesday 1st November 2016. 662 House of Lords, Select Committee on the European Union, Justice Sub-Committee, Corrected Oral Evidence: Brexit: acquired rights Q.33 (Evidence Session No.5) Tuesday 1st November 2016. 660

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nationals a voice therefore seems a positive way to support Cambridge’s European philosophy.

E.! EU law and Criminal Law The impact that the multi-national collaborative approach in the fight against crime the EU has permitted was summarised in last year’s Graham Turnbull Lecture: “50. [EU] measures, and others like them, really matter. Terrorists like Husain Osman, one of the 21/7 failed bombers, can be extradited in weeks rather than years. The sharing of DNA records and vehicle registration data, and the construction of common databases, has a long way to go. But it can already provide valuable leads in relation to terrorism.”663 In fact, there are five principle ways in which the EU’s structure permits it to fight crime. Firstly, the EU has worked hard to seek to harmonise substantive criminal law.664 At the same time, by introducing minimum protection for victims of crime and minimum rights for defendants, the EU has sought to harmonise procedural criminal law.665 Thirdly, there are a series of agreements designed to improve co-operation between Member State’s law enforcing agencies. Fourthly, courts are required to give effect to judgements and orders issued by equal bodies in other Member States. Often called ‘mutual recognition measures’, the best known is the European Arrest Warrant (EWA). Finally, there are EU agencies specifically charged with improving criminal justice within the EU (e.g. Europol). It is further possible to focus on one aspect of the EU’s work: the measure it has taken to protect itself from international terrorism. Significant measures, which rely on cooperation, have been implemented. Mr. Anderson QC cited the European Parliament’s approval of sharing of air passenger records between Member States, for example.666 At the same time, this expansive function – giving the UK a better ability to protect its borders and its nationals – comes at the cost of having another check placed on the British legal system; the Court of Justice of the EU has the power to hear cases which relate to measures taken to combat terrorism and ensure that they are still proportional. Full spectrum cross-border co-operation loss is the worst outcome. As was made clear in the government’s wide ranging Balance of Competences Review in 2014 “most respondents saw considerable value in practical cooperation at EU level amongst police and customs authorities in order to tackle crime.”667 Indeed, as this same balance of competence review made clear, the European network is not valuable merely through

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Anderson, D. QC, “Graham Turnbull Lecture: Terrorism and the Law” 21st April 2016 at [para.50]. Art.83 of the Treaty of the European Union. 665 Art.82 of the Treaty of the European Union. 666 Anderson, D. QC, “Graham Turnbull Lecture: Terrorism and the Law” 21st April 2016 at [para.49(c)]. 667 “Review of the Balance of Competences between the United Kingdom and the European Union: Police and Criminal Justice” [2014] at pg.47 [para.2.67] 663 664

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the formal mechanisms that the EU organs provide, but also at an informal level. To compound this On the other hand, even if limited co-operation agreements are reached they will not bridge the fundamental problem: the UK will have abdicated its right in shaping policies. It is highly unlikely that the EU would not want the UK to continue to be involved; with Europol, with databases, and with other such initiatives. This is because it is a win-win scenario. What is lost however, are 30 years of influence in leading in this area and ensuring that the way in which these agencies work best integrates within British structures. This is particularly concerning given the increasingly international element of crime and crime networks.668

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CHAPTER IX

Devolution and the Regions Writers: Alex Conway (Co-Editor) Fred Kratt (Co-Editor) Noah Froud Zoe Alipranti Sophie McVea

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EXECUTIVE SUMMARY The impacts of Brexit on the regions of the United Kingdom are multiple and will have far-reaching consequences, many of which are beyond the scope of this particular paper and are addressed elsewhere in this Report. However, in this paper will offer several recommendations that we believe would secure the best possible outcome for the entirety of the United Kingdom following Brexit. England & Wales: Withdrawal from the EU and the subsequent loss of the European Structural Investment Funding (ESIF) scheme will hit the UK’s poorest regions hardest. In order to protect and support these vulnerable areas from the risks posed by Brexit this funding will need to be to be maintained by the UK. Replacement of these European funding sources presents an opportunity for local governments across the country to take back control through devolving greater powers from Westminster. London: The vote for Brexit has been characterised as much as a vote against elites in London as against elites in Brussels. This paper recommends that perceived association between London and Westminster be broken, this could be done through moving Parliament out of London. Upcoming renovation works for the Palace of Westminster means that MPs will be provisionally moved to a replacement site for between 6 and 32 years, and this could be an opportunity to introduce a revolving Parliament system which would be less costly and increase public access to British politics. More power could be devolved to the Greater London Authority, especially in terms of housing and taxation in order to reduce the perception of the capital an exclusive and unaffordable place to live for many Britons. Economically, we recommend that London’s position as a competitive global financial centre be maintained by keeping the City of London in the Single Market. This could be achieved through giving it the status of a Special Economic Zone (SEZ) similar to those found in China. Scotland: Brexit has highlighted the tensions between Holyrood and Westminster and has placed the issue of Scottish independence back on the agenda. This paper recommends that Scotland’s concerns could be accommodated through a separate deal. This sections looks to the model of Greenland within the Kingdom of Denmark and its with the European Union. This models offer a way to preserve the Union by addressing Holyrood’s concerns and thereby preventing a Scottish withdrawal. This would require compromise from Westminster to devolve powers or else risk potential breakup of the Union. Northern Ireland: As the only land border between the EU and the UK, the Border in Northern Ireland is critical in the event of Brexit. The status of the province will be central in the future of relations on the island of Ireland. This paper recommends: the retention of a choice of Irish and/or British nationalities for the people of Northern Ireland, the maintenance of as open and soft a border as possible as well as movement between the UK and Ireland 303


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in the CTA, and in the event of a â&#x20AC;&#x153;hardâ&#x20AC;? Brexit, an agreement to facilitate the free flow of people, goods and services throughout the island between the EU, Irish and British Governments.

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ACKNOWLEDGEMENTS We would like to thank Carol Wright, Nick Crawford, Jun Pang and all those who contributed and gave comments on the paper. In addition, we would also like to thank the people of Cambridge for their feedback during the Cambridge and Brexit Conference on the 24th of February 2017.

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TABLE OF CONTENTS Introduction

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Section 1: England and Wales Section 2: London Section 3: Scotland Section 4: Northern Ireland

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INTRODUCTION This paper deals with the intersection of two highly fraught issues in contemporary British politics: devolution and Brexit. Britain has a unique system of governance which is neither federal nor unitary but straddles the two, often struggling to balance competing voices and agendas across the Kingdom. 669 The process of ‘devolution’ within the United Kingdom, or the granting of certain political powers to regional governments, ‘[h]as turned politics into a fiendish Rubik’s cube, where you can’t complete one face without disrupting another’.670 This process has been made even more complicated in the wake of a narrow majority voting for Britain to leave the European Union. The nature of Britain’s future relationship with Europe is now a matter for intense negotiation in a political climate of ongoing uncertainty, exposing deep fissures both within and between the constituent members of the United Kingdom. Now, the UK Government faces negotiations externally with other European Union member states, and internally with devolved governments within the United Kingdom itself. 671 Despite this formidable challenge, Theresa May confidently proclaimed at the Conservative Party Conference in October 2016, and again in the Government’s White Paper on Brexit, that a ‘Brexit Britain’ would be ‘a country that works for everyone’.672 673 This report attempts to assess and evaluate this claim by focusing on the impacts of Brexit on the regions of the United Kingdom: England (outside London) and Wales, Scotland, Northern Ireland and London. These regions are represented in this paper because each voted in different ways in the EU referendum. From an initial reading, Theresa May’s slogan could be interpreted as an effort to secure what some have called a ‘four-nation Brexit’, or a deal based on compromise that takes into account and accommodates the diverse range views of a diverse country.674 Although the Prime Minister has asserted that “we will negotiate as one United Kingdom” she has also stated that it is the Government’s expectation that Brexit will involve all regional voices and lead to greater regional devolution.675 676 However, the recent ruling by the Supreme Court that the UK Government has the legal right to overrule regional governments opposed to Brexit677 presents a tempting opportunity for Westminster to

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Paun, A, and G Miller. Four-nation Brexit: How the UK and devolved governments should work together on leaving the EU. London: Institute for Government 670 Hinsliff, Gaby. The resentment between London and the rest of Britain is turning into a poisonous political debate. 01 09, 2015 671 Paun, Akash. Brexit consequentials: why the UK must involved the devolved governments in the process of leaving the EU. 06 25, 2016. 672 May, Theresa. Theresa May's conference speech in full. 05 10 2016. 673 UK Government, The United Kingdom’s exit from and new partnership with the European Union (02, 2017) Retrieved 08 04 2017, p17 674 Paun, A, and G Miller. Four-nation Brexit: How the UK and devolved governments should work together on leaving the EU 675 Prime Minister’s Office (29/03/17) “Prime Minister’s Letter to Donald Tusk triggering Article 50” , p3 676 Paun, Akash. Brexit consequentials: why the UK must involved the devolved governments in the process of leaving the EU 677 Supreme Court. “PRESS SUMMARY R (on the application of Miller and another) (Respondents) v Secretary of State for Exiting the.” The Supreme Court. 24 01 2017.

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! go it alone. 678 679 Yet such a move would “run contrary to convention and to the spirit of devolution” and could furthermore, risk jeopardising the very stability of the Union. 680 681 Which of these Brexit strategies the Government will pursue remains to be seen. This paper sets out recommendations that seek to support the Government in its expressed aim to forge a country that ‘works for everyone’. We follow others to contend that the Government should seek to achieve the best possible compromise between the regions of the UK. 682 This cannot be a simple, ‘one size fits all’ deal, 683 but a multifaceted one that reflects the diversity and wishes of the people on these isles and the values that each from each region holds dear, in a truly United Kingdom.

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Paun, A, and G Miller. Four-nation Brexit: How the UK and devolved governments should work together on leaving the EU. London: Institute for Government 679 Thanks to participants at the Brexit and Cambridge Conference for raising this point. 680 Paun, A, and G Miller. Four-nation Brexit: How the UK and devolved governments should work together on leaving the EU, p3 681 Miller, G. ‘Presumed Consent? The Role of Scotland, Wales and Northern Ireland in the Brexit Process’. 11 08 2016 682 Paun, A, and G Miller. Four-nation Brexit: How the UK and devolved governments should work together on leaving the EU 683 LSE, Implications of a Brexit for UK National Governance and Local Government (from LSE European Institute, 04 13 2016) Retrieved 04 07 2017

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Section 1 England and Wales: The ‘Left Behind’ Regions Introduction: The focus of this section is on the consequences of leaving the European Union on England and Wales, excluding London. The dual problem that needs to be addressed is how regional funding is replaced and how the role of local government in allocating this funding can be increased or at least, preserved. Whilst also presenting serious problems, leaving the European Union could offer an ideal opportunity for moving further power away from Whitehall in favour of local government. This includes county councils, new mayoral authorities such as Liverpool and Greater Manchester, as well as the Welsh Assembly. However, there are also dangers for regional economies that come with Brexit and some form of replacement must be found for European funds. The result on the Referendum on EU membership has been seen in many quarters as a vote against the current political-economic status quo. This dissatisfaction was spatially distributed with ‘left behind’ areas with slower rates of economic growth having greater dissatisfaction. Under this logic, providing ‘left behind’ regions with the powers and resources to encourage economic growth should be prioritised. However, this gulf between peripheral and metropolitan areas is more complicated than a simple North/South divide. Within the North West, for example, there are massive variations in growth. The constituencies of Manchester Central, Gorton and Withington experienced an average increase in the number of registered business of 10% in the year 2015/16, in comparison the average of a sample of three East Lancashire constituencies, Ribble Valley, Blackburn, and Hyndburn was 1.77%.684 Economic growth thus remains concentrated in metropolitan areas. Unsurprisingly, these regions voted Remain and those isolated from growth voted Leave. This paper finds little evidence that the government’s policies will reduce this disparity. The cutting of European Structural Investment Funds (ESIF) without any replacement alongside parallel policies of cutting Local Authority budgets in England will leave peripheral areas and their economies considerably weakened. The Effect of European Structural Investment Funds ESIF includes funds allocated through the European Social Fund (ESF) and the European Regional Development Fund (ERDF). The ESF is allocated to boost “employment, skills and social inclusion”685. In England, ERDF is allocated to attempt to help SME’s (small and medium sized enterprises). Both go to the poorest areas with the greatest perceived need. Planned ERDF for England in the period 2014-2020 was €3.6 billion. The three biggest allocations of funding were to the following purposes:

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House of Commons Library, Constituency Profiles, https://public.tableau.com/profile/house.of.commons.library.statistics#!/vizhome/VATandorPAYEregist ered/Data 685 A Guide To European Regional Development Fund and European Social Fund, 2014-2020 Programmes in England: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/487898/ESIF-onlinepublication-december-2015.pdf

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40.4% on “Enhancing the competitiveness of Small and Medium Sized Enterprise” 21.6 % on “Strengthening research, technological development & innovation” 17.3% on “Supporting the shift towards a low carbon economy”686

Cutting of funding reduces the input of local bodies such as local enterprise partnerships (LEPs). LEPs are a partnership between local government and the private sector. At the moment, they decide how funding is allocated per government quotas. Funding allocations are determined by the Department for Communities and Local Government (DCLG) so funds are spent according to strategies drawn up by Local Enterprise Partnerships, the allocation is ultimately determined by Whitehall. This is a change from before 2010 when Regional Development Agencies (RDAs) allocated structural funding more autonomously. Changing this could mean that additional funding could be allocated to alleviate disparities in the quality of education and infrastructure. These are issue areas which fall outside of the previous remit of the programme as determined by the EU and DCLG. Broadly, funding is allocated in inverse proportion to economic development. ‘Less developed’ regions receive the most, this applies to regions with a GDP per capita less than 75% of the average across the EU. In the UK there are two regions that fit this criteria, West Wales and the Valleys and Cornwall and the Isles of Scilly. Considering that West Wales and the Valley’s planned to receive €2,006 million of €2,413 million given to Wales in total we can see how funding is distributed in favour of these least developed regions.687 These regions stand to lose the most from a complete end to payments. ‘Transition regions’ with a GDP between 75-90% of the EU average include Cumbria, Devon, East Yorkshire and Northern Lincolnshire, Lancashire, Lincolnshire, Merseyside, Shropshire, Staffordshire, South Yorkshire, Tees Valley and Durham. Both of these types of region stand to lose far more from the end to ESIF than ‘developed regions’. Considering the relatively remote nature of these regions, they do not stand to benefit from policies such as the ‘Northern Powerhouse’, meaning cuts to ESIF will be particularly devastating. The effect of ERDF, whilst only part of the total investment in an area is economically significant. Wales received £1.9 billion in funding in the period 2007-13. As all EU projects must be co-financed, this requires projects to receive matched funding from private or public bodies. Whilst this is arguably a limitation of the EU system, it does mean that ESIF is responsible for leveraging more funds than the grant figure suggests. In Wales for example, the total value of projects was £3.2 billion for the period 200713.688 These funds in Wales are estimated to have created over 30,000 jobs from the

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European Regional Development Fund, England Operational Programme, 2014 to 2020, Executive Summary. 10th July 2015 687 SPERI British Political Economy Brief No. 24: UK Regions and Structural Investment Funds, The University of Sheffield 688 Auditor General for Wales, European Structural and Investment Funds 2007-2013, April 2014

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! start of 2007 to 2016.689690 In England the figures are similar, despite the smaller amount received per capita, 20,149 jobs were created in Yorkshire and Humber, 20,602 in the North East and 29,795 in the North West. Whilst job creation itself is not a focus of ESIF it arguably provides an indicator of how important ESIF are to some of the poorest areas in England and Wales. Thus if this funding were withdrawn without replacement the effect would be significant. Recent parallel processes have also combined to create a potential perfect storm for local government and their economies in the event of economic downturn. Central government has determined that local authorities will soon be able to keep one hundred percent of their business rate receipts, but this will be at the cost of a withdrawal of funds from central government.691 Whilst this appears to be a form of fiscal devolution, it risks creating a fragile system where if a local economy suffers a downturn, leading to local government tax receipts falling, this may force cuts to local services and infrastructure, which may then makes the local economy suffer further. ESIF are effectively a safety net for regional economies by ensuring a source of investment independent of the economic situation. With the prospect of ESIF being removed in the event of Brexit this safety net is removed. Since June 23rd 2016 three local authorities in England and Wales have already seen their credit ratings downgraded by Moody’s: Cornwall, Birmingham and Lancashire.692 The amount of funding directed to less wealthy regions has significant impacts. The amount directly granted conceals the fact that each project leverages in more funding from other sources and that ‘every Euro spent on structural funds yields an additional €1.21 in GDP’.693 Local governments and economies in these regions will be left vulnerable to cyclic economic downturn if ESI funding halts and is accompanied by government plans to give local governments 100% of their business rate income.694 Currently, the Chancellor has guaranteed to replace any funding is that lost due to Brexit for projects signed before the autumn statement in 2016 and has said it will replace any funds for those signed after, as long as they conform to the government’s economic strategy and are good value for money.695 This was recently confirmed in the government’s white paper. However, the government has made no mention of a replacement fund nor was there codification of what qualified as good value for money.696

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The University of Sheffield, SPERI British Political Economy Brief No. 24: UK Regions and Structural Investment Funds, May 2016 690 Auditor General for Wales, European Structural and Investment Funds 2007-2013, April 2014 Page 99-100 691 Public Finance, MPs warn DCLG on difficulty of full business rate devolution. 14 Jun 16 http://www.publicfinance.co.uk/news/2016/06/mps-warn-dclg-difficulty-full-business-rate-devolution 692 House of Commons Library, Brexit and Local Government: July 20 2016 693 Becker, S. O., Egger, P. and von Ehrlich, M. (2010), ‘Going NUTS: The Effect of EU Structural Funds on Regional Performance’, Journal of Public Economics 94 (9–10): pp.578–90. 694 House of Commons Library, Brexit and Local Government: July 20 2016, 695 Chancellor Philip Hammond guarantees EU funding beyond date UK leaves the EU, 13 August 2016: https://www.gov.uk/government/news/chancellor-philip-hammond-guarantees-eu-funding-beyond-dateuk-leaves-the-eu 696 The United Kingdom’s exit from and new partnership with the European Union. February 2017.

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Devolving Funding Decisions An independent report for the DCLG found that the “decentralised approached” had a positive impact on growth as local actors had better information about problems and could coordinate private and public bodies more effectively.697 This in itself is an argument for further devolution, due to the potential for an increase in economic wealth that comes from a better ability to identify problems and opportunities. The recognition of such disparities can be found in policies such as the The Northern Powerhouse project.698 There is also a strand of political discourse that these measures are too little, too late and that spending decisions, particularly on infrastructure have illogically favoured London. For example, the Northern Hub project in the North West had a return of £4 for every £1 invested.699 CrossRail and HS2 projects had returns of £2.10 and £2.30 respectively, per pound of investment.700701 Considering a ratio of 4:1 is considered value for money, it appears the government has not been following its own logic. Whether such a comparison between projects of differing sizes is fair, there is still a discourse which expresses discontent at the neglect of regions outside of London. The role of this discourse in the Leave vote was evident by the inclination of nonmetropolitan areas to vote Brexit, expressing a discontent with the current status quo. If seen in this light, Brexit should be used to address this sentiment by devolving funding decisions away from London. Even if Brexit is viewed more narrowly, as simply a vote to leave the EU and nothing more, people did not vote for their regions to lose funding and input into funding decisions. The Future of Devolution Within England and Wales Devolution within England and Wales has gained momentum in recent years, the establishment of the Merseyside and Greater Manchester mayoralties is one sign of this. The new powers of the Manchester Mayor include: -! Control over transport -! A Housing Fund of £300 million -! Power to raise and borrow funds -! Control over further education, including the Apprenticeship Grant -! Control over EU ESIF702 Notably, Brexit could rob this devolution of its momentum. These new headline agreements have been part of the process of ‘gift’ devolution, which involves local authorities banding together, as the Greater Manchester Area has done, to agree a grant of powers by local government.

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European Region Development Fund, England Operational Programme 2014 to 2020 HM Government, Northern Powerhouse Strategy, November 2016 699 Transport for Greater Manchester, The Northern Hub, http://www.tfgm.com/trains/Pages/northernhub.aspx 700 BBC News, HS2: Predicted benefits lowered in new government report http://www.bbc.co.uk/news/business-24721214 701 BBC News, ‘Risks remain' on multi-billion Crossrail project http://www.bbc.co.uk/news/uk-englandlondon-28424273 702 House of Commons Library, Devolution to Local Government in England and Wales, 698

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Fears have been expressed that the complexity of Brexit could hamper Westminster’s legislative capacity, so despite calls for further devolution of the powers Whitehall will inherit from Brussels, devolution could be halted.703704 Areas with their own representatives in place, such as Wales, may be able to continue gaining powers but others may struggle. The history of relations between local and central government should also be noted. Local government, with its many overlapping authorities and layers has arguably been the subject of divide and rule tactics by central government. The issue is therefore not just one of capacity to devolve, but of will by Whitehall. If local government lacks any real control, it will prove unable to act to improve the lot of ‘left behind’ regions. It is not just an issue of budgets but of authority: when local and central government are in conflict it is the latter that wins. The most pertinent recent example was the decision to overrule Lancashire County Council’s opposition to fracking.705 If devolution is so meaningless, it will do little to help local economies or heal resentment towards Westminster. This must all be seen within the political context of the reasons for the referendum vote. Not only was the vote an appeal to take back control, the fact the Leave vote was high in areas that were arguably neglected or ‘left behind’ is further evidence of this. With this in mind, it is clear devolution within England and Wales should continue. The variation in vote outcome by region illustrates that the imbalances in decision making, where the majority of decisions are made in London, has fuelled disillusionment with the status quo. Recommendations: To enable a Brexit which works for every region, affirmative action is needed and a replacement of ESIF by the UK government is the simplest solution. As the UK is a net contributor to the EU budget, this should be possible as long as tax revenues do not fall. However, with Brexit’s potential to dramatically alter the UK’s economic position, this is a big ‘if’. There is a need for at least some funding to be allocated according to a set formula. This could potentially be based on a region’s GDP as a proportion of the national average, as is done on a EU wide-basis now. This would ensure that those regions most exposed to the dangers of economic downturn and the reform of business rates would remove more funding. The current Northern Powerhouse project does not fit this model, it has been allocated on a grant basis and the project has attracted criticism for

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Local Government Chronicle, David Paine, Dawes encourages devolution of repatriated EU powers, 5th July 2016 https://www.lgcplus.com/politics-and-policy/devolution-and-economic-growth/dawesencourages-devolution-of-repatriated-eu-powers/7006186.article 704 House of Commons Library, Brexit and local government, July 20 705 The Guardian, “Fracking given UK go-ahead as Lancashire council rejection overturned” Thursday 6th October 2016 https://www.theguardian.com/environment/2016/oct/06/uk-fracking-given-go-aheadas-lancashire-council-rejection-is-overturned

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! centring too much on Manchester.706707 In this example the grant model is problematic as both prioritising the North-West, but also of prioritising one metropolitan area and ignoring peripheral areas which arguably have greater need. A situation where money is granted inconsistently over time and between regions does not provide stability, nor is it perceived as fair. Whilst there are arguments for concentrating some investment in Manchester to create an effective counterbalance to London, there needs to be at least some minimal allocation of funding done on a more regular basis. A scenario in which EU funding is removed and local government revenues are left vulnerable to economic downturn is risky. In the case of Wales, central government has failed to provide any guarantee of a replacement of ESIF despite this being a priority of the Welsh Government.708 Grant-type funding will not deliver for areas it excludes in the short term and in the long term it could prove vulnerable if it no longer proves politically expedient. A formulaic method of allocating funds would therefore ensure local government and regions are not left out and that some funding is at least guaranteed. This does not mean there is not an important role for larger grant-type funding or large scale, centrally administered projects but it does mean that these cannot be seen as a replacement for the money that the poorest regions will lose as a result of Brexit. Spending priorities could be decided by local government, increasing the responsiveness of allocations and the value for money. Taking back control back to the regions would also help solve the potential problems of discontent with the ‘Westminster bubble’ by giving people, through local government or reformed RDAs, a say in how money is spent in their area. Local authorities, better able to discern local needs as well as the economic nuances of an area would be better placed to spend such funds. Some form of replacement is needed alongside further planned devolution, or as noted above, Brexit could lead to a spiral of economic decline or stagnation as regions become dependent on their own, poorer economies for revenue for investment. Brexit offers an opportunity to devolve powers to local government; doing so makes both economic and political sense, given the regional dynamics of the referendum outcome. The concerns over the ‘gift model’ of devolution being halted by a legislative backlog mean that this may not be a simple process and will require determined effort. Conclusions: -! Withdrawal from the EU will lead to the end of European Structural Investment Funding -! This will affect the poorest regions the most.

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The Guardian, “'Northern powerhouse' £556m boost described as missed opportunity” 23 January 2017 https://www.theguardian.com/politics/2017/jan/23/northern-powerhouse-to-get-556m-boost-amidwarnings-of-east-west-divide 707 The Guardian, Manchester wins again in northern transport lottery – at cost to others https://www.theguardian.com/uk-news/2016/mar/15/manchester-wins-northern-transport-lotteryexpense-of-rest-lord-adonis 708 Department for Exiting the European Union and The Rt Hon David Davis MP The United Kingdom’s Exit from, and new partnership with, the European Union White Paper

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Parallel processes like the withdrawal of the local revenue support grant for local councils could exacerbate the risks of such a move, particularly for regions that with low business receipts. The government should therefore pursue a replacement which will allocate money according to a set formula. With the triggering of Article 50, leaving two years until the UK leaves the EU, such a scheme needs to be instituted soon. Government guarantees for funding signed before then are a step in the right direction but they are not watertight and may not reassure investors. Brexit offers an opportunity to develop a more nuanced way of allocating funds, by devolving funding decisions alongside other powers.

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Section 2 – London: the broken heart of Brexit Britain? Introduction This section examines the impact of Brexit on London as a region within the United Kingdom. The section begins with an introduction to the real and imagined position of London as the national capital and economic, political and cultural hub of the United Kingdom and of the world. The section then briefly examines how and why the position of London is a charged political issue across the country, even having implications for the outcome of the EU referendum. Next, the section examines the Government’s current plans for the Brexit negotiations and the key implications for London. This is followed by an evaluation of possible alternative scenarios for London in a BrexitBritain such as independence, devolution or decentralisation. This paper recommends decentralisation as the best option for London post-Brexit. Context ‘The greatest city in the world’ London is a diverse and global city, containing the City, a major hub of global finance, and the Palace of Westminster, the political heart of the UK.709 In the wake of the terror attack at Westminster, London Mayor Sadiq Khan was resolute not only in his denunciation of the attack but also in his conviction that London remained ‘the greatest city in the world’.710 Within the United Kingdom, London also plays a significant role pumping out capital, policy and culture to the rest of the country.711 Making around 25% of the national economic output but only 12.5% of the national population London is hugely (and disproportionately) significant to the British economy.712 713 714 How London performs economically is a good indicator of the health of the British economy at large.715 716 717 Looking in from the outside, London’s position and reputation might appear unique and even enviable. However, within the UK, not all have benefitted equally from London’s success.718 London and the politics of grievance Indeed, for some, the heart of modern Britain is sick. For those on the country’s extremities, London can be a distant and uncaring organ, known simply as ‘Westminster’. London is seen as a place infected by a ‘metropolitan elite’ with liberal

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Greater London Authority, London: The Global Powerhouse. (London: Greater London Authority, 2016) 710 Sharman, J. Sadiq Khan responds to Westminster attack: 'Londoners will never be cowed by terrorism'. (from Independent Online, 2017 03 22) Retrieved 04 01, 2017 711 Clark, G. The sun still rises: London after Brexit. (from Brookings, 2016 06 24) Retrieved 12 1, 2016 712 Greater London Authority. The Europe Report: A Win-Win Situation. (London: Greater London Authority, 2014). 713 Greater London Authority, London: The Global Powerhouse 714 West, M. EU Referendum: Would Brexit prompt London to go it alone? (from BBC, 2016 06 21) Retrieved 12 1, 2016 715 Greater London Authority, London: The Global Powerhouse 716 Greater London Authority, The Europe Report: A Win-Win Situation 717 Heath, A. London's importance to the UK economy keeps on growing. (from City AM, 2013 06 7) Retrieved 12 1, 2016 718 Champion, M. What Will Become of London After Brexit? (from Bloomberg, 2016 10 21) Retrieved 12 1, 2013

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! and pro-European values alien to the majority of the population.719 720 Whereas rural England generally voted to leave the European Union,721 722 London voted to stay in by a margin of 60% Remain to 40% Leave.723 For some commentators, last year’s Brexit vote reawakened a pre-existing “bitter, ugly grudge”724 725 between London and those outside the M25, exposing underlying political, economic and cultural inequalities.726 727 728 729 730 Indeed, some have argued that the dominance of Westminster and difference between London and the rest of the country was not simply an interesting historic fact in last year’s referendum but an actual reason to vote for Brexit.731 732 733 734 Former Deputy Prime Minister Nick Clegg, confirmed this when he suggested that for many in his constituency city of Sheffield, Brexit was often perceived as being: ‘against London more than [it was] against Brussels…“them down there in London are not listening to me, they haven’t listened to me for ages so I’m going to vote against”. It was a punch in the nose for London’735 In our supposedly politically disengaged culture, the position and role of London in modern Britain still engages the political opinions of many inside and outside the capital. Therefore, the question of how London fits within Britain, and Brexit Britain at that, is an important question that so far remains unaddressed. Key issues for London The following section reflects on the Government’s current negotiating stance on Brexit and briefly outlines two significant impacts that such a position could have on London.

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Moore, S. London as a separate city-state? The capital needs to check its privilege. (from The Guardian 2016 06 25) Retrieved 12 01, 2016 720 The Economist, The pragmatic case for moving Britain’s capital to Manchester (from the Economist Bagehot, 2017 02 23) Retrieved 04 08 2017 721 with the exception of some northern cities – Baxter, It's time for London to leave the UK and stay in the EU. (from The Independent, 2016 06 24) Retrieved 12 01, 2016 722 BBC News, EU Referendum results (from BBC News, n.d.) Retrieved 04 07, 2017 723 BBC News. Petition for London independence signed up thousands after Brexit vote. (from BBC News 2016, 06 24) Retrieved 12 1, 2016 724 Hinsliff, G. The resentment between London and the rest of Britain is turning into a poisonous political debate. (from The Guardian 2015, 01 09) Retrieved 12 1, 2016 725 Moore, S. London as a separate city-state? The capital needs to check its privilege. (from The Guardian 2016, 06 25) Retrieved 12 01, 2016 726 West, M. EU Referendum: Would Brexit prompt London to go it alone? 727 Hinsliff, G. The resentment between London and the rest of Britain is turning into a poisonous political debate 728 Moore, S. London as a separate city-state? The capital needs to check its privilege 729 Parker & Sullivan, ‘Sadiq Khan on London after Brexit: 'Open is what we are'’. (from The Financial Times, 2016 10 04) Retrieved 12 01, 2016 730 The Economist, The pragmatic case for moving Britain’s capital to Manchester 731 Paraphrasing of Prof. Ian Gordon (LSE) in Champion, M. What Will Become of London After Brexit? 732 Moore, S. London as a separate city-state? The capital needs to check its privilege. 733 The Economist, The pragmatic case for moving Britain’s capital to Manchester 734 London Finance Commission, Devolution: a capital idea. 735 Clegg, N.. Interview: The Guardian (2017, 01 17)

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The Single Market In her letter to the President of the European Union Donald Tusk, triggering Article 50, Prime Minister May confirmed her intention that ‘the United Kingdom does not seek membership of the single market’.736 Opinion over the likely impact of this for London and the UK is divided even among the Greater London Authority, London’s governing body. One report argued that ‘City’ (i.e. finance) jobs would be lost when the City of London loses access to the single market.737 Another report argued that the business community generally desires membership of the single market but overlooks the other, more political, ramifications of that such as the free movement of people.738 However, the report ranked the UK leaving the Single Market and engaging in a changing world economy as preferable to remaining in an unreformed EU. Nevertheless, in order for Brexit to prove beneficial, the report argued that the UK must keep its economy outward looking and not insular.739 An insular perspective is just what some in London fear the Brexit vote could mean for Britain if interpreted in such a way.740 However, the Prime Minister in her Article 50 letter was keen to assert that although the Brexit vote was a vote for greater national self-determination, she also outlined ‘the deep and special partnership we hope to enjoy - as your [the European Union’s] closest friend and neighbour’.741 The form of this partnership, yet to be decided, is therefore of utmost importance for a UK economy reliant on London. Diverse London After a politically tumultuous and divisive 2016, the New Year firework display in London might have been seen as an opportunity for the country to collectively tune in and unite. Golden fireworks marked, in the words of BBC commentator Clare Balding, the “glorious team effort” of Team GB in the 2016 Rio Olympic Games. However, as if to reassure a national and international audience after Brexit, the amplified voice of London Mayor Sadiq Khan could also be heard among the fireworks saying ‘London is open to the world’.742 743 744 745 This profoundly political statement helps demonstrate the deep cultural differences between London and the rest of the UK that have been awakened by the EU referendum.746 London prides itself on being a great, international and cosmopolitan city.747 748 London Historian Jerry White has said that ‘there is no question that London’s greatness historically was built on migration’ and today London is more diverse than ever with nearly 40% of the London population being foreign

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May, T. Letter to President Tusk. (from BBC News, 2017 03 29) Retrieved 04 01, 2017, p4 LSE, Implications of a Brexit for UK National Governance and Local Government (from LSE European Institute, 04 13 2016) Retrieved 04 07 2017 738 Greater London Authority. The Europe Report: A Win-Win Situation 739 Greater London Authority. The Europe Report: A Win-Win Situation 740 Champion, M. What Will Become of London After Brexit? 741 May, T. Letter to President Tusk., p2 742 BBC New Year Fireworks [Motion Picture]. (2017) 743 Khan quoted in BBC News. Petition for London independence signed up thousands after Brexit vote 744 Champion, M. What Will Become of London After Brexit? 745 Bayliss ‘London is open’ Mayor Sadiq Khan vows to DEFY Brexit and offer City visas to migrants. (from The Express, 2016) Retrieved 01 15, 2017 737

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West, M. EU Referendum: Would Brexit prompt London to go it alone? Greater London Authority. London: The Global Powerhouse 748 Charles Leadbeater (business writer) in Champion What Will Become of London After Brexit? 747

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! born.749 750 Whereas ethnic minorities tended to vote for Remain, those in the UK who identified as ‘English only’ tended to vote for Brexit.751 The Daily Mail recently announced that Khan’s desire for a uniquely open position on immigration into London was tantamount to a “vow to DEFY Brexit”.752 This jars with many in London for whom the capital is “too diverse to care whether its mayor is a Muslim or from any other background”.753 It is in this context that some fear that London, should greater immigration controls come into force, may become a less culturally diverse and open city, 754 or at least a less European one. Whither London? This section evaluates three alternative scenarios for London in a post-Brexit Britain. Independence The first of these scenarios has been much discussed in non-official circles but as yet, perhaps due to its radical nature, has not been given a lot of attention among decisionmakers. This scenario contends that London should become an independent city state.755 Arguments in favour of this position once again emphasise the disproportionate success of London worldwide and within the UK economy given its population size 756 757 758 759 760 761 Nevertheless, despite its economic clout (London has an economy equal in size to Sweden),762 763 London has less control over its own affairs than other ‘devolved’ administrations such as Scotland or Wales.764 765 The Greater London Authority (the Mayor of London and the London Assembly) has relatively little authority over the capital’s issues.766 Politically, the Authority does not have the same powers over public services as a county council would, instead most of that power lies in the hands of councillors in the individual London boroughs.767 Moreover, nearly 75% of London’s budget is derived from central government grants, substantially more than other comparable world cities such as New York (31%) or Paris (18%), thus

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Jerry White in Champion, M. What Will Become of London After Brexit? Greater London Authority. London: The Global Powerhouse 751 Keen, R. Brexit: national identity and ethnicity in the referendum. (from Second Reading: the House of Commons Library Blog, 2016 07 14). Retrieved 04 01, 2017 752 Bayliss ‘London is open’ Mayor Sadiq Khan vows to DEFY Brexit and offer City visas to migrants. 750

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Parker & Sullivan ‘Sadiq Khan on London after Brexit: 'Open is what we are'’. Charles Leadbeater in Champion What Will Become of London After Brexit? 755 Baxter, H. It's time for London to leave the UK and stay in the EU 756 Smith, London after Brexit: independence a non-starter but special status could protect global position. (from The Conversation, 2016) Retrieved 12 01, 2016 757 Heath, London's importance to the UK economy keeps on growing 758 West, M. EU Referendum: Would Brexit prompt London to go it alone? 759 Greater London Authority. London: The Global Powerhouse 760 Greater London Authority. The Europe Report: A Win-Win Situation 761 West, M. EU Referendum: Would Brexit prompt London to go it alone? 762 West, M. EU Referendum: Would Brexit prompt London to go it alone? 763 Inman ‘Devolve power to London as a blueprint for other major UK cities – report’. (from The Guardian, 2017) Retrieved 01 27, 2017 764 West, M. EU Referendum: Would Brexit prompt London to go it alone? 765 Sandford, M. The Greater London Authority: Briefing Paper. (London : House of Commons Library, 2017) 766 Sandford, M. The Greater London Authority: Briefing Paper. 767 Sandford, M. The Greater London Authority: Briefing Paper. 754

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! making a London’s Mayor dependent on goodwill of a Westminster.768 769 Finally the power over cultural and arts initiatives in London belongs to public bodies other than the Authority, such as the Arts Council England.770 Going independent would allow London to gain control over its own budget and internal affairs. However, these arguments overlook the interconnectedness and interdependence of London with the rest of the country. As one commentator has questioned ‘rich London may be the centre of the world, but where does the fuel come from that powers it engines?’771 Indeed, it is fitting that the counties surrounding London continue to be referred to as the ‘Home Counties’, as they house a ‘significant minority’ of those working in London.772 773 774 775 London benefits from a fluid and permeable border across which people, goods and services can freely flow. Therefore, an independent London surrounded by hard borders would be impeded and stifled, harming the city’s development and inclusive character.776 Despite its apparent economic capacity and political clout, there is no historical precedence for self-governance, self-sufficiency or sense of cohesive shared identity unlike Scotland.777 Whilst London may be distinct to the rest of the UK, it is not ‘to the point of being a foreign land’.778 Devolution A second option could be ‘a more radical devolutionary settlement for London’ that seeks to gain powers almost as extensive as those found in the regional governments of Scotland, Wales and Northern Ireland.779 780 London could push for similar devolved powers, taking on the status of a near-‘region’ in its own right.781 782 Indeed, given its distinct political orientation regarding Brexit,783 784 785 London could aim to control its own destiny within the UK.786 787

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Greater London Authority. London: The Global Powerhouse London.gov ‘London and England's largest cities join to call for greater devolution’ (from London.gov, 2013, 09 30) Retrieved 04 01, 2016 770 Arts Council England. How and where we invest public money. (from Arts Council England, n.d.) Retrieved 04 02, 2017 771 Moore, S. London as a separate city-state? The capital needs to check its privilege. 772 Ben Rogers (Centre for London, Director) cited in West, M. EU Referendum: Would Brexit prompt London to go it alone? 773 Hinsliff, G. The resentment between London and the rest of Britain is turning into a poisonous political debate 774 Moore, S. London as a separate city-state? The capital needs to check its privilege. 775 Greater London Authority. London: The Global Powerhouse 776 Hinsliff, G. The resentment between London and the rest of Britain is turning into a poisonous political debate 777 Smith, London after Brexit: independence a non-starter but special status could protect global position 778 Hinsliff, G. The resentment between London and the rest of Britain is turning into a poisonous political debate 779 Inman, ‘Devolve power to London as a blueprint for other major UK cities – report’ 780 London Finance Commission, Devolution: a capital idea. (from london.gov 2017, 01) Retrieved 04 07, 2017 781 Inman, ‘Devolve power to London as a blueprint for other major UK cities – report’ 782 Parker & Sullivan ‘Sadiq Khan on London after Brexit: 'Open is what we are'’. 783 Champion, M. What Will Become of London After Brexit? 784 Parker & Sullivan ‘Sadiq Khan on London after Brexit: ”Open is what we are'’’. 785 Smith, London after Brexit: independence a non-starter but special status could protect global position 786 London Finance Commission, Devolution: a capital idea. 787 Parker & Sullivan ‘Sadiq Khan on London after Brexit: 'Open is what we are'’. 769

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Indeed, although the UK is a highly centralised country, with London as the hub of national political, economic and cultural power, it would be a mistake to conflate the power of ‘London’ with the political power of ‘Westminster’.788 789 790 Indeed a 2017 report, published by the London Finance Commission (a sequel to a similar report published in 2013), 791 has made it clear that this imbalance of power should be rectified by granting even greater authority to the London Mayor, especially in the uncertainty after the EU referendum.792 The report’s argument goes that ‘when London grows, the UK grows’ and therefore London should have more power to control its affairs.793 One practical example of this is control over income tax raised in London, only 7% of which is currently controlled by the Greater London Authority.794 One report argues that London should receive control on up to 50% of its income tax, as soon the case will be in Scotland.795 However, others have argued that London’s success damages the UK economy by stealing opportunities from elsewhere.796 797 Either way, this paper takes the position that it would be a mistake to grant the Greater London Authority similar levels of devolved political power as other regional devolved administrations. Giving London, which is already economically dominant and on average wealthier than other parts of the UK,798 near-equal political power to that of Scotland, for example, may actually make inequalities worse and increase grievances towards the ‘privileged’ capital.799 This effect may be remedied by granting greater devolution to other cities in England also, which the report does propose, albeit briefly.800 801 Decentralisation The final model offered by this paper is decentralisation. This would not only address ‘decentralised fiscal reform’ (control over tax) as others have spoken of,802 but also the real and imagined role of London in the country. This scenario would deal with each of London’s key parts separately. These include London as home to the political power of Westminster; the economic clout of the City of London and the capital’s soft power. Our recommendations to achieve this model are outlined below.

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London.gov ‘London and England's largest cities join to call for greater devolution’ Inman, ‘Devolve power to London as a blueprint for other major UK cities – report’ 790 West, M. EU Referendum: Would Brexit prompt London to go it alone? 791 London Finance Commission, Raising the capital 792 London Finance Commission, Devolution: a capital idea. 793 London Finance Commission, Devolution: a capital idea. 794 London Finance Commission, Raising the capital, (from London.gov 2013, 05) Retrieved 04 07, 2017 795 London Finance Commission, Devolution: a capital idea. p57 796 The Economist, The pragmatic case for moving Britain’s capital to Manchester 797 Smith, London after Brexit: independence a non-starter but special status could protect global position 798 Hinsliff, G. The resentment between London and the rest of Britain is turning into a poisonous political debate 799 Moore, S. London as a separate city-state? The capital needs to check its privilege. 800 London Finance Commission, Devolution: a capital idea. 801 Inman, ‘Devolve power to London as a blueprint for other major UK cities – report’ 802 London.gov ‘London and England's largest cities join to call for greater devolution’ 789

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Political 1.! Break the perceived association between London and Westminster Westminster and London are not the same place. Whilst there is much truth to the former as home to elites stalking the Palace of Westminster’s neo-gothic ‘corridors of power’, the latter is a much older and much more diverse place. It is important therefore to break the widespread public belief that London, rather than Westminster, is to blame for many of the country’s problems. Whilst this may be the case, public imaginations change more slowly which is why we advocate a gradual rather than a sudden change in policy as advocated by others.803 The upcoming renovation and refurbishment of the Palace of Westminster, currently home to the Houses of Parliament, presents an opportunity to make national government more accessible to people from across the country.804 When the works begin, some forecast by the time of the next General Election in 2020, the Houses of Parliament will undergo repairs for as long as between 6 and 32 years.805 806 Not only is this an inconvenience but the project works themselves are likely to cost between £4bn and £7bn.807 808 It has so far been suggested that MPs and Peers could move to alternative sites within central London, the Queen Elizabeth Conference Centre for instance or a specially built temporary glass ‘island’ in the Thames.809 810 Others have called for the construction of a less cramped and antiquated parliament building or for parliament to be moved to other cities.811 812 Whilst some have dismissed the idea of Parliament moving as “an idea for another universe”,813 an intriguing idea suggested by others has been the introduction of mobile or ‘revolving’ Parliament. Indeed, if national decisions were quarterly or seasonally made in different cities throughout the country such as Glasgow, Swansea, (London)Derry or Manchester, ‘Westminster’ would cease to hold such political significance and disdain, and Parliament would more accurately represent the diversity of the country.814 Moving Parliament only a few times a year would also be less cumbersome and expensive than the monthly move

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London Finance Commission, Devolution: a capital idea. The Economist, The pragmatic case for moving Britain’s capital to Manchester 805 Mason and Stewart, Cost of moving MPs out of parliament for repairs could exceed £4bn. (from The Guardian, 2016) Retrieved 01 30, 2017 806 Leftly, Thames could be closed as Westminster undergoes vital repairs. (from The Independent, 2015) Retrieved 01 30, 2017 807 Mason and Stewart, Cost of moving MPs out of parliament for repairs could exceed £4bn. 808 Leftly, Thames could be closed as Westminster undergoes vital repairs. 809 Tolhurst FLOATING VOTERS Bonkers plan to move Westminster onto the River Thames while Parliament is being refurbished. (from The Sun, 2016) Retrieved 01 30, 2017 810 Jamieson, MPs set to move out of Parliament for six years while renovations take place. (from The Telegraphy, 2016) Retrieved 02 01, 2017 811 Mason and Stewart, Cost of moving MPs out of parliament for repairs could exceed £4bn. 812 Leftly, Thames could be closed as Westminster undergoes vital repairs. 813 Moore, R. Moving parliament out of London is tempting… but unworkable. (from The Guardian, 2016 04 10) Retrieved 01 30, 2017 814 The Economist, The pragmatic case for moving Britain’s capital to Manchester 804

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! from Brussels to Strasbourg as in the case of the EU Parliament.815 Whilst Whitehall would remain the hub of the Civil Service, the movement of Parliament would increase the public’s access to British politics and allow MPs to spend more time in their constituencies. 2.! Devolve some greater powers to the Greater London Authority. Whilst for the reasons outlined in the ‘devolution’ scenario above, giving London levels of devolution to rival Scotland would be inappropriate and counterproductive, this paper believes that the Greater London Authority should receive some more devolved powers. London is not universally wealthy but is actually an economically diverse city which contains some boroughs that have problems such as poverty, inequality and class grievances in common with the country’s other large cities.816 Just as there exist those who have not seen the benefit of London’s success and ‘rock star status’ outside the city, there are many ‘losers’ within the capital too.817 To rectify these issues the logic of devolution that ‘local issues better be addressed if decisions are taken locally’ has some credence here.818 819 Diverting a greater proportion, such as 25% (but not a ‘radical’ proportion such as up to 50%)820, of income taxes raised by Londoners into the London budget would increase the city’s ability to govern more effectively at the local scale by reducing the distance between state and citizen.821 822 823 824 825 For example, granting the Greater London Authority greater power over its taxes and budget would provide Mayor Khan with the funds to build more ‘affordable’ housing in London which the capital desperately needs.826 827 However, collecting too great a proportion of London taxes would divert funds away from other vulnerable areas of the country. Moreover, London is home to many large infrastructure projects which impact other parts of the country (such as Crossrail, or the proposed HS2) which are best managed by central government.828 Therefore it is clear that a careful balance needs to be struck.829

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Mendick, R. The farce of the EU travelling circus (from the Telegraph, 2014 01 11) Retrieved 04 04 2017 816 Moore, S. London as a separate city-state? The capital needs to check its privilege. 817 Champion, M. What Will Become of London After Brexit? 818 Greater London Authority. London: The Global Powerhouse 819 Parker & Sullivan ‘Sadiq Khan on London after Brexit: ”Open is what we are'’’. 820 London Finance Commission, Devolution: a capital idea. 821 Matthew Bolton (Citizens UK) in Inman, ‘Devolve power to London as a blueprint for other major UK cities – report’ 822 West, M. EU Referendum: Would Brexit prompt London to go it alone? 823 Paun, A. Brexit consequentials: why the UK must involved the devolved governments in the process of leaving the EU. (from The Constitution Unit, 2016 06 25) Retrieved 12 01, 2016 824 London.gov ‘London and England's largest cities join to call for greater devolution’ 825 London Finance Commission, Devolution: a capital idea. 826 Hill, D. Sadiq Khan sets out key plans for more "genuinely affordable" London homes. (from The Guardian, 2016 11 29) Retrieved 12 1, 2016 827 Greater London Authority. London: The Global Powerhouse 828 Greater London Authority. London: The Global Powerhouse 829 Greater London Authority. London: The Global Powerhouse

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Economic 3.! Keep the City of London within the EU Single Market This recommendation calls for the City of London, the home of Britain’s financial sector, to remain inside the European single market as much as is possible.830 Some have referred to London as “Europe’s – if not the world’s – preeminent global city and financial centre” and, in order to retain this position would need to consider remaining in the single market. 831 Indeed, the City of London Corporation has requested that access to the Single Market should ‘resemble as closely as possible the access we currently enjoy’.832 Whilst the Deputy Governor of the Bank of England has argued that a hard Brexit will not lead to an ‘exodus’ of jobs from London to other financial centres, there is concern among businesses and London government that if Brexit is not handled correctly, London could be outcompeted by the likes of New York or Singapore. 833 834 835 A possible option could be to give the City of London a ‘special status’836 such as a Special Economic Zone rather like Shanghai in China which has different financial regulations than the rest of the country. This would allow the freer flow of labour, capital and goods between the EU and the City. Such an agreement would have to be policed to make sure that the free movement of people does not extend to the rest of London and the UK. Giving the City of London Corporation the power to grant specific visas to non-UK nationals to live and work in the City may be a solution.837 838 Cultural 4.! Create institutions and initiatives to encourage the fostering of multiple British identities. The result of the referendum showed that the UK has the potential to be deeply divided, not least in terms of identity. The UK should recognize that it is a multicultural and multifaceted state and as such British identity should reflect this fact. Forcing all Britons to adopt the ‘victorious’ British identity of those in rural England who won referendum is not the right approach. Instead, education of different regional cultures, the breaking down of national

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Smith, London after Brexit: independence a non-starter but special status could protect global position 831 Smith, London after Brexit: independence a non-starter but special status could protect global position 832 City of London Corporation, The City of London Corporation and Brexit (from City of London Corporation, n.d.) Retrieved 04 08, 2017 833 Tapsfield, There will NOT be an exodus of City of London jobs to the EU after Brexit, says Bank of England deputy governor. (from Mail Online, 2016) Retrieved 12 01, 2016 834 Greater London Authority. The Europe Report: A Win-Win Situation 835 Greater London Authority. London: The Global Powerhouse 836 Smith, London after Brexit: independence a non-starter but special status could protect global position 837 Paun, A., & Miller, G. Four-nation Brexit: How the UK and devolved governments should work together on leaving the EU. (London: Institute for Government, 2016) 838 Bayliss ‘London is open’ Mayor Sadiq Khan vows to DEFY Brexit and offer City visas to migrants.

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stereotypes and cross-cultural exchange visits should be developed at school level. This would respect the fact that different people within Britain think about their national identity in different ways. Like devolution itself, such diversity should be celebrated not suppressed. London could serve as a meeting place for celebrations of British identities not because London cultural identity is superior to others’ but rather because London remains the national capital. Conclusion In conclusion, this section has argued that the position of London in the United Kingdom has and continues to be a subject of great political significance to those living both inside and outside the capital. Brexit, we feel, has brought this issue into sharper focus. The title of this section which refers to London as ‘broken heart of Britain’ tries to speak to both halves of this disunited Kingdom. There is evidence to suggest that for some who voted for Brexit their vote was informed partly by their frustration with preexisting regional inequalities and in particular what they saw as the dominance and privilege of London. Consequently, Brexit became a vote for change in a country centred around London a system some saw as ‘broken’ and not working for them. 839 For Londoners who voted to Remain, Brexit has broken the hearts of those who value the city’s cultural diversity and place within the single market. In order to unite this divided country, it is important to recognise both points of view. This section has also argued that to help achieve a truly United Kingdom, there is a need to actively rethink London’s role in the UK. We contend that rather than improving regional relations in the UK, independence or ‘radical’ devolution for London (gaining the status of a near-‘devolved region’),840 may actually prove counterproductive. Instead, we advocate a ‘decentralisation’ model which advocates that London remain as national capital and a political, economic and cultural hub within England and the UK, but not the sole hub. Following others, and referring back to Section 1, we contend that London should not dominate but work together with other regions and cities in the country.841 842 843 844 We have made a series of recommendations that we believe would maintain London’s strengths (such as the position of the City) and mitigate its flaws (the dominance of Westminster), to make sure that as many as possible, from across the country, benefit from London’s continued success post-Brexit.

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Smith, London after Brexit: independence a non-starter but special status could protect global position 840 London Finance Commission, Devolution: a capital idea. 841 Greater London Authority. London: The Global Powerhouse 842 London.gov ‘London and England's largest cities join to call for greater devolution’ 843 London Finance Commission, Devolution: a capital idea. 844 Heath, London's importance to the UK economy keeps on growing

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Section 3 - Scotland: Breaking the Union? Introduction This section will explore how the Scottish decision to remain in the European Union by an overwhelming majority of 62% could be accommodated in the post-Brexit settlement. A contradictory situation exists at present, with Westminster simultaneously arguing that the Union needs to be preserved and strengthened while also extolling the benefits of leaving another wider union. Scotland, under the Scottish National Party, is currently pushing for another independence referendum (as per their pledge, if Scotland were taken out of the EU against its will), 845 foreseeing that their concerns in a Brexit Britain will not be met. This section will analyse an alternative model which could have applications for Anglo-Scottish relations with an emphasis on the possibilities and consequences of possible independence. The model being explored here is that of Greenland. Greenland Despite the unprecedented situation of Brexit, Greenland’s status offers a case study which demonstrates that a constituent member can have a different relationship to the EU than its parent kingdom. The Greenland situation, wherein a constituent member of a Kingdom chose to leave the EU, is the reverse of the situation facing Scotland where the parent Kingdom has decided to leave and the constituent country wishes to remain.846 847 With the accession of the Kingdom of Denmark to the European Union, Greenland was part of the EU from 1973 until 1985. In 1979 Greenland gained home rule followed by a referendum held in 1982 where the autonomous region withdrew from the EU and is now associated with the bloc as an Overseas Territory848 under the Overseas Association Decision. 849 Despite being a relatively small territory with limited involvement in European affairs, remote distance from the rest of the continent and a small population, the arduous process of negotiations was only completed in 1985 after three years and over 100 meetings with EU officials.850 The fact that negotiations lasted three years for this minor case does not bode well for the complexity of the British negotiations.851 However, it is still possible to draw some constructive points from the Greenland deal for Scotland, albeit in reverse, namely securing for a devolved region a different

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David Livey, The SNP 2016 manifesto explained (from snp.org, 04 20, 2016) Retrieved 04 08, 2017 Scottish Government, Scotland’s Place in Europe (from Scottish Government, 12 20, 2016) Retrieved 04 08, 2017

R. Hazell and A. Renwick, Brexit: it’s consequences for Devolution and the Union (from the Constitution Unit, n.d) Retrieved 04 08, 2017 https://www.ucl.ac.uk/constitutionunit/research/europe/briefing-papers/briefing-paper-3 848 LSE European Institute, Could a ‘reverse Greenland’ arrangement keep Scotland and Northern Ireland in the EU?, http://blogs.lse.ac.uk/europpblog/2016/07/07/reverse-greenland-arrangement/ 849 European Commission (04/04/17) “International Cooperation and Building Partnerships for Change in Developing Countries” Available at: http://ec.europa.eu/europeaid/countries/greenland_en [Accessed 04/04/17] 850 POLITICO, Maia de la Baume, Greenland’s exit warning to Britain, 22 June 2016, http://www.politico.eu/article/greenland-exit-warning-to-britain-brexit-eu-referendum-europe-votenews-denmark/ 851 The Telegraph, Greenland showed how to leave Europe as far back as 1984, 24 June 2016, http://www.telegraph.co.uk/news/2016/06/24/greenland-showed-how-to-leave-europe-as-far-back-as1984/

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relationship to the EU from that of the parent state. Funding from the EU’s general budget and membership of the Single Market is unlikely for Scotland, but some form of cooperation is still possible. Achieving a separate deal would require devolving greater powers over foreign policy, immigration and trade to Holyrood. Denmark granted Greenland limited sovereignty after the approval of Home Rule in 1979 and this status has remained unchanged despite the referendum decision on the EU. This effective autonomy has largely placated demands for independence, through some voices still remain.852 This model could potentially be applied to the United Kingdom, with England and Wales leaving the European Union, while Scotland remaining inside both the European Union and the United Kingdom to a large extent. However, this arrangement would most likely receive opposition from Westminster which is seeking a UK-wide exit deal from the EU. Opposition is also likely to be voiced from within the EU itself, such as from Spain which would likely veto any deal that would give special powers to Scotland owing to concerns over Catalonian sectarianism. Despite reservations from unionists here and on the continent, we believe a Greenland-style solution would accommodate the Scottish vote and so help preserve the Union rather than endanger it. This model of devolution would go beyond “Devo Max” to place Scottish trade policies in the hands of Holyrood. Greenland, while not part of the European Single Market, does have access to it for its fisheries, tariff free, in exchange for granting EU access to Greenland waters and a fee from the EU.853 Following a similar arrangement, could offer a solution to allow Scotland to both access the European market on a sector selective basis and still remain part of the UK, much as Greenland does with Denmark. Unlike the situation with Greenland, citizens of Scotland would still be non-EU citizens, unlike the Danish passports held by those in Greenland, and as such an arrangement on travel and immigration would be more difficult to agree. Conclusion Calls to accommodate Scotland in the event of Brexit poses a challenge to Westminster’s one-size-fits all negotiating strategy. UK Government demands for control over borders, immigration and trade run up against free-movement of people, goods and services as desired by a majority of those in Scotland. Greenland’s case could offer a middle-ground between these two apparently irreconcilable positions and give Scotland a chance to have one foot in both Unions. Although the Scottish Government has not pursued the Greenland model believing it to mean that the UK must stay in the EU,854 we do not consider this to be the case. Whilst independence offers Scotland a seductively simple choice of membership of being in one of two unions, the Greenland model offers a chance to access the best of both, despite its unromantic complexities. The option of a ‘clean break’ for independence may be an increasingly attractive option given the messiness of the negotiations that would

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The Greenland Self-Government Arrangement, http://www.stm.dk/_p_13090.html Nationalia, Exiting the EU? Algeria, Greenland and Saint Barthelemy experiences, 23 February 2016, http://www.nationalia.info/new/10722/exiting-the-eu-algeria-greenland-and-saint-barthelemyexperiences 854 Scottish Government, Scotland’s Place in Europe 853

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achieve such a model, however we contend that the benefits of remaining part of the United Kingdom and retaining some form of EU membership are worth the tribulations involved. The threat of independence can be used by Scotland as leverage to put pressure on the UK Government to negotiate such a compromise on behalf of Scotland. If the Government is not responsive to these demands, in the event of a hard Brexit a second independence referendum seems imminent placing the Union increasingly at risk. This paper would propose a change in the constitution of the United Kingdom to allow Holyrood to retain success to the Single Market, whilst also allowing it to remain part of the UK.

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Section 4: Northern Ireland: Brexit and the Border Introduction This section of the paper aims to provide an analysis of the impacts of Brexit on Northern Ireland and the wider effects upon the relationship between the United Kingdom and the Republic of Ireland, specifically focusing on the issue of cross-border relations and the Border itself. Northern Ireland, despite having voted to remain within the EU during the Brexit Referendum is currently on an unknown trajectory towards an uncertain future. 855 As a result of both its history and being the only constituent country in the United Kingdom to share a land border with the EU, the position of Northern Ireland merits careful consideration. The recommendation of this paper is that Northern Ireland’s unique status within the UK and the Brexit debate requires a sui generis solution, with a special status ensuring the continued ability to freely travel and trade across the Border. However, such compromise is unlikely to prove palatable to many in Westminster and Stormont given the strong desire in Westminster to re-impose immigration controls. To take Northern Ireland out of the European Union without due consideration of its position as part of the island of Ireland would be a reckless proposal that puts the political and economic well-being of the region at risk. As An Taoiseach Enda Kenny described it, the UK’s decision to withdraw from the EU is "arguably the greatest economic and social challenge for this island in fifty years."856 This section is divided into two subsections; the first tackles the political and economic impacts of Brexit on Northern Ireland and the second addresses the constitutional complexities of the Border and the impact on cross-border trade relations. These are followed by a conclusion making policy suggestions on how to best mitigate the effects of Brexit on Northern Ireland and ensure the least harmful outcome. The Importance of the Soft Border Following the Belfast/Good Friday peace process, in combination with the Common Travel Area (CTA) and full EU membership, the Border between the Republic and Northern Ireland has become effectively invisible in the landscape. While the Good Friday Agreement has contributed much to this, the importance of the current institutional framework between the UK, Republic of Ireland and the EU is essential to understand. The current political arrangement and peace in Northern Ireland is dependent upon the Good Friday Agreement 1998, guaranteed by both the British and Irish Governments as partners in the EU857, central to which are the guarantees of; freely able to travel and trade across the Border a choice of holding an Irish, UK or both passports and the right of the people of Northern Ireland to vote in a referendum whether they wish to remain part of the United Kingdom or become otherwise. These

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BBC News (24/06/16) “EU Referendum: Northern Ireland Votes to Remain” – http://www.bbc.co.uk/news/uk-northern-ireland-36614443 856 Enda Kenny (07/11/16) “Irish Times Brexit Summit keynote” address: http://www.taoiseach.gov.ie/eng/News/Taoiseach’s_Speeches/Keynote_address_by_the_Taoise ach_Irish_Times_Brexit_Summit_7_November_2016_Westin_Hotel_Dublin.html 857 The Belfast Agreement (10/04/1998) “Agreement reached in the multi-party negotiations” https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/136652/agreement.pdf.

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guarantees, and by extension the fragile political and economic situation, have been put in doubt following the Brexit vote. The CTA, a bilateral agreement between the UK and Republic of Ireland, allows for the free movement of citizens between the two countries (both of which are outside of the Schengen free-travel zone) as well as for the citizens of one to live, work and claim social welfare in the other. In conjunction with the CTA, the membership in the separate EU Single Market and Customs Union allow for free trade, the former permitting free movement of goods, services, capital and people. The latter establishes a zone of tariff-free trade between members and sets common import quotas and tariffs for non-members. Northern Ireland would suffer enormously in the event of an absolute or “hard” Brexit, in which the UK would; -! Leave the Customs Union and conduct trade with the EU27 under WTO Rules -! Leave the Single Market and lose preferential access to it -! Have EU tariffs applied to a majority of goods and services traded with the EU27 -! Become subject to EU Rules of Origin on all UK goods entering the EU -! Leave the CTA and free-travel area within the EU -! Lose employment, residency and social welfare rights in the EU27 -! Re-establish full control over immigration policy -! Have immigration and customs controls on all UK borders with the EU The implementation of these policies would be significant for Northern Ireland. In the event of a hard Brexit, any arrangements must tackle the twin issues of the free movement of people and of goods across the Border. Political Issues Travel would become a difficult issue, with some form of immigration control being necessary to comply with wishes for the UK to control immigration into the UK. The incompatibility of maintaining the CTA with Ireland versus the Republic’s membership of the EU Single Market, and as such committed to free movement, is at odds with the Brexit rhetoric and full border and immigration control into the UK. In addition, arranging a special relationship between the Republic of Ireland and the UK would be subject to the wider EU as part of the free movement of people in the bloc. Irish exemption from Schengen in the EU is structured as a joint arrangement with the UK, emphasising the special nature of the CTA, this is unlikely to be continued with a UK outside the EU. Uncertainty over funding sources, currently provided under the EU Horizons 20142020 programme, will deal a death blow to soft cross-border institutions and peace initiatives. Cross-border departmental, local government and civil society initiatives will be more vital than ever in the context of increased levels of political, economic and social instability.

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Economic Issues In addition to being the most economically deprived constituent country of the UK, Northern Ireland’s economy is far more heavily dependent upon the EU (especially the Republic of Ireland) than any other constituent member, with over half of all exports headed to the EU, 32% of which are destined for the Republic858 and hence more vulnerable to harsher economic or trade restrictions. The reintroduction of cross-border customs, tariffs, inspections according to EU Rules of Origin procedures, customs declarations, delays caused by waiting for goods to clear the Border and VAT payments would have serious ramifications for cross-border business and Northern Irish trade with the wider EU. Compounding this, movement of goods and workers across the border would have serious consequences, especially in the agri-foods sector with some farms being liable to be divided along the border and supply-chains having to adhere to both EU and British regulations and standards or being subject to tariffs when crossing the Border itself which would have severe consequences for local economies, especially if Britain reverts to WTO tariff rules859. Questions of energy security and dependence could arise due to the interconnected nature of the energy grid, which is an all-island arrangement under the integrated single energy market (I-SEM) and scheduled to be redesigned for 2017860. Northern Ireland is dependent on the excess capacity generated south of Border and complications from Brexit could threaten Northern Ireland’s energy security potentially requiring significant investment at the expense of the UK Exchequer, especially if access to European energy markets is closed off post-Brexit. It is worth noting that while Norway is included in the energy market, Switzerland’s accession has been suspended following a referendum opposing freedom of movement, a development which may have ramifications for UK access to European markets861. Despite these potentially far-reaching ramifications, Northern Ireland concerns are at risk of not being heard in the Brexit negotiations given the weight placed on maximising the UK’s trading position862 as they account for a mere 2.4% of exports and 1.5% of imports in the UK economy863. Despite optimism to the contrary about the positives to be gained for Northern Ireland as a result of Brexit864, it is likely to be the

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Rt Hon James Brokenshire MP “Supplementary Written Evidence to European Union Committee (BUI0014) – Figures from HMRC Regional Trade Statistics Q2” http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/european-unioncommittee/brexit-ukirish-relations/written/42551.html 859 Martina Lawless, Edgar Morgenroth (24/11/16) “The Product and Sector Level of a Hard Brexit Across the EU” ESRI Working Paper https://www.esri.ie/pubs/WP550.pdf 860 (EAI) “All-Island Market Renewable Energy Supports and Energy System Decarbonisation Policy statement: ETS” http://www.eaireland.com/policy/all-island-market/ 861 Cambridge Economic Policy Associates (CEPA) (2016) “Some Initial Observations on Brexit and the UK Energy Market” http://www.cepa.co.uk/news-details-initial-observations-on-brexit-and-the-ukenergy-market?selYear=2016 862 BBC News (15/01/17) “Brexit: UK 'could change economic model' if single market access denied” http://www.bbc.co.uk/news/uk-politics-38628428 863 HMRC (06/09/16) ‘Regional Trade Statistics Second Quarter 2016’ https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/547956/RTS_Q2_2016.pd f 864 John Mulgrew (10/01/17) “Northern Ireland businesses bounce back from Brexit with positive end to 2016, survey shows” Belfast Telegraph http://www.belfasttelegraph.co.uk/business/news/northernireland-businesses-bounce-back-from-brexit-with-positive-end-to-2016-survey-shows-35356076.html

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! most heavily impacted and least heard in the event of Brexit865. The highly integrated nature of the Northern Irish and Republic of Ireland economies means that negotiation needs to be take into the account that is in the best interests to preserve as much of the current border arrangement as possible to ensure the economic well-being of the entire island of Ireland, north and south. Constitutional Issues The constitutional issues surrounding the referendum and any changes to the Irish/Northern Irish border are highly complex, not least because they invoke both domestic and European legislation, as well as an international peace agreement, the Good Friday Agreement. Before considering the ability of the government of Westminster to impose a form of Brexit upon Northern Ireland and or its role in determining the border question, an understanding of the background context in which any negotiations regarding Northern Ireland would operate is useful. The Northern Ireland government holds its powers as a result of devolution. Devolution is a process by which the central government, in this case Westminster, passes certain powers to regional legislatures, such as Stormont. Due to the nature of Parliamentary sovereignty in the United Kingdom, which prevents any Parliament binding a future parliament, these assemblies’ powers can be amended or repealed at any time. Northern Ireland has experienced both aspects of this, through the devolution of Policing and Justice in 2013 and the return to direct rule between 2003 and 2007 from Westminster. Whilst the trend of basing devolution on ‘supply and demand’ has had its advantages, the subsequent legal space requiring consideration here is filled with ‘concordats’ or ‘instant conventions.’ 866These contain very little discussion of how different administrations ought to relate to each other in devolution legislation. Once the basis of the relationship between Northern Ireland and Westminster is understood, the question can be raised as to what extent Westminster can legitimately intervene in the decisions of Stormont. The starting point when considering this in the context of Brexit negotiations can be found in the Memorandum of Understanding867, the main document on inter-governmental relations in the United Kingdom. The Memorandum of Understanding states that the usual basis for Westminster’s nonintervention in regional affairs is the Sewel Convention868. This convention provides that ordinarily the UK government will not legislate for the devolved regions without their consent.

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House of Lords European Union Committee 6th Report of Session 2016–17 (12/12/16) “HL Paper 76 Brexit: UK-Irish relations” http://www.publications.parliament.uk/pa/ld201617/ldselect/ldeucom/76/76.pdf p.17 866 Rawlings ‘Concordats of the Constitution’ 2000 867 Memorandum of Understanding and Supplementary Agreements between the United Kingdom Government, the Scottish Ministers, the Welsh Ministers, and the Northern Ireland Executive Committee https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/316157/MoU_between_th e_UK_and_the_Devolved_Administrations.pdf 868 HL Deb vol 592, col 791 1998 Lord Sewell speaking at committee stage of Scotland Bill

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At first examination this may seem to indicate that Westminster is legally prevented from intervening in Northern Ireland without its consent. This is however, not the case. Although the Sewel Convention has been placed on a statutory footing in Scotland and Wales, for Northern Ireland it remains a mere convention. The distinction is that conventions, unlike legislation are generally considered to not be legally binding, although there are of course varying academic interpretations, as with most areas of constitutional law.869 Conventions are instead intended to provide a sort of political or social check on those in power or as a tool in interpreting the law for judges. In constitutional law this difference is often referred to in the legal constitutionalism/political constitutionalism divide. This means that it would be constitutionally lawful for Parliament to legislate on Brexit on behalf of Northern Ireland, something confirmed in the recent Supreme Court case on Brexit870. However, it is obvious that to impose an agreement, particularly on the border, without consensus would be politically damaging in terms of legitimacy for any such agreement. Therefore, when addressing the ‘constitutionality’ of any decisions regarding the border, it is political constitutionalism which should be borne in mind. An agreement could be consensually translated into Northern Irish legislation via a legislative consent motion for example, as seen with Welfare Reforms in 2015871. However, any attempt to impose Westminster proposals without the support of the assembly, whilst lawful, would most likely be in conflict with political constitutionalism. Given the government of Westminster has introduced policies, such as “English Votes for English Laws” 872in response to the West Lothian Question873, preventing devolved regions voting on English issues, imposing ‘English votes on Northern Irish laws” could damage the legitimacy of any negotiations going forward. The ability of Northern Ireland to remain a part of Brexit negotiations, especially regarding its border, is particularly pertinent given the timing of the Article 50’s triggering by Theresa May. Considering the collapse of the power-sharing executive the Northern Irish Assembly is, at the time of writing, currently suspended to allow for negotiations to form a government, severely diminishing Members of the Local Assembly’s (MLA) ability to advocate on behalf of the region at the Brexit negotiating table. With regards to Ireland’s role in any negotiations regarding Brexit and the Border it is necessary to note that it is still obliged to act within EU law and that it may face pressure from actors other than the United Kingdom and Northern Ireland as to what terms to accept. The UK’s negotiating powers regarding the Border may therefore still be required to give regard to EU law and the will of EU states.

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Elliot, ‘Public Law’ 2014 BBC News (24/01/17) “Brexit: Supreme Court says Parliament must give Article 50 go-ahead” Available at: http://www.bbc.co.uk/news/uk-politics-38720320 871 http://www.parliament.uk/documents/commons-public-bill-office/2015-16/legislative-consentresolutions/NI-(Welfare%20Reform)-Bill.pdf 872 http://www.publications.parliament.uk/pa/ld201617/ldselect/ldconst/61/61.pdf 873 Named in reference to a debate on devolving the region in the 1970s 870

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Overall, whilst legal constitutionalism does not require Northern Irish assembly approval of any Brexit negotiations, political constitutionalism may require a nuanced and sensitive approach of negotiations to avoid damaging the legitimacy of any conclusions as to how Brexit should be implemented, especially regarding the border. Brexit Possibilities: In terms of addressing the impacts of Brexit and the Border there are effectively four options available. -! The first option would be the establishment of a formal international border between the Republic and the United Kingdom. The Border with the Republic would be a hard border, with immigration controls, customs enforcement and security checks, reminiscent of the period during the Troubles. In addition to being highly damaging to cross-border trade and travel, such a move could damage the political situation in Northern Ireland, which is in part predicated on a deliberately fuzzy border with the Republic in order to satisfy both those who want a Northern Ireland distinct from the Republic and those who want closer ties. There are also issues over the status of Northern Irish citizens being entitled to both UK and EU (Irish) passports. -!

A second option is to maintain the present soft border between the Republic and Northern Ireland, but to allow for immigration controls at points of entry to Great Britain. While maintaining the current border arrangement allowing for free movement across the Border, this policy would present several challenges. Unionists are unlikely to accept the need to show identification to travel within the United Kingdom which could isolate Northern Ireland both within the UK and Europe (and be further exacerbated in the event of Scottish independence). This approach would put considerable strains on the Irish immigration and customs services. A unique solution would need to be formulated, with Ireland balancing its EU commitments to free movement in the bloc with satisfying UK demands for control over immigration. Questions about the preferential status of Irish citizens under British law (British Nationality Act 1981) would also need to be addressed, as well as the status of British subjects in Ireland in Irish law (Aliens Act 1935). Political issues over the need for Northern Ireland to be part of some trade agreements such as the Single Market, Customs Union or European Free Trade Area (EFTA) raises issues over trade between Northern Ireland and the rest of the United Kingdom as well as potentially subjecting Northern Irish goods and services to EU standards. However, in the event that the UK leaves the EU, the entity entering into a trade and custom arrangement would take on the status of a “third country” and as such, the EU itself has the sole exclusive authority to negotiate, not the Republic874.

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A third possible solution would be to maintain the existing arrangement between the United Kingdom and Ireland, as it currently stands under the CTA, and establish a common entry policy with the rest of the EU. This would

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EUR-Lex (09/05/08) “Consolidated version of the Treaty on the Functioning of the European Union PART FIVE: EXTERNAL ACTION BY THE UNION - TITLE II: COMMON COMMERCIAL POLICY - Article 207 (ex Article 133 TEC)” Official Journal 115 , P. 0140 – 0141 - http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E207:en:HTML

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preserve the current state of cross-border relations and bilateral agreements for which there is some precedent with the United States pre-clearance areas within Dublin and Shannon airports, territory effectively ceded to the US Department of Homeland Security. However, in addition to the political and symbolic opposition to the Republic facilitating UK immigration concerns, such a solution would effectively place Ireland in contravention of the EU’s four freedoms, a move unlikely to find favour in Dublin or Brussels. Despite these concerns, both Prime Minister May’s letter to President Tusk triggering Article 50875 and the European Council’s draft negotiation guidelines for Brexit876 both clearly state a desire to maintain the current CTA arrangement between the United Kingdom and the Republic as much as possible -!

A fourth option, and the one advocated by this paper, would be to argue for Northern Ireland to acquire a special status. The region has a unique geographical and political position and as such needs a unique solution. Potential solutions could draw inspiration from the status of UK possessions like Gibraltar or the Isle of Man, known as “European Territories for whose External Relations a Member State is Responsible (IE/UK/DK Accession Treaty), these regions were partially integrated, being members of the Customs Union as well as the CTA, but not the EU itself. The EU has shown itself to be flexible in terms of accommodating unusual circumstances such as; the Nordic Passport Union, the special pass arrangement between Croatia and Bosnia & Herzegovina or the mutual customs arrangements between Sweden and Norway or Switzerland and her EU neighbours.

However, other more radical options are available, which at present may not be seen as politically viable, but with uncertainty over the consequences of Brexit for the region may become more conceivable. The Secretary of State for Northern Ireland, could, under the terms of the Good Friday Agreement, call for a referendum on reunification with the Irish Republic. While in the current political climate this is unlikely to happen, the impending loss of EU funding for the province and seeming lack of knowledge or concern from Westminster may make this option more palatable, and the province could emulate the East German model of integration into the EU as part of a united Ireland, instead of the torturously long formal accession process. Northern Ireland could also go it alone or form a union of some sort with Scotland, the other constituent country of the United Kingdom who voted to remain and in the event of a second Scottish independence referendum may leave the Union. Westminster could also decide to devolve considerable powers to the Northern Ireland Assembly in terms of immigration and settlement issues as a special administrative zone with control over certain domestic affairs. There have also been recent calls for a dual-governance of the region by both London and Dublin in order to represent the interests of the Island as a whole and both those who voted to remain and to leave during the Brexit

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Prime Minister’s Office (29/03/17) “Prime Minister’s Letter to Donald Tusk triggering Article 50” https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/604079/Prime_Ministers_ letter_to_European_Council_President_Donald_Tusk.pdf 876 Council of the European Union (31/03/17) “European Council (Art. 50) (29 April 2017) - Draft guidelines following the United Kingdom's notification under Article 50 TEU” http://g8fip1kplyr33r3krz5b97d1.wpengine.netdna-cdn.com/wp-content/uploads/2017/03/FullText.pdf

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! negotiations877, this model could serve as a potential template for a unique arrangement for Northern Ireland as well. Conclusion No solution will be perfect, and all bar an absolute break with the EU in the event of a hard Brexit, involve a degree of compromise and willingness to cede some sovereignty over travel or economic policy to EU rules. Until formal negotiations begin and the terms of the United Kingdom’s future relationship with the European Union are known, all theorising about the future status of Northern Ireland is merely speculation. What is known is that the situation of Northern Ireland is critical in terms of Brexit negotiations, with the incoming Maltese Presidency of the EU citing it as the key issue to be resolved before beginning formal exit talks878. The case of Northern Ireland in the wake of Brexit will be central in the future of relations on the island of Ireland. Concerns vital to the well-being of the region include; the retention of the choice of Irish and/or British nationalities for the people of Northern Ireland, the maintenance of as open and soft a border as possible as well as movement between the UK and Ireland in the CTA, and in the event of a “hard” Brexit, an agreement to facilitate the free flow of people, goods and services throughout the island between the EU, Irish and British Governments.

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Henry McDonald (11/01/17) “SDLP backs British-Irish Rule if Northern Ireland Devolution Fails” The Guardian https://www.theguardian.com/politics/2017/jan/11/northern-ireland-british-irish-rule-sdlpdup-sinn-fein 878

The Belfast Telegraph (25/11/16) “Irish border 'most sensitive' Brexit issue: Incoming EU president Joseph Muscat EU leaders are not bluffing over Brexit, Maltese PM warns Theresa May” http://www.belfasttelegraph.co.uk/business/brexit/irish-border-most-sensitive-brexit-issue-incoming-eupresident-joseph-muscat-35244617.htmlBBC News (25/11/16) “EU leaders 'not bluffing' over Brexit terms, warns Malta's PM” http://www.bbc.co.uk/news/uk-politics-38100561

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CONCLUSION Brexit is the biggest existential challenge to face the United Kingdom since the Second World War. The delicate and painstaking efforts that have gone into forging a united polity amongst culturally distinct entities over centuries is at risk at fraying or of even disintegrating unless careful consideration is given to what a post-Brexit Britain is to look like. The Conservative Party, under Prime Minister May pledged at their 2016 party conference to lead a country that worked for everyone, however the concerns and demands of those regions (Scotland, Northern Ireland and the metropolitan centres of London, Manchester, Newcastle and others) which voted to remain in the European Union are at risk of being drowned out by the weight of the (overwhelmingly rural English) leave vote. The result of the EU referendum vote has precipitated a seismic shift in the understanding of democracy and the distribution in the United Kingdom. A referendum with no legally binding mandate has effectively transformed a parliamentary democracy based on representative government into a direct democracy and effectively rides roughshod over the devolution efforts spearheaded under the previous governments. An association of supposedly equal partner countries under the auspices of the United Kingdom is at risk of becoming a ‘Greater England’ subordinating the concerns of the other members of the Union. As this paper has attempted to highlight, the impacts of Britain leaving the EU are many and will have far-reaching consequences. Funding and subventions for underdeveloped regions and those areas across England and Wales most in need will need to be addressed in any post-EU arrangement, and the UK government will have to step into the breach if this support is to continue or risk Deepening inequality. The effective lack of a mandate for Brexit in Scotland, which both convincingly voted to remain and where the ruling Conservative party has only one MP, runs the risk of a successful independence referendum and Scottish secession. Northern Ireland’s fragile political situation is threatened by withdrawal from the EU, the status quo established under the Good Friday Agreement may be disrupted with the difficult issues of squaring the demands for control over borders and immigration with maintaining an open border and the rights of Irish nationals in Northern Ireland. The rhetoric of Westminster which declares Britain will be open to the world while simultaneously controlling access to its shores seems a virtually impossible deal to strike, while the actions towards withdrawing the UK form the Single Market and the free-trade area risk the very economic freedom supposedly espoused by escaping from the red-tape of Brussels. However, this approach of compromise in unlikely to come to pass. Parliament’s adhesion to the “will of the people” and consent to the Government’s white paper879 couple with rulings which negate the right of devolved assemblies to vote on Brexit has left the execution of a British exit from the European Union a fait accompli. In essence our recommendations in this paper amount to a need for a careful and critical look at

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Davis, D. &Department for Exiting the European Union (02/02/17) “The United Kingdom’s exit from and new partnership with the European Union” Available at: https://www.gov.uk/government/publications/the-united-kingdoms-exit-from-and-new-partnership-withthe-european-union-white-paper [Accessed 16/03/17]

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what a Brexit Britain looks like, one which works best for the entire country. This approach demands difficult compromises and concessions by all parties and an equal voice in the upcoming negotiations. Our key recommendations are: -!

Maintain the current structural funding arrangements for underdeveloped regions across the United Kingdom and ensuring that these subventions are regularised and standardised, not subject the arbitrary whims of a distant central government.

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Take into account the concerns of London as the financial engine of the UK economy, perhaps through a special arrangement for the financial services sector.

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Tackle the centralisation and dominance of Westminster over the UK political system, potentially through greater regional and civic political devolution.

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Give Scotland more of a voice in its internal affairs and that devolution continue on if Westminster wishes to keep it within the Union.

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Find a sui generis solution be found for the unique solution of Northern Ireland and the UK Government work in a constructive manner with the EU to ensure the best possible situation for all the inhabitants of Northern Ireland.

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House of Commons Library (2017) Constituency Profiles Available at: Avhttps://public.tableau.com/profile/house.of.commons.library.statistics#!/vi zhome/VATandorPAYEregistered/Data [Accessed 19/03/17] Johnstone, R. (14/05/16) “MPs warn DCLG on difficulty of full business rate devolution.” Public Finance. Available at: http://www.publicfinance.co.uk/news/2016/06/mps-warn-dclg-difficulty-fullbusiness-rate-devolution [Accessed 15/03/17] Paine, D. (05/06/16) “Dawes encourages devolution of repatriated EU powers” Local Government Chronicle. Available at: https://www.lgcplus.com/politics-andpolicy/devolution-and-economic-growth/dawes-encourages-devolution-ofrepatriated-eu-powers/7006186.article [Accessed 19/03/17] Pidd, H. (15/03/16) “Manchester wins again in northern transport lottery – at cost to others” The Guardian Available at: https://www.theguardian.com/uk-news/2016/mar/15/manchester-wins-northerntransport-lottery-expense-of-rest-lord-adonis [Accessed 16/03/17] Sandford, M. (20/06/16) “Commons Briefing Papers CBP-7664 Brexit and Local Government” House of Commons Library, Brexit and Local Government Available at http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7664 [Accessed 16/03/17] Sandford, M. (23/11/16) “Briefings papers SN07029 Devolution to Local Government in England and Wales” House of Commons Library, Devolution to Local Government in England and Wales, Available at: http://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN07029 [Accessed 15/03/17] Transport for Greater Manchester (2017) “The Northern Hub” Available at: http://www.tfgm.com/trains/Pages/northern-hub.aspx [Accessed 13/03/17] University of Sheffield (May 2016) “SPERI British Political Economy Brief No. 24: UK Regions and Structural Investment Funds” Available at: http://speri.dept.shef.ac.uk/wp-content/uploads/2016/05/Brief24-UK-regionsand-European-structural-and-investment-funds.pdf [Accessed 17/03/17] Vaughan, A. (06/10/16) “Fracking given UK go-ahead as Lancashire council rejection overturned” The Guardian. Available at: https://www.theguardian.com/environment/2016/oct/06/uk-fracking-givengo-ahead-as-lancashire-council-rejection-is-overturned [Accessed 15/03/17] Section 2: London 341


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Supreme Court. (2017, 01 24). PRESS SUMMARY R (on the application of Miller and another) (Respondents) v Secretary of State for Exiting the. Retrieved 04 03, 2017, from The Supreme Court: https://www.supremecourt.uk/cases/docs/uksc-2016-0196-press-summary.pdf Hinsliff, G. (2015, 01 09). The resentment between London and the rest of Britain is turning into a poisonous political debate. Retrieved 12 1, 2016, from The Guardian: https://www.theguardian.com/commentisfree/2015/jan/09/resentmentlondon-britain-poisonous-debate-mansion-tax May, T. (2016, 10 05). Theresa May's conference speech in full. Retrieved 03 14, 17, from http://www.telegraph.co.uk/news/2016/10/05/theresa-mays-conferencespeech-in-full/ Miller, G. (2016, 08 11). â&#x20AC;&#x2DC;Presumed Consent? The Role of Scotland, Wales and Northern Ireland in the Brexit Processâ&#x20AC;&#x2122;. Retrieved 03 14, 2017, from https://www.instituteforgovernment.org.uk/blog/presumed-consent-rolescotland-wales-and-northern-ireland-brexit-process Paun, A., & Miller, G. (2016). Four-nation Brexit: How the UK and devolved governments should work together on leaving the EU. London: Institute for Government https://www.instituteforgovernment.org.uk/sites/default/files/publications/IfG _four%20nation_Brexit_briefing_v6.pdf. Paun, A. (2016, 06 25). Brexit consequentials: why the UK must involved the devolved governments in the process of leaving the EU. Retrieved 12 01, 2016, from The Constitution Unit: https://constitutionunit.com/2016/06/25/brexit-consequentials-why-the-uk-must-involve-thedevolved-governments-in-the-process-of-leaving-the-eu/ Keen, R. (2016, 07 14). Brexit: national identity and ethnicity in the referendum. Retrieved 04 01, 2017, from Second Reading: the House of Commons Library Blog: https://secondreading.uk/elections/brexit-national-identity-andethnicity-in-the-referendum/ Greater London Authority. (2016). London: The Global Powerhouse. London: Greater London Authority. Greater London Authority. (2014). The Europe Report: A Win-Win Situation. London: Greater London Authority. May, T. (2017, 03 29). Letter to President Tusk. Retrieved 04 01, 2017, from BBC News: http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/29_03_17_article50.pdf Sharman, J. (2017, 03 22). Sadiq Khan responds to Westminster attack: 'Londoners will never be cowed by terrorism'. Retrieved 04 01, 2017, from Independent 342


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Online: http://www.independent.co.uk/news/uk/home-news/sadiq-khanlondon-attack-response-westminster-parliament-terror-a7644761.html Heath, A. (2013, 06 7). London's importance to the UK economy keeps on growing. Retrieved 12 1, 2016, from City AM: http://www.cityam.com/article/londons-importance-uk-economy-keeps-growing Hill, D. (2016, 11 29). Sadiq Khan sets out key plans for more "genuinely affordable" London homes. Retrieved 12 1, 2016, from The Guardian: https://www.theguardian.com/uk-news/davehillblog/2016/nov/29/sadiq-khansets-out-key-plans-for-more-genuinely-affordable-london-homes Moore, S. (2016, 06 25). London as a separate city-state? The capital needs to check its privilege. Retrieved 12 01, 2016, from The Guardian: https://www.theguardian.com/commentisfree/2016/jun/25/london-separatecity-state-leave-voters-class Clegg, N. (2017, 01 17). Interview: The Guardian https://www.facebook.com/theguardian/videos/623168557870911/?pnref=sto ry. (O. Jones, Interviewer) http://www.bbc.co.uk/iplayer/episode/b087kcs6/new-years-eve-fireworks-20162017 (Director). (2017). BBC New Year's Eve Fireworks [Motion Picture]. Sandford, M. (2017). The Greater London Authority: Briefing Paper. London : House of Commons Library http://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN05817. Arts Council England. (n.d.). How and where we invest public money. Retrieved 04 02, 2017, from Arts Council England: http://www.artscouncil.org.uk/aboutus/how-and-where-we-invest-public-money Baxter, H. (2016, 06 24). It's time for London to leave the UK and stay in the EU. Retrieved 12 01, 2016, from The Independent: http://www.independent.co.uk/voices/brexit-latest-london-independencetime-to-leave-uk-eu-referendum-sadiq-khan-boris-johnson-a7100601.html Bayliss, C. (2016, 09 28). â&#x20AC;&#x2DC;London is openâ&#x20AC;&#x2122; Mayor Sadiq Khan vows to DEFY Brexit and offer City visas to migrants. Retrieved 01 15, 2017, from http://www.express.co.uk/news/uk/715172/Sadiq-Khan-defy-Brexit-Londonopen-visas-migrants-mayor-theresa-may-boris-johnson-trade BBC News. (2016, 06 24). Petition for London independence signed up thousands after Brexit vote. Retrieved 12 1, 2016, from BBC News: http://www.bbc.co.uk/news/uk-politics-eu-referendum-36620401

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Champion, M. (2016, 10 21). What Will Become of London After Brexit? Retrieved 12 1, 2013, from Bloomberg: https://www.bloomberg.com/news/articles/2016-10-21/london-after-brexitwhat-will-happen-to-the-british-capital Clark, G. (2016, 06 24). The sun still rises: London after Brexit. Retrieved 12 1, 2016, from Brookings: https://www.brookings.edu/blog/the-avenue/2016/06/24/thesun-still-rises-london-after-brexit/ Core Cities. (n.d.). London and England's largest cities join to call for greater devolution to drive economic growth. Retrieved 12 1, 2016, from Core Cities: https://www.corecities.com/news-events/london-and-englands-largest-citiesjoin-call-greater-devolution-drive-economic-growth Inman, P. (2017, 01 27). Devolve power to London as a blueprint for other major UK cities - report. Retrieved 01 27, 2017, from The Guardian: https://www.theguardian.com/cities/2017/jan/27/devolve-power-londonblueprint-major-uk-cities-sadiq-khan Jamieson, S. (2016, 09 08). MPs set to move out of Parliament for six years while renovations take place. Retrieved 02 01, 2017, from http://www.telegraph.co.uk/news/2016/09/08/mps-set-to-move-out-ofparliament-for-six-years-while-renovation/ Leftly, M. (2015, 07 04). Thames could be closed as Westminster undergoes vital repairs. Retrieved 01 30, 2017, from The Independent: http://www.independent.co.uk/news/uk/politics/parliament-refurbishmentpart-of-thames-could-be-closed-as-westminster-undergoes-vital-repairs10366347.html Mason, R., & Stewart, H. (2016, 09 08). Cost of moving MPs out of parliament for repairs could exceed ÂŁ4bn. Retrieved 01 30, 2017, from The Guardian: https://www.theguardian.com/politics/2016/sep/08/mps-must-leave-housesof-parliament-4bn-repairs Moore, R. (2016, 04 10). Moving parliament out of London is temptingâ&#x20AC;Ś but unworkable. Retrieved 01 30, 2017, from The Guardian: https://www.theguardian.com/global/commentisfree/2016/apr/10/parliamentlondon-bristol Parker, G., & Sullivan, C. (2016, 10 04). Sadiq Khan on London after Brexit: 'Open is what we are'. Retrieved 12 01, 2016, from The Financial Times: https://www.ft.com/content/d32b1a42-7a5b-11e6-ae24-f193b105145e Tapsfield, J. (2016, 10 12). There will NOT be an exodus of City of London jobs to the EU after Brexit, says Bank of England deputy governor. Retrieved 12 01, 2016, from Mail Online: http://www.dailymail.co.uk/news/article344


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3834420/There-NOT-exodus-City-London-jobs-EU-Brexit-says-BankEngland-deputy-governor.html Tolhurst, A. (2016, 10 03). FLOATING VOTERS Bonkers plan to move Westminster onto the River Thames while Parliament is being refurbished. Retrieved 01 30, 2017, from The Sun: https://www.thesun.co.uk/news/1902808/bonkersplan-to-move-westminster-onto-the-river-thames-while-parliament-is-beingrefurbished/ West, M. (2016, 06 21). EU Referendum: Would Brexit prompt London to go it alone? Retrieved 12 1, 2016, from BBC : http://www.bbc.co.uk/news/ukpolitics-eu-referendum-36526298 Smith, R. G. (2016, 03 25). London after Brexit: independence a non-starter but special status could protect global position. Retrieved 12 01, 2016, from The Conversation: http://theconversation.com/london-after-brexit-independencea-non-starter-but-special-status-could-protect-global-position-61609 Section 3: Scotland Bodkin, H. (24/06/16) “Greenland showed how to leave Europe as far back as 1984” The Telegraph Available at: http://www.telegraph.co.uk/news/2016/06/24/greenland-showed-how-toleave-europe-as-far-back-as-1984/ [Accessed 16/03/17] De la Baume, M. (22/06/16) “Greenland’s exit warning to Britain” POLITICO Available at: http://www.politico.eu/article/greenland-exit-warning-tobritain-brexit-eu-referendum-europe-vote-news-denmark/ [Accessed 18/03/17] European Commission (04/04/17) “International Cooperation and Building Partnerships for Change in Developing Countries” Available at: http://ec.europa.eu/europeaid/countries/greenland_en [Accessed 04/04/17]

Hazell R. and Renwick A., (n.d.) Brexit: it’s consequences for Devolution and the Union (from the Constitution Unit) https://www.ucl.ac.uk/constitutionunit/research/europe/briefing-papers/briefing-paper-3 Retrieved 04 08, 2017 Leth-Olsen, T. (23/02/16) “Exiting the EU? Algeria, Greenland and Saint Barthelemy experiences” Nationalia Available at: http://www.nationalia.info/new/10722/exiting-the-eu-algeria-greenland-andsaint-barthelemy-experiences [Accessed 16/03/17] Livey D., (20/04/2016) The SNP 2016 manifesto explained Retrieved 04 08, 2017: https://www.snp.org/the_snp_2016_manifesto_explained

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Mates, J. (10/05/16) “What Lessons can the UK learn from Greenland leaving the EU?” ITV Available at: http://www.itv.com/news/2016-05-10/what-lessonscan-the-uk-learn-from-greenland-leaving-the-eu/ [Accessed 17/03/17] Pram Gad, U. (07/07/16) “Could a ‘reverse Greenland’ arrangement keep Scotland and Northern Ireland in the EU?” LSE European Institute Available at: http://blogs.lse.ac.uk/europpblog/2016/07/07/reverse-greenland-arrangement/ [Accessed 09/03/17] Statsministeriet, Government of Denmark (21/06/2009) “The Greenland SelfGovernment Arrangement” Available at: http://www.stm.dk/_p_13090.html [Accessed 19/03/17] Scottish Government, (20/12/16) Scotland’s Place in Europe http://www.gov.scot/Resource/0051/00512073.pdf (accessed 08/04/2017) Section 4: Northern Ireland BBC News (24/06/16) “EU Referendum: Northern Ireland Votes to Remain” Available at: http://www.bbc.co.uk/news/uk-northern-ireland-36614443 [Accessed 24/03/17] BBC News (25/11/16) “EU leaders 'not bluffing' over Brexit terms, warns Malta's PM” Available at: http://www.bbc.co.uk/news/uk-politics-38100561 [Accessed 14/03/17] BBC News (15/01/17) “Brexit: UK 'could change economic model' if single market access denied” Available at: http://www.bbc.co.uk/news/uk-politics38628428 [Accessed 20/03/17] BBC News (24/01/17) “Brexit: Supreme Court says Parliament must give Article 50 go-ahead” Available at: http://www.bbc.co.uk/news/uk-politics-38720320 [Accessed 16/03/17] The Belfast Agreement (10/04/1998) “Agreement reached in the multi-party negotiations” https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil e/136652/agreement.pdf. [Accessed 23/03/17] Belfast Telegraph (25/11/16) “Irish border 'most sensitive' Brexit issue: Incoming EU president Joseph Muscat EU leaders are not bluffing over Brexit, Maltese PM warns Theresa May” The Belfast Telegraph. [Accessed 16/03/17] Brokenshire, J. “Supplementary Written Evidence to European Union Committee (BUI0014) – Figures from HMRC Regional Trade Statistics Q2” Available at: http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedo cument/european-union-committee/brexit-ukirishrelations/written/42551.html [Accessed 19/03/17] 346


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Cambridge Economic Policy Associates (CEPA) (2016) “Some Initial Observations on Brexit and the UK Energy Market” Available at: http://www.cepa.co.uk/news-details-initial-observations-on-brexit-and-theuk-energy-market?selYear=2016 [Accessed 19/03/17] Council of the European Union (31/03/17) “European Council (Art. 50) (29 April 2017) - Draft guidelines following the United Kingdom's notification under Article 50 TEU” Available at: http://g8fip1kplyr33r3krz5b97d1.wpengine.netdna-cdn.com/wpcontent/uploads/2017/03/FullText.pdf [Accessed 31/03/17] EAI “The Electricity Association of Ireland (EAI) All-Island Market Renewable Energy Supports and Energy System Decarbonisation Policy statement: ETS” (undated) Available at: http://www.eaireland.com/policy/all-island-market/ [Accessed 18/03/17] EUR-Lex (09/05/08) “Consolidated version of the Treaty on the Functioning of the European Union - PART FIVE: EXTERNAL ACTION BY THE UNION TITLE II: COMMON COMMERCIAL POLICY - Article 207 (ex Article 133 TEC)” Official Journal 115 , P. 0140 – 0141 –Available at: http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E207:en:HTML [Accessed 15/03/17] HL Deb vol 592, col 791 (1998) “Lord Sewell speaking at committee stage of Scotland Bill” Elliot, M. & Thomas, R. (2014) “Public Law” Oxford University Press, Oxford. HM Revenue & Customs (HMRC) (6 September 2016) ‘Regional Trade Statistics Second Quarter 2016’ Available at: https://www.gov.uk/ government/uploads/system/uploads/attachment_data/file/547956/RTS_Q2_2 016.pdf [Accessed 19/03/17] House of Lords European Union Committee 6th Report of Session 2016–17 (12/12/16) “HL Paper 76 Brexit: UK-Irish relations” Available at: [Accessed 15/03/17]http://www.publications.parliament.uk/pa/ld201617/ldselect/ldeuco m/76/76.pdf p.17 House of Lords Select Committee on the Constitution 6th Report of Session 20162017 (02/11/16) “English votes for English laws” Available at: http://www.publications.parliament.uk/pa/ld201617/ldselect/ldconst/61/61.pd f [Accessed 16/03/17] Kenny, E. (07/11/16) “Irish Times Brexit Summit Keynote” address: http://www.taoiseach.gov.ie/eng/News/Taoiseach’s_Speeches/Keyn ote_address_by_the_Taoiseach_Irish_Times_Brexit_Summit_7_November_2 016_Westin_Hotel_Dublin.html [Accessed 18/03/17]

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Lawless, M. & Morgenroth, E. (24/11/16) “The Product and Sector Level of a Hard Brexit Across the EU” ESRI Working Paper Available at: https://www.esri.ie/pubs/WP550.pdf [Accessed 19/03/17] McDonald, H. (11/01/17) “SDLP backs British-Irish Rule if Northern Ireland Devolution Fails” The Guardian Available at: https://www.theguardian.com/politics/2017/jan/11/northern-ireland-britishirish-rule-sdlp-dup-sinn-fein [Accessed 15/03/17] Memorandum of Understanding and Supplementary Agreements between the United Kingdom Government, the Scottish Ministers, the Welsh Ministers, and the Northern Ireland Executive Committee (Oct 2013) Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil e/316157/MoU_between_the_UK_and_the_Devolved_Administrations.pdf [Accessed 18/03/17

Mulgrew, J. (10/01/17) “Northern Ireland businesses bounce back from Brexit with positive end to 2016, survey shows” Belfast Telegraph Available at: http://www.belfasttelegraph.co.uk/business/news/northern-irelandbusinesses-bounce-back-from-brexit-with-positive-end-to-2016-surveyshows-35356076.html [Accessed 18/03/17] Northern Ireland (Welfare Reform) Bill – Legislative Consent Motion (20/11/15) Available at: http://www.parliament.uk/documents/commons-public-billoffice/2015-16/legislative-consent-resolutions/NI-(Welfare%20Reform)Bill.pdf [Accessed 14/03/17] Prime Minister’s Office (29/03/17) “Prime Minister’s Letter to Donald Tusk triggering Article 50” Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil e/604079/Prime_Ministers_letter_to_European_Council_President_Donald_ Tusk.pdf [Accessed 29/03/17] Rawlings, R. (2000) “Concordats of the Constitution.” Law Quarterly Review, 116 (Apr). pp. 257-286 Conclusion Davis, D. & Department for Exiting the European Union (02/02/17) “The United Kingdom’s exit from and new partnership with the European Union” Available at: https://www.gov.uk/government/publications/the-unitedkingdoms-exit-from-and-new-partnership-with-the-european-union-whitepaper [Accessed 16/03/17]

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CHAPTER X

Human Rights Writers: Yen Jean Wee (Editor) Glen Tay Frank Wilson Theophilus Kwek Thomas Bennett

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EXECUTIVE SUMMARY This paper concludes the following: (a) Impact of Brexit on the Legal Protection of Human Rights -! As the House of Commons Joint Committee on Human Rights has noted, “[a] complete withdrawal from the EU would mean that the UK would no longer have to comply with the human rights obligations contained within the EU Treaties, the General Principles of EU law (which include respect for fundamental rights), or EU directives and regulations protecting fundamental rights. The Charter of Fundamental Rights … would not apply and the Court of Justice of the European Union … would most probably cease to have jurisdiction over the UK.” -! Although there is significant overlap between the rights protected in the Charter of Fundamental Rights and the UK’s Human Rights Act 1998, the protection provided by the Charter is more extensive than that under the HRA: it provides a wider range of fundamental rights, and also supplies a more direct form of protection due to the direct effect and primacy of EU law. -! One particular area in which rights dependent on the Charter for their protection will become vulnerable as a result of Brexit is that of data rights and privacy, in light of recent case law of the Court of Justice of the European Union (CJEU). -! Domestic courts in the UK will no longer be bound by the precedent laid down in the judgments of the CEU, which may have an impact in relation to CJEU decisions in cases dealing with fundamental rights. However, CJEU jurisprudence will almost certainly continue to influence domestic courts, and some of these fundamental rights have also been judicially incorporated into the common law and so continue to receive protection (albeit less robust) as common law rights. -! Given the considerable uncertainty that surrounds the legal position after Brexit, it is recommended that the Government should provide clarification as soon as possible on the status of, and level of protection that will be received by, fundamental rights after Brexit – for example, through statutory guidance on the status of existing case law and future CJEU decisions for domestic legal concepts which are derived from or reflect EU law. Any misconceptions about the existing legal framework (for example, the difference in scope of the Charter and the ECHR) should also be corrected. (b) Impact of Brexit on Workers -! The implementation of EU-derived employment law is currently achieved through a combination of primary legislation only alterable by future primary legislation, and secondary legislation enacted under a power to implement EU obligations, most commonly through section 2 of the European Communities Act (ECA) 1972. This paper examines employment rights which are contingent on the ECA 1972 as a conduit for their respective EU Directives to be transposed into domestic UK law. -! Although a Great Repeal Bill has been proposed that will convert all current EU employment law into domestic law, effectively preserving the status of existing employment standards, several EU Directives and their domestic transpositions have long been opposed by elements in the business and political spheres which champion greater deregulation of the UK labour market. We have identified two in 350


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particular which are likely to be significantly amended or repealed post-Brexit. The Working Time Directive was consistently opposed on procedural and substantive grounds during the implementation process. We recommend that the general provisions of the Working Time Regulations be retained in their entirety to avoid sending a perverse signal to employers that exploitative employment conditions would be condoned, that minor tweaks should be introduced to the 48hour opt-out to prevent continued abuse, and that a Fair Employment Ombudsman should be set up to mediate and independently resolve employment complaints. The Temporary Agency Work Directive was enacted in a minimally compliant manner and is, fundamentally, why agency workers have any degree of legal protection in the UK. We recommend that there should be efforts to increase awareness of the specific protections available to agency workers. This would directly alleviate a lack of awareness (as observed by work agencies) of their employment rights. We also recommend that the Fair Employment Ombudsman should provide greater facilities and be empowered to more proactively protect vulnerable workers in general.

(c) Impact of Brexit on Citizens -! The rights of European Citizenship enjoyed by the 65 million UK citizens include rights defined in the Charter (e.g. Respect for private and family life, Freedom of thought, conscience and religion, Freedom of assembly and association) as well as rights defined in the Citizens’ Rights Directive (principally (1) the right to move and reside freely, with family members, within all Member States; (2) the right to study, seek employment, work, or provide services in any Member State; and (3) rights to political representation, ability to petition EU institutions and receive a reply, and right to consular assistance). -! These rights were granted in 1993 as a result of the Treaty of Maastricht. There was no suggestion at the time that these rights might be taken away again, and indeed there was no explicit mechanism for a nation to leave the EU until 2009. Loss of these rights would be a “mass deprivation of rights of abode and equal treatment on a scale not seen since the age of decolonisation” and a tearing-up of a moral and social contract between the government and its citizens. -! Leaving the EU will inevitably involve the loss of these rights on a formal basis. The best outcome from the point of view of preserving these rights would be to leave the EU but remain in the European Econommic Area (EEA), however this seems politically unfeasible in the current climate. However, the EEA agreement is independent of EU membership, and to leave the EEA the UK must follow the procedure defined in Article 127 of the EEA agreement. -! The proposal by Members of the European Parliament Charles Goerens and Guy Verhofstadt to allow individual UK citizens to obtain ‘associate citizenship’ of the EU provides a potential mechanism for UK citizens concerned about loss of their rights to retain those rights on an individual basis. This proposal should be enthusiastically supported by the UK during negotiations. (d) Impact of Brexit on Refugees -! The UK’s departure from the Dublin III Regulation will not only raise financial and human costs for asylum-seekers by incentivizing repeated applications and 351


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irregular migration, but also increase the pressure on the UK’s domestic asylum system, while removing it from the institutional oversight of the EU - thus creating the conditions for human rights infringements. Existing means of seeking judicial review, and foreseen improvements in the conduct of asylum processes, cannot be expected to offset the loss of formal oversight. Beyond Dublin III, leaving the EU would also have legal, diplomatic and social effects on the rights of refugees and asylum-seekers in the UK. Not only would the UK’s legislative protections of refugee rights be detached from minimum standards enshrined across the EU; both the UK and the EU would also have a weaker bargaining position vis-a-vis partner states in the global South, while the UK’s impending departure from the EU has already been taken to legitimize street-level violence against immigrants and refugees. In the short term, the Government should fully transpose the EU’s current protections of refugee rights into UK law, and appoint an independent commission to oversee the UK’s domestic asylum system and investigate any rights infringements. In the long term, the Government should negotiate an opt-in to the Dublin framework, the EURODAC system, or both; and pursue a regional burdensharing solution that goes beyond Dublin III’s limited aims.

(e) Current Societal and Political Climate -! An analysis of human rights as reported in the British press indicates a tendency to distort the relationship between British and European courts in addition to common statistical and factual errors. These sources of misinformation can be identified most often, though not exclusively, within tabloid newspapers and often prove critical of the European institutions and mechanisms designed to protect human rights, presenting them as fundamentally anti-British. -! These ideas have been affirmed by a political discourse prone to similar levels of factual error. In particular, a distortion of the role and consequences of the Human Rights Act serves to legitimise the misinformation provided by the British media and can be seen to have contributed to the particularly divisive nature of debates on the relationship between Brexit and human rights. -! Though the attention of the Press Complaints Commission has been drawn to some cases of misreporting on human rights, there has existed no efficient mechanism of combatting the often falsified way in which debate over human rights and Britain’s relationship with Europe has been conducted in the press or political sphere.

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ACKNOWLEDGEMENTS This paper would not have been possible without the help and guidance of: -! Dr Stuart Wallace, our advisor; -! Mr Michael Campbell and Mr George Bangham, Trustees of The Wilberforce Society; -! Niall Oâ&#x20AC;&#x2122;Connor, from the Centre for European Legal Studies; -! The Cambridge University European Society; and -! The Wilberforce Society.

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TABLE OF CONTENTS 1 Introduction

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2 Impact on the Legal Protection of Human Rights

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3 Impact on Workers

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4 Impact on Citizens

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5 Implications for Refugees

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6 Current Social and Political Climate

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7 Conclusion

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8 Bibliography & Works Cited

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1

INTRODUCTION

The development of human rights protection in the UK has been a gradual and even piecemeal process, and human rights are arguably more vulnerable in the UK than in many other countries where they are enshrined in a constitutional document. The notion of ‘human rights’ is itself a contested concept, and the view taken of the scope and types of rights which should be regarded as ‘fundamental’ in this sense will inevitably be informed by one’s socio-political views. This is attributable in part to the United Kingdom’s traditional recognition of residual ‘civil liberties’ rather than positive and declaratory ‘rights’, encapsulated in Lord Justice Browne-Wilkinson’s well-known dictum in the 1985 case of Wheeler v. Leicester City Council: “Basic constitutional rights in this country such as freedom of the person and freedom of speech are based not on any express provision conferring such a right but on freedom of an individual to do what he will save to the extent that he is prevented from doing so by the law … These fundamental freedoms therefore are not positive rights but an immunity from interference by others”880. As Lord Justice of Appeal Philip Sales noted in 2016, “[r]ights discourse exists in uneasy tension with English law” – but, from the latter part of the last century, “rights discourse has made a bid to become more central in the way we reason about law”881, in no small part due to the entry into force of the Human Rights Act (HRA) 1998 in 2000, which incorporated the European Convention on Human Rights (ECHR) into the law of England and Wales, and which is also an integral element in the devolution settlements with Scotland and Northern Ireland. In light of this, the impact of the UK’s impending withdrawal from the European Union is likely to have significant implications for human rights, both direct (for example, in terms of the removal of institutional mechanisms for the protection of particular rights) and indirect (in the sense that ‘Brexit’ may be symptomatic of wider societal perceptions regarding fundamental rights that may shape the form and extent of their protection in the years to come). This policy paper will first briefly outline the effects of Brexit on the legal framework for the protection of human rights, and subsequently examine the impact on three groups of individuals – workers, citizens, and refugees – who may be particularly affected by Brexit. It will then analyse the current societal and political climate, with policy recommendations being made in each section of the paper.

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Wheeler v Leicester City Council [1985] AC 1054, per Browne-Wilkinson LJ at 1065. Philip Sales, “Rights and Fundamental Rights in English Law,” Cambridge Law Journal 75, no. 1 (2016): 86-7. 881

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2

IMPACT ON THE LEGAL PROTECTION OF HUMAN RIGHTS

EU law has been recognised as an important pillar of human rights protection in the UK882, and indeed Article 2 of the Treaty on European Union (TEU) states that the EU is “founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights”. In October 2016, the Secretary of State for Exiting the European Union said in a statement to the House of Commons that the Government would introduce a Great Repeal Bill, the effect of which will be that the European Communities Act (ECA) 1972 – which incorporates European Union law into the UK’s domestic law – will cease to apply when the UK leaves the EU883. The recently published House of Commons Joint Committee on Human Rights report has summed up the legal position as follows: “A complete withdrawal from the EU would mean that the UK would no longer have to comply with the human rights obligations contained within the EU Treaties, the General Principles of EU law (which include respect for fundamental rights), or EU directives and regulations protecting fundamental rights. The Charter of Fundamental Rights [...] would not apply and the Court of Justice of the European Union [...] would most probably cease to have jurisdiction over the UK.”884 Using the above as a framework, this section will outline the direct impact of Brexit on the legal mechanisms for protecting human rights in the UK.

2.1 European Union Treaties, Directives, and Regulations The immediate effect of Brexit will be to render less secure the status of human rights which rely for their protection upon EU law, and to make them more vulnerable to subsequent repeal or dilution. All EU regulations are directly applicable in UK law885, and the Court of Justice of the European Union (CJEU) clarified in the Politi case that regulations are capable of complete direct effect886. Treaty provisions that are unconditional and sufficiently

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House of Commons Joint Committee on Human Rights, Written Evidence from the Equality and Human Rights Commission (HBRE0058) (October 2016), http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/human-rightscommittee/what-are-the-human-rights-implications-of-brexit/written/41692.pdf: 3. 883 Department for Exiting the European Union, Exiting the EU Next Steps: Ministerial Statement 10 October 2016 (10 October 2016), https://www.gov.uk/government/speeches/exiting-the-eu-next-stepsministerial-statement-10-october-2016. 884 House of Commons Joint Committee on Human Rights, The Human Rights Implications of Brexit (19 December 2016), http://www.publications.parliament.uk/pa/jt201617/jtselect/jtrights/695/69504.htm#footnote-089backlink: [1]. 885 Article 288 of the Treaty on the Functioning of the European Union (TFEU); Commission v Italy (1972) Case C-39/72, [1973] ECR 101. 886 Politi S.A.S. v Minister for Finance of the Italian Republic (1971) Case C-43/71; EUR-Lex, “The Direct Effect of European Law,” http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=URISERV:l14547, (2015).

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! precise are also directly effective887. Directives which are unconditional and sufficiently precise888, and for which the specified implementation period has passed889, are capable of vertical direct effect against an “emanation of the state”890. The significance of this is that directly effective provisions made at the EU level are ‘automatically’ part of the law enforceable in ordinary legal proceedings brought by individuals in domestic courts, without the need for them to have been incorporated into domestic law. Moreover, the doctrine of primacy of EU law means that EU law takes priority over domestic law in the event of a conflict between the two891, and requires domestic courts to set aside any provision of domestic law which conflicts with EU law892. The doctrines of direct effect and primacy together have provided an important mechanism for protecting human rights derived from the EU level in the UK. If the UK is no longer bound by EU law as a consequence of Brexit, the primacy doctrine will no longer apply to prevent domestic laws implementing EU rights-enhancing directives from being repealed893. Although the Equality and Human Rights Commission (EHRC) has noted that the Government has indicated that it does not intend to repeal any of this body of law, this does not preclude the possibility of these rights being removed or diluted by a future government894. In addition, directly effective EU law which has not been incorporated into domestic law is currently “a significant source of directly enforceable human rights law which the courts can apply when considering a matter within the scope of EU law”, and this is particularly significant in relation to some aspects of workers’ rights (an area which will be considered in Part 3 of this paper) and accessibility regulations protecting disabled individuals895.

2.2 The Charter of Fundamental Rights The Charter of Fundamental Rights (‘the Charter’), in force following the signing of the Treaty of Lisbon in 2007, reaffirms the “rights, freedoms and principles”896 upon which the EU is founded, such as the right to life (Article 2), the prohibition of torture and inhuman or degrading treatment or punishment (Article 4), the protection of personal data (Article 8), and non-discrimination (Article 21). The Charter applies to the public bodies of Member States only when they are making decisions within the scope of EU law (as well as to the institutions of the EU itself)897, and this is one way

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Van Gend en Loos v Nederlandse Administratie der Belastingen (1963) Case C-26/62; Cooperativa Agricola Zootecnica S Antonia v Amministrazione delle Finanze dello Stato (Cases C-246-249/94) [1996] ECR 1-4373. 888 Van Duyn v Home Office (1974) Case C-41/74. 889 Pubblico Ministero v Ratti (1979) Case C-148/78. 890 Marshall v Southampton and South West Hampshire Area Health Authority (1986) Case C-152/84. 891 Flaminio Costa v ENEL (1964) Case C-6/64. 892 Amministrazione delle Finanze v Simmenthal SpA (1978) Case C-106/77. 893 House of Commons Joint Committee on Human Rights, The Human Rights Implications of Brexit: [58]. 894 House of Commons Joint Committee on Human Rights, Written Evidence from the Equality and Human Rights Commission: 6. 895 Ibid: 6-7. 896 Charter of Fundamental Rights of the European Union (2000/C 364/01), Preamble. 897 Åklagaren v Hans Åkerberg Fransson (2013) Case C-617/10.

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in which it is narrower in scope than the European Convention on Human Rights (ECHR)898. There is significant overlap between the rights protected in the Charter and the Human Rights Act (HRA) 1998 (which gives the ECHR effect in the UK’s domestic law), and only the former is directly linked to the UK’s membership of the EU899. However, as the Equality and Human Rights Commission has highlighted900, the protection provided by the Charter is more extensive than that under the HRA in a number of ways. First, domestic legislation that conflicts with a fundamental right protected by the Charter can be disapplied by domestic court, as a result of the combined operation of Article 6(1) of the TEU (which states that the Charter has the same legal effect as the EU Treaties) and sections 2(1) and 2(4) of the ECA 1972. This is illustrated by Benkharbouche v. Embassy of the Republic of Sudan901, where the Court of Appeal disapplied conflicting provisions of the State Immunity Act 1978 in order to uphold the claimants’ rights to a fair trial under Article 47 of the Charter. By contrast, the HRA only empowers domestic courts to either interpret domestic law (in the form of Acts of Parliament) so as to comply with the ECHR as far as possible (under section 3 of the HRA), or issue a declaration of incompatibility (under section 4 of the HRA). Secondly, the Charter protects some rights that are not (expressly) protected by the HRA. Apart from the aforementioned right to protection of personal data (Article 8), other noteworthy rights are the right to engage in work and pursue a freely chosen or accepted occupation (Article 15); the right to fair and just working conditions which respect the worker’s health, safety, and dignity (Article 31); and the right of access to preventive health care (Article 35). This is due to the fact that the Charter codifies fundamental rights drawn from the ECHR, the Community Social Charter 1989, the Council of Europe’s Social Charter 1961, the case law of the European Court of Human Rights (ECtHR) and the CJEU, and the constitutional traditions common to the EU Member States as general principles of EU law902. Thirdly, rights contained in both the Charter and the HRA are sometimes defined in the Charter to provide broader protection than in the equivalent provision in the HRA. For example, Article 21 of the Charter prohibits “[a]ny discrimination based on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation”. In contrast, Article 14 of the ECHR can only be relied on in relation to the other rights and freedoms contained in the ECHR, and Protocol 12 to the ECHR (Article 1 of which contains a general prohibition of

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House of Commons Joint Committee on Human Rights, The Human Rights Implications of Brexit: [16]. 899 Prime Minister Theresa May has indicated that the Government does not intend to withdraw from the ECHR in this Parliament due to the lack of a House of Commons majority: most recently confirmed by the House of Commons Joint Committee on Human Rights, The Human Rights Implications of Brexit: [2]. 900 House of Commons Joint Committee on Human Rights, Written Evidence from the Equality and Human Rights Commission: 7-8. 901 Benkharbouche v Embassy of the Republic of Sudan [2015] EWCA Civ 33; [2015] 3 WLR 301. 902 Andrew Sanger, “State Immunity and the Right of Access to a Court under the EU Charter of Fundamental Rights” International and Comparative Law Quarterly (2016): 214-5.

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discrimination) has not been ratified by the UK. The Charter therefore protects a wider range of fundamental rights, including some social and economic rights not protected in domestic law by the HRA, and also supplies a more direct form of protection, due to the direct effect and primacy of EU law. Article 1(2) of the Protocol on the Application of the Charter of Fundamental Rights of the European Union to Poland and to the United Kingdom903 provides that “nothing in Title IV of the Charter [which includes Articles 31 and 35 mentioned above] creates justiciable rights applicable to … the United Kingdom except in so far as … the United Kingdom has provided for such rights in its national law”, and Article 2 of which states that “[t]o the extent that a provision of the Charter refers to national law and practices, it shall only apply to … the United Kingdom to the extent that the rights or principles that it contains are recognised in the law or practices of … the United Kingdom”904. Notwithstanding this, however, the CJEU held in R (NS) v. Secretary of State for the Home Department that Article 1(1) of the Protocol “does not call into question the applicability of the Charter in the United Kingdom”905, and merely reiterates Article 51 of the Charter (which states that the Charter only applies to EU institutions and bodies, and to Member States only when they are implementing EU law). Although, as the London School of Economics (LSE)’s Commission on the Future of Britain in Europe has observed, the Charter is likely to have “residual effects” in domestic law906, one particular area in which rights dependent on the Charter for their protection will become vulnerable as a result of Brexit is that of data rights and privacy. In this regard, the Equality and Human Rights Commission observed that recent case law of the CJEU has “led to increased protection of human rights in the context of data protection and state surveillance”, the latter of which is “a particularly intrusive interference in the right to privacy”. Within the last few years, the concept of a ‘right to erasure’ (or a ‘right to be forgotten’) was raised in the version of the General Data Protection Regulation (GDPR) adopted by the European Parliament in March 2014907, the CJEU in Mario Costeja González acknowledged that such a right existed and held that Internet search engine operators like Google may be considered to have acted incompatibly with EU Directive 95/46 in their processing of users’ personal data by providing data that is “inadequate, irrelevant or no longer relevant, or excessive in relation to [the] purposes [of the processing at issue carried out by the operator of the search engine] and in the light of the time that

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Protocol on the Application of the Charter of Fundamental Rights of the European Union to Poland and to the United Kingdom (2007/C 306/157). 904 Emphasis added. 905 R (NS) v Secretary of State for the Home Department (2011) Case C-411/10: [119]. 906 London School of Economics and Political Science (LSE) Commission on the Future of Britain in Europe, The Implications of Brexit for Fundamental Rights Protection in the UK: Report of the Hearing held on 25 February 2016 (2016): 7. 907 Position of the European Parliament adopted at first reading on 12 March 2014 with a view to the adoption of Regulation (EU) No .../2014 of the European Parliament and of the Council on the Protection of Individuals with regard to the Processing of Personal Data and on the Free Movement of Such Data (General Data Protection Regulation), http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P7-TA-2014-0212&language=EN: (53)-(54).

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has elapsed”, “unless they are required to be kept for historical, statistical or scientific purposes”908. In the event that it is found, following a request by the ‘data subject’ – the individual to whom the disputed information and links personally relate – pursuant to Directive 95/46, that “the inclusion in the list of results displayed following a search made on the basis of his name of the links to web pages published lawfully by third parties and containing true information relating to him personally” is incompatible with the Directive for the reasons stated above, “the information and links concerned in the list of results must be erased”909. Although some Member States – including the UK – have construed this right narrowly in implementing the Directive910, the ‘right to erasure’ still represents a significant form of data protection for individuals. In addition, the 2015 case of Google Inc. v. Judith Vidal-Hall, Robert Hann, Marc Bradshaw911, the Court of Appeal relied on the Charter to disapply a provision of the UK’s Data Protection Act 1998 which was held to be incompatible with EU law912. Notwithstanding this, the Government has confirmed that Brexit will not affect the commencement of the EU’s General Data Protection Regulation (GDPR) in 2018913, which seeks to ensure the “[c]onsistent and homogeneous application of the rules for the protection of the fundamental rights and freedoms of natural persons with regard to the processing of personal data” throughout the EU914. The effect of Brexit on the field of data rights and privacy thus remains to be seen, but the removal of the Charter as a legal basis for the protection of such rights could potentially have significant ramifications here and in other fields. Having said the above, an important qualification to the efficacy of the EU legal framework in safeguarding fundamental rights must be noted in relation to areas that are subject to complete harmonisation under EU law. The April 2016 FRAME Work Package comments on the “very worrying prospect that the EU’s pursuit of a level playing field across Europe in different fields risks creating a race to the bottom, with the lowest common standard becoming the European norm”915. This is illustrated by the CJEU’s ruling in Melloni, where it held that the national court was not permitted to apply the more robust human rights protection available under domestic law to an issue involving the European Arrest Warrant Framework (an area completely harmonised under EU law), on the ground that this would cast doubt on the “uniformity of the standard of protection of fundamental rights”, “undermine the principles of mutual

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Google Spain SL, Google Inc. v Agencia Española de Protección de Datos, Mario Costeja González (2014) Case C-131/12: [92]-[94]. 909 Ibid: [94]. 910 Olswang, EU Data Protection Reform: Where Are We – and What Can You Do to Prepare?, http://www.olswang.com/media/48316310/olswang_s_top_12__eu_data_protection_reform.pdf, (December 2014): 15. 911 Google Inc. v Judith Vidal-Hall, Robert Hann, Marc Bradshaw [2015] EWCA Civ 311. 912 House of Commons Joint Committee on Human Rights, Written Evidence from the Equality and Human Rights Commission: 11-12. 913 Information Commissioner’s Office, “Overview of the General Data Protection Regulation (GDPR). 914 Council of the European Union, General Data Protection Regulation (2016): [10]. 915 Anna-Luise Chané, Agata Hauser, Jakub Jaraczewski, Władysław Jóźwicki, Zdzisław Kędzia, Michaela A. Šimáková, Hanna Suchocka, Stuart Wallace (FRAME), EU Engagement with Other European Regional Organisations, Work Package No. 5 – Deliverable No. 2 (30 April 2016), http://www.fp7-frame.eu/wp-content/uploads/2016/10/Deliverable-5-2.pdf: 93.

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! trust”, and “compromise the efficacy of that framework decision”916. Further, the CJEU said in Opinion 2/13 that accession to the ECHR would undermine the ‘principle of mutual trust’, as the ECtHR would require a Member State to check that another Member State has observed fundamental rights, and this would conflict with the obligation of mutual trust between Member States and “undermine the authority of EU law”917. FRAME thus argues that the CJEU has thereby undermined the protection of human rights within Europe through its interpretation of the principle of mutual trust, by “focus[ing] disproportionately on the establishment of a common area of freedom, security and justice” – the first part of Article 67 TFEU – “without placing enough emphasis on ensuring respect for fundamental rights and the different legal systems of Member States”918. While this does not negate the benefits in terms of human rights protection that have been conferred by the CJEU and its jurisprudence, especially not in areas not subject to complete harmonisation (such as those covered above), this should be borne in mind as a drawback that exists under a regime that aims for uniformity in fundamental rights protection.

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Melloni v Ministerio Fiscal [2013] 2 CMLR 43: [63]. Opinion 2/13 of the Court (Re Accession to European Convention on Human Rights) [2015] 2 CMLR 21: [194]. 918 Chané, Hauser, Jaraczewski, Jóźwicki, Kędzia, Šimáková, Suchocka, Wallace (FRAME), EU Engagement with Other European Regional Organisations, Work Package No. 5 – Deliverable No. 2: 96. 917

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2.3 The Court of Justice of the European Union The CJEU is the primary judicial institution responsible for the interpretation and application of EU law. It ensures that Member States comply with their obligations under EU law and interprets EU law at the request of national courts and tribunals919. In particular, infringement proceedings can be taken by the European Commission or another EU Member State against national governments for failing to comply with EU law, and preliminary rulings can be given where a national court is in doubt about the interpretation or validity of EU law or to determine whether national law is compatible with EU law (in order to ensure that EU law is applied consistently across the EU)920. Article 263(4) of the Treaty on the Functioning of the European Union (TFEU) also provides an avenue for judicial review proceedings to be instituted by any “natural or legal person … against an act addressed to that person or which is of direct and individual concern to them and against a regulatory act which is of direct concern to them and does not entail implementing measures”. Judgments of the CJEU are binding on all Member States, and they carry more powerful enforcement mechanisms due to the primacy of EU law921. Unlike the European Court of Human Rights, the CJEU is not a court of individual petition and individuals cannot bring proceedings directly against their national governments, although they can do so indirectly in domestic courts where the issue concerns directly effective EU law. In comparison to proceedings brought to the ECtHR based on the rights stated in the ECHR, this avenue based on EU law may therefore be more accessible to individuals. After Brexit, domestic courts in the UK will no longer be bound by the precedent laid down in the judgments of the CJEU. It will also no longer have jurisdiction in the UK, as was recently reaffirmed in the Government’s latest White Paper, entitled “The United Kingdom’s Exit From and New Partnership With the European Union”922. This may have an impact in relation to the CJEU’s decisions in cases dealing with fundamental rights, such as Defrenne v. Sabena (No. 2)923 (on non-discrimination on grounds of gender). More recently, on the abovementioned issue of data protection and privacy, the CJEU held that the “general and indiscriminate retention” of emails and electronic communications by governments is illegal, and only targeted interception of traffic and location data in order to combat serious crime is lawful924 – thus raising the

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International Justice Resource Center, “Court of Justice of the European Union”, http://www.ijrcenter.org/regional-communities/court-of-justice-of-the-european-union/. 920 European Union, “Court of Justice of the European Union (CJEU)”, https://europa.eu/europeanunion/about-eu/institutions-bodies/court-justice_en. 921 House of Commons Joint Committee on Human Rights, The Human Rights Implications of Brexit: [59]. 922 Department for Exiting the European Union, The United Kingdom’s Exit From and New Partnership with the European Union, White Paper Cm 9417 (2017), https://www.gov.uk/government/publications/the-united-kingdoms-exit-from-and-new-partnership-withthe-european-union-white-paper: 13. 923 Defrenne v Sabena (No. 2) (1976) Case C-43/75. 924 “EU’s Highest Court Delivers Blow to UK Snooper’s Charter,” The Guardian, https://www.theguardian.com/law/2016/dec/21/eus-highest-court-delivers-blow-to-uk-snoopers-charter, (21 December 2016).

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possibility of challenges against the UK’s Investigatory Powers Act 2016. Once again, the impact of these CJEU rulings on domestic courts’ subsequent decisions remains to be seen. CJEU jurisprudence will almost certainly continue to influence domestic courts as persuasive, albeit not binding, authority. Some of these fundamental rights have also been judicially incorporated into the common law and continue to receive protection as common law rights. However, such protection will inevitably be less robust due to the need for the courts to remain within their designated constitutional role, and reluctance to appropriate Parliament’s legislative authority. This is illustrated by the post-HRA cases of Wainwright v. Home Office and Campbell v. Mirror Group Newspapers Ltd. In Wainwright, an entirely new cause of action for breach of privacy would have had to be created in order for the claimants (who had been made to undergo strip searches by prison officers), and so their claim was dismissed; Lord Hoffmann stressed that the case law was “flat against a judicial power to declare the existence of a high-level right to privacy”, and that such a right was in any case not required in order for the UK to comply with the ECHR (Article 8)925 . By way of comparison, in Campbell, where the claimant brought an action against a newspaper group regarding the publication of private information, the House of Lords held that the common law had “long afforded protection to the wrongful use of private information by means of the cause of action which became known as breach of confidence”926. The ability of the courts to continue to protect human rights established only at the EU level may thus be compromised by Brexit, although indirect and more restrained forms of protection may still be possible: Lord Hoffmann noted in Campbell that human rights law has had the effect of “identify[ing] private information as something worth protecting as an aspect of human autonomy and dignity”, and “must influence the approach of the courts to the kind of information which is regarded as entitled to protection, the extent and form of publication which attracts a remedy and the circumstances in which publication can be justified”927. In light of this, it is perhaps the shift in attitudes regarding which fundamental rights are deserving of protection, and the extent of protection they should receive, which will be the most worrying development in a post-Brexit environment where the forces of European human rights jurisprudence and the protections that EU law has put in place have been removed.

2.4 Preliminary Recommendations The extent of the impact of Brexit on the legal framework for the protection of human rights in the UK remains uncertain, and much depends on the actions and responses of the Government and the courts in the years to come. The Secretary of State for Exiting the European Union has stated that the forthcoming Great Repeal Act “will convert existing EU law into domestic law, wherever practical”, in order to “provide for a calm

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Wainwright and Another v Home Office [2003] UKHL 53, per Lord Hoffmann at [26] and [32]. Campbell v Mirror Group Newspapers Ltd [2004] UKHL 22, per Lord Nicholls at [13]. 927 Campbell, per Lord Hoffman at [50] and [52]. 926

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and orderly exit and give as much certainty as possible to employers, investors, consumers and workers”928. However, the Government has thus far done little to clarify the legal position, and the House of Commons Joint Committee for Human Rights stated that the Government “seemed unacceptably reluctant to discuss the issue of human rights after Brexit”, and the Minister of State responsible for human rights did not provide more information on “what the Government saw as the most significant human rights issues that would arise when the UK exits the EU”929. It also noted with concern that the Government “saw the question of domestic protection for fundamental rights as a matter for negotiation with the other EU Member States”, which would be odd unless it was “prepared to diminish such protections significantly”930. In light of the above, a preliminary recommendation (before the other substantive areas are dealt with in the following sections) is that the Government should provide clarification as soon as possible on what the status of, and level of protection received by, fundamental rights after Brexit will be. Most pressingly, as the EHRC has recommended, the Government should issue “statutory guidance on the status of existing case law and future CJEU decisions for domestic legal concepts which are derived from, or reflect similar concepts in, EU law”931. In addition, the abovementioned changes should be made clear to individuals and other decisionmaking bodies as far as possible, as should any subsequent changes introduced by the Government, so as to correct any misconceptions about the existing legal framework (for example, the difference in scope of the Charter and the ECHR) and maximise legal certainty going forward. The Government has acknowledged the importance of providing such guidance and clarification. In its most recent White Paper, the Government stressed the importance of providing business, the public sector, and the public with as much legal certainty as possible and stated that it would do so wherever possible, ahead of and throughout the negotiations932. Although the White Paper states that “wherever practical and appropriate, the same rules and laws will apply on the day after we leave the EU as they did before”, so as to preserve the rights and obligations that already exist in the UK under EU law, thereby providing “fairness to individuals whose rights and obligations will not be subject to sudden change”933, Parliament will subsequently be able to decide which elements of EU law to keep, amend, or repeal after Brexit has taken place – uncertainty therefore remains. Similarly, the White Paper clarifies that the Government believes that the EU law that is preserved “should continue to be interpreted in the same way as it is at the moment”, in order to “ensure a coherent approach which provides continuity”, while leaving it “open to Parliament in the future

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Department for Exiting the European Union, Exiting the EU Next Steps: Ministerial Statement 10 October 2016. 929 House of Commons Joint Committee on Human Rights, The Human Rights Implications of Brexit: [21]. 930 House of Commons Joint Committee on Human Rights, The Human Rights Implications of Brexit: [22]. 931 House of Commons Joint Committee on Human Rights, Written Evidence from the Equality and Human Rights Commission: 13. 932 Department for Exiting the European Union, The United Kingdom’s Exit From and New Partnership with the European Union: 9. 933 Ibid.

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! to keep or change these lawsâ&#x20AC;?934. The forthcoming White Paper on the Great Repeal Bill will likely be helpful in elaborating on the Governmentâ&#x20AC;&#x2122;s position in this regard, but much remains to be seen.

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Ibid: 10.

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3

IMPACT ON WORKERS

The competence of EU institutions in the sphere of fundamental workers’ rights stems from specific Articles in the TFEU. Such competence can be broadly broken down into two fields: competence to combat discrimination and ensure equal treatment, and competence to adopt measures in upholding standards of health and safety at work, amongst other working conditions935. EU competence in respect of anti-discrimination and equal treatment arises from Articles 8 and 157 of the TFEU, which aim to combat gender inequality and empower EU institutions to legislate to ensure the application of the equal treatment principle. Articles 10 and 19 of the TFEU similarly grant legislative competence to EU institutions to combat discrimination based on “sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation”. This has produced three core EU Directives that protect workers from discriminatory practices on the grounds above: the Race Equality Directive 2000936; Employment Equality Framework Directive 2000937, and the Equal Treatment Directive 2006938. Generally speaking, EU competence in respect of conditions of work arises from Articles 153 and 156 of the TFEU, which confers legislative competence on EU institutions to adopt legislative measures to set minimum requirements in “in health and safety at work, conditions of work, social security and social protection of workers, and information and consultation of workers”, amongst other fields. However, legislative measures implemented under these Articles may only be adopted through Directives, not Regulations. These Directives include the Working Time Directive 2003939, Temporary Agency Work Directive 2008940, and the Transfer of Undertakings (Protection of Employment) Directive 2001941.

3.1 Current Status of Employment Law EU employment law provides a minimum standard below which domestic law cannot fall942. This is expressed as the principle of minimum, but not minimal

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HM Government, Review of the Balance of Competences between the United Kingdom and the European Union: Social and Employment Policy (2014), https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/332524/review-of-thebalance-of-competences-between-the-united-kingdom-and-the-european-union-social-and-employmentpolicy.pdf: [2.2]. 936 Directive 2000/43/EC, implementing the principle of equal treatment between persons irrespective of racial or ethnic origin. 937 Directive 2000/78/EC, establishing a general framework for equal treatment in employment and occupation. 938 Directive 2006/54/EC, on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation. 939 Directive 2003/88/EC, concerning certain aspects of the organisation of working time. 940 Directive 2008/104/EC, on temporary agency work. 941 Directive 2001/23/EC, relating to the safeguarding of employees’ rights in the event of transfers of undertakings. 942 House of Commons Briefing Paper 7732, Brexit: Employment Law (10 November 2016), http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7732#fullreport: 3.

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! harmonisation943. where Member States are free to impose standards over and above the minima specified in the Directives; however, they are prevented from using the relevant Directives as a basis for lowering existing domestic standards944. The transposition of EU Directives into UK domestic law is currently achieved through two mechanisms: (i) through primary legislation (Acts of Parliament, most notably the Equality Act 2010), which are themselves alterable only through subsequent primary legislation which amends or repeals the earlier primary legislation; or (ii) through secondary legislation enacted under a power to implement EU obligations (as provided for in section 2 of the European Communities Act 1972, and/or peripherally through any other parent primary legislation). It should be noted that a third mechanism of direct effect (as discussed above in section 2.1 of this paper) allows for Treaty provisions (including Articles in the Charter of Fundamental Rights) to be justiciable and enforceable in domestic courts if the conditions of unconditionality and sufficient precision are met. In theory, such rights stemming from directly effective Treaty provisions will automatically cease to have effect upon the UK’s withdrawal from the EU945. However, in practice, it can be reasonably said that the relevant rights have been adequately protected by Directives, themselves underpinned by Treaty provisions, subsequently transposed into domestic law through their implementing domestic legislation. Several authors have explained the choice of mechanism (the use of primary or secondary legislation) in transposing Directives into domestic law by referring to accepted good standards of employment practices, or to pre-existing UK legislation in effect before the EU legislating in respect of its competence in that area946. For example, the Equality Act 2010 entrenches anti-discrimination practices that are already commonly accepted as good workplace practice, and supersedes existing preDirective domestic legislation in the same vein, including the Sex Discrimination Act 1975, Race Relations Act 1976, and the Disability Discrimination Act 1995. Given that repeal of the ECA 1972 would not in itself lead to an erosion of rights protected by primary legislation, the focus of this paper will be on the rights contingent on the ECA 1972, providing a power to implement appropriate secondary legislation giving domestic effect to the relevant Directives, as a ‘conduit’ for their transposition into domestic law.

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HM Government, Balance of Competences Review (2014). cf. Article 6, Race Equality Directive 2000/43/EC; Article 8, Employment Equality Framework Directive 2000/78/EC; Art 24, Working Time Directive 2003/88/EC; etc. 945 House of Commons Briefing Paper 7732, Brexit: Employment Law (2016): 3. 946 Niki Walker, Taylor Wessing LLP, “Brexit – Employment Law and HR Implications,” https://unitedkingdom.taylorwessing.com/download/article-brexit-employment-law.html, (June 2016); James Davies and Bethan Carney, Lewis Silkin LLP, “Brexit: Implications for Employment Law in the UK,” http://uk.practicallaw.com/2-623-3441, (26 February 2016). 944

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3.2 Current Government Position on EU-Derived Employment Law (PostBrexit) In a speech to the Conservative Party conference in October 2016, Prime Minister Theresa May confirmed that existing workers’ legal rights will continue to be guaranteed in law, at least whilst she remains Prime Minister, through the effect of a Great Repeal Bill which will repeal the ECA 1972, and convert all current EU employment law into domestic law (as noted in section 2 above). Any subsequent modification of EU-derived employment law will be subject to Parliamentary scrutiny and approval, itself subject to the UK’s international obligations with non-EU countries and the EU, post-Brexit947. This position has been reiterated by the Secretary of State for Business, Energy and Industrial Strategy, Greg Clark, in a House of Commons debate on 7 November 2016. The Secretary of State reaffirmed the Government’s commitment to preserving EUderived employment law regardless of the future relationship between the UK and EU, and that this transposition was not time-limited by a ‘sunset clause’948. Further to that, in the same debate, the Minister of State for Exiting the European Union, David Jones, noted that CJEU case law up to the date of the UK’s exit from the EU would be given effect in domestic courts where relevant on EU-derived employment law949. The same position has been upheld in general terms in the Brexit White Paper published on 2 February 2017950. The practical effect of the Great Repeal Bill will be to preserve the status of all EUderived employment rights. It has been noted by the Secretary of State for Exiting the EU, David Davis, that there is a political imperative for doing so, since “the great British industrial working classes voted overwhelmingly for Brexit… [and he is] not at all attracted by the idea of rewarding them by cutting their rights”951. The Brexit White Paper reiterates the same stand by stating that the Great Repeal Bill ‘will maintain the protections and standards that benefit workers’ and that the Government is committed to not merely safeguarding EU-derived employed rights, but enhancing them952. There is also a pragmatic reason for continued preservation: any post-Brexit trade agreement between the UK and EU will likely require some degree of adherence to EU standards of employment protection, especially so if the UK subscribes to the ‘Norway option’ of remaining in the European Economic Area (EEA) without being an EU Member

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Prime Minister Theresa May, “Britain after Brexit: A Vision of a Global Britain,” http://press.conservatives.com/post/151239411635/prime-minister-britain-after-brexit-a-vision-of, (2 October 2016). 948 House of Commons Hansard, “Exiting the EU and Workers’ Rights” (7 November 2016): c 1302–7. 949 Ibid: c 1363. 950 Department for Exiting the European Union, The United Kingdom’s Exit From and New Partnership with the European Union: [7.1]. 951 David Davis, Conservative Home, “Trade deals. Tax cuts. And taking time before triggering Article 50. A Brexit economic strategy for Britain,” http://www.conservativehome.com/platform/2016/07/daviddavis-trade-deals-tax-cuts-and-taking-time-before-triggering-article-50-a-brexit-economic-strategy-forbritain.html, (14 July 2016). 952 Department for Exiting the European Union, The United Kingdom’s Exit From and New Partnership with the European Union: [7.2].

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! State953. We have identified (and will cover in detail in the subsequent sections) two Directives relating to EU employment law whose domestic transpositions are grounded in secondary legislation and are likely to be significantly amended or repealed postBrexit, due to past and present unpopularity with UK businesses and segments of the UK political sphere. We note from our review of the literature954 that other Directives such as the Part-time Work Directive 1997955, Fixed-Term Work Directive 1999956, and Transfer of Undertakings (Protection of Employment) Directive 2001, not to mention various decisions of the CJEU that have proven unpopular957 are also vulnerable to post-Brexit legislative modification, but within the constraints of this paper we have chosen to focus on the two Directives which are most likely to be amended.

3.3 Working Time Directive 2003 The Working Time Directive was introduced as a ‘health and safety’ measure under the former Article 118A of the TFEU (now Article 153), recognising that “improvement of workers' safety, hygiene and health at work is an objective which should not be subordinated to purely economic considerations”958. It sets out rights to daily and weekly rest, limits on maximum weekly working time, paid annual leave of at least four weeks, and measures to protect night workers. It was implemented in the UK through the Working Time Regulations 1998, itself enacted under the power to implement EU obligations vested in section 2 of the ECA 1972. Before the regulations came into effect, there were no general regulations in the UK relating to working time or entitlement to leave, and workers and employers often agreed their own terms and conditions (through collective agreements)959. This was despite the UK being a signatory to various international instruments recognising limitations on working time as a human right960.

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Walker (2016); Davies & Carney (2016); Rachel Suff, Chartered Institute of Personnel and Development, “What will Brexit mean for UK employment law?”, http://www2.cipd.co.uk/community/blogs/b/policy_at_work/archive/2016/06/28/what-will-brexit-meanfor-uk-employment-law, (28 June 2016). 954 Michael Ford QC, Workers’ Rights from Europe: The Impact of Brexit (evidence submission for CBP 7732), https://www.tuc.org.uk/sites/default/files/Brexit%20Legal%20Opinion.pdf, (10 March 2016); Walker (2016); Davies & Carney (2016). 955 Directive 1997/81/EC, concerning the framework agreement on part-time work concluded by UNICE, CEEP and the ETUC. 956 Directive 1997/70/EC, concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP. 957 British Airways plc v Williams (2011) Case C-155/10; Stringer v HMRC (2009) Case C-520/06; Landeshauptstadt Kiel v Jaeger (2003) Case C-151/02 (amongst others). 958 Directive 2003/88/EC: Preamble [4]. 959 Department for Business Innovation and Skills, Analysis Paper No 5, The Impact of the Working Time Regulations on the UK Labour Market: A Review of Evidence (December 2014), https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/389676/bis-14-1287-theimpact-of-the-working-time-regulations-on-the-uk-labour-market-a-review-of-evidence.pdf: 10. 960 UN Declaration of Human Rights 1948, Article 24; European Social Charter 1961, Article 2.

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3.3.1 Government and Business Opposition It is not a secret that the UK Government has consistently opposed the implementation of the Working Time Directive on procedural and substantive grounds. It brought proceedings challenging the legal basis for its adoption (that it should have been recognised not as a ‘health and safety’ measure but an ‘economic’ measure, which would grant the European Parliament much greater power over its adoption)961, implemented the Working Time Regulations 1998 two years past the implementation deadline, and immediately used the derogation provided for in Article 22 of the Directive to allow for individual opt-outs from the 48-hour weekly working time limitation. During the course of the Brexit referendum debates, prominent Leavers repeatedly drew on a report from a right-wing think tank which placed the Working Time Directive as the third-costliest EU-derived legislation that was effective in the UK, with an estimated cost of £4.2 billion per year962. Despite the promises made by the Prime Minister and the Secretary of State for Exiting the EU, a post-Brexit repeal of large parts of the domestic transposition of the Working Time Directive has been recognised as fully in line with an orthodox Conservative vision of a deregulated market, as reflected by the passing of the Trade Union Act 2016, which, in a sector of employment law untouched by EU intervention, added significant hurdles to an existing body of already complicated rules which restricted the ability of unions to take strike action963. The Confederation of British Industry has consistently called for the opt-out from the 48-hour week to be retained, reasoning that it contributes to labour market flexibility in the UK, by giving employees the choice to work more than 48 hours if they want to, and firms the flexibility to meet fluctuations in demand. It has not, however, opposed the right to paid leave964. As an illustration of how a deregulatory Conservative Government could potentially erode the protections which the Working Time Directive provides for individual employees, the Working Time Directive (Limitation) Bill, a Private Members’ Bill sponsored by Christopher Chope MP, sought to limit the application of the Working Time Directive by disapplying it to doctors and health professionals and discounting ‘on-call’ time not actually spent working965, amongst other limitations.

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UK v EU Council, Case C-84/94, [1996] ECR I-5755. Open Europe, “Top 100 EU Rules Cost Britain £33.3 bn,” http://openeurope.org.uk/intelligence/britain-and-the-eu/top-100-eu-rules-cost-britain-33-3bn/, (16 May 2015). 963 Michael Ford QC, “The Impact of Brexit on UK Labour Law” International Journal of Comparative Labour Law and Industrial Relations 32, no. 4 (2016): 491-2. 964 Confederation of British Industry, “CBI responds to incorrect Vote Leave claims about Working Time Directive,” http://www.cbi.org.uk/news/cbi-responds-to-incorrect-vote-leave-claims-aboutworking-time-directive/, (1 January 2016). 965 In direct opposition to the judgment in C-303/98 Sindicato de Médicos de Asistencia Pública v Conselleria de Sanidad y Consumo de la Generalidad Valenciana (SiMAP) [2000] ECR I-7963. 962

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3.3.2 Working Time Directive 2003: Policy Recommendations There is a broad consensus across businesses and employees that the opt-out be retained so as to allow a greater degree of individual choice on working hours966, even though the 48-hour week may remain hotly contested by multiple parties. Furthermore, longhours working (working over 48 hours a week) is more prevalent amongst highly skilled, well-remunerated workers as opposed to low-skilled, low-paid workers – data suggests that in 2013, 51% of long-hours workers came from managerial or professional occupations967, whereas only 6% were in elementary occupations968. In light of these circumstances, we make the following proposals. First, the general provisions of the Working Time Regulations should be retained in their entirety. Given the compliance challenges that businesses faced after its implementation, the fact that domestic law is in some circumstances more generous than the Regulations in providing entitlements969, and the long-term trend of falling working hours across both the developed world970 and the UK971, we are of the opinion that the Regulations play an increasingly less substantial role in determining the length of the working week in the UK (and in the circumstances that they do serve their restrictive purpose, the individual is given free rein to disregard it by using the opt-out). Instead, the signalling function that the Regulations serves a much greater role today: to indicate that “improvement of workers' safety, hygiene and health at work is an objective which should not be subordinated to purely economic considerations”. A wholesale repeal of the Regulations would have negligible effect on average working hours in the UK or the average state of any of the other employment conditions covered in the Regulations, and would conversely send a perverse signal to employers inclined to employment abuses, or employers with lax existing compliance, that there would no longer be sanctions for exploitative employment conditions. This would be counterproductive and undesirable. Secondly, minor tweaks should be introduced to the opt-out to prevent its abuse by employers. One survey from 2001 found that 23% of long-hour workers who did not sign an opt-out felt pressured by employers to work longer, around half of whom understanding it as a condition of their workplace972. Another survey from 2004

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Department for Business Innovation and Skills, Analysis Paper No. 5 (December 2014): 44-5. Note that Regulation 20 of the Regulations excludes “managerial executives or other persons with autonomous decision-taking powers” from the working time limit, given that working time duration can be determined by the worker himself. 968 Office for National Statistics, Labour Force Survey (2013), http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/guidemethod/method-quality/specific/labour-market/labour-market-statistics/index.html. 969 For example, more generous paid leave entitlements granted by the Working Time (Amendment) Regulations 2007. 970 Sangheon Lee, Deidre McCann, and Jon C. Messenger, Working Time Around the World: Trends in Working Hours, Laws and Policies in a Global Comparative Perspective (London & New York: Routledge, 2007). 971 Labour Force Survey (2013). 972 BMRB Social Research (Department of Trade and Industry), “A Survey of Workers’ Experiences of the Working Time Regulations,” Employment Relations Research Series No. 31, (2004). 967

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indicated that 21% of those who signed the opt-out felt a degree of employer compulsion973, a finding corroborated by the evidence submitted by the Trades Union Congress to the House of Lords EU Committee in 2004974 – under the Regulations, employers are not permitted to pressure employees into signing an opt-out. Though, as above, there is a strong degree of consensus on retaining the opt-out, there has been little suggestion of procedural modification to prevent abuse. We recommend that the voluntary opt-out be subject to an automatic expiry at the end of every calendar year, and that a standardised form be used that clearly sets out the fundamental protections the Regulations provide in respect of working time. This prevents two possible avenues of exploitation: first, that of employers hiding the optout in the fine print of an employment contract during the initial signing process, second, that of continued use of an indefinite opt-out to prevent drawing the attention of employees to their fundamental rights, circumventing the spirit of the Regulations. Thirdly, an employment ombudsman should be set up to mediate and independently resolve complaints relating to employment abuses and discrimination. Other ombudsmen already exist in the UK, and Australia has a Fair Work Ombudsman that resolves disputes related to underpayment of wages or entitlements. Similarly, EU countries such as Spain, France, Belgium and Italy have Labour Inspectorates with a greater scope of competences than the corresponding Inspectorates in the UK975, being able to follow up on complaints about breaches of the working time limit and other employment conditions976. The Fair Employment Ombudsman should be preliminary to an Employment Tribunal claim, and could incorporate or subsume elements of the conciliation procedure currently used by the Advisory, Conciliation and Arbitration Service (Acas), and have relatively more expansive investigatory powers. Such an approach would address the weaknesses of the wholly voluntary conciliation procedure which is dependent on the willingness of both parties to negotiate and compromise – a condition unlikely to be present where vulnerable workers are subject to a significant power imbalance in their employment relationship.

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Chartered Institute of Personnel and Development, Working Time Regulations: Calling Time on Working Time? Survey Report (May 2004), http://www2.cipd.co.uk/NR/rdonlyres/4FF9B072-6B03465F-9C65-8AC3CA5E0247/0/3029worktimeregs.pdf. 974 House of Lords European Union Committee, HL Paper 67, The Working Time Directive: A Response to the European Commission’s Review (8 April 2004), https://www.publications.parliament.uk/pa/ld200304/ldselect/ldeucom/67/67.pdf. 975 The UK also suffers from a lack of centralised enforcement: the Health and Safety Executive is limited to investigating breaches of health and safety regulations only; the Employment Agency Standards Inspectorate oversees employment agencies, and the Gangmasters Licensing Authority regulates businesses within a limited number of industry sectors. 976 European Federation of Public Services Union, A Mapping Report on Labour Inspection Services in 15 European Countries (2012), http://www.epsu.org/sites/default/files/article/files/EPSU_Final_report_on_Labour_Inspection_Services. pdf.

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3.4 Temporary Agency Work Directive 2008 The Temporary Agency Work Directive recognised that Article 31 of the Charter provided that “every worker has the right to working conditions which respect his or her health, safety and dignity, and to limitation of maximum working hours, to daily and weekly rest periods and to an annual period of paid leave”977. It was implemented in the UK through the Agency Workers Regulations 2010, and gives all agency workers equal treatment entitlements in relation to access to facilities and information on vacancies as permanent employees. It has been noted that the Regulations were enacted in a manner that was minimally compliant with the Directive, and that the Directive and its domestic transposition are the only reason why agency workers “enjoy any degree of legal protection in the UK”978. Article 5 of the Directive provides for certain “basic working and employment conditions”, though Regulation 5 of the Regulations requires a twelve-week qualifying period before agency workers have that right as enjoyed by comparable direct employees of the hirer. The Regulations also construe ‘pay’ narrowly for the purposes of equal treatment,979 and also provide for an exemption in respect of basic pay through the ‘Swedish derogation’, where the temporary work agency offers the agency worker a permanent contract of employment and pays the worker between assignments980.

3.4.1 Government and Business Opposition The Government set out its reservations to the draft Directive by prefacing them with an assertion that the national minimum wage and working time regulations (as covered in section 3.3 of this paper) were sufficiently adequate protections for agency workers, noting that agency work contributed to labour flexibility and greater choice for both employers and employees. Its primary concerns were that the Directive would make agency workers less attractive to hirer companies, which would increase unemployment981. A Joint Declaration was later made by the Government, Confederation of British Industry, and Trades Union Congress on 20 May 2008, which agreed to the implementation of the Directive in the UK subject to the twelve-week qualifying period as later laid down in Regulation 5 of the Regulations982.

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Directive 2008/104/EC: Preamble [1]. Ford, Workers’ Rights from Europe: The Impact of Brexit: 29. 979 Ibid. 980 Regulations 10–12, Agency Workers Regulations 2010. 981 Department of Trade and Industry, Explanatory Memorandum on European Community Legislation: Amended Proposal for a Directive of the European Parliament and of the Council on Temporary Work [15098/02 COM(02)701] (10 January 2003), http://webarchive.nationalarchives.gov.uk/20050302053421/http:/www.dti.gov.uk/er/agency/em.htm: [12]-[13]. 982 House of Commons Library Standard Note SN/BT/4200, Temporary Agency Workers (21 January 978

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Business hostility to the Directive and the protection it extends to agency workers is exemplified983 by the Beecroft report, which identified the Regulations and the attached guidance by the Department for Business Innovation & Skills as an onerous regulatory compliance burden for businesses, suggested that businesses would find it less attractive to hire agency workers and would increase artificial turnover to avoid the twelve-week qualifying period, and asserted that “many agency workers would probably prefer the possibility of longer periods of employment to the benefits which the regulations give them if they are retained for more than twelve weeks”984.

3.4.2 Temporary Agency Work Directive 2008: Policy Recommendations The provisions of the Agency Workers Regulations should be retained in their entirety as they provide for the barest of legal protections available to agency workers. A postBrexit reduction or elimination in such protections might cause a reversion to the preRegulations status of agency workers under UK law: more vulnerable due to their lack of proper employment status985 and their consequent lack of employment rights accruing to employees986. Even with the Regulations in place, the UK continues to rank third-lowest amongst OECD countries (after Canada and the US), and the lowest amongst EU countries, for the strictness of its employment protection legislation in respect of temporary contracts.987 Despite this, work agencies are noted to scrupulously implement and maintain compliance with the Regulations through the use of detailed frameworks and databases988, an encouraging sign that suggests that the implementation of additional measure may not be as large a compliance burden as expected. The UK’s labour market also continues to rely on agency workers. It is estimated that there were 865,000 agency workers in the UK in 2016, constituting 3% of the workforce, with an increasing trend noted since 2008989. With an eye on strengthening protections for agency workers who are making up an increasingly insubstantial portion of the workforce, we make the following recommendations. First, there should be an increased awareness of the specific protections accruing to agency workers under both the ‘comparable employee’ (agency workers’ basic

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 2010), http://researchbriefings.files.parliament.uk/documents/SN04200/SN04200.pdf: 7. 983 Ford, Workers’ Rights from Europe: The Impact of Brexit: 29. 984 Adrian Beecroft, Report on Employment Law (24 October 2011), https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31583/12-825-report-onemployment-law-beecroft.pdf: 15–16. 985 Bunce v Postworth [2005] IRLR 557; James v Greenwich [2008] IRLR 302. 986 As an illustration of current vulnerability even under the present Regulations in force, see Smith v Carillion [2015] IRLR 467. 987 OECD.Stat, Strictness of employment protection – temporary contracts, http://stats.oecd.org/Index.aspx?DataSetCode=EPL_T, (3 January 2017). 988 Chris Forde and Gary Slater, The Effects of Agency Workers Regulations on Agency and Employer Practice (2014), http://www.acas.org.uk/media/pdf/5/7/The-effects-of-Agency-Workers-Regulations-onagency-and-employer-practice.pdf: 24. 989 Resolution Foundation, Secret Agents: Agency Workers in the New World of Work (December 2016), http://www.resolutionfoundation.org/app/uploads/2016/12/Secret-Agents.pdf.

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working and employment conditions to be the same as permanent employees after qualifying period) and ‘Swedish derogation’ models. This would directly alleviate a lack of awareness that has been noted by work agencies of workers who are looking for work about their rights as agency workers under either model. This can be undertaken by government departments such as the Department for Business, Innovation and Skills, or non-government bodies such as Acas, possibly through means of hardcopy pamphlets (in simple English and other European languages) distributed to temporary work agencies. In being clear and consistent on the benefits and provisions available, agencies would be able to incentivise a greater number of potential agency workers to register with them for placements – this is in line with existing industry good practice to keep agency workers informed and updated with relevant information990. Second, the Fair Employment Ombudsman (a recommendation from section 3.3.2) should play a more proactive role in investigating employment abuses particularly when they concern agency workers, who are often low-paid, unaware of their rights, and in a position of vulnerability despite efforts by agencies to uphold good industry practices. This is also in line with a recent Government commitment to appoint a statutory Director of Labour Market Enforcement and Exploitation991. The current system is highly reactive and depends on the initiative of individual workers or their union representatives (if they have union membership) to take their claims to Acas for early conciliation, and failing resolution at that stage, to an employment tribunal. The increased costs and complexity of a tribunal claim are likely to be deterrent factors on individuals seeking to resolve disputes with errant employers, particularly so if employers refuse to attend conciliation; this situation is made worse by the lack of legal aid available to employment claims that do not constitute discrimination claims under the Equality Act 2010992. We suggest that the Ombudsman provide out-of-hours hotlines, translation facilities for European languages (or providing case deferrals to a later date and time when an appropriate translator is made available), and be empowered to conduct follow-up investigations if allegations of serious misconduct following whistle-blowing by individuals or third parties993.

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Forde and Slater, The Effects of Agency Workers Regulations on Agency and Employer Practice: 26. Department for Exiting the European Union, The United Kingdom’s Exit From and New Partnership with the European Union: [7.5]. 992 Legal Aid, Sentencing and Punishment of Offenders Act 2012, Schedule 1, paragraph 43. 993 Similar recommendations were made by the Trade Union Congress (TUC) in its report prior to the implementation of the Agency Workers Regulations: TUC Commission on Vulnerable Employment, Hard Work, Hidden Lives: The Full Report of the Commission on Vulnerable Employment (7 March 2007), http://www.vulnerableworkers.org.uk/files/CoVE_full_report.pdf: 226-7. 991

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4

IMPACT ON CITIZENS

Citizenship of the EU was introduced by the TEU in 1993 and is defined by Article 20 of the TFEU994. The preamble to the Citizens’ Rights Directive 2004 describes citizenship as the “fundamental status” of nationals of member states995. The rights of European Citizens are defined in Clause 2 of Article 20, which states that “[c]itizens of the Union shall enjoy the rights … provided for in the Treaties …”. Article 6 of the Treaty of Lisbon gives the Charter the same legal status as the Treaties.996 It is therefore Article 20 of the TFEU that confers the rights defined in the Charter on European citizens.

9.1!

4.1 Rights and Benefits of European Citizenship

In addition to the rights defined in the Charter (discussed in section 2.2 of this paper, there are citizenship rights specifically defined in Article 20 of the TFEU. These include: -! -! -! -! -!

The right to move and reside freely, with family members, within the territory of the Member States; The right to study, seek employment, work, or provide services in any Member State; The right to vote or stand as a candidate in local and European elections in the state of residence; The right to diplomatic and consular protection from the authorities of and Member State in third countries; and The right to petition the European Parliament, to apply to the European Ombudsman, and to address the institutions of the Union in any of the Treaty languages and to receive a reply in the same language.

Other important rights defined elsewhere in the Treaties – and therefore conferred via Article 20 on all European citizens – include: -! -!

Rights to non-discrimination (under Articles 17, 18 and 45 of the TFEU); and The right to equal pay (under Article 157 of the TFEU).

In an opinion piece for The Guardian written in October 2016, entitled “I'm being stripped of my citizenship – along with 65 million others”, David Shariatmadari writes: “[European] citizenship established an identity [...] separate from nationality, shared between individuals in the Union […] In the 23 years since, cultural, political, academic and social exchange has become the norm. What might have initially seemed like a paper exercise has become durable and meaningful to millions [...]”997. This illustrates

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Article 20 of the TFEU. Directive 2004/38/EC. 996 Article 6 of the Treaty of Lisbon. 997 “I'm being stripped of my citizenship – along with 65 million others,” The Guardian, 995

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the far-reaching impact that the loss of European citizenship and the rights accompanying it is likely to have. To cite one example of such exchange, the Erasmus programme, which celebrates its thirtieth anniversary this year, has given nine million people the chance to study, train, volunteer, or gain professional experience in another member country998. Future UK participation in this programme is now very uncertain999.

4.2 Current Government Position on European Citizenship Rights As noted in section 2 above, the Government's policy will be to pass a Great Repeal Bill which will “transfer all EU laws currently in force onto the UK statute book”.1000 From a human rights perspective, there are a number of problems with this approach. Parliament cannot (even if it wished to) replicate rights that are exercisable in other Member States (e.g. the rights to travel, live, work and study in other Member States). Even for rights that could in principle be replicated by a domestic UK law, the right would no longer be enforceable via the CJEU1001. The House of Commons Library has estimated that 13.2% of UK primary and secondary legislation enacted between 1993 and 2004 was EU-related, and that the Great Repeal Bill would be "potentially one of the largest legislative projects ever undertaken in the UK"1002. The Secretary of State for International Trade, Liam Fox, has called EU nationals living in the UK a "negotiating card"1003, and on 19 October 2016 Members of Parliament voted against a motion calling for protection of EU nationals' rights to live and work in the UK after the UK leaves the EU1004. The Government has not made clear its position regarding the protection of the corresponding rights of UK citizens who currently live and work in other EU countries, or who may wish to do so in future. This is despite the fact that approximately 3.3 million citizens from other EU countries live in the UK, and 1.2 million UK citizens live full-time in other EU countries; and of the latter, at least 400,000 are retirees in receipt of a DWP pension1005.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! https://www.theguardian.com/commentisfree/2016/oct/07/eu-citizenship-stripped-brexit-theresa-may, (7 October 2016). 998 Lifelong Learning Platform (LLP), “2017: Celebrating 30 Years of Building Europe Through Education,” http://lllplatform.eu/policy-areas/erasmus/2017-30th-anniversary-erasmus-milestoneeurope/, (23 December 2016). 999 “Government urged to protect EU Erasmus student exchange scheme,” The Guardian, https://www.theguardian.com/education/2016/sep/13/government-urged-to-protect-eu-student-exchangescheme, (13 September 2016). 1000 Institute for Government, Brexit Brief: The Great Repeal Bill (2016), https://www.instituteforgovernment.org.uk/brexit/brexit-brief-great-repeal-bill. 1001 This was one of the arguments advanced by the plaintiffs in R (Miller & Dos Santos) v Secretary of State for Exiting the European Union, discussed in more detail in section 4.3 below. 1002 House of Commons Briefing Paper 7793, Legislating for Brexit: The Great Repeal Bill (21 November 2016), http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7793. 1003 “EU Citizens Living in UK Respond to Liam Fox Calling Them a Negotiating Card,” iNews, https://inews.co.uk/essentials/news/politics/eu-citizens-living-uk-express-upset-liam-fox-describesnegotiating-card/, (5 October 2016). 1004 “MPs vote against motion protecting right of EU nationals to live and work in UK after Brexit,” iNews, https://inews.co.uk/essentials/news/politics/mps-vote-motion-rights-eu-nationals-live-work-ukbrexit/, (20 October 2016). 1005 Migration Watch UK, Briefing Paper: The British in Europe – and Vice Versa (23 March 2016), https://www.migrationwatchuk.org/briefing-paper/354.

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It might be argued that the rights of European citizenship that are explicitly stated in Article 20 of the TFEU – free movement, voting in elections, consular protection and so forth – are not ‘human rights’ in the same sense as rights defined in the EU charter or the ECHR. This raises the broader issue of what in general can be considered a human right. Is the right to “move and reside freely within the territory of the Member States” (Article 20 of the TFEU) more fundamental than, for example, the right to “have access to vocational and continuing training” (Article 14 of the Charter)? It should be noted, however, that free movement is protected in a different way by ECHR Protocol 4, Article 2. ECHR Protocol 1 Article 3 provides for free elections; however this perhaps falls somewhat short of clearly protecting the current right of EU citizens resident in the UK (and UK expatriates in the EU) to vote in “local and European” elections. The Vienna Conventions offer consular protection rights, but possibly not the protection “of the diplomatic and consular authorities of any Member State on the same conditions as nationals of that State” as per Article 20 TFEU1006. This paper submits that the rights of European citizenship are indeed fundamental human rights; and in any event (as stated above) Article 6 of the Treaty of Lisbon gives Charter rights and rights defined elsewhere in the Treaties the same legal status. If the ‘social contract’ model of human rights is adopted – where governments make an implicit or explicit promise to protect an array of fundamental rights, and in return citizens (most of them, most of the time) agree to abide by the government’s laws and regulations1007 – the fundamental nature of European citizenship rights becomes apparent. It has been noted that the effect of Britain’s leaving the EU will be “a mass deprivation of rights of abode and equal treatment on a scale not seen since the age of decolonisation”. In the Guardian article cited earlier1008, Shariatmadari notes that European citizenship was the result of a treaty (signed in this case by a Conservative Government), and argues that as well as being an agreement between States, a treaty is – morally, if not in a formal legal sense – a promise to one’s own people. There was no suggestion at the time that the rights granted would later be taken away. Indeed, prior to the entry into force of the Treaty of Lisbon in 2009, there was not even any explicit ability for a Member State to withdraw from the EU. Shariatmadari continues: “Mass stripping of citizenship had previously only occurred when an alternative citizenship was created [...] for example, when Algeria won independence from France, and Algerian nationality came into being [...] a solemn social contract made between a government and its people a quarter of a century ago is being torn up [...]”. This should not be treated lightly.

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Emphasis added. Andrew Heard, “Human Rights: Chimeras in Sheep’s Clothing?”, http://www.sfu.ca/~aheard/intro.html, (1997). 1008 “I'm being stripped of my citizenship – along with 65 million others,” The Guardian. 1007

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4.3 Status of European Citizenship Rights The Government may be able to secure the rights of UK citizens living in other EU countries, but this will not preserve future rights of free movement for those who may wish to work or study in other EU countries at some later point in their lives. The position of third-country nationals also seems particularly precarious. Under current EU law, a UK citizen who goes to live or work in another EU country may be accompanied by family members who are not EU nationals; and the same right to be accompanied by non-EU family members is accorded to EU citizens who come to live in the UK. There is of course no guarantee that these rights would continue after UK withdrawal, and the position regarding the preservation of such rights has not yet been clarified by the Government. The impact of this is encapsulated by a widely-shared comment made by an individual named Nicholas Barrett on the Financial Times website the day after the referendum: that “the younger generation has lost the right to live and work in 27 other countries. We will never know the full extent of the lost opportunities, friendships, marriages and experiences we will be denied. Freedom of movement was taken away by our parents, uncles, and grandparents in a parting blow to a generation that was already drowning in the debts of our predecessors".1009 Even if the rights of UK citizens currently living in other EU member states can be secured, it may prove impractical for many to continue to exercise those rights unless current arrangements regarding healthcare, benefits and pensions continue in force.1010 Under EU law, UK state pensions paid to the more than 400,000 UK retirees living in other EU countries are subject to annual increases just as for UK citizens in the UK. After the UK leaves the EU, there would be nothing to stop the UK Government from freezing these pensions at current levels1011. Financing of healthcare for the UK’s expatriates is also an issue. While the ability of expatriates to provide for their own health care costs is in principle required by Article 7 of the Citizens’ Rights Directive, the practical impact of this requirement on individuals is at present greatly mitigated by intergovernmental arrangements, under which the UK reimburses other Member States for some of the health care costs of visitors and expatriates via the EHIC and ‘Form S1’ systems1012. It is not clear whether or not these arrangements will continue after UK withdrawal. If they do not, expatriates may need to take out expensive private

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“Readers Respond to the EU Referendum Vote,” Financial Times, https://www.ft.com/content/f4dcdf62-399d-11e6-9a0582a9b15a8ee7?siteedition=intl&_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Ff4d cdf62-399d-11e6-9a0582a9b15a8ee7.html%3Fsiteedition%3Dintl&_i_referer=http%3A%2F%2Fwww.vox.com%2Fd6795f8d1 187ffd676d14eb8ff536c2a&classification=conditional_standard&iab=barrier-app, (28 June 2016). 1010 Peter McNab, ICAS, “What Will Brexit Mean for UK Citizens in the EU and EU Citizens in the UK?”, https://www.icas.com/ca-today-news/what-will-brexit-mean-for-uk-citizens-in-europe, (24 August 2016). 1011 Tanya Jeffries, “Will EU Expats have State Pensions Frozen? Retirees in Dark over Future Finances after Brexit Vote,” ThisIsMoney, http://www.thisismoney.co.uk/money/pensions/article-3736307/WillEU-expats-state-pensions-frozen-Brexit.html, (18 August 2016). 1012 “How Might Brexit Affect Expatriates?”, The Connexion, http://www.connexionfrance.com/Brexitexpats-expatriates-EU-referendum-12169-news-article.html, (3 February 2016).

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! health insurance policies1013. The immediate policy questions for the Government and for Parliament, which must be resolved, are: (1)! Will delivery of notification to withdraw per Article 50 inevitably lead to the UK leaving the EU and therefore to the loss of the rights of European Citizenship that have been outlined above? (2)! Can rights which have been granted by Parliament (via the European Communities Act (1972) as amended following the signing of the Treaty of Maastricht) be removed by the executive using so-called prerogative powers? (3)! If the outcome is to be that 65 million UK citizens are to be stripped of their European Citizenship and its associated rights, is there anything that can be done to mitigate the damage? For reasons which are elaborated in the discussion in section 4.3 below concerning the revocability of Article 50 notification, it seems highly desirable for these issues to be resolved prior to delivery of such notification. The first two questions were the subject of the R (Miller & Dos Santos) v. Secretary of State for Exiting the European Union case1014, which was heard by the High Court in October and by the Supreme Court between 5 and 8 December. The plaintiffs claimed among other things that rights which were granted by Act of Parliament cannot be taken away except by Act of Parliament. This basic constitutional principle originates in the Bill of Rights 1689: “the pretended power of suspending the laws and dispensing with laws by regal authority without consent of Parliament is illegal”. A crucial question was whether Article 50 notification sent by the UK can be unilaterally withdrawn. If it cannot, then it would seem that invocation of Article 50 does inevitably lead to leaving the EU and therefore to loss of citizenship rights. On 24 January 2017, the Supreme Court ruled by a majority of 8 to 3 that an Act of Parliament is indeed required to permit the Government to submit a notification under Article 50, and the ruling seems to assume that this cannot later be withdrawn. The proposal by Members of the European Parliament (MEPs) Charles Goerens and Guy Verhofstadt to allow UK citizens to retain an individual ‘associate citizenship’ after the UK’s withdrawal1015 may go some way towards mitigating the injustice of wholesale involuntary loss of rights that Shariatmadari describes in the quote above. However it is not clear to what extent this proposal from the Alliance of Liberals and

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“Britons in Spain Fret over Healthcare, May Come Home after Brexit,” Reuters, http://www.reuters.com/article/us-britain-eu-spain-insight-idUSKBN1430KD, (14 December 2016). 1014 R (on the application of Miller and Dos Santos) v Secretary of State for Exiting the European Union [2017] UKSC 5. 1015 “Brexit Talks to Include Plan for UK Nationals to Keep EU Citizenship,” The Guardian, https://www.theguardian.com/politics/2016/dec/09/brexit-talks-plan-for-uk-nationals-to-keep-eucitizenship-verhofstadt, (9 December 2016).

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Democrats for Europe Group in the European Parliament would be supported by the centre-right majority, or whether the proposal would actually feature in Brexit negotiations (as the cited article from The Guardian claims).

4.3 Policy Options The policy options available to the UK Government have been widely discussed elsewhere as with respect to trading relationships and the impact on the economy, however the impact on Citizens’ Rights has not generally been highlighted in such discussions. Broadly speaking, the options are: 1.! Leave the EU but remain in the European Economic Area (EEA) – the ‘Norway model’. The EEA consists of the 28 EU Member States plus Norway, Iceland and Liechtenstein. EEA members participate in most aspects of the EU’s internal market, with the notable exception of agriculture and fisheries. The EEA is based on the same ‘four freedoms’ as the EU: the free movement of goods, services, persons and capital. EEA countries that are not part of the EU contribute to the EU budget, and agree to adopt similar legislation to the EU in the areas of social policy, consumer and environmental protection, and company law. EEA countries that are not EU members are not represented in the European Parliament or the European Commission. This option limits the impact of loss of Citizenship rights, as UK citizens would retain the right to study, work, retire to, and offer services in the other EEA Member States. UK citizens would lose the formal protection of the EU Charter of Fundamental Rights. It should be noted that the Agreement on the European Economic Area (‘EEA Agreement’), to which the UK acceded in 1993, is an entirely separate document from the EU treaties. If the UK wishes to withdraw from the EEA Agreement, it must give twelve months’ notice in accordance with Article 128 of that Agreement. The same issue therefore arises as with notification of withdrawal from the EU under Article 50, namely whether such notification can be delivered by the Government under prerogative powers, or whether an Act of Parliament is required. An application to the High Court for permission to seek judicial review on this question was recently dismissed as “premature”1016. 2.! Leave both the EU and the EEA, and re-join the European Free Trade Association (EFTA) – the ‘Swiss model’. The UK was a founding member of EFTA in 1960, but left when it joined the EEC (as it then was) in 1973. The current members of EFTA are Norway, Iceland, Liechtenstein and Switzerland. Of these, only Switzerland is outside the EEA. The EFTA countries other than Switzerland are subject to the jurisdiction of the EFTA Court, which coordinates closely with the CJEU. EFTA as a bloc has concluded trade agreements with 24 non-EU countries, however individual EFTA members are also free to conclude bilateral trade

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“Fresh Brexit Legal Challenge Blocked by High Court,” The Guardian, https://www.theguardian.com/politics/2017/feb/03/fresh-brexit-legal-challenge-blocked-high-courtarticle-127, (3 February 2017).

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agreements. Switzerland, unlike the EFTA members that are also members of the EEA, has a complex series of bilateral agreements with the EU. However, the Swiss referendum in February 2014, which narrowly voted to restrict free movement of persons, would – if implemented – cause all these agreements to lapse. What exactly the ‘Swiss model’ would mean for the UK is therefore unclear. It seems unlikely that UK citizens would retain rights to work, study and retire in the other 27 EU countries unless the UK granted reciprocal rights. 3.! Negotiate new bilateral trade agreements with the EU and with non-EU countries. As these arrangements would focus on trade, they would do little or nothing to preserve the European Citizenship rights of UK nationals. 4.! Trade under ‘WTO Rules’ in the absence of negotiated trade agreements. From the point of view of preserving Citizenship Rights, or preventing the loss of such rights, this would be effectively the same as option 3.

4.4 Government Position The Government’s White Paper provides some information as to its plans. Section 6, “Securing rights for EU nationals in the UK, and UK nationals in the EU”, states that the Government “want[s] to secure the status of EU citizens who are already living in the UK, and that of UK nationals in other Member States, as early as [it] can”1017. While this aim is laudable, it does not reassure UK citizens in the UK who may wish to preserve the rights of free movement that they currently enjoy. Nor does it do anything to help a UK citizen currently living in France, for example, who may wish to retain the option of moving to, say, Germany at some point in the future. The Government also stated its wish to “gain control of the numbers of people coming to the UK from the EU”1018, and indeed the twelve principles stated in the Preface by the Secretary of State include both controlling immigration and ensuring free trade with European markets1019. Other European leaders, including Chancellor Angela Merkel and Luxembourg’s Prime Minister Xavier Bettel1020, have been fairly clear in stating that the UK cannot ‘cherry-pick’ from among the ‘four freedoms’ of the single market – the free movement of goods, services, capital and people. The White Paper’s wish to control immigration while still retaining free trade may therefore not be realistic or achievable. In other respects, the White Paper is notable for its lack of detail. For comparison, the Scottish Government’s White Paper, “Scotland’s Future: Your Guide to an Independent Scotland”, ran to 670 pages. The UK leaving the EU is at least as

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Department for Exiting the European Union, The United Kingdom’s Exit From and New Partnership with the European Union: 29. 1018 Ibid: 27. 1019 Ibid: 5-6. 1020 Gašper Završnik, “Luxembourg PM: UK Can’t Have Cake and Eat It,” Politico, http://www.politico.eu/article/luxembourg-pm-uk-cant-have-cake-and-eat-it/, (29 November 2016).

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great and complex a change as Scottish independence, but the current White Paper (at 77 pages long) is silent on many important issues.

4.5 Policy Recommendations To minimize the damage caused to individual UK citizens by the loss of the rights associated with their European Citizenship, the following policy recommendations are suggested: First, the Government should immediately enact in UK law all rights granted under the Charter and under Article 20 TFEU that are not already provided by the HRA. Far from being a ‘Great Repeal Bill’, this would be a significant addition to UK domestic human rights law. The overriding goal should be to minimise the negative practical effects on individual UK citizens of the loss of the rights of European citizenship. The most important of such rights is arguably the freedom to travel freely and live and work in any of the other 27 countries. From a point of view of preserving the European Citizenship rights of UK nationals, this would be the preferred option of those discussed in the previous section. However, since this option does not seem politically realistic in the current climate, a significant loss of rights by UK nationals seems inevitable. Secondly, it would be desirable to assure continued residency rights, healthcare and pension arrangements, and other citizenship rights for UK citizens that are resident in other EU countries. The group ‘UK Citizens in Europe’ has produced an Alternative White Paper detailing many of the issues that these people face1021. That paper explains why it is not sufficient merely to guarantee continued residency rights, but that the whole array of rights currently in place should be considered to be indivisible. One hypothetical example cited is that of a UK professional aged 40 living and working in Italy through freedom of movement, with mortgage and young family born there, qualifications recognised through EU mutual recognition arrangements. If recognition of the person’s qualifications is not preserved and the person has to re-qualify under Italian regulations (perhaps requiring a multi-year full-time course), a right of residence alone is inadequate if this person is without an income during that period and cannot maintain himself or herself and his or her family. It should be noted that UK Citizens in Europe calls on the UK Government to “guarantee immediately and unilaterally these [same] rights for EU citizens resident in the UK”1022. On 1 March 2017, the House of Lords voted by 358 to 256 in favour of an amendment to the European Union (Notification of Withdrawal) Bill, to the effect that the UK unilaterally act to preserve the EU-derived rights of the EU citizens and their family members in the UK. By failing to act first and unilaterally in this matter, the UK has probably already squandered what

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UK Citizens in Europe, Towards an Alternative White Paper on the European Union (Notification of Withdrawal) Bill (1 February 2017), http://www.ecreu.com/pdfs/alternative-white-paper-presented-byUK-%20citizens-in-europe.pdf. 1022 UK Citizens in Europe, Towards an Alternative White Paper on the European Union (Notification of Withdrawal) Bill, [10].

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little political goodwill it still had; but the Government could perhaps reclaim some respect if it accepted the Lords’ point of view. If agreement cannot be reached, then the consequences could be extremely severe, with up to 1.25 million British migrants being displaced from their homes on the continent. Thirdly, the proposal of MEPs Charles Goerens and Guy Verhofstadt to allow individual UK citizens to obtain ‘associate citizenship’ of the EU should be fully and enthusiastically supported by the UK. This seems to be the only way (short of remaining in the EU) for individual UK citizens to formally retain those of their current rights of European citizenship that are exercisable in the other 27 Member States. Fourthly, the question of whether or not a “not