Brexit & Wales: a Briefing, 12 March 2018

Introduction

With less than 300 working days until we leave the European Union, clarity seems to be increasing on a number of issues but it is decreasing as to how this will affect landowners in Wales.

The relationship between Welsh and UK governments is adding an additional level of complexity to the debate. Unfortunately, there is little clarity in Ministerial announcements as to whether their announcements apply in Wales or England and Wales, and even where there may be clarity, it is not always obvious where the funding to support the policy lies.

The Brexit discussion is once again shining a light on the constitutional make-up of the United Kingdom.  Since the UK joined the European Union in 1972, the structure of ‘domestic politics’ has changed radically and withdrawal from Europe raises a number of challenging questions as to the role and competence of the Devolved Administrations in Wales, Scotland, and, despite the current situation, Northern Ireland. Devolution has always been considered in the context of the UK being a member of the EU. This is written into the Government of Wales Act and Government of Scotland Act.

Most land use, farming and economic development policies of interest to CLA members have been devolved from Westminster to the control of the Senedd in Cardiff. Many of these policies are also directly and indirectly influenced through EU Regulation and Directives. One may argue that whilst these areas have been devolved to Wales, the oversight and control through the membership of the EU meant that the opportunity to deviate radically from a common position was limited. Whilst the UK was the member state of the EU, it was up to the governments of Scotland, Wales, England and Northern Ireland to interpret and implement EU policy as they saw fit. The EU was the reporting authority and auditor.

 The European Union (Withdrawal) Bill

When looking at the recent announcement in relation to how agricultural policy will be applied and the impact it will have on businesses post Brexit, it is necessary first to consider the constitutional context that will shape the domestic legal system when the UK leaves the European Union. At the root of the issue is the fundamental question of how EU-derived law is translated into domestic (English and Welsh) law. This is the subject of intense debate and political disagreement.

In the autumn of 2017, the UK Government introduced the European Union (Withdrawal) Bill to Parliament with the intention of repealing the European Communities Act 1972 and making other provision in connection with the withdrawal from the EU. For the purposes of regulatory consistency and to ease the process of negotiating a transition agreement and longer term, a trade deal with the EU, the UK Government recognised the necessity of adopting much of the regulation and legislation that derived from the EU into domestic law. This draft Bill will essentially convert EU law into UK Law.

The EU (Withdrawal) Bill seeks to save the provisions of EU law and describes them as being a body of “retained” EU law within the UK. Essentially, the “UK Government” will replace the “EU” in all regulation where the EU used to be the overriding authority. For example, through the provision of the EU (Withdrawal) Bill, all the provisions of the CAP, including the rules and regulations, will continue to be the law in the UK after 29 March 2019. Those rules will be fixed in time, and any changes to those laws will have to be made by Parliament in Westminster until such point that the powers can be passed on to the Devolved Administrations through frameworks.

UK Ministers continue to reiterate their intention that, in the long term, Brexit is an opportunity to enhance the powers of the Devolved Administrations. However, the Devolved Administrations have a differing view as to the constitutional merits of the approach proposed in the draft Bill:

 

UK Government Interpretation

Welsh Government Interpretation

UK Ministers argue that   there is a need to ensure a smooth exit from the EU and the proposals as set   out in the draft Bill are the simplest and most effective way of returning   the sovereignty of Parliament. For that reason, the UK Government will retain   all relevant EU legislation until such time in the future as it can be   unpicked and competency given back to the relevant devolved governments in   line with the devolution settlements.

 

Agriculture   and Environment are devolved matters and Welsh Ministers are accountable for   delivering against these policy areas in Wales. Currently, when a EU   regulation needs to be adopted into UK law, the government with the relevant   competency passes the legislation in the way it sees fit. As such, as the UK   exits the EU and “brings back” legislation and regulation, Welsh Government   believes that these rules should come back directly to Cardiff and that there   is no requirement for these to be ‘retained’ at Westminster for a period of   time.

Alongside, the EU (Withdrawal) Bill, the Secretary of State for Wales established an Expert Implementation Group, which CLA Cymru is represented on, to support a smooth and orderly exit from the EU for Wales. The Panel has been providing two-way communication from Wales into the heart of UK Government, and specifically informs UK Government on where UK frameworks may be needed alongside the Withdrawal Bill and how they might operate in practice.

All involved agree that there is a need for co-operation through ‘frameworks’ and there has been some progress by politicians. Negotiations between respective Ministers at the Joint Ministerial Committee (EU Negotiations) have agreed that common frameworks will be established where they are necessary in order to: 

  • Enable the functioning of the EU internal market, while acknowledging policy divergence
  • Ensure compliance with international obligation
  • Ensure that the UK can negotiate, enter into and implement new trade agreements and international treaties
  • Enable the management of common resources
  • Administer and provide access to justice in cases with a cross-border element
  • Safeguard the security of the UK 

However, the term ‘framework’ has been over-used and over-simplified. It has come to refer to all arrangements in all circumstances where EU-derived law is intended to return to Westminster control through the provisions of the European Union (Withdrawal) Bill in areas which have been devolved, but takes no account of the sensitivities of how they are created and where the balance of power lies.

 

As the EU (Withdrawal) Bill has progressed through Parliament, the intensity of the debate has intensified. While the draft Bill made it through the House of Commons, the House of Lords continues to consider the constitutional merits of the approach. For a number of weeks, Cabinet Office Minister and Chancellor of the Duchy of Lancaster, David Lidington, has made clear his intention to bring forward amendments to clause 11 to recognise the concerns of the Devolved Administrations and these were outlined in his speech in Flintshire on 26 February, but it did not go far enough to satisfy the Devolved Administrations.

 

On 27 February 2018, Welsh Ministers asked the Assembly to consider the introduction of the Continuity Bill as an emergency measure in the event it was unable to offer its consent to the Withdrawal Bill. The Law Derived from the European Union (Wales) Bill seeks to transfer EU law in areas already devolved to Wales into Welsh law on the day the UK leaves the EU. This will provide Welsh businesses with the legal certainty and stability they have long called for. This emergency measure, is introduced in parallel to similar measures in Scotland.

The Welsh Government’s preference remains for the UK government to amend the EU (Withdrawal) Bill in a way that satisfies their concerns. But, as so much time has passed without any agreement between the Governments on the amendments required, they felt the need to proceed with the Continuity Bill as a fall-back option to protect Welsh devolution. It is the ‘insurance policy’.

Carwyn Jones:  “We remain constructive partners in talks with the UK government about changes to their EU Withdrawal Bill – and this remains our preferred outcome. However, we are running out of time and have developed our bill to prepare for a situation where the UK government does not adequately amend its bill to respect the devolution settlement. It would be irresponsible to refuse to give legislative consent to the UK government’s bill while also not being prepared to put in place our own measures to give clarity about EU-derived law in Wales relating to devolved matters”.

On 6 March, 44 Assembly Members backed the plan, with 10 members voting against. This means that the legislation will pass through the Assembly quicker than usual and could clear the legislative process as soon as 21 March if the Assembly members chose to make it law.

Why is this constitutional debate important (or relevant) to CLA members?

This is essentially a constitutional debate, but it is significant as it is distracting attention away from the substantive discussions on policy and funding. Farming and land use have become the topics through which the constitutional debate is discussed and described, but this has delayed the timeline for actual policy development until the last few weeks.

The impact of the constitutional debate on the agriculture and land use sector is clear to see from the UK Government’s announcement of 9 March where they outlined the 24 areas where there they believe they need to temporarily retain powers at a UK level which would frustrate the powers of the Devolved Administrations. These include:

  •  Agricultural support
  • Animal welfare
  • Fertiliser regulations
  • Animal health and traceability
  • Genetically modified organisms’ marketing and cultivation Organic farming
  • Food labelling

 Future Agricultural Policy

 In Wales

In response to the Referendum result, the Cabinet Secretary for Energy, Planning and Rural Affairs, Lesley Griffiths, took a proactive approach and quickly established a stakeholder Round Table for her portfolio. The Round Table has met regularly since then to inform and prepare for Brexit. This Round Table forms part of a wider Welsh Government response to Brexit which has led to the preparation and publication of a high level position paper called Securing Wales’ Future.

The Rural Affairs Round Table established a number of sub-groups that have developed thinking over the last year. The Evidence and Scenarios group, which has recently published its report, has assessed the evidence of their impact of Brexit in a number of scenarios. The Land Use group has considered the future shape of land use policy in Wales, including the delivery mechanisms for this that fit in with our unique Welsh legislation. The Trade group has looked at trading patterns and opportunities that may appear post Brexit. Importantly, all consideration of future Welsh land use policy is built upon the existing legislative framework that has been established in Wales over recent years.

The Well-being of Future Generations (Wales) Act requires public bodies in Wales to think about the long-term impact of decisions, to work better with people, communities and each other, and to prevent persistent problems such as poverty, health inequalities and climate change. The Act is unique to Wales and is considered an opportunity to make a long-lasting, positive change to current and future generations. The legislation also embeds the Sustainable Development principle into law. This is described as "The process of improving the economic, social, environmental and cultural well-being of Wales by taking action, in accordance with the sustainable development principle, aimed at achieving the well-being goals." It sets out five ways of working needed to achieve the seven well-being goals.

The Environment (Wales) Act puts in place the legislative foundation needed to plan and manage Wales’ natural resources in a more proactive, sustainable and joined-up way. The Act will mean significant economic, social and environmental benefits for Wales. It has been designed to support and complement the work to help secure Wales’ long-term well-being, so that current and future generations benefit from a prosperous economy, a healthy and resilient environment and vibrant, cohesive communities. The National Natural Resources Policy, developed under the Environment Act sets out the measures needed to enable Wales’ to achieve these objectives. It also helps to tackle the challenges and focuses on the opportunities. Importantly, farming and land use are recognised as major contributors to how we manage our natural resources, and it is in this context that post Brexit farming policy will be developed.

On 20 February, Cabinet Secretary Lesley Griffiths set out her vision for post Brexit Land use policy in Wales and kick-started a conversation with the industry on how this can be delivered.

  •  •          Must keep Farmers on the land – Welsh land must be managed by those who know it – this is best for  the rural economy, communities and environment.
  • •            Agriculture sector must be prosperous and resilient in the future. Status Quo is not an option. Basic  Payment Scheme will not help withstand changes brought on by Brexit.
  • •          New policy should be based on land delivering public good for all the people of Wales. Public good is not just about  environment: the Welsh landscape underpins the Welsh brand so is vital for tourism and food.
  •  •          Support should be accessible to all – giving farmers an opportunity to make a living from the land. This may mean asking farmers to do different things in return f     or tax-payer money.
  •  •          Not turn our back on food production compete in a global market. This is also about supporting supply chai- where sustainable production is viable, must help farmers ns processors and manufacturers.

 

 

 

  1. In addition to these principles setting out the vision for future policy, the Cabinet Secretary made a number of important statements in terms of the wider context:

 

  • Farming in Wales is different and policy for Wales should be made in Wales.
  • Welsh Government’s belief is that there is a need for greater clarity on what funding will return to Wales. However, for the first time the Cabinet Secretary has stated that she will fight to protect all the funding that is returned to Wales for agriculture to be used for agriculture.
  • Recognises the need for working across the UK – but states that this needs to be done on the basis of equal partners with fair decision-making, fair governance and fair funding.

These are high level principles which set the direction of travel. More work is on-going to flesh these ideas out and a detailed consultation on a command paper is expected over the summer.

 How does this compare to England?

When making comparisons between England and Wales, it is important to remember that there is a different journey in terms of developing post Brexit policy, starting from a different place. There is no parallel in England to the Well-Being of Future Generations (Wales) Act and the Environment (Wales) Act, so while the concepts of sustainability and well-being are well-established in the Welsh psyche, these are new conversations for our English counterparts. Recent announcements by UK Ministers are focused on England such as the launch of the DEFRA 25 year environment plan in January and more recently the consultation Health and Harmony: the future of food, farming and the environment in a Green Brexit. However, while badged ‘for England’ we must be mindful that due to the ongoing disagreement as outlined above, these policies will influence or possibly impose certain outcomes in Wales – be those budgetary or policy-related. Furthermore, the boundary between England and Wales is porous and complex supply and processing chains cross the border on a daily basis.

 In England

Several strategic documents and plans already in progress in Westminster were held back and redrafted to take account of the implications of EU Exit. The modus operandi in Westminster following the referendum result was to get their own house in order before engaging with stakeholders. The doors have now been opened and two key strategic documents have been issued for consultation.

On 11 January 2018, the Prime Minister finally launched the long awaited “A Green Future: Our 25 Year Plan to Improve the Environment”. This is a comprehensive plan covering 48 policies and identifying 270 actions for Defra. Many of the proposals in the plan will directly affect the CLA membership.

According to the Prime Minister in her introduction “We hold our natural environment in trust for the next generation. By implementing the measures in this ambitious plan, ours can become the first generation to leave that environment in a better state than we found it and pass on to the next generation a natural environment protected and enhanced for the future”.

Although not crystal clear, it is assumed that much of what is included is for England only, but the report states that the outcomes from the Plan are likely to be implemented via a Domestic Agricultural Policy. It is not clear what this means for Wales and whether this means that, by stealth, the Environment Plan will also become applicable in Wales. Either way, it is clear that the ideas are mirroring concepts already enshrined in ‘Welsh’ law.

The report proposes changes to land use policy, including the introduction of biodiversity, offsetting and significant changes to agriculture support. The paper discusses concepts of public money for public good and payments for ecosystems services. The paper also includes a more effective application of ‘polluter pays’.

The paper includes an aspiration to connect people and the environment to improve health and wellbeing.

This doesn’t include imposing or funding greater access rights, but instead encourages better use of what we have. These aspirations resonate with our well-being legislation and more recently with the discussions we had in Wales last summer with the consultation ‘Taking Forward Wales’ Sustainable Management of Natural Resources’.

On 27 February, Defra published their consultation entitled ‘Health and Harmony: the future for food, farming and environment in a Green Brexit’ outlining plans to change the way that land is used post Brexit. Amongst other things, it sets out:

  •  The intention of the UK Government policy is to end the basic payment system in England.
  •   The system that eventually replaces BPS will be based on ‘payment for public good’ the main  public good is ‘environmental enhancement’, but the government is open to payments for a range  of other public goods.  o The current basic payment system will stay the same, unaltered, through the 2019 payment  window, but changes could start happening after that.  o There will be a transition period (exact length to be decided) during which the basic payment  scheme will be phased out, probably through a series of staged reductions in the amount claimants  of different sizes receive.  o The Government will continue to make available new Countryside Stewardship agreements and  all schemes will be paid until the end of the contracted period.
  • The new scheme will be piloted with opportunities to get involved from as early as 2021.

Again, while the consultation is clearly focused on English policy, it is important to set this against the issues outlined above and to recognise that what happens in England might, directly or indirectly, impact on what options are available for Wales depending on the constitutional arguments and more importantly budget allocation. Applying the Barnett formula to agriculture funding would be catastrophic.

The table below summarises some of the key developments in recent weeks and leading up to Brexit:

 

2018

EU

                   UK GOVERNMENT                             WELSH GOVERNMENT

11 Jan

 

Defra 25-Year Environment Plan

 

Feb

 

House of Lords debate EU (Withdrawal) Bill

 

20 Feb

 

 

Cabinet Secretary sets out vision for post Brexit   agriculture policy in Wales

26 Feb

 

Lidington Speech on Frameworks

 

27 Feb

 

Defra launches ‘Health and Harmony:

the future for food, farming and environment in a   Green Brexit’

Welsh Ministers introduce Emergency

Continuity Bill

6 Mar

 

 

Welsh Ministers vote to take forward Continuity Bill   as Emergency legislation

21 Mar

 

Wales  Continuity Bill 

Continuity   Bill could  become law

22/23 Mar

Brussels Summit on Trade

 

 

 

 

  

 

Apr

Talks on Trade

 

 

28-29 Jun

Brussels Summit

 

 

 

Jul

 

UK Agriculture Bill

Command Paper on Welsh Agriculture

Policy    

18/19 Oct

 

Target for agreeing EU (Withdrawal)

Bill

 

Jan 2019

 

Ratification of EU (Withdrawal) Bill 

 

29 Mar

 

BREXIT

30 Mar

 

TRANSITION BEGINS

 

 Commonality

 Whilst confusion remains on exactly where control and accountability lie, the policy direction and principles underpinning the approach of both Westminster and Cardiff have several areas of commonality that can give an indication of what to expect in future.

Both sides of the M4 have identified the payment for public good as the underpinning principle for agriculture sector support in the future. Whilst there are some differences in interpreting “public goods/ public benefit” – Westminster is more environmentally focused compared to Welsh Government’s broader social and cultural definition – the underlying principles are common. There have been clear indications from both governments that the world of public goods does not include direct payment as we now know it.

It has been acknowledged by all governments of the UK that the agriculture and land use sectors do not respect political boundaries and that there is a need for co-operative working between governments through a framework to prevent the creation of internal markets. Work continues to understand what this co-operative working will look like, but the acknowledgement that our complex supply chains mean that joint working is necessary is encouraging. The flip-side of the ‘power grab’ argument in relation to the recent announcement on frameworks is that it begins to outline the areas where co-operation is essential.

 Outstanding issues

The conversation around the future of agriculture support is now firmly in the public sphere and some progress being made around developing principles. There is, however, a significant number of outstanding issues that require early attention to understand the impact of Brexit for businesses on the ground in England and Wales.

 

Frameworks

Until the four governments of the UK can   reach a comprehensive understanding of how they will work together in the   future, there exists a number of major decisions that need to be taken:

  •   What   institutions need to be realigned/created to deliver the new world policy?
  •   Are   these England and Wales, or separately?
  •   Where   will ministerial accountability lie?
  •   What is   the inter-governmental dispute resolution process? § How/where will borders with the Republic   of Ireland lie?

 

Budgets

How does agricultural money get to Wales in   the Future?

Under   the current CAP régime, 16% of the budget is spent in Wales. If the money for   agriculture policy were delivered to Wales with the annual block grant using   the Barnett Formula, it is estimated that this would fall to 4%. Budget   allocation may be a means through which Westminster could control policy   delivery in Wales indirectly. There is concern that failure to adopt   similar/same policy interventions as proposed for England could lead to a   ‘Barnetisation’ of funding.

 

Timeline

Defra,   however confusingly, are in the process of setting their timeline for moving   from current support structures to future arrangements through a series of   transitional and implementation periods. For Welsh farmers, there is the   added complication that Welsh Government have not set out their intentions   and timelines.

 

Crossborder holdings

Historically,   individuals with land straddling a border between England and Wales have   faced the most confusion, delays and annoyance in terms of policy and   payments. There is

 

no indication that there   is any regard to these businesses and little comfort can be offered that this   will change in the future.

 

Trade

Agriculture   is a commodity business and many key sectors in England and Wales are heavily   reliant on trade outside the UK. This is particularly the case for livestock   and trying to achieve carcass balance. Competency for trade policy lies with   Westminster and although under the leadership of the Secretary of State Dr   Liam Fox there has been some pleasant rhetoric about working with Devolved   Governments to reassure Welsh producers that their products will be able to   access appropriate markets, the black and white reality is currently far from   convincing.

 

Whilst   the trade with the EU is caught up in Brexit negotiations, it is important to   consider that although trade is essential for the agriculture sector,   agricultural trade is not as essential to the UK economy. More often than   not, agricultural products are not considered in Free Trade Agreements around   the world due to the complexity of the subject.

 

European

Structural

Funds

The   Common Agriculture Policy has received significant political attention in the   press as it is the foremost policy area being used to test the waters of   Brexit change. Overall, however, the reach and influence of CAP in Wales is   far surpassed by the use and impact of European Structural Funds.

 

These   funds underpin almost all economic development activity across the country   including infrastructure, construction and business development.

 

Welsh   Government has already begun to look at the issue of replacement for this   funding, but Westminster has indicated it will not be looking at this area   until December – four months before we exit the EU. Historically, CAP and   Structural Funds have been separated by state aid limitations and artificial   barriers. Now could be an opportunity to revisit some of these foundational   principles through which government intervention to support business growth   is delivered. There is a conversation needed about where business support to   increase productivity/business efficiency and increase competitiveness within   the agriculture sector sits. The delays and complexities of agricultural and   environment policy are causing a backlog in other, equally essential policy   areas to the potential detriment of Wales.

 

 What Next?

The constitutional debate is ongoing and is likely to dominate proceedings for the short term. The CLA continues to put pressure on politicians to move beyond the constitutional debate and focus on developing appropriate policy and processes and CLA continues to make these arguments at Westminster and in Cardiff.

An immediate priority is to plot a timeline beyond Brexit to understand the impact on businesses on the ground.

 CLA Cymru intends to keep this briefing updated as developments come to light.

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