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Vice-President, Policy & Resources Committee - Brexit Update

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Wednesday 26 September 2018

This is the fourth update statement from the Policy & Resources Committee on the States of Guernsey's work as the UK negotiates to leave the EU. It has been a busy summer for anyone working on Brexit matters and we continue to progress our preparations for whatever situation may unfold beyond March 2019.

In October or November of this year the UK Government is seeking two agreements - a legal text, 'the Withdrawal Agreement', and a political agreement on the framework for the future relationship with the EU. However, if the UK fails to achieve these there is the possibility of a 'no deal' scenario where the UK will leave the EU without any agreements. The States of Guernsey is preparing for both outcomes.

Engagement with the UK

We continue to work hard at political and official level to ensure that Guernsey's, and the wider Bailiwick's, position is clearly understood and that our views are taken into account. The UK Government remains committed to representing those views, even if they differ from their own. We are working alongside Jersey and the Isle of Man and our engagement remains strong across a wide range of UK government departments.

For example, we are in regular contact with HM Revenue & Customs on the establishment of a customs arrangement with the UK to replace Protocol 3; the Department for International Trade about the future international and global trade in goods and services; and with the Home Office on issues relating to the movement of people, covering both the free movement and settlement of British and EU citizens within our community. We are also engaging in wider policy areas, such as with the Department of Health and Social Care, planning for the continued provision of healthcare and medicines and the prevention of diseases. These discussions will continue, and undoubtedly will intensify further, across the UK Government as March 2019 approaches.

In March 2018, the Cabinet Office established a fortnightly 'Crown Dependencies Contact Group' at senior officials' level - an essential link to ensure clear dialogue and understanding of the UK and Islands' positions and planning.

There is evidence that this continued engagement is helping to ensure our interests and position are well understood by the UK. In early July, Deputy St Pier attended the latest Crown Dependencies 'Chief Minister's Quarterly Meeting' chaired by Robin Walker MP, Minister at the Department for Exiting the EU, together with representatives from Jersey and the Isle of Man and the Ministry of Justice Minister, Lord Keen. The UK's depth of understanding of the issues which might impact the Bailiwick of Guernsey was obvious and encouraging. The next such meeting is taking place next month.

The British-Irish Council continues to provide a valuable opportunity to discuss matters of mutual interest with Heads of Administrations from each of the BIC Members. Guernsey hosted a BIC Summit in June, at which we secured in the final communique all Member Administrations' recognition of the importance of respecting and upholding the long established and formal relationships that we share. The next BIC Summit is in November and will be most timely for the Brexit process.

Furthermore, Guernsey's government will be represented at both the Conservative and Labour Party conferences this year - by myself and Deputy Le Tocq respectively - to continue to develop a wide base of engagement with UK MPs. States Members will also be aware that Deputy St Pier has written to the Prime Minister this week to reiterate once again that it is vitally important that our interests in the Brexit process continue to be taken into account and that our ancient constitutional relationship with the Crown is upheld. That letter was an opportunity to express the view that a deal that provides an orderly exit and a strong economic outlook for the UK is in the best interests of Guernsey; and that a no deal outcome would not be in our interests.

The UK's position

On 6th July, at Chequers, the Cabinet agreed a collective position for the future of the UK's negotiations on Brexit, known as the 'Chequers Proposal'.

On 12th July the UK Government published its white paper based on this proposal outlining the Cabinet's views on 'The future relationship between the UK and the EU'. The white paper outlines that the UK Government is seeking 'a principled and practical Brexit' in the form of an Association Agreement. A UK/EU Economic Partnership is proposed to allow free trade areas for goods, leading to a frictionless border via a "Common Rule Book". The white paper also outlines proposals on digital commerce, services and investment, free movement and socio-economic cooperation. It suggests binding provisions relating to open and fair competition, these horizontal commitments intended to ensure a 'level playing field' for trade. We are continuing to assess the possible impacts for Guernsey of this proposal, whilst awaiting the formal October European Council meeting - during which the EU is expected to provide their response to the Chequers Proposal.

The UK Government is publishing a wide range of technical guidance notices which cover potential outcomes if the UK and EU fail to reach an agreement. Those notices also consider what mitigation might be necessary. As those papers are published, they are being analysed for local implications and the States will publish information via our website to explain if, and how, no-deal impacts could affect Guernsey.

Guernsey's Readiness

The Policy and Resources Committee's Brexit Group, which includes representatives from the Committee for Home Affairs and Committee for Economic Development, together with CIBO, continues to meet every two weeks. Each time, the Group is kept informed and coordinates the strategic response to latest information from Brexit discussions and negotiations.

Legislation Planning

In November last year, the States considered the necessity of legislation to enable the Bailiwick to continue to function after Brexit. Two Projets were approved by the States in June this year and have subsequently been approved in Sark and more recently in Alderney. There is a third 'overarching' Brexit Projet to be considered in all three islands before the end of the year. This will be joined by a customs Projet, led by the Committeefor Home Affairs, to underpin the new customs regime that will be required when our Protocol 3 relationship ends.

As has previously been indicated, it is likely that the three Bailiwick legislatures will need to consider further Projets and secondary legislation to ensure that we maintain the flexibility and ability to respond quickly to events. This is likely to include matters linked to trade, as well as other legislative fixes required as a consequence of the UK's exit. Some of this may be at short notice. This legislation will be essential whether there is a 'deal' or 'no deal'.

The States have made it clear that EU nationals within our community should not face undue uncertainty. Therefore immigration legislation is being considered to ensure that those who are eligible to do so, can apply to settle in the Island in the same way as EU nationals will be able to throughout the UK.

Guernsey's Deal Planning

It is essential to the Bailiwick that any deal between the UK and EU takes our interests into account, and respects our ancient links with the Crown. Areas such as international trade in goods and services, immigration and transport are paramount to our economy and objectives.

Guernsey officials are working closely with HM Revenue & Customs to establish a future Guernsey-UK customs arrangement underpinned by a Ministerial agreement and legislation which will need to be considered by the States Assembly before it takes effect, in accordance with the States' Resolution on customs matters from July. This should ensure that goods from outside the UK, from the EU and globally, will be able to continue to flow into and out of the Islands as they do now. The proposed agreement is essential for the Bailiwick's economy. It demonstrates the close and detailed cross-Committee work that is going on between the Policy & Resources Committee and the Committeefor Home Affairs.

Consideration is also being given to the potential opportunity for Guernsey to join the UK's Membership of the World Trade Organisation ('WTO'). Joining the WTO would enable Guernsey to trade in goods and services globally using the WTO's rules which ensure that all countries trade on the same basis and are protected from any unfair or excessive trade sanctions (trade restrictions or high tariffs). Obtaining membership of the WTO would be significant for the Bailiwick's future. It will ensure that the Islands can trade with, and be treated as, any other global trading partner. Preparatory work has progressed well and I am hopeful that we will be in a position to present more details on this to the Assembly for consideration in the coming months.

Guernsey's Contingency Planning ('No Deal' Planning)

Whilst both the UK and the EU maintain that negotiating a deal is the priority, the probability of a 'no deal' scenario has increased since July. Plans are being advanced to ensure that critical services and supplies can continue to flow in and out of the islands if the UK leaves the EU with no deal.

If there is a disorderly exit on 29 March - referred to by many as a 'cliff edge' due to the potential sudden change in arrangements - the Bailiwick needs to ensure that proportionate contingency plans are in place.

Some of the priority areas for a 'no deal' scenario include:

The Civil Contingencies Authority has been briefed on current planning and will provide governance through its political oversight of Guernsey's 'no deal' contingency planning moving forward.

It is particularly important for 'no deal' planning that the various Committees work together to consider what mitigation might be required. We are working closely with our colleagues in Jersey as there may be pan-Channel Island solutions to many 'no deal' challenges. We are also liaising closely with the Isle of Man. It is vital that information is shared between the UK and the Crown Dependencies to ensure that our planning is aligned, particularly in areas where we are dependent on UK supply chains.

One example of joint working within the Bailiwick is in respect to road traffic and the status of Crown Dependency registered vehicles and drivers, particularly in the event of a no deal scenario. Guernsey licensed drivers might need an International Driving Permit issued by the States of Guernsey to continue to be able to drive in the EU post-Brexit. The Policy & Resources Committee and the Committee for the Environment & Infrastructure are considering the extension of the 1968 Vienna Convention on Road Traffic before the 29 March 2019. This would safeguard the ability for Guernsey licensed vehicles to be driven throughout the EU post-Brexit. The extension of the Convention would require the introduction of periodic roadworthiness testing of commercial and private vehicles. The Committees are working to find a way to introduce and roll out such a scheme in a practical and proportionate way. The Government of Jersey is seeking to do the same.

Resource implications

The Policy & Resources Committee continues to keep resource requirements under constant but close review in liaison with other committees, particularly Home Affairs and Environment & Infrastructure, as well as St. James' Chambers. We have approved funding requests for additional resources, including in respect of systems changes that are required within the Guernsey Border Agency. We anticipate further requests will be forthcoming for areas such as immigration and the supply of passports. In order to help manage this transition, in the 2019 Budget Report to be published on 8th October, we will be recommending that a £3m Brexit reserve be established to enable us to manage the further costs that will be incurred whatever the outcome of the UK's negotiations. I should emphasise that this number is not a budget, a forecast or an estimate. It is simply a prudent recommendation based on the information available to date. The final expenditure may prove to be greater than or less than this sum, dependent on many variables.

In conclusion

Challenges still lie ahead on the road to Brexit. There is a need to prepare for various possible outcomes, against a ticking clock. That clock is ticking more loudly as the deadline is now only six months away! Whilst it is still not clear how the UK/EU negotiations will conclude, I am clear that Guernsey's government is leaving nothing to chance.

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