Regulatory Mayhem ahead

David Hannay is a member of the House of Lords and former UK ambassador to the EU and UN.

It is high time that the government took Parliament and the public into its confidence over the risks and challenges that lie ahead in charting a course through the regulatory complexities of leaving the EU. So far they have said virtually nothing and, so far as one can tell, have done virtually nothing to address these regulatory issues.    

The scale of the problem is huge. There are 30-40 EU regulatory or standard setting agencies whose jurisdiction in the UK will cease on the day we leave. While in some instances we still have national agencies which mesh with these EU ones, in many we rely entirely on the EU body and have little or no national expertise.

No doubt some of the rulings of these EU bodies may seem vexatious – bankers certainly resent having their bonuses capped, although others might not share that view – but by and large they perform a crucial function in protecting consumers, workers and the environment and much more besides.

And before Brexiters throw their hats in the air at the prospect of a funeral pyre of Brussels regulators, just remember that many of these agencies deal with vital issues affecting the lives of individual citizens – the launching of new medicines, the management of dangerous chemicals, the regulation of banks, nuclear energy, aviation safety, maritime safety, food safety, judicial and police cooperation. Remember too that it is the work of these agencies which helps to ensure the frictionless trade across the biggest single market in the world, which it is the government’s ambition to replicate as closely as possible in a post-Brexit world.

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In theory, we could establish national regulatory agencies for those functions which are essential. But that requires the recruitment and training up of specialist staff – incidentally reversing the trend of recent years to shrink the number of civil servants; it requires the installation of sophisticated and efficient IT systems on which our recent track record has been patchy, to put it politely; and it will incur costs which will take a substantial bite out of the funds we will not be sending to Brussels (in any case much less than that mythical figure of £350 million a week in which only the Foreign Secretary seems still to believe). No one can seriously think that this can all be accomplished in the 17 months remaining before the end of March 2019. Which is why the enthusiasm of many Brexiters for crashing out without a deal is so grossly irresponsible.        

That pretty horrendous regulatory cliff-edge is one of the factors driving the adults in the government towards the need for a transitional period, during which we would effectively remain within the EU’s regulatory framework which is policed by the European Court of Justice. That was the sense of what the prime minister proposed in her Florence speech, although she remained, and remains in Parliament, remarkably coy about the extent to which, during that transitional period we will become a rule-taker rather than a rule-maker.

Moreover, transition remains no more than a postponement of the cliff-edge, not its removal. And there is little doubt that the risk of regulatory divergence between the rules laid down by our new regulatory agencies and the EU’s agencies will massively complicate the negotiations for a new trade relationship between us. So much for taking back control .        

Not one word about these complexities was uttered by the Leavers in the referendum campaign; and they are not saying anything about it now either. Their supporters have simply been sold a pig in a poke.

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Edited by Hugo Dixon