Exiting the European Union Committee
Oral evidence: The progress of the UK’s negotiations on EU withdrawal, HC 372
Wednesday 10 October 2018
Ordered by the House of Commons to be published on 10 October 2018.
Members present: Hilary Benn (Chair); Mr Peter Bone; Joanna Cherry; Stephen Crabb; Mr Jonathan Djanogly; Richard Graham; Peter Grant; Wera Hobhouse; Andrea Jenkyns; Stephen Kinnock; Jeremy Lefroy; Mr Pat McFadden; Seema Malhotra; Mr Jacob Rees-Mogg; Emma Reynolds; Stephen Timms; Sammy Wilson.
Questions 2686 - 2770
Witnesses
I: Sir Amyas Morse, Comptroller and Auditor General and Head of the National Audit Office.
II: Jill Rutter, Programme Director, Institute for Government; Julian Jessop, Chief Economist, Institute for Economic Affairs; Sir Simon Fraser, Deputy Chairman, Chatham House, and Adviser, Europe Programme, and former Permanent Secretary, Foreign and Commonwealth Office.
Witness: Sir Amyas Morse.
Q2686 Chair: Good morning. Can I welcome Sir Amyas Morse, Comptroller and Auditor General from the National Audit Office? We are very grateful to you, Sir Amyas, for coming to give evidence to us this morning. You are the first of two panels this morning, and a number of us have questions that we want to put. As ever, succinct questions and answers as succinct as possible would help us to get through all of the things that we would like to cover. I will begin by asking you which you think is going better: preparing for a deal or preparing for no deal.
Sir Amyas Morse: Very good, Chair; that is a great start. They are quite similar actually. Preparing for no deal has had the stimulating fear-factor effect of getting people to get down to it a bit in thinking through some of the practicalities, which took quite a long time to get started. They only got started when people realised that we really might not have a deal. It spurred more cross-Government working and a sense of urgency to the whole thing, which has probably helped push things forward. I will say it like that. I am retaining both halves of the apple, if I can say it like that.
Q2687 Chair: What happened to the “chocolate orange”?
Sir Amyas Morse: I am sorry for the fruit imagery; I apologise to the Committee. The intervention I gave at that time was because I was really concerned that I was not seeing a sense of overall priority and urgency, being frank. I saw that particularly instanced by our first major piece of work, which was on the border systems project. I found that was ranked as one of HMRC’s priorities and it was having quite a lot of difficulty getting agreement for extra funding to uprate the CHIEF system, which has now moved forward into being an important part of the way of dealing with a hard Brexit. The whole thing was not moving with the sense of urgency and cross-departmental co-ordination that it needed to have. That was the reason for raising the temperature.
I had said a year before that I thought there was already a massively heavily loaded programme in Government, before Brexit. There needed to be some sense of realistic prioritisation about that programme and, in addition to that, there needed to some hard talk about what could and could not be done on Brexit, all at the same time. A year later, I did not see many signs of that having happened and that is the reason for upping the tempo a bit with that issue.
Q2688 Chair: Are you saying to us there has not been prioritisation among all the competing priorities, both those that existed before Brexit came on the scene and all of the Brexit stuff that Departments have to deal with?
Sir Amyas Morse: There has been some. Some Departments have definitely done more of this than others. I have not seen a universal reprioritisation. In many cases, I have seen a determined continuation of the full programme, which is true, for example, with the Department for Transport. It has told me in terms, “We’re going to continue doing everything we were going to do before”. I am not finding fault; I am just stating it as a fact. I have seen reprioritisation in HMRC and in Defra.
Q2689 Chair: Talking of Defra, which Government Department are you most concerned about when it comes to preparations? You particularly highlighted Defra.
Sir Amyas Morse: There is a difference between being concerned and critical. Defra’s portfolio happens to have the most concentrated number of challenges in it, as far as I can see. HMRC has a fair number as well. The Departments we have done studies on, particularly the recent studies on transport and Defra, are the ones we probably have most concerns about, and I would include HMRC behind that, because a lot of the systems that HMRC provides are critically interdependent on the capability of those two other Departments. The reason we have done studies on them is because we think they are the ones with the most significant Brexit issues. They are not the only Brexit issues, but the most salient ones.
Q2690 Stephen Kinnock: Good morning, Sir Amyas. The Chair has already mentioned your comment back in July about the potential for the Government falling apart like a “chocolate orange”. In the event of no deal, how high would you estimate the risk of that chocolate-orange scenario in reality?
Sir Amyas Morse: I do not think it would because, since then, a number of cross-working entities have come into existence in government, most notably the Border Planning Group. That group has been quite effective in pulling together a consideration of border issues and in reflecting realistic assessments of risk into central Government, up into the top levels of government. There is a more unified view, which is being reflected in the ministerial committee. There is a more unified view.
There is so much concentrated risk. If you think about it, if you pardon me saying, you would not start from here. A lot of things are going forward with very short timescales and, generally speaking, the civil service is putting a terrific effort behind this, but because of the large number of unresolved risks that will be there in March, some are bound to come to reality. Rather than saying it will fall apart like a chocolate orange, what will happen is there will be points of failure.
Q2691 Stephen Kinnock: Are you in a position to say where the most likely points of failure will be, in all probability? Where do you see the major pressure points?
Sir Amyas Morse: Can I answer it like this? Rather than predicting failure, I would say there are points of crucial interdependency. There are a lot of systems that are dependent on the CDS system working. When you analyse it, you realise there are points of complex interdependency where, if one thing does not work, is not ready on time or is not working properly, it has an effect across the system on quite a number of other activities in other Departments. That is one thing to say. It is inevitable that the areas that will be under most stress will be at the border. I am not going to pick the losers any further than that, but I would say the challenges will lie at the border.
Q2692 Stephen Kinnock: If we take an example such as agricultural products such as meat, currently that flows around the European Union with no checks whatsoever, but meat coming in from outside the European Union is checked. Approximately 20% to 30% is stopped at the border and checked by vets and other regulatory bodies. If that scenario is what we are looking at on 30 March, are you confident that the meat industry, to take it as an example, and the public administration that underpins it would be able to cope with the new checking procedure?
Sir Amyas Morse: What I can say is this. The Department has thought about this and, as far as possible, is taking action, but it is not necessarily suggesting that all those actions will be completely effective. For example, they are checking what capacity there is in the market for veterinary services for people to be available to do more certification. They are exploring areas where they could use people who are not fully qualified vets to do parts off this work. What they are doing as mitigation is all sensible, but it does not follow that there are no circumstances in which all those sensible actions may not fully mitigate the risk.
Q2693 Jeremy Lefroy: Could we turn to the planning by DExEU for Departments moving beyond next March? Have you seen a step change in the Departments’ focus since the Public Accounts Committee report in February with more work on implementation?
Sir Amyas Morse: Yes, I have, but it is completely to be expected that what would happen would be a step-down where DExEU had a very major role at first in creating central plans and implementation of policy. Then that gets spread out to the Departments to develop their plans, then you need to have plans that result in things actually happening, so there is a natural progression through those. Now, the Departments are engaging in getting plans in place and getting expertise to make things happen on the ground. It is not a criticism to say that that was how the sequence went, but we are now at the more challenging end. Everybody enjoys planning, but the question is: is anything going to happen? Will it happen to the right timescale? How will that go? We are at the point now where the detailed implementation planning is happening, which requires different types of expertise. I remember talking to the Permanent Secretary of DExEU, who said, “We built the Department up and the vast majority of people hired have policy expertise”. Well, policy expertise is not going to be terribly helpful when you are into implementation planning.
Q2694 Jeremy Lefroy: You mentioned earlier that you felt that perhaps there were problems in the Department for Transport or that there had not been as much progress in the Department for Transport. Can you give us some indications of what areas?
Sir Amyas Morse: Pardon me; I do not think I said that there were problems in the Department for Transport. What I said was the Department for Transport continues to aim to pursue its full non-Brexit programme. I do not see that as necessarily good or bad, but I was asked the question: has it reprioritised? The answer to that is no; it has maintained its existing priorities. By the way, that is true of the vast majority of Departments in Government. Would I have welcomed a more holistic prioritisation exercise? Yes, I would have done. There is more prioritisation discussion happening now than there was earlier, so we are moving in the right direction, but it might have been helpful to have done that a bit earlier.
Q2695 Jeremy Lefroy: Thanks for that clarification but, given that the Department for Transport covers an area that is likely to see substantial problems if there were going to be problems, and they would be visible very quickly, are you concerned about that particular area?
Sir Amyas Morse: If you go back to what I said about a hard Brexit and the big areas I would worry about, transport is inevitably an area where—you will pardon me for saying—the rubber hits the road. It is clearly an area where, if risks have not been addressed, they will be highly visible and have significant consequences. The first thing to say is the Department has considerable project management expertise from all of the rail, road and other transport projects they run, so it is in the fortunate position of having quite a lot of implementation skill on board and it may use that. It is quite confident about getting everything done. I have some concerns that, because it is faced with this task, is approaching it vigorously and needs to be positive about it, it has convinced itself that it is less risky than it actually is. My job is to be on the objective side of that. If you listen to the Department, there is more risk than it is saying on some of their timelines and projects. Nonetheless, it is approaching all of this vigorously and with considerable expertise.
Q2696 Jeremy Lefroy: Finally, there are two aspects regarding the legal position and the statute book. What is your view on the ability of Departments, particularly the Department for Transport but also others, to have a statute book ready for March 2019? What is your assessment, given there could be a huge difference in outcome if things were dealt with in a relatively flexible way on 30 March and beyond, by the UK and whatever other state parties involved, and a hard‑line approach that went exactly by the rules? Have you had any indication of whether you would expect a more flexible approach to be taken by other parties if everything was not quite in order, as far as the statute book was concerned, either on our side or the other side?
Sir Amyas Morse: First, it is clear that there is a great deal of legislation that needs to pass and so far we have not been progressing according to plan. It does not mean that we will not do in the next period of time, but that is publicly established. I do not feel I have any particular expertise on what rate the House will function or statutes will pass. I am spending a lot of time talking to senior civil servants about this and I am very interested in the issues they face. I have certainly heard civil servants say that the danger in the way this subject is framed is that people are talking about it either being a hard Brexit or not. There is either a deal or is there a hard Brexit, and there is no intermediate point and there are no reasonable mitigating agreements that might be made. Of course, there are a range of things between them that might possibly be put in place.
In thinking about what I might say to you about this, I thought I would say that but, on the other hand, it is very much dependent on good will from both sides. It is not something that can be enforced in any way. It is possible that there might be a set of more nuanced arrangements. In other words, it becomes inevitable that we are going to be leaving the EU without having a withdrawal agreement in place, but there is some understanding of the circumstances of that and some desire to mitigate the impact. That sort of thing might well be possible, but it depends heavily on circumstances and good will. I do not think I can add more than that.
Q2697 Seema Malhotra: Thank you for coming to give evidence today. I will start by picking up the point you were just discussing about the legislative programme and the readiness for Brexit. This is irrespective of whether there is a deal or not. The Government estimated around 800 SIs would need to come through Parliament. I asked the Leader of the House whether she thought the timetable was realistic in September and she seemed to think it was, but I am wondering whether you have a view, based on any further discussions with Departments, about whether there has been significant progress in drafting those SIs. Will the bottleneck just be the timetabling in Parliament?
Sir Amyas Morse: No, it is not just that. I am sure you realised that when you asked your question. In some Departments, there has been some delay in getting SIs drafted. “Delay” is probably not fair, but there have been some bottlenecks in getting SIs drafted. I cannot go into detail on that. There is the drafting end and there is the parliamentary end. You are quite right in saying a lot of these things need to be in place, irrespective of whether there is a withdrawal agreement. I think the sense of urgency and pressure will come on, and there is the possibility that the House will need to thing about whether it is prepared to modify its sittings, et cetera, to try to accommodate faster passage towards the end. I have seen all these considerations being made, but I do not see myself as a great expert on them, to be frank.
Q2698 Seema Malhotra: It is an interesting point, because the Leader of the House also seemed to rule out any changes to sitting times, but it seems to me this is a difficult circle to square.
Sir Amyas Morse: Emergency pressure always has the strange effect of making people think about things differently, sometimes.
Q2699 Seema Malhotra: Are you doing any further work with Departments on any delays to the drafting of SIs to have a clearer view of exactly what the status is?
Sir Amyas Morse: We are not at the moment, but we might do if we find ourselves in the new year and it still looks like there is likely to be an issue. It is possible, but there are other bodies that are better equipped than the National Audit Office to look at the state of preparedness of SIs, so I am not rushing to the front of the queue for that.
Q2700 Seema Malhotra: Thank you very much for that. I also wanted to pick up on some of the issues that you have raised on co-ordination across Whitehall. The NAO has done some extremely important work around the 300-plus workstreams and preparedness for no deal. There has been a lot of difficulty getting clarity on those workstreams and on the publication of those workstreams, even the title sometimes. A recent Institute for Government report on Whitehall highlights what it described as “a culture of extraordinary secrecy” surrounding information. It believes this has been hampering preparations, a lot of which require extensive co-ordination, as you have outlined. Have you seen this level of secrecy in government before, outside of national security, for example? Does it surprise you?
Sir Amyas Morse: No, it does not surprise me. The fact there is an instinct for secrecy does not surprise me, frankly.
Seema Malhotra: It is the level of secrecy around some workstream and Government business issues.
Sir Amyas Morse: Can I for a minute put the other side of the argument, because I have listened to it many times now? The argument is that it might affect negotiations for people to find out what preparedness there is. It might weaken arguments in the possibility that we have options. I listen to that but, to be honest, I have always been very sceptical about that argument. I took the view in planning our work that, irrespective of how it ran, that argument would be beginning to decay when we got to this point. That is why we started by doing a series of briefings that did not contain any kind of assessment. They simply gave information. In the first half of this year we were publishing briefings and now we are doing work where we are evaluating them and giving a lot more detail. I figured that the ability to hold the line on not coming forward with details and workstreams would reduce and, actually, that is what has happened, so we have been able to get more information and put it out. The arguments about damaging our negotiating position have reduced.
To be fair, DExEU would say that that is natural; time has elapsed and negotiations have taken place. All I would say is that it has been visible to me that members of the civil service have been using our reports to find out what is happening on Brexit. I do not think that is a good state of affairs. I am thrilled that I have a wider readership but, if you are asking people to be behind what you are doing, you need to make sure that they know what the overall enterprise is and feel very well-informed. I think it was all taken a bit too far, frankly. Yes, I do think that.
Q2701 Seema Malhotra: Where do you think the co-ordinating and communications point therefore needs to be strengthened? Is it the Cabinet Office, DExEU or Number 10?
Sir Amyas Morse: Those points are more effective now than they have been. The machinery of government changes that have been put in place and the sense of urgency generated by the approach of the March date have led to more openness, clearer messages and clearer prioritisation. On that if I may, looking at this whole thing from the point of view of being a businessperson or a manager, managing uncertainty is very difficult. It is clear that you are trying to make progress, yet you do not know whether there will be a hard Brexit, a withdrawal agreement or more time. I can understand there was a degree of uncertainty as the probabilities looked one way or the other, but one of the most important challenges for leadership is to take away the risk of that and say, “I want you to move forward strongly. We will not blame you if it turns out that not everything you did in the long term pays off”. That is very important, particularly with the possibility of a hard Brexit. We do not want an insurance policy that protects you against what might happen in that eventuality. The answer for a lot of the work is that that could have been signalled through government a bit more effectively and a bit earlier.
Q2702 Seema Malhotra: Thank you; that is extremely helpful. I will ask one final question, which follows on from your point on leadership and co-ordinating in difficult circumstances with perhaps competing scenarios that may take you down different pathways. In a sense, you have to be able to plan effectively for that. There will be a further challenge, which the Institute for Government has raised, which is the length of the transition period. Look at large Government projects and take a couple of examples. The apprenticeship reform programme was six years of planning; the Customs Declaration Service, five years; Making Tax Digital, five years. The Brexit transition period will be 21 months. Do you think that a transition period of less than two years is realistic?
Sir Amyas Morse: If you will forgive me, I saw that and, in one way, you are quite right. When you do major projects, you go through a series of processes in setting them up and planning them. You try to eliminate uncertainty and get a clear goal. All of those have been pointed out by the Major Projects Authority. I do not disagree with that, but one of the interesting features about Government is the interaction between a desirable management approach and political forces. That is not something to be apologised for; that is how it is. You need to try to manage that uncertainty with these different currents coming in.
I would just say that 18 months is a lot better than March. A lot more can be accomplished in that time—not everything but quite a lot of the things. A lot of the things that I see as big risks in March I am reasonably confident will be under control in 18 months. If you said to me, as a principle, if it is desirable to do all of this stuff in double-quick jig time and if everything will be finished in 18 months, no, I do not think it will. But particularly with this shock stimulus of March, quite a lot more will be in place. The gaping risks will mostly have sensible solutions to them. Will they be perfect? No, but they will probably be sensible by that time, in quite a number of places.
Q2703 Mr Bone: Good morning. You are a senior chartered accountant, a very sensible profession, if I may say, even if you are a chartered accountant in Scotland, and not England and Wales.
Sir Amyas Morse: Do you regard that as good? I was not sure if that was a commendation.
Q2704 Mr Bone: Are you a civil servant as such?
Sir Amyas Morse: No.
Mr Bone: That explains why you are clearly answering the questions that we put to you today. I thought that might be the case.
Sir Amyas Morse: I work for the House.
Q2705 Mr Bone: On the question from Seema about parliamentary time and SIs, one of the issues must be the time for Parliamentary Counsel to get the SIs correct. It is not the time that it takes for us to pass them; it is their time in preparation. They also need to continue to do all the other SIs that the Government require. Have you looked at the possibility of a problem there?
Sir Amyas Morse: I am afraid I have not, I have to confess. If somebody asked me to look at it, I would investigate the capacity out there in the marketplace for getting people with constitutional law capabilities to come and supplement the already great abilities of government counsel. The fact is there are people in London who do constitutional law who could probably help. If that turned out to be a problem, it is not an insurmountable one in terms of getting resources. We just have to be a bit flexible about it.
Q2706 Mr Bone: Could I just move to what you have called a no-deal situation? The strange thing is that, if we have no agreement, we know what our future trading relationship will be; it will be WTO rules. That is very clear, but there are these other side agreements that you were talking about earlier. For instance—and I refer to my declaration in the Register of Members’ Financial Interests—it seems to me inconceivable that aeroplanes would not fly from Europe to the United Kingdom and vice versa. As a chartered accountant, you would look at the very conservative view of that not happening, but are we preparing for something that really is implausible, because there would be an agreement, would there not?
Sir Amyas Morse: It is not implausible. It is not impossible and it could happen by mistake, rather than deliberately. It could happen deliberately and it could happen by mistake—it depends. I try to avoid getting involved in the political spin, but it depends how friendly or unfriendly the accompanying music is while all this goes on. If you say, “We are leaving in March and we are going to take a very tough attitude towards it; you can take us to court for whatever money you want from us”, it is not impossible for anyone, even a chartered accountant, to think of scenarios where people might not be terribly helpfully disposed to us.
The point about all these arrangements I have talked about is they require mutual good will to put them in place. If we do not continue to be members of the chemical industry body in Europe, when we have a substantial amount of chemical exports to Europe—in fact, by far the majority of chemical exports to the world go to Europe—they will just stop if we do not get an arrangement under any franchise. There are other examples like that, where you are relying on goodwill to get them into place.
Q2707 Mr Bone: I do not want to make any political points. I just want to talk about the contingency planning part. If you just stood back and said that, on 29 March, no aeroplanes would fly to Europe or here, people would say that is absurd, would they not? How much effort do you think the Department for Transport should put into that planning compared to others? That is the judgment it has to make, is it not?
Sir Amyas Morse: Departments are being sensible about this. If I take some examples from Defra, there are things that Defra recognises, contingency plans, which it cannot get into place by March and, therefore, it is making sensible prioritised efforts. There was a point about the rest-of-the-world agricultural products export regime. That is a monstrous contingent task. They probably cannot get all of it done in the time available, but they are trying to reach bilateral agreements with the top 19-odd countries that represent 90% of our food exports. That is a very sensible approach, so I am not seeing people behaving in a silly way. I am seeing people making pragmatic decisions to prioritise the biggest risks. I do not think there is a vast amount of unnecessary, nugatory effort. There is quite a lot of intelligent, targeted effort, because they are so short of resource that they are being very practical about it.
Q2708 Mr Bone: There are some things we could unilaterally do that do not require the European Union to act. For instance, we have said what we are going to do with EU citizens. That is a certainty, is it not? When it comes to agricultural imports, why do we suddenly have to start inspecting those which come into this country, because the standards are what we have accepted for years? You could argue the other way around as well, but we would not necessarily need to plan for that, would we?
Sir Amyas Morse: I have had a look at the WTO rules and I do not hold myself up as an expert on WTO at all, but there are some rules about consistency of regime. Before we say it is completely free and easy, you need to be satisfied about that and I am not sufficiently authoritative. I would want to have a pretty good look at it. WTO is not laissez-faire; it is quite a detailed, heavy rulebook that you have to comply with, including a lot of things that would mean quite high friction. We already understand WTO in the affected Departments, but it is not a simple, easy solution to everything. I thought I would take this chance to emphasise that.
Q2709 Stephen Crabb: Tony Meggs of the Infrastructure and Projects Authority talks about the “six sins of project failure”. You are probably familiar with them: “lack of clarity around project objectives; lack of alignment among stakeholders; unclear governance and accountability; insufficient resources; inexperienced project leadership; and an overambitious schedule”. Do you think that is a helpful way to look at something of the scale and complexity of Brexit at this point in the cycle?
Sir Amyas Morse: It is certainly a helpful way to look at a lot of Government projects. When you do, you will find that not everything is there. I am not sure it is that helpful in looking at Brexit, for the reasons that I mentioned earlier. People have not sat down and said, “I know what; we will have a Brexit project”. What has happened is the civil service has been landed with a very challenging task. You would not set out to do it this way from the management point of view.
What you are dealing with here is something where you cannot put your ducks in the row in the time that you ought to be able to. You do not put your plans in place and have a clear objective. You cannot do all that. You just have to start running, but that is not an argument for not getting those things in place later. I see a lot of Government projects where they say, “It is very urgent to get started, so we couldn’t do all this stuff”. You say, “Fine, but there is no reason why you cannot do it now”.
As we move forward here, I would like to see better planning and clearer objectives. As the options reduce, it becomes much clearer what path we are going to follow and so the planning quality needs to go up, and we will be pressing for that. It is a well-made point, but there is no point saying that we will not start until all these things are in place. That is just not practical politics, is it? It is more a question of retrofitting as we go.
Q2710 Stephen Crabb: Can I ask you further about one of those criteria, project leadership? How successful have the Government been in either finding from within the system and deploying people with relevant skills and experience or recruiting from outside?
Sir Amyas Morse: The Government certainly recognise they need to recruit from outside. There is also quite a high rate of departure of people who have been recruited into some of the Brexit implementation teams.
Q2711 Stephen Crabb: What is that a symptom of?
Sir Amyas Morse: There is perhaps not enough clarity about what they are trying to do and the timescale they are doing it in.
Stephen Crabb: Talented people are walking out the door, because Government are not giving clarity.
Sir Amyas Morse: There is a high rate of churn in some cases. As we get to more mission clarity, everybody will find themselves more focused and it will be, in some ways, more motivating to be in these tasks. If you know that you are working on an international trade agreement, you have X years to do it and you know what you are trying to achieve, it is easy to get motivated. Where you are in a position where you do not quite know which way we are going to go, it can create quite a lot of difficulties in the organisation.
Q2712 Stephen Crabb: Clarity is important. People having the relevant skills and experience is important. To what extent do you think that a factor here is whether people in the system genuinely believe in the project or not? Have you seen any evidence of the presence or non-presence of Brexit believers in the system affecting the delivery of any of the workstreams you have been talking about?
Sir Amyas Morse: I have not seen civil servants being affected that way. They are far too professional. They have put a massive effort into this. I am often in a position of criticising things that have been done, but I take this chance to say I am very impressed by the massive amount of work and effort that have gone into this by the civil service. It is one of the toughest situations that you could be in. They have done very well.
I will just add to your earlier question that Departments recognise that they are going to have to recruit more, and in some scenarios quite a lot more. I can quote Jon Thompson at the Public Accounts Committee saying he might have to recruit between another 3,000 and 5,000 people, so these are not small numbers. The Departments recognise it. Will they be successful in getting that many people with the right skill sets is a different question, because a lot of other people are fishing in that pool as well? You are competing with private industry.
Q2713 Wera Hobhouse: You have been painting an improving picture of progress, but there is still a discrepancy between what your report found and what DExEU is saying, which paints a more positive picture. Are you concerned about whether it is doing that deliberately or whether it will have a bit of a shock from understanding that it is behind? We are obviously getting the positive picture. It would want to paint a positive picture, would it not, but is there a danger that it does not quite understand the danger that there is not enough progress?
Sir Amyas Morse: It may want to paint a positive picture and quite well understand the difficulties it faces. It is not impossible for these things to happen at the same time, because it has to motivate everybody to move forward and show a can-do attitude. I can understand that. What I am trying to do in my work is to make sure that Parliament has a realistic view of the coincidence of many risks. However hard DExEU or the rest of the Government machine works, you cannot take away the risk, for example, of implementing a digital project in six months that you would normally take two or three years over. You still do your best. You implement it as fast as possible, but you do not have the trialling, the testing time and all the other things. What that means is, despite giving it your absolute best shot, you are carrying with you more risk of failure than you would have had in a normal sense. That is just an inevitable part of doing so much stuff so fast, and not necessarily being able to chart all of the interactions of each decision that you are making, because you do not have time to do that.
If you consider the probability of a no-deal scenario, there was a period not that long ago when it was regarded that we were very likely to have a deal. You could see that, although people were working on a no-deal scenario, it was not regarded as a very high probability and then suddenly it shot up as very urgent with the Government giving go-ahead signals. Now the mood music is switching around again. Perhaps they should ignore that completely, but it has an effect. If you have limited resources, are you going to follow every one of these changes? How well prepared can you be? It is quite disorientating.
Q2714 Wera Hobhouse: Can I ask one further question? You have been saying that we also have the transition period, so some of that risk can be mitigated because we then have 18 months when we can resolve some other things. Is that not exactly the sort of blind Brexit that you are talking about? You are saying that we cannot foresee some risks, but to wait and see what happens in the transition period. Is that not the blind Brexit we are talking about?
Sir Amyas Morse: I am not advocating anything. I am just telling you that if you say you have until March to resolve all these problems, or you have until March plus 18 months to resolve them, more things will be rolled out satisfactorily in that longer period. That is not saying it is a good idea. I am just telling you that, inevitably, having a longer period of time will allow this. Let me take CDS, a specific. It is the border system. Many other systems are interdependent on it. Its rollout has actually slipped a bit. If we find ourselves with an extension, I can confidently predict that, in 18 months, CDS will have been fully rolled out, it will be fully trialled and it will be working well.
I am making the very mundane point that that sort of thing will happen in a number of cases, across Government. Things that are being done against a very tight timescale will then have a bit longer to be settled in, tested and proved. Does it mean that there will not be any risks or problems within the 18-month period? No, I am not saying that to you. I am just saying it is common sense that having 18 months longer to resolve things means you will have knocked some of those risks on the head, not all of them. I am not saying anything very complicated.
Q2715 Peter Grant: Good morning. I will say first of all that you were very tactful in not pointing out to Mr Bone earlier that the word “Scottish” does not need to be applied to Scottish chartered accountants, because the Scottish institute is the only one whose members are allowed to use the much-coveted CA designation. Paler imitations are of course available, but the original is always the best.
I will come back to the area the Chair asked you about at the beginning, which was about the lack of information and lack of information sharing. We are hearing, for example, that DExEU and/or the Cabinet Office have at times prevented other Departments from communicating with stakeholders. Defra, for example, has raised that and we heard from witnesses previously about the use of non-disclosure agreements in the Government’s discussions with businesses. Clearly these agreements have their uses, but they appear to be being used a lot more in relation to Brexit than has previously been the case. Are you comfortable that, when the Government ask for a non-disclosure agreement, they are doing it for the right purposes, or do you have a concern that, by not allowing more openness in the debate about the potential impact of Brexit, they may be preventing businesses in particular from being adequately prepared?
Sir Amyas Morse: If I might separate those factors out a little, we have done work on non-disclosure agreements, gagging clauses and things like that used in the NHS and other places, and I generally take a pretty severe view of them where they are used to cover over misconduct or failure. However, there is a legitimate use if you are consulting members of industry, way in advance of settling policy, about something and saying to them, “We want to consult you on a confidential basis, but we need you to agree that you will not talk about this”. As far as I know that is the only type that has been made use of here, and I do not regard that as unsatisfactory in itself.
Is it a good thing that there has not been clearer communication with business? It has been driven by a desire not to cause uncertainty or concern in the business community, but it has carried a heavy price with it. Government could have told stakeholders more and it would have been positive if they had, but I understand their argument for not doing it, which is that it will only cause ferment in the business community. I think they underestimate the capability and maturity of the business community quite a bit. They are actually very good at running their businesses and, if you do not give them a chance to plan ahead and to solve their problem, you are putting them in a very difficult position. Many businesses are going to find themselves in a relatively difficult position.
Q2716 Richard Graham: You have touched on the twin issues of crisis management and sensitivity about secrecy during negotiations. Both are arguably inevitable outcomes of the singular challenge that Brexit gives Government. To what extent is this work for the NAO effectively new ground, auditing a negotiation process, or are there parallels with scenario planning in other work you are doing?
Sir Amyas Morse: There are parallels, yes. It is new in that this is a different thing to what we have done before. For example, we examined the estimate of what the financial settlement might be and things of that sort, which we reported on quite a long time ago. We have not examined another thing of that sort, but we have looked at and examined a lot of estimates of financial liability and financial agreements, so that is not new. Frankly, many things that Government do are long-term projects and programmes, and what we are trying to advocate to Government is long-term scenario-based planning, more like what happens in complex large business enterprises. That is something I am very keen for Government to do more of. It is not a novelty to us to be thinking in terms of scenario planning, analysing scenarios and so forth. To be frank, before I was fortunate enough to come into this job, I spent a long time as a global partner at PricewaterhouseCoopers, and we tried to run our business that way.
Q2717 Richard Graham: Because some of the challenges involved—and you gave the example of chemical exports to Europe—require co-ordination on both sides of the channel, to what extent does the NAO have contact with a counterpart in Brussels, so you could compare the work being done here with the work over there, or is this all done about our preparations with no real input on what their preparations are?
Sir Amyas Morse: We have good relationships with the European Court of Auditors and have done work for them on auditing the agricultural fund regime and various other things of that sort. I have to be careful about this, because I am acting for the UK. If I had been having little side channels with European colleagues, it could have been quite unsatisfactory, so we have been rather careful not to do anything like that.
Q2718 Richard Graham: To what extent do you think the Court of Auditors is doing a similar task to the one you are doing here, and how open and transparent is that?
Sir Amyas Morse: I am sure it is. We are negotiating with a collective entity there, rather than a single country. It is being asked to do work and it is providing assurance, and we agreed that we would provide independent assurance to the UK. I am aware that it is doing some of the same things we are.
Q2719 Richard Graham: Many of your comments earlier were about the difficulty of trying to prepare for all possible scenarios but, within a period of weeks, we hope and trust the Government and all of us will be able to focus more on one particular scenario. At that stage, what are the implications for the work both that you are doing and the work that Government Departments do? Presumably it narrows the focus and enables much deeper work on that particular scenario. Is that something you are preparing for?
Sir Amyas Morse: It is something I would expect to happen. Obviously I would be astonished if they carried on working on scenarios that are clearly not going to happen any more. Much of the work that Government have been doing to prepare for no deal is quite likely to come in pretty useful in the narrower scenario going forward. There may have been a lot of nugatory effort but, as regards work product, a lot of it will come in quite useful.
Q2720 Richard Graham: The English civil war was described as the greatest example of unintended consequences in our history. What are the biggest risks of unintended consequences in this negotiation?
Sir Amyas Morse: I do not think I want to answer that, actually. I would be civil war”. I think you are asking me a policy question and I do not feel I have any competence to answer that.
Chair: That is the first time the English civil war has been mentioned in this Committee.
Q2721 Stephen Timms: When you made your memorable comment in July about the danger of things falling apart like a “chocolate orange”, you were clearly worried about how things were going. After that the Prime Minister restructured the Government’s negotiating arrangements, taking greater control in her own office and somewhat downgrading the role of DExEU. Has that helped to improve things since July?
Sir Amyas Morse: First, I cannot comment on how effective it has been at improving the negotiations, because that is not a subject I look at. What I call the in-principle negotiations going on at Government level is not something I review, so I cannot say how effective it has been at that, which I suspect was the primary objective. It has not been bad for DExEU to find that it is not trying to be, at one time, the negotiation support Department and implementation in the UK. It has provided it with more focus, so in that way it has been good. It has also been a good thing to get the wider involvement of the Cabinet Office and, to some extent, the Treasury in this planning. I see more active involvement. I see a lot more of John Manzoni and people in the Cabinet Office in planning now and he brings considerable senior business background to it. Things are working better, leaving aside the policy negotiations, on which I do not want to comment.
Q2722 Stephen Timms: There has been progress on the co-ordination and leadership concerns you were expressing in July.
Sir Amyas Morse: That is right.
Q2723 Mr Djanogly: When we talk about no-deal planning or implementation projects, most people think of them as a functional or mechanical process, rather than following policy decisions. Listening to what has been said, I was wondering if there has been, in your experience, much room for politics within those processes. Have Ministers been in disagreement as to the way that implementation should happen? Has there been more room for policy within the process than you would have thought?
Sir Amyas Morse: That is above my pay grade.
Q2724 Sammy Wilson: We have discussed a lot this morning the requirement and need to prepare for a no-deal scenario. Some Departments, as you have said, Mr Morse, are more advanced than others. Is there a danger, however, that in making those preparations, putting in place the arrangements that are necessary and communicating them to the businesses that have to work them that, if there is a deal, many of them will have to be unpick quite dramatically and cause further costs to business or indeed further confusion?
Sir Amyas Morse: There is a possibility of that, but I am bound to stick to what I said a long time ago, in fact a year ago, when I said I do not think it is a mistake to pay an insurance premium against a risk. It is quite likely that some things have been put in place because of the March deadline. If we end up signing the withdrawal agreement and having an extension of a period of time, some of that work may turn out to have been nugatory, but it is important not to criticise that unless it has been careless, because it insured us against a real risk that is still there now. I felt the Treasury is slightly in that position still that we are going to test you very strongly on how you are going to spend this money and whether it will have enduring value under any circumstance. I am afraid that, when we are talking about risks like this, you just have to get on with it and try to get that insurance premium in place. If it turns out we have a withdrawal agreement and another 18 months, the work has been well done for the most part, and I would quite like to have seen us even do a bit more.
Q2725 Chair: Presumably, going back to the transition period and the question that Seema Malhotra was putting to you, if we got to the end of transition but we had not yet concluded negotiations on the future partnership, the no-deal planning that is being done now against the possibility of falling off a cliff at the end of March might be handy if we were facing the prospect of coming out of the transition period at the end of December 2020 with no extension, but no long-term agreement arranged.
Sir Amyas Morse: That is true and the other thing that is true is you might reach the end of the extension period and find you do not have the agreement you thought you were going to have at all. I do not mean that it is just not finished. What you are going to have is a statement of intent, as I understand it, then a very active set of negotiations. Supposing we sign a withdrawal agreement, there will be a statement of intent and a binding withdrawal agreement to be signed, and the statement of intent will either be delivered to everybody’s satisfaction or not. You may be looking at a different regime then than what you had during the extension period. You almost certainly will do. I suspect some of this work will come in if the relationship changes permanently, as there will need to be different systems to support that.
Chair: That is very helpful. Sir Amyas, we are very grateful to you for coming along this morning. Your answers have been helpful to our enquiries. Thank you. We will move seamlessly now on to our second panel.
Examination of witnesses
Witnesses: Jill Rutter, Julian Jessop and Sir Simon Fraser.
Q2726 Chair: I welcome to this second session this morning Jill Rutter, Programme Director, Institute for Government; Julian Jessop, Chief Economist and Head of the Brexit Unit at the Institute for Economic Affairs; and Sir Simon Fraser, Deputy Chairman and Adviser to the Europe Programme at Chatham House and former Permanent Secretary at the Foreign and Commonwealth Office. We are very grateful to you as a Committee for giving up your valuable time to join us here today. I will begin by putting to each of you the first question I put to Sir Amyas Morse. Which do you think is going better: preparing for a deal or for no deal?
Jill Rutter: Which is going better? Preparing for a deal makes different demands, particularly on timetables, than preparing for no deal. The key thing with preparing for a deal is it means concluding the withdrawal agreement, if we assume that that is the deal we mean, and the political declaration. It then means preparing the withdrawal agreement Bill, which will need to go through Parliament, but it makes a lot of the other preparations, given the nature of the transition embodied in the withdrawal agreement, and gives you a potentially longer timetable for those. A lot of the implementation concerns and some of the issues being raised in the Government’s technical notice about no-deal preparations are at least postponed until December 2020. This is a set of issues when we potentially face another cliff edge, if we are exiting then without a deal, or we will need some of those preparations anyway, because the nature of our deal will mean we need to run intra-EU customs declarations and all that. The preparations for the withdrawal agreement Bill, subject to whatever is going, I assume are going quite well in the Department for Exiting the EU. We do not have very much visibility on that. You may have a better view.
Preparing for no deal is a hugely more difficult task, which is reflected in the Government’s preparedness notices, which rather underline the scale of that task. I do not think the scale of the adjustment came out quite as much as it might have done from Sir Amyas, as it is not just about Government being ready. Government are one of the players, but business is the counterparty to that. There is a scale of uncertainty because, at the moment, a lot of the Government’s notices assume a lot of co-operation from the EU. As was pointed out, that might be feasible if we have what we term an “amicable” no deal, but it is much more likely, if we do not get a withdrawal agreement, that it will be an acrimonious no deal, at least in some respects.
One of the things the UK is doing is making clear that it will also be quite an asymmetrical no deal. There are a lot of areas where the UK is making clear that we would continue to recognise EU authorisations, EU licences and things like that, which is a recognition of the reality that we would not have the scale to reauthorise all those things, but that UK businesses and UK individuals would face a lot of extra burdens. That is where the real difficulty is. How much should private people be taking on the risk of preparing that?
Julian Jessop: The honest answer is that neither is going particularly well. I find it extraordinary that it is more than two years since the referendum and something like 170 days before we leave the EU and, frankly, most of us are none the wiser about exactly what the terms of our departure will be, let alone the future relationship. I am often asked whether we are actually leaving in March 2019 at all. Will there be an extension of Article 50? Will those calling for a people’s vote or second referendum be successful? In that sense, preparation for a deal has not been going very well.
Equally on the no-deal side, we are still being asked questions that have an element of truth to them, questions such as whether planes will fly and so on. There is still an enormous amount of uncertainty out there about what no deal might mean. There is a range of possible outcomes. I am sure I will end up saying more about those later, but there seems to be an enormous amount of uncertainty there. If your benchmark for how either process is going is the degree of uncertainty, I would still say it is very high in both cases.
Q2727 Chair: Why do you think it is that it is not going very well? Is that an inevitable consequence of the task in which the country is engaged or the way in which it has been handled?
Julian Jessop: I suspect it is a bit of both. If you were a die-hard remainer, you would argue that this process was always going to be extremely difficult and the leave side has underestimated how difficult it would be, so what we are seeing is inevitable. Alternatively, if you were more positive about Brexit, you would say that it reflects a cautious attitude on the part of the key decision-makers to regard Brexit as an exercise in damage limitation and therefore to focus on minimising the costs, rather than to seize the opportunities. It is a mixture of both.
My own feeling is that the process simply has not been done very well. It seems extraordinary that we still have big questions that are unresolved, and I suspect that is more because of a lack of cohesion and heart within the Government about what the course should be, rather than that it is inherently difficult, although I accept that is the case too.
Q2728 Chair: A lack of cohesion within Government is a reference to the well-publicised differences of view there have been about what the right approach to take is. That has occupied a lot of the time, has it not, since the referendum and certainly Chequers in July?
Julian Jessop: That is absolutely right.
Sir Simon Fraser: There are three parts to this question. As far as I can see, the negotiation of the withdrawal deal next March is going quite well between the professional negotiators, and I am very confident that they can put together a deal. Whether that deal is voted through Parliament is another matter, but the preparation of that deal is doable, in my view as a professional negotiator.
If you are talking about the final deal that will come later, in 2020 or beyond, we are a long way off that for the reasons that have just been explained, because we do not have clarity on what we are aspiring to achieve. In any case, there is a much more complicated long-term negotiation that has to be carried through, so we are going to have to have a separate negotiation on that.
Thirdly, I do not think the preparation for no deal is going particularly well, from what I have understood, either from our side because of the short timeframe involved, as we heard from Sir Amyas Morse earlier, or on the EU side, because there seems to be a reticence to come forward with no-deal planning contingency arrangements at the moment.
Q2729 Chair: You referred to the negotiation of the future partnership and the length of time that would be available to conclude that before, in its absence, we fall off the same cliff a bit later. How concerned are you that the current draft of the withdrawal agreement contains no provision for any possible extension of the transition period? If that remains the case, what do you think is the alternative place where the UK could put itself, pending the conclusion of negotiations and the ratification of a treaty or treaties on our future relationship, given the astonishing scale of issues that will need to be addressed in those negotiations?
Sir Simon Fraser: I have concerns with the approach that we are now pursuing, which is that we will have a withdrawal agreement if we have one. It does not specify what the nature of the future relationship is going to be. It is going to be a blind Brexit to a considerable degree. If we are going to have a withdrawal agreement that is now pretty well inevitable.
Secondly, the continuation negotiation on the future relationship, in my view, will not start in all seriousness until we have had the European Parliament election and a new Commission in place, which will happen in November next year. You actually have a little over one year of serious negotiating space. You can prep and scope it beforehand, but that contracts the period. Therefore, it is very unlikely that we will have a conclusion to that negotiation by the end of 2020. My view is that there will have to be an agreement to extend that arrangement. It is neither convenient nor necessary for either the UK or the EU sides to be talking about that at the moment, but I suspect it will be on the agenda.
The alternative could be that we face a cliff edge at the end of 2020, but it is unlikely that will be the case, because we will have been engaged in a negotiation and will have more clarity about the options. If we face that and come to a no deal, one of the advantages, again as Sir Amyas has pointed out, is that we will have more time to prepare what needs to be prepared.
Q2730 Chair: That is very helpful. Can I briefly ask both Mr Jessop and Ms Rutter what you think about the possibility of concluding a negotiation on the future relationship by the end of December 2020? Do you think it is likely to happen or not?
Jill Rutter: If you are going for the bespoke arrangement that the Government have made clear they want, you expect chapter-by-chapter negotiation. As Simon has said, there are lots of reasons on the EU side why most of next summer will be a write-off, so you will not be getting huge amount of activity there. There is some technical ground clearing. It is very demanding. The other bit is that this is a much shorter time than the EU has taken to negotiate any other similar trade arrangement or association agreement.
The other part of course is that there is a much more complex ratification process for the long-term deal than there is for the withdrawal agreement. The withdrawal agreement under the Article 50 process needs QMV and the Council, and a simple majority in the Parliament. It does not go for national ratifications. We have seen the complexities attached to ratification of the CETA deal. There will be lots more at stake for a lot of countries in the UK deal, because the UK is an economy that matters loads more to them. That is a potential further difficulty. We think it would be a very sensible time to consider slipping in a clause allowing the possibility of extension to the transition to allow for that and give us certainty that it is an available option if necessary.
Julian Jessop: Here I start to disagree for two reasons. In a nutshell, 21 months would be long enough, and that is partly because of where we start from. It is not as if we are a new country coming from far away, where the objective it is to lower existing trade barriers. It is to prevent the erection of new ones, so we are already largely converged. There is a discussion to be had about potential future divergence but, to begin with, we are already in it.
The second point is that, if you allow for the possibility of the deadline slipping further, it reduces the pressure on the negotiators to get a deal done. There is a danger that you are continually kicking the can down the road and not getting anywhere. March 2019 is certainly too soon to get all of this done. The end of 2020 will be enough but, if you let it slip further, the pressure on the negotiators to get things done will slip and we will not get anywhere at all.
Q2731 Chair: You would accept, if your optimism turns out not to be justified and it had not been concluded by December 2020, there would be a need to extend the transitional arrangements.
Julian Jessop: No, I would not because, at that point, we would have had enough time to think through fully what a no deal or a WTO trade deal would mean. That should be the default at the end of 2020, to revert to trading on WTO rules, with the other side agreements that may be necessary in areas such as air services and so on, rather than having a continual rolling-over. It is the option where you have checked out but never actually left. We need to prevent that by having an explicitly time-limited period, if you are going to extend the process of leaving.
Q2732 Joanna Cherry: Ms Rutter, can I ask you about the Institute for Government’s early report that criticised the creation of DExEU and argued that Brexit negotiations would be better co-ordinated from within the Cabinet Office? Do you think that DExEU has been effective or that your initial criticisms have been proved right?
Jill Rutter: Actually, it was not an initial criticism. It was a warning not to set up a dedicated Department for Exiting the EU. We got in just before the Prime Minister took over and announced the creation of DExEU, so it was probably one of our shortest-lived pieces of advice ever, as it was massively overtaken. We thought on the negotiation side that it was always inevitable that the Prime Minister would lead this. That is true of all major international negotiations. Having a separate Department, unless the Prime Minister and the Secretary of State were effectively Siamese twins, would lead to tensions. We saw that. The critical moment when that was acknowledged was not this summer, with the announcement of a change to the machinery of government, but last year, when it was made clear that Olly Robbins, the UK’s lead negotiator on the officials side, would cease to be the Permanent Secretary at DExEU and move fully into the Cabinet Office. It was always inevitable that the Cabinet Office would lead that.
Another interesting thing that officials from some Departments told us was that DExEU was seen not to be able to play the Cabinet Office honest broker role. It was seen as being a Department with a lot of skin in the game and with its own view on what should happen. That is another potential source of difficulty. That said, I think DExEU is performing some important functions now that, if they were not in DExEU, would have to be done somewhere: the sort of thing that Amyas Morse was talking about, the co-ordination of the massive legislative programme and the oversight—the programme management almost—of that massive implementation programme with all those interdependencies, has to be done somewhere. That could be a programme office within the Cabinet Office but, since DExEU is now doing that and we now have a sensible division of labour on negotiation versus legislation implementation, this probably is not the moment to abolish DExEU.
Q2733 Joanna Cherry: The former Chief of Staff to David Davis, Stewart Jackson, was very critical of the civil servants in the Europe unit, particularly suggesting that they had proposed Chequers. He queried the “constitutional propriety of having an unelected unit” and described it as “almost Nixonian”. What is your comment on that?
Jill Rutter: I had not seen those comments. That is quite intriguing.
Joanna Cherry: It was in PoliticsHome.
Jill Rutter: I must add that to my reading list. I thought there was a very interesting exchange between your Chair and one of your members when Olly Robbins was giving evidence. Those of us who have worked a lot in government know that Number 10 and the Cabinet Office quite often have slightly different takes on the agenda from departmental Secretaries of State. On many issues, we see our hard-won work going into Number 10 and emerging looking quite different when it comes out and then a process of interesting negotiation goes on. It has always been known and it is quite interesting.
We did a report a few years ago at the Institute for Government called Centre Forward, in which we interviewed somebody who had been a head of the Europe unit in the Cabinet Office, and he basically said, “You basically know if you’re there who you’re working for. You’re always working for” who he termed “the principal”, and that meant the Prime Minister. You knew from that unit that your mission was to make sure that Departments, on these critical international negotiations, knew that things have to come to the Prime Minister. Basically you do what they want and what they can get their Cabinet to support. If the Prime Minister does not have Cabinet support, then they will not be able to do things. I did not think it raised significant constitutional issues, I have to say. Having been knocking around in government for years, we have seen these sorts of wrangles between different bits of Government.
Q2734 Joanna Cherry: You think it is pretty typical.
Jill Rutter: It is business not quite as usual, but nothing with Brexit is quite business as usual. Is it a constitutional outrage? I do not think it is.
Q2735 Joanna Cherry: What Mr Jackson was complaining about in the interview with PoliticsHome was, he suggested, this unit was “making policy, making without-prejudice undertakings to Brussels, without real scrutiny and oversight by the Cabinet or the Strategy and Negotiations Sub-Committee”. Would you agree or disagree with him?
Jill Rutter: He should raise those problems with the Prime Minister. Where do Cabinet Office units get their authority from to do these things? They do not make it up; they get their authority from the Prime Minister. I have worked in the policy unit at Number 10. You know when you work in the policy unit at Number 10 you will go and tell Departments that the Prime Minister wants X, Y and Z. Why can you do that? It is basically because you know that the Prime Minister wants X, Y and Z. You are left out on a limb when you are telling Departments to do X, Y and Z, and then the Secretary of State goes to the Prime Minister who says, “I never said that. Of course I do not want you to do X, Y and Z. Do what you want”. Those sorts of units derive their authority from the Prime Minister.
Q2736 Joanna Cherry: Do you think it is fair to say that, if people have criticism of the civil servants in this unit, they should really be directing them at the Prime Minister rather than at the civil servants?
Jill Rutter: Yes, I do.
Q2737 Joanna Cherry: This is just a quick question about the secrecy issue. I know you sat in on Sir Amyas Morse’s evidence. In your report about Whitehall preparedness, you have talked about a culture of “extraordinary secrecy” bedevilling planning for Brexit. You will be aware that the devolved Administrations, at least the two that exist at the moment in Wales and Scotland, are very unhappy about the degree of information they have been given and the process through the JMC. To what extent do you think this culture of secrecy has impacted on the involvement of the devolved Administrations in the process?
Jill Rutter: It has been difficult for Whitehall Departments. It has been even more difficult for the devolved Administrations. Obviously there have been layers of complexity because of all the politically unresolved issues, particularly over things like the withdrawal Bill, where we still have the argument going on about legislative consent. That political context has made working with the devolveds more difficult, but the extraordinary secrecy has made things much more difficult for anyone trying to deliver at arm’s length. A lot of the front-end implementation of Brexit falls to people not sitting a convenient distance from a terminal in Whitehall to go and read the relevant papers or for a Permanent Secretary’s office to go and read the guidance. That makes delivery very difficult. Somebody described it as there being areas where the devolved Administrations know they are going to have to do things that fall to them, there being areas that they know fall to UK Government, so they do not have to do things, but then there being quite a big grey area where they are not sure who is doing what. That is the danger area.
Q2738 Sammy Wilson: Mr Chairman, you have already alluded to this, but maybe each of the panel could indicate to us the position as far as the EU is concerned. We have been talking about preparation for a no deal on our side. How prepared do you believe the EU is for a no-deal situation?
Sir Simon Fraser: My view on the EU’s position is that the EU does not want us to leave. That is their starting point. If we are going to leave, in my view the EU would prefer to have an orderly negotiated departure through a withdrawal deal. The EU side and the Commission officials leading it have been trying to pursue a coherent approach to a withdrawal agreement. They believe that deal can be done, although they are uncertain about the British political acceptance of the deal. Technically, they believe a deal can be done. Therefore, there are a number of factors affecting their position on no-deal planning.
The first is that they do not want to give ammunition to those in this country who would argue that no deal does not have adverse consequences. They would be cautious about being premature in doing no-deal contingency planning and contaminating or affecting the negotiation through that. Secondly, they feel that the impact of no deal, although undesirable and bad for the EU, would be worse for the UK. Therefore, they feel that this probably gives them leverage in the negotiation, because it puts more pressure on the UK. I would imagine that to be the case.
They have issued a number of notices about the implications of no deal for business. Those have largely been informative rather than advisory notices, and we are expecting some more information from the Commission shortly in some critical areas, such as aviation, continuity of financial services contracts and the like, so there is progress on their side. I think they could have done more. I can understand from their perspective why they have not.
Julian Jessop: I agree with that assessment. The levels of preparedness, based on the information in the public domain, look pretty similar. I know the EU published its preparedness notices earlier than the UK, but the content of those very much outlined the legal position, in most cases. It did not add much information. I am sure that is the sort of information that any reputable trade body would already be telling its members. Rather than telling you what would actually happen, it is simply saying that, in the absence of any new law, this is the consequence. It is not clear to me that the EU has stolen a march on this.
Both sides seem to be accelerating the process. From the UK side, for example, we now know that the UK medicines regulator will be allowed to approve medicines that are regulated in the EU as safe for UK citizens. Similarly on the EU side, the European Aviation Safety Agency is now being allowed to look at potential licence approvals from those who only hold a UK licence at the moment, which is exactly the sort of flexibility that we would want to see. Both sides are stepping up the process, but they were in a similar position to begin with.
Q2739 Sammy Wilson: Are there other areas where you believe these mini-deals are necessary? Indeed, you are now suggesting that they are possible because preparations are being made for them.
Julian Jessop: I could probably list hundreds of different areas where a degree of co-operation is going to be necessary if we leave without a deal. The sorts of solutions are a mix of legal steps that need to be taken. The planes not flying is a good example of this because, in the absence of any preparation, it is factually correct that British airlines would not be allowed to fly into Europe and many British-made parts would not be authorised to be in any plane flying anywhere. There is a problem in principle. It is not enough to say that, just because it is fixable, we can forget about it, because somebody actually needs to fix it in the event that we leave without a deal. That is replicated across a whole load of different sectors.
My view on this has always been that, if the political will exists and in particular if the economic imperative is there, all of these problems, however complicated and numerous they may be, are fixable. I know there is a discussion we might want to have later about the degree of good will and animosity that might surround a no-deal scenario.
Jill Rutter: Of the Government’s 76 no-deal notices that we have had so far, 19 suggest that the Government would like a side deal. There are 19 of them, so roughly a quarter of them depend on some sort of side-deal arrangement and the Government are hoping for that. We obviously have some quite difficult ones to come, which we have not seen yet. The Government is assuming that that would be helpful.
There is a bit of no-deal activity going on. A week ago, the French announced they were taking décret powers—a sort of Henry VIII equivalent—to react in the event of no deal, not least to guarantee the rights of UK citizens who are resident in France and things like that. The Irish are going to bring forward draft legislation if it still looks like there is no deal in November. The Dutch are talking about hiring people and so are the Irish. There are those sorts of activities.
One of the things that is quite interesting about no-deal preparations has been this commission of an apparent block or rowing back on technical talks between people. We saw the Calais region representatives saying it would be very helpful to be talking to Dover and ports on the other side of the Channel about how you would manage in the event of no deal, because either side the ports can freeze up and those sorts of technical talks have not been taking place about how you would manage, which would be helpful if you were going to put in place optimal mitigation.
Sir Simon Fraser: Do you mind if I make one additional point? You talk about mini-deals but, from my perspective, it is important to be clear these would be temporary stitch-ups, not long-term solutions. They would be care and maintenance deals. They would be bare-bones agreements and they would not necessarily, in any way, provide the full range of permissions or authorisations that we have under the current circumstances. I wanted to make that additional point.
Q2740 Sammy Wilson: Our earlier witness indicated that whether these deals are likely or not, call them “mini-deals”, “temporary stitch-ups” or whatever, depends on the mood that exists when and if we reach a situation when there is no deal. Given what you have all said so far about the mood on the ground and the preparations that are being made, if there is no deal, there will be a degree of bitterness, acrimony and recrimination anyhow. Even given that, since all of these issues are important for the working of everyday life and movements between the UK and the EU, is it still likely that we will get a series of these short-term arrangements?
Julian Jessop: Can I have the first go at that? I am at the optimistic end on this one. I do not think no deal has to be acrimonious. It may simply be that, through no fault of the discussions between the UK and the EU, time has simply run out. The most likely scenario for no deal would be that the UK Parliament itself cannot agree a deal. It would not be that the UK and the EU have fallen out; it is that the UK has not quite got its act together.
A lot also depends on what the two sides do on the most important issues. If, in that scenario, the UK made a good offer on citizens’ rights, which it has effectively already done, if it confirmed that it would pay at least some, if not necessarily all, of the financial settlement, and if there is a satisfactory backstop on Northern Ireland, that deals a lot with the good will issue as well. Finally, even if the two sides are splitting up in an acrimonious way, there is still the obvious economic imperative, and to some extent legal imperative as well, to co-operate as closely as they can. Coming back to aviation, I do not think the two sides would completely allow flights to cease, just because they are a bit fed up with each other about the way the no-deal process has run out.
Jill Rutter: I am not quite sure how this comes about. The only thing that Parliament is voting on that is legally binding in the autumn is the withdrawal agreement, with those elements that Julian just set out. We see in the EU (Withdrawal) Act, that the Government can only bring forward the withdrawal agreement Bill once the meaningful vote has passed. That was my understanding of what happened during the passage of the EU (Withdrawal) Bill. The Government need to have that meaningful vote and have their deal approved. The Government need to take powers to, for example, make the financial settlement. It needs to be authorised to make these payments, so it will need some sort of parliamentary authority.
I would have thought that, if there is no withdrawal agreement, it is likely to be quite acrimonious. It may not be acrimonious for a long time but, at the point at which there is no withdrawal agreement, it could be quite acrimonious. There is a different sort of long-term no deal, which is that we try and fail to settle the long-term trading relationship or maybe manage the security partnership and not settle the terms of trade. That could be quite different, then you might see lots of side deals coming forward as people realise we have just agreed to disagree on where we got to on the trade thing or we could not do it in time.
There is another interesting question. I noted that, when the Committee visited Michel Barnier in Brussels, he said that there would be no side deals but just “unilateral contingency measures”. The Commission would probably be looking at unilateral contingency measures that would make sure that there was as little pain as possible for EU businesses, but that would disproportionately concentrate the minds of people in the UK, who they might hope to bring back to the negotiating table. [Interruption.]
Chair: I am sorry for the machine-induced heckling that our witnesses are having to endure. I do not know what the cause of it is, but there we are.
Q2741 Emma Reynolds: It is the machinery of the House of Commons. Sir Simon, could I start with you? You said earlier that you thought a deal on the withdrawal agreement will be agreed. Do you therefore think that we are approaching a compromise on the Northern Irish backstop? Maybe I could invite you to speculate on what that might be.
Sir Simon Fraser: It is very kind of you to invite me, but I am not sure I will take up the invitation. I believe that the principal obstacle to getting a withdrawal agreement is not the negotiation, because, if there is desire on both sides politically and skill on both sides in the negotiation, it can be done. The biggest risk is the uncertainty of the meaningful vote on our side.
The Northern Ireland issue in particular is extraordinarily important and sensitive for many reasons but, in the end, this is a backstop arrangement for something that may or may not happen in two years. While I understand how integrally that is linked to some of the big policy considerations that have to be worked out over time, it would not seem an entirely rational thing to block the withdrawal agreement on that insurance arrangement. I understand that is a difficult thing to say, because it is such an important issue. I also believe there is in the negotiation progress on new ideas being discussed to try to facilitate an agreement on the backstop.
Q2742 Emma Reynolds: You also said earlier that you think a blind Brexit is most likely, in which the political declaration is relatively vague. Does that mean that Members of Parliament would not, for example, know whether our future relationship would be based more on Chequers, EEA or a Canada free-trade-style of agreement? You suggested November next year would be the real start of negotiations on the future relationship. Would we be in the dark until then or later?
Sir Simon Fraser: It seems that is an inevitable consequence of where we have got to in this negotiation and also, frankly, of the lack of agreement on the British side about what it is we are going to be asking for. The Prime Minister has put forward a proposal on Chequers that does not command the full support of her own party or possibly every member of her Cabinet. It is quite difficult in those circumstances for us to say we are going to have a very clear sense of direction on 1 April on what we are going for. It seems that, if the political framework is agreed in the withdrawal deal, it will need enough flexibility for different models of the future relationship to still be open to negotiation during the second phase. You could have very strong commitments to free, open, frictionless trade, but the precise model and extent of it and the way in which it is legally expressed seem to me to be unclear.
Q2743 Emma Reynolds: What in your view would be the impact of a Canada free trade agreement-style deal on business in particular, manufacturing in our country and the wider economy?
Sir Simon Fraser: A Canada-plus-plus-plus free trade agreement, a third-country free trade agreement with the EU, is not what I think would be the most advantageous outcome for this country economically. It is what I suspect may well be the long-term outcome, given the red lines on both sides about different issues—on our side about accepting single market rules and the ECJ, and on the other side about disaggregating membership of the single market.
If we got to that, and it depends on how many additionalities, how many pluses, you have beyond a classic free trade agreement, there would be significant disadvantages. You would need a new tariff regime. You can negotiate that. You would have significant disadvantages in services trade with the EU, because that would certainly not be covered to anything like the extent. The single market coverage of services is at least four times greater than the average FTA coverage of services for market access. Most importantly, you would have this whole question about regulatory conformity. The decision we would probably have made was that they were not going to be close to the single market or necessarily accepting EU standards, which leads to the possibility of non-tariff barriers and the necessity of more regulatory checks, so there are impediments to trade, which are reflected in the estimates. Under this model, the loss of growth in the British economy over years would be much greater than if you had a single market or customs union EEA-style model.
Q2744 Emma Reynolds: Some of those proponents of a Canada-style or no-deal scenario suggest that, because the opportunities with the rest of the world are so great, they will make up for any trade losses with the rest of the EU. What is your view of that suggestion?
Sir Simon Fraser: I have never subscribed to that view, at least in the short-to-medium and medium-to-long term. If you look at the volume of our trade with the European Union and compare it to other countries in the world other than the United States, we would need a phenomenal increase in our trade volumes with those countries to compensate for reductions in our trade in Europe. Over the very long term, maybe that could be done.
Take the example of the Trans-Pacific Partnership, which has been in the news recently. I did some research on this yesterday. The 11 members of the Trans-Pacific Partnership account for 8% of our exports. Germany alone accounts for 11% of our exports. The quality of market access that you get through membership of the TPP is much lower. It is basically WTO plus a bit, as compared to the quality of market access that you get from the single market. One has to look at these things in some detail to see where the realistic options are.
Q2745 Emma Reynolds: Jill Rutter, there has not been much discussion yet of what kind of parliamentary scrutiny MPs would have of the future relationship. Let us say that the withdrawal agreement goes through our Parliament and we end up leaving in March next year, as the Government are planning. Obviously there are lots of uncertainties around that, but say all of that happens; what is your view of the role MPs should have in the next stage? When a future relationship is negotiated, what kind of scrutiny should we receive on that front?
Jill Rutter: That is a very interesting question. I am not sure I am going to give a deeply satisfactory answer, but we have been trying to organise an event on exactly this. The International Trade Committee is doing an inquiry at the moment about Parliament’s role in trade agreements. We have been unable to tempt them to come and pre-empt their inquiry, which is slightly annoying, so we might do something down the line if they would like to come and talk at the Institute for Government.
What is important is for Parliament to take back control and set out in advance its expectations of the sorts of information that Government should be providing to it and when. If you look at the scrutiny of the Brexit negotiations, notwithstanding the very good efforts of this Committee, the Government’s general line has taken its cue from the Prime Minister’s initial “no running commentary”. The Government have been quite reluctant to disclose information, share analysis and stuff like that.
The Commission and the European Council—and Simon will be able to say more about this than me, through long experience of problems of getting parliamentary ratification of trade deals—have been forced to adopt a much more open sharing approach. At various points on the exit negotiations, David Davis, very early on when he was Secretary of State, promised that MPs would be given at least the same information as MEPs. That might be the standard that Parliament might want to start from. It is interesting how you involve MPs in what may be sensitive negotiations. You might want to think about some sort of arrangement that looks more like the Intelligence and Security Committee, where MPs will be briefed as a Privy Counsellor or on a more confidential basis if things are really sensitive.
What we have not seen or we have seen incredibly little about, and it is a really interesting question about preparing for the future deal, is we are quite in the dark about the whole process around preparing for the future deal. We have not seen an external stakeholder engagement plan that there might be. People are thinking in Whitehall about how they are going to organise internally. In many ways, as Simon said, this is the difficult part. The withdrawal agreement is very difficult, but it is not a difficult negotiation. It is under three big headings, whereas the long-term relationship affects all our defence and security relationships, but also every section of the economy, so MPs should rightly be pressing the Government for early engagement on how they propose to do this and make clear their expectations about what information they want at what stage. Do they want to look at a mandate for the negotiations? The European Council produces guidelines; the European Parliament sets out its own expectations of what it wants from negotiations, et cetera. It will be an interesting exercise. I hope the International Trade Committee will set out what it expects.
Q2746 Emma Reynolds: I have one brief last question. Sir Simon, the first time you appeared before our Committee, which I think was our first evidence session, Dominic Raab, who was then a member of this Committee, asked you whether there would be fewer or more civil servants after Brexit. Anyway, this came out in the debate you were having with him. I wonder whether we could revisit that and have opinions from the rest of the panel. There is a view from some who want Brexit that it will lead to fewer rules and regulations, and a smaller Government. I just wondered if you could tell us what your view of that suggestion is.
Sir Simon Fraser: I remember that exchange very clearly and we have all been on a steep learning curve since then. I assume that includes Mr Raab, because I suggested that Brexit would in fact result in an increase in bureaucracy and more civil service, which he found difficult to agree with. The reality is that we have 7,000 more civil servants than we had then and are expecting to have 16,000 more by 2020. His Department, which at that time we were told would have 400 people in it, now has 700 people in it. Defra, which is the Department now led by the other former member of this Committee, has added 1,300 staff in Brexit-related jobs. That is not talking about HMRC, which Sir Amyas Morse mentioned before, and the Home Office, where 1,500 jobs are expected to be added. To be honest, my position in that discussion has stood the test of time.
Jill Rutter: There is the big short-term bounce that we have in the policy work required to support the negotiation, this massive legislative effort and getting the initial systems up and running. Brexit has undoubtedly been a bit of a bonanza for civil service job creation. My colleagues have produced these very nice graphs to show a handbrake turn on the reduction of civil service numbers until June 2016, then going back up. Something like Defra is an extreme case in point. In the longer term, you would expect some diseconomies of scale, where we have to set up our own regulatory capacity. At the moment we do things through the EU so, if the Health and Safety Executive has to expand its capacity or chemicals regulation, because we can no longer pool that with the European Union, though the European Chemicals Agency, there will clearly be some long-term additions. There will be some long-term additions to customs if we have to manage customs frontiers for the long term, administering a new migration regime.
In the longer run, you would hope that we would also be able to look at whether there was scope for running things in a better, smarter, more efficient way. After that initial hump, are there processes, things and different ways? Could we make a leap to doing things differently and better? You might see some of that coming down and there may be scope to dispense with redundant compliance requirements.
The other area that Simon has not mentioned is that the Foreign Office certainly seems to be of the view that it will be required to up its capacity quite considerably, because it will be harder for us to engage in Europe. We have seen a rundown in some of the capacity of the European embassies. Sir Simon McDonald came and spoke at the Institute for Government about this. Basically, you did not need that much capacity because everybody was meeting their counterparts all the time in Brussels. You would need to staff up some of that, and I am sure the Treasury is looking forward to getting in all those spending bids in next year’s spending round.
Julian Jessop: Can I quickly disagree with almost everything that has been said? On the point about the backstop, it is essential the backstop is credible. It is something that we were, if push came to shove, willing to agree to. A lot of the backstops currently being proposed, certainly anything that involves remaining in the single market and customs union, or a border between the north of Ireland and the rest of the United Kingdom, would be acceptable. Whether they are a backstop or a first option, we cannot sign up to those.
The second point is to pick up on something Simon said about the TPP only accounting for 8% of our trade compared to Germany’s 11%. That is factually true now, but it is partly because we do not have a free trade agreement with the TPP countries. We also know that that group of countries as a bloc will be growing quicker in the future than the EU, so that position will change.
The third thing is about civil servants. It is actually a great benchmark. From the point of view of the Institute for Economic Affairs, it would be a disappointment for us if we did not end up with fewer civil servants at the end of the day than we have now. As Jill and Simon have both implied, a lot of the increase in employment at the moment is due to the adjustment, the transition, extracting us from these relationships. In the long term, we already have a lot of these regulatory agencies; it is not as if we are creating them from scratch. We have a Civil Aviation Authority. We have a medicines regulator, a Food Standards Agency and so on. It is not clear to me that we need new institutions or new people there. To begin with at least, we are simply copying across legislation from the EU. It is not obvious to me that there is huge pressure there on civil service resources in the long term, once the system beds down. I hope there are plenty of areas where we will have a more flexible approach to regulation. That does not necessarily mean deregulation; it means pro-competitive regulation that boosts markets.
Q2747 Emma Reynolds: On that point, are these regulators not going to have to take on some of the tasks that are being done by EU regulators, for example monitoring compliance? They do not necessarily do some of the stuff that the EU regulators do.
Julian Jessop: In many cases, the way these things work is that the EU decides the rules, but they are then applied by national regulators. Take the roaming charges, for example; it is Ofcom in the UK that makes sure that British companies do not impose roaming charges that are not allowed by the rules. In a sense, they are doing the work already. I have no doubt at all that, in the short term, there will be more work for them to do, because they are not just implementing the rules. In many cases, they are having to think what they actually are, because they previously came from Brussels. In the short term, yes, but in the long term it is not obvious to me that we will need more civil servants. We already have these institutions. I would hope, in the long term, they would have less to do because we will have fewer regulations than we have at the moment.
Sir Simon Fraser: Can I just make one point, Chair? We actually have free trade agreements through the European Union with Canada and now with Japan, which are two of the biggest economies in the TPP. The UK is part of those and the quality of those agreements is better than the quality of the TPP, so these things are very complicated.
Q2748 Stephen Crabb: Sir Simon, can I come back to and build on one of Emma Reynolds’ previous questions about blind Brexit? Large parts of the business community will be listening with dismay to talk about a blind Brexit. If you were advising a company that was desperate for more clarity on future trading arrangements, would you be saying at this stage that it is not totally blind and it is likely that the political declaration will effectively set a floor at a Canada‑plus arrangement with optionality built in for a much deeper economic partnership, or would you be saying that it is likely to be a much fudgier declaration, with language that would be left for others to interpret and try to reinterpret at a future date?
Sir Simon Fraser: I do some work advising business on these things and what I say to businesses now is the most important goal is to achieve the withdrawal deal and get the transition, because that gives you operating continuity for another couple of years, which seems extremely important to me at this stage. That is the number one short-term priority and objective for business. If we are going to have Brexit, which was not my preference, I hope we will achieve that deal.
Then there will be different options on the table. We know what the parameters of the discussion will be around the different options. In a sense, the EU has said we can either have a Norway-style EEA arrangement or a Canada-style FTA-plus-plus-plus arrangement. They could live with either of those models and we will need to decide, over time, where we want to end up on that spectrum.
I heard Pascal Lamy, the former French Commissioner and Director-General for the WTO, talk about this this week. His interesting view was that, in the end, this is a choice for the UK to make over time about the nature of the relationship we want, and, linked to that, how thick a border we want in economic and trade terms. I suspect that that debate will continue in this country for quite a while, as the second phase of the negotiation goes forward. I would say to business that it needs to be seeking to influence those who are conducting that negotiation and making policy to make sure that the economic interests of the country, consumers, suppliers and businesses are reflected in those choices.
Q2749 Stephen Crabb: Sir Simon, again, can I run past you a comment that was made to me by a European Finance Minister the morning after the Salzburg summit, about the second referendum? He said that he and others like him were holding out for the UK to eventually hold a second referendum and reverse its decision. When I pushed back on that, he said, “When your body politic grinds to a halt, you will be desperate for a way out of this”. Is that a view that is common among European politicians who are engaged in thinking about Brexit?
Sir Simon Fraser: I cannot speak for European politicians, but my perception of this is that they regret but respect the decision that was taken in the referendum. They would like more clarity from the UK about what that really means, so we can negotiate both the withdrawal and the new relationship. If, in the end, we were to decide by one means or another that we did not want to leave, I still believe that the overwhelming majority of political leaders in the European Union would welcome that reversal of our position, however it was reached. That is my view. That does not mean I expect that to be the case, but that is the position I think they would take.
Q2750 Stephen Kinnock: I wanted to come back to a point Mr Jessop made right at the start, which is that, if you were to measure success based on levels of uncertainty, we are in a pretty disastrous situation. I am paraphrasing, but you in essence said it does not look good from the point of view of uncertainty. A big factor in the uncertainty conversation is this issue of a blindfold Brexit. The political declaration will not be legally binding and could, therefore, be a vague and nebulous document, which in essence does not give us much clarity when it comes to the meaningful vote. That massively ratchets up the level of uncertainty. The vaguer the political declaration is, the less certainty there is for business, citizens, the country at large and ourselves.
That said, what is your view on what the Prime Minister’s official spokesperson said the day before yesterday, which was that there will be no withdrawal agreement unless there are “precise” guarantees in the political declaration of a frictionless trading relationship between the United Kingdom and European Union post-Brexit? Do you think that statement from the Prime Minister’s spokesman will help to increase certainty levels? Indeed, it was confirmed from the Despatch Box by Dominic Raab that that is the Government’s position. I am just interested on your thoughts on the uncertainty question in the light of that statement.
Julian Jessop: First I have a general point on the uncertainty question. Although the degree of uncertainty is clearly very high, it is quite encouraging how well the economy has continued to perform. We can argue about how strong growth would have been without the vote to leave the EU, but the bottom line is the economy has continued to grow at a fairly healthy pace. There has been some uncertainty holding back investment, for sure, but the unemployment rate has continued to fall and so on. Although there is a high degree of uncertainty, I am quite reassured that the economy seems to be continuing pretty much as normal. That is a reflection of the way that most people, outside the Westminster and the Whitehall bubble, view these things. Businesses will deal with whatever they are given. If that is an increase in frictions that is what businesses do; they can deal with frictions. Consumers will deal with whatever is thrown at them as well, so I would not overplay the importance of uncertainty, but there is undoubtedly too much at the moment and it needs to be clarified.
I would rather not comment specifically on what individual politicians or their spokesmen have said. The IEA is non-political. I will just make a general point that, for us, the process of Brexit has always been about a series of trade-offs. You will be familiar with our Plan A+. One of the criticisms we had of the current process is that it always seems to be about the UK and the EU. It is not thinking about the broader dimensions, including trade with the rest of the world. You talk about the importance of maintaining frictionless trade with the EU, but I do not think that can be the be-all and end-all of that process. If it was, by the way, we should join the euro tomorrow, because it would lower frictions in trade with the EU even further, so it cannot just be about that. We have to recognise there are other parts. Just as the euro is a point about the independence of monetary policy and other commitments you might make to members, similarly, leaving the EU is about regaining independence on trade and regulatory policy.
Most sensible Brexiteers, and I would include myself as one of them, would accept there will be an increase in trade frictions with the EU as a result of us leaving, even under a Canada-plus-plus-plus deal. The challenge is to minimise those frictions in such a way that does not also limit the potential upsides from leaving. That is where the Chequers plan in particular falls short. Our own plan and several others would do a lot better.
Q2751 Stephen Kinnock: Ms Rutter, I am just wondering about your perspective from Government. Our whole posture on these negotiations has been that there will be a legally binding international treaty for the withdrawal agreement and the political declaration will be a non-binding statement of intent. The Prime Minister’s statement—or the Prime Minister’s spokesman, but it is the same thing—seems utterly to have turned that on its head, because it seems now that the political declaration must contains precise guarantees of frictionless trade, meaning at least as frictionless as it currently is, as a precondition for the withdrawal agreement to be finalised. Has that caused confusion in Government?
Jill Rutter: I cannot speak for whether it has caused confusion in government. I am not hardwired into the people doing the negotiation. The Prime Minister has always had a calculation to make about how much precision is helpful in the political declaration. The former Secretary of State was very much of the view that, if you were going to persuade people who might be reluctant to vote for the withdrawal agreement including the financial settlement, you needed basically to have nailed down as much as you could on the future relationship. The EU has always made clear in its guidelines that its position could evolve if the UK’s position evolves. Whatever is in that political declaration could change if circumstances in the UK and the UK’s preferences moved, whether on freedom of movement, the European Court of Justice or things like that. That would be possible after the political declaration. Michel Barnier can always go back for revised guidelines if things change. That was in the EU guidelines in March.
What is difficult is it is almost impossible, as far as I can see it, for the EU to allow language about frictionless trade. I thought the EU has always been clear—I am looking at Simon—that frictionless trade, as the EU defines it at least, means being within the single market and the customs union. We produced a report last year saying that, if you want frictionless trade as now, you have to be in the single market and the customs union. Those are the two bits of architecture that give you frictionless trade. Move away from those and inevitably you will have a bit of additional friction. You can minimise it through facilitation agreements, smart technology, conformity assessment, bits of mutual recognition and a whole bunch of things, but basically there will be added frictions. I would find it very interesting if the Prime Minister gets words saying “frictionless trade”, as opposed to “as frictionless as possible”, which is more often the formulation. We had a long time when we were all talking about the “exact same benefits”. One of Sir Keir Starmer’s six tests is still whether a deal offers the “exact same benefits”.
One of the things that the Irish backstop experience shows us is that it is quite important, even if you go for more expansive language, that both sides understand what each other means by it. You do not want another going through of “That’s not what we meant by the language that we put into the political declaration”. I would hope that people are clear, when we get the political declaration, that both have the same understanding of what it means about the field within which we are negotiating. Otherwise, those negotiations get off to a much more difficult start, but Simon is a much more experienced negotiator than I am.
Sir Simon Fraser: I do not like the term “frictionless trade”, because what is it? It is so vague it does not really help us. It does not help us at all, so it is one of the things that I would like us to get away from and have more specificity. What we are talking about is trying to maintain the freest possible flow of trade and access to markets between the UK and the EU. Whether you are in favour of Brexit or against it that is one of your objectives.
If I may say so, my personal reading of the Prime Minister’s spokesman’s statement is that it was largely directed at a domestic audience, in view of things that were being said around her over the weekend and on Monday. It seems to me that the strategy we are taking towards this whole process is dependent on a degree of constructive ambiguity in the political framework. That is why the political framework is non-binding, in order to be a platform for the launch of the second negotiation. We will be seeking language in that framework that sets out principles that both sides agree should underpin the future relationship, but which will not give specificity on the form of that relationship, at this stage.
Q2752 Wera Hobhouse: We have moved a little further from it, but I would like to go back to the side deals. Jill Rutter, you mentioned that they are a preferred option or the Prime Minister really wants to go that way. She has obviously gone out and done quite a lot trying to achieve some side deals. Could you outline the risks involved in doing lots of side deals?
Jill Rutter: There are two different sorts of side deals. There are side deals with the EU, where we need them to go on recognising UK systems, UK authorisations and things like that. They were the sort of thing Julian was talking about, keeping the planes flying. That is one suite of side deals we would need in the event of no deal or, in the longer term, if we did not have an overarching big deal in which they were included. The US at the moment has 35 of what you could call side deals with the EU, even though there is no free trade deal between the EU and the US, to make trade flow more easily and things like that. They are in areas like data, aviation and things that matter to people, such as pets. Would we be a listed country so that we could take our pets overseas and did not have to notify everybody four months in advance that Fluffy wanted to go to France for the weekend? There is that sort of step.
There is another thing, and Amyas Morse referred to this when talking about Defra, which is quite interesting. All the deals to which we currently have access through our membership of the EU will all fall over in the event of no deal, on 29 March 2019. This is the thing that is concentrating a lot of work in Whitehall and progress is being made. We will not be part of those deals once we leave the EU. There is a footnote in the withdrawal agreement that says, if this withdrawal agreement is signed, the EU will write to all the people who are parties to those agreements, all the third countries, and say, “For the duration of the transition period, please treat the UK as if it is an EU member state. Go on doing things as now”. That would be hugely easier.
As Amyas said, the example in the NAO report on Defra says there are 153 countries or something like that where we would need to have agreements on exporting animal products, and Defra is prioritising 15 to 19 of those, so the top 90%. Then the NAO has this strange bit of language in their report, that Defra is taking the risk of not being ready for the other 10%. That is not actually Defra’s risk to take—and I used to work at Defra—unless Defra is underwriting the loss of business for those poor businesses that made the mistake of having selected a non-priority country to make niche exports to. It is an interesting thing where the Government, as Amyas Morse said, are doing a very sensible 80/20, 90/10 exercise of where to prioritise, where to get things done and what we can get over the line. Of course it is right to pick off the top ones, but it does not mean that there will not be a few very localised examples of people who are badly caught out if they happen to have a business that is completely dependent on exporting to the country that we have not rolled over a deal with. Those are the other deals.
There is a lot of work going on in Whitehall on this issue of third-country deals. If you talk to some of the third countries involved, they say they can be ready for that, because they have their own domestic ratification process to go through. They may also seek to change the terms of those deals, because it is not absolutely clear that the deal that the EU negotiated with them is the same one as they would seek to negotiate with the UK. I was talking to one big country that said, “We can probably be ready by December 2020 to get the follow-on agreements in place. March 2019 would be a bit of a nightmare to get those”. You can see on the aviation thing that the Government’s no-deal notice says there are 17 countries, including the US and Canada, with which we have access to separate deals through our EU membership rather than covered by bilateral deals. This could be quite extensive. There will inevitably be businesses, transactions and those types of things that fall through those gaps, however much effort we put into all of those. It will be messy, bumpy and uncomfortable.
Q2753 Seema Malhotra: I want to ask a follow-up to Sir Simon Fraser’s point. Sir Simon Fraser, you talked about how we would need a phenomenal increase in trade with other countries to make up for the loss of access to the EU markets and the quality of market access being an issue. You talked about how this needed to be looked at in some detail. Could I ask if you think it is not being looked at in sufficient detail? Is that why you said it needs to be looked at in more detail? Are you concerned?
Sir Simon Fraser: I have different concerns. One concern is the way that this is discussed in public is rather simplistic. There is an assumption that joining the TPP gives you the same advantages in relation to trade with Canada as the EU-Canada trade agreement does. That has to be examined and understood in much more depth. These are very complicated things, and not all trade agreements or free trade agreements are anything like the same in the scope, coverage and depth of access they give you. If you have a scale where the EU single market is the gold standard or the best, the WTO rules are the base, the TPP is a little better than that and others are on the scale in different places. That has to be understood as well, it seems to me. That is one of my concerns.
Another concern is, if you look at what the Department for International Trade is doing, it is focusing in particular on three potential trade agreements, which are New Zealand, Australia and the United States. They are the ones they have chosen to start with. That is laudable, but the fact is we trade four times as much with the Czech Republic as we do with New Zealand. We need a sense of proportion about what it is we are losing in Europe, what we are potentially gaining elsewhere and over what timeframe. That is the fundamental point I am driving at.
Q2754 Seema Malhotra: Could I ask Mr Jessop if this issue has been analysed by the IEA, in terms of the loss of trade and the speed with which we might be able to make up that gap?
Julian Jessop: “Yes” is the short answer. As far as the quality of trade deal is concerned, we have a large external panel of trade experts who would take a different view of the merits of joining the TPP, for example, than Simon would suggest. We have had a go at quantifying the benefits, but it is difficult to do. This is a general problem with modelling the economic impact of Brexit.
Q2755 Seema Malhotra: What is difficult to do? Is it to see where there will be a reduction in trade or to see how we might close the gap?
Julian Jessop: The general problem first is that the costs of Brexit are relatively easy to quantify and are upfront. We can see those in the cost of the increase in trade barriers. The benefits, though they are potentially larger, are harder to quantify and further out in the future. It is very hard to be precise about the numbers. If you look at trade deals though, the experience has, by and large, been that they have delivered far bigger benefits than were anticipated when the trade deals themselves were being done. There are plenty of examples of trade deals between countries like, for example, China and New Zealand, where the benefits that were expected over many decades were actually achieved in just a few years. There is a tendency for people to underestimate the benefits of free trade deals and potentially overestimate the costs of those situations where there is an increase in friction. It is very hard to do.
Q2756 Seema Malhotra: Is it a risk though? You have put forward an alternative model, which you recently published. Do you consider there to be a risk to the UK economy? What if it is not easy to close the gap?
Julian Jessop: Those risks are greater if you operate with not having any opportunities at all. If you simply had a policy of maintaining as close a relationship as possible with the EU, you are definitely getting an increase in costs compared to where we are now, but you are not going to open up those opportunities. I should say that this is not just in trade. There is a tendency to think that the game is to have increases in trade with the rest of the world to offset reductions in trade with the EU. There are other parts to the jigsaw as well, including regulatory optimisation. It may be that the trade part of the story alone is not enough to offset the costs of a looser relationship with the EU, but those other benefits, particularly around regulation, are enough in total over the longer term.
In the short term I, like most people, accept that the initial impact on the economy has been negative. From here though, there is all to play for. If the Government have a policy that allows you to maximise the opportunity as well as minimise the costs, there is every chance we will end up, in a few years, looking back on this and thinking what a great idea it was.
Q2757 Seema Malhotra: Do you also hold to your point that you might need to have civil servants who are good at seven-dimensional chess?
Julian Jessop: Yes.
Q2758 Seema Malhotra: Is that realistic? Is your proposal one that any Government would be able to take on board and see that we could implement for a country and businesses seeking to make decisions?
Julian Jessop: One of the starting points of this conversation was whether DExEU was being cut out of the process. I would add another Department to that, which is the Department for International Trade. We have people there, including Crawford Falconer and others, who I think should be far more closely involved in this process than they are at the moment. That is a reflection of the fact that we are just focused on the relationship with the EU. We need to do more to think about our relationship with other countries.
Q2759 Seema Malhotra: We are going around in a slight circle, because we are saying there could be quite a reduction in trade with our main trading partners, which are very close to us geographically, without any clarity from what you have done so far on how quickly you could close the gap with trade deals with other countries.
Julian Jessop: That is a fair point.
Q2760 Seema Malhotra: Thank you for that. I know we are running out of time. I just want to ask you another point. I wondered whether you have considered this perspective. You have laid out the argument again that we should be in a relatively straightforward position to be doing a trade deal, because we are starting from the point of having the same regulatory framework. Do you also take the perspective and have you considered that, where you might be planning with countries with which you are not currently converged, you are planning with known differences and planning for convergence, which gives greater certainty? Do you agree there is quite an issue if currently you are convergent and you are planning for divergence, where there are greater unknowns? Therefore, the infrastructure you need to put in place is probably bigger.
Julian Jessop: This is one of the potential advantages of Brexit. At the moment, we are locked into a model where we have to accept the EU way of looking at regulation, so the precautionary principle, for example. In the future, we will be able to have a variety of different regulatory regimes depending on the country that we are trading with. There may be parts of the US model, for example, which we prefer to the EU.
Q2761 Seema Malhotra: There is a variety of regulatory regimes. Do you think, if businesses are seeking to trade, they would therefore be able to or want to be dealing with a variety of regimes? Would that increase the cost for UK business?
Julian Jessop: It is already the situation that, if you are producing a good for export to the EU, it may well be different from the same good you are producing for export to other countries.
Seema Malhotra: The majority of trade is also with the EU.
Julian Jessop: That is fine. That would then be a choice for businesses. If a business is primarily going to continue to trade with the EU, it will follow the EU model. A business looking to trade with other parts of the world may well prefer to choose a different model. That is what I mean about the competition of models.
Q2762 Seema Malhotra: I will leave it there, but some of the points are that what you are producing may be more theoretical than seemingly grounded in reality about the kinds of decisions businesses have to make and how they need to invest in their business.
I will just put one final question to Jill Rutter. This is in relation to the 800-plus SIs that we need to pass in Parliament prior to our leaving the EU. You may have heard me ask Sir Amyas Morse a similar question, but is it your view that it is realistic to see these pass through Parliament in the timeframe that we have remaining?
Jill Rutter: I want to comment very quickly on the points that Julian was making. We are producing a report next week called Understanding the Economics of Brexit that looks at all the different models. One of the things that we bring out is a checklist of questions to ask when the Government produce their impact analysis. Are the assumptions consistent? If a model assumes a very deep, close trading relationship with the EU, but also assumes loads of benefits from lots of other free trade deals, is that a coherent set of assumptions? That is one of the things that MPs should be asking about whatever analysis the Government finally end up with, because sometimes you want too much to do that, and also to scrutinise some of the policy choices underpinning them.
The SIs and drafting capacity are quite interesting. I thought the NAO reports on both DfT and Defra referred to drafting constraints that Departments were encountering in the summer and upon which counsel had been advertising for more people, so there are some constraints on the drafting side. Two DExEU Ministers are appearing this afternoon before the Procedure Committee to answer questions about the process of bringing forward all these SIs. I know the sifting committee has been interested in the timetable, because the deadline for getting the SIs that need to get through in the event of deal or no deal is February to meet certain things. The sifting committee potentially faces a huge amount of work, particularly if those do not come through in an even flow, so that the Government has a sort of massive essay crisis and then dumps everything on Parliament. That might not be an unknown way of going. It is very interesting.
Legislation is going through, but remember there will be some Bills, particularly in the event of no deal. We have not seen a fisheries Bill yet or a migration Bill. We are still waiting for the migration White Paper that was promised in July last year. We have seen that, which we might need to introduce a new system and secure citizens’ rights if there is no withdrawal agreement, so there is quite a big demand on legislation and drafting capacity. As Amyas Morse said, Government can potentially buy some of that in, though I think Parliamentary Counsel is usually quite jealous of its skills and thinks they do not necessarily exist outside. It is doing a lot of the heavy lifting on SIs, but we calculated that because of Brexit, SIs would have to be going through at about twice their normal rate between now and the end of February. That has implications for the quality of scrutiny. That has been a big issue with people concerned about the way in which Ministers propose to use their delegated powers.
There is much less pressure on that front in the event of the withdrawal agreement being finalised and, as Simon said, passed by Parliament. There is an interesting issue that did not really come out of the Amyas Morse session: if the Government get a withdrawal agreement but the parliamentary fate of the withdrawal agreement is still uncertain, what does that do to no-deal planning within government? Do the Government say they can call all that off now or still take the risk that Parliament will not approve either at the meaningful vote or the withdrawal agreement Bill in its current form? Does they continue with that contingency planning?
Q2763 Stephen Timms: Can I take you back? I know time is running out, but you made a point earlier, Ms Rutter, when you correctly quoted what Monsieur Barnier told us on 3 September, which was that, if there was no deal, there would be no further negotiation. You have also pointed out to us that the Government have indicated they would like at least 19 mini-deals in the event of a no-deal outcome. The US precedent that you referred to suggested we may need about 35 in the event of a no-deal outcome. I would be interested in the views of you all on this. Do you think in reality the pressures on the EU would be such that, despite what Mr Barnier says, they would have to get into negotiations about all these things following a no-deal outcome? If you do think there would be negotiations, how plausible is it, if we find ourselves next month in a position where there is no deal, that we could negotiate between 19 and 35 mini-deals between now and the end of March?
Jill Rutter: Simon is much better connected in Brussels than I am, but there is evidence of increasing focus. The initial EU view was that their no-deal contingency notices were designed to say this would be so awful that no sensible Government would contemplate it. They were designed not as practical guides to what would happen, but as, “This is what being a third country means; you are not seriously going to go there, are you?”
It was quite interesting that, a couple of weeks ago, something called the Deutsches Aktieninstitut, which is a shareholder body, produced something saying that no deal was so difficult to contemplate that regulators needed to start being allowed to talk to each other. Yesterday we had a press release from the Bundesverband der Deutschen Industrie, which was reported in the FT today, saying that negotiators basically have to show readiness to compromise. They say a transition period is “indispensable” for German business and things like that. It is interesting that there has started to be a ratcheting-up of domestic political pressure. The Government have, after all, been waiting quite a long time for the German business cavalry to ride over the hill and force a compromise. It will be very interesting to see what happens. Of course, they put in the obligatory material about the integrity of the single market in that. I only have the press release in German, so I will not read it out, but basically the headline is that Europe must prevent a worst-case scenario. It is saying the negotiators need to get their act together.
What I do not know and cannot really judge, because I am in London and not in other capitals, is whether those are one-offs or there is a bit of rising pressure. Obviously the people most exposed are the Irish, who have been doing a lot of work. They are now doing roadshows on preparing for no deal around the country and have a very good website on preparing for Brexit. The Dutch are the next down the line, so the real impacts are the northern European countries and Spain. Spain and Portugal are also quite affected.
Q2764 Stephen Timms: Can I ask for Mr Jessop’s views on this? You have described the stories around no deal as “Project Fear 2.0”. Do you think it is plausible to achieve 35 mini-deals between now and the end of March? In using that kind of language, do you think that the stockpiling of food and medicines that we understand is underway at the moment is unnecessary and the Government should not be bothering with that kind of thing?
Julian Jessop: First of all on the scope for doing these sorts of deals, it is worth stressing that these are not cherry-picking rights that are only available to existing EU members. If we take the air services agreements, for example, the EU has air services agreements with all sorts of countries that are not in the EU. There are plenty of non-EU countries, including China, I believe, which participate in the Euratom programme. This is not a question of breaching the fundamentals of the EU. Whatever you think about the political and legal arguments, I also think the economic forces will be overwhelming as well. There will be pressure to do these deals.
In terms of Project Fear 2.0, there are similarities. There are two. A lot of the stories are frankly ridiculous. My personal favourite is that the UK is going to run out of food by August next year. I think 7 August was the date suggested. Now that is clearly ludicrous. There is also a similarity in that a lot of this is actually counter-productive, because there are some genuine concerns that anybody who has looked at this for any length of time would recognise. Again on air services, it is technically possible that planes would not be allowed to fly but, if you always couch it in this ridiculous hyperbole about apocalypse and so on, people do not take those genuine risks seriously.
Stephen Timms: So they should not be stockpiling.
Julian Jessop: It depends. If I was looking at something like insulin, the risk/reward is clearly that you should be stockpiling, because none of us can know what will happen with certainty. Even though the risks of there being a shortage of insulin are miniscule, you would still want to have some. I would not be stockpiling food, for example. Even if it were practical to stockpile food, the idea that we would not have enough food is ridiculous.
Q2765 Stephen Timms: You think there should be stockpiling of medicines. By talking about Project Fear 2.0, you imply this is all ridiculous.
Julian Jessop: A lot of this is sensible business planning anyway. There are all sorts of reasons why the NHS would want to have stockpiles of medicines. These things happen. You want stockpiles of flu medicines and so on. I am not saying this is anything new. There is a potential risk out there. It is like any insurance policy; it is very unlikely that we would need these things, but it is necessary in some areas. My use of “Project Fear 2.0” is partly meant to be constructive. I am generally saying to the people who are saying these things that they are not helping themselves, because very few people buy this stuff anymore. If you have relentlessly negative headlines, people do not take enough notice of the genuine risks that exist.
Q2766 Stephen Timms: But you do think that stockpiling is needed. Can I ask Sir Simon what you think the realistic prospects are of achieving 19 to 35 mini-deals between November and the end of March?
Sir Simon Fraser: There is a slight confusion of categories when we are talking about these deals, which we need to be careful of. The first thing I would say is that a business or something has to do its contingency planning on the basis of no deal, because that risk definitely exists. That is the first point. Secondly, as I have said, a deal is achievable and should be achieved, subject to our political circumstances.
My own view is that a lot of people say things when they are negotiating. Michel Barnier is not going to say, while he is negotiating a deal, that if we do not get the deal we will do something else. You always have to take the context into account. My view is that there would be pressure on the EU side, as on the UK side, to reach pragmatic arrangements if there was a significant impending risk of no deal. There will be very big pressure. I am not sure when that will kick in and how it will be expressed. If we get to no deal, there will be an attempt to extend the negotiation and various efforts made to keep the show on the road, but the EU’s approach to doing either these temporary or substitute arrangements would be quite limited. It would be focused on areas of their principal concern, not ours, and they would not be in the business of handing out presents to us, so we have to be realistic about that.
One thing I want to say is, when you look at the no-deal scenario, it tells you that no-deal Brexit is very far from taking back control. We could make unilateral gestures or offers to the EU side, but we would be entirely dependent in a no-deal context on their unilateral good will to make offers to us on the other side. It is a very bad outcome.
Q2767 Mr McFadden: I just want to get one thing clear in my mind. I know we are at the end. Going back to these 7,000 extra civil servants, what is the annual cost of an extra civil servant? Is £30,000 a year a reasonable figure?
Jill Rutter: It depends who they are. It is certainly not if they are policy officials. A lot of the initial hires were mainly policy people, who are significantly higher than that. The civil service has expanded its Fast Stream programme. We have been losing people into Government, because their salaries are quite attractive. If you go in as a grade 7, which was a principal, the starting salary for somebody in London is just a bit north of £50,000. When you talk about the big bulk numbers to come for something like customs officers and people running the migration system, those people are down the civil service ranks. That is just the salary; that is not the pension.
Q2768 Mr McFadden: Let us be really fair and small-c conservative and say £30,000. Let us say they are all grade-7 policy advisers. With 7,000 at £30,000 a year, would I be correct in saying that is £210 million a year?
Jill Rutter: The interesting figures to have a look at are in a report we produced called Costing Brexit, where we looked at what we thought the Government had spent on Brexit so far. Some of it is from civil servants and some of it is consultancy spend. The real big spend on estates and IT has not got going.
Q2769 Mr McFadden: Let us keep it simple; just focus on these staff costs. We have decided that £30,000 a year is at the low end. My arithmetic may be wrong but I think 7,000 civil servants is £210 million a year. That is more than our annual net contribution to be a member of the EU, is it not?
Jill Rutter: No, because our net contribution to be a member of the EU is around £10.5 billion. It is £350 million a week versus £210 million a year.
Mr McFadden: We are not in that territory.
Jill Rutter: The ballpark figure the Chancellor allocated for Brexit preparation work in 2018-19, which pays for most of those civil servants, but also pays for developing new systems and things like that, was £1.5 billion. Still that is nowhere near.
Mr McFadden: We are looking at £1.5 billion as the annual cost of this.
Jill Rutter: That is for the preparation work.
Sir Simon Fraser: My understanding is that direct spending on Brexit, which is not just these costs but by Government, is estimated to be up to about £4 billion by the end of 2020.
Julian Jessop: Those are relatively small sums of money. I am an ex‑Treasury official, so I am allowed to say that.
Jill Rutter: So am I, and I think £4 billion is quite a lot.
Stephen Kinnock: Tell that to my constituents. We could do a lot with £210 million in Aberavon, I tell you.
Julian Jessop: Around 1% of GDP is £20 billion so, if we can prevent a 1% to 2% hit to GDP by having a few civil servants, it is worth it.
Q2770 Wera Hobhouse: I have one question for you then. You said, “In the long term”, but what do you call the long term? In the short term we might have some increases, but in the long term it will be fine. What is the long term?
Julian Jessop: I am going to use 15 years.
Jill Rutter: Horizons all look at 2030 basically.
Julian Jessop: That is a reasonable time.
Chair: Can I thank Jill Rutter, Julian Jessop and Sir Simon Fraser for coming today and for answering all of our questions? It has been really helpful.