RPP Schulz leaving, Verhofstadt remaining and Brexit coming

Overview

Whilst the last few weeks have given the PM and the Government some positive economic news, this week has certainly been more challenging from a political perspective. In addition to photographers capturing an image of a Conservative MP's aides notes on Brexit as they were leaving Downing Street, she faced unhelpful interventions from former Prime Ministers, a challenging meeting between David Davis and Guy Verhofstadt as well as a reduction in her Parliamentary majority when Zac Goldsmith last night lost his by-election.

Highlights

  • Conservative MP Mark Field's parliamentary aide, had their Brexit notes caught on camera. The notes said the UK was aiming for a "have our cake and eat it" strategy and would get “transitional” controls after Brexit that would give Britain access to the single market for a limited period. It said a deal on manufacturing would be “relatively straightforward”, an agreement on services, including the financial sector, is likely to be “harder”. The notes also said the French negotiating team would be “difficult”. Downing Street have said that notes have no connection with them, and didn't reflect Government policy.
  • Prime Ministers always find it particularly unhelpful when their predecessors try to influence the political debate. This week has seen Tony Blair say that Brexit ‘can be stopped’: Blair told the New Statesman that Brexit is ‘like agreeing to a house swap without having seen the other house.’ In addition to this former Conservative PM John Major told the Times that he sees a “perfectly credible” case for a second referendum on Brexit. He said “the tyranny of the majority has never applied in a democracy and it should not apply in this particular democracy.”
  • The UK government faces another legal challenge over single market: Lawyers are going to argue that parliament should have a say over whether Britain could remain in the EEA. Their case is that the referendum asked the public a single question over whether the UK should leave the EU, and did not delve into more complex economic issues.
  • On the difficult political question on the future of EU citizens in the UK and UK citizens living in the EU, the PM's pre-Brexit expats plan have been reported to have been rebuffed: Angela Merkel allegedly refused a request by Theresa May for assurances that Britons living in the EU and EU citizens living in the UK would keep their rights to residence, work and healthcare after Brexit.
  • However on a more positive note, following a meeting on the 28th November Theresa May met her Polish counterpart, Beata Szydlo. The PM signalled closer co-operation in defence, cyber security and enterprise during Downing Street talks and insisted that Brexit will not strain their relations. They interestingly discussed encouraging teaching Polish in UK schools to help support the Polish community.
  • Guy Verhofstadt met with David Davis: The Brexit secretary met the European Parliament’s chief negotiator in Strasbourg. They agreed the UK should leave the EU before the European elections in 2019, with Davis suggesting May 2017 would be the real kick-off for detailed negotiations. Verhofstadt said his red line in the negotiations remained protecting the EU’s so-called “four freedoms”. He also said the end of results of the talks “has to be a close partnership between EU and UK in the interest of the citizens”.
  • Finally the process to replace Nigel Farage as leader of UKIP has at last come to its conclusion, with Paul Nuttall becoming new UKIP leader: On Monday the former deputy leader, won with 62.6% of the vote. After the party’s recent instability, Nuttall said “Today is the day we start to put the UKIP jigsaw back together.”


Written by RPP Head of London Office, Andrew Brown

Schulz leaving, Verhofstadt remaining and Brexit coming: Speculations about the next President of the European Parliament

Martin Schulz has decided to continue his personal career in Berlin and to leave the European Parliament in Brussels. He will be running for the German Parliament (the general election in Germany will take place in September next year) and he does so, as the European Peoples Party (EPP) has insisted on fielding their own candidate for the position of the EP President for the remaining 2.5 years of the current European legislature. The next elections to the European Parliament are supposed to take place in May/June 2019.

Schulz had been seeking re-election for the second half of the legislature, but the agreement after the 2014 elections with the EPP foresees that the EPP will take over the EP Presidency in January 2017 until the end of the mandate. Among others, Commission President Jean-Claude Juncker (EPP) had been very vocal when it comes to campaigning for Schulz, as they had worked very well together in the past, in particular in Juncker’s own party circles. For some EPP representatives this has even been difficult to swallow. There is not only in Brussels or Strasbourg a big coalition (EPP and the Socialist S&D) but also in Berlin there is currently a “grosse Koalition” in power and the current situation of the Social-Democratic party (SPD) in Germany seems to be a bit desperate as yet another electoral defeat in next year’s general elections is looming. The SPD has to import political skills from Brussels in order to be well prepared for the elections. It is said that Schulz could well become successor of German Foreign Minister Frank-Walter Steinmeier, who is supposed to become elected as German Head of State (Bundespräsident) in February 2017. He not only enjoys a broad support in the parties of the government but also in the opposition. But the German “K-Frage” (K-question: Who will become the Social Democrat challenger of Angela Merkel?) has still to be addressed, they have until the end of January to decide on the SDP leader.

Schulz is also entering the leadership race. Schulz is known to express his opinion in a straight forward way which might be a challenge, as various diplomates in the German Foreign Ministry have voiced internally. Regarding the Brexit talks he had said recently: “I refuse to imagine a Europe where lorries and hedge funds are free to cross borders but citizens cannot”. Of course, Schulz, as a President, has always been very outspoken and it will be interesting to see when he has to negotiate with his new Foreign Minister colleagues, in particular from those (EU) countries, about various critical remarks he has previously made.

Leading EPP politicians in Brussels, among them, the chair of the EPP Group, Manfred Weber, Commission President Juncker and Elmar Brok, current chair of the Foreign Affairs Committee of the European Parliament, have highly praised the excellent co-operation they have had with Martin Schulz and all his achievements. With Schulz’s departure, many observers this week in Strasbourg, during the EP plenary session week, have expressed a certain discomfort that too many leading positions in the EU could now be held by EPP representatives. This notion could make the election of the next EP President not as simple as it looks at first sight: although S&D had made the above-mentioned deal with the EPP, there is no guarantee that a majority of MEPs will unite behind an EPP candidate in the end. Other options might be explored, French Liberal MEP, Sylvie Goulard had been mentioned as an alternative to an EPP candidate which could get also many votes from the left side of the House. Whereas the EPP have pointed out that they will come forward with their own candidate during December’s plenary, there are forces that would like to see Manfred Weber running for that post, others would prefer a female candidate, e.g. Irish MEP Mairead McGuinness. Her election would be an interesting scenario from a Brexit perspective. The election of the new President is foreseen to take place in January next year.

Schulz’s departure is unlikely to have a strong impact on the Brexit talks as whoever will be elected as the new EP President, will almost certainly stick to the same red lines. The European Parliament has to vote on, and could therefore even veto!, both, the terms of the UK’s exit and the even bigger subsequent deal to establish Britain’s future relationship with the EU.

The ALDE Group Leader (Liberals), Guy Verhofstadt, who has been appointed as the EP Brexit negotiator, thanks to the support of Martin Schulz, will ensure continuity. Verhofstadt welcomed UK Chief Negotiator David Davis, to his office in Strasbourg last week with the words: “Welcome to Hell!” Ahead of their talks the two men laughed off some kind of a misunderstanding over Davis’ comment “Get thee behind me Satan” in September when answering a House of Commons Committee question about Verhofstadt, who has also served as Belgian Prime Minister. The ALDE Group Leader expressed also that he is looking forward to a “hell of a conversation”.

Although the Commission is meant to be the leader of the Brexit talks, it could be noted that the EP is considering to be, “politically at least”, on equal footing when conducting the talks. To that end, each of the Committees of the EP have also started their own work on the Brexit talks by producing reports. The findings of these reports can also be considered as some kind of preparatory work for the “big” EP Brexit vote next year, once Article 50 has been triggered. This resolution will shape many of the expectations of the MEPs regarding the future outcome of the negotiations. In that context, the importance and the profile of the EP will certainly rise and has risen already…

Written by RPP Senior Director Advocacy and Policy, Thomas Krings

Philip Hammond's First and Last Autumn Statement

On 23rd November, The Chancellor of the Exchequer, Philip Hammond MP, delivered the Autumn Statement, an update on the economic forecast and the Treasury’s upcoming plans for the economy. This was the first significant fiscal event since Britain’s decision to leave the European Union and therefore drew much attention.

The economic forecast came from the Office for Budget Responsibility (OBR) and needless to say, according to their predictions, there are going to be strong economic consequences for post-Brexit Britain. The OBR predict that national debt is to increase by £220bn over a five-year period, taking the total to £1,945 trillion by 2021, debt will peak at 90.2% of national income by 2018 and public sector borrowing will increase by an additional £118 billion over the next five years, the majority used to offset the costs of Brexit. Saying that, economists seem to be as accurate as pollsters with their predictions recently. Overall, the Autumn Statement kept income tax rates stable with no changes, the national living wage is set to raise from £7.20 to £7.50 an hour, whilst the income tax threshold, the rate at which you start paying tax, will raise from next April from £11,500 in April to £50,000 by the end of Parliament. These measures are designed to boost spending in the economy and to continue to make the UK a place to invest also. A cut in corporation tax will also take place, which could put the UK on collision course with its EU Member State neighbours as the country seeks to continue to make the country the favoured destination for Foreign Direct Investment in Europe. Other Member States have previously warned against the UK cutting its corporation tax ahead of the formal Brexit negotiations. Given that the economy was one of the most important factors in the Brexit campaign, this Statement was closely watched by political commentators and the media but in the end it made little impact. The so-called 'giveaways' and the tax increases were seen by analysts to be largely cost neutral in terms of the overall impact on the public finances but there were big boosts to Government support for the life sciences sector and on manufacturing, seen as key sectors of the economy post-Brexit, and have been heavily publicised as part of the Government’s industrial strategy.

Lastly, this will be the last Autumn Statement as the Chancellor of the Exchequer pledged to end this in future years with future budgets taking place in the Autumn instead, with a Spring Statement to respond to OBR forecasts. This could be a direct impact from Brexit as the Government looks to control its message on the public finances in the coming months and years. From the Autumn statement we can gather that a focus of the government is to make Britain more productive, this is reflective of the long-term investments into British industry that could make Britain more self-sufficient once they have left the European Union.

Written by RPP Director of Policy and Advocacy, Mark Walker

Sunday 4th December – Europe's Next Electoral Test

In the wake of Britain’s decision to leave the European Union, the election of Donald Trump, and far-right parties becoming increasingly successful at local elections, a wave of right-wing populism appears to be spreading. We have two more significant events taking place on Sunday 4th December; the Austrian presidential election and the Italian referendum on constitutional powers.

This is the second rescheduling of the Austrian presidential election due problems with the postal voting. The two candidates are anti-establishment choices due to the candidates for the central-left Social Democrats and the centre-right People’s party being knocked out of the contest in April. Remaining is former Green Party politician Alexander Van der Bellen who is running as an independent and his competitor is Norbert Hofer from the far-right Freedom party. The candidates are so neck and neck that pollsters are refusing to call it. It will be a significant shift from mainstream politics if Mr Hofner is successful. The Freedom Party was set up by former Nazis in the 1950s. It is fuelled by anti-Islamic language and has become increasingly popular since the European migration crisis has unfolded. If Mr Hofer is elected, he will be the first far-right head of state in Western Europe since the second world war.

On the same day Italy will be holding a referendum set up by Prime Minister Matteo Renzi, which proposes to reduce the constitutional powers of the senate and the local regions, in order for him to push forward a major economic reform. Whilst few disagree with the economic reforms being a necessity, similar to the cases of Trump and Brexit, a ‘No’ vote has become an anti-establishment choice, particularly as Renzi promised to resign if the referendum does not go his way. The ‘No’ camp is being fuelled by the Five Star movement, the momentum that is growing around this movement has given them political power and it is expected by pollsters that “No” will win.

If Norbert Hofer and the “No” camp are victorious on Sunday, it will be another destabilising factor for Europe to address, and this could potentially have consequences for the European Union.


 Written by RPP Policy Researcher, Lucy Kerr