The European Union (Withdrawal) Bill is working its way laboriously through its Committee stage, with 80 hours of parliamentary time scheduled. One of the first and main challenges has been the imposition of the date in law for exiting the European Union 29 March 2019. Why is this so important?
The underlying reason, I believe, is to protect as much as possible of our financial services industry. Its importance is significantly more than the provision of employment, important though that is (3.4% of the workforce), because it also generates 11.5% of annual tax revenues. It is therefore vital for the future economic viability of the UK’s public sector, contributing to health, education and social services: not in their entirety, but without it there would be a massive hole in their funding.
The French and Germans want our financial sector to move to Paris and Frankfurt respectively. In fact they’re even competing with each other to make their appeals and the longer the Brexit talks drag on, the more uncertainty there is - therefore making it more likely that financial businesses will set up offices in these European centres. Initially they may do this as a contingency but the more the uncertainty goes on, the larger the numbers that will move.
The French and Germans know this, and it’s therefore not in their interest to reach early decisions on these negotiations – they therefore have no incentive to wrap things up early. In any case, deals in the European Union are rarely completed until 3 am on the morning after whatever the deadline applies, so prevarication is standard practice in Brussels.
Quite the opposite applies to the United Kingdom. We need to force decision by use of deadlines to stop the drift of our financial businesses away from London. Fortunately Article 50’s two year time span allows us to fix such a deadline, and that’s what Theresa May is doing. We should support it.
It’s vitally important that the Chancellor’s plans for the UK economy are not thrown into confusion as a result of the loss of so much of our tax base. Forget the idea that we might get special deals for the UK financial sector – we won’t, however hard we ask. The one thing we can deliver for these businesses is certainty around which they can build their plans. That’s why it isn’t just a ‘Hard or Soft Brexit’ issue, it’s about ensuring our public finances remain viable into the future.
20th November 2017