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Brexit: implications for Wales

Brexit will require bargains to be reached not only between the UK & EU, but Westminster & Cardiff, as Cathrine Grubb explains.

A decision by the UK to withdraw from the EU, would trigger the provisions of Art 50 of the Treaty of the European Union. This provides for a transitional period for the UK to negotiate and conclude an agreement for its withdrawal in accordance with Art 218(3) Treaty on the Functioning of the European Union. As a matter of EU law, the provisions of the EU treaties and associate EU legislation will continue to apply until the withdrawal agreement enters into force or, in any event, two years after the UK has notified the EU Council of its intention to withdraw. The European Council and UK can extend the period that EU law has force in the UK if they unanimously agree to do so.

EU treaties and associate legislation are given force in domestic law by the European Communities Act 1972 (ECA 1972). As a matter of UK law, EU law will cease to apply in the UK if the provisions of ECA 1972 are modified or repealed by the Parliament at Westminster. In theory, EU law could therefore cease to apply any time after the referendum, without any agreement being reached with Brussels, if Parliament so legislates.

The Government of Wales Act 2006 (GoWA 2006) provides for a conferred model of devolution in Wales. Under this model the National Assembly for Wales (Cynulliad Cenedlaethol Cymru) only has legislative competence where this is specifically conferred by statute, with the UK Parliament having responsibility for the remainder. There are currently plans underway to implement a reserved powers model of devolution similar to that of Scotland. However, the Wales Bill, which is seeking to implement these changes, has been the subject of heavy criticism from the Welsh Affairs Select Committee and Welsh government and so when these changes will come into effect is uncertain.

Wales has devolved powers to legislate in significant areas of EU activity as set out in Sch 7 of GoWA 2006 (agriculture, environment, food and health to name but a few). However, the Westminster government has made clear that EU membership is a matter of foreign policy and a matter for central government to determine exclusively.


Difference in Wales

Even a relatively modest majority in England in favour of leaving would be enough to outweigh any level of support for remaining in from Northern Ireland, Scotland and Wales. England has 84% of the population. If only 59.6% of people in England voted to leave the EU, it would be enough to take Britain out of Europe even if no one in the rest of the UK voted to leave (www.natcen.ac.uk/blog, 11 December 2015). If we assume that people in the rest of the UK vote in similar proportions as recent opinion polls, then the percentage of “leave” votes in England needed to tip the balance in favour of leaving would be closer to 52.5%.

While the UK on average has received less money per person from Europe than it has paid in—for Wales the opposite is true. Research by Cardiff University’s Wales Governance Centre suggests that in 2014, Wales received around £245m more from the EU than it paid in. Wales has received around £4bn since 2000 and is set to receive a further £1.8bn between 2014 and 2020 if the nation votes to stay in on 23 June.

Consequently, different implications and considerations apply to Wales in the event of Brexit than in England. Clearly, in areas where Wales has legislative competency, the Assembly will have the power to legislate to accommodate Welsh interests. However, the extent to which exercise of devolved powers would have a material effect on protecting Welsh interests in the event of Brexit is questionable. Wales still remains financially dependant on the rest of the UK and Westminster retains control over matters of employment, foreign policy and finance.

In terms of making up the shortfall of investment Wales currently receives from the EU, the Wales Act 2014 already legislates for devolving some fiscal powers to the National Assembly. These provisions are not yet in force as concerns have already been raised that the proposals will give a Westminster government the chance to make cuts to the funding sent to Wales. However, even if these powers were introduced and taxes were increased, the National Assembly for Wales would still be dependant on Westminster to provide a significant contribution to make up the shortfall of funding that would otherwise have been received from the EU.

The Welsh farming industry delivers around £5.8bn to the economy, with 90% of exports going to the EU, and so continued agricultural trade with the EU is important for Wales. Continued trade is likely to be conditional upon farmers continuing to meet similar health and quality standards as they do now.

The National Assembly has the power to ensure such standards continue to be met regardless of Westminster’s position leading to a potentially easier trading environment between Wales and the EU. However, if continued free trade is also dependant on free movement of persons, this would be a matter of border control and outside of the National Assembly’s powers. Westminster is likely to consider a trade agreement a matter of foreign policy and thus outside the National  Assembly’s remit. An exit strategy that does not properly accommodate Welsh interest may therefore lead to calls for greater devolution, or at least the National assembly seeking to stretch the broad wording of s 108 of GoWA 2006 which permits legislation in any areas that “relate to” devolved areas.

Consequently, the impact Brexit will have on Wales is very much dependant on what is negotiated not only between the UK, EU and rest of the world but between Westminster and Cardiff.