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What’s that coming over the hill?

There is relief in No.10 this morning and a sense that President Juncker has given HMG something to show for its efforts. However, the past few days have been more important for showing how political tensions come to the surface when actual decisions have to be made. During the Withdrawal Bill debate this week, a Minister passingly mentioned that new EU directives will be adopted during any transition phase (and potentially beyond). Even if there is “discretion on the details of implementing an EU obligation” post-Brexit, this sort of proposal guarantees monstrous dust ups in the New Year.

Spring Statement (of intent)

The Treasury has set 13th March as the date of the Spring Statement. Although Hammond wanted to move to “one major fiscal event per year”, the political demands of the Brexit process and the financial demands of key public services means 2018 will see at least two meaty tax-and-spend set pieces. 

Industrial relations

Free-market Conservatives have been keeping their powder dry while they weigh up Brexit progress and their own chances in the next General Election. However, senior Tory MPs tell us they weren’t much impressed by Theresa May’s introduction to the newly published Industrial Strategy White Paper – the PM opens the document by declaring her “belief in a strong and strategic state that intervenes decisively wherever it can make a difference”.

(D)upping the ante

Whitehall is preparing the ground for extending the Conservative-DUP confidence and supply deal beyond its two-year term. We expect to see new measures on things like VAT and Air Passenger Duty, as well as steps to allow the £1bn already agreed to be spent even without a Northern Ireland Executive to officially receive the cheque. The Government’s desire for an ongoing deal with the DUP goes some way to explain why the latter has become more bullish this week.

Trading blows

The Government’s draft Taxation (Cross Border Trade) Bill set out proposals for managing trade post-Brexit. This is a vital piece of legislation, partly because the UK currently has no domestic customs law at all, and partly because it would give HMG the powers necessary to apply a deal with the EU27. However, the Government risks making the same mistakes it did with the Withdrawal Bill by explicitly asking MPs to grant powers to “amend or repeal any Act of Parliament whenever passed”. It’s hard to see Grieve and co going along with that.

Brexit infrastructure

Among the many hundreds of pages of Budget documents last week, a letter from Philip Hammond to the National Infrastructure Commission (NIC) is especially interesting. The Chancellor has asked the NIC to “undertake a study on the future of freight” and report its findings “in Spring 2019”. The NIC is asked to consider how to address issues around congestion, emissions and new technologies – but it is forbidden from looking at how Brexit might affect the country’s need for new freight infrastructure. In his letter, the Chancellor says that “issues relating to border controls and customs, and issues relating to the UK’s exit from the EU, are out of scope”.

The Chancellor’s letter in full is here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/661457/Chancellor_letter_NIC_study.pdf

Corporate intervention

Public sector pensions is a dry topic, but it could get pretty spicy. Many are invested in ‘passive funds’, which means politicians and Civil Servants can’t pick and choose the shares involved – and they can be in companies working in controversial sectors or based offshore. If a future Government can’t decide which companies receive the cash, it might try to set new rules for all companies to meet partisan preferences on corporate behaviour. Corporate leaders should be thinking about what that intervention might look like…

Budget politics

The Budget will, inevitably, be a mix of technocratic measures and political positioning. The former will see less action to counter ‘fiscal drag’ (where inflation bumps more people into higher bands without the Government having to do anything) and the latter will testify to Sajid Javid’s ability to push Hammond on housing. If he can, it will not only set a precedent for other Ministers, but also increase Javid’s own political stock considerably.

Dangerous liaison

Select Committees have repeatedly made headlines this year as Ministers give new insights on Government policy under scrutiny from their colleagues. By becoming chair of the all-important Liaison Committee that interviews the PM, Sarah Wollaston’s name is going to be in the papers a lot more – something that should be keeping advisers in Number 10 up at night.

The taxpayer pound (and dollar, and yen..)

Brexit watchers often focus on the potential for new international trade deals after 2019. More prosaically, this week’s draft Trade Bill sets out ambitions for independent membership of the ‘Government Procurement Agreement (GPA)’. This is the WTO system that gives companies a chance to bid for public sector contracts worth more than £1.3 trillion every year. It’s a helpful reminder that the chances of Brexit being a success will be determined outside the Berlaymont as well as in it.


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