A first glance at some of the main points in May’s deal

We set five tests for it. Does this draft agreement pass them? And does it really take back control of our borders, laws and money?

When Theresa May set out her strategy for the Brexit negotiations, she set out three goals: to take back control of Britain’s money, laws, and borders.

As the talks have progressed, more issues have emerged – not least Northern Ireland and the territorial integrity of the UK. So this month we suggested a further five points to consider.

They are: would the deal hive off Northern Ireland? Does it threaten to break up the Union? Would it trap the country in a customs union? Does it hand over money for nothing? And does it more closely resemble Chequers, or ‘Canada’?

Below, we take a look at how the Prime Minister’s proposals measure up against these yardsticks.

Are we taking back control of our money?

Probably. We’re paying the so-called ‘divorce bill’ as part of the Withdrawal Agreement, so won’t be able to use it as leverage during the future relationship. Lee Rotherham also points out that there’s little mention of the UK regaining our share of EU assets, despite lots of mention of our liabilities to the bloc.

Perhaps more ominously, we will continue paying in during the initial ‘transition period’, and if we choose to extend it Article 138 says that our contributions will be established at an ‘appropriate’ level by the Joint Committee. One Labour MP compared this to signing an insurance agreement without knowing what the excess was.

The question is whether, or how, we end up disentangling ourselves from the EU during that period. Some of these issues may only become clear when the future relationship is negotiated.

Are we taking back control of our laws?

When it comes to the jurisdiction of the European Court of Justice, the negotiators seem to have made some progress. Compared to the EU’s initial proposals (which a former ECJ judge denounced as ‘leonine’) its role is substantially reduced, and the idea that it would be the mediating institution in disputes between the UK and the EU is gone. One analyst has dubbed this a ‘solid win’.

On the other hand, this piece in the Financial Times suggests that the role of the ECJ, especially during the transition, could be much greater than the above analysis suggests, and that it might in effect remain the ultimate arbiter of UK-EU disputes.

Beyond that, there are other points of concern. First, Rotherham reports that the deal locks the UK into the European Convention on Human Rights, precluding any possibility of repatriating judicial supremacy to these islands – a longstanding Conservative ambition, and one shared by the Prime Minister.

Moreover, there was extensive ‘level playing field’ provisions (Annex 4) which would prevent future British governments from setting independent policy in a broad range of areas, and Rotherham suggests that the section on equivalence could end up with Britain in “in a fax democracy version of a Regulatory Union, and probably in a form of Customs Union.”

Finally, there is the salient fact that the backstop proposals, if implemented, don’t contain any procedure for the UK’s unilateral withdrawal (at least not without resiling from our entire negotiated relationship with the EU). This is a serious curb on the practical power, if not the technical sovereignty, of Parliament.

CCHQ is taking pains to combat the idea that the backstop is inescapable. In an email to the National Convention, Brandon Lewis writes:

  • “If both sides agree the future relationship is ready we would leave the backstop. This judgement would need to be taken in good faith and with view to their commitment on best endeavours.”
  • “If there is a disagreement, a special conference would try and resolve the differences.”
  • “If that failed to reach an agreement it would go to independent arbitration as to whether the NI protocol is still needed to meet its objectives.”

According to Article 170, “independent arbitration” means “the International Bureau of the Permanent Court of Arbitration”, an intergovernmental organisation based at The Hague. The five-person panel will comprise two members apiece from the UK and the EU, plus one independent member, whittled down from a shortlist of 25 (Article 171).

On the face of it this could allow the UK – if it had a very strong case – to climb the chain of appeals and have EU objections to withdrawing from the backstop overridden at the PCA. That doesn’t seem a likely scenario, however, and can’t be spun – as Lewis is trying to do – as a practical, reliable means of quitting the backstop.

Are we taking back control of our borders?

Eventually, probably. The Withdrawal Agreement at least doesn’t commit the UK to maintaining freedom of movement in perpetuity, and it has been argued in some quarters that the Government has actually managed, to an extent, to divide the ‘four freedoms’ and secure some form of market access without unlimited EU immigration.

However, the UK will have to maintain our current policies – including freedom of movement – at least until the end of the ‘transition period’ in 2021. Unless a full future relationship has been negotiated by then (and experience doesn’t offer much grounds for optimism) we will then probably use our one-off extension of the ‘transition period’, further prolonging freedom of movement.

If we revert to the backstop, freedom of movement comes to an end, but at present that option looks likely to be so unpalatable that few prime ministers would choose to enter it if they can help it.

The upshot of all that is that is that we aren’t locked in to freedom of movement indefinitely, but we probably won’t be able to introduce new controls for years.

On a final note, Rotherham suggests that, despite what David Mundell and other Scottish Conservatives have been saying about the UK becoming an ‘independent coastal state’, in fact the fate of British fishing stocks is still on the table.

Will it hive off Northern Ireland?

The barriers are less than they might have been – it doesn’t look as though there will be a customs border down the Irish Sea – but Northern Ireland is still a case apart under the proposed backstop, which is why it features in a huge share of the deal’s text.

Whilst the customs union provisions will be UK-wide, Ulster will remain additionally subject to a range of single market rules and other EU laws including VAT and excise (Article 9), Agriculture and environment (Article 10), the single electricity market (Article 11), and in part state aid (Article 12).

This will put Northern Ireland in the problematic position of having its economy regulated by a foreign legislature in which it is unrepresented (although MEPs from the Republic of Ireland might try to claim that mantle), and with the explicit intention of prioritising its alignment with the EU and Irish markets rather than the British one, despite the latter accounting for vastly more of its external sales.

Since the British Government will also have no right to withdraw, this means that Northern Irish voters will have no democratic control over important areas of law via either Stormont or Westminster.

However, RTE’s Tony Connelly has tweeted to explain how the EU intends to allow GB-NI trade to run smoothly… and it sounds a lot like the combination of targeted checks, back-office enforcement, and technology that was supposedly incapable of allowing for a ‘frictionless’ north-south trade border without the backstop. A Dutch customs expert has also told MPs that a technical solution on north-south trade is perfectly practical (video available).

If Dublin and Brussels are sincere when they say that their goal is simply to ensure smooth trade and avoid giving would-be terrorists obvious targets, this holds out some hope that the customs element of the backstop could be obviated entirely by a proper north-south arrangement.

However, it may be very difficult to get this done in practice. As the Prime Minister told the Commons on Thursday, under these proposals the backstop cannot be revived once it is set aside. That will make the other side very wary about doing so.

The problem of Single Market rules, however, would remain regardless.

Does it threaten to break up the Union?

The backstop poses several potential dangers to the integrity of the United Kingdom, both in relation to Northern Ireland and elsewhere.

First, there are the long-term ramifications of the Northern Irish economy potentially re-aligning away from the mainland in the course of a decade (or longer) locked into structure that gives preferential treatment to north-south commerce, and of Irish politicians unofficially – but probably publicly – presuming to act on its behalf inside the EU.

Ian Lucas, the Labour MP for Wrexham, highlighted the extraordinary way in which the agreement handles GB-NI trade in a question to the Prime Minister on Thursday.

Not to be under-estimated either is the damage this could do within political unionism. Northern Ireland’s position in the United Kingdom has not been strengthened by its almost complete political isolation, and if the links forged over the past couple of years were burned in the process of passing this deal it would represent a significant step backwards.

But the backstop isn’t just a problem for Northern Ireland. As Joanna Cherry, an SNP MP, has pointed out, such a high-alignment and asymmetrical arrangement makes life much, much easier for separatists across these islands. Not only does it restore the high floor for ongoing relations which made ‘independence in Europe’ so saleable, but it throws in an added advantage in that Scotland could theoretically regain its status as a ‘rule maker’ whilst not missing out on any trade with rUK.

This, and not just solidarity or high unionist principle, is presumably why both David Mundell and Ruth Davidson threatened to resign in the event of a withdrawal agreement which offered differential treatment for Ulster. Since that’s exactly what we’ve got, their u-turn on this is hard to explain.

Nor is all quiet on the Welsh front: during questions in the Commons yesterday a Plaid Cymru MP once again illustrated the dangers of the backstop by asking May to assure him that there would be no border between England and Wales if the latter were to adopt the Northern Irish settlement.

Would it trap the country in a customs union?

There seems a very strong chance of this. As previously explained, the backstop would lock the UK into a customs union without the ability to withdraw unilaterally. Worse, that would be a customs union in which the Government had no input into the rules.

Of course, neither side officially wants the backstop to come into force. But there are reports that, on the EU side at least, it is viewed as something to be built out on when constructing the future relationship, rather than merely a refuge of last resort if the negotiations falter. There is therefore a risk that integration on this level becomes the basis of the future partnership.

Does it hand over money for nothing?

Our editor posed the following question: “Since a future trade deal will be covered by an unenforceable political declaration – not the Withdrawal Agreement – what safeguards are there against shelling out £40 billion for nothing?”

The short answer seems to be “not many”. The political declaration on the future relationship is broad-strokes, to say the least, and whilst it could potentially shape up into a good agreement there are also plenty of areas where things could go wrong from London’s perspective. Rotherham also sets out in his Brexit Central piece several ways in which he thinks the financial settlement is unfair on Britain.

What is certain is that if the UK hands over the entire divorce bill it won’t be able to use those billions, and the threat of the EU being under-funded, as leverage during the negotiations. (The IEA have suggested one way in which London might split the payments, holding back £19.8 billion earmarked for “outstanding budget commitments”.)

Chequers or Canada?

This one we can’t definitively answer. The withdrawal agreement is not the future relationship, and the document we have on the latter is too short to draw clear conclusions from. A lot will depend on how the negotiations go between next March and the ultimate end of the transition period in “20XX” (note: not even “202X”!).

Whether or not an all-UK ‘Canada’ arrangement is possible seems to depend on whether the Government can negotiate to have the EU’s minimal-friction, tech-enabled, and intelligence-led customs arrangements applied to north-south trade from Northern Ireland instead of east-west.

However, there are ominous indicators. As our editor highlighted on Friday morning, the final spur for Dominic Raab’s resignation was the insertion, without his knowledge, of a commitment to pursue ” ambitious customs arrangements that build on the single customs territory provided for in the Withdrawal Agreement”. That doesn’t entirely close off the path to Canada, but it heavily skews the parameters of the negotiations towards a settlement that looks more like Chequers.

Labour indicates it won’t back Theresa May’s Brexit deal

Draft no longer mentions ‘frictionless’ trade, says Starmer.

U.K. shadow Brexit Secretary Keir Starmer dismissed the draft Withdrawal Agreement struck by EU and U.K. negotiators as “inadequate in so many ways,” and signaled that Labour would not back the deal.

Starmer told the BBC’s Today program Thursday that while he had yet to fully read the deal in detail, early indicators weren’t good, and “if it’s not good enough, why on earth should Labour back it?”

The opposition Labour party has said for months that it will not accept a “vague or blind Brexit” deal, Starmer said, adding there is “nothing in [the draft deal] about a comprehensive customs union.”

The deal would effectively lead to a “trade agreement that makes it harder to trade, not easier to trade,” Labour’s Brexit chief said.

Referring to the section in the draft agreement on customs arrangements, Starmer noted that at first glance, it appeared “there will be more friction at the border. It doesn’t even use the phrase ‘frictionless’ anymore.”

The 585-page draft document, agreed Wednesday, demonstrates that it is “impossible to replicate the benefits” Britain now has in the European Union, Starmer said.

“Why on earth would you back a deal as bad as this one?” he concluded.


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“The UK joined as one nation and must leave on that basis.” The DUP’s letter to May – full text

“Unlike the previous political declarations, the scope for delay, fudge or obscurantist language has passed. This is now a time for clarity and plain speaking.”

The DUP have released the full text of their letter to the Prime Minister expressing their concerns about the continued threat of a border in the Irish Sea. See it on Twitter here, or read the full transcript below. Today’s Times has extracts of Theresa May’s reply.

“Dear Prime Minister,

We are writing to you at this crucial time as the United Kingdom enters the final phase of negotiations with the European Union.

The so-called backstop has so far dominated the negotiations on a Withdrawal Agreement.

You will recall during our discussions in December 3017 that we warned strongly against the risks for both Northern Ireland and the United Kingdom as a whole of paragraph 49 of the Joint Report. Despite our advice you chose to proceed with the Joint Report. You will further recall our insistence that, if there was to be such a protocol then paragraph 50 set out that there must be no new regulatory barriers between Northern Ireland and the rest of the United Kingdom. This means frictionless trade from NI-GB and GB-NI.

When our warnings were validated by the EU’s version of the backstop produced earlier this year, it was welcome that this was rightly rejected by you as Prime Minister on behalf of the Government and also by the Labour Party as well. Indeed, many throughout Parliament rightly identified the EU protocol ass anathema to our precious Union. What was unacceptable then is equally unacceptable today. Neither the passage of time, nor new language has changed the substance.

The EU is clearly seeking a permanent backstop enshrined in international law, which would be operational in any circumstances in the future where we have trading relationships which are deemed by the EU to necessitate a so-called hard border between the UK and the Irish Republic.

It is totally unacceptable that there could be a Withdrawal Agreement which provided that Northern Ireland at any time in the future could be subject to the rules of the Customs Union or parts of the Single Market whilst the rest of the UK was not.

We would be left in the position of having provisions in an internationally binding agreement that ensured that Northern Ireland must follow rules and laws determined by other countries with no say in their formulation and with a goods border in the Irish Sea.

Obviously, we support the Government’s insistence that Northern Ireland cannot have a separate and distinct customs regime.

However, the focus has been disproportionately upon the issues of customs rather than the matter of EU Single Market regulations.

In all our discussions, we have consistently argued that there must not be a customs or regulatory border between Northern Ireland and the rest of the United Kingdom.

During our recent engagement with Michel Barnier we heard little to suggest that he had changed his position in relation to treating Northern Ireland separately from the rest of the United Kingdom for the purposes of both customs and Single Market regulations.

Whilst the EU negotiators have conceded the need to de-dramatise the language in the so-called backstop text and to relocate checks away from the main ports, the fact remains that under their proposals Northern Ireland would have to be aligned to EU regulations across a number of significant areas.

It seems some progress may have been made in terms of the backstop in recognising that the United Kingdom must be treated as a single customs territory but there seems to have been no such movement on the insistence by the EU to have Northern Ireland alone aligned to European Union regulations.

It is our assessment that the constructive engagement strategy of our government’s negotiators has not always been reciprocated by the EU. The EU seems to be wishing away elements of the 8 December 2017 Joint Report between the negotiators of the European Union and the United Kingdom Government.

In particular, on the backstop, the EU has ignored what was agreed and instead proposed what it wished was agreed.

We fully appreciate that the Withdrawal Agreement is legally binding. Unlike the previous political declarations, the scope for delay, fudge or obscurantist language has passed. This is now a time for clarity and plain speaking.

It is vital for both Northern Ireland and the entire United Kingdom that if agreement is reached, it must be clear and must not risk opening divergence within the United Kingdom for generations to come.

Paragraph 50 of the December Joint Report was clear. It requires that no new regulatory barriers develop between Northern Ireland and the rest of the United Kingdom unless the Northern Ireland Executive and Assembly agree that distinct arrangements are appropriate for Northern Ireland.

We have yet to see any definitive translation of the commitments in paragraph 50 of the Joint Report into legal text by the EU or the UK government. The full implementation of the commitments in paragraph 50 is required.

If there is to be a so-called backstop then paragraph 50 must be implemented in full.

We are resolutely opposed to any Northern Ireland specific backstop which not only leaves Northern Ireland aligned to specific sectoral EU market regulations but is, when operational, not time-limited by date. In such circumstances, Northern Ireland would inevitably be subject to greater EU regulation over time while Great Britain would not. By definition that would bring about new regulatory barriers within the United Kingdom and damage Northern Ireland’s place within the UK internal market.

Indeed, if Northern Ireland is subject to EU single market regulations then it will also be subject to the ECJ in some form as the arbiter of those regulations. This position leaves Northern Ireland as a rule taker from Brussels but also importantly it creates a democratic deficit on an important part of our economy – agriculture and manufacturing. It would also leave us tied to the EU state aid regime.

We remain concerned that the EU has tried to transform the specific e.g. animal health and pre-existing areas of bilateral agreement such as the Single Energy Market to cover all issues. This does not protect the various Northern Ireland agreements. Rather, what is proposed systematically undermines key aspects of those agreements.

In the debate regarding the backstop there has been a lack of serious consideration of the practical consequences for the long-term future of our political institutions – a focus upon getting an outcome over what the outcome will be.

Northern Ireland’s constitutional position is accepted as being a full part of the United Kingdom. The UK joined as one nation and must leave on that basis. Anything less is diluting the aforementioned historic agreements and disabling to the principle of consent at the behest of the EU.

Importantly, the implications for the Union do not stop with Northern Ireland. The Scottish nationalists are ready to pounce on any distinctive treatment for Northern Ireland and use it against the pro-Union voices in Scotland.

All of this is based upon an inflation of the risk of a hard border. For our part we have made clear that we do not want to see infrastructure on the border, nor do we seek to rewind the good progress that has been made between Northern Ireland and the Republic of Ireland. In no scenario is this going to be the result.

As a consequence of the EU’s behaviour on this matter, it is time to remind them that the entire process is founded on the principle that nothing is agreed until everything is agreed, including the backstop.

Following the outcome of the Salzburg commit we welcomed the statement made by you in that,

“…no new regulatory barriers should be created between Northern Ireland and the rest of the UK unless the Northern Ireland Executive and Assembly agree.”

This directly addresses the issue of a regulatory divergence within the United Kingdom and is the only position that respects the UK’s political institutions and the various Northern Ireland political agreements and it cannot be abandoned.

The Democratic Unionist Party wants to see a negotiated outcome that allows the United Kingdom to withdraw from the European Union in an orderly manner. We stand ready to support withdrawal agreements that protect Northern Ireland’s place within the Union of Great Britain and Northern Ireland and which do not leave Northern Ireland subject to EU customs and single market regulations while the rest of the United Kingdom is able to chart a new course following our departure from the European Union next year

Our position has always been and remains that we will not support arrangements that leave Northern Ireland separated from the rest of the United Kingdom and tied to the European Union’s customs or regulatory regimes.

We look forward to continuing discussions with you and your team to ensure we secure an outcome that is advantageous for us all.

Yours sincerely,

Rt Hon Arlene Foster MLA, Leader

Rt Hon Nigel Dodds MP, Parliamentary Party Leader”

Councils warn of ‘economic shocks’ from no-deal Brexit

A Local Government Association report says councils fear they are being kept in the dark by Whitehall on no-deal planning.

LONDON — Councils in England and Wales are lobbying the U.K. government for help to avoid “local economic shocks” in the event of a no-deal Brexit, according to a report prepared for the Local Government Association (LGA) board.

The document, which was discussed at an October meeting of the organization’s leadership board, warns of “stark” issues facing councils and raises concerns they are being kept in the dark by Whitehall on major aspects of no-deal planning.

It predicts that councils may not find out “the detail of Brexit” until “the last minute” and that preparations for “local economic shocks or emerging local opportunities [may] need to be developed quickly.” In some cases, it may already be too late for councils to train staff to cope with changes in time for a possible no-deal Brexit in March 2019, the document, which has not previously been reported, warns.

‘Stark’ concerns

The LGA, which represents English and Welsh local councils in their dealings with central government, has told Whitehall that its heavily publicized no-deal “technical notices” do not cover key issues and that more advice papers are needed “to address the impact across all services at a local level,” the report adds.

Councils lack clear guidance on what will happen to EU citizens in their jurisdictions in the event of no-deal, the report states.

However, it concludes these are “unlikely to be delivered,” adding: “Under the no deal scenario, these issues are stark as preparedness is needed by March 2019 when a switch from EU rules to new UK rules becomes effective.”

In a further complaint, the papers note that “much of the Government’s preparations on Brexit is being undertaken through confidential meetings,” a phenomenon described as “clearly unhelpful” and “hampering efforts by councils to prepare for Brexit.”

Councils lack clear guidance on what will happen to EU citizens in their jurisdictions in the event of no-deal, the report states, while noting that there has been “no response” from government to concerns raised by the LGA about potential costs to local authorities — which have faced deep budget cuts in recent years — if the price of new tariffs on EU goods is passed on to them.

Equally, details of how a U.K. plan to replace EU regional funding would operate in the event of no-deal is also “yet to be developed.”

Concerns particularly focus on councils with authority for food safety and other checks at ports. Advice contained in the government’s no-deal papers on this issue are “purely technical,” the report says.

British Chancellor Philip Hammond set aside additional funds for cross-Whitehall preparations for Brexit, but it is unclear how much will go to local councils | Tolga Akmen/AFP via Getty Images

“They do not consider the training/change management needed locally nor do they consider any additional resource that might be needed,” it states.

“Councils are capable to manage this change but they need new resources for new duties. Change requires training and an understanding of detail of front-line staff. Under a no deal scenario, the time and training needed for such additional capacity may not be available and ‘a period of grace’ may be needed in which any confusion between the sudden shifts in regulatory systems will result in support rather than punishment,” the report argues.

Dysfunctional government

Painting a picture of dysfunctional cross-government working on Brexit, the paper describes how the local government sector itself has had to “deal with and coordinate the work of all departments in order to understand the scale of the work needed by councils. This continues to be a concern.”

“There is still an onus on the sector itself to join up the action plans of Whitehall,” it adds.

The report, which was submitted for discussion at a board meeting on October 17, ahead of the government’s latest budget statement on October 29, says that the LGA is in discussion with the Ministry for Housing, Communities and Local Government about the need for “resources or capacity which deal with these local risks and opportunities.”

In the budget, Chancellor Philip Hammond set aside an additional £500 million for cross-Whitehall preparations for Brexit, but it is not yet clear how much of this will be allocated to local councils.

A government spokesperson said: “We firmly believe it is in the interests of both the EU and the U.K. to strike a deal, and we remain confident we will agree a mutually advantageous deal with the EU.

“However, it is the duty of a responsible government to continue to prepare for a range of potential outcomes.

“We continue to work closely with local areas and meet representatives regularly. Our Brexit Ministerial Local Government Delivery Board, which the LGA are part of, is meeting regularly.”


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Tim Berners-Lee: ‘I don’t regret creating the web’

But the creator of the world wide web wants governments, companies and citizens to reshape the internet for the 21st century.

LISBON — Tim Berners-Lee, the creator of the world wide web, has no regrets.

Despite trolls, misinformation and harmful content filling up the internet, the 63-year-old British engineer said he believed the positive effects of his creation outweighed its downsides — though he warned about the need to keep the web open and free for all.

“I don’t regret creating the web,” Berners-Lee told POLITICO at Web Summit, a technology conference in the Portuguese capital.

But, he added: “A couple of years ago, I realized there was a change of attitudes. We can’t assume that connectivity will inevitably lead to more understanding.”

Twenty-eight years after Berners-Lee’s invention, his World Wide Web Foundation published a manifesto on Monday urging governments and companies around the world to boost connectivity, give people greater control over their data and provide a safe haven for debate.

His call for greater control over personal data echoes a shift among policymakers, who on both sides of the Atlantic are pushing for greater restrictions on the global digital ecosystem.

From a digital tax in the United Kingdom to multibillion-euro antitrust fines from the European Commission against Google, officials are moving to sanction and impose rules on digital giants.

Digital rights campaigners are similarly trying to keep the web open to all, avoiding a so-called “splinternet” in which different countries or regions follow contrasting rules of the online highway. Tech giants are also looking to reshape their relationship with users amid concerns that the balance of power has shifted too much in favor of some of Silicon Valley’s biggest names, particularly in light of recent data scandals at tech giants like Facebook.

“We believe we need stronger rules that give people greater control,” Mounir Mahjoubi, France’s digital minister, told POLITICO in Lisbon. “The web can’t just be decided by the strongest actors.”

France is the first government to sign up to Berners-Lee’s new pledge, whose goals include promises to make it easier for all to access the internet, protect people’s rights online and keep the web safe from harmful material.

The European government joins 57 other organizations, including Google and Facebook, which similarly have pledged to spend the next six months working together to draw up proposals for how such lofty expectations can be put into practice. The aim, according to the Web Foundation, is to hold regular meetings between now and May, to hammer out the details and unveil a so-called “contract for the web” in late spring, 2019.

“A lot of discussion is a first good step,” Berners-Lee said. “We can set the agenda for lots of people.”

From talk to action

Much will depend on how the disparate organizations — everyone from Google and Facebook to Access Now, the digital rights group, and Tom Wheeler, the former head of the U.S. Federal Communications Commission — work with each other.

Despite common ground over removing the worst malicious content from the web and giving people control over their online information, many of these groups and individuals stand on different sides of the debate over how the internet should be regulated.

Such differences — including the role of large tech players in wider society and potential restrictions on government surveillance — are likely to come to the surface as Berners-Lee’s Web Foundation seeks to find compromises between the players over the future of the web.

France’s involvement in the project is particularly calculated.

While Emmanuel Macron, the country’s president, has made it his goal to make France more welcoming to startups and the rest of the tech industry, his government similarly has been championing the need for more regulation over large tech companies, as well as the potential imposition of new taxes on revenues generated from digital services.

“France wants to lead the way,” said Mahjoubi, the French digital minister. “We want to make the web impactful for the whole of humanity.”


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In today’s Budget let’s send the world a message that we will thrive outside the EU

The last Budget before Brexit is a spectacular opportunity to send a message to the world that the British economy will not just survive but thrive outside the EU. In order to do that, some very clear messages need to be sent out. This is the vision thing which neither the Prime Minister or the […]

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The last Budget before Brexit is a spectacular opportunity to send a message to the world that the British economy will not just survive but thrive outside the EU. In order to do that, some very clear messages need to be sent out. This is the vision thing which neither the Prime Minister or the Chancellor seem able to do.

We need a vision of a low-tax, low-regulation economy, which will overpower Germany and France as the largest economy in Europe. The number one lesson of economic history is that freedom works: there is no more robust an economic relationship than that between economic freedom and prosperity. And if you’re going to make a statement, it needs to be a big one – because economic behaviour doesn’t change with small tweaks to the system.

So how does the Chancellor make a big statement with very little money? When I worked at the Institute of Directors, we lobbied the previous Chancellor to pre-announce cuts in Corporation Tax. This made business happy about tomorrow, even though they weren’t that much better off today.

The rate of Corporation Tax stood at 28 per cent in 2010 and has been progressively reduced to 19 per cent today, with a commitment by the Government to reduce it to 18 per cent from April 2020. This what we need now: a promise from the Chancellor to deliver progressive reductions in Corporation Tax until the rate reaches just 10 per cent in 2025. Outside of tax havens, that would be the lowest rate of corporation tax in the world. This is a tax cut as much about the message as the money. Moreover, it is doable over that timeframe because each percentage point costs around £2 billion in lost tax revenue – before taking into account any dynamic supply-side effects which might increase (not decrease) revenue.

HM Treasury in part justified the previous Corporation Tax cuts in the wake of the financial crisis, as being necessary because of the economic shock the economy had experienced. Well, the Treasury seems to think both in the short and long term that Brexit is a negative shock to the economy; and so on the basis of its own argument, it needs to reduce Corporation Tax again, and in the same pre-announced manner.

I’m happy to use the Treasury’s argument against them, even though I fundamentally disagree with their long-term assessment of the economic consequences of Brexit. The problem here is that it’s very difficult to critique the Treasury’s assessment because it seems to have recognised the flaws in its previous methodology – published before the referendum – and abandoned it, but refuses to provide any detail of its subsequent approach and the assumptions behind it.

If HM Treasury is so confident in its analysis, why be afraid to publish it? The suspicion must be that they’re not confident and are only coming up with big negative numbers because of the questionable assumptions they employ about the post-Brexit world.

Research published by Economists for Free Trade (of which I am a part) shows that with the right policies, GDP could be 7 per cent higher – not lower – by 2030 as a result of Brexit. We can argue about how big that number is, but the key point is that it is positive not negative. With regard to no deal, other commentators, such as Open Europe, have recently published research which essentially says, yet again, that all the gloom and doom and Project Fear is way overdone. And they’re not advocating the domestic and international policies of economic liberalisation advocated here, which would increase the benefit of Brexit.

The most important supply-side liberalisation in the wake of Brexit is international, not domestic. It would mean that the UK could use exit from the Customs Union and the Single Market to reduce tariff and non-tariff barriers on imports from all over the world. The static (consumers and intermediate producers pay lower world prices) and dynamic (competitiveness and productivity are raised) gains from this liberalisation, in combination with domestic economic liberalisation, would set Britain on the road to far greater prosperity in the coming decades.

With negotiations not concluded, the Chancellor probably doesn’t want to say too much about the future of the City, but one thing he should be saying in private is that HM Government will unleash the City to ensure that it remains the number one financial centre in the world.

And if the Chancellor wants to make sure just-in-time logistics continue to work smoothly after Brexit, why not spend some more money on road investment to make sure overall transport times are reduced? As with pre-announced tax cuts, pre-announced road infrastructure investment would not break the bank now, or in the future, but it would change the mood music and begin to help people catch the post-Brexit vision of an economy intent on maintaining and improving its status as an FDI magnet.

Where there is no vision, the people perish.

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