Parliament has spoken – one step closer to no deal?

In our blog post yesterday, we outlined the options available to the UK after parliament’s overwhelming rejection of Theresa May’s Brexit plan. It’s been clear for some time that the majority of MPs are in favour of a ‘softer’ Brexit: closer alignment with the EU with a possible preference for a permanent customs union. However, building a majority around any single course of action has so far proved impossible. Political considerations, electoral chances and differing interpretations of ‘what kind of Brexit’ people voted for have all played their part in providing us with what seems like an unbreakable parliamentary deadlock.

Amongst all this, parliament has voted for an amendment to the finance bill explicitly opposing a no-deal Brexit. However, the amendment does not and cannot prevent a no-deal Brexit. Unless parliament is willing to unilaterally revoke (or at least extend) Article 50, it is unable to simply stop a no-deal Brexit from happening. There will be no vote on ‘stopping no deal’. In order to avoid such a scenario, parliament must agree on an alternative course of action. Given the majority against no deal, we may see a scenario in which MPs are willing to compromise and vote for an alternative course of action as opposed to a disorderly exit. This may, in the end, be some revised iteration of Theresa May’s deal: MPs may reluctantly accept it as better than no deal, if all other avenues have been ruled out.

However, until minds are changed or compromises reached over extension, another referendum, a general election or another form of Brexit, no deal remains the default option for the UK on 29 March. Whether MPs oppose it or not, no deal will remain a very real possibility until such time as they are able to break the deadlock and build a consensus around anything else.

In his new year letter to the sector, NCVO’s CEO Stuart Etherington talked about the serious implications that a no-deal Brexit could have for charities and society in general. In light of the dwindling options available to parliament, the time remaining and the increasing possibility of a ‘disorderly’ Brexit, many organisations and individuals across parliament, the charity sector, the private and public sectors have understandably expressed concerns regarding the serious implications of a no-deal Brexit. It is important that we outline the very real consequences of this scenario for voluntary organisations and civil society as a whole, using our voice to call on politicians to act in the national interest and avoid further harm to our communities and their futures.

Sir Stuart also wrote of the importance of charities and civil society to shaping the debate around our country’s future after Brexit. That future starts with, and will be defined by, the manner in which we leave the European Union. It’s therefore imperative that the government secures the best possible outcome for civil society and the nation as a whole.

We’ve had a look at the headline implications of a no-deal Brexit and what they mean for charities.

The economy

The economic landscape in which we operate has a huge impact on the work voluntary organisations do. We rely on a buoyant economy. Times of economic hardship – such as those brought about by the 2008 recession or the worst effects of austerity – generate increased need throughout society. This places a strain on voluntary organisations that may already be struggling to cope with reduced finances and increased costs. Whether it relates to income streams, contracts, public procurement rules, VAT rules, state aid or government funding, economic health directly correlates to our work.

The economic forecasting of HM Treasury and the Bank of England, as well as the overwhelming consensus of economists, suggests that a no-deal scenario would lead to major economic contraction in the short-, medium- and long-terms. Mark Carney predicted that in the event of a ‘disorderly’ no-deal Brexit, the economy could contract by 8%, the pound could plummet, house prices could tumble by 30% and interest rates could rise dramatically to combat rising inflation which could rise to 6.5%. He also predicted that unemployment could rise to 7.5%. Other features of official predictions include a 10% increase in shopping bills and Britain ‘£150bn worse off’. Of greatest concern is the suggestion that a no-deal scenario could see the UK sink into a financial crisis and a recession akin to the 2008 financial crash.

In the context of economic contraction, the government’s ability to deliver an effective UK shared prosperity fund as per its manifesto commitment of 2017 could be severely impeded. If this is poorly designed, insufficiently funded or scrapped altogether, our sector will suffer from both the loss of EU structural funding and the UK government’s inability to invest in our communities. A failure to replace EU funding has troubling implications for charities, which are estimated to receive at least £258m each year from the EU. Furthermore, the government’s ability to capitalise on the opportunities of Brexit for the voluntary sector around reform to VAT and State Aid rules may be affected by no-deal: any treasury experiencing a recession or contraction is unlikely to relax VAT rules for anyone.

According to the overwhelming body of evidence (see the appendix), economic downturn has an adverse impact on the ability of the voluntary sector to carry out its work effectively. The consensus around economic downturn resulting from a disorderly Brexit could have serious implications for the work of charities across the UK. A ‘sudden’ or ‘cliff-edge’ Brexit would provide little to no opportunity for the sector to prepare for uncertainty, and could see charities bear the burden.

Citizens’ rights and staffing issues

A no-deal Brexit throws up a great deal of uncertainty around the status and rights of EU citizens to live and work in the UK. The recent government white paper on immigration provides few assurances for voluntary organisations, such as many operating in health and social care, which rely heavily on EU nationals.

The introduction of one-year temporary visas may have serious implications for such organisations, while the possible casting of research work as ‘low-skilled’, coupled with a tightening of the cap on low-skilled workers from abroad could well have major implications for organisations who benefit from the work of foreign-born university researchers. A lack of clarity over the recognition of professional qualifications and access to university education for non-UK nationals in a no-deal scenario only heightens the damaging uncertainty.

A recent IPPR report suggests that charities could lose 25,000 staff after Brexit, with little ability to replace them or insufficient resources to train replacements. The uncertainty regarding the rights of EU citizens – which must be addressed in any Brexit deal – could become a cliff-edge of rights in a no-deal scenario.

After the referendum in 2016, we arguably saw a reduction in civic participation, particularly among EU nationals in the UK. It is vital that the government provides greater clarity and assurances for individuals and organisations affected in order to ensure that the there are no cultural barriers for those wishing to live and work legally in the UK. A no-deal Brexit, cutting ties with the EU overnight, does nothing to encourage civic participation amongst EU citizens already living in the UK, and the uncertainty arising from a disorderly exit has serious implications for the ability of many voluntary organisations to continue their work uninterrupted.

Control of laws, trade and a level playing field

A no-deal Brexit, in which we revert to WTO trading terms, is understood by many to risk adverse effects on supply chains involving goods such as food and medicine.

Many voluntary organisations rely on supply chains in order to deliver services. Organisations such as hospices, which require medicine and food imported from abroad, could be seriously affected by increased border checks and controls. Limited, impeded or hindered access to these products would have a severe impact on their work.

Furthermore, a no-deal scenario runs the risk of regression on social, environmental and labour regulations currently upheld by EU law, prompting organisations such as Greener UK to describe the effects of a no-deal Brexit as ‘terrible’. The requirement for the UK to create an independent body to enforce environmental commitments and to maintain effective enforcement of its commitments on labour and social standards is vital to the rights of those in the voluntary and charity sectors, and no such guarantees have been provided in a no-deal eventuality.

A no-deal Brexit: serious implications for charities

Though some argue that a no-deal or WTO Brexit would be manageable for the UK, most experts agree that it remains the least preferable option, and the significant weight of economic opinion warns against this scenario as one of major risk for the UK’s economy, particularly in the short term. This may in turn have an adverse effect on the charity sector. We urge government to listen to the voice of civil society and community-based voluntary organisations in order to deliver on their concerns and ensure that the sector feels the benefits promised to the country.

Appendix

Useful resources, and key themes and figures

 

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