16 April 2018
The External Affairs and Additional Legislation Committee began an inquiry into the Welsh Government’s administrative and financial response to Brexit in October 2017. The resilience and preparedness of the public and private sectors in Wales and the importance of preparing for various Brexit scenarios had been raised in a number of the Committee’s previous inquiries. As a result, the Committee decided to look at how the public sector and businesses in Wales should be preparing for Brexit.
The purpose of the inquiry was to examine:
- the Welsh Government’s internal administrative and financial response to Brexit; and
- how the Welsh Government supported public services, higher education, third sector and economic sectors to prepare for exiting the European Union.The Committee made seven recommendations in its final report. The Committee found that there is a need for the Welsh Government to do more in terms of scenario planning, including for a ‘no deal’, to prepare Wales for Brexit .Furthermore, the Committee found that the public, private and third sectors in Wales need a stronger steer from the Welsh Government on how they should be preparing for Brexit and that more needs to be done to ensure that information is filtering down from representative bodies to individual organisations.
- As part of the inquiry, the Committee launched a consultation and held a number of evidence sessions to inform its work. The Committee also visited stakeholders in Swansea, Llanelli and Caerleon, to look at how the public sector and businesses in Wales are preparing for Brexit.
The Committee’s Report
The Committee published it report How is the Welsh Government preparing for Brexit? (PDF, 744KB) on 5 February.
The first part of the report focuses on scenario planning and engagement, whilst the second part of the report examines preparedness of public services and the economy.
In terms of scenario planning and engagement, the Committee made a number of recommendations aimed at the Welsh Government, including that the Welsh Government should:
- undertake urgent examination of the likely parameters of various Brexit scenarios, including a “no deal scenario”;
- publish the sectoral analysis of impacts of Brexit on the Welsh Government’s nine priority sectors;
- improve communication with individual organisations through greater encouragement of representative bodies to cascade information to those organisations; and
- issue, as soon as practically possible, clear and accessible guidance to businesses, public sector organisations, and the third sector on what the implications of various Brexit scenarios, including a “no deal” scenario, could mean for those organisations.
With regards to preparedness of public services and the economy for Brexit, the Committee recommended that the Welsh Government:
- seek clarity from the UK Government on how the proposed Shared Prosperity Fund would be allocated and administered;
- publish, in conjunction with the Higher Education Working Group, any work done in reviewing its strategy in relation to research and innovation in the higher education sector to take account of the implications of Brexit in this area; and
- set out how it intends to spend the anticipated consequential allocations arising from additional money being spent at UK level to prepare for Brexit and clarifies whether these will be ring-fenced for supporting activities in relation to Brexit in Wales.
The Welsh Government’s response
The Committee’s report was welcomed by the Welsh Government. The First Minister’s formal response to the report (PDF 218KB) was published on 12 April. It accepted three of the recommendations and accepted four others in principle.
The Welsh Government accepted the recommendation relating to engagement with stakeholders and committed to increasing this engagement, including the more effective use of representative organisations for cascading information to individual organisations.
The Welsh Government also accepted the need to seek clarity from the UK Government on the Shared Prosperity Fund. The First Minister reaffirms that the Welsh Government rejects the idea of a centrally-administered economic development fund and that they are calling on the UK Government to ensure that regional investment decisions continue to be made in Wales.
Finally, the Welsh Government accepted the recommendation in relation to its higher education strategy.
Recommendations accepted in principle
One of the recommendations accepted in principle related to preparing for various Brexit scenarios, including “no deal”. In terms of a no deal scenario, the First Minister states:
[…]we have continuously emphasised that this would be catastrophic for Wales. We therefore do not want to normalise such a disastrous outcome, but we recognise that should the UK Government fail to reach a deal with the EU27, the Welsh Government has a responsibility, in devolved areas, for ensuring that necessary arrangements would be in place. Work is intensifying across Welsh Government departments in relation to potential operational arrangements needed to ensure we are prepared for our exit from the EU, based on different scenarios.
However, the response stresses that the Welsh Government does not believe that it is possible to completely mitigate the impacts of a no deal outcome on Wales, and in such a scenario, it would be the responsibility of the UK Government to make arrangements and supply resource.
In response to the recommendation that the Welsh Government publish their nine sectoral analyses, the First Minister says:
We have been working closely with our entire sector teams to identify the gaps in our data and to better understand the picture across each of the sectors impacted by the UK’s withdrawal from the European Union.
The response also notes that that the Welsh Government will research the impact of Brexit on small and medium-sized enterprises in Wales including direct and indirect impacts through the supply chain.
With regards to the recommendation about issuing guidance to the private, public and third sectors on the potential implications of Brexit, the First Minister states that, at this stage of the negotiations, this could be ‘lengthy and confusing’ and ‘would likely fuel further uncertainty. However, he states that once the validity and probability of different scenarios will be clearer, guidance to stakeholders on what this means will be provided as soon as possible.
Finally, in terms of setting out how the Welsh Government intends to spend the anticipated consequential allocations arising from additional money being spent at UK level to prepare for Brexit, the First Minister says:
The Welsh Government does not as a matter of routine, passport the funding consequentials arising from spending decisions made by the UK Government. It is for the Welsh Government to decide how, together with the existing block grant, any additional allocations we receive as a consequence of spending decisions made in England in areas of devolved responsibility are allocated to reflect our priorities. The National Assembly for Wales then votes on our final Budget following scrutiny from the Finance Committee.
The response notes that the Welsh Government has announced a £50m EU Transition Fund to provide support to businesses and public services. According to the First Minister, this fund will be draw on the Barnett consequentials Wales will receive as a result of the £3bn announced in the UK Government’s autumn Budget for Brexit preparedness and also on flexibilities available through the Welsh reserve.
The Assembly will debate the External Affairs and Additional Legislation Committee report in plenary on 18 April. You can watch the debate online at www.senedd.tv.
The Committee continues to examine what the Welsh Government is doing in terms of planning for Brexit. In addition, some of the sectoral concerns heard during the inquiry, particularly in the fields of health, higher education and equalities were explored during the Committee’s latest work on Wales’ future relationship with Europe (PDF, 9MB).
Article by Manon George, National Assembly for Wales Research Service