Enterprise, Innovation and Skills Committee: One year in – Stakeholder event

A year after its first stakeholder event in July 2016, the Economy Infrastructure and Skills (EIS) Committee invited a wide range of stakeholders back to reflect on the highlights of the year and to consider the Committee’s emerging priorities for next year.

What happened?

On 19 July 2017, Members of the committee and stakeholders discussed how the committee has delivered its work programme and what we can do to drive things forward, in particular:

• What were the highlights of the Committee’s first year? And what could the Committee have done better?
• What the key trends or events over the next 12-18 months?
• Is the timing right and is anything missing in the Committee’s initial thinking about future work?

Key themes emerging from much of the discussions were the impact of Brexit and the importance of the Welsh Government’s forthcoming economic strategy.

Thanks for the participants

Russell George AM, chair of the EIS Committee, thanked contributors for sharing their expertise. He said:

“A year after we first invited a range of stakeholders to inform us about what we should do as a committee, we wanted to hear what they thought of what we have done. And to see what they thought of some of our emerging ideas for the coming year.

”After today’s discussions, I believe that we are on the right track to develop a work programme which incorporates the views of stakeholders from across the three main strands of our remit – the economy, infrastructure and skills.”

What happens next?

The clerking team will use the ideas and comments from stakeholders to inform a paper for the Committee to consider in September setting out priorities and inquiries for the coming year.

Brexit in Wales – Article 50 and the High Court: What does it mean?

On 3 November 2016, the High Court of England and Wales decided that the UK Government and the Prime Minister does not have the power to use the prerogative to trigger Article 50 of the Lisbon Treaty to start the UK’s exit from the European Union without the consent of Parliament.

What are the prerogative powers?

The UK’s institutions are defined and function on the principle of the “separation of powers”: the executive, the legislature and the judiciary.

• The executive is made up of the Crown and the Government (which includes the Prime Minister and Cabinet Ministers). Their job is to propose laws and make policies;
• The legislature is made up of Parliament and all Members who are not a part of the UK Government. Their job is to make sure that the UK Government’s decisions are in the best interest of the UK and its people; and
• The judiciary is made up of all the judges in the courts of law, including tribunals and magistrates courts. Senior judges are appointed by the Crown (or the Queen).

This principle of the “separation of powers” means that our Government, Parliament and Judges should be functionally independent.

The principle suggests that it’s important for all the powers to be separate to protect against one of these institutions having more control than the others – it’s about keeping them all in check and balanced.

Following the UK’s decision to leave the European Union, the UK Government decided that it would trigger the process by using its own prerogative power, which means they wouldn’t need to consult Parliament in the decision-making process. Some argued that the referendum result was enough.

Why was the High Court involved?

Some people felt that by not consulting Parliament and allowing Members of Parliament a opportunity to vote, the UK Government was acting outside of its powers and not allowing Parliament to scrutinise its approach to leaving the EU.

The High Court was asked whether, as a matter of UK constitutional law, the Government is permitted to trigger Article 50 in this way without reference to Parliament.

The High Court ruled that it would be unlawful for the UK Government to trigger article 50 without an Act of Parliament. You can read the full judgment here.

The UK Government have said that they will appeal the High Court decision to the Supreme Court next month.

What are the views of the Welsh Government?

Following the High Court decision, the First Minister of Wales, Carwyn Jones AM restated the Welsh Government’s position:

“The position of the Welsh Government has been consistent throughout – we accept the decision made by the people and will not work against the referendum result,”

“We are working hard to get the best possible exit terms for Wales. However, it is important that votes take place in all four nations to endorse the UK negotiating position.”

The National Assembly for Wales

The National Assembly for Wales’s External Affairs and Additional Legislation Committee have been looking at the implications for Wales once the UK leaves the EU. From trade models and international law, the implications for agriculture to research and investment, the Committee have been seeking the views of experts to help them understand the issues Wales could face.

The Committee now want to hear your views on what should be the top priority for Wales before the formal process of exiting the EU. You can submit your views here or keep up to date by following them on Twitter @SeneddEAAL.

Brexit in Wales – Agriculture and Fisheries

Last week, the External Affairs and Additional Legislation Committee focused their attention on Agriculture and Fisheries and the implications for Wales following the UK’s decision to leave the EU.

You can watch the full session on Senedd.TV.

As part of the session, Members and invited experts discussed their views on the priority areas for agriculture and fisheries in the negotiations on the UK’s withdrawal from the EU, and the challenges post-withdrawal.

You can follow the discussions on Twitter and Facebook using #BrexitinWales.  To keep up to date on the work of the Committee follow @SeneddEAAL.

Key Issues for Agriculture in Wales

Policies affecting Welsh farming and its food supply chain are determined largely by the EU through the Common Agricultural Policy (CAP), food safety and animal welfare legislation and also indirectly by the World Trade Organisation rules.

The CAP is the EU’s mechanism for providing direct support to farmers, for protecting the countryside and for supporting the development of rural areas. The CAP runs for a seven-year period. Under the 2014 – 2020 round Wales receives around €322 million of funding each year in direct payments to farmers in addition to €355m million for its 2014 – 2020 rural development programme.

The Welsh Government is directly responsible for implementing the CAP in Wales (and is required to comply with the various EU Regulations which set the legal framework for the policy). For farmers eligible for the CAP this means the Welsh Government manages the direct payments they receive.

How would the UK withdraw from the CAP? Would it be phased in over time or stop immediately after the UK leaves?

The Welsh agricultural sector is heavily dependent on the current subsidies it receives under the CAP to make a profit. This is particularly the case in upland livestock farms. The Chancellor’s announcement that the UK Government will honour current levels of direct payments to farmers until 2020 has been welcomed by the farming unions.

However, some have called for clarity on how any fund distributed after withdrawal will be allocated to the Welsh Government and subsequently by the Welsh Government to Welsh farmers. Clarity on the levels and types of any funding available after 2020 has also been sought.

Brexit in Wales – EU funding, research and Investment

This week, the External Affairs and Additional Legislation Committee focused their attention on EU funding, research and investment and the implications for Wales. You can watch the full session on Senedd.TV .

The objectives of this session were to consider:

• the implications for Wales of Brexit on access to key EU funding sources;
• the potential impact of Brexit more broadly on Welsh Higher Education;
• to understand the potential implications and impact of Brexit on access to finance for key infrastructure developments in Wales.

You can follow the discussions on Twitter and Facebook using #BrexitinWales.  To keep up to date on the work of the Committee follow @SeneddEAAL.

Update

On 2 October the Prime Minister made a speech on Brexit at the Tory Party conference, covering a number of issues:

• Article 50: the UK Government will trigger this no later than the end of March 2017. It will not consult the Houses of Parliament in doing this, asserting the right of royal prerogative, and that the UK Government will defend this position in the courts.
• Great Repeal Bill: to be presented in the next Queen’s Speech, the Bill will remove the European Communities Act 1972 from the statute book and enshrine all existing EU law into British law.
• Control over immigration: the UK will decide on its own immigration rules post-Brexit.
• Workers’ rights: the Prime Minister gave a commitment to preserve existing workers’ rights enshrined under EU law and to further enhance these.
• No opt-outs, one United Kingdom: the Brexit negotiations will be undertaken as the UK and the UK will as one United Kingdom – there is no opt-out for Brexit and the Prime Minister stated ‘I will never allow divisive nationalists to undermine the precious union between the four nations of our United Kingdom’.
• No replica model: negotiations with the EU will not be about copying another model – Norway model or Switzerland model. It is going to be an agreement between an independent, sovereign United Kingdom and the European Union. The focus will be on free trade, in goods and services aimed at giving British companies the maximum freedom to trade with and operate in the single market – and let European businesses do the same in the UK.

EU funding

Wales continues to be eligible to participate in EU programmes and access EU finance until the UK formally leaves the EU. Wales currently receives a considerable amount of funding from the EU.

The Wales Governance Centre published research ahead of the EU Referendum that suggests that Wales – in contrast to the UK as a whole – is a net beneficiary of EU funds.

These are some of the most relevant sources of EU funding to Wales:

• Structural Funds: under the 2014 – 2020 round Wales has been allocated almost £2 billion from the EU – with £1.6 billion going to West Wales and the Valleys and over £325 million to East Wales.
• Common Agricultural Policy (CAP): under the 2014 – 2020 round Wales receives around £250 million of funding each year in direct payments to farmers in addition to €355m million for its 2014 – 2020 rural development programme.
• Horizon 2020: is the EU’s programme to support research and development and innovation. Up to May 2016 Wales has secured around €45 million from Horizon 2020 for 95 projects, including around €10 million for the COFUND initiative, with Welsh Higher Education accounting for around €28.5 million of this total.
• Erasmus+: the EUs programme to support mobility in the field of education and training. This includes mobility in higher education for students and staff, which is a high priority for Welsh universities. It also includes mobility in other forms of education: further education, vocational training, and school education, as well as youth engagement, areas where Wales has traditionally been actively involved.

Accessing EU funding

Given non-EU Member States take part in a range of EU programmes, there will be strong interest in the negotiations in considering (i) whether the UK Government will prioritise continued participation in EU programmes beyond Brexit and (ii) if it does, which areas will be on its priority list.

The role of the Welsh Government and the Assembly in identifying which programmes would be of most interest to Welsh stakeholders and lobbying the UK Government to prioritise these in its negotiations is something to be considered.

What we can be certain about is that Wales will not be able to receive support from the regionally managed Structural Funds programmes nor the Common Agricultural Policy (including the Rural Development Programme).

UK Government: EU funding guarantee update

On 3 October the UK Chancellor Philip Hammond MP published an updated UK Government guarantee to support projects receiving funding under the current round of EU programmes.

The October statement extended the original deadline to ‘the point at which the UK leaves the EU’, following pressure from the Devolved Administrations, including the Welsh Government for the deadline to be extended.

The October statement confirms that the UK Government will:

• Guarantee EU funding for structural and investment fund projects, including agri-environment schemes, signed after the Autumn Statement and which continue after we have left the EU.
• These conditions will be applied in such a way that the current pipeline of committed projects are not disrupted, including agri-environment schemes due to begin this January.
• Where the devolved administrations sign up to structural and investment fund projects under their current EU budget allocation prior to Brexit, the government will ensure they are funded to meet these commitments.

The specific references to agri-environment schemes due to begin in January alleviates the concerns expressed by the Welsh Government about the uncertainty around funding for these.

Higher Education

There is consistent support from the Welsh HE sector for continued participation in Horizon 2020 and Erasmus+. Both are viewed as important elements of the international and outward looking approach of the sector. The ability of academics to move posts freely within the EU was also valued highly.

The Welsh HE sector has consistently over recent years highlighted the under-funding of research capacity in Wales as a significant barrier to Welsh success in Horizon 2020. In 2015 the Leadership Foundation published a report which states there is a shortage of around 600 researchers in Wales.

Welsh HE has underlined the importance of EU funding to the sector, with EU Structural Funds being viewed as an important source to help ‘fill’ the funding gap, and to enable key investments that otherwise wouldn’t have taken place. The Swansea Bay Science Campus is a good example of this, combining EU Structural Funds with European Investment Bank finance, and is covered in further detail below in the section on EU investment in Wales.

EU students and Welsh HE

The Higher Education Statistics Authority (HESA) data shows a total of 7,095 EU national students were enrolled at Welsh universities in 2013/14 (a 4% increase from 2012/13). The majority came from Germany (18%), France (13%), UK EU-domiciled (11%) Spain and Ireland (8% each), Greece (7%), Poland (6%), Italy and Bulgaria (4% each), and Romania (3%).

In terms of the most popular subjects for EU students in Wales, enrolments were as follows:

• Business & management -1,105
• Humanities – 1,691
• Engineering & technology – 988
• Science – 926
• Social sciences – 688

It is estimated that EU students currently provide at least £24m to Welsh universities and the overall impact to Wales attributable to income from EU students was £47m. An EU student studying in Wales on average generates £19.7k for Wales and 0.19 Full-time Equivalent jobs. Additional impact is also generated in the rest of the UK from students studying in Wales. These are likely to be a conservative estimate according to Higher Education Funding Council for Wales.

EU Investment in Wales

The European Investment Bank (EIB) is the European Union’s bank, owned by and representing the interests of the Member States. The UK owns a 16% share: the same as Italy, France and Germany. Although the EIB does invest outside the EU, 90% of loans are made within the Union.

Over the previous decade the EIB has directly invested nearly £2 billion in Wales. The EIB describes current EIB lending in the UK as being “at record levels and supporting a more diverse range of projects than many other EU countries”.

Following a departure from the EU, legal obligations concerning EIB loans already agreed in the UK would not change. However, Article 308 of the TFEU states that Members of the European Investment Bank “shall” (i.e. must) be Member States. Leaving the EU, therefore, would mean the UK would no longer be a member of the EIB.

The EIB is another source of finance to which organisations in Wales are eligible to apply for support. A number of projects were successful during the Fourth Assembly including the Science and Innovation Bay Campus at Swansea University (see below), officially opened in October 2015, which received €60m investment from the EIB. The Welsh Government submitted a number of project ideas for support under the European Fund for Structural Investment, managed by the EIB, during 2015, including the South Wales Metro project.

EU funding in Wales following Brexit  

It is not necessarily the case that leaving the European Union would result in either an end to the UK contributing to the EU budget, or receiving funding from it. As discussed in the previous blog on alternative models to EU membership, countries outside the EU that currently have a high degree of access to the Single Market (such as Norway and Switzerland) contribute to the EU budget and enjoy some level of participation in EU funding streams.

The European Economic Area Agreement ensures participation by Iceland, Liechtenstein and Norway in a number of EU programmes, including Horizon 2020 (research and innovation) and Erasmus + (education and training). Although EEA members are not generally eligible for European Structural Funding, Norway and Liechtenstein qualify for some cross-border and transnational programmes. No non-EU countries are currently part of the CAP.

Fundamentally, the UK’s future access to EU funding programmes – both for the current programming period (2014-2020) and beyond – will be subject to negotiations during the withdrawal process.

Next steps

Next week on 10 October, the Committee will be looking into the implications for Wales in relation to agriculture and fisheries. The National Assembly for Wales’s Climate Change, Environment and Rural Affairs Committee are also looking at these implications. You can contribute your ideas on how to address the implications on their online dialogue page.

You can read more about the implications for Wales by the National Assembly for Wales’s Research Team or catch-up on our previous blogs on international law and trade and developments to date.

You can follow the discussions on Twitter and Facebook using #BrexitinWales.  To keep up to date on the work of the Committee follow @SeneddEAAL.

Leaving the European Union: Implications for Wales – Developments in Wales

Following the United Kingdom’s vote to leave the European Union, the National Assembly for Wales is examining the implications for Wales.

The External Affairs and Additional Legislation Committee has been tasked to ensure that the interests of Wales and its people are protected during the process of withdrawal and in the future domestic, European and international relationships that follow. It is also responsible for making sure that the interests of Wales and its people are represented in any new relationship with the European Union and the countries that make up the United Kingdom. You can follow the discussions on Twitter and Facebook using #BrexitinWales.

 

The story so far

The First Minister, Carwyn Jones AM appeared before the Committee on 12 September 2016. You can watch the full session on Senedd.TV or read the transcript of the session here. Here, he gave an update on the Welsh Government’s response and actions since the referendum result and identified their six priorities to protect the interests of Wales:

• To protect jobs in Wales and maintain economic confidence and stability
• To play a full part in discussions about the timing and terms of the United Kingdom’s withdrawal from the European Union.
• To retain access to the 500 million customers in the Single Market.
• To negotiate continued participation, on current terms, in major EU programmes like CAP and Structural Funds up until the end of 2020 while arrangements are made for the longer term.
• Wales is a net beneficiary from the EU to the tune of hundreds of millions of pounds. There is now an overwhelming case for a major and immediate revision of the Barnett Formula taking into account needs arising from EU withdrawal, and
• Withdrawal from the EU is a massive constitutional shift for the United Kingdom. The relationship between Devolved Administrations and the UK Government must now be placed onto an entirely different footing.

He repeated his desire to see a UK negotiating position agreed on a four-nation approach involving Scotland, Northern Ireland Wales and England, and stated that one of the red-lines of the Welsh Government would be tariff free access to the Single Market.

He stated membership was not an option as this had been rejected by the EU referendum vote, but that he was flexible on which alternative model was pursued, provided it guaranteed access for as many sectors as possible to the European Market.

Developments in Wales

This week, Members of the Committee have been visiting Brussels for a series of meetings to inform their work on what the implications could be for Wales and in particular, the options for alternative models to EU membership. This has included meetings with Members of European Parliament, the Canadian and Swiss Missions to the European Union, the Irish Permanent Representative to the European Union, the European Commission and officials from Wales House and the Scottish Government.

What are the alternative models to EU membership?

There are a number of alternative models the United Kingdom may consider for its future relationship with the European Union.

The Norway Model

Norway is in the European Economic Area (EEA) but not in the EU. The EEA is an internal market providing for free movement of persons, goods, services and capital, and is comprised of the 28 EU Member States plus Norway, Iceland and Liechtenstein. This is the model outside of the EU which is most integrated with the Single Market. These three countries make contributions to the EU budget, and take part in some non-economic activity such as counter-terrorism. Though they must follow most of the rules of the Single Market, they have no vote or vetoes in how these rules are made.

Non EU Members of the EEA do not make contributions to or receive CAP funding. Although they are not generally eligible for European Structural Funding, Norway and Liechtenstein qualify for some cross-border and transnational programmes. The EEA Agreement ensures participation by Iceland, Liechtenstein and Norway in a number of other EU programmes, including Horizon 2020 (research and innovation) and Erasmus + (education and training).

Negotiated bilateral agreements

A number of countries have negotiated differing degrees of access to the EU’s Single Market, bringing with them a certain number of the obligations of EU membership.

Apart from the EEA, Switzerland’s agreement with the EU goes furthest to replicating the terms of EU membership: both in terms of opportunities and obligations. In return for a partial access to the Single Market, Switzerland must accept the free movement of people, contribute to EU spending and comply with most of the rules of the Single Market, such as product safety standards, environmental requirements and so on. Similarly to the non-EU EEA countries, Switzerland has no votes or vetoes on how Single Market rules are made.

Switzerland does not participate in CAP, is partially involved in Horizon 2020, and though not generally eligible for European Structural Funding, it participates in some cross-border and transnational programmes.

Canada

At the other end of this spectrum, Canada has recently finished negotiating a Free Trade Agreement with the EU – the Comprehensive Economic and Trade Agreement (CETA), which is going through the final stages of ratification. These negotiations have taken around seven years. The Canadian model involves less access to the Single Market than Switzerland has, and accordingly entails fewer obligations. With a Free Trade Agreement, countries agree market access, tariff levels and quotas for trade between them and the EU. As noted in the case of Switzerland, exporters wishing to sell to the Single Market are obliged to comply with the EUs Single Market rules concerning product safety, environmental and other standards. One of the advantages of a free trade agreement like CETA is that it includes mutual recognition of standards. Parties to a Free Trade Agreement do not, however, have any votes or vetoes on how the EU Single Market rules are made. Canada does not contribute to the EU budget, and does not directly receive funding from its funding streams. There is not free movement of people between Canada and the EU, though there are arrangements for the temporary movement of certain professionals.

World Trade Organisation-only Model

The UK, along with all other EU Member States, is also a member of the World Trade Organisation (WTO). In the absence of alternative arrangements, the UK would fall back on its WTO membership to provide the terms of its relationship with the EU. This is the only formal model of a future relationship which is currently available to the UK and that would not require further negotiations.

Under this model, UK access to the Single Market would be subject to the same tariffs as all 161 other WTO members that have not negotiated their own arrangements. Along with the limited access to the Single Market, this model brings with it minimal obligations to the EU. WTO countries are not required to contribute to the EU budget, or accept free movement of people. Again, businesses trading exclusively under WTO rules wishing to sell to the Single Market are generally obliged to comply with its rules. Once again, WTO members do not have votes or vetoes on how these rules are made. WTO countries do not necessarily have direct access to EU funding streams.

Next-steps

It is essential that Wales’s voice is heard and represented in the discussions about the future trading relationship between the UK and the EU, and that we fully understand the positive and negative opportunities of alternative trade models. You can read more about the options open to the United Kingdom by the National Assembly for Wales’s Research Team.

Next week, the Committee will hold the second of its themed expert seminars: Funding, Research and Finance with a particular focus on research and mobility and the impact of Brexit on the Welsh Higher Education sector.

You can follow the discussions on Twitter and Facebook using #BrexitinWales.  To keep up to date on the work of the Committee follow @SeneddEAAL.

Leaving the European Union: Implications for Wales – International Law and Trade

Following the United Kingdom’s decision to leave the European Union, the National Assembly for Wales is examining the implications for Wales.

The External Affairs and Additional Legislation Committee has been tasked to ensure that the interests of Wales and its people are protected during the process of withdrawal. It is also responsible for making sure that the interests of Wales and its people are represented in any new relationship with the European Union, and with the countries that make up the United Kingdom.

Every week over the coming months, the Committee will be hosting a series of seminars focusing on different issues and inviting experts to share their knowledge and ideas, and help Members of the Committee understand how Wales will be affected by the referendum decision. You can follow the discussions on Twitter and Facebook using #BrexitinWales.

Once they have gathered this expertise and knowledge they will need the help of the people of Wales – to ask what their views and priorities are about our future outside of the European Union and what interests are most important to safeguard.

The first seminar took place on 19 September 2016 and focused on International Law and Trade.  You can watch the full session on SeneddTV.

International Law

What is International Law?

International law is the term used to describe the rules that govern relationships between nation-states on the world stage. They’ve grown up by custom and practice, or have been agreed between different countries. Some rules are regarded as binding all countries (e.g. some the rules on genocide), others only bind the countries that have agreed to them in treaties.

There are a number of international courts and tribunals which decide disputes between countries, including the International Court of Justice, which has the widest remit, and of course the Court of Justice of the European Union. But there is no police force or bailiffs similar enforcing court judgments at the international level.

Countries have an incentive to obey international law because they want other nations to comply with it towards them. Sometimes, however, countries breach international law because they feel there is a greater advantage to them in doing so than in obeying. When that happens, other countries have a range of legal and political options to try to persuade or “punish” the wrongdoer, including trade sanctions and even the use of force. The EU system for dealing with breaches by one member country is probably the most highly-developed in the world.

International Trade

As a member of the European Union, the United Kingdom is currently part of the European Single Market. The Single Market is a customs union. This means that countries have tariff-free access to other countries within the union. Members share a common external tariff and the responsibility for trade agreements with third party countries rests with the European Union. The Single Market goes deeper than this, providing for the free movement of goods, services, capital and labour between members of the Single Market. The UK’s future relationship with the Single Market is uncertain, and will be the subject of future negotiations.

You can read more about the options open to the United Kingdom by the National Assembly for Wales’s Research Team.

Although the Assembly can’t make laws about international trade, and the Welsh Government can’t enter into formal agreements with other countries, the Welsh Government is active in promoting Welsh exports and inward investment within our powers for economic development. The National Assembly for Wales makes sure that decisions about Welsh exports and inward investment are in the best interests of Wales and its people.

How important is international trade to Wales?

In June 2016 –

– 1,370 businesses were exporting goods from Wales

– 1,789 businesses were importing goods in to Wales

The last ten years of statistics on trade data for Wales, up to June 2016, show that:

– exports from Wales were valued at £12.1 billion – of which £4.7 billion were to the European Union and £7.3 billion outside of the European Union.

– imports into Wales were valued at £6.9 billion, of which £3.5 billion were from EU nations and £3.4 billion were from outside of the European Union.

– just under 40% of Welsh exports were to the European Union.

[HMRC’s regional trade statistics are the main source of trade data for Wales]

While the United Kingdom is a net importer of goods, Wales is a net exporter – with export values of up to twice as much as imports in recent years.

This means that Wales sells and trades more goods than it buys in.

It is essential that Wales’s voice is heard and represented in the discussions about trading outside of the single market, and that we fully understand the positive and negative opportunities of alternative trade models.

Next week, the Committee will be travelling to Brussels to meet with officials to monitor and influence the negotiations and obtain further expertise. On 3 October 2016, the Committee will meet again in the Senedd to hold a seminar that will look at the impact leaving the EU will have on funding, research and the European Investment Bank.

You can follow the discussions on Twitter and Facebook using #BrexitinWales.  To keep up to date on the work of the Committee follow @SeneddEAAL.