Implementing Brexit in 2018

The Government cannot afford to wait until a future deal is struck to start preparing for day one of Brexit. It must legislate while it negotiates, and implement future arrangements without knowing what Brexit will look like or being clear when it needs to be ready. 

Where are we going?

In 2018, work will continue across all government departments in preparation for no deal unless early agreement can be reached on transition. An agreement on transition would give Whitehall a chance to catch its breath.

But with the "nothing is agreed until everything is agreed" mantra and a ratification process that is likely to last until early 2019, it’s not clear whether there will ever be enough confidence that no deal is totally off the table. Would a handshake on transition and sufficient progress be enough? Or will they want a legally binding agreement that has been passed by both the UK and European Parliaments? If it’s the latter, then Whitehall will be even busier in 2018.

What we know for sure is that early next year, the Treasury will run a mini spending round to allocate £1.5bn of extra cash to departments for their implementation efforts. Big recipients are likely to include HM Revenue and Customs (HMRC), the Home Office and the Department for Environment, Food and Rural Affairs (Defra).

After sufficient progress on citizens’ rights, the Home Office will work on the new settled status registration process, a streamlined system promised during the first phase of talks. The migration white paper will set out the new settled status in detail. It may also set out the principles and approach for the system that will apply for nationals of the EU 27 member states wanting to come to the UK after Brexit. But detail won’t be expected until later in the year, after the Migration Advisory Committee complete the reports the Home Secretary commissioned on EEA nationals and international students.

How did we get here?

The Prime Minister’s Lancaster House speech in January set out her vision for a negotiated Brexit, with the UK outside the Single Market and the Customs Union. That posed big implementation questions: changes at the border; a new migration regime; and new public bodies.

Two years was never going to be enough time to prepare, and the Prime Minister accepted that when she talked of a "phased process of implementation" where changes would be introduced as and when they were ready after exit.

But once Article 50 was triggered, the two-year countdown began and the ‘no deal’ cliff-edge loomed large. By the summer, the Government wanted a wholesale transition to be agreed early. No waiting until the whole deal is negotiated and no phased implementation process. Instead, there would be a block of time - agreed as soon as possible - where there was as little change as possible.

Whitehall ‘domestic implementation’ teams have subsequently spent 2017 preparing for two outcomes: a negotiated outcome or crashing out with no deal. And until transition is nailed down, Whitehall will continue to work on both scenarios.

Even the UK’s preferred option entails big changes, so Whitehall teams have staffed up and money has been spent. HMRC banked an extra £78m for customs and Home Office got £50m for registering citizens. Another £125m has been distributed this year alone across Whitehall for Brexit.

What have we learned?

The UK is being quite pragmatic on transition timeframes

In her Florence speech, the Prime Minister said that the length of transition should be determined by how long it takes to implement the necessary systems and processes. The current estimate was “around two years”, but she gave herself plenty of wiggle room.

She will need it. As our Implementing Brexit: Immigration report shows, a significant change in the immigration system could take several years to implement. Likewise, our Implementing Brexit: Customs report shows that, in the past, major changes in customs at the border have taken up to seven years to deliver from planning to full implementation.

The border looks like the big implementation headache

Most changes in a UK-EU relationship will be felt at the border. At the start of the year, there was a lot of talk about ‘new and innovative technology’ solving all of Brexit’s border problems. But our customs report shows that existing IT issues are difficult enough, even without the change that is needed to be implemented across at least thirty government bodies. As the Brexit border issue gained traction towards the end of year, HMRC boss Jon Thompson made almost weekly visits to the House of Commons Select Committees.

The border issue took centre stage at the end of the first phase of talks when attention turned to the island of Ireland. The Government conceded that, if a rabbit is not pulled out of the hat in the talks, it will maintain "full regulatory alignment" with the Single Market and Customs Union. But there does not seem to be agreement on what that means.

Business has got a lot to do and needs some certainty

Changes to the UK’s migration regime will need to be reflected in HR departments around the country. Traders will need to know how to jump through new hurdles introduced at the border. This means giving organisations outside of government the time to adapt. But until there is some clarity on Brexit, this implementation work is going to be limited. Small businesses in particular can’t afford to invest in changes that might end up being unnecessary.