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Are you prepared for a WTO Brexit?

By Caron Bradshaw, CEO, Charity Finance Group

With the prospect of a no deal Brexit lurking on the horizon, Caron Bradshaw talks about the implications of WTO and urges charities to take action to protect their beneficiaries.

Post byCaron Bradshaw

It is increasingly possible that the UK could reach 29 March 2019 without having agreed the terms of Brexit. Everywhere you turn there is talk of Government preparations for the so called WTO option; whether truckers creating mock traffic jams or conversations about how we ensure planes will not be grounded come March 30th.

If the UK cannot reach agreement with the EU over the departure terms, and no action has been taken to extend the Article 50 deadline, the UK will automatically fall back on World Trade Organisation rules for its trading relationships with the world. Those rules would apply automatically to UK trade with the EU (and other countries with which the EU has free-trade deals) but does not cover non-tariff barriers such as coordinating air space or looking at product safety and standards.

Whilst CFG has not held a position on the decision to exit the EU itself we have said we believe the WTO option is not in the interests of the sector. But the question is ‘are you prepared for a WTO Brexit?’

Firstly let’s recap why we concluded that WTO is bad for charities. We believe that the level of unprecedented uncertainty, volatility and predicted economic disruption coupled with the non-tariff considerations, from workers’ rights to regulatory complexity, present too great a risk to the UK and thus to civil society. (For info our cost benefit analysis can be found here https://www.cfg.org.uk/BrexitPR2018).

If you agree that the economy and society will suffer under a WTO option becoming a reality we would urge you to make that case to your MPs on behalf of your beneficiaries. Data suggests that those areas of economic disadvantage (and lower charity activity) are more likely to have voted to leave the EU (see for example The Young Foundations report). Charities have a role to play in highlighting where we believe our beneficiaries will be negatively impacted by a WTO option – particularly where such beneficiaries are already suffering economically. We should not be shy in speaking up.

However not everyone agrees that WTO is bad for the UK. The argument in favour goes like this – we would have freedom to set our tariffs and thus we could unilaterally reduce the costs to consumers of goods such as food, clothes and footwear. So wouldn’t that be in the interests of the communities we support – especially those who are economically disadvantaged? It’s an attractive thought but I’m not so sure it’s that simple. If we accept there could be economic prosperity flowing from a WTO departure there is still much for us to do.

I listened to a recent interview with Jacob Reese Mogg (JRM), one of the most vocal Brexit supporters. In it JRM said we should welcome and perhaps even celebrate the opportunities that come from a WTO Brexit; referencing economist Patrick Minford in support. Wanting to make up my own mind I went looking for a bit more information. I came across Minford giving evidence to MPs on the consequences of a ‘harder’ Brexit.

My interpretation of his position was this; following removal of the protection of the EU common market and customs union, in order for the UK to economically prosper, a shift is required in the UK economy. Such a shift would necessarily result in the running down of industries, like car manufacturing, just as has been seen with coal and steel in the past. (See this tweet (https://bit.ly/2CvnAhA) from Rory Stewart, Minister of State for Prisons, showing Minford answering questions about the impact of ‘hard’ Brexit on some industries.) Such a necessary shift would need to be offset through ‘compensation’.

During the ‘running down’ of the coal industry there was significant harm caused to the coal mining communities. Much of the regeneration of those communities came in the form of EU funding – which would of course be absent in a post Brexit world. Similarly, with steel making communities; reliance on steel production is more than direct employment or indirect economic impacts that would require financial address; those communities suffer major loss on a human level when an industry collapses.

It is important that our sector plays a part in mitigating the human and economic cost of this shift.

The government has indicated that there will be a United Kingdom Shared Prosperity Fund to replace EU Structural and Investment funds (ESIF), with its stated goal to reduce inequalities between communities and help improve local growth by improving productivity. This might be an opportunity to bridge such a gap but to date there has been insufficient detail on the UKSPF for civil society to have confidence that it will satisfy concerns. The voice of our sector risks being lost and charities could consequently fail to receive necessary funding to enable us to support these communities – so make yourself heard.

Looking beyond the economy; we know that the stated reasons for voting to depart the EU were many and varied. For some it was about immigration, for others it was setting our own laws, the impact of freedom of movement on resources or an ideological opposition to the EU. A WTO Brexit won’t address many of these issues – is that a risk and/or an opportunity for charity? Are we thinking about the role we could play?

I am not going to talk about the tactics or try to predict what comes next or whether a fresh vote or election would address the divisions which gave rise to the Brexit result in the first place. I have called elsewhere for charities to ensure that they address the needs of the communities they serve; especially those who feel left behind and disenfranchised. Brexit has caused or highlighted divisions in society. Those divisions will not be addressed through political decisions alone. There have to be social solutions. We must not be left behind in these discussions and need to speak up.

How prepared is your charity for a No Deal Brexit and what are the issues that will most affect you? Please let us know by completing this very short survey that will only take 1 minute: https://www.surveymonkey.co.uk/r/FQTDX27

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