Leave or Remain, what will the EU referendum really mean for the civil service?

Written by Colin Marrs on 13 June 2016 in Analysis
Analysis

Special report: With just days to go until the EU referendum, civil servants will soon have more on their plates – whichever way the nation votes. Colin Marrs speaks to former senior officials and top civil service experts about the challenges a Brexit decision would pose for Whitehall, and why the alternative won’t necessarily mean "business as usual"

While the bookies still have the “Remain” camp as odds-on favourite to win EU referendum, the polls are much closer. That the United Kingdom could vote to leave the European Union after 43 years’ membership is a very real possibility. Although civil servants might currently be in their second purdah period in just over a year, whichever way the vote goes, the pace of work is set to rise to new levels of intensity after the result is announced.

As with almost all the issues in the referendum debate, the “Leave” and “Remain” sides are poles apart on the extent of Whitehall’s ability to cope with the fallout from a vote to quit the EU. However, it is clear that a number of key challenges – many of which have never been faced before – would confront civil servants trying to untangle and re-establish our relationship with both our European partners and the rest of the world.

To what extent has Whitehall already prepared for a possible Brexit vote? Contradicting previous denials, chancellor George Osborne admitted at a Treasury Committee hearing in May that his department has been working on contingency planning for any financial crisis that might arise following a leave vote – but he denied knowledge of any wider contingency planning relating to future negotiations on trade with the EU.


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Civil Service World also understands that a number of officials are working in a cross-departmental capacity (covering the Foreign and Commonwealth Office, the Treasury, the Cabinet Office and Number 10) to consider possible Brexit scenarios. Their work draws on support from centralised teams in the Cabinet Office including the European Global Issues Secretariat and the Civil Contingencies Secretariat.

Despite this, if the UK wakes up to a Leave vote on 24 June “the aftershocks will be enormous,” to quote one former senior civil servant.


"Chaos at the centre of government"

The first problem that senior officials could face is uncertainty over who they look to for direction. Many are unconvinced that David Cameron could survive as prime minister after leading a failed Remain campaign. “The prime minister wouldn’t last 30 seconds if he lost the referendum and we’d be plunged into a Conservative leadership crisis which is never a very edifying sight,” former Tory chancellor Ken Clarke recently told the BBC. The ex-official quoted above agrees: “Ken Clarke is spot on – I think Cameron would leave the next day,” he tells CSW.

Under that scenario, senior civil servants could have to wait for weeks before getting strategic direction from a new prime minister to allow the planning of negotiations over withdrawal from the EU. Even if Cameron clung on to power, he would face intense pressure from pro-Brexit ministers within his party. “There will be chaos at the centre of government,” says Dan Corry, former head of the Number 10 Policy Unit. “Even if Cameron stays on he will be severely weakened.”

Whoever emerges or remains as prime minister, one of the first decisions they will face is whether and when to trigger Article 50 of the Lisbon Treaty – the as-yet-untested mechanism which guides a member state’s exit from the EU. The article gives negotiating parties a mere two years to reach an agreement on withdrawal arrangements. 

“The idea we could get it done in two years is very optimistic, says Dr Nick Wright, teaching fellow in EU politics at University College London. “Trade negotiations can take a huge amount of time and effort.”

Extending the deadline would require unanimous support from the European Council of Ministers, which is far from guaranteed, Wright says. 

“There is no mad rush to get a whole lot of stuff done by a certain deadline" – Bernard Jenkin MP

“Yes there will be an interest on both sides in reaching a deal, but politics and national interest will come into play. That adds to the complexity and the risks involved. I would be surprised if we didn’t go for an extension, but there would likely be strings attached to doing that.” 

Wright points out that the government doesn’t have to invoke Article 50 until it is ready to do so, giving civil servants time to get their ducks in a row. 

Arch-Eurosceptic and chair of the Public Administration and Constitutional Affairs Committee Bernard Jenkin MP (pictured) even claims there is no need to bother with the mechanism.

“There is no mad rush to get a whole lot of stuff done by a certain deadline,” he says. “I think it is extremely unlikely we will avail ourselves of Article 50. We don’t need to do it if we choose not to or leave unilaterally.”

Whether or not the UK decides to use Article 50, there will be little prospect of escaping a negotiation about the future relationship between the EU and UK – particularly if the UK wants a better deal than is on offer under the default rules of the World Trade Organisation. 

An FCO document released in February on the process of withdrawal from the EU says that any new trade deal would have to be a separate agreement to the withdrawal negotiation. “Article 50 does not specify whether these negotiations should be simultaneous or consecutive,” it says. “This would be a matter for negotiation.”


Negotiations "will be hard headed and tough"

How easy any of these renegotiation talks would be for the civil service is also fiercely disputed. 

Sir Simon Fraser, former permanent secretary at the FCO (pictured), takes a view that falls in between the two camps. 

“Those that argue it is simple because the Europeans need us more than we need them and that we would be able to set terms are making a miscalculation." he tells CSW. "On the other hand, although there will be a certain amount of ill will, I don’t subscribe to the view that they would make life as difficult as possible for us. But it will be hard headed and tough.”

A former senior official from another department is more pessimistic, however.

“My experience of the EU is that the politics always trumps the economics. The mindset would be that we need to avoid a domino effect at all costs. The motivation would be to make it as difficult as possible for the UK. So they’d not only be incredibly complex negotiations, but they’d be in a hostile environment.”

Regardless of whether they run smoothly or not, the civil service will have to bolster its resources significantly to put together a team strong enough to conduct these talks. 

“The UK hasn’t done a trade negotiation unilaterally since 1973, when we joined the European Economic Community,” Wright says. “It will take a substantial team and we have lost our capacity in this area. We will have to recruit people with expertise and it is going to be potentially expensive in the short term.”

Many believe that giving the negotiating team the ammunition it needs to strike a hard bargain with the EU will require significant input from the majority of government departments. 

“The negotiation would call heavily on the whole of Whitehall,” Fraser says. “Virtually every policy area of government has a European element.”

“Virtually every policy area of government has a European element" – Former Foreign Office permanent secretary Sir Simon Fraser

Pulling together input from each affected department would require some sort of central coordination – most likely through a new team in the Cabinet Office, according to a number of commentators. 

The work could prove a strain on an already stretched bureaucracy, Fraser says. 

“I wouldn’t go as far as to say that a vacuum would develop at the top of government, but you would have to bring in some very senior and able people to work on this,” he says. “It would be a significant burden on the administration.”

But Jenkin rejects the idea that the scale of work for civil servants would be so dramatic. 

“It is not necessary to have an audit of every single piece of European legislation and how it affects the UK. The government had the Balance of Competencies review in 2012. It already knows exactly where we are affected by EU legislation.”


"Hugely complex web of legislation"

Others worry that departments will be forced to immediately start the process of deciding which European directives and regulations they want to retain in domestic law. While the former are embedded within UK legislation already, the latter will cease to apply to the UK from the day after it leaves.

“It is a hugely complex web of legislation. Going through all the different regulations we would want to retain is a massive job,” says Wright. “And doing that on top of the government’s day to day legislative programme will be very difficult for civil servants.” 

Dealing with the issue of regulations will require an intensive focus at the top of government, at least in the short term, according to James Mitchell, co-director of the Academy of Government and professor of public policy at the University of Edinburgh. 

“A lot of the big headline issues will require big ministerial and prime ministerial involvement and that will have to be given support by senior civil servants,” he says. “If senior people are focused on Brexit then they won’t be focused on other things.”

But Leave advocates dismiss such fears. Daniel Greenberg, parliamentary counsel at law firm Berwin Leighton Paisner, says: “There will be legislation to freeze existing EU based domestic legislation on a transitional basis. That will mean the immediate pressure is off and we can take our own time to unpack in a logical and sensible way. It will be handled in a way that keeps it orderly.”

Greenberg says that process could unfold gradually over the 10 years following a Brexit vote. “Nobody will care that much. The biggest bugbears of the Eurosceptics – things like bendy bananas and the Working Time Directive – will be priorities and can be dealt with quickly,” he says. “Other things, most people won’t have heard of and the timetable will be dictated by the commercial pressures for change.”

Others cast doubt on whether it is politically realistic to expect the prime minister to immediately announce the incorporation of all EU directives into UK law straight after a vote to leave the institution. 

“Permanent secretaries will sit down with the lawyers and work out a way of keeping the transition manageable but tangible" – Daniel Greenberg, parliamentary counsel at Berwin Leighton Paisner​

“That implies the government wants to maintain current legislation which doesn’t seem very consistent with the outcome,” Fraser says. “One would assume the purpose would be to repeal it in which case you would need to replace it.”

Edinburgh University’s Mitchell suggests that a political fudge might be the only option available. 

“I suspect there will be a single big day for symbolic purposes on which certain powers will be passed back, with a menu for the future,” he says.

Greenberg agrees: “The first thing that permanent secretaries will do is sit down with the lawyers and work out a way of keeping the transition manageable but tangible.”

If sorting out the UK’s relationship with its European partners isn’t enough of a challenge, Whitehall will also face a new set of negotiations with world powers in order to create new trade deals. 

One former senior civil servant says: “Canada and Australia have been conducting trade negotiations for years and they use a team of 200 people – and they tend to do one or two big ones at a time. You could come to deals very quickly but they wouldn’t be very good ones.”


Brexit would require "a significant increase" in FCO resources

Embassies abroad would also face a big task in explaining the UK’s decision to a bemused world, according to Fraser. “It would be a major diplomatic challenge to explain the consequences of Brexit and why we have done it,” he says. “That would require a significant increase in resources for the FCO.”

Another headache could come from closer to home – with pressure for a new independence referendum likely to mount in pro-EU Scotland. 

Mitchell says: “I think that the SNP government won’t rush a vote – it wants to be convinced it can win this time round. But if it went for it at the same time as all the other negotiations going on then things could get extremely interesting for the Whitehall machine.”

In the longer term, the implications of a vote to leave the EU could see a smaller civil service, due to smaller tax income. A recent study by the Institute for Fiscal Studies found that the cash returned to the national coffers from EU contributions could be more than cancelled out by reduced economic growth. It said: “After accounting for reduced spending on financial contributions to the EU, these falls in national income would reduce the amount available to be spent publicly by between £7bn and £48bn a year.”

But again, such predictions have been rubbished by Brexiteers, with Vote Leave immediately denouncing the IFS as a “paid-up propaganda arm of the European Commission”. 

With much uncertainty – and indeed disagreement – about the model of Brexit being proposed by advocates of leaving the European Union, it is hard for civil servants to know exactly what a Leave vote would mean for them. 

However, another former senior civil servant believes that most are praying that they won’t ever have to find out. “My gut feeling is that, in their heart of hearts, most of my former colleagues at senior level can’t believe the country will really, actually vote to leave,” he says. “I don’t think, in their bones, they think it will happen. So if it does, it will be a real shock.” 


"A divided country is never easy for civil servants"

Any civil servant believing that a Remain vote would mean a swift return to business as usual could be in for a surprise. Several politically controversial decisions have been held back because of the referendum, with action on a number of contentious issues postponed until the outcome of the vote is known.

Many ministers who have been on the campaign trail will return to their day jobs to find bulging in-trays. 

“By its very nature there are a lot of cabinet ministers spending a lot of time on the referendum and not bringing forward government business – civil servants are not getting as much ministerial attention as they might normally expect,” a former senior civil servant tells CSW

The sometimes vicious tone of the debate between cabinet ministers during the campaign could also mean that a “reconciliation reshuffle” (or indeed a “revenge reshuffle”) is on the cards – leading to further delays in implementing policy, or even reversals in some areas. 

In any case, civil servants in affected departments will need to give their new minister some time to get to grips with the policy issues they face.

Abroad, the UK will have a job on its hands to rebuild relations with its European partners, according to the ex-senior official. 

“For them there are only two results – one is bad and one is even worse. They are faced with 101 problems on immigration, terrorism, issues in the Euro area and growth. The referendum has been a distraction and they will want to get the UK’s input on all of those issues.”

Even in the longer term, the deep scars caused by the referendum campaign could affect the business of government, according to the former head of the Number 10 Policy Unit, Dan Corry. 

“My feeling is that if there is a Remain vote then the civil service will feel relieved for a while. But we will be a divided country – and that is never easy for governments or civil servants.”

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Colin Marrs
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Peter B (not verified)

Submitted on 16 June, 2016 - 21:26
The first and most critical thing to do is pass legislation setting a date for the repeal of the European Communities Act 1972. If that date is not set then there is a real risk that things will drag on especially if there are leadership elections and so on. If it goes past the 2020 election it could get very messy.

Winston Smith (not verified)

Submitted on 21 June, 2016 - 13:14
George Osborne has already announced that a vote to leave will require a further £15bn in savings, so I expect the Civil Service will see cuts galore. I'm amused by those 'exiters' who seem to think that leaving the EU will put billions back into UK coffers to be spent on the NHS, education and the like. Tory ideology is to continue to cut and sell. If the vote did go to Exit, there are still weapons in Cameron's arsenal that he hasn't called upon - including the second referendum required to pass the leave EU option through Government (which is primarily Remain). The die is already loaded in Cameron's favour, he just hasn't rolled it yet.

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