Brexit: Under any scenario, UK and EU aid will be affected

With UK Prime Minister Theresa May’s Withdrawal Agreement failing to pass the UK Parliament for a third time on 29 March 2019, and Parliament being unable to agree on any alternative at the time of writing, the UK and the EU enter uncharted political territory. What impact will this have on official development assistance (ODA) from the UK and the EU institutions? Predicting the future is perilous terrain for any analyst. This piece looks at three scenarios which remain on the table even after the European Council on 10 April 2019 decided to grant an extension until the end of October 2019.

1. The current scenario: A Brexit delay - EU and UK aid remains largely the same in the short-run

While May successfully requested another delay at the European Council on 10 April 2019, this was clearly not foreseen and some EU leaders had expressed doubts about granting yet another extension. In the early hours, and following opposition from the French President at granting a one-year extension as the President of the Council, Donald Tusk, had proposed, a compromise was found allowing the UK to stay as a ‘withdrawing member’ until Halloween.  

As a ‘withdrawing member state’, the UK will have to continue to pay into the EU budget 2014-2020, including EU aid and past and current intergovernmental ‘off-budget’ European Development Fund. Yet the UK influencing the negotiations for the EU’s budget for 2021-2027 could be contentious, particularly if the UK was still intent on leaving. The ‘Halloween extension’ is conditional on the UK’s agreement to ‘sincerely cooperate’ with the EU during the extension and not throw any spanners in the EU works.

If, by Halloween, consensus can be found within the UK on how to part from the EU by agreeing the Withdrawal Agreement, then the UK leaves the EU.  Under the Withdrawal Agreement, the UK continues to pay into the EU budget 2014-2020 and all outstanding European Development Fund amounts. 

If the UK were to ask for another extension past 31 October, it would have to have a credible plan to break the deadlock (for example, a general election or a referendum) to have this agreed by the EU. If the political event breaking the deadlock is a general election, then the manifestos of the main political parties would give an indication of what their vision on the future of UK aid would be. 

Some think that the UK’s 0.7% ODA target may be under threat in a future Conservative manifesto. The UK could also unilaterally move to a much more flexible interpretation of aid becoming aligned to UK interests in pursuit of global influence post-Brexit.

2. Still possible: A no deal - uncertainty around UK and EU aid would grow

Despite the fact that the UK Parliament has consistently voted against a no-deal Brexit, it is still a distinct possibility, even in the current case of an extension. Until recently, European Commission chief negotiator Michel Barnier considered this to be “very likely”. In the event of no deal after 31 October, the EU will still press hard for the UK to honour what it sees as the UK’s “financial commitments made as a member state”. This covers UK contributions to the EU budget and associated aid spending and the European Development Fund. This could lead to tricky discussions. The assurances provided by the UK in paragraph 59 of the Joint Report of December 2017 (see also our blog ‘Beyond symbolic progress’) could be dropped altogether or selectively followed with a so-called hard Brexit. The UK has not unequivocally publicly indicated otherwise.  

The European Commission’s own Brexit preparedness notices in different policy areas do not explicitly cover EU aid. This is either because aid is not seen as a significant issue or because the Commission thinks it will not be directly impacted. On the UK side, the UK’s Department for International Development (DFID) will step in to make up the difference of loss of income from signed EU grants to UK organisations. But it is not clear how this will impact partners of UK organisations or development-related spending from across the European Commission (research grants to UK organisations, for instance).

The bigger impact of no deal is likely to be a significant drop in the value of the UK pound, which will devalue all UK aid spending made in this currency. The euro may not be entirely shielded either, which could impact aid spending from the continent as well. No deal is also likely to tie up UK government senior political figures (including DFID ministers). DFID, like all UK government departments, will lose capacity and staffing to other UK government departments’ Brexit planning – although it will try and prioritise meeting the UK’s 0.7% GNI target by continuing to spend.

The focus and energy of UK political leaders and civil service will be consumed by coping with a no-deal scenario, with international development issues likely to drop down the agenda. It seems unlikely that all UK aid spending will continue to be seamlessly implemented in a no-deal scenario. Certain disruptions could be anticipated, and this includes trading uncertainties for developing countries in the absence of a transition.

3. Changing tracks: UK remains in the EU past 2020 - EU and UK aid would both be impacted

If the UK chooses to remain in the EU past 2020 or more permanently, it will have an impact on the EU budget – the so-called Multiannual Financial Framework 2021-2027. The initial proposals from the European Commission have already been drawn up with the understanding that the UK would not be a contributor to the new EU budget. This would of course change in the event of the UK remaining a member state past 2020. The total amount available for the future EU budget for 2021, including ODA from the EU institutions, could then be larger – but any contribution from the UK would be part of its ODA commitments rather than in addition to it.  The UK already seeks to exert influence now as it continues to have ideas on how the EU should administer and organise its aid after 2020, including in relation to the European Commission’s proposal on the new €89.2 billion Neighbourhood, Development, and International Cooperation Instrument (NDICI).

Yet draft budget proposals rarely stay intact. The EU budget heading on external spending where ODA is located, has traditionally suffered cuts during negotiations. Having the UK as a member (and paying in) would impact the budget negotiations dynamics and the final amount that would be agreed to. The choice to stay in the EU past 2020 would likely have large-scale ramifications on UK politics, and it is difficult to predict what kind of impact these may have on future UK ODA policy, amount or focus. 

The UK traditionally has been one of the ‘big beasts’ shaping EU development policy and aid spending, along with France, Germany and the European Commission. While technically it would be ‘business as usual’ at the committee level, the UK’s reputation for being strategic, pragmatic and technically competent in EU dossiers has taken a significant dent through Brexit, although this does not have to be irreversible.

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To date the aid ramifications of Brexit have mostly been felt by UK development-related organisations and their partners. Brexit is, however, also sometimes portrayed as a potential opportunity for Africa and developing countries under some circumstances. For the most recent Irish policy on development cooperation, for example, it is an occasion to revisit Ireland’s position as future largest English-speaking EU member state, allowing it to “assume a stronger voice representing the needs of English speaking countries in Africa, the Caribbean and Pacific”.

Of course, Brexit has wider impacts on development than merely ODA, or trade for that matter. The UK and the EU’s standing in the world has also been impacted, with an African counterpart noting that “[f]rom the African standpoint, this creates perceptions of a country [the UK] unsure of itself and its future direction. Indeed, the picture from Africa is of a country struggling to face up to the consequences of the Brexit referendum”.

Stay informed

For those wanting to know more about Brexit, African and international development, see: https://ecdpm.org/dossiers/brexit-international-cooperation/
For those wanting to know more about the negotiations on the next EU multiannual financial framework and how it impacts ODA and international cooperation, see: https://ecdpm.org/dossiers/multiannual-financial-framework-mff/
The European Centre for Development Policy Management (ECDPM) publishes weekly briefings on topics related to international cooperation - you can sign up to receive these for free at: https://ecdpm.org/subscribe/
 

The opinions expressed in this blog are the authors' own and do not necessarily reflect the views of Dóchas.