The state of the economy heading into 2021 and the prospects for growth over the rest of the year.
Documents to download
Joint Committee decisions on the Northern Ireland Protocol (1 MB, PDF)
The Northern Ireland Protocol & the Joint Committee
Following the UK’s decision to leave the EU, the two sides drew up a Withdrawal Agreement (WA) that set out how the UK’s exit would work. This Agreement came into force on 31 January 2020.
The WA established a Joint Committee, which is responsible for the implementation and application of the Agreement Decisions that need to be jointly agreed by the UK and EU.
The Protocol on Ireland/Northern Ireland (the Protocol) is part of the WA which laid out the terms of the UK’s exit from the EU. It sets out the relationship Northern Ireland will have with both the EU and Great Britain (the rest of the UK) at the end of transition period on 31 December 2020. The Protocol will come into force regardless of whether the EU and UK agree a future relationship agreement or not.
The principal purpose of the Protocol is to maintain the open border that currently exists between Ireland and Northern Ireland.
The most important parts of the Protocol to note for this paper are Northern Ireland will follow the EU’s customs code (its rules for bringing goods in and out of the EU) and many EU single market rules for goods, while Great Britain (the rest of the UK) will set its own custom and regulatory rules.
This approach necessitates implementing new checks and controls for goods moving both from Great Britain to Northern Ireland but also, to a lesser extent, from Northern Ireland to Great Britain
Joint Committee decisions
The WA delegated some arrangements relating to the UK’s separation from the EU to the Joint Committee to decide upon. This includes tasks relating to the implementation of the Protocol on Ireland/Northern Ireland.
The Protocol decisions the Joint Committee were empowered to make were as follows:
- Take two decisions on application of customs duties:
- the conditions under which a good brought into Northern Ireland from outside the EU is considered not to be subject to commercial processing (taking into account the nature, scale and result of the processing); and
- the criteria for determining whether a good brought into NI from outside the EU is not “at risk” of being subsequently moved into the EU (Article 5(2) NIP).
The Protocol says this decision should be made “before the end of the transition period”. If it wasn’t, goods would default to being considered at risk and would be subject to the customs duties agreed to in the EU/UK trade agreement, or if there is no agreement, to the EU’s Most Favoured Nation tariff schedule (often known as ‘WTO terms’).
- Establish the conditions under which certain fish brought into NI by UK-flagged ships registered in NI are to be exempt from customs duties
- Decide on the initial level of subsidy the UK could make to support agricultural production in Northern Ireland. If it didn’t make an initial decision by the end of the transition period, then the agricultural subsidies would become subject to the EU’s state aid regime.
- Determine the practical arrangements by which EU representatives may be present during, and access information relating to, the UK’s implementation of the Protocol.
UK Government requests for easing of Protocol rules
The UK Government sought from the EU further easing of rules and checks that would apply to goods moving to and from NI under the Protocol.
In May 2020, the UK Government published a Command Paper (CP) that set out its approach to implementing the Northern Ireland Protocol. It stated two main areas where it hoped the Joint Committee could agree flexibility on implementing the Protocol:
- Not requiring NI business complete export and exit summary declarations when sending goods to Great Britain; and
- Decreasing the frequency and complexity of checks on Agri-food moving from Great Britain to Northern Ireland.
The Paper also raised UK concerns over two other areas:
- The State Aid provisions in the Protocol were not confined to Northern Ireland, but measures that might “affect trade” between NI and the EU, and so they may “reach back” to affect Great Britain to a degree unacceptable to the Government.
- The Government expressed opposition to the EU having a permanent office in Belfast as part of its agreed role under the Protocol to monitor the activities of UK authorities enforcing the Protocol.
Joint Committee negotiations and UK legislation
Joint Committee negotiations
Negotiations on implementing the Northern Ireland Protocol and coming to decisions, started in earnest at the end of April 2020.
Negotiations became more complicated by the UK deciding to introduce two pieces of legislation that allowed it unilaterally deal with the areas of concern it raised in the May Command Paper.
- The UK Internal Market Bill (IMB) when first presented to Parliament in September 2020 gifted the Government powers to unilaterally decide to waive exit declarations for NI firms and reinterpret the Protocol’s State Aid rules. This would break the UK’s legal obligations under WA and international law.
- The Taxation (Post-transition period) Act, was reportedly going to empower Ministers to stop the collection of tariffs on “at risk” goods if agreement couldn’t be reached in the Joint Committee.
The EU objected to these laws in the strongest terms, and the House of Lords repeatedly stripped out parts of the IMB that related to the Protocol, with the Government continuing to reinsert them.
On 8 December, the UK and EU announced that an agreement in principle had been reached by the Joint Committee. The UK agreed to drop the controversial clauses in both pieces of legislation.
On 10 December the texts of the draft Joint Committee decisions were published alongside several unilateral declarations and a new UK Government Command Paper setting out what these decisions meant for goods moving between Great Britain and Northern Ireland.
A Joint Committee meeting was scheduled for the 17 December, and the decisions were adopted.
Joint Committee decisions
The Committee made decisions on the following areas:
- “At risk goods”
For the purposes of determining whether a good is subject to commercial processing, the decision states that certain categories of good that are for the Northern Ireland Market only will not be considered subject to processing; nor will goods declared by small businesses.
For the purposes of determining whether a good is at risk of onward movement into the EU, the decision states that goods will not be considered at risk where the EU tariff is zero, or – in cases where the good is brought in from neither the UK or the EU – the EU tariff is lower than the UK tariff.
In addition, goods will not be considered at risk if they are moved by an ‘authorised’ firm. Trader must register for authorisation through the UK Government, and authorisation is subject to certain criteria. The Government has called this system the UK Trader Scheme.
- Agricultural subsidies
The Joint Committee agreed that the level of agricultural subsidy in Northern Ireland will be set at £382.2 million per year, although in exceptional circumstances this can be raised by a further £6.8 million.
Further decisions will be needed to adapt subsidies to changes in the support made available under the EU’s Common Agricultural Policy each time a new Multiannual Financial Framework (MFF) is agreed. The MFF decides the EU’s budget over a 7 year cycle.
- Presence of EU representatives
The Joint Committee confirmed the right of EU officials to be present during activities relating to the implementation of the Protocol, but stipulated that UK authorities must also be present when these rights are exercised. The decision also grants the EU ongoing access to come UK systems, e.g. the Customs Declaration Service, and access to other systems when necessary.
The EU will not have a permanent presence in Northern Ireland, as they originally requested. It is understood that EU officials will be able to use flexible working space to carry out their work. The EU have stated that under the Protocol EU officials also have the right to be present in GB to monitor UK authorities.
- Errors and omissions
The EU requested in June that five EU single market goods regulations be applied to Northern Ireland, this is done by adding them to Annex 2 of the Protocol. The UK has agreed to add these (though it has modified the application of one of them). Two EU regulations were removed from the Annex. Three new acts that were not proposed in June and two clarifications to acts in the Annex were also added.
- No decision on tariffs on fisheries
The Joint Committee did not come to a decision on what conditions UK-flagged NI registered ships are to be exempt from tariffs. If the Committee does not make a decision by the end of the transition period on 31 December 2020, these products will be treated as if they originated from Great Britain and will potentially be subject to tariffs.
Overview & legal force
Unlike the areas covered above, the Joint Committee was not empowered under the Withdrawal Agreement to make decisions in the areas where the UK sought easing and reinterpretations of EU rules under the Protocol. Unilateral declarations were used instead. Unilateral declarations are not legally binding, but they can be used to help interpret treaties.
- Declarations on export declarations
The declaration states that for most goods being sent by firms from Northern Ireland to Great Britain, will not require pre-departure and/or export declarations. HMRC will instead collect “equivalent” information from sources such as shipping manifests. It is not clear to what extent this will decrease administrative burdens for firms compared to having to fill out the EU’s customs declarations.
- Declarations on agri-food products
Supermarkets and their suppliers bringing agri-food products into Northern Ireland, have been given a three-month grace period before they must comply with the EU’s full Sanitary & Phytosanitary (SPS) regime. However, to qualify for this time-limited exemption firms must sign up to an approved list of suppliers by 31 December 2020. The UK has also agreed to maintain its current EU SPS legislation for the products concerned during the three-month period.
- Declarations on chilled meats
Declarations mean that supermarkets will benefit from a six-month grace period before having to comply with EU SPS rules for bringing in certain types of chilled meats, such as sausages, from Great Britain to Northern Ireland. Supermarkets will have to bring all these products through Border Inspection Posts, have official certificates from UK authorities and carry a label saying, “these products from the United Kingdom may not be sold outside Northern Ireland”.
The Government in its December Command Paper said it believes that a “comprehensive Free Trade Agreement, with an appropriate framework for agri-food issues, would help to support a wider reciprocal UK-EU resolution of general matters of mutual concern on SPS matters”.
- Declarations on human & veterinary medicines
In a unilateral declaration the EU published a series of measures that will allow Northern Ireland a year-long grace period for implementing in full the EU’s rules on testing and selling human and veterinary medicines. The declaration cited the “particular challenges” Northern Ireland faces regarding the supply of medicines post the transition period, and the exceptional circumstances of the Covid-19 pandemic as reasons for this flexibility.
Separately, the EU will also be applying a similar approach to “small markets historically dependent on medicines supply from or through Great Britain (Cyprus, Ireland and Malta)”.
- Declaration on State Aid
The EU sought to address UK concerns about the “reach back” of the Protocol’s State Aid provisions, by setting out three main clarifications in a unilateral declaration:
- The European Commission should “have due regard to Northern Ireland’s integral place in the United Kingdom’s internal market” when considering State Aid cases;
- The EU underlined that an effect on trade between Northern Ireland and the EU which is subject to this Protocol “cannot be merely hypothetical, presumed, or without a genuine and direct link to Northern Ireland”; and
- It must be established why the measure is liable to have such an effect on trade between Northern Ireland and the Union, based on the real foreseeable effects of the measure
The UK in its December Command Paper said the EU’s declaration “addresses the concerns the UK Government had expressed” on how Protocol State Aid provisions might apply in GB. However, legal commentators don’t believe this declaration will have much effect on the “reach back” issue and note that the Court of Justice of the European Union (CJEU) retains its jurisdiction over State Aid matters under the Protocol. It’s not clear what weight the CJEU will give to the declaration.
Documents to download
Joint Committee decisions on the Northern Ireland Protocol (1 MB, PDF)
An Opposition Day debate relating to employment rights, holiday pay and 48-hour weekly working limits has been scheduled for Monday 25 January 2021.
A briefing note on rises in council tax for 2021-22, for the Opposition Day debate scheduled for Monday 25 January 2021