Why has CFG written a report on potential Brexit deals?

August 1, 2017 at 10:35

 As you may have read in the newspapers, Charity Finance Group has drafted a report on the potential opportunities and risks facing the charity sector on Brexit. We have considered the two main scenarios being considered at the moment, a Brexit deal which means that we remain in the Single Market and the customs union and a scenario where we leave the Single Market and customs union.

Our analysis indicates that there are significant risks to UK charities staying in the Single Market and customs union if this leads to the continuation of EU rules on tax, public service regulations and state aid.

This is because we would be left in a situation in which we cannot change rules which negatively impact on the sector, but would be in no position to change them. Leaving the Single Market and customs union would give the UK government the flexibility to do something about these issues.

In this blog, I try to anticipate questions we may be asked about this report and CFG’s position on Brexit.

Aren’t there risks to the economy which would impact on the UK charity sector?

Why are you using the term ‘clean Brexit’ in the report and not ‘Hard’ and ‘Soft’ Brexit?

Aren’t you ignoring the risk that the government will do nothing with its new powers so charities will be worse off?

Won’t leaving the Single Market and Customs Union mean an end to access to EU funds and EU workers?

So a ‘clean Brexit’ is the only option that will help charities?

Is CFG pro-Brexit then?

Aren’t there risks to the economy which would impact on the UK charity sector?

Absolutely, and the report highlights this at the very beginning.

It is hard to read into the tea leaves of what might happen to the economy, but obviously if the UK economy suffers, charities will suffer as well. Poor economic performance could undermine any potential benefits of a Brexit deal and would harm beneficiaries. But given the limited knowledge that we have about how the economy may perform under any Brexit scenario, we have to put those to one side and focus on what the practical outcomes may be for charities and how they help their beneficiaries. This is what we have tried to do in the report, but we will keep looking at this issue and our analysis may change depending on the negotiations or better economic information.

Why are you using the term ‘clean Brexit’ in the report and not ‘Hard’ and ‘Soft’ Brexit?

This has been a subject of much internal debate. Our view is that all terms around Brexit are somewhat partisan. Our motivation in writing this report is to reach out to new audiences – specifically those that have not engaged with the sector on Brexit – so that they understand the needs of charities.

In order to do this effectively, we thought that ‘Clean Brexit’ was most likely to get a hearing in those Brexit-supporting audiences where charities have not been able to make themselves heard yet.

The key is to focus on the substance of different Brexit deals, the words (hard, soft, clean, fudged) are not important. If we were writing this to reach out to anti-Brexit groups, we would use different language.

Aren’t you ignoring the risk that the government will do nothing with its new powers so charities will be worse off?

Definitely not. We have written this report in order to encourage the government to do something.

The latter is obviously better than the former. That still requires the government to make positive decisions, and just leaving the Single Market and Customs Union without making these positive decisions would not help charities at all.

Won’t leaving the Single Market and Customs Union mean an end to access to EU funds and EU workers?

That is not our analysis. The government could choose to keep access to EU funds and EU workers, if it makes the right decisions. This is what we argue in the report.

Ultimately, the UK government will set the rules on migration, so if it wants charities to be able to access EU workers, it can choose to do so. EU funding is trickier, but as with migration, if the UK wants to achieve a positive solution, it can and other non-EU member countries have got access to EU funds on international development, for example, through the right structure. Leaving the Single Market and Customs Union does not mean that you have to give up these things.

So a ‘clean Brexit’ is the only option that will help charities?

No. There are lots of scenarios that could help charities. A Brexit deal which gave flexibility in all the areas that we have proposed and stay in the Single Market and customs union, would help the sector. However, given the current EU negotiating position, it is our assessment that this would be very hard to achieve and would require the UK government to make specific efforts to secure exemptions, opt-outs and flexibilities in the areas that we have noted such as tax, procurement and state aid.

The more complex the deal, arguably, the more risks there are that it won’t allow for this flexibility. A ‘clean Brexit’ is less risky because it would give the UK much greater flexibility on these issues.

Is CFG pro-Brexit then?

CFG has no position on Brexit in terms of whether it is a good or a bad decision.

We didn’t campaign on this issue and we don’t intend to do so now. Our aim is to get the best possible outcome for charities so that they can help their beneficiaries.

We will continue to work with whoever we can to secure the best outcome and raise these issues up the agenda. Sadly, our research has indicated that neither charities nor the public believe that the social impact of Brexit is being properly considered. It is our job to try and change that.