That is a very topical question, because we are approaching a hard deadline, which is at the end of this month, for the UK to be able to request and the EU to agree to an extension of the transition period by up to one or two years. To aid the committee’s understanding, I highlight that that is an important deadline. The request for an extension would be made under the authority of the withdrawal agreement treaty, which, in turn, is founded on article 50 of the treaties. The authority of article 50 has now expired, so the deadline is a hard stop. If the UK has not requested an extension by the end of this month, it becomes very difficult legally to agree to an extension before the end of the transition period at the end of this year.
Raoul Ruparel has put forward an interesting proposition to see whether something is negotiable in that space—as Claire Baker said, it would be a conditional extension. The lawyers will tell you that that would be really difficult, because the legal basis, in European Union terms, is simply not there. Obviously, there are treaty articles that would allow the EU to negotiate a different treaty with the UK, but those treaty articles generally fall under so-called “mixed competence”. Therefore, that could not be decided just by the Council of Ministers on its own; it would require ratification by member state Parliaments. Some countries also have constitutions that require ratification by regional Parliaments. In other words, it is a complicated and time-consuming business. I think that, if the end of this month passes without a request and an agreement on the extension of the transition, it will be very difficult to revive that proposal.
11:15
You asked why the Government is resisting extension. I look at the issue not so much from the perspective of the negotiations or the complex arguments about Brexit; I look at it simply from a practical point of view. If we do not extend the transition, there will be, at the end of this year—deal or no deal—a new trade border with the EU. People need to understand that. Even if we get a free trade agreement, that will require a new trade border for goods and services, because the terms of trade will change substantially. As I said in response to the convener’s questions, that is a huge challenge for UK-based businesses and, indeed, for EU businesses trading into the UK.
Currently, almost every business in the UK is dealing with the biggest peacetime economic shock that we have faced since at least 1929. The afterburn of that shock will be with us through the rest of this year and probably well beyond it. Therefore, this appears to be an odd time to add to the burden on businesses when we have a choice not to do so.
The shock would, of course, be asymmetric. It would impact on UK—or, more particularly, Great Britain—businesses more than it would on EU businesses at a time when businesses would be trying to find their feet again after the coronavirus crisis.
In that context, we might wonder why the Government is apparently insistent that it will not seek an extension. I think that we have to look for the answer to that question in politics. It is a political decision that the Government has taken because—I presume—it believes that it reflects the interests of those who voted in the general election and gave the Government a substantial majority, and that it is sticking by the proposition that it put to the electorate. That is a perfectly legitimate political decision to take but, of course, that political outlook does not necessarily coincide with the interests of a lot of UK businesses.