What does leaving the EU mean for Wales?
15th Jul 2016
This briefing is largely based on the briefing by the House of Commons Library ‘EU referendum: impact of an EU exit in key UK policy areas’. The opinions and judgements it contains are theirs. We expect to review and add to these articles periodically as events develop.
The First Minister for Wales, Carwyn Jones, has said that leaving the EU will have “far-reaching implications” for the devolution settlement between Wales and the UK government. He said that Brexit means that the relationship between the devolved administrations and the UK government “must now be placed onto an entirely different footing”.
Wales’s devolution agreement currently states that any laws passed by the Welsh Assembly have to be compatible with EU law. Leaving the EU will mean that part of the agreement will probably need to change.
The convention is that the Assembly is asked to approve changes like this. If it doesn’t give its approval, making the change could be politically controversial.. This won’t stop the UK from being able to leave the EU, as Parliament retains the power to overrule the Assembly if it wants to.
Impact on Welsh policy
Wales is responsible for applying and implementing relevant EU laws.
These include areas like agriculture, fisheries and rural affairs, animal health and welfare, food, and environment, and where there is an established body of EU law and regulation that Wales must already comply with. Whether EU law will continue to apply to these areas will depend on the outcomes of negotiations.
In the other two main areas where Wales has primary responsibility—education and health—the influence of the EU is more limited. EU-level action in these areas has mostly focused around information exchange, benchmarking of best practice, and mobility of professionals and learners.
The outcome of negotiations in the other areas of policy influenced by the EU where the UK government is mainly responsible will also be significant for Wales. This includes economic development and employment policy, competition policy, financial services, and most aspects of energy policy.
Funding from the EU
The main two areas through which Wales has received funding from the EU are from structural funds, given to poorer areas, and from the Common Agricultural Policy. These amount to about £500 million a year for the 2014–2020 funding round, according to the House of Commons Library.
In addition to these two main sources of EU finance, organisations from Wales have been eligible to participate in a range of different EU funding programmes. These include Horizon 2020, Erasmus+, Creative Europe Programme, the European Maritime and Fisheries Fund and others.
The UK as a whole pays in more to the EU budget than it gets back. But research suggests Wales has benefitted, seeing more spent there by the EU than it effectively pays into the EU through the UK’s contribution.
Leaving the EU means the UK will save the money we pay in, but we won’t necessarily have more money to spend because the performance of the UK economy, and how much we can raise in tax, have a bigger impact on public finances.
So a big question for Wales will be whether the UK government chooses to replicate the funding that Wales gets from the EU once we’ve left, and how this will be balanced against other spending priorities.
This question is particularly significant for some areas. The Welsh Assembly Government has claimed that money from the Common Agricultural Policy has typically made up around 80-90% of basic farm income in Wales.
The Deputy Minister for Farming and Food, Rebecca Evans, has stated if these payments are stopped when the UK leaves the EU, and they are not replaced by the UK government, it would be ‘hugely damaging’ to the farming industry.
Trade with the EU
Around 40-45% of goods exports from Wales went to other EU countries in a few years. £5 billion worth of goods exports were sent from Wales to the EU in 2015, and Wales imported around £3.6 billion of goods from the EU. No consistent figures exist for services.
The UK’s new trading relationship with the EU, and so Wales’s relationship, will depend on negotiation. A vast number of different arrangements could result. We’ve written more about this here.