The post-Brexit ‘red tape’ paradox: Part 1

It has become obvious to all that Brexit has landed us with much more ‘red tape’ than we were subject to as member of the EU. ‘Frictionless’ participation in the Single Market has been replaced by certification and compliance checks, ‘Brexit levies’ and a tsunami of other costly burdens on business applicable even to goods moving between Northern Ireland and the UK mainland. According to The Daily Telegraph, exporters are ‘unable or unwilling to risk border crossing red tape’. A survey by the Road Haulage Association estimates that 65-75% of trucks returning to the continent through UK ports are empty, while the January 2021 statistics indicate that the volume of exports to the EU fell by 68% in comparison to January 2020. A similar ‘cliff edge’-like drop is anticipated when the new rules relating to imports are enforced later this year.

Yet these fresh procedural obstacles are merely the most immediately obvious manifestations of the government’s failure to deliver the post-Brexit bonfire of regulation it promised the libertarian right. While better-informed Eurosceptics have long been braced for the economic damage and political embarrassment that is being inflicted by this tidal wave of bureaucracy, most must now be appalled to find that there has been no restoration of what they came to call ‘sovereignty’.

Theresa May took obvious pleasure in pointing out some of these home truths to Johnson when – just as he was seeking to persuade the House and the nation that the government, having signed the new Trade and Co-operation Agreement (TCA) with the EU, had ‘got Brexit done’ – she informed the Commons on 30 December 2020 that:

‘One thing it does not do is to excise the EU from our lives, because a whole structure of committees is set up, some of which, like the partnership council, will be able to amend the arrangement and make determinations on its operation and interpretation without, as far as I can see, any formal reference to this Parliament.’

Red tape with teeth

And if the red tape facing importers and exporters is creating political and economic headaches, the provisions in the TCA intended to protect workers have the potential to do the same. Tory Brexiteers have long characterised the modest employment rights of EU origin as ‘red tape’ and ‘burdens on business’. Now, courtesy of the Johnson administration’s TCA, it must seem to them that the EU continues to intrude into so-called UK sovereignty, with previously innocuous employment protections now taking the form of the threat of genuine and direct financial burdens on UK firms, ‘red tape with teeth’, which might potentially deny them one of the glittering prizes of Brexit – the ‘repatriation’ of employment rights.

It is, however, beyond question that employment rights of European origin are now more vulnerable to attack than they were when the UK was a member of the EU, and there can be little doubt that at some point the government will seek to retreat from existing standards. In recent weeks, we have seen a grudging admission by Business Secretary, Kwasi Kwarteng, that his department was consulting with business leaders on EU employment law to ‘examine what we want to keep’. The Working Time Regulations, long-resented by the Tories and conveniently unprotected by parallel UK ratifications of either ILO Conventions on working time or the relevant provisions of the European Social Charter (a consequence of British voluntarist industrial relations), were said to have been first item on the agenda of this post-Brexit review of employment rights. Shortly afterwards, however, Kwarteng recanted, stating that “there is no plan to reduce workers’ rights”, a sudden change of heart that could hardly be said to be convincing.

The Business Secretary’s ‘u-turn’ seems likely to have at least in part been motivated by concerns about the reaction of Brussels to such an initiative. Both political embarrassment and the irony of the situation were compounded by the fact that Brexit enthusiasts like Kwarteng – and like Boris Johnson, who anticipated a ‘post-Brexit bonfire of regulation’ – always appear to have failed to grasp that the EU affords Member States an extraordinarily wide ‘margin of appreciation’ in the implementation of employment rights, and of occupational safety and health protections in particular. Despite the ostensible need for such regulation to be effective, the European Commission – most obviously since the exponential expansion of the EU in the early 2000s – has appeared satisfied merely to see that Member States have the required legislation in place. As we argued in our recent pamphlet for the Institute of Employment Rights, the EU pretty much allowed the UK full ‘sovereignty’ over the way it was able to ignore workplace safety standards, permitting the unstated policy of OSH regulatory surrender – non enforcement – pursued by successive governments over the past 20 or so years.

Paradoxically however, the TCA looks, at least on the face of things, that it may offer a change in direction. For one, it requires the UK government to:

‘have in place and maintain a system for effective domestic enforcement and, in particular, an effective system of labour inspections in accordance with its international commitments relating to working conditions and the protection of workers…’

Perhaps more significantly where the maintenance of current protections is concerned, it requires that the UK should not ‘weaken or reduce’ the overall domestic labour protection regime in five discrete ‘areas’. Those are:

1. Fundamental rights at work;
2. Occupational health and safety standards;
3. Fair working conditions and employment standards;
4. Information and consultation rights at company level; or
5. Restructuring of undertakings.

And remarkably, the TCA provides that a failure to resolve disputes over these provisions could potentially result in the imposition of ‘sanctions’ in the form of trade tariffs – ‘red tape with teeth’ – adding to the economic damage inflicted by procedural cross-border red tape.

Workers’ rights still at risk

It is tempting to think, therefore, that the Brexit deal might indeed offer a means of interrupting the UK race to the bottom and its longstanding policy of regulatory surrender. Certainly, at first glance, the regulatory mechanism – the ‘nudge’ that might be applied to secure compliance – does look like it might make any government sit up and take notice.

In fact, notional ‘effective enforcement’ provisions are standard in free trade agreements; there is a similar Article in the EU-Canada CETA agreement. In that agreement, just like this one, the devil is in the detail. In the TCA, the detail in question is the regulatory red tape where we find that – as matters stand – such optimism is unfounded.

First, and unfortunately, even in the implausible event that European Commission and the EU 27 were to attempt to hold the UK to a higher standard than Member States by treating regulatory failure as an actionable breach, the agreement allows the parties to ‘exercise reasonable discretion and to make bona fide decisions regarding the allocation of labour enforcement resources’. Ambiguous as that provision is –  it could be said to refer to the prerogative states must invariably exercise in such matters – it will be seen by our current government to permit policies of non-enforcement, as well as measures like the tribunal fees regime which effectively withdrew many employment protections of EU origin during 2013-17. However, in the absence of provisions in the TCA for judicial interpretation, as matters now stand the precise meaning of ‘reasonable discretion’ and what amounts to a ‘bona fide decision’ will remain open to question until clarified by the parties or, in the highly unlikely event of recourse to the TCA disputes procedure, by means of arbitration (if the parties agree to it) or the non-binding opinion of a specially convened Panel of Experts. Most likely, however, the matter will not be addressed by the UK and EU until the agreement is reconsidered and revised in 2025-26.

Second, the nod to ‘overall’ protection suggests that if a retreat which affects the ‘level playing field’ is matched by a corresponding advance within the same area – or if it can be argued that arrangements have been changed but the same approximate level of protection is maintained – then it may be permissible.

Third, labour provisions are subject to the overarching qualification that a withdrawal or weakening of labour protection by the UK government can only be successfully challenged if UK exporters to the EU are as a result conferred a competitive advantage. That is, any retreat has to be shown to have a materially significant impact on trade or investment. Moreover, any ‘rebalancing measure’ imposed following a failure to secure a settlement by means of the disputes procedure – tariffs are essentially what are envisaged – must be strictly proportionate and go no further than is necessary to restore the status quo.

Finally, if the labyrinthine red tape generating processes set out in the TCA are relied upon then resistance to attacks on workplace rights – and standing to enforce the agreement is strictly confined to the EU – will be a long process. By the time a dispute reaches the stage where tariffs are about to be imposed, British workers will have been deprived of the rights at issue for some time. Moreover, it is very likely that if the government has let the dispute drag on, it will have calculated that it can shoulder the political cost of its actions and will not be planning to restore those rights. The financial cost will, of course, almost exclusively be borne by British workers as well as by the firms doing the exporting, who may well neither have wished for, nor consider that they have benefited from, the withdrawal of protections which ultimately triggered the imposition of the rebalancing measures.

Arguably the best that can be said of the TCA, as it now stands, is that the political disadvantage to the government should it withdraw or dilute employment rights will be deepened by the threat of financial penalties on UK exporters, adding to the already unpopular cross-border red tape. Unfortunately, the TCA’s labour protection mechanisms are so qualified that an attempt to invoke them in order to protect health and safety enforcement is unlikely to be successful. All of which takes us back to a familiar conclusion: the enforcement of formal standards of health and safety in the workplace will ultimately depend on the capacity and the organisation of workers themselves.