Sunak’s promise on EU law defies advice of his Treasury team

Rishi Sunak, one of the favourites to replace Boris Johnson as UK Prime Minister, is promising to repeal all laws inherited from the European Union before the next election as part of his appeal to the hard-Brexit wing of the governing Conservative Party. His own advisers at the Treasury suggested last month that might not be feasible.

Documents seen by Bloomberg show that a senior Treasury official working for Sunak when he was still Chancellor of the Exchequer privately demanded that EU-derived tax laws be exempted from legislation to scrap so-called retained EU law, or REUL. 

Lucy Frazer, the financial secretary to the Treasury, said in a letter that it was not feasible to simply rip up EU laws that had been integral to British tax policy and case law for four decades. She argued that the Treasury should take charge of more carefully repealing the laws during future finance bills to prevent the government from becoming mired in litigation. She also suggested it would not be possible to sunset retained EU law by 2026.

“I continue to have significant concerns over fully ending REUL in tax, and so any solutions we take forward through the Finance Bill cannot go as far as sunsetting all REUL,” she wrote. 

The disclosures shine a spotlight on the conflicts at the heart of government deliberations over its plans to diverge from EU law after Brexit and on Sunak’s thinking as he battles to succeed Boris Johnson as prime minister. On Sunday, Sunak pledged to repeal all retained EU law before the next election if he makes it to No. 10. in a bid to win over the Brexit-supporting Conservative base. The fallout from Britain’s departure from the bloc will be a key issue for whoever takes office next.

A spokesperson for Sunak said that he and his Treasury team had fully supported the goal of removing all retained EU law and had wanted to establish the best mechanism for doing that.

Sunak was the early front-runner in the leadership battle and has the most support among Conservative lawmakers ahead of a week of voting that will decide which two candidates will go forward to a ballot of party members.

Amid a wave of negative briefing between the campaigns, which has seen Kemi Badenoch gunning for members’ favourite Penny Mordaunt over gender self-ID, Sunak is also vulnerable as his resignation sparked Johnson’s downfall. Debates on tax, spending and inflation have been central to the contest so far and have focused scrutiny on Sunak’s record as chancellor.

Writing in the Sunday Telegraph, Sunak vowed to have “scrapped or reformed all of the EU law, red tape and bureaucracy that is still on our statute book and slowing economic growth” by the time of the next election.

Retained EU law is legislation that was directly transposed onto the UK statute book at the end of the Brexit transition period. On June 1, Brexit Opportunities Minister Jacob Rees-Mogg wrote a letter to cabinet seeking ministers’ collective agreement for the proposal to “sunset” or repeal all retained EU law.

Treasury Concerns

Foreign Secretary Liz Truss, who is running against Sunak for the leadership, was appointed to oversee collective responsibility on plan.

On 23 June 2022, the Treasury submitted its response to Truss and then Commons Leader Mark Spencer, calling for a carve out for tax law and requested that Treasury officials be put in charge of addressing retained EU law on tax at an undisclosed later date. Frazer also suggested it would not be possible to meet Rees-Mogg’s target of sunsetting EU retained law by 2026.

“I understand there are concerns about the burden placed by the 2026 sunset and whether this is deliverable without undermining other department priorities,” she wrote. “We must ensure that the deadline is realistic and allows departments to deliver on their strategic priorities — including to avoid creating a cliff-edge that provides risk and undermines business certainty.”

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