Foreign Policy

Theresa May’s Florence Speech: the Key Changes in the UK’s position on Brexit?

Official Brussels and London return to negotiations on Brexit process amid a recent stalemate. Theresa May addressed the British press pack in Florence on Sep 22, 2017 in a bid to gain momentum in the Brexit talks. The city of Florence was chosen because of its location in the heart of Europe and known for its history of trade and finance. The Florence speech itself was seen as an attempt to kick-start the stalling talks  and was largely a symbolic gesture rather than an outline of policy, verbatim, given that May went to Florence in friendship rather than adversity. It was this thinking which could been illustrated through the tone, content and notions employed through the speech of British PM. In her speech, British PM Theresa May tried to set out a picture of a post-Brexit UK. Some key concessions had been ceded through this speech. May outlined her proposal for a transition plan, of which would be over two years (till March 2019), in order to succeed in key agreements, to support business and to offer a degree of stability of families between Britain and mainland Europe. However, a transition plan will also allow May and her government to formulate an implementation plan and their aims and objectives. The parallel talks, as supported by Brexit Secretary David Davis, which had been an area of disagreement between the UK and EU have been dumped in favour of a sequencing of talks – an agreement on dates, priorities and organisation. A major concession which came out of the Florence speech was the acceptance of any law the EU agrees to regarding the rights of EU citizens in the UK. EU citizens arriving into the UK after March 2019 will be subject to a registration system. May has rejected the ‘Canadian model’ for further relationship with the EU, which was previously mooted as a possibility, in favour of a ‘bespoke model’  - a model, which considers the cooperation of Britain with Europe. She has also rejected the idea of a post-Brexit Britain becoming tax-haven, akin to the Northern-Hemisphere/ Hong Kong. That said, David Davis has confirmed that the European Court of Justice will no longer have a mandate over the UK, instead a new system will be formed to deal with the intermediate differences between the UK and EU.  Furthering the notion of cooperation as carried by the rhetoric “Shared History, Shared Challenges, Shared Future”, May alluded to the possibility of a treaty being drafted which would concern deeper cooperation between Britain and her European counterparts in the field of security. She called for a bold, new security pact with the EU and post-Brexit UK considering the UK’s role in European security as vital as never before. In addition, Britain will pay into joint projects involving science and education, whilst also paying to accept the freedom of labour. The speech has been criticised for lacking substance, however, it could be argued that this speech maintained a sensible negotiating stance, leaving the EU space to advance upon its preconditions. Therefore, although the past week of Brexit negotiations was described by both sides as ‘warm and constructive’, still no sufficient progress has been made necessary to move to next phase of Brexit talks.     Iryna Ivashko, ICPS senior analyst, Cameron Gibson, ICPS visiting expert                                                                                                                                                                                                                                                                                                                                                          

ICPS Press
Internal Policy

Bulletin of the regional transparency. Issue 2

We offer to your attention the second issue  of the analytical-information product of the International Centre for Policy Studies, "Bulletin of the regional transparency", which was developed in the framework of the project "Transparency, financial health and competitiveness of the local self-government in Ukraine" being implemented by ICPS and Slovak non-governmental non-profit organization INEKO with the financial support of the U.S. Embassy in Ukraine. The Bulletin contains the review the work of the Project, as well as a variety of materials devoted to increased transparency, financial viability and competitiveness of the local authorities, as well as issues related to the coverage of the decentralization reform. In this issue we offer to your attention materials on: Presentation of transparency rating in 22 regions of Ukraine by experts of ICPS (Ukraine) and Transparency International Slovakia; A violation of the procedural issues in Khmelnytsky City Council during preparation for the next session; Procurement of Chernivtsi City Council with used trolleys in emergency condition; Analysis of the position of the city of Odessa in the transparency rankings of the cities; Abuse in the city Kropivnitskyi in the greening of the city; Exposing individual schemes, discrimination of bidders in public procurement; Recommendations to local authorities on how to improve the transparency and openness of budget processes with participation of citizens. Full version of the Bulletin is available here: /assets/uploads/images/images/eu/nl_02_07_17_.pdf

ICPS Press
Foreign Policy

Ukraine-EU Summit: the beginning of uncertainty

On July 12-13, 2017 Ukraine-EU Summit was held in Kyiv with participation of the President of Ukraine Petro Poroshenko, European Commission President Jean-Claude Juncker and European Council President Donald Tusk. The parties discussed implementation of the Association Agreement, visa regime, reforms and combating corruption in Ukraine, the Russian aggression and the like. At the same time, this summit did not produce a joint statement via contradiction around phrases about "European aspirations" of Ukraine. However, the friendly rhetoric of the summit overshadows the beginning of the crisis in relations between Kyiv and Brussels. Absence of the joint declaration shows that the EU is not yet ready for further rapprochement to Ukraine. On the one hand, the slow pace of reforms and fight against corruption reduces the interest of Brussels to deepening of cooperation with our state. On the other hand, Ukraine has established a foothold among the secondary issues of the EU policy due to  Brexit, migration, terrorism, financial problems and other priorities. In addition, euroskeptic and populist forces, despite the recent defeat at the polls in the Netherlands and France, will continue to play a prominent role in the political life of many countries. As a consequence, European aspirations of Ukraine and other countries neighboring the EU will give rise to ultra-right politicians harshly criticizing their governments and institutions in Brussels. Without further rapprochement with the EU, Ukraine will not have sufficient incentives to continue reforms and fight corruption. The main engine of political and economic transformation in the countries of Central and Eastern Europe was the prospect of EU membership. In the case of Ukraine, these "gingerbread" was the Association Agreement, deep and comprehensive free trade area (DCFTA) and visa-free regime, which many citizens and politicians mistakenly considered to be an intermediate step to EU membership. From now on "soft power" of the EU towards Ukraine is limited to financial support in conducting reforms and sanctions against Russia. It is obvious that the potential of such tools is not enough to ensure the irreversibility of the course of reforms and fight against corruption. Thus, this Ukraine – EU summit will be the beginning of uncertainty about the future of bilateral relations. The ability of Brussels to offer attractive initiative for Ukraine will depend on the continuation of reforms in Ukraine, progress in the fight against corruption, the preservation of democratic achievements and loyalty of Ukrainian citizens to the European idea and values.

Yevgeniy Yaroshenko
Economic Analysis

Budget resolution of 2018-2020 – the first step to the medium-term budget planning

According to the explanatory Memorandum, the main directions of budgetary policy for 2018 - 2020 (hereinafter — the budget resolution) are based on the provisions of the Program of Activities of the Cabinet of Ministers of Ukraine, the Coalition Agreement, the Medium-term plan of priority actions of the Government until 2020, Strategy for Sustainable Development “Ukraine—2020”, programs of cooperation with international financial organizations. For the first time this document envisages the introduction of mid-term budgeting for three years. The main problem of the budget resolution is its weak correlation with the provisions of the state budget, which makes it a purely formal document. The main directions of the budget resolution for 2018-2020 are, according to accompanying documents, as follows: • acceleration of economic growth by creating a favorable investment climate and maintaining macroeconomic stability, in particular, continued fiscal consolidation; • public administration reform, decentralization and public finance reform; • development of human capital through the reform of the health system and education, improving the provision of state social support; • establishing the rule of law and fight against corruption; • ensuring security and defense of the state. As regards foreign policy, in 2019 it is planned to successfully complete a program of cooperation with the International Monetary Fund and to obtain a stable position on foreign markets of borrowings. The most positive aspect of this document is the introduction of medium-term budget planning with the harmonization of several policy documents.  First, the three-year budget is necessary if a country is actively pursuing reform. The reform plan should not just be embodied in the form of strategy, but to have understandable financial security. Therefore, in the case of Ukraine a medium-term budget plan may be the financial reform agenda. This is especially necessary in the context of stability of tax policy in connection with the permanent non-systemic changes in the Tax Code. Secondly, the move to three-year planning in many cases became the reason of the decrease of populist decisions concerning increase of social expenditures in pre-election periods. Legislative increasing of the interdependence of formation of the budget for the current year and a medium-term fiscal plan will help to avoid political influence in making budget decisions. Thirdly, the introduction of a medium term budget plan will also help in improving the effectiveness of the government programs. This is important, given the possibility of resource planning and more effective and balanced allocation of budgetary funds. Very often certain projects, especially concerning construction and reconstruction, last decades because of annual changes in budget priorities and lack of funding. In case of medium-term budget planning, long-term infrastructure projects are possible, and the Ministries will be interested in the implementation of important programs, not only in the disbursement of funds. In the future, the medium-term plan will improve cooperation between the responsible bodies for the preparation of the budget and the budget forecast of the central and local level of government. Three-year budget plan can be the first step on the path to a long-term scenario that will generate long-term state strategy of the main directions of state policy. Moreover, the proposed cap in government spending may be a good benchmark for assessing the quality of state decisions. If we analyze the specifics of the document, its main problem is that the provisions of the budget resolution are very weakly correlated with the provisions of the state budget, which was passed in Parliament. This situation makes it a purely formal document. Other problematic issues are as follows: 1. The lack of explanation of the measures and directions of the state policy on achieving the proposed indicators. Most of them are quite declarative, making it impossible to assess how realistic they are. The question remains as following - on the basis of what calculations the main parameters of the budget resolution were determined. 2. One of the problems is the lack of a monitoring system and adjustments of the proposed expenditure caps, which makes it impossible to evaluate how realistic they are. This also applies to the planned revenues and expenditures for future years, for which the significant growth in the next 3 years is stipulated. In Ukraine, URS may depend not only on economic situation but also on the political one, which increases the risk. In addition, the law does not define any monitoring mechanism, there is no mechanism to adjust the proposed "cap" that is essential in the changing economic situation. The solution to this problem is to develop responsible planning of the necessary regulatory framework for the budget for monitoring and adjustment of deviations. The adjustment mechanism should be implemented with reference to previous plans and forecasts. 3. Problems of implementation of the three-year plan at the local level. This question is of particular relevance concerning fiscal decentralization. In Ukraine there is the situation when the budget is prepared without taking into account the real needs of the regions, preparation of budget requests of local authorities is purely formal, and all decisions are taken at the level of main managers of budgetary funds. Simple bringing medium-term budgetary planning figures to local authorities has nothing to do with the medium-term budget planning. Therefore, in the context of fiscal decentralization it is necessary to develop an effective mechanism of cooperation of competent authorities for its implementation in central executive authorities and at the local level. A three-year plan can give the local government an understanding of the importance of efficient use of resources and a constant search revenues of local budgets, and not only the expectation of permanent funding from the center. Scenarios. The future fate of the medium-term budget resolution can have 3 scenarios:  1) status quo - budget resolution will remain a formal document and its provisions will be poorly correlated with a budget proposed by the Cabinet of Ministers in September 2017. This will lead to the continuation of the chaotic and inconsistent state policy, the loss of state capacity to implement reforms and stimulate economic and social development, to the accumulation of systemic risks. 2) based on the proposed three-year budget resolution, the introduction of a medium term budget planning without a simultaneous reform of the entire system of strategic planning will not lead to the desired effect (predictability and consistency of the state budget policy). This can also create conditions for the permanent inconsistency of medium-term budget plans with the policy in relevant spheres of activity of state authorities. This scenario can bring all efforts spent on its preparation to nothing and does not protect against implementation of the risks associated with the uncertainty and frequent changes of economic policy priorities. 3) based on the proposed three-year budget resolution, the introduction of strict medium-term budget planning simultaneously with the reforms of the entire system of strategic planning is optimal. Medium-term budget resolution should be integrated into the system of state forecasting and program documents. Approval of the budget plan should be carried out annually together with the law on state budget for corresponding year, at the same time to prevent its refinement in subsequent years in the event of changes in the macroeconomic situation or state policy in a particular area. The lack of political will on transition to the medium-term budget planning on the basic of leading experience of European countries will not allow to achieve the following objectives: 1) conducting a balanced policy of forecasting of budget revenues and expenditures; 2) the realism of the budget decision-making and legislative interdependence of formation of the budget for the current year and medium-term fiscal plan will help to avoid political influence on the adoption of budgetary decisions; 3) improved cooperation between the responsible bodies for the preparation of the budget and the budget forecast of the authorities at the central level and local level; 4) avoiding populist decisions to increase social expenditures in pre-election periods; 5) improvement of the efficiency of public programs, taking into account capacity planning rather than annual dependence on the current budget, the budget funds will be more effectively distributed and balanced; 6) medium-term budget planning is the first step on the path to long-term scenario that will generate long-term state strategy of the main directions of the state policy.  

Angela Bochi
Economic Analysis

Presentation of the transparency ranking of Ukrainian regions

International Centre for Policy Studies together with Institute of social and economic reforms continues to work on the project "Transparent, Financially Healthy and Competitive Self-governments in Ukraine​". The issue of transparency of local self-government is one of the two components of the project, along with financial health. So now we present the ranking of transparency of 22 regions of Ukraine in the form of a web platform which highlights all of the rating indicators, as well as recommendations for improving the level of transparency of the regional councils. ICPS expert Svitlana Radchenko noted that  in order to assess the transparency 22 regional councils used the data obtained from the following sources: • Answers to the questionnaire submitted by  ICPS to 22 regional councils. Each questionnaire contained 16 questions • Respond to requests for information sent by ICPS unofficially through a third party ("request of a secret client"). Each query contained three questions and was aimed at identifying the response of regional councils to requests from ordinary citizens • Information  that is publicly available on official websites of regional councils • Information from the profiles of regional councils in the social network Facebook 22 regional councils were assessed, with the exception of the temporarily occupied territories and the Crimea. Two regions (Donetsk and Luhansk) were excluded from the ranking due to differences in the competence of the regional councils and ad hoc civil-military administrations introduced in Donetsk and Luhansk oblasts by the President of Ukraine due to  anti-terrorist operation on the territory of regions. These administrations have partially taken over the functions of local self-government and executive power. In the process of monitoring of official websites of regional councils  by ICPS experts 67 indicators in nine (9) key areas have been allocated, they  reflect the situation on transparency of the regional councils. The most important areas were  the information policy, budgeting, citizen participation and professional ethics and conflict of interest. The overall rating can range from 0 % (worst score) to 100 %(best score). Three areas now have the highest level of transparency in our rating. However, as we see even these regional councils have a lot of work to be done, because the best result is only 58.5 %. Mostly low positions in the ranking are associated with two factors:  1) lack of basic information on public procurement and disposal of assets of the regional council at the web site. It is worth to be noted that some areas have a fairly full web site at the first glance due to the presence of all main sections (such as Zhytomyr region council), but if you search the required information, it turns out that this sections are not informative enough for citizens. 2) the presence of a large amount of information on the website, but a physical inability to find it due to uncomfortable interface. Therefore, some regional councils formally publish data, such as the Declaration on assets and income of the regional head or the deputies or other officials of the council, however, the search for such information, even purposeful, may take an extremely long time. Michal Pesko (Transparency International Slovakia) presented the Slovak experience in the use of ratings to increase the transparency of local governments. It should be noted that the transparency of regional councils is the first one implemented in Ukraine. We believe that the results will contribute to increase of the the level of transparency of regions in Ukraine.

ICPS Press