Monday, 12 December 2016

A transitional deal?

For the last few weeks, the idea of a ‘transitional deal’ has been floating around the Brexit debate. It arises from the realization that the two year period specified by Lisbon A50 is too short to allow for exit terms, still less future terms, to be agreed.

It is worth pausing at this point to recall the Referendum campaign during which the leave campaign was warned that this was so by, to take one important example, Sir Gus O’Donnell the former Cabinet Secretary. This was dismissed as (of course) Project Fear and as “nonsense” by, to take another high-profile example, Fraser Nelson of the Spectator. Nelson opined that the UK could take as long as it liked, by having informal negotiations for as long as it took before triggering A50. But that was, indeed, nonsense as was said at the time and has now been shown to be true: the EU will not enter into negotiations before A50 is triggered. It’s really important to keep recording and reminding about how mislead people were during the Referendum, not just on the headline claims of the Leave campaign but on these perhaps lower-profile, but crucial, points.

At all events, the Chancellor Philip Hammond has today stated that a transitional deal will be likely to be necessary to avoid the ‘cliff edge’ which the Prime Minister recently told business leaders that she, too, understood to be a danger. The cliff edge, to make it clear, refers to the overnight collapse of the trading, regulatory and legal system if there is no agreed deal within two years of the triggering of A50. What Hammond and May are saying is no more than a pragmatic recognition of an obvious reality, but it runs into three problems which encapsulate the problems of the Brexit mess.

The first problem is the internal politics of the government. David Davis, the Minister for Brexit, said just last week that he was “not really interested” in a transitional deal, and went on to say that he would only consider it to be “kind” to the EU – implying that it was something that was of no importance to the UK. So this contradicts Hammond both with respect to the need for such a deal and also with respect to the Chancellor’s formulation that such a deal would be in the interests of both the UK and the EU. Meanwhile, again just last week, Foreign Secretary Boris Johnson said that 18 months would be “ample time” to conclude negotiations. So there is no clear government agreement on this.

The second problem is that of wider politics. Hammond’s statement received a furious reaction from readers of the Brexiter press, as the comments under this report in the rabidly pro-Brexit Express show. More generally, many leave voters are becoming frustrated with what they expected to be an immediate exit from the EU, and if the Tory government go into the 2020 election without having delivered Brexit they will be likely to lose a lot of votes to UKIP, who are now committed to the (crazy) idea of leaving the EU without even triggering A50, let alone having a transitional deal.

The third problem is the EU itself. All of the UK Brexit debate is occurring in a vacuum, as has so much of the discussion about the EU for decades. But Michel Barnier, the EU’s chief Brexit negotiator has indicated that he is opposed to a transitional deal that simply allows the UK to cherry pick terms for single market access. Manfred Weber, conservative leader in the European Parliament and a key ally of Angela Merkel, has been similarly scathing. Others, such as Luxembourg’s Prime Minister Xavier Bettel have been even clearer: there is no half-in, half-out deal on offer. All the indications are that the EU will offer a hard Brexit, with no transitional deal.

This is the realpolitik of Brexit in general, and a transitional deal in particular. Again, it is worth contrasting this with the blithe assurances given by Brexiters during the referendum campaign. Again and again they insisted that ‘the German car industry’ would ensure the sweetest of Brexit deals. It was said to be nonsense then; it has been proved to be nonsense now.

Hammond’s statement about the need for a transitional deal is reasonable, so far as it goes. But unless the UK economy is going to be completely wrecked then at some point – and time is running out – the Prime Minister is going to have tell the British people the truth that Brexit itself is unworkable. That would be hugely politically dangerous for her; but the greater danger to her may lie in not doing so, and having that truth emerge when her currently high poll ratings have slumped. Now, she could lead what is going to happen; then she will have to apologise for it.

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