Sunday 2 September 2018

The calm before the storm?

August was inevitably a relatively quiet month for Brexit news – certainly for news of any substance – and what there was fell mainly into three varieties of illogic.

The first was the now familiar British government position that Brexit means being ‘out’ and yet somehow ‘in’, the latest version being the Chequers Proposal which continues to be talked about as if it were, in and of itself, a viable plan. Indeed David Lidington went so far as to suggest that it was actually the only viable plan, and, with some chutzpah given how long it took the government to produce it, that “lack of time” meant that the EU would either have to accept it or there would be no deal.

But what “no deal” means has been the second illogic of the summer. Caught in the trap that hardliner insistence on no deal planning has created, the government in the person of Dominic Raab had to argue that it would be both a calamity and yet easily dealt with. Outside of government, some Brexiters opined that it would not make any difference and that everything would carry on as usual, which poses the obvious question that if the EU actually does so little, then why is it necessary to leave? Meanwhile, other Brexiters suggested that the effects of no deal would be minimal because various deals would be done to minimise them, which poses the question when is a deal not a deal?

One answer to that could be found in the third of the August illogics: when it is ‘WTO terms’. On this briefly adopted line, there is no such thing as ‘no deal’ because the ‘WTO deal’ awaits. The holes in that formulation came open so quickly that it soon got dropped in favour of the old standby of ‘reverting’ to WTO terms but with a new twist: it would not be on WTO terms as they actually exist but an entirely imaginary version of them. So along with ‘out but in’ and ‘deal but no deal’ we also had ‘WTO but not WTO’ proposed as if they were serious options.

It’s hardly worth picking apart these various statements and arguments (in any case, they will continue to be made) but one key thing to note, because it will inflect much that now happens, is that they entail a constant slippage around what ‘deal’ is actually being talked about. One slippage is between trade and non-trade issues. More importantly, the central purpose of the Article 50 process is the Withdrawal Agreement (WA) not the future terms, whereas the Chequers Proposal is mainly concerned with future terms rather than the WA. But what complicates that dichotomy is that the pivot around which both turn is the Northern Ireland border. Britain has from the first wanted to treat this as a future terms issue, whereas the EU has treated it as a withdrawal issue: the truth is that it is both.

This considerable complication actually opens the possibility of several fudges being made. The future terms agreement, which will be a political framework rather than a deal, could be sufficiently vaguely stated as to in effect defer their negotiation until after Brexit. It has long seemed to me – although I know most commentators disagree – that this will make it possible to agree the NI backstop to the satisfaction of the EU (and, crucially, Ireland), whilst leaving open the belief on the part of the British government that it will never actually have to be implemented because the final future terms will make it unnecessary. That belief would be unfounded, in my view, but it could be enough to get a (WA) deal done, alongside some softenings of British red lines on, in particular, the ultimate role of the ECJ. In the process, Chequers would, by the end of the transition period, morph into a kind of amalgam of Ukraine and Switzerland.

That (or something like it) is, at least, conceivable* - although if it happened no one should be under any illusion that it would be a good outcome for Britain, either economically or politically. It would avoid the immediate crisis of ‘no deal’, but would see the continued leaching away of business, investment, EU nationals and, in due course, jobs and taxes, as well as the leaching away of British geo-political influence. It would also mean that Brexiters would perpetually argue that Brexit had not been ‘done properly’ and would attribute this slow-burn decline to that.

However, if that analysis is right then the Brexit Ultras will be able to see it too, and may very well refuse to endorse the vagueness, compromises and fudges it would entail. Indeed, many of those who have swallowed Chequers have made it clear that any departure from it would be unacceptable, whereas Theresa May has already implied** that some compromises could be made if “in the national interest” (a highly slippery concept). If so, then what we will see in the next few months could be the final, explosive resolution of the civil war which has dogged the Tory Party for almost 30 years – a resolution which may well destroy it. Equally, the Labour Party (even leaving aside its other current problems) will be forced to confront the revival of its own civil war on Europe that had been abeyance since the 1970s and early 1980s but which is now in evidence again.

In those circumstances there will necessarily be both political and economic crisis. Politically, it will mean that no deal (and therefore a March 2019 cliff edge) becomes very likely, by default. That brings an election or a referendum into the frame but the politics of either or both those are equally fraught - if MPs can’t agree on a Brexit deal they very likely won’t be able to agree on referendum legislation, for example. And either or both of those events would entail application for, and agreement to, an extension of the Article 50 period. (Most commentators seem to think that the EU-27 would agree to this if it were in order to facilitate a democratic process rather than simply to extend the negotiating period).

How such a political scenario resolves is unknowable, and that unknowability makes the likelihood of economic crisis all the greater. One thing we have seen this summer is just how twitchy sterling still is to Brexit news. A political crisis of the magnitude envisaged would be highly likely to trigger a full-blown currency crisis. Meanwhile, what is still (relatively speaking) only a trickle of business relocations would be likely to become a flood as those who have made contingency plans put them into practice. The eleventh hour for businesses passed some months ago: if there is a political crisis now, many won’t and can’t wait to see whether it all gets resolved by March. The same applies to individuals, so we would see an intensification of the ‘Brexodus’ of EU-27 nationals that has already occurred. Whatever promises the government may make to them, there is only so much uncertainty that people can accept when jobs, marriages children’s education and more are at stake.

Within these various scenarios, it’s possible to envisage some very peculiar and deeply ironic events. For example, suppose a fudged compromise WA somehow manages to make it through the House of Commons. It also has to be approved by the European Parliament (EP). Thus it’s quite conceivable – and probably quite likely - that UKIP (and perhaps some Tory) MEPs might vote in the EP against a deal which the British Parliament, whose sovereignty the Brexiters so extol, had approved.

Or, another imaginable situation. I’ve argued before (and am still convinced) that this Autumn the Labour Party will come out in favour of another referendum. Suppose that happens, and that, with or without an election, Parliament votes to hold such a referendum. Might we then see a referendum campaign in which Jeremy Corbyn campaigns for Brexit with the enthusiastic backing of the Mail, Express and Telegraph?

And if these latter events seem rather unlikely then I will make a prediction: that events in the coming months will be even more unlikely.

*I don’t mean to imply that it would be easy. Even leaving aside (!) the NI border issue there are plenty of other obstacles, many highly technically complex, to a WA, let alone to the Ukraine/Swiss hybrid, if indeed that is the ultimate destination.

**I draw this implication from May’s statement today that she will not make compromises which are not in the national interest. I assume this is meant to leave wriggle-room to argue that any compromises made are in that interest. This would be consistent with her standard approach to trying to maintain a semblance of unity within her party whilst keeping the Brexit talks from collapsing: it’s an approach which is rapidly running out of road.

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