As soon as the EU decided, quite rightly, to support Ireland in rejecting any deal that resulted in placing infrastructure at the Irish border, the idea of a Free Trade Agreement between the EU and the UK was dead. It became inevitable that the UK would stay in the Customs Union (CU) and the Single Market (SM). The two possible alternatives, which is that the UK would go ahead and impose a hard border and forsake any deal with the EU, or that a border would be created in the Irish Sea, would not be approved by a majority in parliament. If the UK had a strong bargaining position, it could perhaps persuade the EU to compromise over how much of the Single Market it needed to be part of (the Jersey option), but according to Sam Lowe who gave that option its name the “EU will not contemplate the backstop applying to the whole UK”. The UK gave up any bargaining strength it had when it triggered Article 50.
Yet neither leader of our two main political parties allow themselves to see this inevitable implication of the Irish border. Delusion is at its most extreme in the case of Theresa May, who still thinks it is possible to conclude a deal with the EU that would keep the Brexiters in her party on board by appeasing them at every step. So we have the ludicrous situation where the UK cabinet is at loggerheads over which of two impossible plans they will put forward so they can be rejected by the EU. This isn't rearranging deck chairs on the titantic. It is having a full blown row over how the deck chairs should be arranged as the ship sinks.
This charade could be put out of its misery by parliament telling May that the UK has to stay in the CU and the EEA. The former might happen, but the Labour leadership, along perhaps with some of its MPs (and not just the few Brexiters), still think that they can negotiate a bespoke version of the Single Market that either avoids rules on state aid or avoids free movement. There is no reason why the EU need contemplate this, given that they know MPs will not approve No Deal. The left or Lexiters can talk all they want about uniting to guarantee that the EU cannot obstruct a future socialist government, but the lesson of Greece is that if the EU has power it will use it.
It is easy to imagine where these delusions of power come from. After all, despite what Brexiters say, the UK did have considerable influence in the EU when it was a member. Ironically both the Single Market and EU expansion owed a lot to UK pressure. The more interesting question I think is why these delusions continue when the reality of the UK’s powerlessness becomes obvious. Political leaders have had a painful year to learn that in these negotiations the EU calls the shots.
I can think of two answers. The first is ideological blindness. This is obvious in the case of the Brexiters, but I think you can also see it elsewhere in various ways. But I also think there are specific dynamics created by the referendum. Leave votes were in part predicated on an illusion of power: the UK would not be worse off because the EU would be desperate to accede to our demands. Once a politician agrees to go with the 'will of the people', they find it very hard to go back to the 52% and say your beliefs were delusions. And no politician wants to say in public that the UK has to do what the EU says. It is very hard for an elected politician to confront English nationalism, a nationalism largely exploited and distorted in my view by a deeply corrupt press.
The UK is therefore in a trap of its own making. It is obvious what has to happen in the end: the UK stays in the CU and SM either inside or outside the EU. But the leadership and perhaps a majority of MPs in the two main parties either cannot see that yet, or can see it but dare not take the steps to get us there. If Brexit is to survive despite always being a fantasy project it has to end with a whimper, but it could take many wasted years and much economic harm to get to that point. There is one way out that will spare politicians’ blushes and revitalise the economy, and that is to hold a referendum on the final deal where the economic costs of the deal are clearly spelt out.