Brexit Endgame: Stage 1

A characteristic of many endgames in chess where the result is clear is that pieces leave the board quickly to make the eventual win obvious. What we have seen with the resignations of some (Davis, Baker and Johnson at the time of writing) is but the first stage in that process. As I had anticipated, the Brexiters have split, probably for two reasons. The first may involve calculating what the best way of becoming May’s successor is (remember any calculation does not need to be correct). The second is about whether trying to bring May down is more dangerous to Brexit than accepting defeat and playing a very long game. Let me expand on this last point.

BINO (Brexit in name only, or something very close to it) is not a stable position in the long run for a large country like the UK. The very long game for Brexiters sees BINO as a first stage in a gradual distancing of the UK from the EU. The big problem with this strategy is demographic: Brexit was a vote of the old against the not so old. For that reason the instability of BINO is more likely to lead to rejoining, although when that happens depends in part on the EU. But bringing May down could simply backfire and halt or even end Brexit, as it can only be done by enough Brexiters joining Labour in voting against May’s Autumn deal with the EU. If the deal is voted down by parliament we are in ‘anything can happen’ territory, and that anything includes leaving with no deal, no Brexit at all, a new Prime Minister or even a new government. Remember also that it is easy for Brexiters to make threats now, but actually voting against a deal is something else. [1]

A vote of no confidence in May among Conservative MPs, although it will probably be talked about endlessly by the media, is also the least important event in all this. May will win, because Remainers do not want to risk a Brexiter Prime Minister. If Brexiters have any sense they will leave any vote until later anyway, for the reasons I will now explain. 

We have seen the first stage of the Brexit endgame, the first set of pieces to come off. The plan hammered out at Chequers, as Chris Grey explains, is the basis for negotiation that I said May needed to get on the table, but it also cannot be accepted by the EU for many reasons. In terms of pieces still to go, the elaborate attempt in the Chequers plan to give Fox the appearance of still having a job will not stand. But having to concede in effect staying in the Customs Union, and seeing Fox (and others) go? is the least of the three changes the EU will probably require compared to that plan. The EU is unlikely to accept a goods only Single Market deal for the whole of the UK, and is even more unlikely to accept the UK staying in the Single Market without also having freedom of movement.

How the endgame is played by the EU now becomes important, because it will determine when (not how) this all ends. The end result for Brexit if it happens - some form of BINO - is not in question unless something very surprising happens within the EU. But May will be desperate to avoid that becoming clear for as long as possible, and it is up to the EU the extent to which they let her play that game. To continue the chess analogy (my apologies for those who do not play), May wants an endgame that allows her to postpone the inevitable (i.e. to avoid agreeing to BINO) until the time control period of 40 moves comes to an end (we leave in March 2019, and enter transition). That requires a withdrawal/future framework deal that is vague enough that it is not obvious that freedom of movement will continue. Even that may not be enough for May to get any deal through parliament, but that is all she has to play for.

The calculation the EU now has to do involves working out what outcome is most likely in ‘anything can happen’ territory. If they think there is any risk of no deal they might play along with May’s attempts at fudge (although the Irish backstop cannot be fudged). But if they see as the most likely outcome that Brexit comes crashing to an end, then maybe they will play for that form of endgame. That calculation will have a strong influence on how this all ends. Which is not surprising. By triggering Article 50 the UK government gave up control and put our fate in the EU’s hands, like a novice playing a grandmaster.

[1] Actually ending a government is much harder than most imagine after the Fixed Term Parliaments Act. Would Brexiters really join the opposition parties in a vote of No Confidence in the government and become responsible for a possible/likely Corbyn led government? At the moment a vote against any deal with the EU would lead to a No Deal Brexit, but I suspect May has enough leeway to stop that (and the EU would always accept a request for more time to avoid that outcome). She could even threaten the Brexiters with ending Brexit if any deal falls: unlikely I know but it would put various cats among pigeons.

Has Ireland scuppered Brexit?

Should I be shocked that no quantitative Brexit impact assessments were commissioned by David Davis? Is it surprising that there has been no cabinet discussion of the final trade deal? Not if you accept the parallel I draw here between Brexit and Trump. Brexit is an expression of ideology or feeling, an act of faith. An impact assessment is therefore beside the point, and just dangerous to the project. I think you only get outraged by this if you haven’t really accepted what the true nature of Brexit is, and how it came to pass. By this I do not mean why people voted for Brexit, but why a large section of the UK press and Conservative party made it their primary political project. The true nature of Brexit means that the normal rules of politics do not apply, and could not apply.

I was surprised about Ireland. I did not realise until September [1] what it would require from Theresa May. Back in March as Article 50 was triggered I thought that would inevitably mean an open ended transition period (despite lots of talk about 2 years), and so the final destination of Brexit would not be decided until after the next election. If the Conservatives lost that, Corbyn would satisfy himself that the EU would not hinder his economic programme, and we would end up staying in the Customs Union and Single Market (CU&SM). [2]

But will the question of the Irish border change that? Those that constructed the Article 50 process understood that any country leaving the EU would be desperate for a deal, which is why there is a two stage process. The two stage structure maximises the chance that the EU will get the deal they want on the first stage issues. In terms of citizen’s rights and the leaving bill that has proved correct.

What the EU realised long before the UK was that Brexit involved a unique problem. The UK’s only land border with the remaining EU could not be allowed to become a hard border without putting the Good Friday agreement at serious risk. Yet the EU requires a hard border, and the WTO would insist that the UK recognised that (again Brexiter talk of not building one is just nonsense). Ireland’s most important priority was that there should be no hard border, and as a result the rest of the EU agreed to make that part of the first stage.

Once again, this shows you the nature of the Brexit project. Any Brexiter interested in reality would have realised that Brexit put the Good Friday agreement at serious risk, any would have at least thought about the problem. But Brexit is not a reality based project, and so they did not. We should be thankful that the Irish government made this a priority.

In simple terms there are therefore only two possibilities for Brexit that avoid a hard border. Either the UK stays in the Customs Union and Single Market (CU&SM), or just Northern Ireland does and there is a sea border between two parts of the UK. (What 'alignment' means is what the EU chooses it to mean.) The UK government still wants to pretend that other possibilities exist: something technological or that the stage 2 agreement they come to will not require a hard border. But the Irish government quite rightly insists that if neither of those two happen, the UK government recognise that at least part of the UK will stay in the CU&SM. That in the agreement the UK almost signed a few days ago.

It was scuppered because the DUP quite rightly wanted to know which of these two arrangements the UK government had in mind. Above all else, the DUP do not want a sea border between Northern Ireland and the rest of the UK, because they see that as making unification much more likely. I suspect the fact that whatever May said in her last minute phone call was not enough to satisfy the DUP means they will be prepared to bring down the government unless they get some sort of public guarantee that there will be no sea border.

In which case, May will finally have to call the Brexiters' bluff. Maybe she can convince them to keep faith in their rhetoric that there is a technological fix (there isn’t) or there will be a final trade agreement that deals with the problem (there won’t be) and let her commit to no sea border in the eventuality that neither happen. If she cannot, their only other option is the nuclear one of trying to force May out. As the latest poll I have seen suggests the Conservative party membership’s favoured candidate is Someone Else, that looks like a risky move. But if they take that risk, Ireland will indeed have made a difference.

But if they do not, and May does sign up to stage 2 on the basis of UK membership of CU&SM as the fallback position, does that change anything? You would think it should, but because it is the fallback position the UK government will start negotiations over a transition arrangement and a final trade agreement. After we officially leave May will then resign and the Conservatives will set about the task of trying to win the next election. Trade negotiations with the EU will be put on the back burner. We end up at in exactly the same place as I expected we would be back in March.

The only difference is that it will be blindingly obvious that this is all for show. Having signed up to staying in CU&SM as a default, the EU has zero interest in concluding any other kind of agreement, particularly as it will not safeguard the border. It will just be a matter of time before the arrangement whereby we stay in the CU&SM is formalised. But will any British politician that matters have the courage to tell the British people the truth?

The truth is that all their vote has achieved is that they will now have no say in the rules the UK has to follow. Instead whoever wins the next election will come back with some ‘deal’ over freedom of movement which few still care about because no one is coming to the failing UK economy. And of course the Brexiters will cry betrayal because we are, as far as they are concerned, still in the EU, and we will be back to where we were before the referendum, except with no say in the rules we have to obey.

I would really like to think that this can be avoided. Perhaps before we formally leave the EU, enough Conservative MPs (and despite all the noise from some Remainers about Corbyn, it is Conservative MPs who matter) will put country before party and call for a second referendum. Ireland increases that possibility, but from the evidence so far I do not see it happening.

[1] As someone told me, being ahead of the UK MSM on this is a very low bar.

[2] For all those who insist that the Labour leadership wants to leave, you have to realise two things. First, by the time Corbyn takes over we will have left, and he has no interest in pursuing the sunny uplands of trade deals with countries like the US. Second, there is nothing in the CU&SM that really hinders his immediate economic programme. So why leave the CU&SM just after he gets elected? It would profoundly alienate those who voted for him and damage the economy on his watch.  

The Brexiteers know the war is far from over

It is easy to view the letter from 72 MPs criticising the BBC for being biased against Brexit as just another example of the government putting pressure on the news organisation. But if that is all it was, it is odd to have another conservative MP, Nicky Morgan, describe the letter as chilling.

I would argue that this letter as another example of the fear I talked about in this post. Fear by Brexiteers that their little English coup may still unravel. Their reasons for fearing this are real enough. The original Leave vote was based on lies and on obscuring the truth. These lies are perpetuated by those who now feel obliged to advance the Leave cause. I talked in my last post about how Tim Harford had recently noted that tobacco firms had managed to delay by decades the response to the first studies in the early 1950s that smoking was harmful. What chance, then, did economists have before the referendum? But the lies told and truths dismissed in the referendum are going to start to unravel as soon as negotiations begin.

One of the main initial topics of those negotiations will be how much the UK will have to pay the EU. Many of those who voted Leave expected it to be the other way around. For this reason, the UK would like everything to be discussed together, so that this bad news can be hidden. But this is not the way the EU likes to do things, and the negotiations are going to be done the way the EU dictates. Remember they hold all the cards, because it is the UK who suffers most with no deal.

This bad news could be avoided if the UK walked away, which is one reason why the option of no deal is beginning to sound attractive to the Brexiteers. But the British people do not want this. Here is a recent poll that contrasts the popularity of a EEA/Norway option with no deal.

What is described as ‘Hard Brexit’ here is really ‘No Deal Brexit’. The poll says that as many Conservative voters will be as unhappy with no deal as they would be with the EEA option. While the full horror of no deal for the UK economy will take years to manifest itself in lower GDP, the consequences in terms of firms leaving will be immediate. David Davis has not modeled the impact of no deal because he already knows the results would be terrible. [1]

If this is what people feel when confronted with the truth, the only option left to the Brexiteers is to try and hide the truth. Little things are all they ask for from the BBC. Like not mentioning Brexit when talking about rising inflation, because to do so would be ‘controversial’. To play down news of firms planning to leave the UK, because that was the news last week. To not present the view of the EU in negotiations, because this is like a battle and the BBC must be patriotic. The Brexiteers hope that with these ‘small modifications’ to broadcast news, and the pure propaganda from much of the press, they can get away with a deal that is not in the UK’s interests.

If those pursuing this agenda do not think the war is over, it would be foolish for those opposed to leaving the EU to believe it ended with the triggering of Article 50. The Brexiteers fear that if there is no deal, MPs in parliament will at last find their voice to say no. Those opposed to leaving the EU must do all they can to encourage that possibility.

[1] Among political commentators, all predictions by economists are assumed to have equal weight, so even Janan Ganesh writing in the FT can say “politicians are allowed to question [economists] record of clairvoyance”. That is not true, because economists’ predictions are not all alike, as I have explained many times. One of his favourite politicians, George Osborne, has said that Brexit is the “biggest single act of protectionism in history”. History as well as economics tells us that protectionism of this kind is invariably harmful.