Brexit Endgame: second stage (which is unlikely to end with no deal)

We have entered the stage where everyone seems to be worrying about a No Deal Brexit. It was inevitable that the EU would use this as a threat - that is the whole point of the A50 process. Rather less obvious is that the UK would do so as well: we have master tactician David Davis - this is going to hurt us more than you so you should be very afraid - to thank for that. But to be fair, appearing irrationally stupid enough to contemplate No Deal is about the only weapon the government has in its negotiations with the EU. So both sides talk up its chances, which naturally leads everyone to panic. If you want an antidote, this post is for you, although please bear in mind that what follows is about probabilities not certainties, and you can never rule out the possibility of this government doing something really stupid.

Stage one, recounted here, was the break with the Brexiter hardliners to re-engage with the EU after six months backtracking from the December agreement. I call the second stage as what Theresa May has to do to get over the March 2019 hurdle that sees the UK exit from the EU. [1] Unfortunately, given parliament’s failure to provide any guide to the executive, our only clue about what this entails is to think about what is in Theresa May’s interests. (For May, unlike the Brexiters, there is no Brexit ideology we need to worry about, so its interests rather than ideas that matter.)

May’s primary interest is to get a deal. She does not want to go down in history (and down is where she would go if there was no deal) as the Prime Minister who led us to a disastrous No Deal Brexit. Her secondary interest is in perpetual Brexit, by which I mean negotiations that continue to keep Brexit in the news so that a majority of Conservative MPs dare not allow an election for leader and so she stays as PM. These interests tell us what May will try to do.

Perpetual Brexit requires leaving most of the negotiation of what the final relationship will be with the EU until the transition period. That might seem odd, given that this final relationship is what the Chequers document is all about, but see below. I think the EU will probably be broadly OK with that (although I do not think they should be [2]), as long as May agrees to the Irish backstop. As I argued here, May will do all she can to convince the EU that it is politically impossible for her to agree to this backstop. But the likely outcome is that she will fail, and her interests therefore require that she does accept the backstop to get a deal.

The reason why accepting a backstop is politically difficult for her is that any deal that includes it is likely to be opposed by both the DUP and Brexiters. If Labour vote against the final deal then she does not have the votes in parliament for the deal. A potential way around DUP opposition is to convince them that the UK during transition will negotiate a deal that makes the backstop redundant. (For some speculation on all this, see Peter Foster here.)That is a key reason for the Chequers document. But the DUP are as unlikely to accept her word as the EU, so they would require some form of words in any EU agreement that could be held as a commitment.

In passing, if you have a sense of deja vu about all this, you are not imagining anything. This is what happened at the final stages of the December agreement.

The problem with this approach is that anything that would make the DUP happy is likely to worry Brexiters. The more that May says the UK will stay close to Europe so the backstop will never happen, the more the ERG will talk about becoming a vassal state to the EU. It looks, at the moment, like an impossible position. But many things can happen between now and parliament’s vote on any deal with the EU, so I think it will be foolish to discount the possibility that she might just succeed. If she does, we have what I’ve called perpetual Brexit, which in reality means transition=BINO for some time if not forever. (The final deal will probably be BINO with face saving: perhaps I should call this BINOFACE.)

What threats could May invoke to get any deal through parliament. In the negotiations leading up to the deal both the UK and EU will use the threat of No Deal. However once the deal is made threatening No Deal if parliament fails to vote for it is counterproductive if she is trying to convince Brexiters, because No Deal is exactly what these idiots want. A threat of no Brexit however might inspire her Remain rebels. The same would be true of a threat of a second referendum. Perhaps the best threat for her is a general election, because neither the Brexiter nor Remain rebels would want to be responsible for a Corbyn government. The problem with any threats however is that this is not a repeated game, so there is no incentive for her to go through with her threat if it also conflicts with her interests, and people know that.

If she fails to win a vote on the final deal, I still cannot see leaving without any deal as a likely option. It just isn’t in anyone’s interests to let that happen, apart from the Brexiters. But it would be hard for the EU to agree to an extension of A50 on the hope that something turns up. This is where a referendum might become a reality (combined with an extension), as a way out of an impasse. If that happens, it will be the ultimate irony that Brexiter intransigence gives the Remainers what they want. However there is a caveat, and that is that May will propose a referendum with a two way choice between her deal and No Deal. There would be a final fight in parliament to get Remain on the ballot paper in some way.

I doubt, however, that May would want to fight a referendum where Remain is a possibility, because it is quite likely that Remain would win, particularly if Labour leads the campaign for Remain. That would make her position very difficult. As a result, she may prefer the option of a general election. A lot will depend on the polls at the time. But the bottom line is that either an election or a referendum (accompanied by an A50 extension) are more likely than crashing out with No Deal if parliament rejects the final deal. But don’t expect either side to tell you that.

The possibility of parliament voting down any deal and even the possibility of no deal, with the government stockpiling medicines etc, should focus open minds on how ridiculous our position has become. Brexit may get voted down because no one is happy with the form of Brexit we will get. Yet neither the government or parliament is able to say this is ridiculous and we should stop in now. Ostensibly this is because they feel they have to implement the ‘will of the people’. But this is so short sighted, because even the people who voted Leave will be unhappy with the Brexit they get when they see what it is. They voted, it should always be noted, for the “easiest trade deal in history” (Fox) where “we hold all the cards” (Gove). We now know better, but it seems our representative democracy is paralyzed by a vote for a fantasy.    

[1] I’m not going to stick my neck out even further than I am in this post by saying how many stages there will be, beyond saying that it is at least three. The point about calling it an endgame is that the result is clear with best play from the winning side.

[2] Some Remainers do not like me saying so, but the willingness of the EU to keep the terms on which we leave vague when it is voted on in parliament is a bit of an insult to democracy. None of their business, you may say, but they are as much part of theis negotiation as the UK. The majority of UK voters, and probably MPs, would not vote for a BINO type deal where we pay, obey but have no say, and the EU side must know that is where we are heading if a border in the Irish Sea is ruled out.

Theresa May’s perpetual Brexit and Labour's forsaken base.

Two pieces of recent Brexit news are that a majority of the ‘war cabinet’ outvoted May on the choice between two unworkable, and therefore unacceptable to the EU, proposals to keep the Irish border infrastructure free, and Labour plans not to support a Lords amendment to keep the UK in the Single Market (SM). I want to consider each in turn.

The Brexiters, and their followers who just want to be PM and are signaling to party members, have put their collective foot down over the Irish border. This could imply that May will have to finally break with the Brexiters. But first she will try to do what she has done since negotiations began, which is to find a fudge that is good enough for the EU and which just keeps the Brexiters on board. I have no idea if such a fudge is possible, but suppose she manages to achieve one and prevents a revolt from the rebels in her party, so we leave in 2019 as planned.

If that happens, we are in danger of having perpetual Brexit. A final deal cannot be fudged, and the reality is that no deal is possible that will keep the Brexiters happy and be acceptable to the EU. The stumbling block is the Irish border: the EU will not negotiate an FTA that requires a hard border, and the Brexiters will not accept either the UK staying in the Customs Union (CU) and SM for goods, or a border in the Irish Sea. A crunch point could come at the end of 2020, but to avoid that May will plead for an extension which the EU may grant. And so it will go on: perpetual Brexit.

In a strange way, it is in May’s interest for this to happen. No one thought she would last for more than a few years after the 2017 fiasco, but Brexit keeps her in place. The majority of the parliamentary party dare not allow her to go because they will get a Brexiter in her place, given that it is members who ultimately decide. Furthermore, the closer we get to 2022 the less the party will want a bust up over how transition ends, so she fights another election.

If she wins the 2022 election would that finally give her the confidence to do a deal with the EU and ignore the protests from the Brexiters? Two factors suggest not. First, the new intake of Conservative MPs could mean that she would lose a vote of no confidence over Brexit. Second the right wing press, with the election out of the way, might not hesitate to call betrayal if she agrees any kind of deal with the EU. Both the press and Brexiters, knowing that BINO was not at all what they had in mind, would be looking to break off negotiations with the EU and go for No Deal. If she gets an outright majority a deal that puts a border in the Irish Sea becomes possible, but I doubt she will take it or the party will allow it.

The underlying logic is simple. For Brexiters, transition is only bearable because they see it as a stepping stone to a hard Brexit. The EU will not negotiate an FTA without a border in the Irish Sea and no hard border in Ireland. These are irreconcilable positions, a point which the media have just not taken on board. So if May does fudge her way to agreement on the withdrawal bill, it means perpetual Brexit negotiations. Transition, or Brexit in Name Only (BINO), may not sound too bad, but it means never ending uncertainty because business cannot rely on this arrangement lasting decades.

One way to stop fudge is to force the government to break with the Brexiters. One of the difficulties Tory rebels will always have is that it is difficult to vote against a final deal that is fudge, because just as with the original Leave vote fudge can mean almost anything the fudgers want it to mean to get votes. As the polls I discussed here show, it is only by talking about something concrete that voters say wait a minute that was not my Brexit. Which is why votes on Lords amendments to the UK’s withdrawal bill to stay in a CU and (tomorrow) the SM via the EEA can be so useful. Conservative rebels think that with Labour’s support they could win both votes in the Commons. But while Corbyn has been persuaded to back the rebels on a CU, he appears unwilling to do the same on the SM.

I have talked a lot about Labour’s triangulation strategy. That strategy works best when all those who want something that is softer than Theresa May’s Brexit think Labour in reality wants what they want, whatever Labour might actually say. In a purely two party system with rational voters Labour can get away with disclosing that they really only want a slightly softer Brexit than May, because Remainers have nowhere else to go. But reality isn’t like that in two important respects: Remainers can vote for the LibDems or Greens (many thought the Greens would be hammered in the local elections - they gained seats), or they can not vote at all.

Until now, I think we have evidence that Labour has largely succeeded in being all things to all those wanting something softer than May, including those who want to Remain. But as crunch time comes closer this is going to be difficult to sustain. So what does whipping your Lords against voting for the EEA option disclose: that, as long as May is in charge, you are content to see the UK leave the Single market. [1] That might firm your support among some Labour leavers, but it pisses off all Remain supporters and those Leavers who want to stay in the SM.

I think this is a mistake, although I am happy to have experts tell me otherwise. I think it is a mistake because you will lose more votes from disillusioned Remainers than you will gain from reassured Leavers, even when you allow for where each are in parliamentary seats. I keep being told that this is the Tories Brexit, but the moment Labour enable it they become complicit. If car factories in the North East go because we leave the SM, they cannot claim this is not our fault because we abstained on a vote that could have prevented this. Voting to stay in the SM indicates economic competence, which always matters in elections and particularly matters for Labour. 

It also seems like a political mistake beyond votes and reputation. The theory seems to be that a vote to stay in the CU, which the Lords did pass with Labour’s help, will do all the required damage to May. But there are those who argue that such a vote can help her, by giving her an excuse to ignore the Brexiters and do a deal. The Brexiters will be furious, but what can they do at the end of the day, as May can defeat any vote of confidence because Conservative Remainers do not want a leadership election. Wth UKIP dead, they have nowhere to go. May, free of the Brexiters, might even achieve a final deal by 2020 (although crossing her own red lines to do so), and fight the subsequent election as the Prime Minister who got Brexit done.

Which is a long winded way of saying that a vote on the CU may not be enough. If Labour does kill a vote on the SM, they lose another chance to cause problems for May, and this time over an issue she really does not want to lose. Put simply by doing this Labour may be passing up a chance to do great, and possibly terminal, damage to May’s leadership. So the Lords decision looks bad in terms of votes, and bad in terms of politics.

Perhaps most importantly it is also bad in principle. Staying in the SM as well as the CU is the right thing to do if someone else is doing the negotiation. We need to stay in the SM for goods to avoid a hard border in Ireland, and therefore to get a deal with the EU. But the UK is really strong in exporting services, so leaving the Single Market for services is just another act of self harm. I have always been worried, since my time on Labour’s EAC, that the leadership underestimated the damage leaving the SM could do. And if truth be told the Leave vote was won on false pretenses, which means few voted Leave thinking they would be poorer. Which is why there is no mandate to leave the Single Market.

To those who say that Labour have to appease those who voted Leave in our traditional heartlands I would say this. Past Labour leaderships have for many years neglected their traditional heartlands, partly in efforts to appeal to the middle class and partly by embracing neoliberal ideas. They have subsequently tried to win back their traditional base through appeasement over immigration. It did not work then, and it will not work now with Brexit. You win Leavers back to Labour by focusing on the economic issues that matter to them, and not by votes in the House of Lords. 

Appeasement over Brexit is a mistake because Labour alienates its base, just as happened with austerity and immigration. It is time Labour stood up for its principles, which include better public services. Leaving the Single market will mean less money for public services [2], which is why 87% of Labour party members want to stay in the Single Market. Leaving the Single Market is a policy that should be opposed, not enabled.  

Postscript: The Lords amendment was passed by 247 votes to 218. 83 Labour and 17 Conservative peers defied their party and voted for the amendment. Only 3 Labour peers voted against the amendment. Jeremy Corbyn now has to decide whether he regards leaving the Single Market as more important than inflicting what could be a mortal blow to Theresa May. 

[1] We need to dispense with one red herring here. Abstaining does not mean neutrality. If the Lords amendment succeeds it puts the issue on the table, and Conservative rebels think they have the vote to support it with Labour’s support in the Commons. If it fails, it is less likely to be resurrected in the Commons. To say that the EEA option is not Labour's preferred option is irrelevant because they are not in charge and they have limited influence on the outcome. This vote is one point of influence, and they have gone for the worse option. 

[2] Whether they intended it or not, the writings of MMT seem to have convinced many people responding to me on twitter that lower UK GDP has no implications for the level of UK public services. Lower GDP, caused by lower labour productivity because Brexit diminishes UK trade, reduces the resources available to go to private and public consumption. The only way you can avoid less resources going to public consumption is to cut those going to the private sector. Nothing in that statement contradicts or can be changed by anything in MMT theory. If resources are underutilised they should be fully utilised, whether we are in or out of the EU. This is not about utilisation of resources.