Monday, 9 July 2018

Shit Hits Fan

Despite Boris Johnson's definition of it as a "turd", the Chequers' statement remains very much an example of "cake". Behind the verbiage, there is still a belief that the UK can be simultaneously in and out of EU. For example, there will be a "common rulebook" for goods and agri-food but Parliament will retain the right to diverge on those rules. That is either common in name only or sovereign in name only. As has been usual with Theresa May's initiatives as Prime Minister, the statement gives the impression of having no viable existence beyond its utterance (remember "the just about managing" and "strong and stable"?). The cynical view is that it is merely a holding operation until next week's white paper, which will in turn be a holding operation until the EU's rejection of it in the coming months. That cynicism extends to the assumption that the chief Brexiteer cabinet ministers, specifically Johnson and Gove, are treading water until the UK's formal departure in March next year, at which time a sovereign Parliament will be able to diverge from whatever hollow withdrawal agreement finally made it over the line towards the end of this year.

An even more cynical interpretation is that the Brexiteer ministers believe that a deal with the EU other than BINO - Brexit in name only - is unlikely, but that the softest of Brexits can't get over the line because it would be impossible to sell to leavers both among party members and voters. In this scenario, May would be obliged to try and make the most of no-deal, the ultra's preferred outcome, which would call her own position into question because, if it has done nothing else, the Chequers' statement has proven her to be an advocate of the softest possible Brexit: she has made her choice between Johnson and Hammond and sided with the latter. In other words, none of Davis, Johnson or Gove expect the statement to actually form the basis of the final outcome, so their current manoeuvrings should be seen in his light. Johnson is positioning himself as the prophet in the semi-wilderness (a la Churchill - again), Gove has made it clear that his eyes are on the prize of getting to next March in one piece (at which point the sharpened knife will presumably reappear), while the silence of Davis was a good sign that he was considering his position as the Chequers' statement confirmed the open secret that Number 10 is wholly in charge of Brexit policy, calling into question the purpose of DExEU as a distinct ministry. Davis's resignation in the last few hours has an inescapable logic.

Though Chequers has been widely interpreted as a commitment to a soft Brexit, it shouldn't be assumed that this makes it any more palatable to the EU27. While they now have something of substance to critique, or at least will have when the white paper is published on Thursday, the continuing constraint of the UK's red lines (out of the single market and customs union and no ECJ oversight or freedom of movement) means that the proposed relationship remains opaque at best and an affront to the institutional framework of the EU at worst. While domestic critics accuse the government of heading for BINO and thus "vassalage", it should be borne in mind that a deal based on alignment and reciprocity is also a challenge for the EU as it entails the UK gaining the maximum benefits with the minimum of obligations - our old friend, cherry-picking. The sticking point won't be the quid pro quo of financial contributions for benefits equivalent to continued membership, but the UK's insistence on its absolute right to unilaterally enact exemptions and opt-outs from the common rules. It wants to continue using the gym, and will pay a discounted fee for access, but it rejects the obligations of membership and intends to ignore the rules when it suits it.

The most startling part of the statement is perhaps the government's confidence that the backstop agreed in respect of Northern Ireland last December will be irrelevant by this October, envisaging a relationship which ensures "that the operational legal text the UK will nonetheless agree on the 'backstop' solution as part of the Withdrawal Agreement would not need to be brought into effect". This is not only a heroically optimistic interpretation of the "Facilitated Customs Arrangement" and the "common rulebook" as a solution, but a position that simply refuses to countenance the possibility of any pushback by the EU27. It is hard to see why they would commit to an alternative that would require trusting the UK's future intent (maintaining alignment) while ignoring the legal reality (the ability to diverge at will). The issue of the Irish border has led many remainers to imagine that BINO is inevitable. Here is Simon Wren-Lewis: "The need to avoid a hard border in Ireland, now accepted by the UK government, dictates that we stay in the Customs Union (CU) and at least part of the Single Market (SM). That is what the UK government signed up to in December, without apparently realising what it had done. The only alternative, which is to take the deal offered by the EU for Northern Ireland and have a border in the Irish Sea, is not politically acceptable to the Prime Minister and many in parliament."

This interpretation assumes that an Irish Sea border is a non-starter, but is that necessarily so? While alienating the DUP would obviously spell the end for May's current administration, unionism is no longer an article of faith for her party. The Conservatives stopped being explicitly unionist under John Major when the Downing Street Declaration of 1993 stated that the British government had no "selfish strategic or economic" interest in Northern Ireland. The die-in-a-ditch unionists on the Tory benches are few in number and largely overlap with the Brexit ultras who must necessarily be defeated if any form of soft Brexit is to succeed. With the exception of a handful of eccentrics like Kate Hoey, I suspect Labour would have few qualms about accepting a separate deal for Northern Ireland based on the Customs Union and the Single Market for goods, as proposed by the EU27. Its concerns over EU constraints on nationalisation and investment are minimal outside the Single Market for services, and they would have less salience in a region where much of the infrastructure (e.g. gas, electricity, transport) is already integrated on an island-wide basis for simple reasons of geography.

Wren-Lewis argues that the EU27 might be persuaded to allow the entirety of the UK to remain within the Customs Union and a limited Single Market (without Freedom of Movement), but his case heavily depends on two assumptions: that the EU27 could be persuaded to agree to an arrangement that many of its members would consider to be preferential treatment for a non-member, and that the UK government could not accept special treatment for Northern Ireland alone. To this end he is as guilty of cakeism as anyone else: "[Theresa May] needs to impress on the EU, face to face, that a border in the Irish Sea is not possible, and that therefore the UK is also special in that particular sense". A border in the Irish Sea is possible, and arguably desirable given that in a post-Brexit world a new customs regime will have to be implemented anyway. A regime based on port access to Great Britain will be a lot easier to implement and manage than one with the cumbersome addition of a land border on the island of Ireland. One issue among many that the Chequers' statement avoids mentioning is that of smuggling. Given that the Facilitated Customs Arrangement assumes differential tariffs, the scope for illegal arbitrage will be huge, not just in Northern Ireland but across the UK as a whole.

The EU27 aren't going to jeopardise the integrity of the Single Market, and nor is there any reason to believe that they will be attracted to "creating at enormous expense, in unknown timescales and with unknown efficacy a customs system to replicate something that already exists and works". They will make an exception for the special circumstances of the region of Northern Ireland, and they will fudge agreements with countries whose ultimate trajectory is assumed to be greater integration, such as Ukraine, or those who have been held up on the road, such as Switzerland, but they won't set a country-level precedent for a state whose trajectory is beyond the exit. To do so would change the EU's dynamic from one of ever closer union to one of ever greater diversification, and that simply isn't going to happen. Special treatment for problematic regions is part of the grammar of the EU, and member states can exercise opt-outs in many areas, but compromising the Single Market calls the existence of the EU into question. While some Brexiteers might insincerely pine for the simplicity of the EEC, the EU27 have no wish to turn the clock back a quarter of a century and call time on the Maastricht project.

As has been clear for almost a year, Northern Ireland is the sticking point: "unless the UK government can get the backstop through Westminster, the UK will go over the cliff edge in March next year". I believe the DUP's opposition to a hard border is insincere and that they would be happy with a hard Brexit that would help undermine the Good Friday Agreement. This would be deeply unpopular in Northern Ireland, so the DUP are obliged to mask their real intent. Brexit in name only would give them the justification to bring the government down, but they would never do anything to facilitate a Corbyn administration, so their pressure is more likely to be indirect - i.e. encouraging a Tory coup once May is perceived to have compromised on her already soft position under pressure from the EU to implement the backstop in full or even to commit to staying in the Customs Union for the UK as a whole (as Tony Connelly puts it, May is "tortuously, yet deliberately, inching her government along the spectrum, away from Canada and towards Norway"). Their reaction in the next few days will arguably be more crucial to May's ability to go on than any number of coded speeches and uncoded briefings by Boris Johnson, though I suspect they may keep their powder dry for a while yet.

The Brexit ultras have frequently given the impression that they are unwilling to strike - to stick the knife in - but I don't think, contrary to many centrist commentators crowing over the Chequers' drama, that this is because they lack an alternative plan. They have a plan: to exit the EU without a deal and then let market forces dictate future trade agreements. The problem is that this is simply too terrifying for most of the Tory party in the Commons to accept. The ultras appear to have come round to a position in which they have invested their hope in the intransigence of the EU27: anticipating either that May will be forced to accept BINO, which will prompt a popular backlash, or that she will be so frustrated by the other side that she will talk herself into a no-deal outcome. The resignation of Davis and the junior minister Steve Baker is probably not the harbinger of a coup but a message to May that she has gone too far already in trying to meet the EU27 halfway. Johnson and Gove will probably stay on board but with the understanding that further compromise is unacceptable. The current position will be further watered-down and the possibility of an agreement with the EU will recede. Meanwhile, the DUP will smirk.

Update at 18:50 on Monday, the 9th: Johnson resigned as Foreign Secretary this afternoon, but I don't get the sense that a leadership challenge is imminent, though that could well change over the course of the week. Even if there are further ministerial resignations, the aim is more likely to be to constrain Theresa May rather than unseat her, thereby ensuring that a deal with the EU27 becomes all but impossible. I think she'll only face a challenge if she further compromises and we end up with BINO, but her strategy appears to be to delay and obscure this inevitability till the last possible moment.


  1. Ben Philliskirk9 July 2018 at 15:39

    I suspect after the events of the last 24 hours we will be having another referendum or general election before the final decision on Brexit is made.

  2. I might be wrong, but doesn't the keep-May option fall because there is no Tory option that will get a majority in parliament - assuming the ultras back up their words with votes (ha, ha, ha). So no significant Brexit legislation can pass, even with rebel Labour votes. I guess unless she can peel away some Blairites, hence the presentation this afternoon, but that seems to have been met (rightly) with mockery.

    I mean I know that the Tories have take brazen insouciance to public ridicule to new heights, but can May survive as PM in that situation?

    1. In theory, BINO would satisfy a majority of Tory MPs and the great bulk of Labour, but the latter will probably find grounds to object, either outflanking May by saying she has failed to honour the referendum result or suggesting that the gains are now too paltry to justify proceeding with Brexit without a reset of the A50 clock and a new government.

      Of course, the centrists in Labour may then insist on "country before party" and vote with May (briefly entertaining the hope of a political reconfiguration leading to a new Macronist party), but I suspect they will turn out to be too few in number because of a) genuine doubts over BINO (i.e. holding out for a 2nd referendum), b) residual party loyalty and c) that the Tory ultras (and DUP) will offset their impact.

      So, I think you're right: there is no deal that is likely to command majority support while we have a minority Tory administration. The logical solution to this conundrum would be a Labour government that could cut a "better" deal (i.e. less damaging than no-deal and more consistent with the referendum than BINO) centred on an Irish Sea border, de facto GB membership of the CU, and a limited services FTA.

      However, there is no obvious route to a change in government while the Tory ultras think they can get to March 2019 without a deal and while the DUP think they can blame a no-deal outcome on the EU generally and the RoI specifically. May would probably resign at that point, having become the most unpopular PM in history (hated by leavers for her attempt at BINO and by remainers for delivering a hard Brexit), which would open the door for a new Tory leader willing to extol the opportunities. Johnson may have his day yet.

    2. Yes, I realised last night that I've been underestimating the ultras. They're just waiting for the timeout to happen with no deal and parliamentary sovereignty to kick in. So they are prepared to do anything that doesn't affect the timetable. So May hobbling on is not a problem for them. The media are more interested in the psychodrama. Ordinarily you'd expect business to have a quiet word with the back room of the Tories, but do they have the leverage any more? If not then do we just lurch from one crisis and missed deadline to another until March?

    3. We've been lurching from one crisis to another and missing deadlines since March 2017, so I doubt it will change much from here on in.