Brexit: Deal or No Deal

by Razi Rahman | 26th November 2018

Following this weekend’s European Council meeting, the Prime Minister and EU Heads of Government emerged with the same message: the agreed deal involved compromises on both sides, but it was the best deal available for both the UK and the EU. In carefully choreographed comments, they dutifully declared that there would be no renegotiation and no plan B.

It was left to the President of Lithuania, Dalia Grybauskaitė, to inject some political reality voicing what many were privately thinking: “It is far from over.  Anything could happen.”  With all of the opposition parties and a number of Conservative MPs set to vote against the deal, the President of Lithuania outlined four possible outcomes should the House of Commons reject the agreed deal: a renegotiation; a People’s Vote; a general election; or a no deal scenario.

Yet Mrs May is not giving up just yet.  Today she embarks on a fortnight of intensive activity designed to persuade people that her deal is the right deal and win over wavering MPs through a mix of direct appeal and indirect pressure.  A packed grid of speeches, articles and interventions has been prepared by No10 strategists, culminating in the meaningful vote, probably on 11 or 12 December.  Expect the Prime Minister to make an economic argument focussing on the risk of no deal and a political argument around the risk of ending up with no Brexit at all.  This activity and direct pressure from the Government whips is likely to bring some Conservative MPs back into the Prime Minister’s fold.  Yet these efforts are unlikely to save the government from defeat.  So where do we go then?

In recent weeks commentators have suggested that the government expects the financial markets to react badly to a defeat on the deal and in such an environment put the deal before MPs a second time in the hope that they will reconsider.  This is the so-called TARP scenario, where the House of Representatives in 2008 initially rejected the economic bailout before approving it a couple of days later.  However, what many forget now is that initial vote in the US Congress was a real shock which led to a profound market and political reaction, whereas here people are expecting the Brexit deal to be voted down and is in effect “priced in”.

Having voted against the deal, there must be some doubt that MPs will just change their mind a second time without some (at least cosmetic) change to the Withdrawal Agreement.  Could the fact that the Government is scheduling the Parliamentary vote just before a planned European Council meeting be an indication that they expect Mrs May to return to Brussels with demands for changes in order to get it through the UK Parliament?  And if she did, are there areas (perhaps already identified) where the EU could make concessions or will President Macron and others refuse to countenance such changes?  Negotiations will be on a knife-edge and events at Salzburg show that mis-steps can be made, even where the parties don’t intend it.

If the government finds itself in a position where winning a “meaningful vote” in Parliament is out of reach, no-deal comes into view.  The real fear must be that there is no parliamentary majority for any particular outcome and the country ends up by default on a white-knuckle no deal rollercoaster.  This cannot be ruled out.  Yet the last few days have shown that most MPs, including a number in the Cabinet, are prepared to consider almost anything other than this.   In this scenario, Labour would push for a General Election, but would be unlikely to achieve it as the last thing Conservative and DUP MPs would want is to risk Jeremy Corbyn ending up in Downing Street.

This would lead to two possible routes out of the crisis – EEA/EFTA membership or a People’s Vote.  Both have their challenges – the former would require continued freedom of movement, the latter agreement on the question to be asked, timetable (Article 50 would have to be extended) and details such as spending limits.

In this scenario, it may be the Labour frontbench as much as the Cabinet that determines the UK’s future by deciding which option to back and putting together a winning coalition with other Opposition MPs and pro-European Tories.

Yet amidst all this uncertainty, one thing appears certain.  This country’s sometimes fractious relationship with its continental cousins will not be resolved in the coming days or weeks.  For even if the terms of withdrawal are agreed by 29 March, the most difficult discussions and decisions – on our future relationship – are yet to come.

 

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About the Author

Razi Rahman

rrahman@maitland.co.uk

Razi Rahman is Partner and Head of Political of Maitland/AMO and brings to the team more than 20 years of experience working in politics, government and communications

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