July 20, 2018
Why preparations for no-deal Brexit are a positive development
The fact that both sides in the Brexit negotiations are preparing for a no-deal scenarios gives us hope. This may sound surprising at first, but in a negotiation the certainty that no-one is bluffing is a necessary prerequisite for both sides to strike a deal, and for such a deal to be ratified. We still believe that a deal is the most likely scenario but, if it happens, it will happen at the last minute - or beyond.
The Guardian reports this morning that Theresa May will today reassert the position that she would never accept a customs border inside the UK. In doing do, she reiterates the content of the recently agreed amendment in the Commons. We think this is a genuinely unsurpassable red line. We also agree with her that no British prime minister would ever accept such a border, and also that it would be a violation of the Belfast Agreement just as a hard border inside Ireland would be. This point, we think, is not sufficiently appreciated in the EU.
The Times reports further that the UK government will step up its preparations for a no-deal Brexit, with a regular series of public briefings about the impact of leaving the EU without an agreement. Consumers and companies will be given detailed advice in weekly dispatches from next week onwards. Internally, the UK government has prepared 70 technical notes on no-deal contingencies, which will be released over the next months.
What is the politics of a no-deal Brexit? We keep hearing commentators who assert that parliament will never vote for it. These commentators seem to be unaware of the rather limited options parliament has to prevent a no-deal Brexit. Parliament cannot impose an extension of the Article 50 deadline. It may at most force the government to ask for it. The EU would have to agree, unanimously, and it already laid out the limited sets of conditions under which it would do so. Parliament can instruct the government to change its negotiating mandate, or it can pass a vote of no-confidence which in turn may trigger new elections. It could legislate for a second referendum, but it is far from clear that the EU will be a colluding partner in this.
One should also not underestimate the potential political attraction of a no-deal Brexit. It might unite the Conservative Party, as Fraser Nelson writes in the Daily Telegraph this morning. There may be no parliamentary majority for May's Chequers plan right now, but a rejection of her plan by the EU could well lead to an expression of indignation in the UK parliament, and it might tip the balance.
As Chris Giles argues in a comment in the FT, there is still a path towards an agreement, despite the amendment that made a customs border inside the UK illegal. His idea is to separate the customs union from the VAT administrative system and the single-market laws. The whole of the UK would piggy-back on the Northern Irish backstop and stay inside the customs union, but the mainland would be opting out of the EU’s VAT system and the single-market laws. This arrangement would technically fulfil the requirement of no customs border inside the Irish Sea. It would push all the border friction on to the Dover/Calais border, which is a big hassle and clearly not sustainable, but a possible stop-gap.