May 09, 2018
A moment of truth in the Brexit talks
The Brexit process is going through one of its most interesting phase right now, and we think there is now a potential for a fundamental change in the debate on the future relationship. We don't care very much for the antics of Boris Johnson and the other pro-Brexit Tory rebels. They don't have a majority to topple Theresa May, nor do they have a majority in the House of Commons in favour of a hard Brexit.
In fact the very opposite is likely. The Commons might force the government to reconsider its position on both the customs union and the single market, after yesterday's vote in the House of Lords in favour of the UK remaining in the EEA. The Lords are not relevant themselves. But the vote matters procedurally in that the amendment will now go to the House of Commons. It is possible that the government might face defeat there as well. What is also interesting is the sheer scale of the rebellion among Labour peers, 83 of whom defied the party line against supporting the EEA amendment. Could this happen in the Commons as well?
We think this is unlikely, unless Jeremy Corbyn changes his mind on the EEA in view of the mounting pressure inside his party. There is probably now a majority in favour of the UK negotiating a customs union agreement with the EU - an amendment to the trade bill - but this amendment is unlikely to be voted on for quite some time. The EEA amendment, however, is more urgent.
We have argued ever since the Brexit referendum that the result of the vote should be respected, but that the EEA is the superior Brexit option because it allows a much broader trading relationship with the EU than a mere customs union. This was also the key argument used by Lord Alli, the Labour peer who proposed the amendment in the Lords yesterday.
In a separate vote, the House of Lords approved an amendment to remove March 29 as a binding exit date. This amendment is largely symbolic as the EU has already made clear that it will not extend the Article 50 timetable, except to allow extra time for ratification should this be needed. The main difficulty with all the amendments on the customs union and the EEA is that they have no direct legal effect. The UK parliament is not in a position to amend Article 50 TEU, nor does it propose to undo the Article 50 notification that has triggered the process. The UK Parliament is thus not in a position to force the outcome. All it can do is to influence the UK government's negotiating position. The trouble is the closer we get to the final deal, the less impact this will have. The importance of the Lords' amendment therefore lies with the timetable. If this comes to the Commons before the June summit, as it probably will, May will probably be forced to amend her negotiating mandate. Our best guess would be for a second transitional phase that would lock the UK into an EEA-type arrangement for a limited period after 2020.