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April 03, 2019

Game on

Brexit has now literally reached the moment of crisis in the classical Greek sense of the word: a turning point. This can now go two ways: either Theresa May and Jeremy Corbyn reach a compromise or, failing that, the UK can still crash out of the EU without a deal. A new avenue has opened up, but the odds of no-deal Brexit are the same. 

The new situation leaves EU leaders no choice but to go along with it for now. We will know within a few days whether May and Corbyn can reach agreement, or whether this goes back to the House of Commons. The main constraints for both leaders is the enormous radicalisation in British politics. A majority of 14 out of 27 cabinet ministers are now in favour of a no-deal Brexit. And a YouGov poll has 44% of Brits in favour of a no-deal Brexit against 42% Remain - if this were to be the final trade-off. 

There have been no ministerial resignations yet, but the Tory party was clearly not a happy place last night. We thought this morning headline of the Daily Telegraph summed up the mood in the party right now: 

"Theresa May's cabinet signals support for no-deal - but she turns to Jeremy Corbyn for help."

And the usually-smug second-referendum supporters were also distinctly unhappy about the prospect of being sidelined by May and Corbyn.

On a technical level, the route forward is relatively straight-forward. As we have been arguing before, the solution lies in changing the political declaration. Andrew Duff has an interesting new proposal. The European Council could separate withdrawal agreement and political declaration, and agree to have the latter amended and finalised during the transition period. A customs union would be, in our view, a sensible framework for a discussion, but it is not an off-the-shelf solution that can be agreed between two party leaders at a meeting. Nor does it solve the Irish border backstop problem. So, if there is compromise, it will be more about procedure than concrete outcomes. 

The danger for May is that by pivoting towards the customs union May could lose more Tory MPs who supported her deal than Labour MPs who switch. It is not clear that, even if May and Corbyn were to agree on a compromise, it would find favour in the Commons. We assume it would.

This leaves us this morning with a similar set of choices as before: some version of a future relationship, based on the existing withdrawal agreement, versus a no-deal Brexit if this process falters. Both scenarios would be consistent with elections. No matter what happens now, May's government is likely to lose its majority. 

The important thing to remember is that May's priority is to secure Brexit, not for her successor to win an election. Herein lies a political opportunity for compromise. There is a clear but narrow path forward. And we don't think the Tory party is ready for an election at this point. Her hand is perhaps a little stronger than it would appear.

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April 03, 2019

Can someone please take the table off-the-table!

We marvel at the sheer illiteracy of the recurring idea to take no-deal off the table. It is legally impossible to do - since no-deal is the default. And it is politically impossible to do, since the EU rightly insists on a positive decision - be it acceptance of the deal or revocation. What is happening in the UK is that MPs want to revoke but don't dare do so publicly. They want this process to end in revocation, but without their fingerprints all over it. 

We received a good analysis from a UK official whose judgement on this process has been consistently reliable. We think it is worth quoting the analysis in full. Its overall conclusion is that the Cooper/Letwin bill and the indicative votes are going to lead nowhere:

"I do not really see the need for legislation when an affirmative motion would achieve the same end. I think this is a diversionary tactic after the indicative votes have all failed and Cooper/Letwin realised they weren’t going to get any majorities tomorrow either (why would they get one tomorrow having not gotten one yesterday?).

On my analysis of the situation, I think Speaker Bercow has totally disgraced his office and he is now openly using his powers as chair to facilitate a soft Brexit, and he is not applying the rules equally (preventing the government presenting the same motion twice, allowing remain back benchers to present the same motions over and over again – some of these amendments have been voted on five times now!).

Also I thought it was a pretty disgraceful spectacle of Nick Boles storming out of the Commons, crying, because not enough people voted for his motion. That really is the last thing anybody needs right now.

On the options that have all been rejected, I cannot see how any of them is even feasible. The second referendum has lost now several times and this view will only be reaffirmed when free voting is ended on any final motion and the Cabinet are whipped to vote against it. Common Market 2.0 is absolute sheer fantasy. Why would EFTA rewrite their own treaties to grant the UK a derogation? It also is predicated on the twin delusion of controlling migration and having a say in all trade policy, neither of which is going to happen.

The Customs Union doesn’t solve the Irish Border issue (you still need the backstop) and, again, Clarke and the other proponents still think a British vote on EU trade policy, as a non-member, is a goer."

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