Brexit: The endgame

Simon Wren-Lewis 05 July 2018

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First posted on: 

mainly macro, 3 July 2018

The logic of the Brexit project’s demise has been there for all to see as soon as it was clear the EU would stand by Ireland’s wish for no border. The need to avoid a hard border in Ireland, now accepted by the UK government, dictates that we stay in the Customs Union and at least part of the Single Market. 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.

The EU have now made it clear that the deal offered to Northern Ireland (staying in the Single Market for goods without freedom of movement) is not available to the UK as a whole. It is a special deal recognising the unique problems of Northern Ireland, and cannot be something offered to any member state that decides to leave. The political reason is obvious, as such a deal might become attractive to populist politicians in other EU states.

That is the EU’s position, but the UK has not even tried to test it in negotiations, because it has spent all the time since the December agreement arguing with itself. The Brexiters, who include our chief negotiator, have with the help of their Legatum helpers spent their time making various proposals, each more fantastic than the last. Their final argument is that we should leave everything to the last minute because only at the last minute will the EU cave and offer us complete access to the Single Market on whatever terms we like. Perhaps some really believe that, but there is an alternative interpretation of what the Brexiters are doing. They are trying to delay because that way they may get their own favoured outcome of no deal by default. In short, by intent or not, they are trying to sabotage a Brexit deal.

That is not the only reason why Theresa May has to finally stop appeasing the Brexiters and formally make the proposal to the EU of extending the Northern Ireland deal to the rest of the UK. She 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. She also needs to argue that she needs to be able to go back to the people with something better than ‘Brexit in name only’ (BINO), because BINO was not what most Leavers voted for. It might lead to, for example, the UK having something like the Swiss option of favouring (in a very small way) local markets for certain types of jobs. The EU of course may not be in any mood to be kind to a government and prime minister that has for so long been out of touch with reality, but just in case they are she needs to give them time to be generously creative on her behalf. 

To do all this she has to finally break with the Brexiters. I have seen it said that this will bring her down – it will not. As the Brexiters are a minority she would win any vote of no confidence among her party. Would they take the ultimate step of supporting in parliament a vote of no confidence in the government? With many of the Brexiter leaders having ambitions to succeed May, I doubt it. Partly as a result, I suspect all most will do is register their dissent, and say forever more that if only the UK had hung on a bit longer the EU would have caved. It will also be difficult for some Brexiters in the cabinet to stay there, but somehow I don’t think that will worry May too much. The people who will go for her in a big way will be the Brexit press, but right now as far as Brexit is concerned they are paper tigers.

The reason why May needs to dress the deal up as something it is not (or persuade the EU to leave the door open to non-BINO options until after we leave the EU) is that otherwise everyone will ask what is the point of BINO: Brexit in name only. Like transition, it will be ‘pay, obey but no say’, and to all intents and purposes freedom of movement will remain. The Brexiters will be the first to make that point until perhaps they realise it might jeopardise Brexit itself. So May has to pretend we got something worth leaving for. As I wrote in January, Brexit will end not with a bang but a whimper. 

If she does manage to do all this, Labour will find themselves in a very difficult position. In the days when they were triangulating, I said it was crucial that they always stayed the Remain side of the Conservatives to keep their members and voters on board. But now they have nailed their colours to the wall: stay in the Customs Union but leave the Single Market because of its position on state aid and maybe to avoid freedom of movement. It is a position that they can get away with so long as the Conservatives are still negotiating with themselves. But if May has to agree to stay in the Single Market to get a deal, two problems with Labour’s position become clear.

First, how does Labour’s position prevent a hard border in Ireland? If the EU will not allow the UK to be in a single market for goods only, that means the Irish border dictates BINO. If May has finally recognised reality, why haven’t Labour? An argument that Corbyn could somehow achieve a settlement that May could not is not completely stupid, but I doubt it will play well. Second, they will now be arguing for a harder Brexit than May, which the majority of their members and voters will not like. You could even see the Brexiters joining with Labour in voting against what is essentially a BINO final deal. So if May is forced to accept staying in the complete Single Market as part of the deal, expect Labour to change their position or suffer some serious political damage.

If things go as I outline here, there will be a short period where people who are not Remainers will rightly ask: why are we doing this if the only substantial thing we have achieved is to have no say on how the budget we pay into is spent, and how the rules and regulations we have to obey are changed? But our political class will not draw the obvious implications of that. A true statesman of a prime minister would say I did the best I could, but for the sake of peace in Ireland and the unity of the UK Brexit cannot happen, and so the best thing for the UK to do is to remain in the EU. And if I then ask why that does not happen in the UK, my best answer is because of an ideologically driven right-wing press. Their great achievement will have been to campaign for a Brexit that gives sovereignty back to the people which ends up doing the opposite.

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Topics:  Europe's nations and regions Politics and economics

Tags:  Brexit, Theresa May, EU, Northern Ireland

Professor, Economics Department and Merton College, Oxford

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