Article 50, Boris Johnson, Brexit, Customs Union, Michel Barnier, Single Market

Britain in a Brexit “Black Hole”

This blogpost was written on Sunday morning March 31st 2019.

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Today, Sunday, March 31st, two days after the UK should have the left the European Union, it appears to have fallen into a Brexit “Black Hole”, unable to leave on agreed terms but also not wanting to leave with “no deal”.

This is what happens when you run a referendum on something as open-ended as “Let’s leave the EU” without having any idea what that might mean in practice. Triggering the two year’s Art50 notice was, as we have written before, like selling the house and agreeing a quit date without having decided beforehand as a family where you are going to live in the future.

At best, you might end up renting your old house back from the new owner. At worst, you find yourself out on the street, homeless. No matter what you decide, your end state will be worse than where you are now. No wonder the family can’t agree on anything.

Following Friday’s vote in the House of Commons which saw the Withdrawal Agreement negotiated between the EU and the UK again defeated, this time by 344 votes to 286, the UK is now scheduled to leave the EU on April 12th without an agreement.

A no-deal Brexit looms. Were this to happen then, from April 13th, the UK would be completely outside the scope of EU law, with all that that implies.

The very real possibility of this happening is not to be underestimated. In fact, it will take some considerable effort to ensure that it does not happen. Sometimes, you just run out of road. Leaving on April 12 with no agreement is now the legal default position. It will take a positive decision by parliament to pursue another course of action to prevent that happening.

As I write this briefing, the UK press is reporting that over 170 Conservative MPs, including cabinet ministers, have written a letter demanding that the UK leave the EU on April 12, or shortly thereafter, with or without a deal. Which shows just how difficult it will be for the UK to get out of the black hole in which it finds itself. There are no longer any easy options.

So, if there are no easy options what exactly are the options for the UK now in play?

First option: the Commons could decide, at this 11th hour, to finally accept the Withdrawal Agreement and the related Political Declaration. Given the votes so far, this seems unlikely. But in politics, never say never.

Even at this late stage, if the UK votes before April 12 to accept the Withdrawal Agreement, then the EU has already said that it would be given until May 22 to put the necessary measures in place to allow Brexit to go ahead in an orderly fashion. In that case, the transition arrangements provided for in the Withdrawal Agreement would come into effect. “Transition” would last until December 31, 2020, but this could be extended until December 2022. During transition the UK would be a de facto member of the EU, applying and following all EU laws, but it would have no involvement in EU decision making.

The EU has repeatedly said that while the Withdrawal Agreement is “locked” and cannot be reopened, there is room for flexibility in the “Political Declaration” which sets out the framework for discussions on the future relationship between the EU and the UK after the UK has left.

During the transition the substance of the future relationship between the EU and the UK would be negotiated. Many experts, however, have pointed out that given the range of issues that have to be discussed and the complexities involved even the 2022 end-date of the transition period may not afford sufficient time for a deal to be completed.

The Political Declaration as it stands today reflects the “red-lines” Theresa May drew at the start of the Brexit process some two years ago. She made it clear that, for her, Brexit meant leaving the EU’s customs union and single market, ending the free movement of citizens between the EU and the UK, and ensuring that the UK was no longer subject to the jurisdiction of the European Court.

At the same time; she also indicated that the UK wanted an agreement with the EU that more or less gave it all of the benefits of EU membership without it actually being a member and so having none of the obligations that membership involved. Such a deal was never going to be on the table.

Given May’s red-lines the EU has said that the best that would be on offer to the UK in the future would be a free trade agreement, somewhat similar to that agreed between the EU and Canada. While such a minimalist deal would suit the Brexit ultras who want a “clean break” with the EU, many MPs, and the overwhelming majority of the business community, see such an approach as extremely damaging to the UK’s economy which is deeply integrated into the wider European economy and cannot be uncoupled overnight.

There are two strands of opposition to the Withdrawal Agreement and the accompanying Political Declaration.

The ultra-Brexiteers: mostly to be found on the hard-right of the Conservative Party, object to it because, they argue, the “backstop”, designed to prevent border infrastructure in Ireland, has the potential to lock the UK into a never-ending customs union with the EU. As such, it dashed their dreams of the UK being free to negotiate trade agreements across the world in its own right.

It is worth noting that many of those on the hard Brexit wing have little or no business experience, having lived the best part of their lives inside the Westminster political/media bubble. This has not prevented them from telling businesses that they know better than the people actually managing businesses what is best for them. (This is also true of most of Labour’s front bench).

However, the bulk of MPs who reject the Withdrawal Agreement/Political Declaration and who are nearly all to be found on the Opposition benches, do so because the Declaration fails to set out in detail the nature of the future economic relationship between the UK and the EU. The EU has repeatedly made it clear, as noted above, that it is open to rewriting the Declaration if the UK changes or abandons May’s red-lines. This rewriting could be done quickly, in days at a push.

So, option two could be for the Commons to vote for customs union and/or single market membership to be included in the government’s negotiating mandate when it comes to discussions on the future relationship between the EU and the UK.  The Withdrawal Agreement stays as it is, but the future possibilities are opened up considerably. This could happen tomorrow, Monday, when the Commons again votes on several motions on post-Brexit options.

A further wrinkle could be if the Commons voted to rewrite the Declaration but also added that the final deal between the EU and the UK, to be negotiated during the transition period, had to be endorsed by a referendum, with re-joining the EU as the alternative option.

If the Political Declaration was to be rewritten along these lines, then the Withdraw Agreement might be voted through by the Commons and the UK would leave the EU on May 22 next.

A third option, or possibility would be for the Commons simply to vote to revoke the Article 50 notice and to inform the EU that the UK was staying. The European Court has ruled that the UK can do this unilaterally. This, however, would have to be a decision to cancel Brexit entirely. Revoking the A50 notice is not akin to a sports “time out”, buying time while strategy and tactics are reassessed.

A majority of the members of the House of Commons would probably like to go down this road and cancel Brexit entirely. Given, however, the “sacred” status that the “will of the people” as expressed in the 2016 referendum has assumed in UK politics, most of them would probably back off doing so. Further, the pro-Brexit leadership of the Labour Party is a major obstacle to such a course of action.

I suspect that if the UK did try to revoke the Article 50 notice the EU would demand a legally enforceable commitment that this ended the mandate of the 2016 referendum and that the UK government no longer had the power to simply re-serve the notice at any time it chose. This would be an extremely difficult ask of a Conservative government.

The fourth scenario is one in which the Commons fails to adopt the Withdrawal Agreement/Political declaration, whether as currently written, or rewritten as described above. In such a scenario to avoid crashing out without an agreement the UK would have to ask the EU for an extension of the Article 50 two-year timeline.

Many in the UK seem to believe that they only have to ask for such an extension for the EU to automatically grant it. This seems to us to be very far from the case. The EU would want to know the reason for the extension. “We need an extension to kick the can around for another nine months or a year”, as former Prime Minister, Gordon Brown, has suggested, would not cut it. The extension would have to be needed to facilitate a major event that could change the UK’s approach to Brexit completely, such as another referendum or a general election.

The EU has already made it clear that if any extension was to be granted then the UK would have to hold elections for the EU Parliament in May. The April 12 deadline was drawn up with this in mind as it is the last date by which those elections can be organised in the UK.

While the holding of European Parliament elections in the UK would be politically highly charged, the real concern for the EU of continued UK membership during an extended A50 notice period would be the behaviour of the UK in EU decision making bodies during this time.

Would the UK seek to block policy and personnel decisions as leverage in its on-going exit negotiations? Remember, as we have pointed out before, later this year the EU are due to appoint a new EU Commission president and the UK as a continuing member would have a veto on any such appointment.

Such concerns would become even more heightened if Theresa May, who will be ousted as prime minister in the very near future, was to be replaced by a hardline Brexiteer. Can’t you just see the UK tabloid headlines:

“GOTCHA, says BoJo to Barnier.

PM Boris vetoes Brexit-nemesis Barnier as next EU Commission President”.

I don’t know any business which would allow an extremely disgruntled employee who has announced that they are leaving because the hate the company to stay in a decision-making role during their notice period. Think of the damage they could do. They would be put on gardening leave immediately.

So, this is where we seem to be as I write. Then again, who knows what may happen in the House of Commons during the coming week.

Brexit is a tale of two cities, Brussels and London. From the time the UK voted narrowly in June 2016 to leave, the EU has been consistent in its approach. Fix the exit terms in the legally binding Withdrawal Agreement and sketch out the terms of the future relationship in the aspirational Political Declaration.

Once the UK has left the EU then the fine print of the future relationship can be negotiated in granular detail. The transition arrangement was crafted to facilitate this. It allows the UK to glide out of full membership into whatever future arrangement is eventually negotiated.

From the start, the EU made it clear that it was not going to negotiate a future economic and political relationship with the UK while it still remained a member.

Brussels sees what it has offered the UK, which was not expelled but freely choose to leave, as entirely reasonable from its point of view.

In London, the ultra-Brexiteers in parliament see what is on offer as not “Brexity” enough. But the bulk of members of parliament know that what will be on offer in the future will be a deal that is a lot worse than what the UK has now as an EU member.

Because this is what Brexit is. A demand by the UK for the worsening of the terms of trade between the UK and the EU. By definition, Brexit will create bureaucratic borders and paper mountains where none now exist. Billions will be spent on compliance instead of those billions being spent on growing businesses and creating jobs.

New research by CER shows that already the UK economy is 2.5 per cent smaller than it would be if Britain had voted to remain in the European Union. The knock-on hit to the public finances is £19 billion per annum – or £360 million a week. And Brexit hasn’t happened yet.

This is the choice the UK has made. It just does not know how to live with the consequences of that choice. As Nick Cohen puts it in today’s Observer:

[this is] Britain this weekend – without a coherent government to rule, a competent opposition to take over or a clue how it will it get through the next week.

3 thoughts on “Britain in a Brexit “Black Hole”

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