Brexit Update 14th December 2018

By December 28, 2018 Brexit Updates

Top 3 developments

• EU rejects UK push for legal guarantee on backstop
• May baulks at meaningful vote, before facing ballot on her leadership
• ECJ rules that UK can unilaterally withdraw Article 50

UK Update

EU sends mixed signals on May’s push for backstop ‘legal guarantee’

European leaders have stated that there is “no room” for renegotiation on the withdrawal agreement. However, they are prepared to offer Theresa May assurances that the backstop would only be in place for a “short period” in order to quell the fears in Parliament of an indefinite backstop. Officials have begun working on language to assure the government that the EU has no intention of using the backstop to ‘trap’ Britain. They have initially, however, declined to offer any legal guarantee that would undermine the principle of the backstop, which will do little to reduce existing Conservative MP’s concerns over the longevity of the backstop, especially given the Attorney General’s analysis of the potential permanence of customs union membership. The most likely outcome of negotiations are likely to be a reforming of the non-legally binding political declaration offered by the UK and EU, or potentially a more strongly worded commitment by the EU Council on seeking a trade deal ahead of any backstop implementation. Brexiteers however fear that deadlock on a trade deal down the line make the implementation of the backstop almost inevitable.

May postpones the vote

The Prime Minister delayed the meaningful vote on the Brexit deal one day before it was due to take place. The U-turn also came three hours after the Environment Secretary, Michael Gove, stated that the vote was “100 per cent” going ahead on Tuesday, along with an announcement from the European Court of Justice that Britain could revoke Article 50 without permission from the 27 other EU states, thereby reversing Brexit.

Theresa May declared that there are ‘severe concerns’ from Parliament over the conditions of the backstop and that the vote will be delayed whilst she returns to Brussels to attempt to renegotiate and gain concessions. She refused to name a date for the postponed vote, even during shouts of “when?” rang out through the House of Commons. She has, however, hinted it would happen before the 21st January. The lack of a set date has caused tension within the House, and fears over the looming possibility of a no-deal Brexit as the March 29th deadline approaches!

May flew to the Hauge for talks with Dutch Premier Mark Rutte and then visited Angela Merkel in order to convince them to renegotiate. The EU27 have widely stated that there is “no room” to renegotiate and will only extend Article 50 to allow May more time to pass the deal through Parliament. Whitehall has already drawn up a clause that could be inserted into the agreement giving Britain the unilateral right to withdraw from the backstop and trigger “no deal”. This was never formally tabled in the negotiations but could be resurrected. Nigel Dodds stated that “the Prime Minister must come back with changes to the Withdrawal Agreement, including the backstop, or her deal will be voted down”.

May survives again…obviously

The negative reaction to the delayed vote on Monday triggered an influx of additional letters of no confidence to 1922 Committee Chair, Graham Brady. The 48 letters required to hold a confidence vote had been met on Tuesday night, Graham Brady announced Theresa May would face a vote on her leadership on Wednesday evening. May cancelled her trip to Dublin in order to remain in the Commons and fight her corner as Prime Minister, repeatedly arguing that she had delivered ‘the best deal for Britain’ and was committed to delivering Brexit on 29th March 2019. Addressing her own MPs ahead of the vote, she did give one concession, that she would step down as a leader of the Conservative Party before the next General Election.

May won the vote by 200 votes for compared to 117 votes against. As a result, she cannot be challenged as Conservative leader for at least another year. The no vote was significantly higher than initially expected, with more than a third declaring they no longer have confidence in her leadership. In a statement after the vote, May announced that she had listened to what those who voted against her had a to say and vowed to press on with her plan to win further reassurances from Europe before attempting to push her Brexit deal through the Commons.

It is hard to believe that any of the 117 MPs that voted against May will support the Brexit plan or will be converted in the remaining weeks before a vote. Moreover, there will inevitably be numerous MPs who, whilst they voted for May this week, will not necessarily support this bill. Labour and opposition parties, including the DUP are also highly certain to vote against the deal. With the European Court of Justice’s announcement that Britain could revoke Article 50, there has been an increased campaign within Parliament for a second referendum with a push for ‘a vote on Brexit reality, rather than a vote on Brexit fantasy’. Theresa May has repeatedly stated that she is committed to delivering Brexit, thereby staking her party’s reputation on delivering the result of the 2016 referendum. There have been suggestions that a potential Plan B would be a second referendum that does not include the option to remain in the EU. However, by doing this May does risk alienating the 48% of Conservative MPs who voted for remain.

Push for the UK to join CPTPP

New Zealand’s trade minister, David Parker, has said that the country is “really keen” to strengthen economic ties with the UK after Brexit, having “suffered as a consequence” of its first joining the European Economic Community in 1973. Shinzo Abe, Japan’s Prime Minister, and Scott Morrison, Australia’s Prime Minister, have also publicly stated their support for the UK joining the CPTPP. However, Parker emphasised that Britain must be “willing and able to agree high-quality terms” of the trade alliance in order to become a member. A senior diplomat has said that “the UK has to choose whether to plug in or not. This isn’t a bilateral negotiation…The UK cannot come and dictate.” There are various concerns from other members of the CPTPP that Britain would attempt to opt-out of certain conditions of the CPTPP if its relationship with the EU remained a positive one.

EU Update

Macron’s financial woes

French President Macron has sought to make concessions to the French public following a month of violent revolt against planned fuel tax hikes and the cost of living. In order to appease the public, Macron announced a €100 a month increase in the minimum wage without extra cost to employers, the removal of social charges and income tax on overtime payments, and the scrapping of a tax rise on poorer pensioners. He also apologised to the public during a televised address, stating that he had underestimated public anger and failed to grasp the distress of struggling families and individuals. However, Macron has not stated how he plans to fund the promised concessions, whilst the European Commission has voiced concern about the financial feasibility of the plans. It is likely they will come at a price, such as inflating the budget deficit, pushing up the national debt and ultimately failing to adhere to EU commitments of fiscal discipline. Italy is currently facing the ire of the European Commission over similar rises in spending commitments, although it is yet unclear what the future reaction of the Commission to Macron’s increases will be.

Italy caves in on EU budget demands

Rome has made a significant U-turn and has proposed cutting its planned budget deficit for 2019 to 2.04% from 2.4% of GDP. This marks the end of a two-month dispute between Italy and Brussels over the country’s budget. Much like President Macron, the Italian Prime Minister has provided no detail about how he will reduce the deficit, with the leaders of both coalition parties stating that their spending programmes would stay intact. However, the EU’s economy commissioner, Pierre Moscovici, stated that “it is a step in the right direction, but we are not there yet, there are still steps to be taken, perhaps on both sides”. This could cause a trouble for the eurozone if both Italy and Brussels cannot take further steps to reduce the budget concerns.

Upcoming Key Dates

 21st January: Final date expected for a ‘meaningful vote’ on the UK-EU Brexit Deal
 29th March 2019: UK planned exit from the European Union
 30th March 2019: UK planned transition period.
 31st December 2020: UK planned exit from the transition agreement.

 

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