Brexit Update 18th July 2019

By July 30, 2019 Brexit Updates

Top 3 developments

  • Margot James, the Government’s Digital Minister, resigned following her decision to vote against the Government on an amendment to the Northern Ireland (Executive Formation) Bill.
  • Stephen Barclay had declared the Withdrawal Agreement to be ‘dead’.
  • Ursula von der Leyen was officially confirmed as the next EU Commission President.

Leadership Update

Johnson Goes Pro(rogue)

With the leadership contest coming to a close next week, Parliament and the wider press have already assumed that Johnson will take the leadership position. There have been many reports about how Johnson will conduct himself as Prime Minister and how he will secure his Brexit promises, should he become the new leader of the Conservative Party. The consensus appears to be that Johnson himself will not become heavily involved in policy, unlike his predecessors May and Cameron, but rather delegate to his ministers and aides, giving them increased power.

Fears remain that Johnson could prorogue Parliament to move ahead with a no-deal Brexit, as Parliament have already overwhelmingly rejected a no deal. As Johnson has refused to rule out suspending the Commons to ensure the UK leaves on October 31, reports suggest that he could use his first Queen’s Speech to shut Parliament and prevent MPs blocking a no-deal Brexit. Frontbenchers such as Philip Hammond, the current Chancellor, and David Gauke, the Justice Secretary, have threatened to vote against the party during a vote of no confidence and to quit the Government in order to prevent a no deal. Additionally, MPs such as Dominic Grieve have tried, and failed, to pass several amendments through Parliament that would limit the Prime Minister’s power to bypass Parliament. However, an amendment to the Northern Ireland (Executive Formation) Bill was passed by the House of Commons today, by a majority of 41, which aims to block the new Prime Minister’s efforts to prorogue Parliament. Most notably, today, the Government’s Digital Minister, Margot James MP, resigned following her decision to vote against the Government, other Ministers are thought to have abstained the vote.

The numerous amendments within Parliament to block a no deal demonstrates the will within Parliament to remove such an option from the negotiation table with Brussels. Though the amendment does not make it impossible for the next Prime Minister to suspend Parliament, it does make it more difficult. Should the Prime Minister attempt to move forward with such a tactic, demonstrating a disregard for the views of Parliament, there will definitely be difficulties ahead and a vote of no confidence could become a possibility.

Lack of Luck for the Irish Backstop

The Conservative Leadership candidates have declared their red lines for their forthcoming Brexit renegotiation, during a debate on Monday. Both Boris Johnson and Jeremy Hunt have stated that they would not be willing to accept the Northern Ireland backstop, even if a time limit was set. The EU27 have stated that the only amendment that they would be willing to make to the Withdrawal Agreement and to the backstop would be to allow a time limit for one. However, this appears to have already been rejected by both candidates.

Opposition to the backstop within Parliament was one of the key reasons May’s deal was rejected three times, which ultimately forced her to resign as Prime Minister and leader of the Conservative Party. However, eliminating a hard border between Northern Ireland and providing frictionless trade was a crucial part of a 1998 peace deal that ended three decades of sectarian violence. It is an essential part of the Withdrawal Agreement from the EU side, as Ursula von der Leyen has reiterated this week, and therefore unlikely to be removed, increasing the chances of a no deal Brexit.

Power to the People

As members of the Conservative Party are electing a new leader of the Party, the winning candidate subsequently becomes the Prime Minster without being elected by the wider public. This then begs the question of whether the candidate will wait until 2022, when the next general election is scheduled for, or pursue the tactic of an earlier election whilst the opposition is still weak to attempt to increase the Government’s majority and solidify their position as Prime Minister. However, rumours in the press suggest that Boris Johnson will call a general election sooner rather than later, as senior allies of Johnson have reportedly commented that “there’s a desire to get this done while Corbyn is still around. Labour is utterly divided – Brexit is killing them. Labour is not in a fit state to fight a general election.”

Whilst Johnson has made it clear that he would not call a general election before the Brexit process is over, it is possible that he may call one immediately after, in order to secure a majority, whilst Labour is still a divided party and thus not a threatening opposition. Although, the public is clearly dissatisfied with the major political parties, there is logic in launching a general election, as this would provide Johnson with a mandate for his policy platform. Additionally, holding a general election earlier in his premiership would provide an opportunity to gain legitimacy  before being able to prove either way whether he can deliver on any of his existing promises, unless he is defeated in a vote of no confidence before the Brexit negotiations are complete.

Boris lays his Trump Card

In an attempt to make an instant mark as Prime Minister, Boris Johnson has announced that one of his main targets is to secure a post-Brexit trade deal with the US, committing to flying to the US within the first two months of becoming Prime Minister. Johnson has argued that by securing a trade deal with America, the UK “will be very quickly in the market for other deals”. Under plans being discussed by Johnson’s team he would strike a limited trade deal in “one area” of goods in time for 31st October, while he and Trump would then establish the broad outlines of a fully-fledged deal.

However, Liam Fox told Today on BBC Radio 4 this morning that undertaking any agreement before the UK left the EU would be in breach of international law. This is because the EU secures trade deals on behalf of its 28 members, and no individual country is able to make deals on their own behalf. Whilst the UK is planning to leave the EU in October, it would not be able to secure an individual trade deal before this time, without breaching international law. It is unclear whether these comments have an any impact on Johnson’s strategy, as it is likely he will pursue a closer relationship with the US, given his current favour with the President.

UK Update

Fifth time lucky

It emerged this week that the UK negotiating team had a particularly tough meeting with Brussels this week, with Brexit Secretary Steve Barclay reportedly telling Michel Barnier five times that the Withdrawal Agreement was ‘dead’. The EU have repeatedly outlined that the Withdrawal Agreement would not be re-opened, and both leadership candidates have suggested they would tweak the current deal to remove the backstop. Barclay’s claim therefore can be seen as a signal to Brussels that the current deal has no chance of passing through Parliament, and so the options they have are to either accept changes to this deal or face the potential of a no-deal Brexit.

It remains to be seen whether Barclay’s tactic was effective or not. His newfound toughness could be seen as a tactic to prove to Johnson or Hunt that he does have what it takes to lead these negotiations, and that he should keep his current job when the new PM comes in. But considering both candidates have outlined how they want to refresh the negotiating team, Barclay could end up being surplus to requirements.

When the Mogg rolls in

Jacob Rees-Mogg stuck his head above the parapet this week by disagreeing with the Chancellor’s claims that a no-deal Brexit could cost the economy £90bn, and instead argued that Brexit could instead contribute £80bn to the economy. Clearly there is quite a difference in opinion, and the £170bn discrepancy between the two individuals is monumental; a sum which is about the same level of Qatar’s total GDP in 2018!

It is very difficult to know which argument is correct, as both are predictive models that are hypothetical at best, but it does reveal the stark contrast in how the Treasury and other agencies such as the Office for Budget Responsibility (who today warned that no-deal could cause a recession) are completely at odds with Brexiteers about a no-deal Brexit. However, it does provide insight into why there are individuals who are enthusiastically pursuing a no-deal Brexit despite the warnings about its economic impact, because they simply don’t believe them. Given that the Treasury’s predictions of an immediate recession in the event of a leave vote in 2016 never materialised, it is unsurprising that Brexit supporters continue to view these forecasts with scepticism.

The real figure of the impact of a no-deal Brexit is most likely somewhere between the middle of these figures, but the huge contrast shows what happens when ideology mixes with economics. One of these two predictions is likely to be wrong by 10s of billions, and it muddies the waters of debate because how is an impartial observer supposed to make their mind up when they are hearing two such radically different ideas about the consequences of no-deal? The new Prime Minister will need to objectively assess both of these models and communicate to the UK which one is more plausible, as the public need to know some hard truths about the true impact of no-deal, especially if it is being used as a negotiating tactic.

Put one FTSE in front of the other

One of the more interesting stories this week was the report about a poll taken of FTSE 100 Chairmen about their Brexit predictions. Incredibly, 11 out of 17 believed that the UK would not leave the EU on the 31st October. Despite the hard rhetoric of Boris Johnson, the favourite to become the next PM, there is a distinct lack of confidence in the next Prime Minister taking the UK out by this date, nor rallying the country and Parliament around the prospect of a no-deal.

These are some of the most powerful people in the country, and usually have their ear very close to the ground about anything that could disrupt their business. It is likely that their understanding of the political climate is impeccable, and their judgement earns them millions of pounds a year, so this poll should not be brushed aside as more gloom from business.

Who rules the roost?

Senior civil servants in Northern Ireland have outlined fears that direct rule will be imposed in Northern Ireland within the next three months to see through Brexit. There is currently no executive in the Northern Ireland Assembly, and hasn’t been since January 2017 when the partnership between the DUP and Sinn Fein collapsed. There are fears that judgements over security and the economy would become far more complex and political if Brexit happens, and that executive decisions will need to be made.

Civil servants are already highlighting that they are having to make decisions which elected representatives should be making, and considering they are supposed to be impartial, they will not be able to make the big decisions that will face Northern Ireland after Brexit, especially if we leave without a deal. Direct rule of Northern Ireland will raise fears that the tensions that have bubbled under the surface since the Troubles will rise up again and reopen old wounds so UK policymakers will want to avoid this at all costs.

EU Update

Leyen of the Land

Ursula von der Leyen was officially confirmed as the next EU Commission President this week after the European Parliament narrowly approved her nomination by just nine votes. However, despite being endorsed by both Emmanuel Macron and Angela Merkel, the tight vote shows that there is not widespread enthusiasm for von der Leyen. It is common knowledge that she is a compromise candidate. She was no one’s first choice, and was only chosen because all the preferred candidates were too controversial for one EU sect or another.

Another hesitation is that she has never been a frontline European leader and is about to become the most public leader of Europe. Although she has been a trusted Lieutenant for Merkel for almost 15 years, and no one doubts her competence and intelligence, there are questions about her political character. She will be the figurehead of the EU, a superpower lining up against Russia, China and the US. Does she have the grit to lead the EU against the monumental challenges it will face in the coming years?

In order to secure her authority, her first order of business will be to carve her own identity as Commission President. This will mean escaping the shadow of the queenmakers of Merkel and Macron, which could spell bad news for those who support Macron’s ambitions for sweeping, pan-European reforms. But she is a committed federalist, a supporter of a ‘United States of Europe’ with its own army and the hard power to match other world superpowers. If she is committed to being a maker of big history, this could be the political avenue she pursues.

In the meantime, however, she has the small task of Brexit to deal with. If she is lucky the UK would have left the EU on the same day that she takes office, but she also faces the possibility of either granting the UK another extension or facing the consequences of a no-deal Brexit on the bloc. There will be no honeymoon period for her presidency that’s for sure.

Upcoming Key Dates

  • 23rd July: Leader of Conservative Party is elected.
  • 30th September: Jeremy Hunt’s cut off date for a realistic deal.
  • 17th October: EU October Summit
  • 31st October: Current Brexit Deadline.

 

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