Brexit Update 8th March 2019

By March 20, 2019Brexit Updates

Top 3 developments 

  • Geoffrey Cox fails to gain notable concessions from the EU ahead of the second meaningful vote next week.
  • Parliament split over whether to announce tariff removals before a no-deal is confirmed.
  • Government attempts to secure favour with Labour MPs by increasing funding to struggling communities.

UK Update

If at first you don’t succeed…

The Attorney General, Geoffrey Cox, has been in Brussels this week as part of the Government’s efforts to renegotiate the Irish backstop. Cox’s main aim has been to secure legal assurances that would appease Parliament in time for the meaningful vote on Tuesday. Whilst the United Kingdom has been softening its position on the backstop, the bloc insists that the 585-page exit agreement cannot be rewritten and have suggested that the solutions offered by Cox contradict the idea of trade movement in Ireland.

Cox put forward two ideas to break the deadlock. One was to extend the scope of the Withdrawal Agreement’s “arbitration panel,” allowing it to rule on whether both sides are acting fairly in their efforts to cut a future trade deal — and offer the UK a way out of the backstop if they are not. The other is what some are calling a “mini-backstop” —which would “limit the mechanism to only cover elements that relate to border infrastructure.” It seems fair to say neither have been approved by the bloc.

Cox has admitted that few changes have been made this week, suggesting the Prime Minister will lose the vote next week. However, Downing Street is hoping that the bloc will offer concessions just before the vote takes place next week, as Cox remains in Brussels over the weekend. The lack of notable concessions means that May’s Withdrawal Agreement remains unchanged since it was first presented to Parliament in December, suggesting that a similar crushing defeat will take place. If an extension of Article 50 occurs, the EU27 have little faith in the renegotiation period and whether a deal will be secured that can win the support of Parliament.

The Prime Minister will address an audience in Grimsby today, in a last-ditch attempt to secure support for the deal. Reports suggest that May will fly to Brussels on Monday in order to attempt to secure changes to the original deal. It remains to be seen whether either of these two activities will have any impact on how the MPs will vote next week.

Mo Money Mo Problems

The PM’s announcement of a £1bn Stronger Towns Fund to help struggling communities was accused of being a bribe to persuade Labour MPs to back her deal. A large proportion of the funding was proposed to be directed to the North West of England and the West Midlands, areas that are traditional Labour strongholds. While this funding was welcomed by Labour MPs, they were quick to highlight that this failed to countervail the impact of austerity, and would not influence their vote against the PM’s Brexit deal.

As well as being accused of bribery, the PM also faced criticism from Conservative MPs who were angry that such generous funding wasn’t being spent in their constituencies. There is no doubt that the money is being disproportionately given to areas which are traditional Labour areas, as £212 million is going to the North-West, which has 50 Labour seats; whereas only £25 million is being spent in the South East, which has 50 Tory seats. But it is also true that these are the areas that have struggled the most in the UK economy over the past few years. It is likely that these communities would welcome any increase of funding in their area and the accusations of bribery will not resonate beyond the Westminster bubble.

Tariff we are only being told now, then why is it so import-ant?

The International Trade Secretary Liam Fox urged the Treasury on Wednesday to release information about proposed tariff cuts under a no-deal Brexit for MPs to consider before next week’s meaningful vote. The Cabinet have reached an agreement about which import duties will be levied in the event of a no-deal Brexit, but there is disagreement about whether this information should be released. Only the Treasury can release this information, but the Chancellor Philip Hammond and others within Cabinet such as the Business Secretary Greg Clark are opposed to releasing this information.

The argument is about whether MPs should know about these tariff cuts so they have a broader understanding of the implications of their vote next week, or whether this information should be released only when no-deal becomes a certainty. MPs such as Treasury Committee Chair Nicky Morgan have warned that MPs shouldn’t expect to have to “vote blindly”. However, the logic from the Treasury is that releasing this information could cause unnecessary panic and confusion amongst businesses as they might be alerted to tariff cuts on their products that might not actually ever be implemented.

It is unlikely that any MP would change their vote because of proposed tariff cuts, but it is hard to justify that businesses should be kept in the dark about these proposed tariff cuts when there are only 3 weeks until a no-deal Brexit could become a reality, with the expectation that Government will slash up to 90% of trade tariffs. Leaving without a deal is the default option if May’s deal is rejected and Article 50 isn’t extended, and these tariff cuts would have a significant impact on a number of vital industries.

EU Update

Macronesty is the best policy

French President Emmanuel Macron this week called for a “European renaissance” to tackle the crisis created by a “dead end Brexit”. In a letter to all “European citizens”, he set out a vision to breathe new life into the EU. Some of his claims were incendiary, as he accused Brexiteers of “lies and irresponsibility” in order to provoke a hard Brexit and stated that these actions were a threat to the EU. His vision was also bold, being far more ambitious than any other European leader has previously been and advocating greater integration and ever closer union of EU member states.

Macron called for the EU to move towards a common defence policy, to create a European Agency for the Protection of Democracy which would protect elections from cyberattacks and fake news and urged a revision of the Schengen rules which abolished border checks for those travelling between certain member states.

These proposals were music to the ears of Brexiteers, who saw this as evidence that the ultimate goal of the EU was to create a European super state. However, Macron’s policies gained unlikely support from within the EU, with proposals being endorsed by Hungarian President Victor Orban, as he said that they could be the beginning of a “serious and constructive dialogue on the future of Europe.” This support should be taken with a pinch of salt however, as it is likely that the Hungarian President and others see these reforms as an opportunity to reshape the bloc according to their interests. In this case, that will mean stronger borders, more national sovereignty and reduced immigration and oversight from Brussels.

Make Britain Great Again

Despite the claims that Brexit uncertainty is stalling the UK economy, European investors have more than doubled investment in Britain over the past three years. According to S&P Capital IQ data, buyers from the EU have acquired over 553 UK assets, reaching a total of $31.1 bn over the past 12 months. The reason for a surge of investment in Britain is that the impacted price of UK assets, due to a drop in the pound, has caused them to become more attractive, with investors putting money in now while the price is lower, in order to create to benefit from their growth after Brexit. Spencer Baylin from Clifford Chance stated that “investors have to take a view on the performance of those assets in a post-Brexit environment. Some will take the long view and invest, others will wait and see”.

Whilst this news is positive, it should not be taken as a sign that Brexit will have no impact on our long-term economic future. Government forecasts still estimate the UK economy to grow slower than it would do if we remained an EU member.

FAQ – The Meaningful Vote

What is the meaningful vote?

  • The Government cannot ratify the Brexit deal agreed with Brussels until it has been approved by MPs who would do so by voting for a motion “moved by a Minister of the crown”.
  • It is the vote on this motion that is referred to as the ‘meaningful vote’.
  • It will be the second time Parliament will vote on the Withdrawal Agreement, with the planned exit day only 3 weeks away.

What votes are likely to take place next week?

  • Vote on the Withdrawal Agreement as it stands – 12th March.
  • Vote on whether or not to leave the EU without a deal, if the Withdrawal Agreement is defeated – 13th March.
  • Vote to extend Article 50 for greater negotiation time, if a no deal is rejected – 14th March.

What will happen if the vote is rejected?

  • If the vote is rejected, Parliament will decide whether or not to have a no deal. Should this vote occur it is most likely that it will be rejected considering that the Spelman amendment has already passed through Parliament, indicating Parliament’s opposition to no-deal.
  • If a no deal is rejected, which it appears that it will be, then there will be a vote on an extension of Article 50 for a longer negotiation period. May has suggested a “short and limited” period, however EU27 leaders are sceptical over how productive this would be and would prefer a 21-month period in which a solution to the Brexit dilemma could be decided. This extended period would require the United Kingdom to participate in the European Parliamentary elections.
  • Jeremy Corbyn unveiled a plan to support a Second Referendum last week but has now stated that this will not happen if a deal is agreed upon and supported by Labour. However, People’s Vote campaigners consider a second referendum inevitable if an extension occurs.

How likely is it to pass?

  • Geoffrey Cox has been in Brussels this week to gain legal assurances over the backstop but has been unsuccessful to gain any concession from the EU27. The main opposition to May’s Withdrawal Agreement has been due to the conditions over the backstop and Parliament has consistently campaigned for a renegotiation to confirm the temporary nature of such a backstop.
  • Since Cox’s negotiations have not gone as planned this week, Cabinet is now expecting the vote to be defeated by between 60 and 100 votes. However, Cox is remaining in Brussels over the weekend, and is being joined by the Prime Minister on Monday, with the hope of gaining last minute changes.
  • The EU27 also believe that the vote will be defeated, giving less time to negotiations and preparing for an extension of Article 50.
  • There are suggestions that the ERG may vote in favour of the Withdrawal Agreements over fears that an extension of Article 50 may result in a softer Brexit. However, it is unclear whether an extension is seen as a big enough threat to bring all the rebel Tories into line and allow for the vote to pass.

Upcoming Key Dates

  • 11th March: May flies to Brussels for last minute renegotiation
  • 12th March: Second meaningful vote due.
  • 13th March: Spring Statement / Parliament vote on whether Britain should leave 29 March without a deal.
  • 14th March: Parliament vote for an extension if no-deal is rejected.
  • 22nd March: One week until Brexit
  • 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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