Why a no deal scenario is now the most likely Brexit outcome
Talks between the UK and the EU have been at an impasse since the September Salzburg summit. After her bruising treatment by EU leaders, a wounded Theresa May addressed the nation from Number 10, reiterating her red lines and insisting that the government is preparing for No Deal if her requirements are not met. In her October conference speech May re-stated her position, including her commitment to the principle that ‘No deal is better than a bad deal.’ She still insists that a strategy of pursuing high regulatory alignment (though she has dropped the word ‘Chequers’) is the only way forwards. However, it appears that talks taking place this week herald further concessions from the Prime Minister, with departure from the customs union looking ever more remote a prospect.
Theresa May is seeking to deliver on the referendum result while also preserving the Union with Northern Ireland. In particular, she is committed to ending free movement; failure to insist on border control would look like a clear betrayal of the electorate’s wishes. She has expressly ruled out the EU’s two alternative proposals: dividing the Union with a border down the Irish Sea on the one hand, and keeping the whole UK in the Single Market and customs union perpetually on the other.
It looks like the EU has accepted that the UK won’t tolerate freedom of movement. Its chief concern now is that Northern Ireland doesn’t become a ‘back door’ for goods that haven’t been subject to the proper checks or duties entering the EU. Furthermore, although it doesn’t broadcast this, the EU is undoubtedly trying to deter other member states from following Britain’s lead by allowing it to ‘cherry-pick’. Dividing the Single Market and its ‘Four Freedoms’ is unacceptable as a matter of EU doctrine, which is the explanation for the European objection to Theresa May’s Chequers plan.
Lay onlookers may wonder what the fuss is all about concerning the Irish border – after all, only around 50 businesses of any significant size conduct regular cross-border operations. The problem arises because when Britain leaves the EU it will (in theory) be free to go its own way on customs and import duties. The Irish Republic, however, will naturally remain in the European Union. As part of the UK, Northern Ireland will follow the UK’s regulatory and trading arrangements, but this divergence will create the need for goods crossing from North to South to be checked for compliance and for the correct tariffs to be imposed. This could create the need for significant infrastructure – cameras, barriers, a border force, etc. – dividing Northern Ireland from the South, potentially inflaming republican sentiments and undermining the Good Friday Agreement, which sought to preserve an all-Ireland economy and eliminate border friction.
The Prime Minister must also placate the DUP, Northern Ireland’s largest Unionist party, as she relies on their votes in Parliament for her majority. DUP leader Arlene Foster has said that avoiding a hard border is a “blood red line”, but Unionists will also refuse to allow divergence from the UK in any form – this gives the government few options. Yesterday the DUP threatened to vote down the Budget (in breach of their agreement to support the Tories) if their demands on the border aren’t met, refusing to back the government on an Agriculture Bill amendment in a clear warning shot to show May they mean business.
Recent developments focus primarily on the so-called ‘backstop’. This is an emergency measure to be deployed in the event that talks fail and a mutually agreeable solution can’t be found. If this happens, the current plan is to keep the whole of the UK in the customs union to avoid a hard border arising, and to prevent Northern Ireland from becoming a hole in the customs-and-tariff wall that surrounds the EU. Recent negotiations have suggested that this could go on beyond the 2-year transition period if necessary, but Brexiteers have declared this to be wholly unacceptable. In particular their concern is that if Britain is still in the customs union in 2022 then a General Election defeat to Labour could see it stuck there forever. Eurosceptic leader Jacob Rees-Mogg has labelled the plan a “serious breach” of the principle of Brexit. Furthermore, current backstop plans may entail Great Britain leaving the Single Market while Northern Ireland remains in it for goods, again raising the spectre of checks for goods crossing the Irish Sea.
Boris Johnson, Steve Baker, Sir Bernard Jenkin and Priti Patel have all lambasted both the Chequers proposal and the backstop plans as they will keep the UK effectively bound to EU regulations and hamstring the country, rendering it unable to strike third party trade deals of its own. They support a Canada-style Free Trade Agreement which would deliver much greater freedom over trade but severely more limited access to the Single Market, especially on services. What’s more, it could take far too long to negotiate given that the transition period is due to end in December 2020. The EU has indicated that technological solutions to the Irish border in the event that Britain opts for a more basic FTA will not be enough to placate their concerns over customs and tariffs.
All in all, a workable deal that satisfies all parties is looking less and less likely. After the debacle at Salzburg EU leaders have offered few concessions, but instead are seeking movement from the UK side. Michel Barnier, the EU’s chief negotiator, revealed yesterday that he is holding off on the publication of a joint text on the future deal, probably for fear that it will enrage British Brexiteers. Worryingly, the momentum has shifted away from thrashing out a permanent agreement and towards extending backstop provisions, suggesting that no long-term strategy exists.
When the Prime Minister returns with a deal she faces the prospect of getting it through Parliament. The government will whip the Bill heavily as the parliamentary arithmetic is wafer-thin, but Cabinet minister Penny Mordaunt has refused to back the PM and suggests that up to 40 Tory MPs are planning to rebel. Meanwhile, Labour is committed to opposing almost any deal, and it’s unclear whether government whips will be able to convert enough moderates to steer the Bill through the Commons. Now DUP members may refuse to walk through the government lobby it looks as though no majority for the kind of compromise proposal that’s likely to come before the House exists. If the Bill is rejected then no-one knows what will happen next – the default position is an exit on World Trade Organisation terms, but the forces of Remain would use this opportunity – and the probable departure of Theresa May from Downing Street – as an opportunity to exploit the chaos, seeking to keep Britain in the EU indefinitely.