Brexit is served – and neither option is palatable

10 November 2018

9:00 AM

10 November 2018

9:00 AM

When the Lisbon Treaty was signed in 2007, the inclusion of Article 50 was hailed as a concession to British Eurosceptics. For the first time there was an exit clause: a clear, legal way for a country to leave the European Union. Whatever concerns Britain had about the federalist direction of the EU, it was now at least enshrined in treaty that this country had a right to get out should MPs vote for it to do so. It was intended as a reassurance that the United Kingdom had the sovereign right to leave the EU if it wanted to.

What worries cabinet members about the current Brexit plan is there is no clear exit clause. Because of the so-called ‘backstop’, the UK will not be able to leave unilaterally. Even Downing Street has admitted this.

The ‘backstop’ started out as an arrangement intended to cover just Northern Ireland, and to satisfy Dublin that there would be no hard border. After months of wrangling, there will now be a UK-wide backstop. If this deal is done, it will mean that all of the UK will, effectively, be in a customs union with the EU and unable to make comprehensive free trade deals with anybody else. At the same time, the EU will demand a series of ‘level playing field’ provisions designed to ensure that Parliament forfeits the right to cut regulation on the UK economy in a way that might secure competitive advantage over the EU 27. MPs would likely have to follow EU rules on social and environmental standards, despite having no say in making them any more.

The Prime Minister will say that this is not as bad as it sounds, that both the UK and the EU want this situation to be temporary. She will point out that it does, at least, prevent a customs border in the Irish Sea. But the truth of the matter is that if this deal is passed, Northern Ireland will, as the Attorney General warned the cabinet on Tuesday, be bound more closely to EU regulations than the rest of the UK is. To compound this, Northern Ireland wouldn’t have a say on any new rules that Brussels introduced. All told, it’s an unusual definition of taking back control.

To understand why such a seemingly unattractive deal appeals to No. 10, we must go back to December. Then, Theresa May wanted the EU to declare that ‘sufficient progress’ had been made on talks to move on to the next stage — so she signed up to a joint report with the EU that included various commitments on the Irish border. At the time, her political team regarded this as a victory. They reassured people that this was a typical Brussels fudge, that these commitments were open to interpretation. But the UK never produced a legal text setting out what it thought the joint report meant. The EU did, and in doing so set the terms for future negotiation.

May was immediately clear that no British prime minister could sign up to a deal that would separate Northern Ireland off from the rest of the United Kingdom. This is especially true for a prime minister dependent on the Democratic Unionist Party for her parliamentary majority. But to protect the union, she then had two options. One was to risk no deal, which she would see as a personal failure (and would guarantee her removal). The other was to recognise that she was in a hole but carrying on digging until it was big enough to fit the whole UK in, not just Northern Ireland. This is why Downing Street has ended up pushing for a UK-wide backstop.

In May’s defence, she has made progress on this front. The EU is now discussing a UK-wide backstop, having initially said this could not be in the withdrawal agreement. But the question now is how much of the Northern Irish backstop remains. The EU will demand that its own regulations cover Northern Ireland in various areas. Whether this is too much for the DUP remains to be seen.

At the same time, the ‘level playing field’ regulatory demands that the UK-wide backstop entails will severely curtail the freedom of the Government to act. When the cabinet sees all these requirements written down, some might balk — especially because it’s so unclear how the UK would free itself. Resignations might follow. As one cabinet member says: ‘This is my own red line. At a push, I’ve accepted we obey EU regulation on product standards. But if we also have to obey their rules on how our companies are run, then it would be capitulation. Hers, but not mine.’

Crunch time is fast approaching. If the UK and the EU do sign a Brexit deal, there’ll be a transition period that runs to December 2020. But it is now highly unlikely that this will provide enough time to agree a trade deal or to sort out future customs arrangements. I understand from those who have seen its latest iteration that the political declaration, which will set out the plan for the future relationship between the UK and the EU, contains a series of options. This means that the most important decisions have yet to be taken, let alone worked up in detail or negotiated on. The result is that it is almost certain that in December 2020 either the transition will need to be extended or the backstop invoked.

The UK would then find itself in an arrangement that it would struggle to leave. One of those who has carefully examined the legal implications of this tells me that the backstop will be entrenched in UK law, as the European Communities Act of 1972 was. On top of this, the backstop will create an open-ended international legal obligation for the UK. This would mean that the UK couldn’t simply renounce the backstop or give notice to quit. Rather, it would have to hope that the proposed ‘joint review mechanism’ would allow the UK to leave it. To put it another way, this would be like the UK having to go to arbitration before invoking Article 50. The UK would not have the sovereign right to simply quit the backstop.

As one senior cabinet member puts it: ‘She used to say that no deal was better than a bad deal’. But what does she call this? How bad does a deal have to be before she admits that it’s a bad deal?’ Or to put it another way, why not go for no deal? It would be a clean Brexit, with the UK leaving the EU and free to regulate its economy as it saw fit, to strike trade deals with any countries it wanted to and to chart its own course in the world.

The reason the cabinet are baulking at no deal is that they know, in a way that the public does not, just how unprepared this country is for it. Few cabinet members want to be seen as the people responsible for it. By accident or design, May’s failure to make proper preparations for no deal has become her strongest card in forcing through her deal.

There is no bold, emergency economic strategy for no deal sitting there waiting to be deployed. Little effort has been made to line up alternative import routes to avoid the threatened Calais log-jam. Instead, those responsible for no-deal planning talk fatalistically about how hard it is to bypass the Dover/Calais artery.

A series of mini-deals to keep things moving would, of course, be better than no deal. (Indeed, many argue this could be the best outcome in the current circumstances.) But this would let May off the hook, so the EU has declared it isn’t interested in mini-deals. Some argue that this attitude will change as Brexit day approaches if Britain calls its bluff. Surely, Brexiteers argue, the EU will act in its economic self-interest? But this negotiation should have taught us the EU will accept economic pain to make a political point. And if there is no deal, 80 per cent of the customs duties will go to the European Commission itself rather than the member states.

Chaos on the Dover/Calais route might even suit Emmanuel Macron. His team regard the European elections next May as being crucial and are trying to pitch them as a fight between Macron and the nationalists: Orbán, Salvini, Le Pen and the rest. In France, he’d be fighting against the pro-Brexit Marine Le Pen — one recent poll has her party on course to defeat Macron’s En Marche. It would, politically, help Macron to be able to point to how leaving the EU brings stagnation, not freedom. His team imagine pictures of a gridlocked Kent are to their political benefit. They believe they could use them as proof that populism comes at a price. They are, I understand, sanguine about the likely impact on Anglo-French relations.

Inside government, one well-informed source talks of how the first few months under no deal would be akin to those days when government incompetence — think lost tax discs — dominates the news. Businesses would be quick to blame any problems on no deal. In such circumstances, it is not hard to imagine voters turning on both Brexit and the Tories.

There is another scenario: that May’s plan is vetoed by her cabinet or her party and the Tories pursue no-deal talks — but that they are stopped by parliament. The vote for Article 50 contained permission to leave the EU without a deal, so it isn’t clear what mechanism Parliament would have to rescind this permission. But as cabinet ministers admit privately, it would be almost impossible to pursue a no-deal Brexit if the Commons was against it. This raises the prospect of a second referendum that, regardless of the result, would calcify divisions in our country and give Britain a firm shove in the direction of a toxic, culturally divided politics.

When David Cameron brought his EU renegotiation back to the Cabinet in February 2016, much of the debate around the table was, unsurprisingly, about sovereignty. It was argued that the fact that the UK was having a referendum about leaving — and the EU couldn’t stop it — was proof that the UK was sovereign. The case was made that as long as you could get out of something, you were still sovereign. It would be ironic if the UK ended up leaving the EU in a way that tied it to the EU forever.

No deal and a second referendum both undoubtedly bring with them risks. But a backstop that the UK can’t leave would bring huge risks too. It would raise profound questions of democratic accountability — perhaps more profound than those caused by EU membership. The UK would not have taken back control but ceded it.

The disruption caused by no deal would be temporary, but a bad Brexit deal could linger for years, destabilising and defiling British politics. There are no great Brexit options any more, the UK Government has played its hand too badly for that. But May must make sure that the backstop doesn’t turn out to be worse than no deal at all.

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