It has been a rough ride and one which at times did not look
like it would ever be achieved, but the UK and EU have finally agreed a draft
divorce treaty which sets out the bare bones of what will happen on 29 March
2019 (all 585 pages of it here).
Naturally, this is not the end game: An awful lot of effort has been expended
just so the UK can get to the start line for the marathon talks with the EU
that lie ahead. But at least the UK has been able to agree a relationship that
does not imply a hard border in Ireland, thus satisfying one of the EU’s key
requirements and offers a glimmer of hope that a hard Brexit can be
avoided.
The draft agreement involves a UK-wide customs backstop, thus removing the need for a customs border within the UK – which is the approach I have advocated all along. However, the EU has insisted that Northern Ireland remains in a deeper customs and regulatory relationship with the EU, which has so angered the DUP. It is hard to digest the full implications of the document, given its dense legal language, and undoubtedly more details will emerge. But at a first glance, the UK will not be able to unilaterally end the backstop arrangement with Northern Ireland – the EU has a veto. The document also states “the institutions, bodies, offices, and agencies of the Union shall in relation to the United Kingdom, and natural and legal persons residing or established in the territory of the United Kingdom, have the powers conferred upon them by Union law. In particular, the Court of Justice of the European Union shall have jurisdiction as provided for in the Treaties in this respect.” In other words, the UK has to play by the rules established by the ECJ.
EU27 ministers are scheduled to meet next week and are unlikely to raise any serious objections. All being well, it is possible that the UK government and the EU27 will hold a summit on 25 November to ratify the agreement. And then the fun starts. Any deal has also to be ratified by the UK parliament and various politicians and media commentators have spent the last 24 hours telling us how difficult it will be to get this done. Indeed, Theresa May’s negotiation efforts continue to unite hard-core Leavers, who believe that the plan as currently envisaged will turn the UK into a “vassal state”, and Remainers who believe the deal is so much less favourable than current arrangements that the only way to proceed is via a second referendum (a “people’s vote”).
Let’s start with the voting arithmetic to assess whether it can pass through parliament. By my reckoning, there are 638 MPs eligible to vote (650 MPs in total, less 7 Sinn Fein MPs who have not taken up their seats; the Speaker of the House and his three deputies, who by convention do not cast a vote, and one MP is suspended). This means ratification requires 320 votes. We know that anywhere between 40 and 80 Conservative MPs are likely to vote in principle against any agreement with the EU (let’s round that up to 100 to account for other malcontents). The Labour leadership will almost certainly try to use the Brexit vote as an attempt to force a general election, though not all will necessarily follow. Assume, therefore, that 200 of 257 Labour MPs vote against the deal. What about the rest? The 9 DUP members appear minded to vote against, as do 4 from Plaid Cymru. If the 12 Lib Dems and 35 Scottish Nationalists also withhold their support, it is dead in the water. Even if each of the 7 independents supports the government’s position, the plan would be defeated by 360 votes to 278. However, if the Conservative dissidents can be limited to 55 or less, the plan has a fighting chance.
A more pertinent question is why would anyone vote against the agreement? Obviously, up to 80 Conservatives are irredeemable hardliners who have no interest in reaching an accommodation with the EU. The DUP objects to the prospect of differing EU customs relationships for Northern Ireland and the rest of the UK. But what is in it for Labour? The party leadership clearly wants to put pressure on the government and force an election but a large bloc of Labour MPs oppose Brexit on principle and are thus unlikely to vote for a policy which entails leaving the EU, despite the fact that their leaders are pro-Brexit. Thus, MPs from the same party can be expected to vote against the government for different reasons but the end result is still the same. In a similar vein, the SNP and Lib Dems are also opposed to Brexit and will vote against legislation that enables it. But gambling on the prospect of a second referendum, in the event that the government’s efforts to find a compromise have failed, would be an exceptionally risky strategy. We simply do not know what will happen if the agreement is rejected in Westminster.
For all the sound and fury, I cannot envisage that the UK will be able to improve on the current deal. It is far from perfect: Financial services are clearly not going to get any preferential treatment which from a professional perspective is not good news. And as I have long pointed out, an arrangement in which the UK is a rule-taker is massively sub-optimal compared to the status quo. But it is perhaps the closest economic relationship that the UK can possibly achieve if it wants (foolishly) to curb the free movement of labour. Agreement is all about compromise – as the journalist Paul Waugh put it, this is the Rolling Stones solution (“you can’t always get what you want / but if you try sometimes / you might find you get what you need”). It remains to be seen how much compromising MPs are prepared to undertake.
More to the point, pro-Brexit supporters have never been honest with the electorate about the choices that leaving the EU entails. Jacob Rees-Mogg and his cronies simply cannot obtain a better deal than any compromise offered by the EU. Brexiteers claiming that the UK has capitulated to Brussels are, to be blunt, barking mad. I have more sympathy with hard-core Remainers but short of halting the Article 50 process, which will give the UK more breathing space to decide how it wants to proceed, voting down the compromise agreement risks a no-deal outcome. As the IMF pointed out today, a no-deal Brexit could be expected to cost around 6% of GDP in the long-term versus the no-Brexit baseline (figures which accord with my own simulation exercises).
Much as I do not want the UK to leave the EU, I fear the motives of those who would vote against the agreement even more. It would almost certainly spell the end of Theresa May’s career, and whilst many might say that is no bad thing, who in their right mind would want to take on the poisoned chalice that is the PM’s role? And if it leads to a new election, it is likely to result in another hung parliament as the electorate punishes those parties which used the Brexit process for their own political gain. There are bad deals and there are bad deals. If the UK really must leave the EU, then the terms set out today appear to be the least-worst option. As bad as the terms are, the alternatives are far worse.
The draft agreement involves a UK-wide customs backstop, thus removing the need for a customs border within the UK – which is the approach I have advocated all along. However, the EU has insisted that Northern Ireland remains in a deeper customs and regulatory relationship with the EU, which has so angered the DUP. It is hard to digest the full implications of the document, given its dense legal language, and undoubtedly more details will emerge. But at a first glance, the UK will not be able to unilaterally end the backstop arrangement with Northern Ireland – the EU has a veto. The document also states “the institutions, bodies, offices, and agencies of the Union shall in relation to the United Kingdom, and natural and legal persons residing or established in the territory of the United Kingdom, have the powers conferred upon them by Union law. In particular, the Court of Justice of the European Union shall have jurisdiction as provided for in the Treaties in this respect.” In other words, the UK has to play by the rules established by the ECJ.
EU27 ministers are scheduled to meet next week and are unlikely to raise any serious objections. All being well, it is possible that the UK government and the EU27 will hold a summit on 25 November to ratify the agreement. And then the fun starts. Any deal has also to be ratified by the UK parliament and various politicians and media commentators have spent the last 24 hours telling us how difficult it will be to get this done. Indeed, Theresa May’s negotiation efforts continue to unite hard-core Leavers, who believe that the plan as currently envisaged will turn the UK into a “vassal state”, and Remainers who believe the deal is so much less favourable than current arrangements that the only way to proceed is via a second referendum (a “people’s vote”).
Let’s start with the voting arithmetic to assess whether it can pass through parliament. By my reckoning, there are 638 MPs eligible to vote (650 MPs in total, less 7 Sinn Fein MPs who have not taken up their seats; the Speaker of the House and his three deputies, who by convention do not cast a vote, and one MP is suspended). This means ratification requires 320 votes. We know that anywhere between 40 and 80 Conservative MPs are likely to vote in principle against any agreement with the EU (let’s round that up to 100 to account for other malcontents). The Labour leadership will almost certainly try to use the Brexit vote as an attempt to force a general election, though not all will necessarily follow. Assume, therefore, that 200 of 257 Labour MPs vote against the deal. What about the rest? The 9 DUP members appear minded to vote against, as do 4 from Plaid Cymru. If the 12 Lib Dems and 35 Scottish Nationalists also withhold their support, it is dead in the water. Even if each of the 7 independents supports the government’s position, the plan would be defeated by 360 votes to 278. However, if the Conservative dissidents can be limited to 55 or less, the plan has a fighting chance.
A more pertinent question is why would anyone vote against the agreement? Obviously, up to 80 Conservatives are irredeemable hardliners who have no interest in reaching an accommodation with the EU. The DUP objects to the prospect of differing EU customs relationships for Northern Ireland and the rest of the UK. But what is in it for Labour? The party leadership clearly wants to put pressure on the government and force an election but a large bloc of Labour MPs oppose Brexit on principle and are thus unlikely to vote for a policy which entails leaving the EU, despite the fact that their leaders are pro-Brexit. Thus, MPs from the same party can be expected to vote against the government for different reasons but the end result is still the same. In a similar vein, the SNP and Lib Dems are also opposed to Brexit and will vote against legislation that enables it. But gambling on the prospect of a second referendum, in the event that the government’s efforts to find a compromise have failed, would be an exceptionally risky strategy. We simply do not know what will happen if the agreement is rejected in Westminster.
For all the sound and fury, I cannot envisage that the UK will be able to improve on the current deal. It is far from perfect: Financial services are clearly not going to get any preferential treatment which from a professional perspective is not good news. And as I have long pointed out, an arrangement in which the UK is a rule-taker is massively sub-optimal compared to the status quo. But it is perhaps the closest economic relationship that the UK can possibly achieve if it wants (foolishly) to curb the free movement of labour. Agreement is all about compromise – as the journalist Paul Waugh put it, this is the Rolling Stones solution (“you can’t always get what you want / but if you try sometimes / you might find you get what you need”). It remains to be seen how much compromising MPs are prepared to undertake.
More to the point, pro-Brexit supporters have never been honest with the electorate about the choices that leaving the EU entails. Jacob Rees-Mogg and his cronies simply cannot obtain a better deal than any compromise offered by the EU. Brexiteers claiming that the UK has capitulated to Brussels are, to be blunt, barking mad. I have more sympathy with hard-core Remainers but short of halting the Article 50 process, which will give the UK more breathing space to decide how it wants to proceed, voting down the compromise agreement risks a no-deal outcome. As the IMF pointed out today, a no-deal Brexit could be expected to cost around 6% of GDP in the long-term versus the no-Brexit baseline (figures which accord with my own simulation exercises).
Much as I do not want the UK to leave the EU, I fear the motives of those who would vote against the agreement even more. It would almost certainly spell the end of Theresa May’s career, and whilst many might say that is no bad thing, who in their right mind would want to take on the poisoned chalice that is the PM’s role? And if it leads to a new election, it is likely to result in another hung parliament as the electorate punishes those parties which used the Brexit process for their own political gain. There are bad deals and there are bad deals. If the UK really must leave the EU, then the terms set out today appear to be the least-worst option. As bad as the terms are, the alternatives are far worse.
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