Obviously, the fact that there was a snowball-in-hell’s chance of the deal being ratified would have put the prime minister in an impossible position and called what is left of her authority into question. On only three occasions in the last 100 years has a government been defeated by more than 100 votes and it is pretty easy to construct a scenario in which the Withdrawal Agreement would have been rejected by a majority of around 125. Recall that the 139 vote defeat suffered by Tony Blair’s government in 2003 on the question of involvement in the Iraq War arguably marked the beginning of the end for the prime minister as his authority began to leach away. Theresa May is in a far weaker position and it is questionable whether she would survive such a crushing blow. May’s future, however, is a subject for another day. At issue is where does the UK go from here?
The PM has made it clear that she intends to meet with other EU leaders to discuss the concerns surrounding the backstop which threatens to leave the UK permanently tied to the EU. However, it is difficult to imagine any circumstances in which the EU will make any concessions. The Commission’s view is likely to be something along the lines of “we gave you a reasonable deal which you can take or leave as you see fit. In any case, you haven’t voted on it yet. Come back and see us when you have.” So May could be forced to put the Withdrawal Agreement to a parliamentary vote, and of course it will be heavily rejected. In this case the prime minister goes to Brussels to repeat her request and the EU27 merely repeats the first part of its answer.
Under these circumstances, the UK would have no option but to request an extension to the Article 50 process. The question is how the UK would then use the extra time made available? Probably the first option it would pursue is a Norway Plus arrangement in which the UK joins EFTA and applies to join the EEA (an option only available to EFTA or EU members). Whilst this would minimise the economic costs, the UK would still be subject to the four freedoms of goods, services, capital and labour. In essence it would be a rule-taker. Indeed, as I noted six years ago in response to the FT’s year-ahead 2013 questionnaire “Anyone with notions that we can negotiate a Swiss or Norwegian-style existence on the fringes of the EU is dreaming. Such an existence would still mean that we are subject to large parts of EU legislation but without any power to change it – something which the euro sceptics would like even less than the system they have now.”
What is worrying is that many politicians still don’t understand this point and they have had six whole years to think about it and a whole lot of information put in front of them to demonstrate it. Maybe, just maybe, they will eventually get it in which case the UK would be mad to pursue such a course of action. I suspect that the other alternatives involve either a general election or – and whisper it quietly – a second EU referendum. An election does not do anything to resolve the Brexit question and should be viewed as a side effect of the current political impasse rather than an attempt to resolve it. With regard to a second referendum, I agree with the PM when she says “if you want a second referendum to overturn the result of the first, be honest that this risks dividing the country again” (as I hope I made clear here). But if politicians cannot agree what form of Brexit they want, they may have no choice but to put the question back to the people.
The reason we might end up in this position is primarily due to the fact the government failed to manage the process. The referendum result was never legally binding but May did all she could to make it sound like it was. She was far too late to face down the Brexit ultras who promised unicorns and cakes and indeed pandered to their prejudices (remember “citizens of nowhere” and “queue jumpers”). Perhaps most damningly, the referendum was treated as a winner-take-all outcome in which the near-half of voters who opposed Brexit were completely marginalised. For those who express sympathy with the PM for the near-impossibility of her task, remember that she made it far harder for herself than it needed to be.
I would not like to predict the outcome of a second referendum (I wouldn’t even like to predict the question on the ballot paper). But if it is a choice of “Remain” or “Accept the current deal” the likelihood is that the UK might not even leave the EU (some polling data here, for what it is worth). Further support for this option comes from today’s ECJ ruling that the UK can unilaterally rescind its Article 50 notification, for it suggests that the EU is giving the UK room for manoeuvre if it changes its mind on Brexit.
Nothing that has happened today has helped markets, with sterling falling to its lowest since April 2017. Although markets fear that today’s events have raised the likelihood that the UK will leave the EU without a deal, I don’t buy it. Nonetheless, there is major uncertainty regarding the nature of the UK’s future relationship with the EU which has put sterling under great pressure and 3-month GBP option volatility is on a par with what we saw around the time of the 2016 referendum (chart). Like nature, markets abhor a vacuum and today’s decision to withdraw the parliamentary vote has exposed a major void where the government used to be.
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