Doing the splits

Although I am not a political commentator, it is impossible to look at the biggest issue(s) in British economics without concerning ourselves with the political context against which they are being taken. None of these issues comes bigger than Brexit, although it increasingly seems as if the debate has little to do with leaving the EU and is more the battleground on which various factions are fighting to try and reshape the domestic political debate. Quite where the chips will fall once the fighting is over remains to be seen.

The first steps toward reshaping came this week with the news that 12 MPs have resigned from their parties (9 Labour and 3 Conservatives), with 11 joining a new movement calling themselves The Independent Group (TIG). As I noted on Monday, Labour MPs decided to leave their party for a variety of reasons but Brexit was very much at the heart of their decision. The three Conservative MPs who jumped ship on Wednesday were very explicit about the fact that the government’s handling of Brexit was the decisive factor in their decision. Anna Soubry, the redoubtable (former Conservative) backbench MP was clear about her reasons for leaving (for those with 24 minutes to spare, this Times podcast is well worth a listen). It  is evident that she does not have much time for Theresa May as prime minister, arguing that she is out of her depth, and in a TV interview earlier in the week Soubry went so far as to suggest that May has “a problem with immigration” which explains her antipathy towards the single market. That is quite a bold allegation but Soubry can point to the “Go Home” campaign carried out in 2013 by the Home Office, when May was Home Secretary, as evidence.

Obviously we are in the realms of the speculative here so it pays not to push it too far. However, it would explain why the PM has been so keen to give in to the ERG which is increasingly described as “a party within a party,” and I have long questioned the PM’s commitment to the Remain campaign that she nominally supported. Given the small number of ERG MPs, I have never understood why the PM did not try and face them down earlier if she was so opposed to their views. If there is even the slightest grain of truth to Soubry’s allegation, it calls the whole basis of the government’s Brexit strategy into question for it implies that the ideological considerations of a small proportion of Conservative Party members, which number around 124,000, are being placed ahead of the economic wellbeing of the 66 million people living in Britain.

Ideology is not, of course, confined only to the Conservatives. The opposition Labour Party is arguably the most ideologically oriented party to sit in parliament in many a year. Even in the 1970s, when Labour was swinging to the left at a rapid rate of knots, there were sufficient heavyweights in the political centre who were able to slow efforts by activists to take over the party machinery. Simply put, Jeremy Corbyn is the most left wing leader of a major political party in the post-1945 era (you can check out his voting record here). Interestingly he has “generally voted for more EU integration” – 60 votes for, 24 votes against, 47 absences, between 2006 and 2019. But he opposed remaining in the EU in 1975 and the ratification of the Maastricht Treaty in 1993, whilst backing a Conservative proposal in 2011 calling for a referendum on the UK’s withdrawal from the EU.

Whilst the right-wing of the Conservative Party wish to leave the EU to further a free-market agenda, Corbyn has been critical of the EU’s role in protecting workers’ rights. He is thus open to the charge of enabling the wishes of the Tory right via a diametrically opposed left-wing stance. Back in 2015, just after he was elected leader of the party, a senior aide was quoted as saying “I don’t think that Jeremy is going to find very many people supporting him in the idea that we should leave the European Union.” (Link here to Reuters story but it does not work in Firefox though seems to be OK in Explorer). Younger people who voted for Labour in 2017 as a protest against the Conservative’s handling of the Brexit issue have been sadly disappointed.

Despite the government’s apparent ineptitude, Labour trail the Conservatives by 4 points based on an average of the last 10 published opinion polls. At the end of December, the two parties were running neck-and-neck. Although the gap is not statistically significant, the trend is noticeable. It will be interesting to see how the recent political defections change the balance. A poll carried out before the defection of the three Tory MPs gave TIG a 14% share versus 38% for the Conservatives; 26% for Labour and just 7% for the LibDems. One poll does not represent a trend but the initial numbers suggest that Labour and the LibDems may struggle if TIG ever becomes a fully-fledged political party.

But we may not get to find out. If TIG damages Labour more than the Conservatives, and on the assumption that (i) the government can deliver a soft Brexit (this week’s votes will be interesting and may force the government to delay the Article 50 deadline) and (ii) the number of defections to TIG is limited, a sensible strategy on the government’s part might be to try and hold an(other) early election. There is certainly lots of chatter suggesting that a summer election is a possibility. It would, of course, make a mockery of the Fixed Term Parliaments Act, designed to prevent governments from controlling the timing of elections, but that did not prevent just such an outcome in 2017. As a reminder, the Act requires two-thirds of MPs to vote in favour which, given that Labour have been pushing for such an election, is likely to be achievable. If TIG proceed to split the Labour vote it might allow the Conservatives to regain the parliamentary majority they squandered in 2017 whilst also seeing the nascent TIG all but wiped out as they lose their seats to representatives from the main parties.

If this strategy does play out it will simply reinforce the political status quo and leave those voters hoping for an alternative to the ideological convictions of the main parties with nowhere to go. Moreover, a third general election in four years would be too much for most voters to swallow. But much as Brexit gives a uniquely British dimension to the political debate, the tectonic plates are shifting in many other countries too. They say that the four most dangerous words in markets are “this time it’s different.” But as regards politics today, this time it really is.