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After having been critical of Theresa May’s tenure as Prime Minister it would be stretching it to say that I am sorry to see her go, but there is always something unpleasant about seeing a leader being forced from office in the way that she was. Above all else, May is dutiful, dogged and determined – qualities we may yet come to appreciate in the event that Boris Johnson inherits her crown. This would explain why May continued to push forward with her Brexit deal in the teeth of all opposition – she genuinely believed it was her duty to deliver on something that she thought was the reason why she was elected Prime Minister.

In her resignation speech today, May gave hints at the kind of PM she could have been: It was emotional, passionate and reminiscent of the speech that she gave in Downing Street three years ago when she took on the job. She quoted the humanitarian Sir Nicholas Winterton who once told her, “Never forget that compromise is not a dirty word. Life depends on compromise.” Unfortunately during her time in office, the PM did not live up to those principles. Almost up until the last moment, she continued to treat the result of the Brexit referendum as a winner takes all event and showed little sign of listening to the near half of voters who did not share her vision of a post-EU Britain. Her first conference as party leader produced the (in)famous "citizens of nowhere" speech which did nothing to reunite the country in the wake of the Brexit referendum.  Let us also not forget that prior to her tenure in Downing Street, May was a Home Secretary who oversaw a hardening of attitudes towards immigration (remember those Go Home vans?). Empathy and compassion were not words which were used in conjunction with the PM’s character.

Still less would they ascribe the quality of flexibility. Former Labour PM Harold Wilson, who died 24 years ago today, was criticised during his time in office for being flexible in his beliefs, but he managed to keep the UK out of the Vietnam War despite the best entreaties of Lyndon Johnson, and prevented the hard left from taking over the party until long after he had retired. History now remembers him as a canny operator who dealt well with the hand he was given. The same cannot be said of Theresa May. Her doggedness proved to be her undoing as she failed to build a coalition that would have allowed parliament to accept the Withdrawal Agreement. She made the same mistake as her predecessor in pandering to the Eurosceptics by trying to offer them sufficient concessions to keep them onside, not realising that they don’t do compromise. May undermined her own position by tolerating the indiscipline of Boris Johnson, simultaneously emboldening the Brexit ultras whilst making her look weak.

The people May surrounded herself with prior to the ill-fated 2017 election, particularly her advisers Nick Timothy and Fiona Hill, had long shielded her from Conservative Party colleagues and as a result she may have been somewhat out of touch with what they were thinking. Indeed it was at their behest that May became the central figure in the 2017 election campaign, but it transpired that the more the electorate saw of her the less they were impressed. After Hill and Timothy left in the wake of the election debacle, it often seemed as though the PM was somewhat rudderless.

All in all, May will not rank as a great Prime Minister and this is someone who succeeded David Cameron – a man who will forever be associated with the failed gamble of the EU referendum. She promised to deliver Brexit and failed – a matter of intense personal regret for her. However, she may not go down as the worst PM since 1945: One study suggested that this dubious honour should be bestowed on Sir Anthony Eden who was PM between April 1955 and January 1957.

I looked yesterday at how events might pan out over the next few months (here) and a more detailed look at the succession candidates can wait for another time. However, the demise of Theresa May might just herald the end of the traditional centrist Conservative Party. Across the industrialised world, the traditional political party lines are being redrawn. Voters identify less with the distinction between labour and capital, which has characterised the political landscape for many decades, than with where parties stand on particular issues, notably nationalism which finds expression in the UK in the form of Brexit.

As the Tories tack to the right and Labour to the left a huge void has opened up in the centre of British politics, which will have major implications for the course of economic policy. So far, no party has emerged to fill that void. The breakaway splinter group Change UK does not appear to have gained sufficient momentum to be that movement. Consequently, many millions of voters continue to see themselves as politically homeless. In better times, Theresa May might have been viewed more sympathetically as one who did her best under trying circumstances. But her inflexible approach to Brexit helped to widen the political gap that had been emerging for a while. As she prepares to leave office, however, it is worth reflecting that her reputation will be judged against the achievements of her successor. History may yet judge her more favourably than the commentariat does today.

The end of May

Game of Thrones, the TV series which ended its 8-year run this week, followed the fortunes of various political dynasties as they pursued their claims to the Iron Throne which would allow them to rule all the seven kingdoms of Westeros. The path to the top was brutal with various leading contenders beng executed, murdered or dying in battle. As a piece of television fiction it was compelling but it is highly improbable that such levels of brutality could be sustained in real life. That said, the behaviour of the Conservative Party increasingly resembles a GoT plot line which is unlikely to end well.

It appears that MPs believe compromise is for the weak

As regular readers of this blog will know I have been highly critical of the way in which Theresa May has conducted Brexit policy over the course of the last three years. She has tried to "own" the issue, pandering to the right-wing of her party, when in reality cross-party support was always going to be required in order to find a consensus, particularly following the needless 2017 general election which cost the Conservatives their majority. When May finally cottoned onto the need for a cross-party solution last month, her political position was so weak that the Labour Party had little incentive to cooperate in order to get the Withdrawal Agreement ratified by parliament. But the reaction this week to May’s ten-point plan to get the Withdrawal Agreement Bill through parliament said more about MPs than it did about the prime minister. Having listened to what the right-wing of her party want, what Remainers want and the issues raised by the Labour Party, the PM offered something for everyone and ended up pleasing no-one.

So it came to pass that the day before the European Parliament elections, the UK news was dominated by stories discussing how long the prime minister was likely to keep her job. As a campaign message it was the most spectacular of own goals: Not that the Tories have bothered to campaign for an election in which the PM promised the UK would not have to take part, and they could well trail a distant fourth in terms of the vote share. Yet as ineptly as May has handled Brexit – so much so that she has created space for a Nigel Farage resurrection – and as inflexible as she is on policy issues, the problem is less the prime minister than an inability of MPs to compromise. Whilst there are many good reasons for not liking the Withdrawal Agreement negotiated with the EU last November – it essentially compels the UK to be an EU rule-taker during the transition period, which runs to end-2020 – it is still the least worst outcome that the UK could have obtained.

It has now become an article of faith amongst the ultras that the only good Brexit is a hard Brexit, yet three years ago even the most ardent proponents of leaving the EU were not advocating such a policy. Somewhere along the line, the Brexiteers have convinced themselves that leaving the EU at any cost is the only goal worth pursuing and it is impossible to convince them otherwise. This is not a rational, evidence-based policy: It is faith-based zealotry. And the more the faithful proclaim their litany, the greater the pushback by their ideological opponents. Indeed, in the fly-on-the-wall documentary, Brexit: Behind Closed Doors, in which cameras followed the EU Parliament’s Brexit representative Guy Verhofstadt for two years, the former Belgian prime minister warned that the Remainers were increasingly becoming a problem due to their inability to know when to compromise.

Who really wants to take on the impossible job?

It has thus become impossible to meet in the middle and it does not matter who is the prime minister in the current environment. At the time of writing, it is reported that May is likely to announce her departure within the next 24 hours. Her successor, who is expected to be a Brexiteer, will inherit a minority government reliant on the DUP and a party divided over Brexit. If, as widely tipped, that person is Boris Johnson it is difficult to imagine any improvement in the current parliamentary impasse. Johnson is widely loathed by large numbers of Conservative MPs who do not trust him due to his duplicity during the Brexit referendum campaign and his dreadful tenure as Foreign Secretary. His advocacy of a no-deal Brexit will not win him any friends outside the coterie of backbench Tory MPs who believe such an outcome is somehow in the UK’s best interests. This is to say nothing of the fact that he is also reviled by many European leaders and he would be the last person to send to Brussels to plead for any concessions. 

However, Johnson is not guaranteed to get the top job. Although he is the favourite, we all know what happened in 2016 and Oddschecker.com is offering odds on dozens of MPs so it is a crowded field. But none of them set the pulses racing and none have the brand recognition that the Tories need. If he does beat off the challenge of MPs to go forward as one of the two candidates from which members of the Conservative Party will choose a new leader, he will probably win a majority of the 120,000 party members eligible to vote. Johnson will then have a maximum of three years before he faces the 46 million eligible to vote in a general election which will determine whether he is the Heineken candidate of old (reaching the parts other mainstream politicians cannot reach) or whether he is now Marmite Man (loathed at least as much as he is loved).

The bottom line is that Brexit has indeed upended politics in a way that even Nigel Farage did not envisage in 2016. It has certainly changed the Conservative Party and severely damaged its reputation for competence. Worse still, it has completely eroded many people’s faith in politics, the echo of which will resonate for many years.

Sometimes it pays to pass up the top job

I have often used the Alex Ferguson syndrome to describe the poisoned chalice of taking on the prime minister’s job in the current circumstances and it is a metaphor worth revisiting. Recall that following Ferguson’s departure as Manchester United manager in 2013 his replacement, David Moyes, seemed to find the job too daunting and was gone in less than a year. It was thus decided that a bigger, more well-known figure was required to fill the post and the board duly appointed the highly acclaimed Dutch manger Louis van Gaal. He lasted two years before being sacked with the board deciding that insufficient progress was being made. May reminds me of Moyes – a low profile character who is out of their depth in the top job. Johnson has many of the characteristics of van Gaal – confident and up for the fight. Yet the Manchester job proved to be van Gaal’s last in football.

The moral of this story, and indeed the same is true of Game of Thrones, is that being in the right place at the right time is important and even extraordinary people will struggle with mammoth tasks if they find themselves in the wrong place at the wrong time. Succeeding Theresa May will be like walking into the lion’s den. I suspect whoever they are they will eventually be chewed up and spat out by the complexities of Brexit.

Brexit Through the Looking Glass

This morning in the office we were kicking around song titles to describe the current Brexit situation. As one old enough to remember the glory days of punk, my contributions were "Should I Stay or Should I Go" by The Clash (released in 1982) and "Anarchy in the UK" by The Sex Pistols (1977). Such is the shambolic state of the Brexit debate that we are beyond the five stages of grief (denial, anger, bargaining, depression and acceptance) and have reverted to outright ridicule.  

It is hard to know where to start but the bulk of the blame for the disastrous sequence of events over the past two years has to be laid squarely at the feet of Theresa May. I have no doubt she is a fundamentally decent woman who believes in delivering the best she can for her country, but as a prime minister she is useless. There is no shame in that. Some people are just not cut out to lead and she is one. But it has got to the stage where she is an outright liability to her party and country. She repeatedly makes promises she cannot keep and continues to bluff her way through, even though she has the weakest possible hand of cards. 

The litany of errors is long: By treating the non-binding referendum result as if it were a winner-takes-all event, May alienated Remain voters and large parts of her own party. Triggering Article 50 without a plan of what the government hoped to achieve was a huge strategic mistake. And the ill-judged election call weakened her domestic authority. Add to that her failure to judge the intentions of the EU, let alone the Brexit ultras in her own party, and the last two years have seen a steady erosion of May’s authority to the point that she makes a lame duck look secure.

The only reason she remains in 10 Downing Street is that the alternatives are either worse or simply don’t want the job under current circumstances. But as The Times noted this morning in an editorial, "Mrs May's attempt at brinkmanship has failed. Without trust and authority it is hard to see what she has to offer, having been trounced twice. The Conservative Party may now decide that only a new leader can find a path to an adequate Brexit." Following parliament’s efforts to prevent May from keeping no deal on the agenda this evening, with her own cabinet colleagues voting against her, her authority is weaker than any prime minister I can recall.

In fairness to the PM, when you are being undermined at every turn by so-called colleagues such as Jacob Rees-Mogg, David Davis and Boris Johnson, a difficult job becomes impossible. The Conservative Party generally is a mess. The pro-Brexit ideologues in the European Research Group have effectively split the party in two with their continued denial of the economic realities facing a post-Brexit UK. There will be no healing so long as they remain in the party. One of the great puzzles of modern British politics is how Theresa May remains so relatively popular (amongst Tories she is second only to – wait for it – Boris Johnson). The answer is she is opposed by Jeremy Corbyn whose dissatisfaction ratings are the highest of any opposition leader in 40 years. Labour has shown no leadership on Brexit and the 48.1% who voted Remain in 2016 believe themselves to be completely disenfranchised by the main political parties.

The great irony of the UK’s current position is that it has spent decades trying to undermine the EU’s drive towards ever-closer union, whilst Brexiteers celebrated winning their “independence” in 2016, only to now have to throw itself on the mercy of the EU to grant an extension of the Article 50 deadline. The sheer, utter, spectacular incompetence of the UK political class in allowing itself to be put in this position defies words.

Having handed the negotiating power back to the EU, what is likely to happen now? Other EU leaders have expressed the view that the UK needs a good reason to be granted an extension, and incompetence in dealing with its own MPs is unlikely to be good enough. And whilst Theresa May has expressed a preference for an extension that is both limited and one-off in nature, the EU is unlikely to give much weight to her wishes. Why should it? It’s not as if she can deliver on what she has promised. Moreover, DExEU has already suggested that the UK is not prepared for a no-deal Brexit in March and there is no reason to suppose it will be any better prepared in (say) three months’ time.

There is thus a strong possibility that if the EU does grant an extension, it will come with conditions attached – one of which may be that it has to run to end-2020. This will not go down well with MPs, many of whom will decry that the UK is being held prisoner by the EU. They may then be forced to make a choice between leaving without any deal and accepting that the only way that Brexit can be delivered at all is by accepting a prolonged delay.

This will raise the risk of a no-deal Brexit which is exactly what most economists have warned against for at least three years. Under these circumstances, I would not be at all surprised if the Withdrawal Agreement that has twice been rejected by parliament by two of the largest margins in the last 100 years will once again find its way back onto the table (and that is indeed being widely trailed on this evening's TV news programmes). Theresa May used to say that no deal is better than a bad deal. Judging by her desperation to get this deal over the line, she now seems to think that the opposite is true.

We should be in no doubt that the political shambles which has emerged over the past two years is the result of a lack of planning, organisation and leadership. Whatever people thought they voted for in 2016, it surely wasn’t this. My favourite quote to describe the Brexit omnishambles comes from fictional spin doctor Malcolm Tucker from the BBC satire The Thick of It who, when faced with political accusations, fired back with the memorable line “How dare you come and lay this at my door! How dare you blame me for this! Which is the result of a political class, which has given up on morality and simply pursues popularity at all costs.” What was political satire in 2012 is the political reality of 2019.

Downing Street cred

Yesterday’s announcement that Theresa May will, for the first time, countenance the possibility of an extension of the Article 50 deadline came not a moment too soon. To recap, the PM announced: (i) that she will offer a second meaningful vote on the Withdrawal Agreement no later than 12 March; (ii) if parliament rejects it yet again, then the government will table a vote no later than 13 March to ask MPs if they accept leaving without a deal; (iii) if they do not, parliament will be asked to vote on 14 March whether it will vote for an extension of Article 50 beyond 29 March.

Theresa May's credibility dwindles by the day 

I have been pointing out for months that an Article 50 extension was the most sensible outcome given parliament’s failure to agree what it wants, and it is good to see that reason finally appears to have penetrated 10 Downing Street. A bigger question is what took the PM so long to understand the reality of the UK’s position? It is understandable that she wants to get parliament to accept the Withdrawal Agreement negotiated in November, but her strategy of insisting there was a choice only between her deal and no deal was never realistic.

More than anything the decision confirmed the impression of a prime minister whose authority has disappeared like a badly fixed wig in a hurricane. Over the past two years May has promised that the government would decide the timing of Article 50, until the Supreme Court determined that it was a matter for parliament. She gambled on a general election and lost her parliamentary majority. She promised that “we will take back control of our laws and bring an end to the jurisdiction of the European Court of Justice” but is now pushing an Agreement with the EU in which “the UK’s domestic courts and authorities will be required to have due regard to the case law of the Court of Justice of the European Union.” May has also faced down a leadership challenge in which one-third of her party’s MPs failed to support her and when the Withdrawal Agreement was put to the vote it was defeated by the biggest majority inflicted on any government since 1924. Then there is the small matter of the parliamentary rebellion two weeks ago by members of her own party, which failed to offer support for the negotiating position with the EU that they had instructed her to take. And now, the prime minister who has promised parliament more than 100 times previously that the UK will leave the EU on 29 March is prepared to renege on that commitment as well.

This lack of credibility matters for what happens next. A three-month postponement of the Article 50 deadline will nominally give the PM more time to renegotiate with Brussels. But the EU has already stated that it will not renegotiate the Irish backstop arrangement, which is such a sticking point for Brexit-supporting MPs. Nor is it likely to grant major concessions to a leader who cannot guarantee that they will be passed by parliament. In addition, May cannot simply replay the trick of telling MPs that if they do not pass her Withdrawal Agreement the UK will crash out of the EU at the end of June without a deal, given that she has already blinked in the face of reality.

Nor is the economics credible

As if we needed reminding of the damage that a no-deal Brexit could cause, DExEU yesterday published a summary document outlining the difficulties that the economy would face. In short, it highlights the lack of preparedness with government departments reported as “being on track for … just over two thirds of the most critical projects.” The UK has signed trade agreements with only one of its major trading partners (Switzerland which was the 12th largest export market in 2017) though does have arrangements in place with Chile, the Faroe Islands, members of the Eastern and Southern Africa (ESA) Economic Partnership Agreement, Israel and the Palestinian Authority (which makes me wonder what Liam Fox has been doing since autumn 2016). 

In addition, DExEU also speared one of the options put forward by Brexit supporters that Article XXIV of the General Agreement on Tariffs and Trade (GATT) will allow tariff-free trade with the EU for a ten-year period. As DExEU pointed out, “This is a misunderstanding of what the rules are … [since] it would require the agreement of the EU.” And as the Secretary of State for International Trade told the House of Commons on 14 January this year, the “suggestion would not deal with all the regulatory issues—the non-tariff barriers—that are so important to many businesses.”

DExEU also pointed out that “there is little evidence that businesses are preparing in earnest for a no deal scenario, and evidence indicates that readiness of small and medium-sized enterprises in particular is low.” Other gems include the nugget that 30% of the UK’s food supply comes from the EU and “the potential disruption to trade across the Short Channel Crossings would lead to reduced availability and choice of products” with the result that “food prices are likely to increase, and there is a risk that consumer behaviour could exacerbate, or create, shortages in this scenario.” The report goes on to point out that the “service sector (which makes up around 80% of UK GDP) is supported by free movement of people and a range of cross-cutting regulation such as mutual recognition of qualifications. In a no deal scenario … the UK would risk a loss of market access and increase in non-tariff barriers.” It concludes that a no-deal Brexit on 29 March “does not allow Government to unilaterally mitigate the effects of no deal.”

None of this comes as any surprise to the economics profession, which has been warning of these issues for more than three years. Given the complexity of the issues outlined in the report, matters will be no different on 30 June. Of course much of this can be avoided if the UK signs the Withdrawal Agreement. But this would make the UK an EU rule taker, which is (i) a much worse position than the one we enjoy today as an EU member and (ii) not a position the Brexiteers have shown any willingness to sign up to. That said, in an interview this morning in the Financial Times, Jacob-Rees Mogg, the keeper of the Brexit flame, suggested he was prepared to back down from his hardline position on the Irish backstop. Perhaps he now realises that if he blocks the Withdrawal Agreement, the bad Brexit that would result may be the only one he will get given that the Labour Party has moved towards backing a second referendum which may reverse the 2016 result.

Those suggesting we should just “get on with it” because “that’s what the people voted for” are wrong. There are no good outcomes – only less bad ones. But it would help if certain politicians, starting with the prime minister, were more honest about the trade-offs that Brexit entails. That way, voters might be able to make less ill-informed choices rather than relying on slogans painted on buses.