Where the Hell are we now?

May’s deal, no-deal, Norway or Bremain? The vote on the Withdrawal Agreement did not take place on Tuesday. Instead, there was a putsch by Tory Ultras – which Mrs May survived. So, Mrs May will steer us through Brexit. But which Brexit?

Crisis at Christmas

If a general knows he will lose a battle, he should not fight it. (Sun Tzu, The Art of War (China, 5^th century BC)).

Vidi, veni, vinci. She saw, she came – and then she avoided defeat. The debate on the meaningful vote was already in its fourth day when it vote was pulled. This is what Mrs May told the House of Commons in a statement on Monday afternoon (10 December):

I have listened very carefully to what has been said, in this chamber and out of it, by members from all sides. From listening to those views it is clear that while there is broad support for many of the key aspects of the deal, on one issue – the Northern Ireland backstop – there remains widespread and deep concern. As a result, if we went ahead and held the vote tomorrow the deal would be rejected by a significant margin.

Now it is true that a large majority of the 100 plus prospective Tory dissenters – not to mention the 10 DUP members – are very exercised by what is effectively an EU veto on the UK ever leaving the Customs Union unless it effectively cedes sovereignty over Northern Ireland to the EU. That sticks in many a craw. But the backstop (horrible word) is by no means the only reason why to ratify this deal would be an act of cringing supplication.

For a start, there would have been no possibility of making trade deals which gave third states preferential treatment over the EU itself. I could go on: but let me just say that – not for the first time – Mrs May was economical with the truth. There is not broad support for the deal either inside the House or in the country at large.

Moreover, Labour was not going to vote the deal down because of the backstop – but rather because of the exotic confection that they could get a better deal. I mean, who could seriously doubt amongst my distinguished readers, that 24 hours after Mr Corbyn had kissed Her Majesty’s hands, Sir Starmer, despatched to Brussels accompanied by the verbose Ms Long-Bailey and the ever-empathetic Ms Abbott, would make mincemeat of Monsieur Barnier? Surely, they would return the next day to London on the Eurostar with a piece of paper: peace in our time. Job done.

So the notion that all Mrs May might have to do next was to get assurances about the backstop from her fellow heads of government in Europe was (to put it mildly) far-fetched. There would have to be a substantive review of the mechanism by which it is triggered – or not. Many fine minds have been working on this in the background. A distinguished lawyer of my acquaintance was up all night re-drafting the relevant clauses of the Withdrawal Agreement in collaboration with Tory MPs. They emailed the draft to Monsieur Barnier. Came there no reply, of course.

What about the assurances? Frau Merkel listened politely and then trotted out the tired formula that Brexit negotiations were a matter for Monsieur Barnier and his team, and that individual heads of government (even the Bundeskanzler), could do nothing to interfere. So Mrs May’s trip to Berlin on Tuesday was a waste of RAF kerosene. As we all knew it would be. Similarly, Mrs May’s appeal for help to the assembled EU leaders on Thursday night fell on deaf ears.

Whatever many of my Leave-inclined readers might think of the EU negotiating machine – Michel Barnier, Martin Selmayr, Sabine Weyand – Federalists to a man and woman and lawyers all – it has been consistent, and single-minded. There was never any way that the EU was going to say: OK, England, we admit you’re special, so we’ve decided to give you everything you want with no price to pay…No, they sat down and asked back in summer 2016: OK, what are England’s greatest weaknesses? Let’s work on those…

And they came up with the trope of the Irish border – and how outrageously invidious it would be if Old Farmer Kelly, driving a consignment of potcheen from County Monaghan to County Armagh, might have to fill out a customs declaration online. (Even though he already has to file a VAT return.) Surely, the machine argued, that would be in flagrant violation of the Good Friday/Belfast Agreement (1998), a sacred treaty between the United Kingdom and the Republic of Ireland; and that, by that fact alone, the masked men in green berets might think themselves justified in resuming the armed struggle.


The noble Irish people, who proudly fly the EU flag above their public buildings, would have to be protected from the English imperialist madness that is Brexit by their 26 now tricolour-clad, Guinness-swilling and Blarney Stone-kissing European friends.

But that is not even the half of it. The Withdrawal Agreement that Mrs May is still so anxious to ratify is specifically designed to prevent the UK from ever achieving any competitive advantage over the EU. Leavers such as this writer always regarded Brexit, not as a Rubik Cube to be solved, but as a once in several generations’ opportunity to reshape the UK economy into a global winner. Not so Mrs May – who was, after all, a nominal, though unenthusiastic, Remainer. She believes first that Brexit is an unfortunate exercise in damage limitation; and second that the EU elite is inherently reasonable and that we have no choice but to comply with their judicious demands.

She has been negotiating almost entirely alone, assisted only by the Whitehall mandarinate. As far as we can tell she has treated her cabinet like the proverbial mushroom farmer: they are kept in the dark but every so often she opens the door and hurls a bucket of ordure over them…There should have been a Leaver in charge from the moment Captain Cameron abandoned ship…And she has come up with a deal which would leave us with less sovereignty than we had inside the EU…You can see why many Tories, who were already hopping mad on Monday, completely lost it on Tuesday…

We knew that Mrs May was a bloody difficult woman (something we rather admired). What we didn’t get is that, politically speaking, she is so far along the autistic spectrum that she is a head-banging self-harmer. But she is our head-banger: for she is the person who will see us through Brexit.

The Norway Option

The chattering classes have been talking about a pivot towards the Norway Option, even as a temporary arrangement, as a way of getting out without a cliff-edge Brexit.

There have been a number of distinguished minds consistently advocating membership of the European Free Trade Area (EFTA) since 2016 – amongst them Dan Hannan MEP and Cristopher Booker of the Sunday Telegraph. The oft-repeated argument is that we could join EFTA automatically since we were a member of the trade bloc from its inception in 1960 to the moment we joined the EEC (as it was then) on 01 January 1973.

The EFTA countries[i]– Norway, Iceland, Switzerland and tiny Liechtenstein – are members of the EU Single Market and of the Schengen Area, but they are not in the EU Customs Union. That means that they have to harmonise their commercial regulations with those of the EU, on which they are consulted, though they have no direct input into their design. They enjoy border-free travel to Schengen states (unlike the UK and Ireland) and they are committed to the four freedoms, including freedom of movement. However, there is a mechanism – a kind of emergency break so desired by Mr Cameron – according to which they can limit migration from EU states in certain circumstances. Most importantly, since they are not subject to the tariffs agreed under EU trade treaties, they are able to make free trade agreements (FTAs) with third-party states.

Norway is neither in the Common Agricultural Policy (CAP) nor the Common Fisheries Policy (CFP). Norway had two referendums on whether to join the EEC/EU – one in 1972 and another in 1994. In both referendums the metropolitan areas voted for EU membership but the coastal communities – Norway has one of the largest fishing industries in Europe – were opposed. Norway jealously preserves its fish-rich territorial waters for Norwegian fishermen alone. There are many British fishermen, not least in Scotland, who envy that.

The Daily Telegraph reported on 01 December that eight cabinet ministers – including Chancellor Hammond – had discussed a “Norway Plan B” given the nil chance of the May-Barnier Withdrawal Agreement passing through the House of Commons. According to the report, these cabinet ministers believe that a Norway model could win the support of 70 Labour MPs, the DUP and even some SNP MPs.


The Norway-plus idea advanced by Nick Bowles MP is that we would be out of the political institutions of the EU and no longer bound by the mantra of ever-closer-union. We would not be subject to the ECJ. We would have to make financial contributions – as Norway does – but they would be relatively modest. Under the EEA agreement Britain could suspend free movement if it causes “serious economic or societal difficulties”. Supposedly, Liechtenstein has invoked this cause for the last 22 years.

It seems that the EFTA members would have no objection to our membership. However, the EU would oppose it as it would erect a supposed “hard border” in Ireland. (The Republic would be in the Customs Union but Northern Ireland outside.). Once again, the wretched trope of the Irish border trumps all.

There are arguments against the Norway option on both sides. The Bank of England (a bastion of Remain) thinks that the City could be disadvantaged since we would be a rule-taker (as indeed under Mrs May’s deal). Brexiteers, like Steve Hilton, argue that not even Norway likes Norway.

No-deal

New terminology has evolved in recent weeks to describe various no-deal scenarios. Accidental no-deal means that we muddle through the late winter and spring and then wake up on 30 March to find that trucks cannot cross from Dover to Calais because they do not have the right paperwork – and no one on either side of the Channel knows what the correct paperwork looks like. Mitigated or planed no-deal means that, come the day, truck drivers will be equipped with all the necessary documentation and that customs checks on both sides would be conducted by officials expeditiously.

I explained three weeks ago how, in principle, the UK could take up its seat at the WTO in Geneva on Monday, 01 April 2019. From that day onwards the UK would endeavour to negotiate a free trade agreement with the EU (which is the stated intention of the Political Declaration) as a WTO state, dealing directly with the world’s largest trading bloc. Since both sides would start from a position of enjoying identical regulatory regimes (and the UK would not seek to modify regulations for its own sake) that task should be completed much more swiftly than, for example, the EU-Canada FTA which was signed in 2016 after seven years of wrangling.

All this begs the question of whether a Withdrawal Agreement is necessary at all. When the British Empire was dismantled in a kind of closing-down sale during the 1950s and ‘60s, there were no withdrawal agreements – just treaties that recorded the change of jurisdiction and the transfer of state assets from the British Crown to the newly independent states. Of course Britain should meet any outstanding obligations, as should the EU; and, of course, the framework agreements regarding, for example, cooperation in scientific research should be perpetuated wherever possible. I note, however, that it is Europe that is kicking the UK out of the Galileo Programme – much against its will – not Britain flouncing out.

It is true that even the best mitigated no-deal would cause dislocation in supply chains for the first 3-6 months or so: but that is not necessarily an excessive price to pay for the greater prize – the ability to reshape our trading relations in a way that maximises opportunities for us. The Japanese should not fret: tariffs are not really the problem at all as these are generally modest and can be easily budgeted for. The impact of tariffs on the export of Nissan cars will be much inferior to the competitive advantage conferred by the depreciation of the pound since 2016.

Bremain

On Tuesday (11 December) Sir John Major (PM 1990-97) declared that Article 50 should be revoked forthwith. On Monday the European Court of Justice (ECJ) had ruled that the UK could unilaterally rescind Article 50 without the agreement of the EU-27 – but only if it intended to return to the fold and not to stall for time in further tedious negotiations. There is very probably a majority of MPs who would like to do this – just as there is a majority of the population who would like the horrible nightmare to go away.

Remainers dream of reversing Brexit; but that would only come at the price of undermining public confidence in parliament itself – the social contract between ruled and rulers. To be sure, they can – and probably will – delay Brexit. But it cannot be avoided.


Those who argue in favour of a second referendum – a so-called People’s Vote (as if the first one was not a people’s vote) – do so because they believe that there is a fighting chance that the 52-48 outcome might flip back to Remain. There is very little evidence, however, that public opinion has shifted on this – as Professor Curtice of the University of Strathclyde recently reminded us. Personally, I have encountered many people who voted Remain who are appalled by European arrogance during these negotiations. True, many of us underestimated how difficult it would be to unpick the thousands of agreements that bind the UK to Europe in every domain – but that, in itself, has shed light on the extent to which governments from the 1980s (including Mrs Thatcher’s) transferred powers to Brussels without adequate national debate.

For those who advocate the People’s Vote there are three main questions.

First: on what basis would a second vote be a more legitimate expression of public opinion than the first? Why not hold a third if the desired result is not achieved? We know that this has been a tactic used by the EU elite – for example in Ireland and Denmark. When the French rejected the European Constitution in 2005 the EU just re-packaged it as the Treaty of

Lisbon and drove that through anyway.

Second: what would the question be? If it is another binary choice between Mrs May’s deal (which Labour opposes) and Remain, then that would surely be unacceptable to Leavers who oppose Mrs May’s deal. If it were a three-way choice between No-deal, May-Barnier and Remain, then what merry Hell would be released if the British people, in their infinite sagacity, accorded 33 percent for each option? I contend that there is no question format which could achieve consensus. The outcome would therefore be more confusion and recrimination.

Third: what does Remain mean? Is it to go back to the balmy days of the status quo ante bellum? It is by no means clear that the British rebate and exemption from the euro and the Schengen Agreement would still be available. On one reading of the Maastricht Treaty (1993) Britain’s opt-out from the euro will expire in 2023 (though there is some contention about this). And what about Mr Cameron’s emergency break of February 2016? Is that still on the table? Even more contentious: will we have to sign up to President Macron’s European Ministry of Finance with its tax harmonisation agenda? And will the European Army be able to deploy British regiments in conflicts, or to summon Europe’s largest aircraft carrier, HMS Queen Elizabeth, at whim?

A second referendum is a very bad idea – and talk of Remain-after-all is simple-minded. Even if you believe we have jumped out of the frying pan into the fire, that is not an argument for jumping back into the frying pan.

No confidence?

On Tuesday Ms Sturgeon called on Mr Corbyn, as Leader of the Opposition, to table a motion of no-confidence in HM Government. Mr Corbyn declined, saying that it was important to wait until “the appropriate time”. So, having attacked Mrs May for delaying a vote that she feared she would lose, Mr Corbyn delayed a no-confidence vote because he was not sure he could win it.

In the event, the coup came, not from Labour, but from the Tory Ultras on her own side. Just after 07:30 hours on Wednesday we learnt that the Chairman of the 1922 Committee, Sir Graham Brady, had received at least 48 letters from Tory backbenchers expressing dissatisfaction in Mrs May’s leadership – and that, consequently a vote would be held that very evening.


The irony is that if Mrs May had gone ahead with the vote of the Withdrawal Agreement on Tuesday, and even had it been conclusively defeated, there would have been no challenge to her leadership. That would have been an outcome – of a kind. It would have been clear that the deal required substantial amendment to get the support of the House. As it is, she merely offered the prospect of prolonging the agony.

As we know, Mrs May survived, though by an underwhelming majority. As a result, under Conservative Party rules, she will not be open to a further challenge for 12 months – so she will continue to steer the ship of state through the momentous year of 2019. Because she pledged that she would not lead the Tories into a 2022 election, her authority is irreparably damaged, and the fissures that run through the body of the Tory Party are more evident than ever.

How bad is it?

The British, especially the English – who tend to apologise if someone steps on their foot – have had another bout of embarrassment. What must all this look like in Paris, Berlin, Tokyo or Washington, they ask?

Actually, the French have been pre-occupied this week by a periodic national uprising; the Germans (who think the Brits are stupid, anyway) are distracted by the new leader of the CDU (when will mini-Merkel take the reins from Frau Angela?); the Japanese are more interested in Carlos Ghosn’s tax affairs; and our American friends are distracted by the trial of Michael Cohen.

Meanwhile, the Legatum Institute ranked Britain as the seventh best country in the world to live in, taking into consideration not just GDP but personal wellbeing. This year we overtook the Netherlands, Canada and Australia. Germany was in 14^th place; the USA was at number 17 and Japan at 23.

I see no riots in the street; Waitrose is still pullulating with foodies; West End theatres are full; at the National Gallery the Mantegna-Bellini exhibition is a must-see triumph. More significantly, on Tuesday, the ONS revealed that wages are rising at their fastest rate for over a decade. Many ordinary people are back in the black. Given the talk of crisis – and the mainstream media’s obsession that it is entirely the fault of “the Tories” – the opinion polls have been remarkably forgiving.

This is not a national crisis, as most victims of misfortune across the world understand the awful reality of that word. It is a crisis of leadership: though a temporary one.

How will it all end?

If the postponement of the vote smacked of panic, the whistle-stop tour of Europe stank of desperation and the leadership vote reeked of bathos. Despite her pyrrhic victory, this was the week that opinion hardened against Mrs May – both inside the Tory Party and in the country at large. As Nick Timothy wrote in the Telegraph on Thursday, she may have survived, but her deal is dead. Anything short of a legally binding ability to exit the backstop will not be supported by the 117 who voted against her.

Right now, it seems to me, the best outcome is also the most likely one: mitigated no-deal. The third act of the Brexit drama – the denouement – will be even more dramatic than the second.


In the third act the leading lady will leave the stage. I have a track record of correctly predicting the next prime minister. In early November 2015 I foresaw in these pages that Mr Cameron would lose the EU referendum and would swiftly be succeeded by Mrs May. (In my satirical piece about Mr Putin’s birthday party.) Next week, in my last Friday column of 2018, I shall reveal precisely who will be the UK Prime Minister at Christmas 2019 – and why his tenure will be a much happier one than Mrs May’s.

But there are bigger things going on even than Brexit. I will also share next week why I now believe that the outlook for the markets in 2019 is fraught with risk. Clue: go easy on the drastic plastic this Christmas – there’s far too much debt sloshing around the global economy…

[i]The European Economic Area (EEA) is EFTA minus Switzerland.