After Tony Blair’s recent intervention, John Major became the latest ex-Prime Minister to flag up his concerns about Brexit this week. Speaking to Chatham House, he cautioned against “cheap rhetoric”, suggesting that the promises made to British people about what the can expect after Brexit were potentially “unreal and over-optimistic”. In particular, he pointed out the barriers to being able to secure a trade deal within two years of triggering Article 50.
It’s this point which highlights one of Theresa May’s most significant difficulties – the contrast between her more interventionist social and economic vision, and the free-trade, low-regulation country that some of those currently siding with the Prime Minister are seeking – which is where the UK may end up without a deal. The coalition of voices currently working together to deliver Brexit doesn’t necessarily share a coherent vision for the future of the UK, and at some point these contradictions are likely to burst out into the open.
“We cannot move to a radical enterprise economy without moving away from a welfare state” Major warned, adding that “such a direction of policy, once understood by the public, would never command support.” If you accept the argument that many people, especially in the midlands and the north of England, voted for Brexit because they’re fed up of being “left behind” by globalisation and didn’t feel the economic benefits of EU membership have been fairly shared across the country, then it seems unlikely that the libertarian leanings of Douglas Carswell, for example, will satisfy their concerns. For the moment the focus on delivering Brexit and reducing immigration is holding these groups together – but it’s a delicate thread that could yet unravel.
The Prime Minister can’t always get what she wants
Theresa May had been determined to get the EU exit Bill through Parliament without any amendments, and until this week she’d done a pretty good job on that front, deftly batting away Labour’s amendments in the House of Commons – aided of course by a small but healthy majority and the firm whipping system.
The House of Lords is another a matter though. With a different party makeup, almost 200 Crossbench peers, and no overall majority for the Government, it was likely that the ship would hit some stormy waters in the upper chamber. This week peers rocked the boat when they voted by 358 to 256 to guarantee the rights of EU nationals living in the UK after Brexit.
With most of the British public in favour of guaranteeing the rights of EU citizens this was a natural site for a rebellion – but the Prime Minister has insisted repeatedly that she does not want to settle this issue unilaterally, separate from the rights of UK citizens in other EU countries. She’ll seek to overturn the amendment when the Bill moves back to the Commons, probably successfully. But the defeat is still significant in showing that Mrs May can’t rely on everything going her away, and will likely delay her timetable slightly.
The CBI is worried about trade
Our former Prime Ministers aren’t the only ones worried about the impact of Brexit. The Confederation of British Industry this week warned that leaving the EU without a deal and trading on World Trade Organisation terms would open a “Pandora’s box” of economic consequences which would be harmful for both UK and EU businesses.
CBI President Paul Drechsler said that, while some firms are preparing for the possibility of no deal, “in reality many firms can’t prepare because the cost of change is simply too high to even consider it”. He accused those who have advocated that the UK should walk away without a deal of being irresponsible, pointing not only to the potential for high tariffs, but also regulatory barriers which would act as a block on trade.
There are those (such Tory MP John Redwood and the recently renamed “Economists for Free Trade” grouping) who have suggested that leaving on WTO would not be a problem – but this certainly isn’t a view that’s shared widely within the business community. Expect the CBI to keep the pressure up over the next two years to try and ensure that the Government comes away with a good deal.
David Davis has asked for a plan B
Brexit Secretary David Davis is also clearly aware of the potential for the UK to leave the EU with no trade deal in place and no transitional measures to tide us over. He’s asked ministers to put together plans for this eventuality – although he insists that he considers it an unlikely scenario.
Treasury documents leaked last year suggested that the UK’s GDP could fall by as much as 9.5 per cent if it reverts to WTO terms, and that tax revenues could fall by as much as £66bn a year. The exact economic impact of leaving the EU is matter of contention, but if these predictions came to pass it would clearly create huge challenges for the rest of Theresa May’s agenda. With the Article 50 notification fast approaching, the situation should start to become clearer.
EU leaders are making their own plans
With Theresa May confident that the EU exit bill will be passed, allowing her to trigger Article 50 later this month, the rest of the EU is preparing for the negotiations ahead. EU leaders have apparently pencilled in a summit for the first week of April to respond to the UK’s formal notification that it plans to leave the European Union and set out guidelines for EU negotiators.
However, the process could be delayed by the Government’s defeat on the amendment in the House of Lords this week – meaning that the legislative process will take longer to finish – and May’s desire to avoid the SNP conference which finishes on the 18th March. As four weeks will be needed to prepare for the summit, this could push it back to after Easter. But whatever the exact timing, it’s clear that the wheels are in motion to start the process – and after more than six months of speculation, we’re all going to get a firmer idea of what the Brexit negotiations are going to look like.