It has been quite a week in Westminster. Theresa May has cleared two vital parliamentary hurdles on the increasingly tortuous path towards Brexit, narrowly getting the Trade and Customs Bills through the Commons. But this came at a significant cost; to her personal authority, to the unity of the Conservative Party and to the credibility of the Government.
The Government’s handling of these votes only heightened the emotional tensions within the Commons, compounding the increasingly entrenched policy splits on Brexit within the Conservative Party. There have been remarkable scenes of ‘blue on blue’ action in the Commons and across the media throughout the week. Some high profile Conservative remainers have even publicly raised the prospect of a national unity government bringing in Parties from across the Commons. Former Cabinet Minister Justine Greening has also called for a second referendum with three choices: endorsing whatever deal is agreed, remaining part of the EU, or leaving with no deal.
Monday’s decision to give Government support to Brexiteer amendments to the Customs Bill triggered a furious response from remainer Conservative MPs; they felt the Prime Minister was reneging on her own Chequers plan. By Wednesday evening the remainers had become rebels. They defeated the Government on an amendment to the Trade Bill binding the UK to EU medicines regulation post-Brexit, and nearly defeated the Government on another amendment that would have forced membership of the Customs Union as a fall-back option. This saw a dozen Conservative MPs rebel, despite warnings from the whips that defeat would trigger a vote of confidence in the Prime Minister and, possibly, an early General Election. The Government only won the day due to the support of a handful of Labour Brexiteers.
But after all the noise and fury has died down and parliamentarians drift away to their constituencies for the summer, what are the practical implications of this remarkable week for business and investors?
Firstly, while the risks to the Prime Minister and her Brexit plans have increased, a deal with the EU remains the most likely outcome.
Some of the Prime Minister’s detailed plans as set out in the White Paper (such as the ‘Facilitated Customs Arrangement’), look harder to deliver in practice in light of the Customs Bill amendments. But this was always likely to be the case. The most significant aspect of the White Paper and the Chequers agreement was to signal that the Prime Minister was willing to adopt a more pragmatic approach involving closer alignment with the EU than she had previously set out. It is likely that further compromise on the hard detail can ameliorate the damage done by these amendments.
Ultimately, there are two scenarios in which a no-deal outcome could be reached. First, a breakdown in the negotiations themselves. This remains a possibility given the complexity and scale of the issues at play. However, there is a genuine desire on both sides to reach a deal. No-deal would be damaging to the EU as well as the UK and this is well understood by the Commission and remaining member states. The second potential no-deal scenario could arise following a rejection of the deal by the UK Parliament.
That is why the more worrying outcome of this week for the Prime Minister is growing evidence that the parliamentary arithmetic on any particular form of Brexit may not stack up. It is accepted wisdom that there is a clear majority against a no-deal scenario. It also appears that there is not a majority in favour of remaining in the Customs Union. But these are not hard and clear calculations.
At some point later this year Parliament will likely be presented with some form of deal. At that point, with the Article 50 clock ticking and huge ramifications should Parliament reject the offer on the table, it will be an altogether different proposition to vote against it than to inflict a tactical defeat on the Government via the Customs or Trade Bill. It is impossible to predict what will happen, but there is a desire among most parliamentarians for a pragmatic solution to Brexit. If they are presented with something they think even partially fits this description in the Autumn then the Prime Minister may yet navigate her way through.
What about the future of the Prime Minister herself? She remains in a vulnerable position with no majority in Parliament, grappling with hugely controversial and complex issues on Brexit that are splitting her Party. This last fortnight has further weakened her authority. But she remains Prime Minister despite all the recent turmoil. There is still no clear alternative leader, still no apparent desire on behalf of any of the few credible potential leadership contenders to take over.
May will now spend the summer selling her Brexit approach to local Conservative parties across the country and, finally, engaging with the Commission in earnest. Many potential pitfalls remain and trouble will continue to brew over the summer, building up to what will be a very challenging Autumn period. But her premiership should now survive at least until those Brexit crunch points later in the year.
Marc Woolfson, Director