Hold Brexit, We Need an Election
By David Worsfold
It was inevitable. Changing Prime Minister from Theresa May to Boris Johnson did absolutely nothing to alter the simple fact that Parliament has been deadlocked over Brexit ever since May came back from Brussels with her first Withdrawal Agreement nearly 18 months ago. Sooner or later MPs were going to have to turn to the country, either in a General Election or a second referendum on Brexit to seek a potential resolution to the crisis that has dominated British politics since the referendum in June 2016.
There were a dozen votes in Parliament on a possible second referendum and none of them came close to producing a majority so one-by-one the opposition parties came to the conclusion that they would have to support a General Election. That will now happen on 12 December and the volatility of British politics makes the outcome almost impossible to predict this far away from polling day.
In the meantime, we have Boris Johnson’s new Withdrawal Agreement deal lying on the table with the EU having agreed to give the UK until the end of January next year to ratify it. The mood music from Brussels says there will be no more extensions to the Article 50 withdrawal process but we have heard all of that before.
The deal itself is almost identical to May’s. Only Johnson seems to believe the 5 per cent or so that is different is an improvement. Crucially, the proposed changes to the arrangements for managing the Irish border have sent Johnson’s onetime allies into the Democratic Unionist Party into a tailspin of rage because they are now looking at a nominal border in the Irish Sea. The DUP represents the pro-British Protestant half of Northern Ireland and they fear this could be a step on the way to Irish re-unification after 100 years of partition. The Catholic Irish nationalist community elect MPs but as they represent Sinn Féin they will not take their seats in a British Parliament.
The Johnson deal does at least have a transition period running until the end of 2020 which offers some chance of ironing out issues around health insurance, travelling to Europe with a car and the position of the large British expatriate community in Spain. There is, however, a huge amount of naïveté suggesting that the full Future Trade Relationship (the second phase of the leaving process) can be concluded in that time. Not a chance. It will take at least ten years to negotiate a full trade agreement covering all goods and services.
This means there are two potential cliff edges for Brexit.
The first would come at the end of January when the current extension of the Article 50 process to agree a Withdrawal Agreement expires. The current thinking is that if the Conservatives get an overall majority on 12 December then the deal negotiated by Johnson will go through the UK Parliament quite quickly, followed by ratification by the relevant European institutions straight after Christmas, facilitating a moderately orderly exit in January.
Anything short of an overall Conservative majority but with them as the largest party would leave us in a similar position to one we have today. This stalemate would see the UK crash out on 31 January without a deal unless the EU blinks again at the very last minute and offers another extension. A No Deal Brexit has damaging implications for members of the EU, especially those countries whose ports do the most trade with the UK so they do not relish a No Deal Brexit.
If Labour emerges as the largest party they will probably seek support from the Liberal Democrats and SNP – Scottish Nationalists (both expected to do well in the election) to ask for a longer extension to negotiate a radically different deal which could then be put to the country in a second referendum towards the end of 2020 with remaining in the EU as the alternative. The complication with that scenario is that the SNP are getting impatient to hold another referendum on Scottish independence next year.
Even if Johnson is re-elected at the head of a majority Conservative government and passes the Withdrawal Agreement, there will be a second No Deal cliff edge at the end of 2020 if the Future Trading Arrangements are not in place. If that happens trade between the EU and the UK will revert to World Trade Organisation terms with tariffs on a wide range of goods and services.
There are so many ifs and buts that the one constant of the last three and a half years remains: businesses are frustrated and confused about what they should plan for. Investment decisions are being deferred and major decisions are being put off. At the same time, consumers are growing cautious about spending money which is starting to have a depressing effect on the economy.
It would be a fool who said everything will be clearer after 12 December.