Brexit Blues? How divided are ministers over their approach to leaving the European Union?

It has been said of Richard Wagner’s music that it is “better than it sounds”. Many in the business community might be hoping that the Government’s approach toward leaving the European Union is better than it currently looks. The past two weeks or so have hardly been a public relations triumph in terms of elite sentiment, even if the public as a whole has rather more sympathy with ministers.
The Conservative Party conference led the markets to discount sterling to the point where it has reached record lows against the dollar and now seems set to achieve the status of the Somali shilling on the international exchanges. While this is a boon to exports in the short-term, as the official data yesterday has already hinted in the medium-term it is an invitation to inflation.
A proposal by Amber Rudd, the Home Secretary, to oblige companies to publish data on the number of foreign workers that they employ went down so badly with corporate Britain that it has become an ex-policy at astonishing speed. Added to which, as soon as the House of Commons returned after the party conference recess, MPs saw the bizarre spectacle of ministers seeking to assert that while the act of withdrawing from the EU was designed to restore parliamentary sovereignty, Parliament itself should have but a limited role in discussing, never mind deciding, what Brexit might look like. Once again, a retreat had to be sounded.
Throw in press speculation that David Davis, the Secretary of State for Exiting the EU, and Liam Fox, Secretary of State for International Trade, are convinced that the Treasury is seeking to put a brake on their activities in the name of retaining membership of the single market, with Philip Hammond, if the wilder chatter is to be believed, ready to leave Cabinet if the UK opts to depart from said single market and the overall impression is not one of coherence.
To an extent that sense is correct but it was and is also inevitable. The Brexit project is the most challenging and complicated that any UK administration has faced in seven decades. The existence of new departments alongside the historically dominant Treasury and Foreign Office would only ever reinforce those tensions. And if the Labour Party ever managed to find itself an able and intelligent Shadow Brexit Secretary, which in the form of Sir Keir Starmer, who has a fine legal mind, it has now done then a Government with a majority of a mere 12 seats and a minority of staunchly pro-EU MPs within its ranks was always destined to be vulnerable to an ambush in the House of Commons.
So what is really going on in Whitehall and is it, in the spirit of Wagner’s music, better than it looks?
Ministers were surprised, even stunned, by market reactions to their party conference
No one in Number 10, the Treasury, nor any of the departments with a claim on Brexit remotely saw the slump in sterling coming. As far as all of these actors were concerned, the markets should either have welcomed what was announced or have anticipated it. In advance of the Conservative conclave in Birmingham, business had asked for far more clarity on the timing of triggering Article 50; which is precisely what it was offered with the explicit statement that it would occur in the first quarter of 2017, with the implication that departure from the EU itself would probably then take place two years later.
Everyone with an interest in the matter knew that to affect withdrawal the European Communities Act 1972 would need to be taken off the statute book, calling this procedure a “Great Repeal Bill” may sound melodramatic but it matters not a jot in terms of substance. Furthermore, the decision of the Prime Minister that at the time of repeal all existing EU law would instantly be repatriated in to UK law and only after that would their continued future be contemplated seemed to ministers like a rather ‘soft’ Brexit way of moving, offering maximum flexibility in negotiations. It also seemed absolutely obvious to those around the Cabinet table (whether they had campaigned for Remain or Leave) that ‘taking back control’ over migration will be an unambiguous necessity. Indeed, officials in Downing Street are still scratching their heads as to what it was that was said that could rationally push markets to assume the hardest of hard exits was imminent and selling pounds.
In fairness to outside observers, the atmospherics around the conference rather than the details of anything announced were striking. The sentiment was distinctly UKIP-lite; it was difficult from the flavour of the occasion to recall that the official position of the Conservative Government, and so the wider party, six months ago was that the UK should stay in the EU. The mantra was not only ‘Brexit means Brexit’ but ‘And Thank God For That’. It was a classic example of those who were inside the conference bubble not really understanding how it looked to those on the outside of it.
There is no serious dispute within Cabinet that authority over migration must be reasserted
The Cabinet certainly contains a range of opinions over migration but there is not one member of it who does not accept that it was the determining issue in the referendum on 23 June and that the minimum condition for a politically credible Brexit is that the UK is in a position to choose how many and whom of EU nationals are able to be employed in the UK. The absence of any serious contest on this point thus sets the parameters for everything else that follows. The Chancellor concedes this as much as any other actor (even if key Treasury officials deeply regret the reality they are faced with).
This does not mean that there will not be bitter disputes over what the details of any new migration policy will be. The likely outcome is that prospective EU migrants to the UK must have a firm offer of employment in advance and must demonstrate either high skills or be willing to work in sectors that have an evident shortage of domestic labour.
Within that framework, however, there is room for pro and anti-migration factions to battle. Does a ‘firm offer’. have to involve an interview either inside the UK or abroad or could it all be sorted out via the internet? What are ‘high skills’ or the proxy for them (possession of a university degree?)? What do employers have to do to prove that there is a shortage of available domestic labour? How must will such a system cost and who should pay for it? All of this will be the subject of intense lobbying. It does not, though, affect the core policy principle.
The real contest will be about access to the single market and not membership of it
Absent a dramatic change of sentiment within the EU itself, there is not one Cabinet member who believes that the UK can maintain its current relationship with the EU and also assert supremacy on migration policy. This means that in practice everyone accepts that the UK will not be a member of the single market as that term is presently understood to mean today. The issue is hence simply one of how much the UK is willing to sacrifice in terms of being prepared to maintain EU legislation over various sectors ‘voluntarily’ and (more controversially) whether it is ready to make some payment in to the EU budget solely to deal with the costs involved in the operation of the single market itself.
It is true that there is a divide here at the moment. It is a more subtle one than is being portrayed. It is not the Chancellor versus the PM, or the Chancellor versus the Brexit ministers. Mr Hammond is certainly willing to compromise the most in order to secure the widest practical access to the single market (notably to protect financial services and the car industry). Dr Fox is the one who has the least enthusiasm for any concessions at all in this realm (not least because if the UK were to stay part of the Customs Union his department would have a much reduced remit). Boris Johnson is closer to Mr Hammond. Mr Davis is nearer to, but not as absolutist as, Dr Fox. Mrs May will end up making the call on this crucial matter. But she will do so late in the day having kept her options open.