One Direction Brexit: May’s approach to leaving the EU was and is clear and is unlikely to change
Theresa May’s speech on Brexit yesterday was accompanied by a frenzy of media speculation, commentary and some sharp movements in the currency markets. It was billed as offering a new level of clarity in advance of the formal triggering of Article 50 of the Lisbon Treaty by 31 March.
Precisely why anything that she said was received as a surprise is, to me, by far the most surprising aspect of the entire episode. The broad direction of travel has been apparent since the end of the summer break (see the last BVCA Insight of August for supporting evidence). Nor has Mrs May been that Delphic in her public statements on the subject, despite the official line that she does not ever engage in, or encourage others in her administration to offer, “running commentaries”.
The essence of her strategy is both principled/dogmatic (according to philosophical taste) and pragmatic/ad hoc (again to be determined by one’s own outlook). The UK is unambiguously separating itself from the European Union, its objectives, its institutions and its obligations (thus a ‘hard Brexit’ in the lexicon of these matters) but will then seek to establish a new relationship which shadows certain aspects of the status quo as it exists today, but on a quite different constitutional, legal and cultural basis. It is a One Direction Brexit. It is absolutely clear in its end, and, of necessity, is only mildly flexible in means.
To appreciate the near inevitability of this stance, five factors are central to Brexit from here on in.
The institutional architecture
Almost the first decision that Mrs May took upon becoming Prime Minister was to establish two completely new departments in Whitehall – the Department for Exiting the European Union and the Department for International Trade – and to appoint committed advocates of leaving the EU to lead them (David Davis and Liam Fox). Selecting individuals with that position in the referendum was all but unavoidable as the Prime Minister herself had been in the Remain camp (albeit reluctantly). Engaging in institutional innovation of the form she determined, on the other hand, was a choice.
She could have done it differently. She could have designated either the Treasury or the Foreign Office to be the department responsible for the Brexit process and selected a Leave campaigner as the Secretary of State, but she did not. There was no need to create a Department for International Trade as a stand-alone institution at all or it could have been bolted on to another existing Whitehall entity - what became the Department for Business, Energy & Industrial Strategy could have been the Department for Business, Energy & International Trade instead. It would not even have been deemed a political necessity, if that route had been adopted, to have a Leave advocate at its helm.
Yet these two departments were created and that has had seminal consequences within Whitehall now that they have been staffed to an adequate level (although more expansion will be witnessed). The Department for Exiting the European Union is an incredibly unusual entity in UK government. It does not represent a permanent policy stream or a permanent social or economic constituency. It has a shelf-life in that presumably once the UK has fully departed from the EU it will be wound up. It has one purpose and one purpose only, implementing the withdrawal of the UK from the EU and it will follow that mission remorselessly. It thus has a bias by design in favour of a ‘clean’ Brexit which compels a preference for what will be termed a ‘hard Brexit’ if that is unavoidable. The Department for International Trade has been established even though the UK cannot conduct trade deals on its own until after Brexit has occurred and would still not be able to do so if the UK were to be part of the Customs Union thereafter. This means an institutional impulse exists to quit the Customs Union.
Party sentiment
It is difficult to overstate how profound the referendum result has been for the Conservative Party at Westminster, both as a membership organisation and among where it draws support in the electorate. The centre of gravity among Conservative MPs a year ago was in the ‘Reluctant Remain’ space on the spectrum. It is now in the ‘Orderly Leave’ category. True believer Remainers are now a much smaller minority among Conservative MPs than absolutist hard Brexiters were in January 2016.
The activists and the membership of the Conservative Party has similarly moved to an almost unanimous acceptance that, as Mrs May put it at her party conference, “Brexit means Brexit and we are going to make a success of it”. There is minimal appetite in the party for anything that smacks of half-leaving. And the Conservative electorate in the country has changed stance as those who backed Remain out of loyalty to David Cameron more than any other factor have the liberty to change their minds and as ex-Tory UKIP supporters who approve of Mrs May move back over towards the Conservatives.
The migration factor
As should now be blindingly obvious, the restoration of independent UK control over its borders and command over the levels and character of who can live and work in this country is the darkest red of red lines as far as the Prime Minister personally and a vast majority of her colleagues are concerned. There can be no credible means of leaving the European Union that does not result in a fundamental shift in this regard. That single fact renders the ‘Norwegian Model’, or membership of the European Economic Area, politically impossible and even makes the ‘Swiss Model’ or becoming aligned with the European Free Trade Association politically implausible. It also means that the UK cannot be a ‘member’ of the single market, it can only have certain forms of access to or association with it. Crucially, though, Mrs May has opened the door to a possible ‘cash for access’ deal in this space.
European sentiment
The implication of Sir Ivan Rogers’ infamous leaked farewell e-mail as the UK Ambassador to the EU in which he warned against “muddled thinking” over Brexit was that senior ministers were ignoring his warnings that the EU would not be helpful in the negotiations over our departure, or just deluding themselves that sentiment would shift once serious bargaining had started.
If so, that is quite harsh on those ministers. They essentially accept what Sir Ivan told them that he was being told and that not much was likely to change in what others thought, but they have drawn a different conclusion. Sir Ivan plainly believed that the response to his analysis was that a change of course was needed in a ‘soft Brexit’ direction. Mrs May and her advisers, by contrast, take the view that if no soft Brexit on terms which matched the domestic political reality is forthcoming, then it would be better to prepare for a harder Brexit and to regard any concessions or partial deal that did emerge as a bonus.
The short-term economy
All of the four factors outlined above produce a dynamic in favour of a clearer and a cleaner Brexit with a relatively modest interim or transition period between the act of leaving the EU and finding a final settlement thereafter. The one element which could (and theoretically might still) operate in the opposite direction would be a significant decline in short-term economic activity in the UK of a form that was widely accepted to be exclusively or overwhelmingly the consequence of the vote to withdraw and for that disruption to prompt sections of the public to change its mind over leaving. In the absence of such evidence, the economy today is also serving the cause of a One Direction Brexit. To conclude, Mrs May’s approach to leaving the EU always was and is clear and is unlikely to change.
Tim Hames
Director General, BVCA
