16 Jan 2019

Towards Plan B? May will probably try to buy a little more time before she shows her hand

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In the end, it was an even worse margin – 230 votes – than had been feared by ministers. There had been a faint hope that with the outcome all but certain, some Conservative MPs would hold back from striding in to the ‘No’ lobby to soften the blow of defeat and allow the Prime Minister a little more room to recover. The fact is, though, as set out in BVCA Insight last week, that if the Democratic Unionist Party did not move on the vexed question of the Irish border backstop in the light of the proposals for Northern Ireland put forward by Theresa May, and the reassurances contained with the letters exchanged between her and the presidents of the European Commission and European Council, then it was unlikely that mainland Conservative MPs who had previously expressed opposition to the Withdrawal Agreement would be then able to pivot politically and, even if highly reluctantly, embrace it. All of the whipping in the world could not change the fundamentals.

It will not, however, mean the end of this administration nor, unless she wants to leave now, of this Prime Minister. The decision made by Jeremy Corbyn to move a vote of no confidence is a sideshow. The DUP has been crystal clear that it would not assist him in bringing Mrs May and her colleagues down and ushering in an early general election. There is no chance of a splinter set of Conservative MPs breaking away from their party now in order to trigger such a ballot either.

What really matters is what Mrs May will do over the next few days and then say on Monday when she is obliged to report back to the House of Commons on the next act in this saga. That in turn depends on how much autonomy her Cabinet is willing to afford her at this stage in proceedings. There could be a point when, if there was no sense of a credible strategy coming from Number 10 and no sign of real consultation with her senior ministers, that the Cabinet would ‘take back control’ and force her hand (and/or force her out), if only out of concern that if they did not then Parliament would do so. But, assuming that Mrs May has not had enough of the whole Brexit drama and decides that she will walk away from it immediately, then she has a little more time in which to explore her options.

What are the possibilities that will be running through the minds of Mrs May and her inner circle?

One more heave

The Prime Minister’s first instinct will be to attempt to revive Plan A in a different form. This would entail a dash to Brussels and another round of telephone calls to other European leaders in order to acquire a further shift that might defuse the Irish border backstop controversy. The stated stance of the DUP is that they will not back a Withdrawal Agreement unless either (a) the backstop is dropped or (b) there is a unilateral exit mechanism from it or (c) it has an expiry date. It is extremely hard to imagine how the EU-27 could meekly accept any of these provisions as all of them would mean that what is meant to be an ‘all-weather’ insurance policy to ensure that there is no hard border would not be an ‘all-weather’ outcome. It would take an enormous change of heart in Dublin to do this.

So, realistically, what Mrs May might aim to obtain is something different. It would be a (d), namely a further avenue which the whole UK could take in mid-2020 if it was obvious that a free trade deal would not be completed by the end of that year, in addition to the present (politically poisonous) choice between extending the transition period potentially up to 2022 (which would be costly) or entering a backstop arrangement which would require the agreement of the EU in order to dissolve.

If the Prime Minister could find this Third Way, through the application of a provisional free trade agreement or reverting in the very short-term to membership of the European Economic Area and the Customs Union, for instance, then it is conceivable that the DUP might reconsider its stand and from there a means of bringing back a revised version of the Withdrawal Agreement to the House of Commons could open.

Neither Cabinet nor Parliament would be willing to wait indefinitely while Mrs May sought to convince the EU to be more flexible. At the very, very, most she may have three weeks in which to pull it off before she was compelled to throw in the towel on Plan A totally.

Link up with Labour

Arithmetically, the voting numbers in the House last night mean that a majority for an Agreement could be found between Conservative MPs loyal to the Prime Minister and the bulk of the Labour Party. By this means, Mrs May could bypass both the DUP and the pro-Brexit rebels and enact the Withdrawal Agreement without them. Maths and politics are, nonetheless, rarely a joint honours discipline.

The numbers could be there but there is zero possibility that it would happen. The price that Jeremy Corbyn would demand for entertaining such an arrangement would be a permanent Customs Union between the UK and the European Union. Any hint of that would lead to virtually every minister who backed Leave walking out and the Conservative Party enduring a split on a scale that would eclipse that seen over the repeal of the Corn Laws in the 1840s. It is not even worth the Prime Minister sending the slightest hint or any threat that she is contemplating such a notion.

Straight to Plan B

The other realistic strategy for Mrs May, therefore, is to announce on Monday that she is moving on to a Plan B with immediate effect. This would be somewhat awkward as she has spent most of the past three months insisting that there is no Plan B but this does not preclude a change of direction.

The most viable Plan B is a variation on the ‘Norway for Now’ or ‘Norway Plus’ scheme as a new version of a transition period. The UK would enter the European Economic Area in the short-term and maintain the Customs Union until an end state with the EU has been negotiated. There are many challenges that come with this approach but a number of advantages as well.

As the UK is a signatory to the treaty that created the EEA, the legal aspects of morphing into it are not believed to be unduly complicated if the political goodwill to do so exists. Although such a state of affairs would be similar to that envisaged under the extended transition period scenario and indeed parts of the backstop, the whole of the UK would be involved in this formula so the provisions which would need to be applied to Northern Ireland uniquely under the backstop do not apply.

Furthermore, if the free trade talks between London and Brussels dragged on with the suspicion of bad faith by the EU-27 entering the equation, the UK could not be ‘trapped’ in the EEA as Article 172 of its treaty allows for any member state to withdraw from it unilaterally once 12 months’ notice had been served.

If the Government were to back such a Plan B then there is probably a majority among MPs for it. The DUP would have no logical reason to oppose it. Most pro-Brexit rebels would fall into line, especially if the offer is supplemented by a clear pledge from Mrs May to stand down this year and thereby allowing them the chance to seize the leadership and take the negotiations in a Canada direction. Moderate Labour MPs would prefer it to a disorderly Brexit. Moderate Conservatives would hope that it became the basis for a final settlement.

The main tactical question would be whether it could be implemented by 29 March. The longer the delay before it, or any alternative Plan B that has yet to emerge, then the greater the chance that Article 50 may be extended until near the end of July or the close of September. That is increasingly the real question.

If Mrs May is allowed a free hand by the Cabinet, her preference would be to try one more heave. If that were then to fail and Plan B were not to become official policy until next month, then it is hard to envisage how ministers could avoid an Article 50 extension. This is coming close to inevitable.

Tim Hames
Director General, BVCA


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