Theresa May won the Chequers game – now Remainers must face reality

Image: Bankenverband – Bundesverband deutscher Banken, Public Domain

Throughout more than fifty years as professional economist, rare has been the opportunity for me to claim “I was right” – even less “I told you so”. However, the recent meeting in Chequers of Theresa May with her unspeakable cabinet provides me with one of those rare moments.

Despite repeated and almost universal denials of the possibility of a Brexit agreement brokered by the accident prone May, a deal now seems if not imminent then certainly in the offing. And, yes, I predicted it. As much as I might like to attribute my prediction to analytical brilliance, the explanation is mundane: recognising the obvious.

The coming of what May dubbed a “UK-EU free trade area” is what any reasonably open-minded observer would have anticipated. The pieces of the Brexit puzzle have been lying around in full sight, awaiting some momentarily open-eyed person to put them together.

The Brexit jigsaw puzzle

Like jigsaw puzzles, the likely Brexit outcome is more easily assembled when one begins with the corner pieces then works to the centre. First among these is that any Brexit outcome will be determined by the most powerful actors. These are the financial interest of the City of London and German manufacturing capital.

Especially important is German trade in transport equipment with Britain (including cars). German producers have a substantial surplus as a glance at the numbers shows. The Merkel government has sought and will seek a deal acceptable to German manufacturers, as May will with the barons of the City. Both governments are right-wing, whose natural constituency is big business. As with most decisions in Brussels, the other EU governments are likely to yield to German economic interests and seek compensation and reciprocity on other issues (immigration, in EU budget negotiations, etc).

The second corner piece is that few if any Conservative MPs will cast a vote the result of which is to bring the government down and force an early election (that is, before 2022). The Chequers game demonstrated yet again that the enthusiasm of Tory Brexit MPs for “no deal” is more than offset by their loathing for a Labour government, with Tory Remainers in agreement on that point. To put it simply, fear of an end to almost forty years of Tory and Blairite neoliberalism far outweighs fear of leaving the European Union.

The improbability of a second referendum of any type provides the third corner piece. The first obstacle is timing. The average time it takes for parliament to process a bill to law is about 12 months. The Article 50 two year deadline is 29 March 2019. If a referendum were scheduled for the 11th hour, such as 21 March, referendum legislation would need Royal Assent not later than a month before to allow minimal campaign time. Parliament “rises” for recess on 17 July and does not return until 5 September when party conference season begins, which does not end until the first week of October. That leaves very little time, about 18 calendar weeks for legislation to run its course. The schedule is even tighter because of the five weeks of scheduled recess during October through mid-February.

This leaves a very tight parliamentary schedule to achieve a very contentious goal.  The difficulties are compounded by the likelihood that a May government might not itself introduce a second referendum bill, even were a Tory revolt to be successful. The alternative, a private embers bill, would face well-known and insurmountable obstacles. The likelihood that all the best outcomes occur – a sufficiently large and solid revolt of Tory MPs, a shift by Labour to enthusiastic support, new legislation that gets passed through parliament, and a question that is favourable or neutral to Remain – is very small indeed.

The fourth and final corner piece is that the fear of Brexit economic disaster represents a losing strategy in 2018, just as it was in June 2016. Thanks to fiscal austerity, the British economy has fluctuated between stagnation and sluggish growth for eight years. The most negative calculations of Brexit compare economic growth with and without EU membership. Were the same method used for the impact of austerity, the Brexit estimation would seem trivial. For a decade UK growth performance has been dismal, so how persuasive is the fear that GDP growth might decline from 2% to 1.7%?

After identifying the corner pieces, filling in the puzzle is an easy task. The important players want a deal. Tory parliamentarians are unlikely to bring their government down. The odds are stacked against a second referendum. And the public propaganda strategy for retaining membership was and is ineffective. All of this is obvious, yet even after the Chequers game almost every commentator and some of the public still persist in the “no deal” illusion.

Let reality intrude

As I write, articles are dismissing May’s cabinet agreement as temporary and certain to collapse. Remainer optimism has seized on cabinet resignations as indicating “chaos” in the government, an oft-used word with no clear meaning. The immediate question is not whether the Tory government is chaotic or orderly. Instead the important question is: will May survive? If a revolt removes her, the Chequers deal becomes an irrelevant.

If her removal prompts a new election, the probability of stopping Brexit increases dramatically. A successful leadership challenge requires that a majority of Tory MPs take the gamble of bringing the government down and prompting an election that ushers in a Labour majority, or a Labour coalition government. Every progressive should hope that so-called chaos transforms into successful Tory rebellion, while recognising that its likelihood is not high. The obvious “stop-Brexit” strategy is to eject this government.

Bitter experience and many disappointments have convinced me that, when it comes to politics, one must plan strategy and tactics for the worse outcome. For a realistic Remainer, the worst outcome is the following scenario:

  1. May and her allies reach a tentative agreement with their continental counterparts (all right-wing except in Portugal and Spain).
  2. The agreement is announced at the Tory party conference at the end of September.
  3. Three weeks later at its scheduled meeting, the European Council gives conditional approval to the same or similar agreement.
  4. In November the British and European parliaments approve the agreement.
  5. Before the end of 2018, Britain is out of the European Union with a new trade agreement in place.

As Will Hutton has written, approval by the European Council is quite likely.  Furthermore, no announcement will be made at the Tory Conference without de facto agreement with Brussels. Members of the European Parliament may grumble, but any agreement approved by the European Council will pass. For the May government, the weakest limit in this scenario is UK parliamentary approval. This is also the only point at which progressives can block the scenario from running its course.

We face the possibility that long before any second referendum could be approved, much less voted on, Brexit will be a “done deal”. The anti-Brexit strategy must therefore take that seriously and plan accordingly. We must pressure Tory Remainers to think, for them, the unthinkable – a rebellion that could bring the government down.

Accepting reality

The refusal to entertain the possibility of a Tory brokered deal may in part result from deep anxieties about the consequences of Brexit, an outcome many view as too disastrous even to contemplate much less plan for. While I share those anxieties, I also realize that what we want to happen, and what will happen, are frequently different.

For many reasons, I want the British government to retain membership of the European Union. Contrary to what I want, the probability is high that Theresa May’s government will end Britain’s membership of the European Union, perhaps before the end of the year.

The time has come for rational Remainers to shift strategy, away from methods of prevention and towards developing a policy agenda to mitigate an undesired outcome.  Managing adversity requires foresight and policies. If by a great stroke of good fortune we remain in the European Union, our Brexit preparations will prove unnecessary, erring on the side of caution. But if Brexit happens, our preparations for it will provide the progressive policy response to mitigate disaster.

  • aldo

    The idea in general terms might sound fine. But what are the conditions of that free market.? What about migration ? If Britain controls its frontiers and does not allow migrants, and at the same time it is allowed to negotiate with the whole world, then my first impression is that Brexisters won the game.

  • Silverwhistle

    Why try to mitigate disaster? We should fight to rejoin if we are forced out against our will.

    • ANGRY_MODERATE

      I agree, but the UK would doubtless not receive such favourable terms as it now has. The Brexit lobby has badly damaged the UK’s interests, regardless of whether we remain, exit permanently or eventually rejoin.

      • Silverwhistle

        If you mean the opt-outs, we should not have had them to start with. I want to be a full member of the EU, the same as my friends on the Mainland. The so-called “favourable terms” are one of the reasons some people are saying “good riddance”. But I don’t want “special treatment”, just equality of treatment with the other members.

        • ANGRY_MODERATE

          Fair enough.

    • William MacDougall

      “Against our will”???? The largest number of Brits that has ever voted for anything voted to leave, a clear majority.

      • Silverwhistle

        A “clear majority” would not have been in margin-of-error territory, made all the more murky by the dubious behaviour, manipulations and funding behind the Leave campaign.

        • William MacDougall

          It would have been even clearer if the Government and EU had not misused government money and civil servants to campaign for remain, far more dubious behaviour.

          • ANGRY_MODERATE

            You are off your head. Your grasp of constitutional and legal issues is zero.

      • ANGRY_MODERATE

        “Clear majority”? I advise you to take some lessons in arithmetic.

  • William MacDougall

    How do you imagine that membership of the EU could be ended before the end of 2018? Yes if the EU rejects the Government’s very generous Chequers White Paper or if Labour fails to support it then chances of a no deal exit become high, but in May 2019, not this year.

    • ANGRY_MODERATE

      Is this a comedy act? — “the Government’s very generous Chequers White Paper”. It’s one of the funniest things I have read in some time.

    • Red

      From before the day of the referendum, the EU said the four freedom are indivisible and there cannot be “cherry picking”.

      And what does the Chequers Paper offer ? Asking “frictionless access at the border”, “participation by the UK in those EU agencies that provide authorisations for goods in highly regulated sectors” and “a new Facilitated Customs Arrangement that would remove the need for customs checks” yet “Free movement of people will end as the UK leaves the EU”.

      In other words, the UK want to cherry-pick some freedoms but not the fourth. That level of disregard of the other party’s core stance, spelled out again and again for more than two years is nothing near generous, it’s plain insulting.

      • William MacDougall

        Well first, I don’t see how membership could end this year, before the end of 2018, so I think you’re just commenting on my calling Chequers “generous”. It is indeed cherry-picking, i.e. a compromise, but it is very generous cherry picking in that it offers a lot more EU control of British laws than people thought they were voting for. And if rejected by the EU and the EU continues to insist on a backstop with a GFA violating Irish Sea border, then we are likely to leave without a deal: no ransom payment, no freedom of movement, no controls on the British side of the Irish border, and high tariffs on German cars and French cheese; do they want that? “Generous” or not, the EU would be well advised to take the Chequers offer, if it’s still on the table next week.

  • ANGRY_MODERATE

    The limitations of economists are rather too obvious in this article. The author appears to be unaware of the massive legal and political problems that May has failed to address — most notably those concerning free movement of goods and people. Free trade is not the same as a customs union and is not the same as the Single Market. Similarly, migration of workers is not the same as free movement and the right of settlement. No external country has ever been able to get the EU to weaken its resolve on these two issues, and logically this makes sense. Once you start diluting core principles of a political institution, that institution starts to disintegrate. The EU will not accept suicide as the Brits have done.

    • 3aple

      May I suggest you read the EU’s own Four Freedoms, in particular, the actual wording regarding services. You will see that this much vaunted freedom is not, nor has been free in the EU. It has never been more than an aspiration. Is it entirely coincidental that this ‘Freedom’, which has never been fully pursued by the EU, would be most beneficial to the UK, which has an economy strongly reliant on services?

      Yet here we have one of the EU’s fundamental “core principles of a political institution” already diluted. Do you think that might be why “that institution starts to disintegrate”?
      .

      • ANGRY_MODERATE

        Ermm, no. I don’t need to read anything because I first published research on this issue in 1989. Things have moved on since then, with more freedom to provide services than before. There has always been national opposition to allowing certain services to be provided, which is why there is a massive body of litigation in the CJEU on the matter. There remain some restrictions, but they are much less than before. There is no dilution: there is a pattern of slow improvement.

        Therefore, I cannot concur with your comment. The institution is not clearly disintegrating, but the biggest problems concern the incompetent political design of the eurozone (against expert economic advice) and the far right governments that refuse to allow a common European asylum system (CEAS) to function properly, with appropriate distribution of refugees across the EU. This has now deteriorated to not even accepting the principles of the 1951 Refugee convention, in the case of Hungary. In reality, the fascist Orban is closer to the UK Tory party anyway — which has failed to treat refugees and immigrants with the rights and respect that they are entitled to.

  • Holmeboy

    I expect us to rejoin the EU within 20 years.

    The reason I believe this, is because I have never been convinced by the Brexiteers promise of a promised land outside of the EU, the economic case was always flimsy at best. We’ll go into this semi-detached status that the Chequers agreement proposes, and chug along with that for a decade or so, but throughout that time, there will be a pro-EU case made (just as there has long been a leave EU case made), and we will eventually move closer and rejoin, the problem will be that the terms won’t be as favourable (with all the opt outs etc) as we currently enjoy.

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