After the election comes the painful Brexit reality



by Brendan Donnelly, Director, The Federal Trust



It should have come as little surprise that the election called by Mrs. May, supposedly to set the tone for the forthcoming Brexit negotiations, should have contained so little serious discussion of that crucial issue. Opinion polls have long demonstrated that the European Union is a matter of consuming interest only to a small portion of the electorate; the main party of opposition, the Labour Party, has naturally wished to focus its criticism of the government on policy areas in which the Conservative Party is generally regarded as weak, such as the welfare state; and the Liberal Democrats, who had entered the election campaign with high hopes of garnering an “anti-Brexit” electoral bonus, are still too politically enfeebled to be able to generate a European debate within the electoral campaign by their own efforts. It is not only Mrs. May’s European partners who are indifferent to her claim that a reinforced Parliamentary majority will help her in the Brexit negotiations. It appears the British electorate do not care much either.

Ironically, however, one of the most pressing and important challenges immediately facing the new government is precisely the start on 19th June of the negotiations designed to bring about British withdrawal from the EU. The EU has spent the past year adopting and refining its position for these negotiations. Mrs. May and her colleagues gave the distinct impression before and during the General Election campaign that they had no very clear strategy beyond hoping that they could keep most of their European cake outside the EU and eat it as well.  They will have less than a fortnight after the election to develop a more sophisticated strategy before the first round of negotiations begins. The list of “red lines” already drawn up by the EU is a formidable one. Ominously for the British government, these “red lines” are both substantive and procedural, the latter in particular having the potential to bring the Brexit negotiations to an early and public deadlock.

In the detailed negotiating guidelines adopted by the European Council, great emphasis is laid on the sequencing of the Union’s negotiations with the United Kingdom. The topic of most interest to the British government, that of the future commercial relationship between the UK and the EU, will not be discussed until the European Council (which acts by unanimity)  judges that “sufficient progress” has been made on three precedent issues. These issues are the financial settlement accompanying Brexit, the rights of EU citizens after Brexit and the implications of Brexit for the UK’s closest neighbour, Ireland. Each of these issues in its different way is an intractable one. Taken together they present a diplomatic challenge for the negotiators that may well prove unbridgeable.

Whether wittingly or not, the European Commission has increased considerably the political difficulties of the British government’s negotiating position by its insistence on the greatest possible transparency in the negotiations. This is particularly applicable to the financial settlement accompanying Brexit. The UK’s contribution to the EU’s small budget has always been a bone of contention in the British media generally, and not just in the Eurosceptic newspapers. There have already been exaggerated headlines in the British press and other media denouncing the amount likely to be demanded of the United Kingdom in the misleadingly described “divorce bill.” It is conceivable that if Mrs. May had been able to present at the end of the negotiations a final figure of financial settlement needing to be paid to achieve a trade agreement, she might have been willing and able to persuade her party and its supporters in the mass media to accept such a global arrangement. But it is difficult to see how she will be able to weather the storm of criticism that will inevitably rain down upon her head in the United Kingdom over the coming months as the details of the negotiations about the financial settlement arising from Brexit are remorselessly published and dissected. The Prime Minister may well find herself wishing that the European Commission corresponded more in reality to the vicious British caricature of it as a secretive and unaccountable body. She would find it much easier to deal with it if it were.

Mrs. May’s recent retreat after public criticism of her party’s manifesto proposals for reforming social care payments does not suggest she finds it easy to stand up to criticism from those she regards as her natural supporters. Moreover, it is not only in regard to the Brexit financial settlement that she will find herself confronted with internal political difficulty.  The EU has demanded in its negotiating guidelines a high degree of protection for the rights of EU citizens currently in the UK. It has also made clear that it will only regard as acceptable a guarantee of these rights which is policed by the European Court of Justice. This runs entirely contrary to Mrs. May’s personal aversion to the Court and is incompatible with the familiar rhetoric of the “Leave” side in last year’s referendum about “taking back control” of British borders.  It is true that some respite during the difficult Brexit negotiations may be available to the Prime Minister in discussion of Irish issues, where the Irish government has stressed its desire for a quick and satisfactory agreement. Nevertheless, the Irish government can be expected to demand cast-iron guarantees that after Brexit trade will continue unimpeded within the island of Ireland. It is very difficult to see how these guarantees can be given as long as the UK is firmly set upon leaving the EU’s Customs Union, a position reaffirmed in the Conservative manifesto for the General Election.

Given this unpropitious background, it is surprising that more attention has not been focussed in this country on the strong possibility that it will prove technically and politically impossible to move on to the second phase of negotiations between the UK and the EU. It may be that the premature General Election has served to distract attention away from this real danger. At the beginning of the General Election campaign, some of Mrs. May’s supporters claimed to believe that her capacity to engage in constructive compromise during the Brexit negotiations would be enhanced by a larger majority for her in the House of Commons. This claim never had much to commend it and has seemed increasingly threadbare as the campaign proceeded. Certainly, her rhetoric during the election campaign on the European issue has, if anything, been more bellicose than that which preceded the delivery of the Article 50 letter in March. Nor is it clear that after Labour’s improved showing in the opinion polls Mrs. May will in fact have a greatly enlarged Parliamentary majority after 8th June. If Mrs. May only has a small majority, the hand of the most radical Eurosceptics within her Parliamentary party will be greatly reinforced.

David Davis has described the issue of sequencing in the Brexit negotiations as the “row of the summer.” This is probably to misread the negotiating strategy of the EU, which does not intend to have a “row” on this matter but simply to have its negotiating procedures observed.  It is the firm determination of the EU to proceed to negotiations on future commercial relations with the UK only when it has made “sufficient progress” on other issues. The UK’s negotiating partners emphatically do not share the British government’s self-congratulatory assessment of the relative negotiating positions of the two parties. It is more than questionable whether any British government led by Mrs. May will be able to make such sufficient progress as to satisfy the initial demands of the European Council. This reality could well become apparent even in the initial rounds of negotiations and would have considerable economic and political consequences.

Many analysts have argued since the EU referendum last year that the negative economic consequences of Brexit will only become apparent over time and relatively gradually. It is therefore in the view of these analysts unlikely that public opinion on the European issue will shift radically during the two years of negotiations leading up to Brexit. A government firmly set on Brexit, as is Mrs. May’s government, should experience little difficulty in achieving its goal before the unhappy consequences of Brexit manifest themselves in the longer term. This analysis has a certain initial plausibility, but it is one that would be entirely undermined by the breakdown at an early stage of the Brexit negotiations.

It is already clear from the Conservative manifesto that Mrs. May’s government will seek what has traditionally been called a “hard Brexit.” If it ends up achieving a “hard Brexit” that has not even been negotiated with our partners, then the blow to confidence for financial markets and economic decision-makers would be immense, and might well serve to bring forward the timetable of eventual economic disruption universally predicted by economists as a consequence of Brexit. There is within the financial and business community of the United Kingdom a considerable measure of suppressed anxiety about the course that Brexit is taking. By a mixture of reassurance and threat, the government has managed until now to keep a lid on this rising disquiet. The looming likelihood of an unnegotiated Brexit could well provide the final straw for this disquiet to become generalized and public, with unpredictable consequences for the political economy of the United Kingdom.

It was the optimistic assessment of Mrs. May when she called the General Election that the electorate would see her as a more competent and credible negotiator of Brexit than Jeremy Corbyn. In the probably still likely event of her remaining Prime Minister after 8th June, this assessment will be put to the most searching test. An unalloyed failure to negotiate Brexit terms with the rest of the EU would hardly be a vindication of Mrs. May’s negotiating skill. But such a failure is the most likely outcome of the interaction between the high demands put to the Prime Minister by the European Union and the restricted room for manoeuvre allowed to her by her supporters, and indeed by herself.

Much political energy has been devoted to the question of Parliament’s or the wider electorate’s role in evaluating the outcome of the Brexit negotiations. We may well soon be confronted with the surprising conclusion that no such outcome can be achieved. Too little thought has been given to the question of what Parliament could and should do in such circumstances. In the weeks leading up to the General Election, rumours have abounded of the setting up of new political parties and the reconfiguration of old ones. The prospect of a non-negotiated Brexit would deliver a powerful impetus to this process. It is one thing for the 63% of the electorate who did not vote to leave the EU last June to be unrepresented by the major parties in the event of a “soft” or a negotiated “hard” Brexit. For them to continue unrepresented in Parliament by any significant political formation in the event of a suicidal and  unnegotiated Brexit would be quite another.