The Brexit Breakdown

9 December 2017

9:00 AM

9 December 2017

9:00 AM

Theresa May’s Brexit challenge is truly Herculean. Every time she believes she has done enough to finally move the Brexit process on, she is told that there is something else she must do. And each time, her tasks become more difficult.

The problem is compounded by the fact that May is weakening her own hand. The Monday misstep has harmed the UK’s position. As one Tory insider laments, ‘Things with the EU are bad. It shows Theresa can’t really deliver.’ Even a senior figure at the Department for Exiting the European Union admits that the ‘handling was poor’.

The UK is also coming up against hardball negotiating tactics. There have been moments when the Irish have refused to speak to May, saying that they’d rather the diplomats sort things out.

The Prime Minister had hoped to spend this weekend celebrating a victory; instead, for the second time this year, she is left trying to work out how things went so wrong. A deal with Dublin and Brussels seemed to have been agreed on a solution to the Northern Irish border problem but she was un-able to deliver it because the DUP, a Northern Irish party with just ten MPs, decided to veto it. How on earth was this allowed to happen?

The answer starts in No. 10. Veteran Tories lament that it is hopelessly understaffed (at a time when the demands on it have never been greater) and that there is a general lack of direction and grip. This problem has been made worse by the government’s recent personnel troubles. Political party problems (i.e., dealing with the DUP) are supposed to be solved by the chief whip, but Julian Smith is just a few weeks into his job. On such important issues Mrs May’s deputy ought to pull things together but, I am told, ‘Damian Green is effectively not operating. He’s one of the people who should be squaring off the DUP.’

Green’s role in government is vital. He is one of the handful of people trusted by May, and it’s part of his job to keep the devolved parts of the UK up to speed with the Brexit talks. But Green is fighting for his political life as he awaits the results of the Cabinet Office’s investigation into his personal conduct. The scandal has effectively put him out of action.

The situation is all made worse by the fact that the final deal on Brexit is a topic so explosive that Mrs May has, even now, still not dared hold a conversation about it with her cabinet — which cabinet members find extraordinary. It’s not just the DUP: everyone feels left in the dark. This lack of trust will make the debate even more contentious. ‘Hugging the EU close is more difficult now. Everyone is hypersensitive,’ says one of those who has been conveying No. 10’s message to Tory Brexiteers. One well-placed Conservative warns that ‘everyone is more suspicious than before’. In a sign of how bad the mood is among some Brexiteers, one of the leading figures in Vote Leave tells me there is a ‘week to fight back’ against what they view as an attempt to bounce the cabinet into accepting a soft Brexit, which would see the UK follow EU rules and regulations.

A deal with the EU soon on the first phase of the negotiations is not just possible, but likely. Neither side wants the talks to collapse, but if the UK isn’t deemed to have made ‘sufficient progress’ at next week’s Brussels summit, then May will come under huge pressure to walk away.

If the talks do move on at the summit, the really hard work will only just be starting for May. As one of those who has worked on the Brexit negotiations laments, ‘If she can’t get something basic like this right, how will she get the bigger deal done? It’s far more complex and involves far more players.’

In crude terms, the Brexit talks so far have been about the divorce settlement. When the talks move on, they will be about what kind of country the United Kingdom wants to be, and where it wants to stand in the world. The debate will expose deep divisions, not just in the country at large, but in the Tory party too.

When the new Brexit inner cabinet met for the first time last month, Boris Johnson pushed for a conversation on what kind of final relationship the UK is seeking. He didn’t get it. But he did get a commitment from the Prime Minister, recorded in the official minutes of the meeting, that this would be discussed before Christmas.

May’s much-mocked ‘Brexit means Brexit’ is her way of saying that we’d leave the single market (thereby restoring control of borders) and the customs union (thus retrieving the power to negotiate trade deals). The first point is not up for debate; immigration was one of the driving forces behind the Brexit vote. But the customs union is a less politically charged issue. Remaining in it would mean Britain couldn’t sign a comprehensive trade deal with anybody other than the EU. This would nullify the whole point of Brexit for many in the cabinet and leave this country as a rule-taker, not a rule-maker. How could Liam Fox, Boris Johnson or Michael Gove stay in government in these circumstances? It would also be a poor outcome for Britain, considering that Norway is in the single market but not the customs union.

Another option would see the UK leave both the single market and the customs union but continue to follow EU regulations from the outside. The idea is that this so-called ‘EEA minus’ approach would help the UK maintain the best access possible to the EU’s internal market.

Interestingly, cabinet opinion does seem to have moved slightly against this option. The Sunday before the Budget, Philip Hammond — seen as the leading advocate of a soft Brexit — said he looked forward to taking a different regulatory approach to the EU in fast-moving, technology-driven industries. One cabinet colleague reports that Hammond has said this in private conversations, too. Intriguingly, Amber Rudd, who campaigned more prominently for Remain than any other minister, echoed this point when the cabinet met before the Budget.

I am told that the basis for the cabinet’s discussion on the future trade deal will be a paper from the Brexit department. One influential figure there tells me that ‘The chances of a high-alignment, status-quo recommendation to cabinet is extremely low.’

The UK debate on all of these points too often forgets that the cabinet is not just negotiating with itself. Michel Barnier and his team have repeatedly stated that Britain has two choices: to be like Norway — in the single market — or Canada — with a trade deal that covers goods far more than it does services. Given the desire to show that the four freedoms of the single market are indivisible, it is hard to imagine the EU allowing Britain to avail itself of the first ones (free movement of goods, services and capital) while refusing to allow the fourth (free movement of people).

To reach a deal on the Northern Ireland border, May appears to have conceded that Britain might align itself with (i.e., adapt) EU regulations on agriculture and energy, but to protect harmony with Northern Ireland and the rest of the United Kingdom (which is the DUP’s priority), all of the UK would have to make similar promises. The Vote Leave champions in cabinet — Boris Johnson and Michael Gove — might accept this, at a push. But they would not accept any more.

The Boris/Gove alliance, which collapsed so spectacularly in the immediate aftermath of the referendum, has been repaired to some extent. They are pushing together on the importance of the UK being able to do things differently after Brexit. But temperamentally they are in different places. Boris is, as always, fearful that the whole point of Brexit is being lost. He is keener than Gove to try to win assurances from May on what Brexit actually means. Gove is less eager to have this fight. As one person who knows both men well tells me, ‘She isn’t forcing this argument, so Michael doesn’t want to establish red lines.’ Gove is also less bothered about the money and the terms of the transition than Boris. One Vote Leave ally of the pair says that ‘Boris has a strong populist nose on the money’, which Gove lacks.

This debate can’t be delayed much longer. Those who want to stay in the EU’s regulatory orbit have been adept at using the Irish question to advance their agenda. Gove, who thinks that it vital that the UK can diverge from the EU, is expected to wade into this debate soon. One of his allies says No. 10 is repeating David Cameron’s pre-referendum mistake of assuming that Gove will ultimately go along with whatever is decided, even if he hasn’t been consulted on it.

Those who want to stay close to the EU for fear of something worse have another argument up their sleeve too: Jeremy Corbyn. As the prospect of Corbyn becoming Prime Minister becomes ever more real, the idea of signing a deal that restricts the UK’s freedom of action becomes more appealing to those on the centre-right. The early Thatcher-era argument that Europe is a bulwark against Bennism (which led many Conservatives to oppose Brexit in the 1975 referendum) is making a comeback.

Then there are those in government who criticise Boris and Gove for wanting, in the words of one source, ‘to diverge for the sake of it’. They argue that pragmatism means the UK should be willing to accept EU rules in a slew of areas. One minister summed up this argument after the cabinet meeting on the Florence speech, when he opined that ‘Boris and Michael might be intellectually right, but they are practically wrong.’

The Brexit debate is difficult because the referendum revealed a country that was evenly divided on the question. But splitting the difference would be the worst of all worlds. Being in the single market but not in the EU for anything other than a temporary period would bring the drawbacks of membership without the benefits. As Theresa May tries to navigate her way into the next round of the Brexit talks, she must remember that if Britain is not going to do anything differently, then all of this agony really will have been for nothing.

James Forsyth talks to the former Greek finance minister Yanis Varoufakis.

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