How will the various factions in the Tory party look at the Brexit transition deal?
In Brexit Transitional Deal Part One : The Economics we looked at the likely impact of a Brexit transitional deal on UK trade, this article considers the political impact. A transitional deal would likely put the UK in a position akin to Brexit Lite up until the end of 2020. It would be a bit like a trial separation between the UK and the EU before the divorce. However, it opens the door wider for the UK government to fall before the transition period completes and a new Government to be elected with a different view of what Brexit should look like. (after all Brexit means Brexit). Therefore for hard Brexiteers it comes with a certain amount of risk; for everyone else it offers the possibility of a softer Brexit, or possibility no Brexit at all.
What would be the implications of extending the transition period out for as many years as necessary to complete bilateral negotiations?
Extending The Brexit Transition Deal – Brexit Lite
Admittedly Brexit Lite does little to increase control over immigration in the short to medium term, however it does offer several political and economic benefits:
- Brexit Lite is in line with the marginal preference of the British electorate to leave indicated by the 4% margin of victory (52% leave – 48% remain)
- Least economic impact – good for both UK and EU short to medium term prosperity
- Largely reinstates what the UK signed up to originally – a European Common Market
- Allows the UK to trade as a full EU member for some market sectors but have bi-lateral deals in other sectors
- Allows bi-lateral trade deals to take place at the pace required to negotiate the best deal
- Increases the likelihood of a widening of the EU rather than a deepening
- Puts the UK in a position to influence what EU membership lite looks like in an acknowledged two-speed Europe. The UK would probably transition from a Norwegian style model into something more like the Swiss model
- Allows UK the time required to negotiate a bilateral agreement of freedom of movement
- Provides the option to re-assess the situation in 10 years time. The political and economic situation will have moved on by then. At a future Brexit vote, the British population could make an another assessment about wanting more, the same or less EU integration
Change Of UK Government May Affect Duration Of The Brexit Transition Deal
In what circumstances might the transition deal be extended? It would require the UK government to fall in the next 3 years, an election to take place and a new government to choose a different path.
If there was a general election it would very likely become a proxy vote on Brexit: maybe one party (Con) would offer leave at end of transition deal; another (Lab) would offer the extension of the transition period to allow more time for negotiation- the “Jobs First” Brexit deal; and another (Lib Dem) would offer to kill Brexit entirely.
Hard Brexiteers Fear UK Government Would Not Outlast Transition Deal
Given a Brexit transition deal lets the UK try out to Brexit Lite, which is likely to be relatively benign and hence popular, hard Brexiteers may not want the risk of having to keep the Government with the current leader in power all the way through to the end of 2020. To last 3 years requires maintaining the support of the DUP in Northern Ireland through border negotiations, justifying a sizeable exit payment to EU which includes the transition period, likely failing to secure any bilteral trade deals and minimising the infighting in the Conservative party over who is the next leader.
“No Deal” Brexit Is Secured By No Transition Deal
Hard Brexiteers may feel this is way too big an ask and instead prefer not to have a transition deal. This brings the end of Brexit 21 months sooner. With no large EU exit bill and a hard border in Northern Ireland guaranteeing DUP support, then the Tory ranks should be able to stay in line until Brexit completes in March 2019. If hard Brexiteers form this analysis then their goal will be to pressurize the Brexit negotiators to give little ground so there is no movement on the Brexit exit bill, the Northern Irish border or citizens rights and hence trade negotiations with the EU do not start. And if trade negotiations have not started and make significant progress by March 2018 then UK companies will start to invoke their “no deal” contingency plans. Shortly thereafter, “no deal” would inevitably have to become the official policy, negotiations would largely cease, and planning for practicalities of a “no deal” Brexit would need to commence to ensure
No Deal Would Result In New PM in 2019
Once Brexit was completed in 2019, hard Brexiteers would have the benefit of replacing Theresa May by Boris Johnson, David Davis, Jacob Rees-Mogg or another suitable candidate who is a true Brexit believer. The new Prime Minister will need to give an energetic performance in the following 3 years to strike (or at least make significant progress on) a number of bilateral deals with our main trading partners: the USA, Switzerland, China, UAE, Hong Kong, Japan, Canada and the biggest one which is the EU. The Conservative government would want to into the next election in May 2022 with as many deals as possible in place.
Surviving The Brexit Transition Deal
The softer Brexiteers hope that a Brexit transition deal is struck and that there is a bounce in the economy as the cliff-edge moves 2 years into the distance. There is also the assumption that the UK would be able to agree a significant number of bilateral trade deals during the transition period, and that some solution can be devised for the Northern Ireland border that meets approval with the DUP, the EU and the UK government. Under less political, economic pressure then the UK government may last to the end of Brexit transition period, the end of 2020.
The End Of Strong And Stable Government in May 2022?
On January 2nd 2021, after the Brexit champagne has been drunk and the transition period is over and the UK has regained full sovereignty, senior Tories will have a decision to make.
If Brexit has gone badly with a failing economy, and no bilateral trade deals in place by the end of the transition period, then the Tories will expect to lose the next election. In this case the Prime Minister will remain unchallenged and left to fight and lose the election. Theresa May will be assigned the blame for a poor Brexit for not being a true believer. The Tory will regroup and prepare for opposition and the next election in 2027.
A Change of Leadership in 2021
If Brexit has gone moderately well, then there is a real chance a few candidates will want to step forward to take the credit. In this case there might be an early leadership challenge to Theresa May and a new Conservative leader and Prime Minister would be elected by Spring 2021 well in time for the next UK election on 5th May 2022. The new Prime Minister would only have a year in the job, which is long enough to make an first impression but not long enough to assess their results and hence should make for a close fought election in 2022.