The key Brexit battlegrounds as 2018 begins

The key Brexit battlegrounds as 2018 begins

With ‘sufficient progress’ in the bag and the EU Withdrawal Bill making it through Committee Stage in the House of Commons with a day to spare before the Christmas recess, Brexit finished 2017 in much better shape than many pundits and analysts predicted. So what are the key issues ahead for Brexit in the opening months of 2018 as talks move on to the all-important trade negotiations?

Cabinet conclusions

While the end of 2017 was dominated by high-profile battles between London and Brussels, the DUP and Dublin, rebels and the Government, arguably the most significant battle was going on behind the scenes around the Cabinet table. ‘Divergers’ like Boris Johnson and Michael Gove have been pushing for the UK to opt for a ‘Canada plus’ approach, which would see the UK sign a comprehensive free trade agreement with the EU but return full legal power to Parliament after Brexit.

Meanwhile, ‘aligners’ such as Philip Hammond and Amber Rudd have been arguing for something more akin to an ‘EEA minus’ option, which would see the UK mirror EU rules and regulations very closely, preserving the status quo to the greatest extent possible as a non-EU member and limiting the UK’s power to decide its laws for itself, even after it leaves the EU.

After months of shadow boxing between the two sides over the issue, Theresa May held two key meetings to start thrashing out the issue properly in the final week before Christmas – first with the smaller Brexit ‘war cabinet’ on Monday and then with the full Cabinet the day after.

The key phrase which seems to have emerged from this first round of meetings is ‘gradual divergence’ – the UK will not be drastically changing its laws overnight when it finally leaves the EU, but will take back the power to do so in the longer term. While this doesn’t sound wholly unreasonable in itself – vast swathes of the statute book are clearly not going to be torn up on the stroke of Big Ben as the UK leaves the EU but will be reformed over a period of years – it is ultimately still a temporary fudge.

Important questions remain to be answered about ‘gradual divergence’. Who decides how gradual the divergence is? Who decides how far the UK can diverge? Will the UK be able to make these decisions itself, or will it require complex renegotiation with the EU or even treaty change to some future UK-EU treaty for the UK to be able to set its laws for itself after Brexit?

The latter scenario, where the British Parliament simply substitutes being in thrall to the EU for being in thrall to a new UK-EU treaty, would clearly not be satisfactory. Moreover, if the UK willingly chose to limit its options now, this would be needlessly throwing away leverage before the trade negotiations have even started.

The internal politics are further complicated by the impending Cabinet reshuffle. With a firm decision on the UK’s desired ‘end state’ not expected until the end of January, the balance of power within the Cabinet could well be different by the time this decision is made.

Transitional tribulations

While the EU has now officially given the green light to trade talks, there is a catch – they probably won’t actually start until March. While there were attempts by some in Brussels to spin it as a ‘punishment’ for David Davis’s comments following December’s agreement, the reality is that both sides need a little more time to work out their negotiating positions, with the UK Government yet to fully decide, as discussed above, and EU diplomats needing to shuttle back and forth between European capitals to secure some level of vague unanimity across the EU27 before they can give Michel Barnier his official negotiating ‘mandate’.

The focus of the next couple of months will instead be on securing a deal on transitional arrangements. Anathema as it may be to many Brexiteers, there appears to be little way round what will essentially be a ‘standstill’ transition period. Under the current proposal on the table, the UK will leave the EU in name on 29th March 2019 but will continue to be almost a full member in practice for around a couple of years, most likely until 31st December 2020. The UK will cease to have voting rights or representation on EU bodies during the transition period, although it will continue to receive its allocated share of EU budgetary expenditure until the end of the current EU budget window in 2020 (which it is paying into during this time as part of the financial settlement).

A battle against these basic terms of transition is one the UK is unlikely to win and hence should avoid expending undue negotiating capital on. (Similarly, Brexiteers’ domestic political capital would also be better spent elsewhere.) More important is securing meaningful concessions which will have tangible benefits for the UK as it prepares for full departure from the EU, for instance the ability to open formal trade negotiations with ‘third countries’ during this period.

European Disunion

The first phase of the negotiations was not stacked in the UK’s favour. The EU was simultaneously setting the rules, acting as the referee, and had 27 players on their side all playing together as a team. At the same time, half of the UK’s supporters were so obsessed with jeering their own team from the sidelines that the EU could afford to sit back and take a breather, simply running down the clock while British supporters put all the pressure on their own side for them, with some even calling for their team to give up altogether.

But despite the hostile crowd, uneven playing field and moving goalposts, the UK managed to get in at half time only at a slight disadvantage, having achieved much more than many believed it could. And its prospects for the second half suddenly look much better than they did in the first.

There are major bust-ups in the EU dressing room before the second half has even started, and many of them aren’t even about the game. The players have decided they’re more interested in playing for themselves than playing for the team. The Captain has taken a heavy knock and she might not even be able to come back out for the second half, while a lot of the players aren’t too keen on the flashy young Vice Captain who only joined the team last year either. Meanwhile, the manager has already cracked open the brandy.

Trade talks have yet to begin and already the EU is struggling to rally member states around its hardline position that no deal is possible unless it is a ‘Canada dry’ option or full EEA membership. Emmanuel Macron’s plea last week for EU countries not to act in their individual self-interests is likely to be a futile one for obvious reasons. Ireland and Hungary have already given their backing to a deal which would facilitate ‘uninterrupted’ trade in goods and services, while one EU Prime Minister was reported to have said at a recent EU summit that he hoped “no one is suggesting that my country’s interests should be sacrificed in the EU’s name”.

Challenges are coming thick and fast for the EU, with its disputes with Hungary and Poland continuing to rumble on, Angela Merkel still struggling to form a government in Germany and almost half of Germans in favour of her resigning as Chancellor now, and elections in Italy in March which are also liable to throw up some uncomfortable results for the EU. Macron and Brussels will swiftly find themselves with few friends across Europe at a time when they are very much in need of them if they pursue an agenda of trying to punish the UK simply to prove a point.

Meanwhile, there are tentative signs that much of the so-called British establishment, for instance the big business lobby groups which have spent most of the last eighteen months moaning about Brexit, is belatedly coming to the realisation that they are much more likely to get favourable outcomes in the negotiations by putting pressure on Brussels than by simply whingeing to the British press about the Government. And while the influence of similar EU business lobby groups (such as German car manufacturers) should not be overstated, if Brussels becomes the main impediment to a good deal, they are unlikely to sit back and let it happen without a fuss either.

The last of the Remainers

That said, it is not all plain sailing on the UK side. The narrow parliamentary arithmetic makes every vote on the EU Withdrawal Bill a potential battleground, and although it cleared Committee Stage before Christmas, the Bill still needs to pass Report Stage and Third Reading (timetabled for next week) before it progresses to the House of Lords, where ratty Remainers such as Lord Adonis are hungrily waiting to sink their technocratic teeth into it.

The lack of a Government majority and overwhelming pro-EU bias of the Lords means that the Bill will inevitably be amended multiple times on its passage through the Upper House, so the real question then becomes what will happen to the Bill once it returns to the Commons. If the House of Commons rejects the Lords’ amendments and the Labour Lords subsequently choose to officially back down, as happened with the Article 50 Bill, then this should clear the way for the Bill to pass into law in more or less its current form.

However, if the Lords decides not to bow to the will of the elected chamber and refuses to let the Bill pass in the the form approved by the Commons, this will open up a more protracted battle where the status of the unelected Lords is likely to come under intense scrutiny once again. Some, like Adonis and Heseltine, are likely to fight until the last, aware that this is probably their final chance to lay any sort of significant blow on Brexit. But with those still calling for Brexit to be reversed outright becoming an increasingly lonely and desperate minority, this may well prove to be the final nail in the coffin of the ‘Stop Brexit’ campaign as the vast majority of the country rolls up its sleeves and gets behind the Government trying to deliver the best deal for the country.