UK Politics

Get ready for a no deal Brexit

BY Andrew Lilico   /  12 October 2017

As expected, this week’s Brexit talks included no new breakthrough. The UK has now flat refused to discuss an EU “exit payment” any more until trade talks begin, beyond minor technical discussions. The EU negotiator Michel Barnier describes the UK position as “disturbing” and the talks as in “deadlock.” He says he is unable to recommend to the EU council meeting next week that talks on trade begin.

Some of this is doubtless the natural theatre of EU negotiations, wherein politicians seem to revel in declaring discussions at the point of collapse and regard themselves as heroes for last-minute late night shenanigans. Furthermore, it had been understood for several weeks that a finding of “sufficient progress” was unlikely in October and the commencement of trade talks might slip to December.

There may be more to it than that, however. In Thursday’s press conference after the latest round of talks Barnier rather emotionally declared that the phase 1 issues on the rights of EU citizens, the Irish border and the “exit payment” have “nothing to do” with trade talks. If he hasn’t grasped by now that the UK position is (as it has been from the beginning) that it is impossible to resolve any of these questions without discussing a trade deal, for they are intrinsically and inextricably interlinked, it is hard to see how progress can be made between now and December, either.

Many commentators continue to assert that a deal remains overwhelmingly likely. Very often that is because they assert confidently that the UK will soon fold, agreeing to pay €50 billion, €80 billion, €100 billion, who knows what?, ECJ oversight of 3 million EU citizens indefinitely after Brexit and Northern Ireland staying in the Single Market and Customs Union, without any undertaking of a trade deal to come. The assumption is that the UK will be so desperate for a trade deal that it will give the EU anything to get it. Talk of “no deal preparations”, they say, is regarded by the EU as hot air or an absurd threat to hold a gun to your own head.

I think there is a risk that those commentators reflect a genuine view among the EU and the EU negotiating team in particular. They may be  concluding that Britain will, in the end, give the EU anything it asks for if it plays tough enough. EU negotiators took much the same stance with David Cameron’s negotiators in 2015 and early 2016. For all the talk of Cameron not ruling out backing Leave, they looked him and his team up and down and judged correctly that they’d fold and back Remain, whatever was given or not given.

What the EU got wrong in 2015/16 it may be getting wrong in 2016 to 2018. Maybe some of the individuals it is dealing with do have defeat and need in their eyes. Maybe they would fold in the end, if pushed hard enough. But the EU will not secure what it wants. If May gives way the government will fall and its attempts to concede will be rendered irrelevant, and even if she somehow got them through, UK voters would eject her government and replace them with a UK government that would renege on most provisions of any deal she’d done.

Part of the reason people assert so confidently that May will fold is that they say she has folded repeatedly up to now. But has she? Some in the press report that she folded near the start on the sequencing of talks, and at the time they mocked David Davis’ claim that the need to start trade talks would be the “row of the summer”. But the UK did not concede on that. The agreement was that there would be no resolution of money, the Irish border or EU citizens’ rights until trade talks were complete. “Nothing is agreed until everything is agreed.” And for all the mockery, what was the row of the summer and now of the autumn as well? Why, it was and is when we should start trade talks! Maybe Davis’ wasn’t such a fool after all?

Others say she made a huge concession in her Florence speech, saying that there would be a transition period of up to two years, that the UK would pay its scheduled EU contributions in that period, and that the UK would meet its commitments. But having a transition period was proposed by May from the beginning, in her Lancaster House speech, a transition period was always expected to involve payment of contributions, and the UK position from the start has been that it would meet its commitments – the question has always been what those commitments are.

I don’t believe May has scope to fold – or indeed, to concede anything more – and I’m not convinced she actually wants to. The UK flat refusing to discuss money any more and the UK government publishing plans for no deal preparations, with hints of major expenditure in the New Year, are very encouraging. Philip Hammond is right to say that such expenditure need not start until the last moment, since the government should still hope for a deal for as long as possible. Once the UK starts spending serious money, it will be hard to go back, partly because to justify the sums involved (which I would estimate as potentially £10-20 billion up-front, around the same cost as a lavish Olympics) the government will need to tell British taxpayers that no deal is likely and is the EU’s fault. That is also a good reason to pre-announce a date at which significant spending will start – so as to give the EU a chance to relent and offer some sign (which it has not yet done) of appetite for a deal. As matters stand, the EU is giving every impression of not wanting to do a deal at all.

How to proceed? If we do start spending billions preparing for a no-deal, we will burn good will as well as money. We should communicate that to the EU as well: if you make us waste money preparing for no deal, that will have consequences for you as well.

Instead, a budget for no preparations should be set as a contingency in Philip Hammond’s Budget – though it need not start to be spent for a few weeks. When and if the deadline for the EU to see sense lapses and no-deal preparations must start, there should also be a Cabinet-rank Minister for No Deal, to oversee the preparations.

As Philip Hammond rightly pointed out, there are two forms of no deal. There is an agreement with the EU to part amicably, if not exactly as friends, in March 2019 with no future relationship in place. That can be called a “no deal deal”. There is also total disagreement, with the EU and UK both claiming the other owes it money, the EU claiming it has jurisdiction over EU citizens and their rights are being unilaterally violated, and no cooperation in dealings with the non-EU world either, at the WTO, existing EU trade deals or other issues such as air routes or the environment.

If we are to have no deal, it would be better to have such a no deal deal. So perhaps we should combine the commencement of serious preparations with a no-deal offer to the EU on the three exit questions. Something like the following: €5 billion in exit payment, an automatic right for any EU citizen living in the UK as at March 2019 to become a UK citizen and a guarantee of no physical infrastructure at the Irish border.

I judge the chances of no deal as now perhaps above 50 per cent. We need to be clear and straightforward with the EU about how we see this. There is no scope for further concessions ahead of trade talks and if they do not start by some date (which I would like to be November 1, but perhaps a couple of weeks’ later is necessary) we shall interpret that as meaning the EU does not want a deal. If that date is passed with no signal of appetite for an agreement, we shall appoint a Minister for No Deal and commence significant expenditure, making a take-it-or-leave-it no deal offer on the three outstanding issues.

We’ve had quite enough of the EU deciding whether there has been “sufficient progress”, as if it were marking our homework. It’s time to change the game.


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