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Why I think a no-deal Brexit is the best remaining option

21 December 2018

8:56 AM

21 December 2018

8:56 AM

There are about a dozen Cabinet members now who think the best strategy is to go full speed in preparing for a no-deal Brexit – if a better EU offer comes along, great, but if not then no-deal is better than the alternatives. In my Daily Telegraph column I say why I think they are probably right. It’s not an option that anyone can, or ought to be, enthusiastic about. All of the disruption (and there would be plenty) would stem from political failure on both sides. But it would be better than the alternatives.

We are (or were) very close to an agreed deal. If Brussels just granted the UK the ability to walk away from its proposed future Brexit talks in one piece (as Nato and even EU members can walk away) then May’s deal would be approved by Parliament. Panic over. But the EU is intent on a backstop clause that means that, if the UK walks away, it leaves Northern Ireland behind. The EU is refusing to budge, thinking Parliament will cave because its members are terrified of a no-deal scenario. But the more ministers look at this option, the more they reach the same conclusion: we’re not cornered, or terrified. No-deal is difficult, but doable – and the disturbance, while undoubted, would be temporary.

Here’s my own reasoning. And, first, a declaration: I’m a pro-immigration liberal Europhile whose preferred option would be for us to be in a reformed European Union that listened and changed, as the concerns of Europeans changed. (Only after Cameron’s failed renegotiation did I accept that this reformed EU was not going to be on offer: this is when I switched from Remain to Leave.) No deal sounds – or is made to sound – like the kind of crazy, ultra option. But look at those think it’s the least-bad of the remaining options – Sajid Javid, Jeremy Hunt, – and you find Remainers who would (like me) rather we had not arrived here in the first place. And who, like me, would rather this whole topic was pushed down the political agenda to make space for what was once called politics, before the world went mad.

  1. May’s deal is not Brexit and will never pass Parliament. Her stamina has been superhuman, powered by her trademark sense of public service. But the deal is awful. She says it means we leave the European Union on 29 March. No: we enter a new phase of Brexit talks during which we relinquish voting rights but remain bound by EU rules and courts in all important respects. But we also agree to surrender our collateral, having pledged £39 billion in advance (a figure we can expect to rise). We’ll then we’ll see what we end up conceding on immigration, fisheries etc – the other supposed wins from the deal. What makes it democratically untenable is the backstop, which binds us indefinitely. The EU has repeatedly said that is the only deal it will offer. It expects Britain to buckle.
  2. If we thought the Brexit talks were bad, the trade talks – under May’s deal – will be worse. The EU decided to take an adversarial approach to Brexit talks, as we saw by the choice of Barnier. We now see this all the time: the British PM rejected, even mocked, in Salzburg and last week’s Brussels summit. Those who backed Remain will ask: what did you expect? The EU was wounded; it will defend itself. It was naive to think it would be any different. Perhaps, but this bodes ill for future talks. I think it’s safe to say that, after the last two years, we know what to expect in the next two – but this time we’ll be tethered to the backstop, unable to walk away. Worse, it augurs for the continuation of terrible relations with the EU.
  3. The EU’s style of Brexit talks (the Barnier effect) are souring relations with our allies: why ensure two more years of this? The EU loves brinkmanship and again, as Sir Ivan Roger says, it is very good at it. The appointment of Barnier was seen in other European capitals as a sign that the EU intended a confrontational approach to the talks. Which drags others in. UK-Irish relations are now at their worst for a long time, Spain is being encouraged to square up to Gibraltar again. Mark Rutte, formerly a major UK ally, is taking adverts in Dutch newspapers in which he trashes the UK. Perhaps Brexit talks were always going to inject poison into relations. But this underlines the case for ending the Barnier show now, switching to WTO trade and resuming the trade conversation later – when we can talk, once again, as allies and equals.
  4. The Norway option has the defects of the above: unless it rids us of the backstop, we remain trapped. And it clashes with the UK democratic principle that no parliament can bind its successors.
  5. Another referendum is plausible, but pointless. The polls show no great change in public opinion: the country is still pretty evenly split. So what’s the basis for going back to the people? That we didn’t know what Brexit would look like then, but we do now? We still know nothing about the likely end-state of Brexit. To call a new referendum without any new information would be seen by the public as a staggering waste of everyone’s time. Brits tend to dislike needless elections, and express this disapproval through the ballot box (as Theresa May discovered last year). A referendum called by Remainers would likely lead to an even-larger Leave result. Getting us nowhere.
  6. No deal: the alternative. Failure to ratify a new Brexit deal would mean that, on 29 March, we pursue the option authorised by Parliament when it ratified Article 50: leaving the EU with no special trade deal and trading with the EU on standard WTO terms. This means tariffs, some border checks and a rush of paperwork. It would bring disruption, but it’d be temporary. Talk of chaos at Calais needs to be put in the context of French officials saying that, for no-deal, they’d need to stop no more than one in every 100 lorries. Talk of air chaos needs to be tempered with the fact that the EU has already made a reciprocal offer to the UK in respect of air traffic rights and the validity of aviation safety certificates in the event of no-deal. Technology hassle? We’re actually pretty good at customs checks, having been ranked 5th in the world. Banks and insurers can easily get around EU rules by setting up an EU subsidiary (as Hiscox has done). The cost? Tariffs would average 4pc under WTO rules; but this has to be seen in the context of the current £10bn a year payment, which works out as closer to 7pc of our exports. Cabinet members in the key no-deal meetings are quite reassured by what they have seen. Might this be underestimating the disruption? Of course, this is the biggest risk of no-deal. There has been very little dispassionate public analysis of this, so no one knows for sure. The questions you have to ask are more basic. Such as: we use WTO terms to deal with the rest of the world. Would it really capsize the economy if we extend this tried-and-tested system to the EU? What are the people who run the ports saying? What are the Customs officials saying? The answer: that it’d be a push, but it would not and could not grind the system to a halt.
  7. No deal would not crash the economy. Look at the forecasts (as distinct from Bank of England “scenarios”). We’re looking at a couple of extra points added on inflation and growth stagnating rather than a crash – but then, after a year or so, inflation subsides and things carry on as before. The hysterical tone of the debate means the figures are presented in deliberately confusing way: 4pc “poorer”, etc. By which they mean per capita GDP growth of 23pc by 2030, rather than 27pc. A gap that can easily be made up by a few overdue economic reforms.
  8. The political risk of no-deal? No greater than under May’s deal. Some Remainers see no-deal as political and economic suicide and will do anything to stop it. Nick Boles (60pc of whose constituents voted Leave) has hinted that he’d even vote to bring down a Tory government. But why? Corbyn is under no rush to re-enter the EU so he’s unlikely to offer a new referendum that Boles presumably seeks. There’s even talk of replacing a Tory government with a Remainers’ coalition of Tory-Labour, which would extinguish the Conservative Party. A bit much for a problem that could be solved by next Christmas. If the Norway option is passed with Labour votes, that would likely split the Tories and pose just as great a risk to party stability. .
  9. Why drag this on? What do we stand to gain – and lose – from another two years of Brexit talks?  The poisonous dynamic of Brexit talks is getting us nowhere economically, prolonging business uncertainty and worsening relations with our closest allies. It is tearing our political party system apart. It is deepening, not healing, the division we saw in the referendum. This promises to get much worse if May signs us up to another two years of talks where the EU plays bad cop, and member states feeling they have to show solidarity with the EU. And all in pursuit of a free trade deal whose benefits would be – at best – a marginal improvement on the low tariffs of a WTO deal. After seeing what Brexit talks are doing to our European relations and our politics, I no longer think the harm is worth the gain. Better to make a clean break, where the worst hassle comes up-front, then focus on renewal and repair. When May goes, then her successor will be more liberal on immigration and more globally-minded. We’d be able to make the EU a generous offer on migration, set lower tariffs and strike new trade deals. And, importantly, to rebuild our relationship with our friends and allies in Europe. That rebuilding will not be possible while we are held captive in the backstop: something that would only breed resentment. As a Europhile, I’d be keen for work to start on a new, positive relationship with Europe as soon as possible. More expensive? Perhaps. But it would be money well spent.
  10. Would we really be forced to “crash out” on 29 March? The UK would ask (and pay for) a year’s extension, so all the countries of Europe can prepare. As all need to. The EU is trying to bounce the UK into signing May’s deal, so it will deny that it would extend the deadline – but it should, for the Dutch, the French, the Irish and all European states.

There are other potential upsides to no-deal.If the EU thought Britain was really prepared to break free next April, rendering its talks and the accompanying drama a massive failure, it might change its mind on the backstop to keep the UK in its orbit. But the EU cannot be relied upon to see sense on this point. It miscalculated with Cameron, and called his bluff – hence Brexit. Also if it does change its offer, ministers might have looked at no-deal plans, seen how manageable it all is – and already decide it’s best to leave in April.

If May had agreed a genuine compromise deal with Brussels – say with generous levels of EU migration and matching all of its regulation, perhaps reflecting how close the vote is – I’d have backed it. Doubtless to the the chagrin of my Brexiteer friends. But the deal she did deliver, as Jo Johnson says, is vassalage. To Ukip’s advantage, perhaps, but no one else’s.

This morning, I received a text message from a minister who said he agreed with my Telegraph column but will still vote for May’s deal. I can certainly see why backing May’s deal can be seen as the more politically stable option (for now) that might – just might – lead to a decent outcome two years’ hence. Ditto Norway. It kicks the can down the road, which has its short-term attractions. It all depends if you think things will be better in two years’ time.

And it’s a balance of risk. Different people draw that balance in different places. And in my case, slightly to my surprise, I’ve come down in favour of no-deal. It’s not a leap into the unknown, but a leap into the familiar. Yes, with plenty of risks. But to me, a no-deal Brexit – or, rather, World Trade Brexit – is the least risky option. Not one that I thought I’d end up drawn to, but we live in strange times.

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