Skip to Content

Coffee House

Would a no-deal Brexit be a repeat of Black Wednesday for the Tories?

7 February 2019

5:07 PM

7 February 2019

5:07 PM

Could a no-deal Brexit destroy the Tory party’s reputation for competence and lead to a crushing electoral defeat in the same way as Britain’s withdrawal from the Exchange Rate Mechanism did in 1992? That is certainly the view of some seasoned commentators, such as Jeremy Warner in yesterday’s Daily Telegraph, and the parallels to an acrimonious Brexit seem obvious. But in reality, the comparison is actually misleading, as it misrepresents the political history of the ERM exit and fails to understand how Britain has changed as a result of the Brexit referendum.

First, it’s worth remembering that what really hurt the Conservatives after ‘Black Wednesday’ was not that government policy had been defeated by economic logic. Instead, the damage was done by the realisation that the initial Tory policy of ERM membership had inflicted a severe recession, a housing-market slump and a fiscal disaster – and very nearly a banking crisis – on the country. The consequences of Britain’s withdrawal from ERM, which restored freedom to reduce interest rates, eventually banished recession. It also made it possible to undertake a fiscal squeeze without crushing the economy. But that squeeze, however necessary, was extremely unpopular – not least because it involved a sharp rise in VAT. The overall effect of the ERM experience was to make people ask why it had happened at all. The answer? The economic incompetence had been in entering the infernal mechanism in the first place.

Similarly, it was a massive failure of political competence ever to take Britain into what became the EU. But this time, electoral vengeance will be sought not against a specific party but against the political class – or at least that part of it that seeks to overturn the referendum result, the Conservative and Labour Party 2017 manifestos, the Article 50 notification and the passage of the EU Withdrawal Act. Leaving the EU is the policy of the Government, however incompetently it has been pursued. So a no-deal exit would be a defeat not for that policy but for those – some of them in the Government – prepared to use any means to frustrate it.

While Neil Kinnock’s Labour party dodged the ERM bullet by spectacularly failing to bring home the expected 1992 election victory, Jeremy Corbyn’s party will not be able to escape any “blame” for no-deal. As more and more people come to understand that Corbyn, despite his public pronouncements, really wants no-deal and to suspect that he wants it to occur in the most unfavourable circumstances, the collapse in his popular standing chronicled by recent polls may well continue. This means that the only people able to claim credit for no deal will be Tory Brexiteers.

A no-deal Brexit would also be likely to provoke a significant number of Labour MPs – conscious of Corbyn’s role in bringing it about – to jump ship. They might, of course, be joined by some Tory Remainers. A Labour party shorn of its more extreme Europhiles might reduce the party’s unattractiveness in some Northern and Midlands working-class, Leave-voting constituencies. But on balance the effect would be to split the Labour vote and lose the party seats. And while it is difficult to draw definite conclusions, it seems likely that Tory Remainers standing as independents – or as part of a new anti-Brexit party – would have less electoral impact, especially as their cause was already lost.

The more fundamental point here is that almost everyone already sees the May Government as monumentally incompetent, particularly in respect of the negotiations with the EU: it has no reputation to protect. Yet it has regained a poll lead. Why? Perhaps the key reason is that so few people trust Corbyn’s stance on Brexit – or his motivation behind it. This means that, for now, the great dividing line in popular opinion is not a question of ancestral loyalty to one of the two once-great parties. Instead, it’s Brexit. And, according to a recent ICM poll, one in four voters want a no-deal divorce from the EU. If this comes about, for many voters it would arguably count as one in the eye – not for the Government – but for those who sought to overturn the referendum result and block Brexit.

Of course, for the Tories to reap electoral advantage from no deal it would require the party to have a leader who would claim credit for it rather than bemoaning it. This leader would also need to see it for what it is: freedom, sovereignty, political legitimacy, not least in respect of Ireland, and an economic opportunity to be seized.

This marks a key difference between the position of the Tories after ‘Black Wednesday’ and where they would be in the event of no deal. In 1992, Major could not claim credit for the ERM exit. As I put it in The Rotten Heart of Europe, ‘That evening [a few days before the markets released Britain from the ERM agony], Major made the speech that, together with the pre-election promise not to raise VAT, was to destroy his credibility with the British electorate. He dismissed the idea of a realignment [in the ERM] as ‘the soft option,the devaluer’s option that would be a betrayal of our future and our children’s future.” Having made that speech, he had no option but to refuse to see ERM exit as the deliverance it was. May does have the possibility of restoring the gloss – a 20 point lead in the polls – that was arguably put on her leadership by the Lancaster House speech in January 2017. She should say, ‘I always said that no-deal was better than a bad deal; and I fought off the efforts of those who wanted to frustrate the referendum result.’ Whether she will do that is another question. But if she won’t, she then must (unlike Major) acknowledge that the task of seizing the opportunity created by a no-deal Brexit is better taken on, for the good of the country and her party, by someone whose heart is in it.

Bernard Connolly is the author of The Rotten Heart of Europe: The Dirty War for Europe’s Money

Show comments