Friday 2 November 2018 - People's Vote

Friday 2 November 2018

Morning Briefing: Irish border deal? - Bankers leave London - Interest rates

The outlines of a possible deal to unblock the Brexit talks are becoming clear - and it’s not a pretty sight. The proposal being “floated” by the EU would kick key issues about our future relationship with the bloc into the long grass.

It would ensure more years of political infighting as different factions in Parliament sought to promote rival visions; keep Northern Ireland guessing over whether there would be border controls in the Irish Sea; cripple our economy with yet more uncertainty; and mean voters have to put up with a blindfold Brexit.

The key new idea covers the so-called Irish backstop which is supposed to avoid a land border in Ireland if no other arrangement can be found. In a concession to Theresa May, the EU negotiators are suggesting the whole UK could stay in a “bare-bones” customs union with the EU and this could be written into the legally binding withdrawal agreement. Previously, the bloc was saying that the possibility for the UK to stay in the customs union could only be contained in the political declaration about our future relationship, which will not be legally binding.

The FT has the most extensive description of the proposal. Although the EU’s shift of position may seem like a victory for the prime minister, it comes with a host of problems - connected with when the backstop might be triggered and when it might come to an end.

As things stand, the backstop would kick in at the end of December 2020, when the 21-month “transition” - during which we would stay in the single market as well as the customs union - is supposed to end. This is because nobody believes that a full new trade deal could be done so quickly. Experts think that would take five years and maybe longer.

But there would then be two problems. First, the economy would face a cliff edge in barely two years when we quit the single market.

Second, it would mean following the EU’s trade policy by applying the common external tariff, including signing-up to any new trade deals, but having no say over them.

Third, regulatory and VAT controls - but not customs checks - would be then needed in the Irish Sea. This is because the EU is insisting that, as part of the backstop, Northern Ireland stays in a deep customs union “applying the union’s full ‘customs code’ and following single market regulations for goods and agri-food products” rather than just a bare-bones one. The DUP, which is propping up the government, may find this unacceptable.


One way of avoiding both these problems is to extend the transition. But it would need to be by several years, not just the one being envisaged. What’s more, it would require an extra financial contribution by the UK, according an EU diplomatic note seen by Buzzfeed. When the prime minister said last month she might be up for an extension, she almost provoked a coup against her.

The problems over when the backstop might end are, if anything, even more difficult. The EU’s idea seems to be that it would end when a full trade deal is signed. The snag is that it is also insisting on a “backstop to the backstop” - so that, if this future trade deal doesn’t magic away border controls between the whole of the UK and the EU, Northern Ireland would stay in a full-service customs union with the EU accompanied by a single market for goods. And that’s the crux of the matter: unless the whole of the UK also stays in at least a full-service customs union with the EU, there’s no future trade deal that would avoid border controls.

All this, however, would be left to future wrangling. Hardline Conservatives would find a full-service customs union was anathema. But if they managed to stop it, the backstop to the backstop would kick in - meaning there would have to be customs checks as well as regulatory and VAT checks in the Irish Sea.

The DUP would be furious. So might Scottish Conservatives, who would be worried that a precedent had been set that could dissolve the United Kingdom

And all this time, remember, the economy would be suffering death by a thousand cuts and the public would be left in the dark about what Brexit actually means. All the more reason for a People’s Vote at the end of the current round of talks.

Video of the day

WATCH: Christopher voted to leave in 2016. Now he's demanding a People’s Vote on the Brexit deal. He didn’t vote for Theresa May’s botched Brexit.

Please share on Facebook and Twitter.

Fishy problem

Mind you, it’s not even clear the other 27 countries will agree to the proposal being floated by  EU negotiators. One issue is fish. A bare-bones customs union would give the UK the right to sell its fish into the EU market tariff-free, but it would not give the other countries the right to fish in UK waters. France, Germany, Spain, the Netherland, Belgium and Denmark have “deep concerns” about giving away such ground in the talks, according to the Guardian.

Another problem is that a bare-bones customs union would give the UK access to parts of the EU market without guarantees that we would stick to a “level-playing field”. France is leading a group of countries saying there must be restrictions on state aid, taxation, labour and environmental standards, so we don’t gain an unfair advantage.

It’s unclear how this will play out. But it seems likely that, if Theresa May wants the deal being mooted, she will have to make further concessions to assuage these concerns - and that will give her more trouble with her fractious party.

Quote of the Day

“The same fundamental problems are there. They’ve played around with the ingredients to the deal.”

Tweet of the day

This from Kirsty Hughes, director of the Scottish Centre for European Relations and a leading supporter of Scotland for a People's Vote.

Bankers leave London

French bank Société Générale has told staff they must either move to the continent, or face losing their jobs. The Times reports that some 300 jobs will be created throughout the EU by relocations and the creation of new roles. This move may be the first in a steady stream of relocations in the lead-up to Brexit.

Graphic of the day

Councils all across Britain are passing motions in support of a on the Brexit deal Read our twitter thread HERE.

Interest rates could rise

… but they probably won’t, according to Governor of the Bank of England Mark Carney. The the Bank will have have to fight both slower growth and higher inflation post-Brexit. The former requires lower interest rates, the latter higher, and it’s not completely clear beforehand which way it will jump. However, Carney was clear that a rate rise was not the scenario the Monetary Policy Committee viewed as being most likely. His point was simply that these things “can go in either direction”.

More Brexit news…

Theresa May STOPPED security services probing Arron Banks in run-up to Brexit referendum - as ex-culture secretary says PM 'has serious questions to answer' (Mail)

Arron Banks faces criminal inquiry over Brexit campaign (Guardian)

City needs to see small print before cheering EU deal (Times £)

Brexit: One week left to agree deal before deadline, Irish foreign minister warns (Independent)

Top Brexit comment

Martin Wolf: A 'no deal' Brexit outcome would justify another referendum (FT £)

Britain faces a bumpy road ahead at the WTO (FT editorial £)