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Have received numerous messages about my last note/thread. Thought I’d use them as opportunity to unpack our latest views on Brexit. Will build on this analysis as our views - and Brexit story - develops
1/ Current probabilities as of mid-December:
40% 2nd Ref. This is our central scenario, alongside extension of Article 50
30% Norway+
20% May’s deal
10% No-deal
Separately, think there is a 15% risk of early election
These numbers fluid, and will evolve
40% 2nd Ref. This is our central scenario, alongside extension of Article 50
30% Norway+
20% May’s deal
10% No-deal
Separately, think there is a 15% risk of early election
These numbers fluid, and will evolve
2/ Why such small % for no deal? There is conflict between the legal position in EU Withdrawal Act and the politics. The overwhelming view among ministers and backbenchers in all parties is that politics will win out
3/ I share this assessment and believe parliament will find a way to stop no deal
4/ How? First, frustrating implementation of no deal. Lots of evidence for this, such as cross-party moves to amend Finance Bill to prevent Treasury doing no deal planning without MPs approval. Another amendment would even stop Treasury raising tax until Brexit deal is approved
5/ There will be similar moves on other Bills. That's before specific no deal laws. Numerous Cabinet ministers are sceptical about viability of no deal and have identified at least five pieces of urgent no deal legislation, which MPs will amend
6/ Then there is extension of Article 50. PM would be highly unlikely to ignore a vote by MPs, probably by large majority, to do this (even though formal request would have to be made by Govt rather than Parliament)
7/ On extension, important to recognise EU position has evolved
8/ EU position since early last year was “only if it can produce an outcome that’s not currently on the table.”
9/ Now, distinction is made between technical extension (to get deal and/or implementing legislation over the line) and political extension (to allow for change in leader; general election or second referendum)
10/ Indeed, informal discussions, albeit immature, are now taking place between UK and EU sides on possibility of technical extension
11/ If not an extension, MPs also have nuclear weapon of bringing down May Govt to prevent no deal
12/ Pro-EU Tories would probably vote with Labour in no confidence motion if that was only way to stop no deal exit. May would also have big trouble in Cabinet if she drifts to no deal, with Hammond and others threatening resignation
13/ Bottom line: the law is unlikely to prove deterministic. Politics will likely impress itself and find a way to prevent no deal exit
14/ This was also the case in context of other big crises in the EU. If the law won out between 2009-12, Greece would no longer be a Eurozone member. Same would possibly be true for much of Southern Europe
15/ So what outcome? 20% for May’s deal. EU won’t afford UK any concessions that cut across the substance of WA/backstop. Other innovative fixes? Possibly. But only after defeated first vote
16/ EU unlikely to respond positively if Commons attaches conditions to the deal (for example, passing an amendment that time bars backstop or does same via start date of new trade relationship in Dec 2021)
17/ Still, this is a good deal for EU. They will want to preserve it. So some upward pressure on 20% to allow for this outcome
18/ Norway+ vs 2nd Ref? At end of last year, referendum was gaining ground at same time as Norway+ was losing it. Many of 75 Labour MPs who voted for Norway-style arrangement in June now back people’s vote. Labour frontbench also unlikely to back Norway+
19/ In addition to Labour MPs changing their minds, Tory MPs also put off by warnings from Carney about impact of Norway deal on financial services
20/ For now, these shifting currents make referendum more likely than Norway+ (40% vs 30%). Structurally, this is where I think Brexit is heading
21/ But taking into account post Xmas mood, probably some downward pressure on 40% as dynamic shifts to extension as an opportunity for May to keep hammering away at revised deal in hope she'll get it through Commons
22/ But, as attempts to broker a Cabinet compromise on Plan B have failed, there is unlikely to be a Cabinet agreement until after May’s deal is sunk
23/ Of course, all usual provisos and qualifications apply. Will build on this analysis as views evolve/change - as they will - in coming weeks
