May firms up her core position
Theresa May’s speech has been hailed as a historic moment for the UK; confirmation that Britain will leave the European Single Market which it had helped to build. But while it may be historic it is not a surprise. Ever since her October conference speech laid down the core red lines of her approach to Brexit – controls on freedom of movement and removal from the jurisdiction of the European Court of Justice – single market membership was dead. It is simply not possible for the UK to remain a member of a club if it is unwilling to sign up to one its four core tenets.
May’s speech finally and explicitly accepted that reality. It also provided further clarity on a number of other critical areas. The UK will no longer remain a full member of the customs union, though here the position remains uncertain, with May hinting at the desirability of securing special status for particular sectors – with the automotive industry presumably at the front of her mind. Britain will seek to retain the common travel area with the Republic of Ireland, and will continue to work closely with the EU on security matters. The PM also opened her mind to the possibility of a interim agreement that would cover certain areas including the all-important financial services industry.
She restated the Government’s belief that a deal could and should be done in two years and guaranteed that a final deal on Brexit would be put to both House of Parliament. However it was telling that the PM stated that a “bad deal would be worse than no deal”, signalling the Government’s willingness to fall back on WTO rules if necessary. That was in line with the warning issued by Philip Hammond in a German newspaper over the weekend, in which he said that the UK would be prepared to move to a more aggressive low tax economic model if the EU sought to undermine its existing trading arrangements.
A message to Brussels
Generous pre-briefing of the speech meant that the pound had already taken a hit before May stood up; so much so that is value rose today. No. 10 will be pleased with the general political reaction. Tory Remainers such as Anna Soubry, Alistair Burt and Bob Neill all issued positive responses. At the same time a number of the Brexit ‘ultras’ who have been consistently hard to please are also showing support including the like of John Redwood, Peter Bone and even Nigel Farage who has described the speech as ‘real progress’.
Labour’s response has been muted, with Sir Keir Starmer suggesting that May has avoided a ‘hard’ Brexit; welcoming her proposals for a transitional arrangement (albeit only in certain sectors), protection for EU nationals living in the UK, protection of workers’ rights and a ‘collaborative relationship with our EU partners’ as evidence that the PM had been listening to Labour demands.
However both Starmer and Corbyn criticised the suggestion that the UK could adopt an aggressive low tax model to attract business, or ‘bargain basement tax haven’, claiming that would threaten the living standards of the British people. This is likely to be their future line of attack and the one area they will feel able to build momentum behind.
The response from the across the Channel has been mixed; Michel Barnier has responded neutrally but some of the European press has warned that May is threatening a ‘trade war’. The sense in the European media that the UK will try to have its cake and eat it has been ever present since the vote to leave but today’s speech reaffirms this and May should not expect an easy ride.
May hopes that today’s speech will close down speculation and set the parameters of debate going forward. She does not intend to publish a white paper ahead of any vote on Article 50, and she warned both journalists and her Cabinet colleagues against ‘stray words’ and ‘hyped up media reports’. However, it is unlikely May will be able to keep a lid on discussions.
Furthermore, her assertion that the final deal will be put to a vote in Parliament begs the question of what happens if Parliament votes any deal down, a question to which May was unable to provide a coherent answer. And her commitment to achieving a deal inside two years will be severely tested. May risks creating a hostage to fortune, should she struggle to achieve these aims.