May's government hits the rocks

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As the government appears to be heading for a no-deal Brexit, Ian Taylor reports on the conflict at the heart of the Tory party, and the dismay and anger this has caused among its big business backers.

Theresa May’s attempt to resolve the issue of British capitalism’s future relations with its biggest trading partner, the EU, plunged the government into crisis in mid-July.

May had attempted to avoid the contradictions inherent in her position since her takeover from David Cameron in 2016 by saying as little as possible. But she made a stab at a resolution and like a home-made bomb it blew up in her face. The business paper the Financial Times reported (14 July), “The prime minister had hoped to be able to finally present a coherent path towards Brexit. Instead, almost everything in British politics is up in the air.”

The Financial Times (FT) is the nearest thing we have to a wiretap on members of the ruling class, or at least on those wired into the same conversations. It is worth noting its account. In the immediate aftermath of the crisis, when two cabinet members resigned within 24 hours, the FT reported, “It is not guaranteed Mrs May’s government will be able to hold together in the autumn. It is also unclear whether there is a majority in parliament for any of the potential paths to Brexit.”

It spelled out the consequences in stark terms in an editorial, noting, “May, belatedly, is pressing ahead for a softer Brexit. The problem is this has met with a cool response in Brussels and has been attacked on all sides at home. To the dismay of business…the prospect of a no-deal exit, more by accident than design, has returned with a vengeance. There should be no illusions about what this would mean in practice.”

A no-deal Brexit would take one of two forms, the FT suggested. One would see Britain and the EU fail to agree and “talks end in acrimony. The UK would spill out of the EU on 29 March 2019, guaranteeing chaos on all fronts. It would spell international isolation, a shock to the economy and a political backlash. No competent government could contemplate such an option.”

The second “more probable” form would see the two sides “agree to disagree”. A series of coordinated unilateral actions would be required to avoid a national crisis. It would create enormous practical and legal uncertainties for businesses. Trade with the EU would switch to World Trade Organisation terms, raising customs checks and tariffs overnight.

“Capital could flee the City of London followed by a run on the pound. Food supplies would be at risk… The UK’s ports and airports would be thrown into disarray. No amount of wishful thinking can overcome this reality.”
The paper warned of “a calamitous breakdown”.

Impasse

The British ruling class has not faced such a political crisis since 1940. The impasse over Brexit may not pose the existential threat of war with Hitler, but it is also not a binary choice of war or surrender, making it in some ways more difficult to resolve.

The crisis threatens the existence of the Tory party — the “first” party of business and most committed to pursuing the interests of capital — because the Tories are engaged, somewhat extraordinarily, in a project that a majority section of the capitalist class perceives as a direct threat to its interests.

Brexit threatens the profits of British-based businesses and of multinationals operating in Britain along with their ease of access to other markets. It threatens business models based on just-in-time production of goods crossing and re-crossing borders as part of the production process. And it threatens profits in the service sector which comprises 79 percent of Britain’s economy.

It also risks a blow to the British ruling class’s position in the world, where it packs a bigger punch than the relative size of British capital would warrant. The fact that there is a section of business in favour of divorce from Europe — Rupert Murdoch is a prime example — merely fuels the split in the Tory party.

May’s Brexit plan finally emerged with “unanimous” cabinet support at a meeting at the prime minister’s residence at Chequers on 6 July, only for cabinet support to unwind spectacularly within two days.

Consternation

The “Chequers plan” signalled May had abandoned plans for a tight relationship with the EU on financial and other services, to the consternation of the City of London. But she proposed a free trade area in goods which would see Britain apply EU rules and collect tariffs on the EU’s behalf.

An unnamed government source described the plan as “cohabiting, without the same commitment as marriage”. It incensed Tory Brexiteers such as Jacob Rees Mogg and led to the resignations of then Brexit secretary David Davis and foreign secretary Boris Johnson.

May briefly steadied the government ship, publishing a White Paper optimistically entitled “The Future Relationship between the UK and the EU”. But on 16 July she was forced to sink the boat herself by accepting four amendments to a customs bill envisaged in the White Paper, claiming all were “consistent” with her strategy.

The first three require “the UK to have a separate VAT regime from the EU”, the government “to table primary legislation if it wishes to keep Britain in a customs union”, and a legal commitment that there can’t be a customs border in the Irish Sea.

The fourth amendment is the tricky one, making it “illegal for Britain to hand over to the EU tariffs [on goods] collected in the UK unless there is agreement that the EU collect tariffs for Britain on a reciprocal basis”.

The government White Paper explicitly stated: “The UK is not proposing the EU applies the UK’s tariffs and trade policy at its border for goods intended for the UK.” That is so utterly contradictory that it led Conservative former chancellor Ken Clarke to ask in parliament, “Are any statements by the government on its trade policy to be relied on for more than a week?”

May only survived by threatening an immediate vote of no-confidence in herself.

Delay

The FT quoted an unnamed minister outlining the only options left to her: “Either we delay Brexit by asking [the EU] for an extension of the Article 50 process or she will be forced to hold another election.” A second unnamed minister confirmed, “The only way out would be a general election.”

Ahead of the Chequers meeting, companies such as Jaguar Land Rover, Nissan and Airbus had issued warnings about the dangers of a hard Brexit and the need for “a common rule book on goods”. This “commercial onslaught [was] encouraged privately by business secretary Greg Clark”, the FT reported.

Yet rebel Tory MPs threaten to scupper the customs scheme by blocking an exit deal and insist they are ready to trigger a leadership challenge. The real crisis was always likely to come this autumn, with a potential follow-up next March if May survives that long.

The FT explained, “The prime minister’s problem is that the White Paper is only the start of the Brexit climbdown. She will have to go much further if she is to secure a trade deal with Brussels. It’s hard to see how pro-Brexit Tory MPs will support May’s deal.”

The newspaper noted that Tory Brexiters claim 60 or so MPs would vote against the kind of deal proposed and quoted a “loyal” Tory MP saying, “They will vote against whatever deal she comes up with.” It reported new Brexit secretary Dominic Raab had “pleaded with colleagues to avoid parliamentary riots and sabotage”.

May spent the summer touring Europe, meeting EU leaders in pursuit of a deal, and despatched Cabinet supporters to do the same. She will spend September trying to convince her own MPs to accept whatever agreement she reaches with EU Brexit negotiator Michel Barnier.

As part of her strategy, the government stressed a new focus on planning for a “no-deal” Brexit, with the “no-deal unit” at the Department for Exiting the EU “suddenly expanded” and officials assigned to plan “messages the government would put out to the public”. The first batch of these appeared just before the August bank holiday.

Raab pledged “to inundate businesses and households with technical advice on how to prepare and initially proposed to publish 70 documents through the summer until someone pointed out it would ensure a stream of damaging news stories.

The FT dismissed the strategy as a “desperate project”. It noted, “Thousands of electricity generators would have to be requisitioned at short notice and put on barges in the Irish Sea to help keep the lights on in Northern Ireland…according to one paper drawn up by Whitehall officials.”

The EU ramped up its own “no-deal” preparations. The FT reported, “Senior EU officials accept that EU governments will not blindly enforce laws that threaten financial stability, ground air traffic or halt production at car or aircraft factories in Europe, as would in theory happen.”

In the event of no deal, EU officials propose “parachute” arrangements and a “secret transition” to be “unveiled only at the last moment”.

The problem for May was summarised by former ambassador to the EU Sir Ivan Rogers who noted, “She is caught between two intolerable options.” Let us assume May can reach an agreement with Barnier, in part because the EU no more wants a no-deal Brexit than most of Britain’s ruling class and Barnier probably views dealing with a weak May as better than dealing with Johnson or some other alternative.

Summarised

BBC political reporter Steve Richards, who presents the Week in Westminster on BBC Radio, summarised the situation: “There has to be an agreement by October. May will threaten to go in the attempt to win the vote [on the deal in parliament]. If she loses, she would go.”

Who would replace her? Johnson is the leading figure among Brexiters. Yet he is deeply unpopular among many Tory MPs and far from guaranteed to win.

Johnson’s racist reference to the burqa in an article in The Spectator in August was in line with his pitch for the leadership to the right of the party and beyond. He will feel he has only until October to bolster his credentials.

There is grave danger in Johnson’s willingness to play the racist card. Yet from a ruling class point of view, he is barely a serious politician. Widely condemned as an inadequate foreign secretary, Johnson was forced into resigning by Davis quitting ahead of him. He would surely have forfeited his last chance of leading the Tories had he not.

The alternative Brexit candidates — Michael Gove and Brexit toff Jacob Rees-Mogg — have even less chance of winning a General Election. They are also deeply distrusted by the Tories’ business supporters. Hence the touting of alternative candidates, with home secretary Sajid Javid emerging as a frontrunner.

A recently published account of the 2017 election by former Times journalist and Labour communications director Tom Baldwin quoted Gove denouncing “the captains of industry [as] complacent” and saying, “If you’re the chairman of a FTSE company, I tend to think you’re wrong.”

This echoed Johnson’s view on company chiefs who warn of the consequences of Brexit, reported as, “Fuck business.” No surprise then that a “Boardroom Bellweather” survey of FTSE 350 companies by the Institute of Chartered Secretaries found only 29 percent believe the government to be “friendly” towards business — an extraordinary situation for the Tories to be in.

In the circumstances, a Tory contest to replace May would resolve nothing.

FT columnist Robert Shrimsley put it like this: “The Tories are caught in a trap from which there is no escape, even with a change of leader. They either deliver and own a hard Brexit with all its consequences or they produce a workable outcome which Brexiters proclaim has betrayed the cause… The Conservative Party is heading for the rocks.”

The government’s lack of a majority in parliament and dependence on the Loyalist bigots of the Democratic Unionist Party (DUP) makes the Irish border key. But it will take only a handful of Conservative MPs to torpedo a deal and fulfil foreign secretary Jeremy Hunt’s warning of “Brexit paralysis”.

May is likely to need the support of Labour, its leaders and MPs, to survive. However, bringing the government down is about all the Parliamentary Labour Party can agree on. Some Labour MPs would no doubt balk at that if it means a Corbyn government. But even Ben Bradshaw, a pro-EU Labour MP and Corbyn opponent, said, “It’s inconceivable the Labour party would ride to the government’s rescue or miss the opportunity of bringing it down.”

Majority

In addition, the FT noted, “Moderate Conservatives say at least 50 Tory MPS would join forces with Labour and other parties…The possibility arises that May will be unable to secure a Commons majority for either a deal or no deal.”

Many Labour MPs expect an election in the spring. The Tories will be irrevocably split. Normally the ruling class can be confident in the Labour Party offering a plan B when the first party of capitalism can’t win an election or can’t agree a way forward. But the prospect of a Corbyn-led Labour government fills the establishment with horror.

The incessant allegations of antisemitism against the Labour leader and his supporters form part of an attempt to discipline Corbyn, if not topple him, in advance of this moment.

The FT’s Shrimsley expressed the issue succinctly, suggesting: “Labour’s antisemitism row offers a deeper truth about Corbyn. The easy thing would have been to adopt the International Holocaust Remembrance Alliance definition and guidelines in full and then fail to implement them. But not Mr Corbyn.

“Is this a man ready to water down positions he has held for decades for mere expediency? We should believe him when he said he would raise taxes, follow protectionist trade policies and sweep away laws banning secondary picketing… Those hoping political or financial realities will temper Mr Corbyn’s actions should…recognise that what you see is likely to be what you get.”

The accuracy of this assessment would require another article. But it’s vital that socialists don’t just stand by enjoying the spectacle of a Tory meltdown and ruling class disarray.

We are engaged in a struggle against racism and Islamophobia and against the real antisemitism of those seeking to build a fascist alternative. We want to see a left-led Labour government win office and deliver on its promises. Both require mass movements.


Brexit: who pays?

A report by management consultancy Clifford Chance estimated the costs to households and businesses of different Brexit outcomes.

It suggested five possible scenarios, two of which approximate to the most-likely outcomes. One is the White Paper option of a “bespoke customs deal”, with Britain outside the EU single market. The other is the no-deal option, with Britain outside the EU customs union and single market.

The study estimates the first of these would raise average UK household costs by 2.6 percent in the first year, while the second would add an average 4 percent to bills — about on a par with the impact of the financial crisis and recession of 2008-09.

But “those earning least would see overall costs increase by 3 percent more than those earning most”.

The study suggests Northern Ireland would suffer most under all scenarios while the south east, excluding London, would suffer least.