U.K. Takes Two Steps Forward, One Step Back on Brexit Plan
(Bloomberg) -- The semblance of unity behind a life-as-normal and business-as-usual Brexit didn’t last.
With Prime Minister Theresa May away on holiday, her chancellor of the exchequer went out on a limb to say a consensus was forming around a three-year transition phase, during which little would change about the U.K.’s relationship with the European Union even past 2019, when the two sides formally break up.
But that vision of harmony was shattered almost immediately. Trade Secretary Liam Fox used a Sunday Times interview to pour cold water on Philip Hammond’s claims that he and other senior ministers had gone soft and agreed to allow the free movement of people to last beyond the two-year negotiations.
It would “not keep faith” with voters’ decision to leave in the 2016 referendum, he said, adding pointedly: “I have not been involved in any discussion on that.”
May’s spokesman, James Slack, told reporters on Monday that free movement will end in March 2019 and that it would be “wrong” to suggest “that free movement will continue as it is now.” He also said that May’s position on an implementation period“ are very clear and well known: It is in no one’s interests for there to be a cliff edge.”
"We have said that it will take time to get immigration numbers down but we are committed to doing so," Slack said. He also said that the transitional period won’t be unlimited, repeating remarks made by May in January.
‘Mice Will Play’
Former Brexit minister David Jones and Gerard Lyons, a pro-Brexit economist and one-time adviser to Foreign Secretary Boris Johnson, also joined the attack in a sign that the war among the ruling Conservatives on the direction of Brexit is unresolved after a bad election put May’s own vision up for debate.
“This is a classic case of when the cat’s away, the mice will play,” Jones -- stripped of his job in the wake of the election -- wrote in the Mail on Sunday. “No sooner is the prime minister on holiday and Parliament away for the summer, than europhile forces in cabinet decide it’s a good time to go on maneuvers.”
Fox’s comments were made in the U.S. before Hammond hit the airwaves on Friday, yet they underscored the level of distrust that seems to pervade May’s cabinet since she lost her party’s parliamentary majority in an election gamble in June. Before she went on her break, the political backstabbing had gotten so nasty some urged May to fire some ministers.
May’s entire platform was founded on the premise of “getting on” with Brexit, but her election debacle left her fighting to stay in power and paved the way for more temperate voices to be heard. People like Hammond, who had campaigned to stay in the EU and wanted the divorce to be as amicable as possible, are now more visible.
Home Secretary Amber Rudd is among those emboldened to soften the government’s stance. She fired the first salvo on Thursday, saying there would be no sudden clampdown on EU migrants to Britain the day after Brexit.
Hammond reinforced those comments a day later, telling BBC radio that “it will be some time before we are able to introduce full migration controls” after Brexit, and that there’s “broad consensus” in the cabinet for a transition of as long as three years.
“While a consensus is emerging in cabinet on a transitional period that lasts until the next election in 2022, there is no agreement on its nature, and certainly no acceptance that it will simply prolong the status quo,” Mujtaba Rahman, managing director of Eurasia, said in an emailed note. “This consensus is fragile.”
Any transitional arrangement “has to be an agreement by the cabinet,” said Fox, who has himself expressed support for the need for an interim deal in recent weeks. “It can’t just be made by an individual or any group within the cabinet.”
Hammond was back in the headlines on Monday when the Times seized on remarks made by the chancellor to France’s Le Monde newspaper. “It’s not our plan nor our vision” to start an “unfair competition” with the EU in terms of taxes and regulations, Hammond told the paper. Britain will retain a “recognizably European” social, economic and cultural model after Brexit, he said.
Hammond this week will visit Brazil as he seeks to build closer ties with a major developing economy ahead of Brexit. He’ll meet political counterparts in Brasilia, and business leaders in Sao Paulo.
Johnson, for his part, has just concluded a similar mission to Japan, New Zealand and Australia, where he sought to dispel fears over Brexit with some of Britain’s trade partners by comparing them to the unjustified concerns approaching the year 2000 -- that a so-called millennium bug would take down computer systems. Lyons reiterated the sentiment in his piece in the Sunday Telegraph newspaper, saying a transition shouldn’t last as long as three years.
“Many of the ‘risks’ being highlighted about Brexit are perceived risks, not real risks,” Lyons wrote. “And a two-year transition would alleviate many concerns.”
Jones and Lyons both accuse Hammond of taking advantage of May’s absence to publicize his own views. May will resurface on Monday, one week into her three-week vacation, to attend commemorations in Belgium for the 100th anniversary of the Battle of Passchendaele, a key clash in World War I. She’s unlikely to use that occasion to say anything on Brexit, and instead could wait until September to make a “major speech” on Europe, according to Rahman.
“This will update the government’s policy, including on the transitional period. It would mark a significant retreat from the hard Brexit she would have pursued had she won a majority in the June election,” Rahman said. “Until then, however, uncertainty will likely remain on what the transitional deal might involve.”
Amid divisions in Britain’s negotiating position, Luxembourg’s Prime Minister Xavier Bettel said the U.K. must face up to the fact it could be forced to pay more than 50 billion pounds ($66 billion) to leave the EU, according to the Mail on Sunday. The exit bill won’t be the only cost Britain faces because of Brexit. Customs checks at the border after the U.K. leaves the EU could cost 1 billion pounds a year and cause delays for goods being shipped in both directions, according to a report by Oxera, an economic consultancy.