Tories Say They Still Back Theresa May as Leader: Brexit Update

(Bloomberg) -- Theresa May only narrowly avoided a catastrophic defeat on her Brexit legislation, but after an intense day in Parliament, the atmosphere at a Tory backbenchers’ meeting suggests she’s out of immediate danger.

Positive Mood Among Tory Backbenchers (5:45 p.m.)

Conservatives leaving the meeting of the 1922 Committee, where May is addressing Tory backbenchers, say the mood is positive -- so much so that one lawmaker withdrew his letter seeking a leadership challenge.

“We all want Brexit to succeed: that is the reality,” Simon Clarke told reporters. “I don’t want to go into the summer feeling like the Conservative Party is at war with itself.”

The call was for unity, a minister said. Asked what had changed since yesterday, he said it was the “realization that we don’t want a Labour Brexit.”

May Says She Didn’t Watch Johnson Speech (5:16 p.m.)

The prime minister joked with reporters as she waited for five minutes before the Conservative Party’s 1922 Committee let her in to address them. Asked if she’ll survive the summer, she said: “I think you know the answer to that.”

She deflected most of the questions on whether she thought she’d survived the term, was looking forward to the summer break and how she felt about the current situation.

But she was clear that she hadn’t watched Boris Johnson’s resignation speech (3:23 p.m.) in Parliament -- and would be too busy to catch up on it later.

May Caught Off-Guard on Volkswagen Emissions (4:44 p.m.)

After more than an hour’s grilling on Brexit, May was caught off guard by Environmental Audit Committee Chairwoman Mary Creagh. She asked why the U.K. the isn’t planning legal action against Volkswagen AG -- as Germany and the U.S. have done -- over the diesel-emissions scandal.

“Other countries make the polluter pay, why haven’t we?” she asks.

After some rifling through papers, May finally says the Department for Transport is regularly meeting with VW executives and is continuing to look at the issue.

Back on Brexit, Creagh then asks May to clarify the environmental standards that the U.K. will be signing up to next year. She wants to know if the U.K. is committing to uphold its existing levels of air quality and renewable energy, or the EU’s targets -- which the U.K. currently isn’t meeting. May says the answer will be set out in due course.

May also says she plans to bring forward an environment bill -- which will include action to clean up the air in Britain’s polluted cities.

May Wants to Ensure ‘Planes Can Still Fly’ (4:17 p.m.)

May’s next grilling is on the subject of aviation. She denies that deadlines for decision-making are slipping, and says that the aim is “to ensure that whatever the outcome is, the planes can still fly.”

The U.K.’s preference is to participate in the European Aviation Safety Agency after Brexit, but it’s also in talks with a “number of countries” on the “arrangements that could be put in place if there is no agreement on a multilateral basis,” May says. Talks aimed at reaching an agreement with the U.S. are also underway, she adds.

Lilian Greenwood, the Labour lawmaker who chairs Parliament’s Transport Committee, isn’t convinced there’s any certainty. The message to the public, as she sees it, is “book your flights at your own risk,” she says.

U.K. Expects EU Aviation Deal Even in a No-Deal Brexit: Grayling

Government to Boost Awareness of No-Deal Scenario (3:51 p.m.)

May tells the committee that the government will be stepping up efforts to increase public awareness about preparations for a no-deal scenario.

“Over August and September we’re going to be releasing a number of technical notifications to set out what U.K. citizens and businesses need to do in a no-deal scenario,” she says. “We imagine there are going to be around 70 of those technical notices that will be issued.”

She later gives an example of what would happen if the U.K. drops out of the European aviation regulatory regime, suggesting a “set of bilateral agreements” would be needed.

May Denies Showing Merkel Plan Ahead of Lawmakers (3:45 p.m.)

Bill Cash -- an arch Brexiteer -- asks May if she’s broken the ministerial code by showing German Chancellor Angela Merkel her Brexit blueprint before it was agreed by Cabinet or presented to Parliament.

May says she did not take copies of the document out of the country to show other people.

May Struggles to Explain Customs Solution (3:43 p.m.)

May ties herself in knots as she tries to explain how her proposed so-called facilitated customs arrangement would function in practice. Facing a grilling from Labour’s Yvette Cooper, she falls back on reiterating that there would be a “tariff revenue formula” to ensure tariffs collected in the EU on goods destined to the U.K. are then paid to Britain.

Cooper then tries to establish whether the tariffs will actually be physically collected at ports in -- for example -- Italy and Spain. “Where’s the money going to be paid?” she asks.

"Ugh" replies May, before explaining why the U.K. wants to have different tariffs, without answering the question.

It was an exchange that illustrates how complicated the U.K.’s proposals are. It also illustrates the point that Cooper is trying to make: the gap between May’s White Paper proposal and the amendment May’s Brexiteers forced her to accept in her own Taxation Bill on Monday.

White Paper: “The U.K. is not proposing that the EU applies the U.K.’s tariffs.”

Whereas the amendment bans the government from to collect tariffs and taxes on behalf of the EU “without reciprocity.”

Johnson Backs May But Criticizes ‘Dithering’ (3:23 p.m.)

Giving a personal statement to the House of Commons, Boris Johnson said he backs May -- but then went on to explain why he couldn’t stay on as her foreign secretary.

He criticized the “self-doubt” she’d shown in her negotiation with the EU. “We dithered,” Johnson said, and allowed the issue of the Northern Ireland border to “dominate the debate.”

If May had only stuck to her original plans -- outlined in her Lancaster House speech of January 2017 -- the country would be heading for a better outcome, he said. Instead, there’s a risk it will be stuck in a miserable limbo, half in the EU, and unable to do free trade deals around the world, Johnson warned.

But he ended with a rallying cry to May and others: “It’s not too late to save Brexit.” May must now return to her original blueprint for a clean break from the other 27 EU countries, he said.

“We need to take one decision now before all others, and that is to believe in this country and what it can do,” he said.

It had been billed as a big moment but in the end, Johnson sharpened his knife ready to kill May’s chances of leading the government through Brexit -- only to leave it lying on the table.

May: Most of Customs System Ready by Dec. 2020 (3:17 p.m.)

May tells Parliament’s Liaison Committee that the “majority” of arrangements required for her proposed post-Brexit Facilitated Customs Agreement will be in place by December 2020, when the U.K.’s exit transition period ends.

There’s a suggestion, she says, that a repayment mechanism may take longer to implement, without providing a timeframe.

As a refresher, the U.K. proposes levying EU tariffs at its borders, providing refunds on goods where U.K. tariffs are lower.

May declined to answer a question on whether a no-deal Brexit would create a hard border on the island of Ireland.

May Says ‘Breaking of Pair’ Done in Error (1:12 p.m.)

May was asked about Monday night’s break down in the longstanding convention called “pairing,” in which members of Parliament are excused if they can’t make it to vote for personal reasons -- with the other side agreeing to stand down one of their own to even up the numbers.

It’s an arrangement which means that politicians who are ill or heavily pregnant are not forced to attend to vote, and it’s central to how Parliament works.

Liberal Democrat Jo Swinson is off work on maternity leave, and the pro-EU lawmaker had been paired with Tory Chairman Brandon Lewis. But instead of staying away, Lewis voted -- with the government -- helping May to win.

May told lawmakers that Lewis had voted “in error” and that the breaking of a pair “was not good enough.” Both Lewis and the Conservative chief whip had apologized to Swinson, she said.

A U.K. official later told reporters the prime minister still has confidence in Lewis.

Fox Warns EU on Car Tariffs, Growth (12:34 p.m.)

Speaking at the Royal Society in London, Trade Secretary Liam Fox suggested that a U.K.-US trade deal could radically reshape the future of global finance -- and hinted that European carmakers should also watch out.

He said the U.K. will have the freedom to set up a single market with the U.S. for financial services based on “mutual recognition” of regulations. This could allow the two powers to write global financial services rules “for the next two decades.”

While President Donald Trump is unhappy with EU tariffs of about 10 percent on American cars, Britain could use its freedom after Brexit to cut the rate to give the U.S. a much more favorable deal, Fox said.

If that’s likely to cause concern to some in Europe about British intentions, Fox wasn’t finished. He said the EU must now respond to May’s Brexit blueprint and face up to the impact of a breakdown in talks on European countries’ economic growth.

“We have made an offer to the EU27 and the ball is now in their court,” Fox said. “The EU27 have to understand what no deal would mean for their economies.”

Tory Divisions on Show in the Commons (12:28 p.m.)

May had the best of her exchanges with Labour leader Jeremy Corbyn during her weekly questions session in Parliament. Although Corbyn had some good lines on Brexit -- “after two years of dither and delay, the government has sunk into a mire of chaos and division” -- he asked an unfocused series of questions, allowing May to simply assure the chamber that her policy was on track.

But the real problem for May came earlier, from her own side.

“At what point was it decided that Brexit means Remain?" asked Andrea Jenkyns, a Tory Brexiteer. The prime minister is a long way from having satisfied the pro-Brexit Tories on her ranks.

May’s Working Majority Shrinks? (12:01 p.m.)

U.K. media are reporting that one of the Northern Irish lawmakers backing May’s government in Parliament has been suspended for 30 days over breaking rules on expenses.

Ian Paisley Jr. is a member of the Democratic Unionist Party that is giving May enough votes to have a working majority in Parliament. She is already scraping by, so this is not good news for her when the next big vote comes up. The suspension is for 30 sitting days starting from Sept. 4, according to reports.

U.K. Seeks Trade Deals with U.S., Australia, NZ (11:47 a.m.)

Trade Secretary Liam Fox says the U.S., Australia and New Zealand are the U.K.’s priorities for future trade deals. The U.K. will also consider accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, known as CPTPP, which includes Canada, Mexico and Vietnam.

A series of consultations on future trade arrangements will be launched in the next few days, he told an audience in London.

Gove Still Supporting May’s Brexit Strategy (11:12 a.m.)

Environment Secretary Michael Gove, the other half of the Johnson-Gove double act in the 2016 Brexit referendum, has been giving evidence to Parliament’s European Scrutiny Committee. But any hard Brexiters looking for signs of opposing May’s plans are likely to be disappointed.

“In a perfect world, I would like the U.K. to have a higher degree of autonomy than that envisaged in the Chequers approach. The Chequers approach is a compromise,” he told lawmakers, referring to the plan agreed by Cabinet at May’s countryside retreat. “That having been said, there are benefits to the Chequers approach -- clear benefits -- which accrue as result of not having that autonomy. One of those is satisfying EU concerns.”

He also said that his department is boosting preparations for a no-deal Brexit, though the government’s preference was still to reach an agreement with the bloc.

Gove mostly stuck to his usual themes, that the U.K. has no plans to dilute environmental and agricultural standards after Brexit, and that the government would would reject any free-trade deal -- including with the U.S. -- that sought to do so.

On fisheries, one of the key themes in the referendum and since, Gove said the U.K. expects to have more quotas to allocate after leaving the EU’s Common Fisheries Policy, and that British companies would be given priority.

Boris Johnson Said to Plan Parliament Speech (10:57 a.m.)

Boris Johnson, the face of the Brexit campaign who resigned as foreign secretary in protest at Theresa May’s proposal for leaving the EU, will give a speech in Parliament on Wednesday, a person familiar with his plans said.

He will speak after Prime Minister’s Questions, which starts at noon.

Johnson said May’s Brexit strategy killed the “dream” of breaking free from the European Union, leading to speculation he was preparing a leadership challenge. However, in a column for the Telegraph earlier this week, he held back from attacking the premier and her plans.

Tory Rebel Calls for Government of National Unity (10:49 a.m.)

The fallout from last night’s customs vote continues, with leading Tory rebel Anna Soubry arguing that Prime Minister Theresa May has lost control of her plan for Brexit, and calling for a emergency coalition government.

“I don’t think she’s in charge anymore,” Soubry told BBC Radio on Tuesday. Jacob Rees-Mogg, who leads a group of hardline Tory Brexiters in Parliament, was “running the country,” she said.

At one point, 16 pro-EU Conservatives were willing to rebel against the government in the crunch vote on the Trade Bill on Tuesday evening, Soubry said. But in the end, after forceful government whipping -- including threats of a general election or vote of no confidence --May won by just six votes.

A so-called government of national unity is usually formed in times of emergency or war to push through policies in the national interest. While Jeremy Corbyn’s Labour shadow cabinet would unlikely back the plan, Soubry said she would seek to enlist the support of smaller parties such as Wales’s Plaid Cymru -- which subsequently backed the idea.

Her call echoed Nicholas Soames, another pro-EU Tory lawmaker, and was also backed by Liberal Democrat lawmaker Norman Lamb.

“Have to bring people together. Agenda being dictated by hard Brexiteers. Massively damaging to our country,” Lamb wrote on Twitter.

Britain’s political parties managed to join together to fight both world wars, and it’s apt that Soames, grandson of former Prime Minister Winston Churchill, should call for a coalition in the national interest.

Now, though, the calls are more a reflection of the irreconcilable divisions on Brexit than a viable proposition. Labour lawmakers are hoping the difficulties over Brexit will tip May into a general election. The idea of the Conservatives backing a national coalition also seemed fanciful.

May Pays Price of Trust to Survive in Brexit War (10:44 a.m.)

Here is Bloomberg’s account of last night’s votes:

As they paced the dark, wood-paneled corridors deep in the heart of the British Parliament, Theresa May’s government enforcers were getting desperate.

It looked as if the prime minister had finally run out of road. After 10 days in which her Brexit plans had been savaged by critics on all sides, a new rebellion was brewing. There were more than enough pro-European Conservatives threatening to destroy her blueprint for leaving the EU to challenge her authority. May’s government whips decided to play hardball.

In the end, they won -- by the skin of their teeth -- and May was saved from what would have been a catastrophic defeat. But in the bitter aftermath, as her opponents licked their wounds, it appeared that the premier had paid a heavy price as trust and goodwill bled away from her government.

Wednesday promises more drama with May facing an intense day in Parliament from prime minister’s questions at noon to appearing before a panel of lawmakers and then meeting her own backbenchers. As if that wasn’t enough, rival Boris Johnson could signal whether he intends to challenge her when he gives a “resignation speech” in the House of Commons -- he stepped down last week as foreign secretary in protest at her Brexit plan.

Based on interviews and comments from lawmakers and advisers on both sides of the U.K. political debate, some of whom spoke on condition of anonymity, this article tells the story of the extreme tensions that are redefining British politics as the U.K. exits the European Union.

It reveals how May worked up a secret plan to abandon her key law, how her officials threatened rebels with an early election, and how she’s now battling claims of using underhanded tactics to gain an advantage -- undermining the basic rules of trust that are essential to the functioning of Parliament.

The danger for May is that if this trust between rival parties’ whips breaks down, every important vote becomes brutal. “It’s very, very bad,” said Philip Cowley, professor of politics at Queen Mary, University of London. “This is the sort of thing which, as when it happened in the 1970s, leads to the complete collapse of relations between the parties. Short-term gain, in exchange for long-term pain.”

The stakes in Tuesday’s crucial votes on the Trade Bill could not have been much higher. With just three months to go before a self-imposed deadline to agree the terms of Brexit, talks have stalled in Brussels because May’s team hasn’t been able to agree what it wants.

For more than a year, May has made it a central plank of her Brexit plan to take the U.K. out of the EU customs union to strike trade deals with other nations around the world.

But she’s facing opposition from pro-EU Tories who want to keep close ties to the bloc. After months of arguments, the debate came to a crunch on Tuesday. Rebel Tories including Stephen Hammond put forward an amendment to May’s Trade Bill that would keep open the fall-back option for the U.K. to stay in a customs union with the EU.

Hammond, a cheerful 56-year-old former minister, had won the backing of 11 other pro-EU Conservatives for his plan. Crucially, the main opposition Labour Party, along with other smaller groups, also lined up against May, who does not have an automatic majority in Parliament. They had more than enough votes -- on paper -- to win.

The government Chief Whip Julian Smith and his team went to work on persuading Hammond’s allies to back down. The whips called pro-European Tory rebels into their offices and warned them they would risk collapsing her government if they voted against her orders, according to people familiar with the matter.

May’s officials drew up a radical plan to abandon the entire Trade Bill -- removing a draft government law from Parliament because it had been changed so dramatically that it would actively damage the Brexit negotiations. Trade Secretary Liam Fox was ready to announce the withdrawal of the bill, if the government lost the crucial customs union vote.

The next step, the whips told rebels, would be to call a vote of no confidence in May’s government. This motion would potentially pave the way for a full-scale general election, which could result in the Tories being thrown out and socialist Labour leader Jeremy Corbyn installed as prime minister.

If the customs union amendment won, there would also be a guaranteed backlash from pro-Brexit Tories who would try to topple May as party leader, rebels were warned.

Meantime, government whips and the pro-EU rebels were adding up their numbers. May’s critics were confident. They believed they had the support needed to defeat her. Then at 6:28 p.m., the first hard evidence of the scale of the revolt emerged.

May lost by 305 votes to 301 -- only the second defeat she’s suffered in the Commons -- on a vote to keep the U.K. inside the EU’s regulatory regime for medicines. The pound, already weakening, extended its losses.

The next vote was the key one: on customs union. But this time, she won, by 307 votes to 301. No sooner had the result been announced than some lawmakers began to ask questions. What had changed? Had the government played fair? Or was there a breakdown in the longstanding convention by which members of Parliament are excused if they can’t make it to vote for personal reasons?

The arrangement means that politicians who are ill or heavily pregnant are not forced to attend to vote, because the other side agrees to stand down one of their own to even up the numbers. It’s a kind of “gentleman’s agreement” and it’s central to how Parliament works.

Liberal Democrat Jo Swinson is off work on maternity leave. The pro-EU Swinson had been paired with Tory Chairman Brandon Lewis. But instead of staying away, Lewis voted -- with the government, helping May to win. The apparently underhand tactic infuriated members of May’s team, including cabinet minister Andrea Leadsom, who has spoken out in favor of helping female lawmakers balance political work and family life.

“Who is taking responsibility for failing to honour the pairing agreement,” another angry Tory, Sarah Wollaston, asked on Twitter. “More than just an extension of the other heavy handed tactics on display, it disrespects women and why maternity leave matters.”

Labour reacted with predictable fury, demanding that Lewis issue an apology. Eventually he did. “I’m sorry Jo,” Lewis said on Twitter. “I think it was an honest mistake made by the whips in fast-moving circumstances. I know how important the pair is to everyone, especially new parents, and I apologize.”

The chief whip also issued a statement, saying he was very sorry to Swinson for the “mistake.”

Whilst the focus was on Tory divisions, there was another reason why May survived. Four pro-Brexit lawmakers in the opposition Labour Party decided not to back the Tory rebels, despite being ordered to. Instead, they voted with May, and kept her Brexit plan on track -- for another day, at least.

©2018 Bloomberg L.P.