Brexit Bulletin: The Impossible Government

Brexit is 56 Days away.

(Bloomberg) --

Today in Brexit: Britain is heading for a third election in four years — the only question is when.

What’s Happening? One day after his first taste of defeat in Parliament, Prime Minister Boris Johnson was force-fed a second, third and fourth helping. For starters, MPs voted twice to back a bill proposed by Labour member Hillary Benn that would force the prime minister to ask the European Union to delay Brexit until Jan. 31. Johnson’s riposte to that setback was to call for a general election in mid-October. Within a couple of hours that, too, had come to naught. 

Now what? Johnson has no workable majority to deliver Brexit: Labour leader Jeremy Corbyn wants his rival to squirm and won’t agree to an election at least until the anti-no-deal bill formally becomes law. Johnson branded Corbyn a “chicken” who’s afraid to fight an election he’s spent two years calling for. Labour finance spokesman John McDonnell told ITV’s Robert Peston that he prefers “later rather than sooner” — to minimize the risk of a no-deal exit — but that the matter is still being discussed within the party.

Meanwhile, in Brussels, EU officials made it clear yesterday that the U.K. has not yet presented any concrete proposals about alternatives to the key sticking point, the so-called Irish “backstop.” Brexit negotiator Michel Barnier, briefing the ambassadors of the bloc’s 27 governments, reaffirmed that talks on the border issue are at an impasse. The mood in Brussels is very pessimistic, one EU official said on condition of anonymity.

At least the House of Lords won’t add to the logjam. The U.K.’s unelected upper house of Parliament agreed overnight to complete passage of the anti-no-deal bill — which would delay Brexit by three months absent an agreement — by 5 p.m. on Friday. Pro-Brexit peers had proposed more than 80 amendments and threatened to filibuster the legislation until Parliament’s suspension at the start of next week.

Britain’s politicians remain transfixed by the same Brexit conundrum they have faced for the past three years. Since 2016 it has divided the people. Now it has paralyzed Parliament. An election could be one way out. Or, as Bloomberg Opinion’s John Authers writes today, perhaps the only way to fix Brexit is a new constitution.

Today’s Must-Reads

• Everything that has happened in recent weeks shows Johnson’s team in Downing Street always wanted an early election, argues Jenni Russell in the Times.
• Nevertheless, the strategy is incredibly risky, with the risk of dangerous defeats for the Tories, writes Robert Shrimsley in the Financial Times.
• Which way did your MP vote on the key no-deal bill? Dive into our map to find out more.

Brexit in Brief

On the Markets | The pound posted its biggest gain in six months, climbing as much as 1.5% to $1.2258 after the anti-no-deal votes. “Ultimately, if the risk of ‘no deal’ on Oct. 31 is shifting lower, and ‘no deal’ is one of the worst outcomes for the pound, then this likely opens the door to a more positive set of Brexit scenarios,” said Adam Pickett, a Citigroup Inc. foreign-exchange analyst.

No-deal BOE | The U.K.’s preparations for a no-deal exit may help limit the economic damage, according to the Bank of England. Updating its assumptions, Governor Mark Carney told the Treasury Select Committee that the central bank’s assessment of the “worst-case no-deal no-transition scenarios has become less severe” since last November’s projections. The drop in GDP from peak to trough is less than the 8% seen last November, but still a dramatic 5.5%.

Hands Off the Pound | Carney also said there’s almost no chance of the central bank intervening in the foreign-exchange market to control swings in the pound, pointing to how the market “adjusted very quickly” after the 2016 Brexit referendum.

Budgets Boosted | Before the latest round of Brexit votarama got underway, Chancellor of the Exchequer Sajid Javid promised to end a decade of austerity. In his first set piece since becoming finance minister, Javid said he would deliver a 4.1% real increase in day-to-day spending for the fiscal year 2020 to 2021, with more than £13 billion ($16 billion) added to total spending compared with plans set out in the spring.

Saying Goodbye Former U.K. Conservative Party chairman Caroline Spelman will quit Parliament at the next election if Britain leaves the EU without an agreement on terms. Spelman, 61, joined the Tories as an 18-year-old and has been an MP for 22 years. “In my constituency there is a large council estate and all the single mums there owe their jobs to the car factory,” Spelman told Bloomberg’s Kitty Donaldson. “I can’t be pro no-deal when I’ve seen the predictions about what will happen to jobs, I can’t ignore it.”

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To contact the editor responsible for this story: Anne Swardson at aswardson@bloomberg.net, Iain Rogers

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