Theresa May, U.K. prime minister. (Photographer: Simon Dawson/Bloomberg)

May Faces Heavy Defeat as Tories Criticize Deal: Brexit Update

(Bloomberg) --

Theresa May is facing a defeat for her Brexit strategy after the Democratic Unionist Party and a key group of pro-Brexit Conservatives rejected the revised terms she’s secured from the European Union. The pound fell.

Key Developments:

  • Deal goes to a vote at 7 p.m.
  • ERG leader Rees-Mogg says most of the pro-Brexit Tory caucus will vote against deal
  • May’s Northern Irish allies the DUP criticize deal
  • If deal rejected, Parliament will vote from Wednesday on no-deal and then on an extension to exit day

Rees-Mogg: U.K. Heading for No-Deal Brexit (6:35 p.m.)

Jacob Rees-Mogg, leader of the pro-Brexit ERG caucus of Tories, said after their meeting the majority of the group’s members are opposed to the deal.

“The feeling in the room was that Cox’s advice hasn’t changed,” he told reporters. “What we wanted changed was very clear.” Rees-Mogg also said he thinks the U.K. is heading for a no-deal Brexit.

Leading ERG member Steve Baker said he expects the deal to be defeated, and the caucus would vote for a no-deal Brexit when Parliament gets the chance on Wednesday. May’s deal is “Brexit in name only,” he said.

Clarke Expects Most of ERG to Vote Against Deal (6:10 p.m.)

Conservative MP Simon Clarke told reporters as he came out of the meeting of the pro-Brexit European Research Group caucus that he expected a most of its members, like him, would vote against the deal this evening.

With more than 60 members in the ERG, May needs most of them to back her deal to even stand a chance of it passing. She could be set for yet another thumping defeat.

Johnson Slams May’s ‘Apron of Fig Leaves” (5:25 p.m.)

Boris Johnson, the figurehead of the Leave campaign who quit as foreign secretary over May’s Brexit policy, told the House of Commons the deal the premier has negotiated “deal has now reached the end of the road.”

The prime minister and Attorney General Geoffrey Cox have “failed” to get the “wholly modest” changes to the deal sought by the House of Commons after defeating the deal in January, Johnson said. Instead, “like Adam and Eve in the garden of Eden, they have sewed an apron of fig leaves that does nothing to conceal the embarrassment and indignity of the U.K.”

He urged Britain to take “what now seems to be the more difficult route, but in the end, the only one that preserves our self-respect” and leave the bloc on March 29. He suggested Britain should then observe single market rules and EU customs duties and “restrain our right to compete for a period of three years whilst we negotiate a free-trade deal.”

Blair Predicts Defeat for May (5:15 p.m.)

Former Prime Minister Tony Blair said he expects May’s deal to be defeated tonight, and the U.K. to then be forced to seek a delay to the Brexit date. Speaking on Bloomberg TV, Blair reiterated his call for a second referendum, adding that he didn’t expect the EU to make any more concessions.

He declined to say whether May should resign if she loses tonight’s vote.

Rees-Mogg Still Undecided on Vote (3:50 p.m.)

Pro-Brexit Conservative MP Jacob Rees-Mogg told the BBC he’s still deciding on how to vote but said he won’t be influenced by warnings that Brexit could be lost if the deal fails. He called that a “phantom” threat, and said the default legal position is for the U.K. to leave the EU on March 29 and preventing that would require a significant U-turn May has shown no sign of making.

He also said some members of his European Research Group caucus would vote for the deal regardless of his decision, he said, though he didn’t know how many. “People can in good faith come to different conclusions,” he said.

Tories Not Preparing for Election (3:20 p.m.)

The Tories aren’t preparing for an election, according to a U.K. official, amid speculation May could call one if she’s defeated.

If her deal is rejected tonight, the government present a motion setting out the next steps for votes. May has promised a ballot on the no-deal option and then on a postponement of exit day.

EU’s Thoughts Turn To Summit And Delay (2:30 p.m.)

EU officials weren’t particularly confident that their legal assurances would be enough to convince members of Parliament to back the deal. Now they’re almost resigned to seeing it defeated again on Tuesday night. They are already starting to plan next week’s summit of EU leaders which, one said, will now be dominated by Brexit.

May should forget getting any more concessions next week, officials said. Instead, the focus will be on delaying Brexit. There are many different ideas among the 27 remaining governments about the length of a postponement, ranging from none at all to two or three months, one year or 21 months. They need to agree unanimously and officials say only leaders themselves can really make that decision.

May Faces Heavy Defeat as Tories Criticize Deal: Brexit Update

May Loses Her Voice Again at a Moment of Crisis (2:20 p.m.)

Theresa May is on her feet in Parliament making the case for compromise, again. But more notable than anything she’s saying is that her voice has almost completely gone. It’s an echo of the terrible moment she endured during the 2017 Conservative conference when she lost her voice in the middle of her main speech, while pieces of the set fell off behind her. Respite is coming from the MPs who “intervene” on her speech to ask questions -- and give her voice a brief rest.

DUP: May’s Revised Deal Isn’t Good Enough (2:15 p.m.)

In a major blow to her hopes of winning Tuesday’s vote, May’s Northern Irish allies in the Democratic Unionist Party rejected her deal. DUP leader Arlene Foster published a statement from the party on Twitter saying May has made “limited progress” in her latest talks with the EU. “However in our view sufficient progress has not been achieved at this time,” the DUP statement said.

The party is worried that the Brexit agreement splits Northern Ireland legally from the rest of the U.K. Maintaining that link is core to the DUP’s fundamental principles.

“We will support the right deal which respects the referendum result and Northern Ireland’s place as an integral part of the United Kingdom,” the statement said. “It is possible to reach a sensible deal which works for the United Kingdom and the European Union but it will require all sides to be reasonable and in deal making mode.”

Bercow Selects no Amendments for Debate (2:05 p.m.)

Speaker of the House of Commons John Bercow has ensured the 5-hour debate will be entirely on May’s Brexit deal and not on any alternative plans. That’s because he’s selected none of the proposed amendments for debate. It also means there will be a single vote when the debate finishes at 7 p.m. -- on the deal May secured last night.

Rees-Mogg Calls for More Time Before Meaningful Vote (2 p.m.)

Jacob Rees-Mogg, one of the leaders of the pro-Brexit Conservatives told the House of Commons that the premier should allow an extra day for the debate on her latest package, because the 5 hours allocated isn’t enough for a matter of such “overwhelming importance.”

“It does not help the government achieve what it wishes to achieve and that is a majority in the vote,” Rees-Mogg said. “If people feel that they have been bounced, that they have been hurried and that they have been harried, their natural instinct is not necessarily to cave in but it is in fact to stiffen their resolve and see how the cards fall.”

Cox Says U.K. Can Pull out of Any Treaty, At a Cost (1:30 p.m.)

Cox is still taking questions from lawmakers. Asked by Jacob Rees-Mogg, a figurehead of the pro-Brexit Conservatives, whether a future government could be punished for pulling out of the backstop, he said the U.K. had the “undoubted legal right,” if it chose to, to walk away.

“There is a right for the United Kingdom to terminate this,’’ Cox said. “A sovereign state has the right to withdraw if a treaty is no longer compatible with its fundamental interests or fundamental circumstances.”

But there was then a word of caution: “It would be unwise and it would not be in the tradition of this country to do so,’’ he said.

Sinn Fein: Backstop Fundamentally Unchanged (1:30 p.m.)

The DUP have also been painted into a corner by Sinn Fein, the nationalist party from Northern Ireland. The party’s Brexit spokesman David Cullinane told RTE he’s satisfied that the deal on Monday has left the backstop fundamentally unchanged. Anything that leaves Sinn Fein happy usually annoys the DUP.

Pro-Brexit Lawyers Recommend MPs Reject Deal (1:20 p.m.)

Lawyers representing the pro-Brexit European Research Group Conservative caucus said changes to the backstop aren’t enough to win their support. They concluded the advice of Attorney General Geoffrey Cox doesn’t meet the tests the government set itself.

“In the light of our own legal analysis and others we do not recommend accepting the Government’s motion today,” said Conservative member of Parliament Bill Cash, one of the ERG’s so-called Star Chamber of lawyers.

The group of lawyers also including Nigel Dodds of the DUP, May’s Northern Irish allies in Parliament. In Parliament, he said the U.K. could be “trapped” in the backstop, the very thing the government was negotiating to avoid.

Cox Says Improved Deal Can Still Trap U.K. (12:50 p.m.)

Attorney General Geoffrey Cox just confirmed to the House of Commons that in some respects, the negotiations haven’t substantially changed from the deal May put to a vote in January and lost by a historic margin.

The legal risk of being stuck permanently in the Irish backstop “remains unchanged,” he said, assuming both parties can’t reach a deal while still negotiating “in good faith” and “with best endeavors.” He did, though, describe that scenario as “highly unlikely.”

He said the documents released last night do secure “legally binding changes that strengthen and improve the withdrawal agreement and the political declaration.” They outline what would “constitute bad faith, which would be the basis of a formal dispute before an arbitration tribunal.”

Cox said the decision on whether to back the deal was essentially political. “The time has come now to vote for this deal,” he said.

Barclay Says Brexit Delay Is Possible (12:30 p.m.)

Closing his appearance before the Brexit committee, Brexit Secretary Steve Barclay said “there may be the need for a technical extension” to the Article 50 process to allow the U.K. to complete preparations for its departure from the bloc. However, he said it’s not entirely in the U.K.’s gift whether one is allowed or not, and how long it may last.

“It’s not within the control of this House,” Barclay said. “It’s not a unilateral decision. This will be a decision taken by the EU27.”

In the Cabinet, “there is absolutely no appetite whatsoever to entertain the idea of having a European Parliamentary Election,” Barclay said. That suggests any extension sought by Britain wouldn’t go much beyond the May 23-26 European elections.

Cox Must Sell Deal, Minister Says (12:20 p.m.)

It’s clear May and her Cabinet are still fighting for every vote, despite Cox’s advice.

Speaking privately, one Cabinet minister said all eyes will be on Cox’s statement to the Commons when he will try to sell the deal to wavering MPs.

His legal advice offers some political cover for pro-Brexit Tories who want to change their mind and back May’s deal, the minister said. There are a lot of Tory MPs who want to vote for the deal because they can see it’s their best chance or delivering Brexit.

According to two people familiar with the meeting with May, Brexiteers who don’t want to back the deal pointed to paragraph 19 of Cox’s legal advice -- that’s the part that concludes the legal risk of the deal is “unchanged.”

But those who want to vote for the deal pointed to paragraph 14, the people said. That states the revisions “provide a substantive and binding reinforcement of the legal rights available to the United Kingdom in the event that the EU were to fail in its duties of good faith and best endeavours.”

Vote Outcome Looks ‘Touch and Go’ (12:15 p.m.)

As May addressed (see 11:30 a.m.) her Conservative colleagues, there was a supportive banging of desks from inside the room. But as he left before it was finished, Brexit supporter Andrew Bridgen was asked if he had been convinced by the prime minister. “No,” he replied.

And fellow Brexiteer Mark Francois said: “I regret to say, speaking for myself, that I found the prime minister wholly unconvincing.”

Nicky Morgan, who chairs Parliament’s Treasury select committee, said the outcome of the vote is “touch and go” and that Cox’s advice hasn’t done much to help get the deal over the line.

In better news for the premier, Health Secretary Matt Hancock said on Twitter there’s “strong Cabinet backing” for the Brexit deal. And Cabinet Minister Andrea Leadsom, asked if the deal was dead, replied: “No, not at all.”

Rees-Mogg: Still Problems on Backstop (11:50 a.m.)

In the Parliament select committee hearing for Brexit Secretary Steve Barclay, pro-Brexit lawmaker Jacob Rees-Mogg -- whose European Research Group will be key to May getting her deal passed -- made clear he thinks there’s been no significant change to the deal. The U.K. would still need to use the arbitration mechanism to leave the backstop, rather than being able to do so unilaterally, he said.

Pound Plunges on Cox Advice (11:45 a.m.)

The pound fell as much as 1.1 percent, the most since December and erasing all of this week’s gains, after U.K. Attorney General Geoffrey Cox said the legal risk of the Brexit deal remained unchanged. The market judged Cox’s verdict made the prospect of May’s deal being approved in Tuesday’s vote much less likely. U.K. government bonds rallied, reversing earlier declines.

Barclay Can’t Say Backstop Trap Eliminated (11:40 a.m.)

Brexit Secretary Steve Barclay is doing the best he can to put favorable gloss on May’s deal and Cox’s advice. Asked by the House of Commons Brexit select committee if the U.K. can unilaterally pull out of the backstop, he answered “yes,” before qualifying that, saying the U.K. has the option of arbitration if the EU seems to be acting in “bad faith.”

But pressed on the matter, he declined to say the new deal eliminates the risk of being trapped in the backstop. “One has to prove bad faith: to say it eliminates it ignores the fact that one also has to prove bad faith,” he said.

May Briefs Tories on Revised Deal (11:30 a.m.)

Conservative members of Parliament are gathering to hear from the prime minster. One Brexit-backer pointed to paragraph 19 of Geoffrey Cox’s legal advice, in which the attorney general says his overall legal advice is “unchanged.”

Most of the MPs are grim-faced, though Cabinet minster Alun Cairns, when asked if the deal is dead replied: “absolutely not, I’m very optimistic.” Kit Malthouse, among the group that worked on a compromise to unite warring Tory factions on the backstop, simply said, “I don’t know.”

Asked the same question, Theresa May smiled grimly -- but didn’t reply.

Attorney General: U.K. Can Still be Stuck in Backstop (11 a.m.)

Cox has released his verdict on May’s latest Brexit package, and it appears to skewer the premier’s chances of getting her deal past her party. Cox acknowledges the legal risk remains that the U.K. could be permanently stuck in the so-called Irish backstop.

“The United Kingdom would have, at least while the fundamental circumstances remained the same, no internationally lawful means of exiting the Protocol’s arrangements, save by agreement,” Cox wrote.

Conservative Brexiteers -- and May’s allies in Northern Ireland’s Democratic Unionist Party -- told her to replace the backstop at the end of January, precisely because of fears Britain could be permanently tied to EU rules.

And Cox has just confirmed that weeks of negotiations haven’t changed that, even if they do “reduce the risk.”

Brexiteer Lawyers Will be Ready to Pronounce (10:45 a.m.)

Brexit campaigners who have been a roadblock to May’s deal have appointed a panel of legally trained Tory and DUP MPs to give a verdict on the latest agreement.

This so called ‘Star Chamber’ court does not need a delay to today’s proceedings and will be ready to give its verdict as soon as possible, according to a member of the panel. They are finalizing their view now.

Leading euroskeptics have said they will wait for the panel’s opinion before deciding how to vote tonight.

Brexit backing Tory Mark Francois said he expects the Star Chamber panel to give its verdict late this afternoon, at the earliest. That decision will be hugely influential for the European Research Group of euroskeptic Conservatives, he said.

“I personally, and I suspect the vast bulk of the ERG, will pay extremely close attention to whatever the Star Chamber tells us,” Francois said in an interview. “I will listen very carefully to what the Attorney General says. It’s going to have to be pretty amazing to convince me.”

Brexiteer Redwood to Oppose Deal (10:30 a.m.)

Pro-Brexit Conservative John Redwood said he’s “made up his mind” to oppose May’s Brexit deal. While his concerns around the divorce settlement go beyond the backstop, in an interview with broadcaster RTE he said it’s clear little has changed on the insurance policy to keep the Irish border invisible.

He said it would be “very difficult” for the Tory pro-Brexit ERG caucus to back support the agreement, though he also stressed he wasn’t speaking for them.

Eurasia’s Rahman Expects May to Lose Tonight (10 a.m.)

Eurasia Group’s Mujtaba Rahman sees grounds for optimism for Theresa May -- even though her deal is likely to fail tonight.

“Many MPs believe May has done enough to avoid another catastrophic defeat, and might even get close to the winning post, while falling perhaps 50 votes short,” he wrote. That would be a “sign of some precious momentum for her deal.”

DUP’s Donaldson Offers May Glimmer of Hope (9:15 a.m.)

Jeffrey Donaldson, a key Democratic Unionist Party lawmaker, gave little away in his interview with Irish broadcaster RTE, saying the group is still studying Monday’s agreement and is awaiting Attorney General Geoffrey Cox’s analysis.

He did, however, seem to offer a glimmer of hope to Theresa May, saying there now appeared to be more “clarity” around the divorce deal. He added, though, that the DUP “could do with more time” to examine the agreement.

Rees-Mogg: DUP, Legal Advice Will Be Key (8:55 a.m.)

Jacob Rees-Mogg, who leads the European Research Group of pro-Brexit Conservatives who May needs to get her deal through Parliament, said his decision will depend on the views of a panel of lawyers working for his group, and the advice from Attorney General Geoffrey Cox.

How May’s Northern Irish allies, the DUP, consider the contentious backstop will also be critical to persuading many Tories to back the deal, he said. One of their members of Parliament, Nigel Dodds, is in the ERG’s legal group which meets at 9 a.m. to discuss last night’s deal revisions.

Rees-Mogg said he needs to be reassured that the U.K. can exit the backstop provision if it needs. “If it is genuinely unilateral and is accepted by the DUP, Geoffrey Cox” and the ERG’s own lawyers, he would vote for the deal, he said. “I am a Conservative member of Parliament, I am always disposed to be sympathetic to a Conservative prime minister.”

He also said the process has been “desperately rushed” and said the government should postpone the vote by a day.

Gove: Government Has Secured Binding Changes (8:40 a.m.)

Environment Secretary Michael Gove said the government is committed to holding the meaningful vote on Tuesday, arguing it’s vital for members of Parliament to back May or risk a diluted Brexit or calling if off altogether. He said the government had secured legally binding changes to the deal, meaning the U.K. could exit the backstop if the EU acts in bad faith.

“If the EU acts in way that is not in accordance with their commitments, we can go to court and we can win,” Gove told BBC Radio, and said nobody should preempt the judgment of the House of Commons. He also warned his pro-Brexit colleagues that rejecting the deal and forcing the U.K. to “petition” the EU for an extension, and that would be in the bloc’s gift.

Varadkar’s Delicate Balance (8:30 a.m.)

Irish Prime Minister Leo Varadkar’s statement in Dublin was a delicate balancing act, making clear that he doesn’t regard Monday’s developments as having reopened the divorce deal or undermining the backstop.

On other hand, he said that the layers of reassurance provided to the British government should put to rest fears fears that the U.K. might be trapped in the backstop. As he heads to the U.S., he said London should now be given “time and space” to weigh the deal deal.

Meanwhile, Spanish Foreign Minister Josep Borrell told Ser Radio the treaty “hasn’t been modified, but there has been a joint declaration and everybody is applauding saying that is legally binding.”

Labour Says Nothing Has Changed (8 a.m.)

Speaking on BBC Radio 4, Labour’s Brexit spokesman Keir Starmer said the revisions to the divorce deal haven’t changed anything and the party would still vote against it.

“It’s a bit like someone reading their home contents insurance and saying ‘this is what I think it means.’ If the other side doesn’t agree, it doesn’t mean anything,” he said.

May will be hoping, though, that some Labour lawmakers reject their own party’s position and back her government tonight; she’s likely to need at least some of their votes to offset Conservative rebels.

Earlier:

©2019 Bloomberg L.P.