May Faces Critics as Risk of Rebellion Recedes: Brexit Update

(Bloomberg) -- Prime Minister Theresa May, not for the first time, is facing talk of a leadership challenge. She needs to make more concessions to the European Union to get a Brexit deal and doing so is making Conservative euroskeptics apoplectic. But it’s not clear that her critics have the numbers to topple her.

EU Citizens Can Stay (5:55 p.m.)

May reiterates her promise to unilaterally guarantee the rights of EU citizens living in Britain to remain, even if she fails to get a Brexit deal.

“In the statement I made after Salzburg I made clear that in a no-deal situation we will guarantee the rights of EU citizens,” she says.

That’s not quite enough for businesses and EU citizens, who want a firm legal guarantee instead.

May Hasn’t Been Summoned Yet (5:50 p.m.)

May hasn’t been invited yet to the meeting of Tory rank-and-file lawmakers on Wednesday, according to an official in her team. Newspapers reported over the weekend that she would be hauled before the powerful committee amid talk of a leadership challenge.

Customs Union By Another Name? (5:30 p.m.)

May has a new term and it sounds a lot like customs union: a U.K.-EU joint customs territory. She’s using it to describe a proposal to remain within the EU’s customs regime for a "temporary" period after Brexit. This is her proposal for the so-called backstop -- the guarantee clause that’s designed to prevent a hard border on the island of Ireland after Brexit.

May sets out her negotiating plan (4:50 p.m.)

May says she’s trying to convince the EU to drop its proposal for the backstop.

Her plan:

  • make the U.K.’s proposal to keep Northern Ireland and the rest of the U.K. in a virtual customs union legally binding
  • introduce the possibility of an extension to the transition
  • neither of these “insurance policies” can last “indefinitely”
  • Crucially, May also said that part of her plan is to make sure that Northern Irish businesses have full access to the British market. That’s a big hint that her backstop might put up some kind of barrier between Northern Ireland and mainland Britain. As Bloomberg has reported, May’s proposal is to put regulatory checks between the province and the mainland.

These are incremental, yet critical steps, that show where the negotiation in Brussels is heading as May tries to keep the peace back home. The trouble is that the EU is still saying that its backstop needs to be somewhere in the divorce deal, even if it’s just as an ultimate, last-resort guarantee.

May outlines condition when extension needed (4:47 p.m.)

He spokesman earlier said it was still an idea, May in Parliament this afternoon went into some detail to explain it was not her favored option -- “ I do not want to extend it” -- but there were circumstances in which it might be needed. There were roars of laughter at times during her statement.

Baker withdraws amendments (4:32 p.m.)

Steve Baker has decided to drop his attempt to sabotage Brexit negotiations. He is the former Brexit minister who is also a leading member of the European Research Group -- an influential group of Tory pro-Brexit lawmakers that have been causing May all kinds of trouble and want a clean break from the EU. They hate the direction she’s taken.

Baker had proposed amendments to a Northern Ireland bill that would have required the Northern Ireland Assembly, which is currently suspended, to approve anything that would treat the province differently from the rest of the U.K. The risk to him was that Labour would help him get the amendment into debate and then pull the rug out from under him, making the Tories look even more split than they are.

He announced on Twitter that he was withdrawing his amendments.

Brexit Secretary Dominic Raab takes questions (4:18 p.m.)

Raab says the motion that the government puts to the House of Commons to win approval for its deal will be amendable. That’s important for anti-Brexit lawmakers, some of whom want to amend the motion to push for a second referendum. For lawmakers it’s about whether they get a "meaningful vote" on the deal --rather than a take-it-or-leave it vote.

But he said it was unrealistic for lawmakers to think they can send May back to the negotiating table or change the terms of an internationally agreed deal.

A pro-Brexit lawmaker on the record (4:12 p.m.)

Conservative politician Bob Seely had this to say on the latest leadership rumor mill: “A leadership challenge this week is very unlikely. We hear talk of threatened rebellions that don’t materialize. The PM will very likely get a deal.”

Asked if he, as a Brexit true-believer, had sent in his letter -- remember, there are 48 needed to kick-off a leadership challenge -- Seely texted “no.”

“The real test will come when Parliament votes - how will hard-core Remainers and Leavers vote and will Labour - as promised - vote against any deal simply to undermine the government,” he said. “So far the story of Brexit is a lot of smoke and not that much fire. That may, however, change when Parliament has a say on any deal.”

Do They Have the Numbers? (4 p.m.)

There’s a whole lot of bluffing going amid all the talk of a leadership challenges. While the pitch of the gossip has certainly ratcheted higher, a few lawmakers signaled in private that they don’t expect a challenge to be launched this week. The Brexiteers don’t have the numbers and are hoping that the center of the party rises up against May.

There’s only one person who knows how many no-confidence letters have been sent --lawmaker Graham Brady, and he isn’t telling anyone.

But Will They Have the Numbers? (2:35 p.m.)

Alongside rumblings of a leadership challenge, the euroskeptics are also plotting a show of force on Wednesday with an amendment that would seek to tie May’s hands in the negotiation. Steve Baker, a leading pro-Brexit lawmaker has proposed some amendments to put May in a tight spot.

But it’s not yet clear if he will be able to pull it off. It depends on the Labour Party and how they decide to play it. Labour could even try to use parliamentary tactics to set Baker up to fail -- as a way of putting Tory divisions on display.

If Baker doesn’t think he has the numbers, he’ll probably back down.

Meanwhile, the pound is selling off on the political uncertainty. It’s down 0.8 percent at $1.2968


Opposition Mounts (1:30 p.m.)

Sky reports that an unnamed, "centrist" Conservative is sending a letter with the aim of triggering a no-confidence vote in May.

May has survived more than a year of speculation that she will be ousted. She has staggered on, mainly because her opponents see no clear replacement, and the hardline faction of Brexit purists most opposed to her policies simply don’t have the numbers. What’s different this time is that the opposition appears to be a bit more broadly based.

Meanwhile Wednesday is shaping up to be the real test for May.

Steve Baker, a leading Brexiteer and former minister, has proposed five amendments that -- if passed -- would tie May’s hands in the negotiation. He aims to make the EU’s Irish backstop proposal illegal.

What is the backstop again? It is the guarantee clause in the Brexit divorce deal that seeks to avoid a hard border on the island of Ireland and which has kept negotiations in stalemate for months.

Baker’s move could just be a tactic to show May their numbers. But the Telegraph reports that the Northern Irish lawmakers propping up May’s administration will support it.

May has repeatedly rejected the EU’s backstop, and is trying to get negotiators to replace it with her own proposal. But as things stand, the EU’s safety net will probably have to be included in the divorce deal, even if only as an ultimate, last-resort insurance clause.

Coming up:

May will update Parliament at 3:30 p.m. in London about the EU summit

Earlier:

©2018 Bloomberg L.P.