Features

May’s deal gets defeated again

The prime minister’s EU withdrawal agreement is now dead. Or is it? Emily Hohler reports.

937-May-634

Will Theresa May's deal ever make it?

WIktor Szymanowicz/NurPhoto

"It was once rare for British governments to lose big votes in the House of Commons," says The Economist. "Under Theresa May it is becoming a habit." On Tuesday, her Brexit deal was "roundly rejected" by 391 votes to 242. Although she has clawed back 40 votes since the first "meaningful vote" on 15 January, this is "still a huge loss by historical standards".

The defeat came after Attorney General Geoffrey Cox advised that, despite a last-minute dash to secure legally binding documents from the EU over the Irish backstop, ultimately, the "risk remained" that Britain could find itself stuck with it, trapping the UK indefinitely inside a customs union.

The next steps

Aside from the "fudge and delay" scenario, unscheduled developments are a possibility, says Paul Dales in Capital Economics. "Something could force May to resign and/or the Labour party could try to trigger a general election." The good news, however, is that despite all the uncertainty, the economy is "holding up well". The UK is growing at a faster rate than Germany, France, Italy and Japan. Lingering uncertainty won't help, but even so, the economy is "well placed" for a Brexit deal and would "cope" with a no-deal "better than most expect".

The trouble is that there hasn't yet been a sense among MPs that this is "really, truly, the last chance saloon", says Anand Menon in The Guardian. "Deadline day depends on a fixed deadline that everyone accepts." European Commission president Jean-Claude Juncker has been clear that the EU will not reopen negotiations,

and that an extension would only be till May. Maybe this is the real deadline. Brexiters will have to decide if theyprefer May's deal to no Brexit at all. Labour MPs opposed to another referendum will have to decide whether to back the deal or "swallow" a second popular vote. At this point remarkably a majority "may be within grasp".

It may be, agrees Robert Shrimsley inthe Financial Times. As May remindedMPs this week, they still need to "choosea deal they can support". Indicative votes may follow to allow MPs to "direct the future course of Brexit deliberations".None of this bodes well for hardliners.

To "ratchet up the pressure, the government will publish papers on no-deal tariffs and arrangements for the Northern Ireland border. None will be pretty." The hardliners' nerve is already beginning to crack. They were desperate for Cox to provide the "cover" they needed to "climb down". "They know that once the other side coalesces around an alternative soft-Brexit plan or referendum, the momentum may prove unstoppable." Once the Commons seizes control of the process, May may struggle to reclaim it. "All Brexit outcomes remain possible, but "one last heave for her deal is also still in the mix".

The Speaker may rule out a third vote if it is not materially different from the last, says Philip Johnston in The Daily Telegraph. And the EU won't offer concessions once the "threat of disruption to EU trade from a disorderly no-deal Brexit" has been "taken off the table". Brexit Britain needed a visionary PM and we got a pragmatist. It's time she went.

Fiscal Phil finds a war chest

Although Hammond did downgrade OBR (Office for Budget Responsibility) GDP growth for 2019 to 1.2% from 1.6% last year, upward revisions in later years (1.4% in 2020 and 1.6% from 2021-2023) leave the average growth rate "almost unchanged". The "real boost" to the public finances comes from assumptions such as increased wage growth and, adds The Daily Telegraph, a downgrading of borrowing forecasts after a "bumper tax haul" in January. Borrowing for the ten months of this fiscal year stands at £21.2bn, its lowest level for 17 years.

This is good news, says Ian Stewart, Deloitte's chief economist, on the BBC. And with Brexit looming, the Treasury needs a war chest. But we should not forget that"the burden of debt in the UK is still at its highest in over 50 years".

So what did fiscal Phil's mini-Budget include? A review of the National Minimum Wage, a new £3bn affordable homes scheme and £100m of extra funding to fight knife crime, says Sophie Smith in The Daily Telegraph. There will be a consultation on how to replace PFI (private finance initiative) contracts and a review of the global tech giants to ensure they pay their fair share of tax.

Although Hammond's plan is "to restart the fiscal squeeze" after 2019/20, he is likely to "ease up" nearer the time, given the government's slim majority and the fact that cyclically adjusted borrowing is still "well below" his self-imposed target, says Samuel Tombs in Pantheon Macro-economics. Since there is "little appetite" for more austerity, fiscal policy will no longer "dampen the economy", strengthening the case for an interest rate rise once Brexit uncertainty has faded.

Recommended

What makes up the price of a litre of petrol?
Budget

What makes up the price of a litre of petrol?

The cost of filling the average car with fuel is falling. Here’s what makes up the price of a litre of petrol.
1 Jun 2023
Will energy prices fall 2023?
Personal finance

Will energy prices fall 2023?

Falls in wholesale energy prices have fed through into a lower energy price cap, but will that continue?
25 May 2023
UK inflation slides to 8.7% - what does it mean for your money?
Economy

UK inflation slides to 8.7% - what does it mean for your money?

Inflation has dropped below 10% for the first time in months, but with food prices at a 45-year high, is this good news and what does it mean for your…
24 May 2023
What is inflation and how will it affect you?
Inflation

What is inflation and how will it affect you?

ONS is set to announce the latest inflation figures this week with experts suggesting we may finally see it slide. We look at what lower inflation mea…
23 May 2023

Most Popular

June’s NS&I Premium Bond prize draw - are you this month’s millionaire?
Savings

June’s NS&I Premium Bond prize draw - are you this month’s millionaire?

Two fortunate NS&I Premium Bond winners are now millionaires. Find out here if you’re one of them.
1 Jun 2023
Savings inertia - why we should all be obsessed with interest rates and savings accounts right now, says Kalpana Fitzpatrick
Savings

Savings inertia - why we should all be obsessed with interest rates and savings accounts right now, says Kalpana Fitzpatrick

Are savers still missing out on hundreds of pounds by not moving their cash for better interest rates?
30 May 2023
Best savings accounts – June 2023
Savings

Best savings accounts – June 2023

Interest rates have been creeping up - we look at the best savings accounts on the market right now.
2 Jun 2023