No Brexit and a minority government – the future for Britain?

Jeremy Corbyn © Getty Images
Jeremy Corbyn: likely to be heading the next minority government

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On Thursday, EU citizens go to vote on who will represent them in the European Parliament.

Britain voted to leave the EU almost three years ago. But we’re still there, so we’ll be voting in these elections too.

There are hopeful suggestions that Britain won’t stay in the EU for long enough for those newly-fledged MEPs to take up their seats.

I have to say, it’s not a bet I’d want to stake much money on.

But what does it all mean for your money in the meantime?

I don’t see how Theresa May’s Brexit deal can win

British politics – like politics elsewhere around the world – has been getting messier for a while now. The crisis of 2008 was the clear turning point. That’s when the majority of people realised that the world did not work the way they had believed it did. In effect, we had a massive crisis of faith.

That shook things up. At the very next election following the crisis, Britain had its first coalition government since World War II. It’s continuing to shake things up today.

Prime minister Theresa May keeps taking baby steps towards leaving the job, but she’s clearly still hopeful that she can get her deal through parliament, in one form or another. She’s set up a further vote in June (this is the fourth one).

Victory seems an unlikely outcome. Yes, the European elections and the presumed triumph of the Brexit party might be sufficient to scare some of her colleagues into opting for the “devil they know” in the form of her deal rather than the nebulous prospect of “no deal”. And the idea of May taking the blame for Brexit might appeal to some of her potential successors.

But I just don’t see how she can muster the numbers. Labour scents blood in the air. If May steps down, then that brings an early general election several steps closer. Even the group of Labour MPs who constantly criticise Jeremy Corbyn won’t change their minds and splinter now if they see a shot at power.

So let’s start by assuming that the European elections are the ultimate protest vote. The Brexit party does very well. The scattered “Remain” vote – led by the Lib Dems – does pretty well. Labour do badly. The Tories end up in fourth place.

Let’s also assume that May’s deal hopes have the staying power of an ice cube in a sauna. The vote comes and goes, and the pressure is on for her to set out her departure timetable.

So come the middle of June, you’re looking at a Tory party leadership election being uppermost in the minds of the government, a Brexit party probably gearing up to fight a general election, and quite possibly – if they’ve any sense of political strategy, which is always a doubtful proposition – the Lib Dems seizing the chance to lead some sort of “Remain” coalition.

And of course, you’ve still got that review of Brexit progress coming up at the end of October. And unless May’s deal does pass, the odds of anything being ready by then look very low indeed. Even if May is replaced by a “hard” Brexiteer, the parliamentary arithmetic won’t change.

No Brexit and a minority government

What does all of this suggest for your portfolio, if anything?

Firstly, the Conservatives are in serious trouble. It doesn’t matter how “hard” a hard Brexiteer they choose to lead the party. If you feel sufficiently strongly about Brexit to make that the core issue you vote on, then Nigel Farage is the obvious face of Brexit, even more so than the Tory’s Marmite candidate (you love him or hate him, apparently), Boris Johnson.

Secondly, the field is far from clear for Labour. There is no doubt that Labour’s stance on Brexit – trying to have its cake and eat it (which some might consider ironic) – is alienating a lot of its voters on both the “Leave” and “Remain” sides.

So there’s a good chance that the next UK government (in the event of a general election) would be another coalition. This likelihood, along with the crashing popularity of the Tories, also suggests to me that we are still more likely to see ongoing delays to the Brexit process.

That said, the odds of a “no-deal” have increased too. I wouldn’t bet on it happening, but there is, I suppose, a chance that the EU finally decides that its best odds of self-preservation are to try to make an example of Britain.

How could that happen? If the European Parliament elections scare the horses sufficiently, with Italy and France in particular kicking up a fuss, then you might get more support for Emmanuel Macron’s integrationist views. Cut Britain loose, “show the populists what happens when you mess with the EU” type message.

However, I do struggle to see this happening. I suspect that if Britain remains mired in disunity, then the prospect of Brexit never happening will appeal more than the idea of making Britain an example, pour encourager les autres.

That’s because none of the European populists (except maybe Marine le Pen, and even that is doubtful) actually want to leave the EU. They just want to bend it more to their will. Kicking Britain out and then having to plug the holes in the EU budget, for example, runs the risk of increasing tension and handing more support to the populists in the case of any internal bunfight.

So in conclusion, for me right now, the most likely scenario is this: May’s deal fails. The Tories replace her eventually. They try to put off a general election for as long as possible, but I seriously doubt that they can get away with holding it in 2022 (that’s the current schedule, according to the Fixed-term Parliaments Act 2011).

Meanwhile, the problem remains – no majority for any Brexit deal, and parliament still able to block it. The EU knows this and despite ever-more grumpy discussions and rhetoric, it just keeps kicking the ball further into the long grass. The next deadline delay is conditional on it being a year or more for the next review date.

There’s a general election. I don’t know what government you get, but it’s a minority one and it’s more likely to be led by Labour than the Conservatives.

What happens then? I have no idea, but I do think it makes sense to start trying to protect your money in the case of a much harder-left government than anyone expects. We’ll be looking at this topic in more detail in MoneyWeek later this month – if you’re not a subscriber, I suggest you sign up to get your first six issues free here right now to ensure that you get a copy of that particular magazine.