Fall Out: A Year of Political Mayhem. Tim Shipman

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Fall Out: A Year of Political Mayhem - Tim  Shipman


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      The most important political argument May planned to make – since it was not widely expected – concerned what would happen if there was no deal. In order to impress on the EU that May was prepared to cut and run if she did not get what she wanted, Nick Timothy came up with the line ‘no deal is better than a bad deal’. Internally, the chief of staff had argued the point vigorously. ‘There are some people on the European side who say the only acceptable deal is one which punishes Britain – that’s not a good deal,’ he said. ‘There are some on our side who are so eager to do a deal that they’ll want to sign up to all the bad bits of EU membership and none of the good bits. That’s not a good deal either.’

      In the aftermath of the speech, this approach was characterised as evidence of the prime minister’s cavalier approach to Brexit and her total capitulation to the brinkmanship of the hardline Eurosceptics. But in private May was far from sanguine about the prospect of resorting to WTO rules, judging that scenario ‘very sub-optimal’. Her view had formed in early September, when Oliver Robbins drafted a paper on the implications of moving to WTO rules for different sectors of the economy. May’s response was to say, ‘I really don’t like the look of that and I don’t want to go for WTO. I don’t want to go there, I do want a preferential agreement.’ The prime minister was convinced enough that, unusually, she did not ask for a more detailed paper to be prepared. A source familiar with the discussions said, ‘She was very clear she wanted some sort of preferential economic and trade agreement and the WTO was unpalatable.’

      David Davis believed Britain would survive a no-deal scenario ‘perfectly well’ but he also approved of May deploying the gambit, telling colleagues it was a strategy of ‘mutually assured scaring the shit out of each other’. To Remainers who told him it was irresponsible to flirt with a no-deal Brexit, Davis said, ‘The more people squawk about a WTO option being so terrible, the more likely it is to happen because it will persuade either side we don’t mean it. And we bloody well do.’ Another cabinet minister said, ‘David Cameron’s mistake when he was negotiating before the referendum was that the Europeans never thought we would walk away. This time we will.’

      It was the chancellor, of all people, who raised the ‘no deal’ issue to Defcon One. On 15 January, the German newspaper Welt am Sonntag ran an interview with Hammond in which he suggested Britain could transform its economic model into that of a corporate tax haven if the EU failed to do a deal on market access. ‘If we are forced to be something different, then we will have to become something different,’ he said. Asked to clarify, he added, ‘We could be forced to change our economic model to regain competitiveness. You can be sure we will do whatever we have to do. The British people are not going to lie down and say, “Too bad, we’ve been wounded”. We will change our model and we will come back, and we will be competitively engaged.’ Jeremy Corbyn dismissed this vision of the UK as Singapore-on-Sea as a ‘bargain basement tax haven’. But Hammond had been concerned that May’s speech would cause the pound to fall and he wanted them to see the government had a plan. His colleagues were grateful. Davis felt the threat would stop the Commission thinking it could push Britain around as it had Greece during the eurozone crisis. A fellow cabinet minister said, ‘That was Phil being a team player even though he was not entirely comfortable with the strategy.’ Hammond would back away from his comments when he talked to Le Monde in July but his intervention in January helped ensure that when May spoke, the pound actually rose.

      Privately, Hammond was less supportive of his prime minister. That week the Economist had run a cover story on May under the headline ‘Theresa Maybe’. ‘After six months, what the new prime minister stands for is still unclear – perhaps even to her,’ it said. The article was curiously timed since May was finally making her strategy public, but Hammond let it be known to a journalist at the magazine that he was amused by the article.

      The final details of the speech were thrashed out during a breakfast meeting in Hammond’s office in Number 11 Downing Street the same weekend. The dysfunctionality of the cabinet committee system had driven decision makers into ever smaller groups. ‘It leaked like a sieve,’ a cabinet minister said. ‘We started having bilaterals, trilaterals and quadrilaterals with Theresa.’ For the crunch meeting Boris Johnson was not invited. ‘The civil service worked out that the only way that they could get any decisions on anything was with DD, Hammond and May in the room,’ a DExEU official recalled.

      Over two hours, the prime minister, the chancellor and the Brexit secretary – and their closest aides – went over each of the twelve pillars of the speech to ‘stress test’ them. One of those present said, ‘It was one of the best meetings a group of politicians making big decisions have had in the time I’ve been there. They chewed the fat on everything and then came to the decision.’

      The purpose of the meeting was to win Hammond’s support for May’s proposals. Davis was invited because it was felt he could help the chancellor over the line. ‘DD can talk to him probably in ways that others can’t,’ a cabinet source said. The meeting was the moment Hammond finally accepted the inevitable, that Britain was leaving the customs union. The chancellor remained ‘appalled’ by the idea, but when the time came to fall into line he did so with a whimper rather than a bang. A source present said, ‘I went in expecting there to be quite a big debate. In truth it was quite mild. It was not quite a shrug of the shoulders but he said, “Yes, okay.” And that was that.’

      A cabinet minister said, ‘Phil knew this was the speech that mattered. The party conference speech was basically telling Europe “Brexit is actually going to happen.” Up until that point, European governments kept on asking us, “How are you going to get out of this?” But the substantive policy was in the Lancaster House speech. Phil realised he had to make the best of a bad job, from his point of view.’ A close ally of Hammond added, ‘He saw the value in Theresa clarifying the situation. She basically bought off the Brexiteers wholesale. Philip still saw the problems but he realised that politically it was the only way to stop their being a leakage to Ukip.’

      Sitting at the back of the room, Fiona Hill breathed a sigh of relief. ‘That meeting was one of the single most important meetings because it meant Theresa could stand up and say that she had DD and Philip not just behind her but utterly intellectually in the same place as her,’ a source close to May said. A cabinet minister agreed: ‘In any economic project – and for God’s sake this is the biggest economic project – you absolutely have to take a chancellor with you.’ Hammond did not have much choice, as a cabinet source observed. ‘The ship was already gone. Phil’s only option was to jump onto the back of the lifeboat or into the sea. He jumped into the lifeboat.’

      Once again, the most important decisions on Brexit in May’s first year in power had been taken by a group of people who could have fitted into a telephone box. The fear of leaks was such that most cabinet ministers were only shown the text of the speech minutes before May delivered it.

      When the Treasury got their hard copy of the final draft the day before, Hammond and his officials made one final effort to change the approach to the customs union. May’s aides had worded that section carefully to maintain a degree of ambiguity. ‘Full Customs Union membership prevents us from negotiating our own comprehensive trade deals,’ it said, but ‘I do want us to have a customs agreement with the EU. Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position. I have an open mind on how we do it. It is not the means that matter, but the ends.’ A Downing Street official said, ‘That language was already a concession to the Treasury. When the chancellor’s comments came back on the draft they were incredibly limited but he did want the language on the customs union watered down more and we pushed back on it. We retained the original language.’ A special adviser added, ‘Hammond mishandled it because she had made up her mind.’

      In May’s forty-two-minute speech the headlines came thick and fast. ‘I want to be clear that what I am proposing cannot mean membership of the single market,’ the prime minister said, since that would mean accepting the EU’s four freedoms – free movement of goods, services, capital and people – and ‘complying with the EU’s rules


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