View in your browser Thursday November 29 2018 By Oliver Wright and Henry Zeffman Good afternoon and welcome to this week’s Brexit briefing from The Times If Theresa May fails to get her Brexit deal through parliament a week on Tuesday one of single biggest reasons will have been her failure to negotiate a unilateral termination clause with Brussels.



Tory Brexiteers are determined to defeat her plan because they know that once it is signed there is no way out. Britain will be legally bound into customs backstops, extended transition and only a promise of Canada-style free trade nirvana.



In this week’s briefing our deputy political editor, Sam Coates, reveals that British negotiators did draw up exactly such a break clause, in precise legal text, only for Downing Street to decide that it was too provocative to insist on.



Today we publish it in full as we look to parliamentary Brexit battles ahead.



If Mrs May deal falls she could be returning to Brussels with her 140-word "option 2" and pleading for further concessions. Moreland on Brexit Theresa's secret Brexit break clause A secret blueprint drawn up by Theresa May’s Brexit adviser to allow Britain to unilaterally abandon guarantees over the Irish border has been leaked to The Times (Sam Coates writes).



Mrs May is facing widespread hostility from dozens of her own MPs over fears that her Brexit plan could leave Britain tied indefinitely to the “backstop”, the Northern Ireland insurance policy designed to prevent a hard border. The “backstop” would keep Northern Ireland in the single market and customs union, with Great Britain also tied to many of the European Union's rules unless the latter gave consent for the UK to leave.



We now know that the prime minister’s Europe Unit did draw up secret plans for a “unilateral” exit mechanism from the backstop, which we publish in full below. Olly Robbins, Mrs May's Europe adviser and author of the plan, urged Mrs May not to make it a formal demand in the negotiations because of the hostility it would create — a decision some Brexiteers continue to question.



The Times has seen this “termination clause with explicit unilateral mechanism”, which some Brexiteers want to resurrect. The blueprint would have created a legal procedure for the UK to exit the backstop if talks over a future trading relationship broke down or if “there has been a fundamental change in circumstances since the conclusion of the withdrawal agreement”.



The leaked draft states that after initiating the procedure a joint EU-UK committee would be set up to consider the “necessary modalities (consequences) and adopt appropriate recommendations”. Referencing the Good Friday agreement, which removed security checkpoints from the Northern Irish border, the document states: “The Union and the UK shall take all necessary steps to enable the parties to the 1998 Agreement to fulfil their obligations thereunder.”



Mr Robbins, who came up with the plan, is understood to have lobbied No10 strongly not to ask him to put it on the table in the negotiations. He feared that it would bring all other discussions to a halt because of the strength of opposition in Brussels and around Europe. No10 followed this advice.



Brexiteers are likely to want this model resurrected as soon as possible if Mrs May loses the vote.



Option 2 - Termination clause with explicit unilateral mechanism

If [after x] the Union or the United Kingdom reasonably considers that there is no prospect that the subsequent agreement referred to in [X] will become applicable [within a reasonably foreseeable period], or that there has been a fundamental change in circumstances since the conclusion of the Withdrawal Agreement, it may be notify the other party, setting out its reasons. If, [X] months after such a notification, the Union or the United Kingdom remains of that view, it may notify the other party accordingly. This Protocol shall cease to apply [X] months after that further notification is received. The Joint Committee shall consider the necessary modalities and adopt appropriate recommendations. The Union and the United Kingdom shall take all necessary steps to enable the parties to the 1998 Agreement to fulfil their obligations thereunder.

Best of comment 1 The cost of Brexit Leading article 2 Trade wars are just the start of our troubles Gerard Baker 3 If May wants sympathy for her deal, she should start by being honest Simon Nixon 4 Leaving the EU will be costly, but what is the price of remaining? David Smith 5 We need to stop being so English about Brexit Hugo Rifkind A game of chicken “We are,” said one senior Conservative MP yesterday, “involved in a game of chicken to be the last man standing.”



What do they mean? If you step back from the noise surrounding Theresa May’s struggle to get her deal through parliament there are really only four Brexit options left on the table: Mrs May’s deal (possibly tweaked); no deal; a second referendum; and a Norway-style soft Brexit.



Each option has its advocates in the Commons but none yet has enough backing to command majority support in the House. Ultimately MPs will have to choose. And that’s where the game of chicken comes in. Supporters of a second referendum and Norway believe that their best chance of success is to be the last deal standing.



Go too early in putting their plans to a vote and they risk being defeated. Leave it too late and the moment could be lost — there might be a new prime minister or even a new government. The final result will also depend on the tactics of Downing Street and the Labour front. Will Mrs May pivot if she loses the vote on her deal a week on Tuesday? Will Labour come out in favour of a second referendum?



The scenarios are endless but the four end games remain the same. Labour's second referendum conundrum What’s in a definite article? Quite a lot, if you’re John McDonnell.



At their annual conference this year, Labour emerged with a compromise Brexit policy after tortuous negotiations. That policy, as restated by a spokesman for Jeremy Corbyn yesterday, is this: “If we’re unable to get a general election, all options would be on the table, including support for a public vote.”



Now here is what John McDonnell told the BBC yesterday: “If we can’t get a general election, then the other option which we’ve kept on the table is a people’s vote.” Note the subtle use of “the” by the shadow chancellor. Labour’s policy is not that if they cannot get a general election then they will back a referendum but that if they cannot get a general election then they do not rule out backing a referendum.



So what was Mr McDonnell up to? The truth is that it is hard to tell. But there is one possibility we can certainly discount: that it was an accident. Mr McDonnell is too smart and too calculating a politician to have misspoken.



Nor is he a committed Europhile. As with Mr Corbyn, before his unlikely elevation to the frontbench he saw the European Union as a capitalist racket. In a parallel universe in which Yvette Cooper won the leadership election he might well have voted to leave.



What is most likely is that Mr McDonnell is playing out in his head the labyrinthine possibilities of what might happen if and when Theresa May’s deal does not pass the Commons and has realised that an election is also unlikely. At that point, Labour would find the grassroots pressure to campaign for a second referendum intolerable, so it makes sense for the leadership to anticipate that pressure and start rolling the pitch for a change in position now.



It is worth noting the difficulties that Labour will encounter even if they do get either a referendum or an election. What would the party’s policy be? In an election it would presumably be to negotiate a better Brexit than Theresa May has managed. Two problems with that: lots of grassroots activists would want the policy instead to be to remain or to hold a referendum backing Remain and, more fundamentally, the Corbyn-negotiated deal is a magic unicorn.



And in a referendum? Labour’s policy would probably have to be to remain in the EU. But how would lifelong Labour voters who backed Leave react?



Or, to put it another way: the Tories’ travails have masked Labour’s own problems forging a coherent Brexit position. Mr McDonnell is just trying his best to navigate a way through the morass. The view from Dublin The DUP's Brexit strategy is fraught with risk John Walsh — Twenty years ago the Democratic Unionist Party was the only mainstream political party in Northern Ireland that opposed the Good Friday Agreement.



Back then, the term mainstream had to be employed loosely to describe the DUP. The party was synonymous with its founder, Dr Ian Paisley, the firebrand preacher who also established the Free Presbyterian Church. It was located at the margins of the political spectrum, which in a deeply polarised Northern Ireland was quite an achievement.



In 1998, the much more moderate Ulster Unionist Party was the voice of unionism and, because of the Protestant majority, it was the most powerful party in Northern Ireland. The SDLP was the moderate nationalist party, representing the majority of the Catholic population.



Over time, the DUP and Sinn Fein displaced the two centrist parties. The DUP is now by far the larger of the two unionist parties and has come to represent mainstream unionist opinion. But Britain’s vote to leave the European Union in June 2016 changed the political calculation in Northern Ireland in ways that would have been unimaginable even a few years ago.



In the last regional and general elections held in 2017, the two unionist parties did not command a majority of the vote for the first time. That cannot be attributed to the Brexit vote but it has significant implications for the position the DUP has taken in negotiations. The party, which has 10 MPs in Westminster, has said it will vote against the Withdrawal Agreement when it goes before the House of Commons on December 10. Arlene Foster, the leader of the DUP, has said she will not accept any agreement that would put Northern Ireland on a separate footing to the rest of the UK. This could be a pivotal moment in the future of Northern Ireland.



The Ulster Farmers’ Union and business representative groups in the region, all of which would have been closely aligned with unionism in the past, are publicly supporting the withdrawal agreement. They have said that a no-deal Brexit would be a disaster for Northern Ireland. The Alliance Party and the Green Party, which are centrist and not aligned to either community, backed Remain in the referendum.



The DUP was the only party to campaign in favour of Brexit, in a province that voted to remain. There is a school of thought that if Mrs Foster had been a bit more strategic she could have sold the withdrawal agreement as a victory for her party. The DUP’s original red line was that it would not accept a backstop that could potentially put a customs barrier down the Irish Sea. The backstop is now a UK-wide customs union. There are protocols in the withdrawal agreement that would involve regulatory checks on goods moving from Britain to Northern Ireland but there are already regulatory checks on livestock and agriculture products moving in that direction. What is proposed are additional light regulatory checks.



Instead, by campaigning against the agreement the DUP is out of step with large swathes of opinion in Northern Ireland. On June 22, 2016 there were very few people, apart from Sinn Fein, questioning Northern Ireland’s place in the United Kingdom. The vote the following day changed everything. There is no unionist, much less broader, consensus on Brexit. Depending on how Brexit unfolds, support for the union itself could come into the mix. Even Peter Robinson, the leader of the DUP before Mrs Foster, said last summer that unionists now had to contemplate a united Ireland.



That is why Mrs Foster’s current tactic is freighted with huge risks. Best of news 1 No-deal Brexit ‘would be worst crash since 1930s’ Philip Aldrick and Sam Coates 2 Brexit: Frontbench discipline starts to fray amid scramble for Plan B Kate Devlin and Francis Elliott 3 Brexit: Ministers ‘in contempt’ for not publishing legal advice Henry Zeffman and Oliver Wright 4 Brexit: Boris Johnson wants a true believer to take part in TV showdown Oliver Wright 5 Brexit deal: Former whips and social media blitz to convince wavering MPs Oliver Wright and Henry Zeffman The view from business What business wants is an orderly Brexit Oliver Harvey — Theresa May’s Brexit deal has been roundly attacked from across the political spectrum. Remainers dislike the fact that at the end of the transition period the UK will cease to be part of the single market. Brexiteers are upset about a temporary customs arrangement that appears to lock the UK into a customs union indefinitely yet with no say on EU law. The DUP are furious about the distinct regulatory treatment of Northern Ireland and its subjection to the European Court of Justice. This puts politicians at odds with businesses, who crave the certainty of an orderly Brexit.



There is still a way for the prime minister to both save her Brexit agreement politically and provide the certainty that businesses need. This comes from theone part of the Brexit deal that has yet to be negotiated: the future relationship. The EU27 are unlikely to reopen substantive talks on the withdrawal agreement but the 26-page political declaration is currently a mere pamphlet compared to the nearly 600-page doorstop that is the withdrawal agreement.



Many of the objections to the deal stem from the fact that it says little about the long-term relationship. We recommend that the UK seeks much clearer objectives. First, that the government makes explicit what is currently implied in the joint statement — namely that a customs union with the EU27 will be a basis for the future relationship, not only a temporary arrangement. It is true that this will limit the UK’s ability to sign trade deals but the reality is that most economists agree that the benefits of such deals are minimal for the UK compared to remaining part of the single market and customs union.



Second, that the UK will seek to remain a member of the European Economic Area and seek membership of European Free Trade Association and that the governance framework for the temporary customs arrangement will be transplanted over to the EFTA court. As well as retaining access to the single market in services – where lies the UK’s comparative trade advantage – the UK’s representation in EU decision-making will be much more robust than the current arbitration panel, as highlighted recently by the former president of the EFTA court. It is true that the UK will have less control over immigration than under the current agreement but Articles 112 and 113 of the EEA Treaty contain an emergency brake on free movement – a dry fact that is little mentioned in the endless punditry.



Third, progress on such a future relationship – when talks begin after the UK leaves the EU in March next year – is already tied to the good faith clause in the current withdrawal agreement. With a clear outline of a relationship that would result in frictionless trade, it will be far harder for the EU27 to drag their feet in negotiations. This should help to allay fears that the UK could remain trapped against its will in a one-sided customs union.



Of course, accession negotiations to EFTA will be subject to approval from existing member states and treaties will need to be adapted. This is far from an insurmountable problem, and the EEA remains the only form of agreement that could be ratified and implemented by the end of the current transition periodm, even if this is extended to December 2022.



Such an approach would appear to be a sharp break from the prime minister’s Brexit policy so far but the temporary customs arrangement already means that the UK will be tied to a customs union. No free trade agreement signed in history would enable frictionless trade across the Irish land border. Logic would dictate that if the UK is to remain aligned with parts of the EU acquis yet leave its institutions it would be far better to do so under the most robust model available.



Need a Norway-plus Brexit be a permanent outcome for the UK? No, and nor may it be suitable in the long run for an economy of the UK’s size. It offers certainty for businesses beyond the transition period and, most importantly, is likely to be the only form of Brexit that commands a majority in the Commons. Confirming that the temporary customs arrangement is permanent is equivalent to Labour Party policy. It could even win the support of the DUP, as customs and regulatory union with the EU27 would negate any need for separate treatment for the region. No treaty is permanent but it will be beholden on both sides of the debate to argue the merits or otherwise for remaining in the EEA and a customs union after the UK joins.



There is still time for Mrs May to secure a decent Brexit deal that will command cross-party support in the Commons and provide certainty for businesses. This will require some political courage but the alternatives, including a disorderly Brexit, are highly unappealing.



Oliver Harvey is head of Brexit research at Deutsche Bank. These are the personal views of the author and do not necessarily reflect the views of Deutsche Bank Your Questions Answered Parliament's Brexit options THERESA MAY’S “FRICTIONLESS” PLAN

Keeps single market in goods but not services. This is her plan, so the cabinet and some backbench Tory MPs support it.

Arguments for...

Mrs May argues that this does minimal harm to the economy while allowing for a migration clampdown, which she believes was the motivation behind the 2016 referendum result.

...and against

It is unlikely to get through parliament, and unlikely to be able to be negotiated with the European Union.

What we were told

Philip Hammond claimed that “nobody voted for Brexit to become poorer”, yet yesterday’s numbers suggest otherwise.

What the government now says

The plan will result in a loss to GDP of between 0.2 per cent and 1.4 per cent by 2035; with a significantly tougher migration policy the drop could be between 1.9 per cent and 3.1 per cent.

What the Bank of England predicts will happen to GDP by 2024

GDP will be 1.25 per cent lower than if Britain had stayed in the EU.

The path to get there

Mrs May wins the meaningful vote, stays as prime minister, negotiates the deal and the EU agrees.



A REALISTIC VIEW OF THE MAY DEAL

The prime minister attempts to negotiate her Chequers deal but the EU says no and they compromise half way.

Arguments for...

If Mrs May’s plan survives parliament this is what will probably happen.

...and against

Could be seen by many as the worst of all worlds, with the UK stuck taking rules from the EU without many of the benefits.

What we were told

Nothing, because nobody is thinking about this yet. The option was outlined by civil servants for the first time yesterday. They called the option an “appropriate analytical approach”.

What the government now says

It would mean GDP could fall by as much as 2.1 per cent by 2035; with a tough migration clampdown the analysis suggests that the loss to GDP could be as high as 3.9 per cent.

What the Bank predicts will happen to GDP by 2024

It will be 3.75 per cent lower than if we had stayed in the EU.

The path to get there

Mrs May wins the meaningful vote, stays as prime minister after Brexit day, tries to negotiate based on her Chequers plan and the EU plays hardball.



NO DEAL

Leaving the EU without a trade agreement and with significant new barriers to trade; backed by Jacob Rees-Mogg and some supporters of his European Research Group.

Arguments for...

It would be a clean break from the EU.

...and against

The analysis, in line with most economists, says that this would cause significant economic harm. Britain could be left in breach of international obligations. Matt Hancock, the health secretary, told cabinet that people would die in a no-deal scenario.

What we were told

“The long-term gain to GDP would be about 7 per cent over the next decade and a half, a half percentage point addition to the growth rate over this period. The Treasury will receive about 10 per cent extra revenue — £80 billion.” — Economists for Free Trade, September.

What the government now says

The government analysis suggests that the loss to GDP would be between 6.3 per cent and 9 per cent by 2035. In the event of a severe migration clampdown, the loss to GDP could be between 8 per cent and 10.7 per cent.

What the Bank predicts will happen to GDP by 2024

A worst-case no deal could result in GDP being 10.5 per cent lower compared with staying in the EU.

The path to get there

If Mrs May loses the meaningful vote and parliament fails to agree another deal or the cabinet proactively chooses to pursue a no-deal, this is the default scenario on March 29 next year.



EEA

Leaving the EU and joining a Norway-style agreement in the European Economic Area. Yesterday’s government modelling is different from the option gaining ground in the Commons that Nick Boles is stewarding, which would involve membership of the European Free Trade Association and include a customs union.

Arguments for...

Minimises friction; if it includes a customs union it will obviate the need for the Northern Ireland backstop, in the long term. Takes the UK out of common fisheries and agricultural policies.

...and against

Britain would not be able to control migration, beyond a possible “emergency brake”. Britain would be a “rule taker”.

What we were told

“If her deal is defeated in early December, Norway Plus offers a pragmatic solution to deliver Brexit and unite the country” — Nick Boles.

What the government now says

By 2035 the government economic analysis suggests that GDP would be between 0.9 per cent and 2.4 per cent lower.

The path to get there

Mrs May loses meaningful vote and, despite her misgivings about the lack of free movement in the deal, MPs back a single market and customs union.



BASIC CANADA-STYLE TRADE DEAL

Leaving the EU and striking a Canada-style trade deal. Boris Johnson is the principal proponent.

Arguments for...

It would mean an agreed departure from the EU and would allow Britain to set its own regulations and rules.

...and against

Would create a hard border on the island of Ireland if the UK tried to negotiate this for the whole country. Northern Ireland would be stuck in a single market and customs union unless the withdrawal agreement was rewritten to remove the backstop.

What we were told

“That is why the heart of the new relationship should not be Chequers but a free-trade agreement at least as deep as the one the EU concluded with Canada,” Mr Johnson wrote in September.

What the government now says

The government suggests that the drop in GDP would be between 3.4 per cent and 6.4 per cent. With a clampdown on migration, GDP could fall by between 5.1 per cent and 8.1 per cent.

The path to get there

Mrs May’s deal fails, she is ousted from Downing Street and the Tory leadership contest produces a more pro-Brexit prime minister willing to oppose the backstop. Have a question? If you have any questions about Brexit you’d like answered, or any suggestions for what you’d like to see in future emails, please contact us on: oliver.wright@thetimes.co.uk @thetimes #TimesBrexit Follow us You have received this email as part of your membership entitlement.



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