Dial B for Brexit – The Government’s Conference Call with Big Business, and the Brexit Endgame

Shortly after Parliament voted down Theresa May’s Brexit deal by a record margin, three Cabinet ministers spent about an hour on a conference call with executives from major UK businesses. The call was transcribed, and it offers a good insight into the relationship between business and government, and what this means for the Brexit endgame.

The House of Commons voted on the EU Withdrawal Agreement shortly after 7.30pm on the evening of 15 January. The government motion to approve the Agreement was defeated, as everyone knows, by the historically unprecedented margin of 230 votes.

After the vote, three senior Cabinet ministers went straight back to Whitehall where, at 9.30pm, they held a conference call with around 330 executives representing businesses with major operations in the UK.

Inevitably, given the number of people involved, someone recorded the call and leaked a transcript to the press – in this case to the Daily Telegraph, which promptly published the text on its website (here, sheltering behind its paywall).

Aside from the pleasure of feeling like an eavesdropper at the Davos conference, reading the transcript offers a genuine insight into the relationship between government and big business, and the likely next steps in the ongoing Brexit saga.

The Conference Call

The three Cabinet ministers involved in the call were Philip Hammond (Chancellor of the Exchequer), Greg Clark (Secretary of State for Business, Energy and Industrial Strategy), and Stephen Barclay (Secretary of State for Exiting the EU).

The call lasted for a little under an hour. Mostly the ministers did the talking. But eleven of the business leaders – including the senior UK executives of Amazon, BP and Siemens – spoke to ask a question or make a statement.

Five key things emerged from the call.

1. Business can live with Brexit, so long as it changes nothing

Philip Hammond: Our purpose in the next few days is to reflect all the things you have told us. First, that we can’t have no deal…Secondly, we need to achieve a deal that allows us at least as close a trading relationship with the rest of the EU as in the Agreement that has been negotiated…The third is that we need to come to a conclusion quickly. This can’t go on much longer.

Roughly translated this means that business can live with Brexit perfectly well, so long as nothing much actually changes as a result of leaving the EU. Moreover, the government has absorbed this lesson and made it central to its agenda.

The government’s aim is to deliver for business an outcome in which the post-Brexit world looks very much like the pre-Brexit world. This, as the call makes clear, is both the underlying purpose of the Withdrawal Agreement and the intent behind what is about to happen next.

I wrote in my critique of the Withdrawal Agreement (here) how, in spite of its many and serious flaws, it attracted the support of big business because it at least provided a form of short/medium-term continuity.

The conference call suggests that business regards this as an axiomatic and sufficient reason to support the Agreement, and is baffled that anyone could take a different view. Hence as Jürgen Maier of Siemens put it: ‘…we are very much behind the Withdrawal Agreement, [and] can’t for the life of us understand why [it] got such a heavy defeat.

2.  Government and business are in joint enterprise

Greg Clark:  Perhaps I can start by saying to everyone on the line thank you for all the evidence and work you have done [sic], especially contacting local MPs over the last few weeks…I am sure it is frustrating that not everyone has changed their minds accordingly, but I don’t think that is wasted…in the days ahead your needs and the way you have communicated them will be influential.

It would be surprising, in fact disconcerting, if the government did not liaise closely with major UK businesses, keep them informed of developments, listen to their concerns, and accommodate their needs to the extent that they were consistent with public policy.

Even so – and making all allowance for the solicitous tone that government ministers are expected to adopt towards big business on a call of this nature – the most striking  feature of the call is the prevailing sense that the ministers involved considered themselves to be engaged in a joint enterprise with business to deliver a certain version of Brexit.

As the call made clear, this includes senior members of the Conservative Party recruiting business in a lobbying operation against their own backbench MPs, in the hope that this will achieve a result more effective than the failing Tory Whip’s Office.

As to the desired outcome, Clark was blunt: ‘Some Members of Parliament want to go even further [than the current deal] in terms of a closer relationship [with the EU]. Our job is to crystallise that and make it happen.

Those who voted for Brexit in protest against finding themselves losers in the globalised economy may note, ruefully, that this is how the world really works.

3.  Plan A is Plan B

Philip Hammond: We are short of time, and we have to be clear that pursuing what we call unicorns – ideas that would involve fundamental renegotiation of the deal we have done with the EU – is not going to work. The Withdrawal Agreement will need to remain in place, but there is flexibility to look at the terms of the Political Declaration on the future relationship.

The Withdrawal Agreement is not going to change. The idea that it could still be changed is talked about within government as a kind of joke. A creature of fantasy. A ‘unicorn’.

What can still be changed, however, is the Political Declaration – the non-legally binding statement of aspirations towards a future trade deal which was cobbled together at the last minute and published as a joint package with the Agreement.

Hammond makes clear that the government’s strategy is not to abandon its deal with the EU, regardless of the scale of its defeat in the House of Commons, but to present it again to Parliament, together with an enhanced version of the Declaration.

Plan B, in other words, is Plan A, reheated, with a little garnish.

As to what the changes to the Political Declaration would look like, Hammond said: ‘The government has already indicated that it is willing to accept amendments tabled by Labour members on workers’ rights and environmental protections.’

What this means is that the Tories had more or less given up on bringing round enough of their own backbenchers to support the deal, and were hoping to gain Labour support by including some words in the Declaration reflecting the special interests of the Labour Party. None of this would be legally effective, of course – the Declaration is just a wish list for negotiations – but it might be sufficient to swing votes towards the Agreement and the Declaration as a package.

As if to prove the truth that no battle plan survives contact with the enemy, this strategy collapsed within 48 hours, when it was undermined by the refusal of Jeremy Corbyn to participate in cross-party talks.

Following this, the government tacked back in the opposite direction. It has reverted to trying to do something (anything) about the ‘backstop’ provisions of the Agreement. The hope is that this could yet bring enough recalcitrant Tory and Unionist MPs back into the fold and get the deal over the line.

There are many things wrong with the Agreement other than the backstop, but criticism from the Tory and DUP side has largely now devolved to a focus on this single issue, and the political calculation (probably correct) is that if only something could be done about it there would be a large number of MPs willing to reverse course and support the deal.

The problem with this is that Hammond made clear on the call that nothing of substance will change: ‘very clearly, removing the Irish backstop arrangements cannot be negotiated‘. The only question therefore is whether the government can find a fig leaf large enough to cover the embarrassment of MPs who, in spite of this incontrovertible fact, now wish to change their minds and support the deal.

4.  There is high level support in Cabinet for ‘taking no-deal off the table’

Philip Hammond: If you remove an option from the table, that has consequences. But in a sense, this is not a decision for us to take. Backbenchers have tabled a draft bill and are taking this forward…The point here is not dependent on the government’s acquiescence in any way. This will be something the House of Commons determines.

Above all, what big business wants is to ensure that Brexit will not occur on a disruptive no-deal basis. The no-deal scenario dominated the conference call. ‘Is there anything you can do‘ asked Doug Gurr of Amazon UK, ‘that would enable us to give any comfort to our global board that no deal can be ruled out?

Since Parliament passed legislation empowering the government to issue the Article 50 notice, and the government exercised that power to set the clock ticking inexorably towards departure, leaving the EU without a deal is now the default position.

To take no-deal ‘off the table’ means: (i) in the short term, extending the Article 50 notice period by agreement with the EU; or (ii) more permanently, withdrawing the existing Article 50 notice. The government’s position at the present time is that it will do neither.

Unless the government changes its mind, Parliament can only guarantee that the UK will avoid a no-deal outcome by further legislating to negate the discretion previously given to the executive and require it to change course.

However, this runs into the problem that control over legislative business lies with the executive. Historically, it has been difficult for ordinary backbench MPs to get sufficient Parliamentary time for their own Bills without government support. And this is not just a matter of convention; government control over the business of Parliament is codified in the Standing Orders of the House of Commons.

Ruling out a no-deal scenario therefore requires two moves. First, backbench MPs must find a way of getting enough Parliamentary time for a debate and vote on legislation that forces the government to extend or withdraw the Article 50 notice. Second, they must find a form of legislation capable of winning that vote in a full House of Commons.

At the time of writing there are several procedural and legislative devices being used by a group of backbench MPs towards this end, to be debated in a session of the Commons on 29 January. But both of these steps, and particularly the first, are difficult to achieve.

However, the MPs pursuing this agenda have two advantages. The first is the Speaker of the House of Commons, John Bercow, who has demonstrated that he does not feel bound by precedent and is unafraid of procedural innovation. It seems likely that he is also personally sympathetic to the cause of those MPs. The second is the existence of high level support within Cabinet.

On the conference call, Hammond mentioned these backbench initiatives no fewer than seven times. On each occasion he paused to emphasise that they were moves being made by parliamentarians and not government. Some might conclude that this was protesting too much. But the real giveaway was his statement that backbench legislation was ‘not dependent on the government’s acquiescence‘.

In fact, as the rules stand, it is entirely dependent on the government’s acquiescence. But Hammond plainly knows, or wants to know, differently.

Those pursuing the legislation that will rule out a no-deal scenario clearly have a key ally in the Chancellor of the Exchequer. This may yet play to their advantage.

5.  No-Brexit is not ‘off the table’

Stephen Barclay: It is often mooted that a second referendum is a way of ending the uncertainty. It would actually lead to a significant period of further uncertainty. Of course one cannot guarantee the result of that referendum either. One could have a prolonged period of uncertainty followed by a result not dissimilar to the first result.

There is not the faintest echo here of the government’s official position – the manifesto commitment of both main parties at the 2017 general election – that the outcome of the Brexit referendum ought to be honoured as a matter of principle.

Instead, Barclay’s stance is one of pure pragmatism. A second referendum would be bad for business because it would take so long to organise, and who even could be sure that it would go the ‘right’ way the second time round?  Better to pursue a Brexit deal which has no real adverse effect on business than to run these risks.

The importance of this relates to the mechanisms being proposed to avoid no-deal. If the Article 50 notice is withdrawn – ultimately the only way to truly rule out a no-deal Brexit – no-one should suppose it will ever be re-issued without a second referendum.

This, for many backbenchers who are pursuing this outcome, is the point. They explicitly support remaining in the EU. The chimera of no-deal is being used to leverage a situation in which not only is leaving without a deal blocked, but a path to blocking Brexit in its entirety can be seen. If the Article 50 notice were withdrawn, all of Barclay’s objections to a second referendum fall away, and it is inevitable that there will be one.

The Brexit Endgame

Two months from the scheduled date of Brexit, the choices simply come down to this – the Deal, No-Deal, or No-Brexit.

The Deal, in the form of the Withdrawal Agreement, was meant to be business-friendly, as far as that was possible consistent with leaving the single market and so addressing Theresa May’s immigration-fixation. But it was so poorly constructed as to be polarising. It pushed many MPs away from the centre and towards positions at opposing ends of the spectrum.

And yet May persists with the same strategy. The closer we get to Exit Day, the more she expects that MPs will gravitate back towards her Agreement for fear of the alternatives. However bad it may be, No-Dealers will be grateful it is not No-Brexit, and those who seek No-Brexit will at least prefer it to No-Deal.

A few tweaks to the Political Declaration are all that is needed to provide sufficient cover for MPs who, having made their point first time round, now want to move back into the more comfortable centre ground.

This is essentially the strategy as told to big business on the conference call on the very evening of the government’s defeat.

Given the high stakes involved, this amounts to a remarkable game of chicken, and more or less as desperate a piece of political calculation as one can imagine. For a government that so often appears at the mercy of events rather than in control of them, it runs the risk of a whole series of unintended, undesired and avoidable consequences. A few basic missteps could easily lead to the disruption of a no-deal Brexit or the toxicity of a second referendum.

Some senior ministers are committed to working with backbench MPs to remove the first (but not the second) of these outcomes from the agenda, taking little care to disguise the splits within Cabinet or their party. There are so many ways in which that could go awry.

Even so, who’s to say that May’s gamble will turn out to have been wrong in the end? For all its faults, and despite its heavy Parliamentary defeat, the Withdrawal Agreement is still the outcome backed by most businesses. For that reason alone, it is far from finished.