Could May be forced into the soft­est Brexit af­ter key vote?

Business Standard - - WORLD - TIM ROSS & ROBERT HUT­TON BLOOMBERG

Prime Minister Theresa May could be forced into a Brexit that keeps the U.K. in­side the Euro­pean Union’s sin­gle mar­ket af­ter she loses the crunch vote on her deal next week.

That is the view among some se­nior of­fi­cials in­side the gov­ern­ment, on both the pro-and anti-Brexit wings of the Con­ser­va­tive Party.

On Tues­day, Parliament is slated to vote on whether May’s Brexit deal should sur­vive or die. All the signs are that politi­cians in the House of Com­mons will choose over­whelm­ingly to stop the agree­ment May has struck af­ter 18 months of talks with the EU.

Rewrit­ing her plan to main­tain the clos­est pos­si­ble ties with the bloc af­ter the split would be the best chance of win­ning a ma­jor­ity in Parliament, of­fi­cials think.

The pre­mier will take a de­ci­sion on Mon­day on whether or not to push ahead with the vote, given that the stakes are so high. If she loses, the U.K. will be fac­ing a chaotic exit from the EU with­out a deal, and May her­self could be forced from of­fice in the political up­heaval that could fol­low a heavy de­feat.

The ques­tion is what will hap­pen af­ter May’s deal is voted down. For now, min­is­ters ar­gue in pub­lic that no other plan can com­mand a ma­jor­ity in the Com­mons, but in pri­vate se­nior of­fi­cials take a dif­fer­ent view. Nor­way Model

The idea that’s gain­ing ground among both eu­roskep­tics and proEuro­peans in the gov­ern­ment is for the U.K. to be­come a mem­ber of the Euro­pean Eco­nomic Area. That would see the U.K. adopt a re­la­tion­ship with the EU modeled on that of Nor­way.

Two of­fi­cials, speak­ing on con­di­tion of anonymity, said Cabi­net min­is­ters in­clud­ing Pen­sions Sec­re­tary Am­ber Rudd, Chan­cel­lor of the Ex­che­quer Philip Ham­mond, and Busi­ness Sec­re­tary Greg Clark -- all pro-EU politi­cians -- would back that op­tion.

This plan would in­volve the U.K. join­ing the Euro­pean Free Trade As­so­ci­a­tion (EFTA), and thereby tak­ing part in the Euro­pean Eco­nomic Area, which in­cludes ac­cess to the sin­gle mar­ket. That would be good news for busi­ness, par­tic­u­larly ex­porters and the fi­nance in­dus­try, which would prob­a­bly be able to main­tain its cur­rent ac­cess to the bloc.

Pro-EU Con­ser­va­tives sup­port this Nor­way model, as does a sig­nif­i­cant part of the Labour Party. Smaller par­ties could also back it, and there’s a chance May’s North­ern Ir­ish al­lies in the Demo­cratic Union­ist Party would too.

Rudd, in an in­ter­view pub­lished Satur­day in the Times, said her pre­ferred al­ter­na­tive is the Nor­way plan, which “seems plau­si­ble not just in terms of the coun­try but in terms of where the MPs are,” but she added that “no­body knows if it can be done.” Rudd said she sup­ports the with­drawal agree­ment.

In ad­di­tion, un­like Nor­way, the U.K. would need a cus­toms union with the EU to avoid a hard bor­der with Ire­land. The glitch is it would mean free move­ment of peo­ple would con­tinue, which many -- in­clud­ing May -- con­sider a be­trayal of the ref­er­en­dum re­sult.

For­mer minister Nick Boles, who’s cham­pi­oned the so-called Nor­way­plus model, says he be­lieves it will ap­peal to both pro-Leave and proRe­main members of Parliament.

“Nor­way Plus is a com­pro­mise that has broad ap­peal to the prag­matic mid­dle,” Boles tweeted on Fri­day. “It de­liv­ers a soft­ish Brexit with a deal that pre­serves mem­ber­ship of the Sin­gle Mar­ket and keeps the union of the U.K. in­tact.”

The View from Brus­sels EU lead­ers are ready to ex­plore the op­tion of Nor­way and it wouldn’t nec­es­sar­ily de­lay Brexit, ac­cord­ing to Euro­pean of­fi­cials. But the bloc wouldn’t agree to it defini­tively until Bri­tain leaves the EU. That’s be­cause Brexit is in two parts -- first the divorce, then the fu­ture re­la­tion­ship, which has only been agreed in vague out­line for now.

The EU would prob­a­bly im­pose stricter con­di­tions on the U.K. than it cur­rently does on Nor­way, of­fi­cials said. This could in­clude tough “level play­ing field” rules to re­strict the Bri­tish econ­omy and ensure the U.K. can’t un­der­cut Euro­pean busi­nesses. It also could in­clude giv­ing EU coun­tries bet­ter ac­cess to U.K. fish­ing wa­ters.

Cru­cially, the EU is likely to in­sist that the much-hated Ir­ish back­stop clause re­mains as an in­sur­ance pol­icy in case fu­ture ne­go­ti­a­tions fail, of­fi­cials said, mean­ing the EU is un­likely to re­open talks on the divorce deal agreed last month. That could be a prob­lem for May in Parliament, though she could ar­gue with some con­vic­tion that with a Nor­way-style deal as the fi­nal des­ti­na­tion, the back­stop would al­most cer­tainly not be needed.

REUTERS

A file photo of UK Prime Minister Theresa May in the House of Com­mons. If she loses Tues­day’s vote, the UK will be fac­ing a chaotic exit from the EU with­out a deal, and May her­self could be forced from of­fice in the political up­heaval that could fol­low a heavy de­feat

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