THE TORY PARTY IS HEADED FOR A SPLIT

EU ambassadors were told yesterday, after a meeting between UK and EU negotiators, that Boris Johnson has 'no intention' to negotiate and therefore, the British government's 'central scenario' is now to leave without a deal. To the extent that we want to appear resolute in our belief that no deal is better than a bad deal, the last two weeks has been a success for Johnson's strategy.  Whether this will prompt the EU to change tack is quite another matter.

There is even the suggestion that Johnson will try to prevent MPs from blocking a no-deal exit by all sorts of ruses including delaying a general election, if one were forced on him, until early November.

I suspect the EU will just see it as more rhetoric and will certainly want to test the resolve by upping the ante even more.  Watch out for more plans on both sides to prepare for a no deal exit and for plenty of accusations and counter accusations.

We are surely headed on this side of The Channel for an almighty constitutional collision between the executive, parliament and the people whatever happens and perhaps even a government of national unity.  Brexit has opened a Pandora's box which will take a generation to close.

Tim Shipman at The Times wrote a fascinating insight into how Dominic Cummings was recruited and what a malign impact he is having on Downing Street. One serving cabinet minister is quoted: “I can’t work out whether this is going to be the greatest implosion in the history of British politics or the greatest triumph, but it’s definitely one of the two.”

And what about this:

"A ministerial aide who listened to Cummings on Thursday said: 'Like the referendum, it’s not clear they have any plan for what happens afterwards.' Another said: 'They say it’s ‘do or die’. There’s not been too much attention about what happens in the event of ‘die’."

So brace for impact.

And the Tory party must surely split.

The ideological differences on Europe are now so deep and so profound it's hard to see how a separation can be avoided. In truth, they should have done it thirty years ago, so its long overdue. We find ourselves in such a mess solely because the Tory party has had this Jekyll and Hyde existence and now Mr Hyde has triumphed. At every election for decades they have presented themselves as a pro-EU party with a slightly lunatic fringe when in fact they were always two separate parties.

The lunatics - now known as the ERG - got themselves elected and with influence over the elected government by standing on manifestos year after year in which they did not believe. They were much closer to Farage and UKIP but realised without the Tory brand they were impotent.  Unfortunately the old 'one nation' Tories among the party membership have been outnumbered by the 'four nation' Tories who think the break-up of the United Kingdom is a price worth paying.  They are the ERG's suicide bombers who are prepared to sacrifice the country and the union in pursuit of an illusion.

We can only hope the EU27, the Commission and the EU parliament stand up to the crazed Conservative ideologues instead of making concessions. The UK began the long, painful and difficult road to save Europe in 1939 when Chamberlain finally came to realise you cannot appease fanatics. We must now hope Europe can return the compliment.

If Johnson fails (as I expect him to) and we do exit without a deal - something I still view as inconceivable - and the nation does descend into chaos with output falling as factories shutdown, unemployment rises especially with the realisation that jobs are being lost directly because of government policy, Kent in permanent gridlock, farmers going out of business, medicine and food shortages, troops deployed to keep order and so on, it will be no satisfaction for us to say 'we told you so'. 

Johnson's government wouldn't last a week. But it may also play to our advantage.

Once we are out, we are trading on WTO rules for at least 5-7 years and maybe longer while a FTA is negotiated.  But surely the quickest way out of the chaos would be to reapply for membership under Article 49:

Article 49

(ex Article 49 TEU)

 

Any European State which respects the values referred to in Article 2 and is committed to promoting them may apply to become a member of the Union. The European Parliament and national Parliaments shall be notified of this application. The applicant State shall address its application to the Council, which shall act unanimously after consulting the Commission and after receiving the consent of the European Parliament, which shall act by a majority of its component members. The conditions of eligibility agreed upon by the European Council shall be taken into account.

The conditions of admission and the adjustments to the Treaties on which the Union is founded, which such admission entails, shall be the subject of an agreement between the Member States and the applicant State. This agreement shall be submitted for ratification by all the contracting States in accordance with their respective constitutional requirements.

We are already in compliance with all of the 35 chapters which need to be agreed and negotiated before a country is permitted to join and one assumes with a new government in place, a referendum and a bit of goodwill we could be safely back inside the EU within a year.  Wishful thinking?  

Possibly, but I still don't believe we are headed for a no deal exit anyway.  The noises may have gotten louder and more strident but when it comes to the crunch, we will blink first.

Incidentally, Larry Summers, a former US Treasury Secretary, this morning poured cold water on the idea we would get a beneficial trade deal with the USA. He is quoted:

"I'm not sure what Britain wants from the United States that it can plausibly imagine the United States will give.

"If Britain thinks that the American financial regulators who have great difficulty coming together on anything are going to come together to give greater permissions and less regulation of UK firms, I would call that belief close to delusional."

He added: "Look at it from America's point of view: Britain has much less to give than Europe as a whole did, therefore less reason for the United States to make concessions. You make more concessions dealing with a wealthy man than you do dealing with a poor man.

Sterling update

The pound is trading very marginally higher this morning (+0.26%) although it dropped by more than 1% again yesterday following a 0.65% drop the day before. We are well inside €1.08 territory now and still headed downwards.