May’s customs union shift changes the next election profoundly

Until last week, Theresa May had a cunning plan. Well before the next election, the drama of Brexit would be over. The transition to post-Brexit life would be completed by December 2020. Business would have 18 months to adjust to it. Tory divisions over Europe would have healed. Life would be back to normal, and so would politics. The prime minister could claim to have overcome the toughest challenges facing any recent British government. If Labour were still led by Jeremy Corbyn, she hoped to contrast her calm stewardship with his dangerous extremism.

That plan is now dead. In order to keep the Irish border completely open, the cabinet agreed last week that the UK will abide by certain European Union regulations well beyond December 2020. If the rest of the EU agrees—and that is, of course, a huge “if”—we shall have in effect two transition phases before Brexit is fully implemented. Let us call them T1 and T2. During T1, up to December 2020, daily life will be largely unaffected; during T2, the UK will have more freedom to go its own way, but we shall still have to obey many customs union and single market rules. T2 will last until technology comes to the rescue: allowing trading and business regulations to diverge, without the need for cameras, customs posts or any other infrastructure at the border.

Brexiteers hope that T2 will be short-lived. The same hopes were expressed when Norway joined the single market in January 1994. It was intended as a brief arrangement ahead of Norway joining the EU as a full member. However, that November, Norwegians voted in a referendum NOT to join the EU. More than 23 years later, the “temporary” single market relationship lives on. For the UK, T2 might be another “temporary” arrangement that lasts far longer than anybody expected. At best the border-dissolving technology will be unavailable until well into the next parliament.

This means that Brexit will affect, and possibly dominate, the next election. The future rules and tariffs affecting British business will be uncertain. The durability of T2 could itself be a major election issue, with the Tories divided over how long it should last. Meanwhile, Labour, the Liberal Democrats and the SNP may well be arguing either for keeping T2 for the long-term, or negotiating a different, closer, post-T2 relationship with the EU than that proposed by the Tories.

Who would all that benefit in the election campaign? Given that few people predicted the outcome of last year’s election four weeks out, only a fool would make a firm prediction fouryears before the next election. We can, however, identify some of the factors that could influence the outcome.

1. Will the government be seen to have handled Brexit well or badly? If the economy is stumbling, and businesses grumbling, because of T2 and its uncertain duration, the Tories are likely to suffer. Likewise if their internal battles continue to fill the news. Voters don’t like divided parties.

2. Even if T2 is heading towards a benign conclusion, and living standards are rising, this will help the Tories only if voters regard T2 itself as a victory for May’s negotiating strengths, rather than the messy consequence of weakness and failure. Black Wednesday provides a stark warning. When sterling crashed out of Europe’s exchange rate mechanism in 1992, the Conservatives’ reputation for economic competence collapsed. No matter that the next five years saw cheaper mortgages, low inflation, falling unemployment and tax cuts: in 1997 the Tories still suffered their worst defeat since 1906. On its own, a cheerful economy is not enough to rescue a government from a reputation-wrecking crisis.

3. Will May still be Tory leader? As long as she wishes to keep the job, she will be hard to dislodge. Too many people get excited by the thought of 48 of the party’s MPs signing a letter demanding her departure. This would NOT precipitate a leadership election; all it would do is force a vote among Conservative MPs to decide whether or not to back May. At present, she would win such a vote handsomely. It might be different nearer the next election, especially if factors 1 and 2 above are looking bad for the Tories. A new leader, less tarnished by the Brexit process, could help Tory MPs to save their seats. In that case, a new vote of confidence in, say, 2020 or 2021 could see May’s departure.

4. Will Jeremy Corbyn still be Labour’s leader? Labour’s weak performance in this month’s local elections is bad news for the party: eight years into the life of a Tory-led government, Labour ought to be doing far better than level-pegging. Last year Corbyn was a fresh outsider who confounded expectations (including mine). That effect now seems to be wearing off. But should Corbyn choose to retire—he will be 73 in 2022—this would not necessarily solve Labour’s problems. The party may choose an equally left-wing successor who puts off many of the voters it needs. In that case, Labour could end up saving the Tories from the defeat to which a continuing, messy Brexit saga might otherwise propel them.