Brexit: Decision Deferred

Rather than holding a definitive vote on Prime Minister Johnson’s Brexit deal on 19 October, MPs in the House of Commons withheld their approval for the deal as insurance against a “no deal” Brexit on 31 October. In response, PM Johnson requested an Article 50 extension, but asserted that his government would nonetheless “press ahead with ratification and introduce the necessary legislation early next week.”

1. What was the purpose of Saturday’s vote?

By 322 to 306, MPs in the House of Commons voted in favour of the Letwin Amendment on Saturday 19 October, thereby withholding their approval of PM Johnson’s Brexit deal unless and until all the implementing legislation associated with that Withdrawal Agreement has passed its requisite stages in Parliament. The intention of the Letwin Amendment was to compel the Prime Minister to seek an extension of Article 50, but only as insurance in order to rule out an accidental “no deal” Brexit on 31 October.

The government responded to the passage of the Letwin Amendment by cancelling the subsequent vote on PM Johnson’s Brexit deal, thereby deferring the decisive test of whether a parliamentary majority exists for that deal until early next week. The Prime Minister complied with the Benn Act by requesting an extension from the President of the European Council, but he also made clear to Mr. Tusk that his government would nonetheless “press ahead with ratification and introduce the necessary legislation early next week…confident that we will complete that process by 31 October.” In bilateral communication with other EU leaders, PM Johnson reiterated his own view that “a further extension would damage the interests” of both sides.

2. What are the procedural implications of the Letwin Amendment?

In our view, it is in the strategic interests of both the UK and the EU-27 for the European Council to withhold a decision on the terms of the Article 50 extension requested by the Prime Minister until after a definitive vote in the Commons clarifies support for the latest version of the negotiated Brexit deal.

On this basis, we expect the Johnson government, in short order, to formally table: (i) a “meaningful vote” on the Brexit deal, (ii) a vote on the second reading of the Withdrawal Agreement Bill, and (iii) a vote on the programme motion for the Withdrawal Agreement Bill. The “meaningful vote” would be symbolically powerful rather than legally definitive; the second reading of the Withdrawal Agreement Bill would formally begin the process of implementing legislation. Either of these will indicate whether a parliamentary majority actually exists for the substance of PM Johnson’s proposed terms of exit. The vote on the programme motion will reveal whether the government can convince Parliament that all requisite stages of the implementing legislation can be ratified before 31 October. Although the order paper for next week is not yet confirmed, we expect the votes on the Withdrawal Agreement Bill to be held on Tuesday. Only once this next stage of the parliamentary process has played out do we expect a formal response from the European Council on the extension requested by the UK’s Prime Minister.

3. So what can we infer about the numbers in favour of PM Johnson’s Brexit deal?

The Letwin Amendment is a useful barometer of support for the PM’s amended Brexit deal. 306 votes were cast against the amendment, and in our view the Prime Minister can effectively lock in that support when it comes to a binary vote on his Brexit deal. In addition, 7 of the former Conservative MPs who voted in favour of the insurance afforded by the Letwin Amendment have indicated that they would vote in favour of the PM’s Brexit deal. Sir Oliver Letwin himself falls into this category. This leaves the Prime Minister 7 votes short of the 320 vote threshold, with a potential pool of 13 Conservative and Labour abstainers on the Letwin Amendment and a cohort of around 20 pro-deal Labour MPs who have not yet been forced to decide. The DUP’s 10 MPs seem to have rejected PM Johnson’s Brexit deal. They voted in favour of the optionality afforded by the Letwin Amendment, but they also suggested they were open to receiving further assurances from Number 10.

Another useful benchmark to consider is the third meaningful vote on former Prime Minister May’s Withdrawal Agreement. Relative to that defeat, Prime Minister Johnson needs to convert 29 MPs to his Brexit deal. Based on a tally of the public comments made by individual MPs over the past week, we think PM Johnson now only needs 5 further converts, from a potential pool of around 8 undeclared Eurosceptic Conservative MPs and the 20 pro-deal Labour MPs who have not yet shown their hand.

All in all, we retain the view that the Prime Minister can reach a 330-310 majority on his Brexit deal. As ever, the numbers are shaped by the options available. By creating more space for scrutiny of the PM’s Brexit deal, the Letwin Amendment undercuts the PM’s ability to confront MPs with a binary choice between “his deal” and “no deal,” while simultaneously imposing the discipline associated with “no more delay.” That said, for those MPs who have been reluctant to support a Brexit deal while a “no deal” Brexit remains an imminent threat, the fact that the Prime Minister has an extension request pending at the European Council will allay fears that their vote for a deal may be used surreptitiously in order to deliver a “no deal” departure.

4. Aren’t the latest events an indictment of PM Johnson’s ability to deliver a deal?

We don’t think so. Although this weekend’s events certainly erode the new Prime Minister’s political momentum, we remain sceptical of the viability of any alternative route out of the existing Brexit impasse. We do not think a majority of MPs will choose a confirmatory second referendum on PM Johnson’s Brexit deal over immediate passage of the deal itself ─ although an amendment to that effect will almost inevitably be tabled next week. Opposition MPs are also likely to table amendments that attempt to reshape the UK’s post-Brexit destination (a much closer relationship with the EU’s customs union, for example), but these amendments are unlikely to jeopardise the legally binding exit terms enshrined in the existing Withdrawal Agreement.
We also remain of the view that Prime Minister Johnson is unlikely to be unseated. On our reading, MPs across the House of Commons remain highly reluctant to support either (i) a Corbyn-led government of national unity (following a vote of no-confidence in PM Johnson), or (ii) a general election under the terms of the Fixed-term Parliaments Act (given the decisive lead that PM Johnson has consolidated in the latest opinion polls).

5. Can the PM still deliver Brexit by 31 October?

We continue to think so. In our view, the incentives of the Johnson government and the incentives of EU-27 leaders are aligned in aiming to secure an orderly Brexit as soon as possible. From this perspective, the greater the ambiguity surrounding the duration and terms of any Article 50 extension — and the longer that decision is deferred — the greater the pressure on MPs in the House of Commons to come to a firm decision on the merits of the new Withdrawal Agreement. We expect President Tusk to withhold the European Council’s decision until after a Commons majority crystallizes on a unique path out of the current impasse. After receiving PM Johnson’s letter on Saturday evening, President Tusk noted that he would “start consulting EU leaders on how to react.”
If the Prime Minister introduces implementing legislation early next week, and if the Prime Minister indeed has the numbers to secure the legislative programme to underpin his Brexit deal, we maintain the view that both the UK and European Parliament can ratify the Withdrawal Agreement and Political Declaration in time for an orderly departure by 31 October. Even if an extension were granted beyond 31 October, it is worth emphasizing that this extension would immediately fall away once both Parliaments ratify the legislation underpinning the negotiated Brexit deal.

6. What are your expectations for the ultimate Brexit outcome?

Our base case remains that the UK will leave the EU on 31 October. Even if that doesn’t happen, we think the probability of a “no deal” Brexit has fallen further now that the new Prime Minister has secured a negotiated Brexit deal capable of uniting both the Eurosceptic and the Europhile wings of the Conservative Party. This will make it harder for PM Johnson to pivot to “no deal” in the event he garners a large parliamentary majority in a post-extension general election. On terminal outcomes, we therefore lower our “no deal” probability from 10% to 5%, we leave our “no Brexit” probability unchanged at 25%, and we revise up the probability we attach to a ratified Brexit deal from 65% to 70%.