The dust starts to settle from Salzburg: the tension over Brexit mounts

After the spectacular breakdown between Britain and the remaining EU countries at the summit in Salzburg last week, what is the state of Brexit? The chatter in the media, mainstream or otherwise, is either hopelessly partisan, or hopelessly superficial (the BBC is taking mediocrity in political analysis to new heights). Before taking the plunge on this I wanted some of the dust to settle, and also to see what the more reliable commentators had to say.

For me, these commentators write for the Financial Times. Easily the best on Brexit is legal correspondent David Allen Green. His take on the summit is that the British Prime Minister Theresa May badly misjudged the mood on the EU side, leading to the breakdown. But he still expects the all-important exit deal to be done allowing the transitional deal to come into play on 30 March 2019, while the details of the longer term relationship are hammered out in time for the transitional period's end on 31 December 2020. For an alternative view I went to Wolfgang Munchau. I don't particularly like him as he is prone to getting a bit worked up, but at least he is free of that awful British superficiality of understanding when it comes to the EU. He suggests that it is the EU side that has misjudged things: they think that a no-deal situation would be so painful for Britain that it will buckle before it is too late - underestimating the political difficulties for Mrs May, even if that is what she really thinks. So he thinks that the no-deal situation on 29 March 2019 is all too likely.

Before trying to make sense of this, it is worth highlighting a couple of other things that are emerging from the wreckage. The first is the idea that Brexit can be halted and made to go away. So far talk of this has been confined to ardent Remainers on the margins of British politics. But for the first time at Salzburg some European leaders spoke publicly about the possibility. Idle talk, perhaps - it is nowhere near the official EU position. But perhaps it explains why some EU leaders are unsympathetic to Mrs May's compromise idea. Meanwhile British commentators are in two camps. One side says that there is growing momentum for a further referendum with reversing Brexit as an option. The other says that not only would this be a logistical nightmare, but there isn't the political will to do it where it matters: in the House of Commons. Labour's fudged conference motion to be debated today gives succour to both lines of argument.

Another thing worth mentioning is rising talk of the "Canada option" in British political circles. This refers to the comprehensive trade deal the EU has struck with Canada, which some think is a model that the UK should follow. The idea is not that this would be in place for 30 March 2019, but that it could be negotiated in time for 2021, when the transition period ends. This has the advantage of being completely consistent with the EU negotiating position, and being acceptable to the troublemakers in Britain's Conservative Party (and the hard Brexiteers in Labour too). It has one overwhelming snag, beyond requiring the dismantling of many manufacturing supply chains and the clogging of ports, which hard Brexiteers have never much worried about. It is inconsistent with the stated aim of an open border between Northern Ireland and the Irish Republic. Which means, under the current EU offer, a sort of customs border between Northern Ireland and the rest of the UK. Most Britons couldn't care less about this - but it is an existential issue for the Democratic Unionist Party (DUP), on which Mrs May's government depends, as well as old-fashioned Conservatives, of which there may be a few left.

So it keeps coming back to Ireland. Here I think there are a couple of issues that don't get talked about enough. The first is that Brexit, especially a hard one, could lead to moves to unify Ireland. This possibility was left in the Good Friday Agreement, but only if most Northern Irish people agreed. Within the EU there was little prospect of that, even as the relative proportion of Catholics is rising (it is said that the UK's more generous welfare state is at the heart of this). But at least one poll showed that this changes in the event of Brexit. Idle speculation? Perhaps: the DUP don't seem to be overly worried about it. But serious political miscalculations happen. A messy Brexit might be resolved by Irish unity - do the DUP really want to risk this?

The other issue is the impact that a hard Brexit, and worse still a no-deal, would have on the Irish Republic: it could be catastrophic, as so much of its trade is either with Britain or through it. Mr Munchau admits that the impact of a no-deal would affect Britain more than its EU partners, but says that the latter's pain theshold is lower. So he advises the British government to hold firm. I'm not so sure about this as a generality (to judge from the way Russian sanctions have been applied, in spite how much they hurt some EU members), but Ireland is surely a weak link. And since Ireland is at the heart of the most awkward negotiating issue, this matters a lot, and gives strength to Mr Munchau's analysis.

And then into this brew we must add the state of British politics. If the EU does bend, and Mrs May is able to put something like her current proposals (referred to as "Chequers" after the place where it was forged with her cabinet) to parliament. Will she have a majority and what happens if she doesn't? The current suggestion is that there will be a sizeable Tory rebellion amongst Brexit hardliners, and Labour will vote it down, which makes Mrs May position look hopeless. But what then? Labour hopes for a General Election: but Mrs May is unlikely to concede it with her party in such disarray. She may then try to resolve the impasse with some form of referendum. If she is cunning, this will simply be between her deal and a no-deal, with no option to remain. Labour is badly split on the latter. Whether there is a Commons majority for an option to remain is questionable.

But the possibility may be enough to make hard Brexiteers, both Tory and Labour, think twice. The cleverer amongst them have already realised that Mrs May's compromise is a sensible staging post to where the want to go. Once the country gets past 29 March, the Remain coalition will start to wilt as there would be no easy way back in. And there is enough ambiguity in the SNP position for them to be persuaded to sit on their hands. A majority for the compromise position may yet be conjured up. If Mrs May was a more skilful politician I would say that with more confidence.

So my prediction is this: Mrs May will stand firm and the EU will start to bend, though it may take until December. Some kind of deal will be negotiated, which still leaves many issues about 2021 unresolved, but which will be enough to get to avoid the cliff edge on 29 March 2019. She will then succeed in getting this through parliament. Ultimately Britain will get a camouflaged Turkey-style deal, with a customs union of sorts in goods and no freedom of movement. So much the same as I was predicting before.

What could change it? If EU governments start to club together to offer the UK a way out of Brexit, that could just change the political dynamics in Britain. Or if a political miscalculation leads to a new General Election, and hence a two month stasis in the negotiating process, then that do raises the odds of a no-deal, whoever wins. So the tension mounts.

Amid the noise about no-deal, a blind Brexit is being put in place

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The quality of political debate in Britain is hitting new lows. The politicians are  not interested in helping us understand what is going on, just in promoting some half-true story or other. 'Twas ever thus. What has changed is that challenge from journalists and commentators is weaker. Most media are promoting their own agendas. The BBC tries to be better, but it just presents one fiction, compares it to the alternative fiction being offered, and retires. Few are interested in talking about what is really happening.

The current talk about a "no deal" Brexit is a case in point. On the one hand, business groups are worrying that this will lead to an Armageddon on the day after exit, at the end of March next year. This is pounced on with glee by Remain supporters as a sort of "told-you-so". Government ministers simultaneously try to say that  it just won't happen, that it is the fault of EU intransigence, and that anyway no deal is better than a bad deal. Brexiteers, like the Conservative Ian Duncan Smith last weekend, just talk about something else completely. What are we to make of this all?

First of all, we have to be clear about what a no-deal Brexit actually is. We are not talking about the choice between the Single Market or WTO terms or something in between. This is what IDS, William Rees-Mogg and others change the subject to when pressed on the topic. What is meant by no-deal is, well, no deal. No trading protocols, no divorce bill, no transition period, no mutual recognition of citizens' rights, no common VAT infrastructure, no mutual recognition of standards. Just a vacuum in place of 40 years of accumulated law and regulation.

And that could be Armageddon. There would be queues at ports, empty shelves in shops, hospitals running out of medicines, layoffs in all kinds of businesses, holidays cancelled and even planes grounded at airports. Things would start to settle down in due course, but with Britain in the weakest possible bargaining position, it is very hard to see how most people aren't going to be made worse off. It is no wonder that Brexiteers don't want to talk about it. They are prone to suggesting that threatening a no-deal will improve Britain's bargaining position in the exit negotiation - a bit like threatening to walk away from a house purchase when you are making yourself homeless.

In fact, if the pro Brexit politicians were interested in intelligent engagement they could make two points. The first is that a no-deal is not in fact all that likely, because the deal is quite close to being done. The main sticking point is trying to find a form of words that will cover the EU's demands on the Irish border. The British government thinks that the current draft is politically suicidal, because it opens the possibility of Northern Ireland having some form of semi-detached status, with a strong boundary between it and the rest of the UK. Although most British people are quite chilled by that prospect, it would have devastating political consequences in the province. But a no-deal would almost as devastating for Ireland as it would be for Britain, so there is sure to be some flexibility on this. Indeed, there are already some signs of movement from the European Commission. The rest can be fudged, even if it does open up the prospect of another no-deal cliff edge when the transitional period comes to an end, on 31 December 2020. This is what the Scottish First Minister Nicola Sturgeon is calling a "blind Brexit": one where the longer term relationship is unresolved. This is exactly what the UK and EU negotiators are planning.

The second point to make is that we will know if there is likely to be a no-deal later this year - probably October. After that it becomes too late for the deal to tidied up and ratified by all the bodies required to do this, for such a complex treaty, in both Britain, the EU institutions and in other EU countries. That gives perhaps five months to prepare for that cliff edge. Temporary stop-gaps can be put together for the most urgent issues: citizens' rights, air traffic, and so on. I can't see that a lot of supply chains or border facilities will be sorted out by then - the infrastructure can take years to build - so there will still be chaos at the borders and some lay-offs. But we should avoid Armageddon.

And the rest is theatre. Remainers want to build up a sense of crisis so that people seriously start to rethink the whole foolish enterprise and call it off before it is too late. They know that once we get beyond exit day it will be much, much harder to get the UK back into the EU. The government thinks it is wise to keep its head down to preserve unity within the Conservative Party and to keep the Democratic Unionists of Northern Ireland on board. The Brexiteer politicians (the clever ones) have probably decided that this battle is done and are getting on with the next one: which is the shape of the world on 1 January 2021. Their main concern is that any deal done on Ireland does not lock out their preferred solution, which, for now, is some sort of Canada trade deal.

Admittedly this is quite delicate. A Canada deal looks incompatible with on open Irish border, which, with Republican terrorists still active and Loyalist groups ready to retaliate, could restart an escalation of violence. But the thing is to fudge it for now and hope that the passage of time will make the problem easier to solve. Under the transitional arrangements there would be an open border until 31 December 2020.

Theresa May's government has played a weak hand quite well. At the cost of making any progress on other burning political issues, including the ones that led to the referendum backlash, she's winning on executing Brexit. She is better off without Boris Johnson and David Davis, the two ministers who resigned in a huff. It would have been better to have negotiated a deal on citizens' rights separately, and put it to bed ages ago; that would make no-deal less scary. The EU side was dead set against this - but it would have been a bonus to their own citizens, so they might have given way. Mrs May made no serious effort (or any effort at all so far as I know) to do this.

So the good news is that Brexit Armageddon is very unlikely. The bad news is that the Brexit roadshow will keep on running after 29 March 2019. I read one article recently which looked forward to the day when we could move on from Brexit to sorting out Britain's many other problems. Alas that day is still years away.

Can Theresa May do a Robert Peel? The tension on Brexit mounts.

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I like to tout my record in predicting the direction Brexit takes. My current prediction is that Britain will leave on 29 March 2019, with a deal of some sort in place, and the prospect of a relationship with the EU something like the one Turkey has: a customs union for agriculture and goods, but not services, and no guaranteed freedom of movement. I was reasonably secure in this idea after the Chequers summit a couple of weeks ago, but the politics since has become ugly. The chances of an accidental catastrophe are rising..

The main issue at the moment is whether or not Britain is able to secure a deal that will allow an orderly exit. This will not of itself determine what the UK's longer term relationship with the EU will be (something not properly undestood by most commentators). But it will usher in a transitional period up to December 2020, during which time these details can be thrashed out. The main problem with this is the future relationship between the north and south of Ireland. The EU insists that there is no hard border between the two, and that this means some form of regulatory alignment. That either means alignment between the EU and the UK as a whole, or that Northern Ireland has a separate legal status of being half-in and half-out of the EU, and that there would be a border of some sort between it and the rest of the UK, as there is with the Isle of Man, I suppose (except that the Isle of Man is completely outside the EU). These alternatives are currently embedded into the current draft of the agreement between the EU and the UK. It looks impossible to get an agreement with the that sort of internal UK border though parliament. Besides this is a critical issue to the Democratic Unionists (the DUP) on whom the Conservative government depends for a working majority.

This brings us to the Chequers proposal - the set of principles, now in a White Paper, agreed by the Cabinet. The main intention of this is to take the threat of a border between NI and the rest of the UK out of the final agreement. This is classic "kicking the can down the road", to use the favoured cliché. People sneer at this sort of can-kicking, but it is usually the only way that big and complex deals like this can be progressed. The question now is twofold: can the British government persuade the EU to accept the fudge and to drop the intra-UK border idea, without making too many further concessions on freedom of movement, etc? And can the government get any such deal through the UK parliament? The former can't be taken for granted, but my main concern for now is the latter.

Things are looking harder than I thought. In my last post I said that the Prime Minister Theresa May had successfully faced down the closet Remainers in her party, and that she now had to face down the Brexit hardliners. In the event, after the Chequers summit, she managed only a partial victory. She has won over some powerful Brexit supporters to her compromise formula, notably Michael Gove and Dominic Raab. But there have been a number of resignations. The two cabinet ministers, David Davis and Boris Johnson, don't look to be that great a loss. They were both under-performers who would not put the work into their portfolios; Mr Johnson was actively disloyal. But there have been more competent people leaving at more junior levels, and these are coalescing around the leader of the hardline Brexit faction, Jacob Rees-Mogg, who is putting up vociferous and effective opposition, supported by much of Britain's press.

How seriously should we take Mr Rees-Mogg's hardliners? The seem to command a group of about 50 Conservative MPs, with 4 sympathisers in the Labour Party and many among the DUP. This is enough to cause trouble, and plenty enough to neutralise the government's majority. But it is not enough to unseat Mrs May from the top job. They should be capable of being outmanoeuvred. And yet they are very effective campaigners. Their message that the Chequers deal is a betrayal of what people voted for in June 2016 is gaining traction amongst people that voted Leave. Once again an emotive message only loosely aligned to the facts is trumping (or Trumping?) a dryer, more intellectual argument that in fact most Leave supporters were not very clear on what it was that they wanted, and that a compromise is what a badly split nation seeks, and that besides, a sovereign parliament can always unpick it after the country is fully out in 2021. If I'm right about this then that's big trouble. Mr Rees-Mogg's 50 MPs can become a much more dangerous 150 or more. And they will be holding the Conservative Party itself hostage. Many draw a parallel with the Corn Law crisis of the 1840s, when the Tory Prime Minister Robert Peel pushed through a liberalisation of trade laws, destroying his party for a generation. Ireland featured in that debate too (the Irish Famine was exacerbated by the Corn Laws - to the total indifference of most Tories). Does Mrs May Peel's steel? Can she do a deal with opposition MPs, as Peel did? Few people think so, but she can surprise.

What makes things so hard to predict is an ideological recklessness about Mr Rees-Mogg and his supporters. They have no time for practical obstacles. They pat away all the various knotty problems with simple solutions based on fantasy (even if the other side often exaggerates the dangers) - or a dream, to use Mr Johnson's word. Mr Rees-Mogg is a fund manager, and it shows. Fund managers (a breed that I used to work with) pride themselves on vision and moving quickly. The practicalities are for the little people. That works well enough for buying and selling shares, most of the time (though I often used to have to clear up the mess when things went awry in the days before modern technology - needless to say this was neither their fault or else they'd say sorry very nicely).

They are insouciant on one issue in particular: the prospect of reaching the leaving date without an agreement with the EU - the so-called no-deal Brexit. "No deal is better than a bad deal," was a common mantra two years ago, and was used by Mrs May herself. The idea is that doing a deal with the EU was like a property transaction, where it doesn't do to look too desperate, and you should show your preparedness to walk away. But for Brexit a no-deal works two ways: it's bad for both sides. The EU is now using this tactic too, and when you look at it, they have the upper hand in any no-deal situation. In order for Britons to go about their ordinary business of importing and exporting, or even going on holiday, they would have few automatic rights. That works the other way too, of course, but the relative impact on Britain would be much higher. When interviewed about a no-deal, hard Brexiteers talk about what the impact might be after any new arrangements (under WTO terms, they say) had bedded in a few years' time, and not the scale of any short-term disruption.

The insouciance extends to Ireland as well. "We won't put up any border posts," they say, "if the Irish government does, then they will be to blame." Blaming somebody else is the thing, rather than solving difficult problems. In fact, as one commentator I read recently has suggested, the core Tory Brexiteers are probably closet English nationalists. They wouldn't be that stressed if Northern Ireland (or Scotland for that matter) drifted off. Actually I wouldn't worry about the former drifting off either, if it wasn't the prospect of communal violence sparked by working class Loyalist communities which could trip over into civil war.

And might Brexit itself fail amid this chaos? Could a parliamentary impasse lead to a fresh referendum with perhaps three choices - no deal, compromise deal or not leaving at all? Some people suspect or hope (depending on viewpoint) that this is the secret agenda of the EU side. But nobody, anywhere, is making any serious preparations for a Remain option. Trying to get it onto a ballot paper at such short notice will be hard.

My guess remains that Mrs May is able to do a Peel in the end, gathering support from enough Labour MPs to win through the parliamentary votes, and that the EU will blink when it comes to some of their red lines. But that will make for a tense endgame.

 

Brexit: is Mrs May winning the end game?

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There are less than nine months to go before the United Kingdom is scheduled to leave the European Union on 29 March 2019. For many Britons this is a welcome step in the fight back against liberal elites. Others, like me, feel sick at the thought of it. In the middle of all this is the UK Conservative government led by Theresa May. How is she coping? Better than most people give her credit for.

Mrs May is not the ablest among our political leaders, who are not an especially able bunch. The so-called Windrush scandal shows this, when perfectly legal and established residents of this country were harassed and even deported because of gaps in their paperwork. This has her fingerprints all over it, from her time as Home Secretary. She failed to see that this was where her policy of a "hostile environment" for illegal immigrants would lead, in spite of being warned. Without an established system for proving identity, rejected as an intrusion of Anglo-Saxon traditions, proving that you are legally here, and thus whether or not the authorities should be hostile to you, was always going to be the problem.

So for something of the complexity of Brexit, Mrs May does not look well equipped. Her start showed the same sort of lack of imagination that led to the Windrush scandal. She set three clear parameters, "red lines", for Brexit. Control of immigration; no payments into the EU budget; no jurisdiction of the European court. That seemed quite common-sense, given that all three issues played a prominent part in the referendum campaign. But the whole system of seamless trading with the EU depends on arbitration by the European Court; the EU (as do many countries, in particular India) sees immigration and trade as being closely linked; and the lubrication to make complex deals work is money. Mrs May's red lines were leading to a very hard Brexit, whereby the UK's relationship with its main trading partners would be put on the same level as, for example, the United States.

For many supporters of Brexit, especially among the political and business elite, that was the whole point of it. For them the EU is a completely misconceived exercise, and by placing it at arms length it would give the country greater freedom to engage with the rest of the world. But there are at least two major problems. The first is just how disruptive such a change would be. There is not just the question of tariffs being imposed on goods that passed over the border, but regulatory compliance, country of origin rules, and value added tax would all have to be administered there, until some sort of alternative infrastructure, not subject to the European Court, was devised. Without it a massive snarl-up would develop at borders, with motorways clogged by waiting traffic, quickly leading to supply shortages, empty shop shelves and job lay-offs. Of course this would all resolve itself in time. But the disruption could go on for a long time and wreak damage that would take years to fix. And, a bit like the financial crash of 2008, it could be very hard to get back to where the country was before.

The second major problem is Northern Ireland. The Good Friday agreement that established relations between the province's two main communities depended on quite a bit of fudge based on the fact that both the UK and Ireland are EU members. The most powerful symbol of this is an open border. The Irish government, and the Catholic community in the North, insist that this open border should continue after the break. How on Earth is that compatible with a hard Brexit? That this should be such a big issue drives Brexiteers mad: it looks completely disproportionate. But that Ireland should loom so large in British politics, and cause such inconvenient disruption, will surprise nobody familiar with the last five centuries of British history. After deeply flawed attempts by the British to control and colonise Ireland, the island has repeatedly come back to haunt British politics. If the Irish Brexit problem isn't solved properly there is a big risk of communal violence of some sort. Much as most Britons would like to abandon Northern Ireland, that just can't be done.

Mrs May takes both problems seriously. They are, of course, being used by Remainers to undermine confidence in the whole project. But that doesn't stop them being real. Her strategy has been to keep talking hard Brexit, while gradually softening her stance. That means some form of regulatory alignment and coordination of customs arrangements, adding up to some form of customs union, together with compromises on the European Court and the mutual rights of citizens. It is easy to despise this as "kicking the can down the road", but she is slowly outmanoeuvring both advocates of a hard Brexit, and closet Remainers who want to collapse the whole project.

The latter group, the Remainers, are now pretty much beaten. Though the idea of a further referendum (not a repeat one, you understand) is gaining hold among the public at large, together with doubts about Brexit itself, it is in Parliament that things matter. But the Remain side need enough Conservative rebels to stand their ground. They haven't. The government scored a decisive victory in recent votes which attempted to give parliament more of a say over the process. One problem is that most of these rebels need to stay in the closet, and not admit that they want to destroy Brexit. A second is that they do not wish to force a chaotic election which might let the Labour Party into power. Meanwhile, the Labour leadership will not press the government to the point of a further referendum, still less breaking off Brexit.

Mrs May's next problem will be to face down hardline Brexiteers who reject her compromises. There are at least fifty Conservative MPs who fall into this camp. But this group is being steadily outmanoeuvred. Passionate as they are, they have been unable to offer any practical solutions to the issues of transitional disruption of the economy, nor of Ireland. This group has always been backseat drivers, full of lots of clever theories about why things will be all OK, or somebody else's fault, and who think you negotiate complex intergovernmental deals in the same way that you negotiate a house purchase. There is no convincing rival plan. They seem to want to storm out of negotiations with the EU, daring them to let a "no-deal" happen, but without a viable alternative deal in mind. This lack of practicality means that they are becoming politically isolated. Dare Mrs May face them down?

What can the Conservative hardliners do? The have enough MPs to force a confidence vote in Mrs May, which would then trigger a leadership election. But surely Mrs May has the grudging support of enough MPs to win any such vote if it was called - which would then protect her from further challenges for 12 months. They could resign the Conservative whip, depriving the government of its majority. But if Labour then put forward a vote of no confidence in the government, would the rebels let Mrs May's government fall? That would either provoke a chaotic General Election, or some kind of transitional accommodation between Labour and the Conservatives to get through the last months of the Brexit negotiations. It is hard to see how either would be to the hardliners' advantage.

So, a bit like the closet Remainers, I think the attempted rebellion by the hardline Brexiteers will fizzle. That will leave Mrs May to strike the sort of fudged and muddled deal with the EU, arrived at in the last minute, which is what most international negotiation usually ends up with. There will surely be some nasty disruption as Britain's exit comes about, but not as bad as it might have been. Which would be quite a result for Theresa May.

Don’t let the BBC and Brexiteers confuse you: Norway and Turkey aren’t the same

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This blog's track record on Brexit remains solid. A while ago I predicted that the UK would opt to stay in the (or a) customs union with the EU. That hasn't happened yet, but the tectonic plates are slowly but surely moving that way. Meanwhile opponents of the idea are trying to undermine it by confusing people about what it amounts to, and the media, even the BBC, aren't helping.

First: what is the difference between soft and hard Brexit? A hard Brexit means a complete break with EU institutions and trading with the EU either on World Trade Organisation (WTO) terms or through a tailored trade deal, such as the one the EU has negotiated with Canada. You might call these the Japan and Canada options respectively. A soft Brexit means remaining part of some EU institutions, without being a full member. It boils down to two main options: the Norway option or the Turkey option. There is technically a third: the Swiss option, but EU officials regard this approach as a failure, and are likely to prefer a hard Brexit.

The Norway option is given support by this week's Economist. It means being part of the the Single Market, but not the customs union. This Norway does though membership of the European Free Trade Association (EFTA), which includes Iceland and Lichtenstein as well. This excludes agriculture and fisheries. It means accepting EU directives as far as most trade goes, and the "four freedoms" - goods, services, capital and labour. It has been given a bad press by both sides of the EU debate. Brexiteers say that it turns the country into a vassal state because it has to accept regulations without a right of veto, and only limited consultation. Remainers say much to the same thing, so why leave? The Economist valiantly makes the case nevertheless. It would be the least disruptive approach for British business, while giving the country significant new rights not available to EU members. Apart from agriculture and fisheries policy, this includes doing trade deals with other countries; Iceland has made a deal with China, for example.

Norway does pay significant sums into the EU budget, though - a bit of a flash-point for Britons. But this is not as bad as it looks: it is mostly aid to Eastern European countries, which is separate from other EU aid, and Norway has a lot of say over where it goes.  So it is actually politically quite useful.

So might this be the elegant compromise that brings the two sides together without entirely satisfying them? There are two big problems. The first is border controls. Not being in the EU customs union means that goods have to be checked as they cross the border, as happens between Norway and Sweden. Since one of the UK's aims is a frictionless border in Ireland in particular (helpful in Gibraltar too), the Norway option would fail. This is one of the toughest issues emerging in the whole process (as predicted from the start by this blog). Brexiteers, who tend to deal in broad visions and not detail, can't stand this instance of the tail wagging the dog. They hope that if Britain says that there will be no checks on goods coming into Northern Ireland, it will force the EU to reciprocate. But that turns out to be more difficult than it sounds - unilaterally waiving tariffs creates issue under WTO rules - as well as being reckless with the Irish peace process.

But there is an even bigger problem with the Norway option: the four freedoms. Or rather one of them: labour. Claims by Brexiteers that more than a minority of their voters wanted a total break with the EU are hard to sustain: the Leave campaign deliberately obfuscated the issue by using Norway as an example of what Brexit might mean. But a claim that those voters wanted complete control over the movement of labour into the country is perfectly credible. The Economist argues that there is more Britain can do to manage incoming EU workers more strictly within the Single Market. I don't think that washes.

The Turkey option addresses both these problems. There are no customs checks at the border, and there is no free movement of labour. The lack of customs checks means that most of those complex supply chains that cross the border between the UK and the rest of the EU should suffer reduced, and manageable, disruption. Agriculture and fisheries can be excluded (as are services, most likely - but this is where the Single Market works less well anyway). What's not to like? It means that doing trade deals with non EU countries can only happen for those goods excluded from the customs union (agriculture and services most likely). The more extreme, neoliberal branch of the Brexit movement, well represented in the Conservative Party, has set great store by doing such deals. And yet to most critics of Brexit this has always looked to be the weakest part of the Brexit case. These other countries are far away, drive hard bargains, and Britain's negotiating position is weak. There is little evidence that the voters are that bothered. Nobody could accuse Turkey of being a vassal state to the EU, so why should they be?

And so the Turkey option looks the most viable form of soft Brexit. In a speech today the Labour leader is taking a step towards it by advocating a customs union with the EU. However he is blurring the issue by suggesting that he wants to be part of the Single Market too. And yet he wants exemptions to suit his agenda, especially on state aid and free movement. The EU will never wear that because of the political difficulties it would create within the union. I would go as far as to say that it is dishonest of Mr Corbyn even to suggest it. It would be much clearer to go straight for a variation of the Turkey option. Still it has served to put the customs union idea on the agenda, and presents the possibility of linking up  Tory soft-Brexit advocates, who have a much clearer grip of the key issues.

And what of the government? It has rejected the idea of a customs union out of hand. But this is just words, meant to placate hard-Brexit advocates within Tory ranks. What the government says it wants is what it has called "Canada plus plus plus". That is almost as dishonest as Mr Corbyn's Single Market minus. The government wants to stay integrated in some sectors but not others. This looks like the sort of cherry-picking the EU so dislikes. But it could be an intermediate negotiating step towards a Turkey-like solution, even if they try to avoid the words "customs union". I believe this may be the game plan of Theresa May, the prime minster, and David Davis, her pragmatic Brexit Secretary. Whether they have the political skills to pull that off is open to question, though.

Meanwhile supporters of hard Brexit are trying to turn the public against the Turkey solution by conflating it with the Norway one. This includes Australia's undiplomatic ambassador, Alexander Downer, to his great discredit, on the radio last night. This allows them to suggest it means accepting free movement of labour, for example. They also suggest that it means that the UK cannot do trade deals with other countries: that is not true either, though the scope of those deals would be restrained. Britain could import US chlorinated chicken and Australian wheat tariff-free if it wants to, as agriculture is not in scope.

For now the politicians are exercised about a potential vote in parliament over the customs union. Expect the government to defer this until the actual shape of its deal with the EU becomes clear. Something like a customs union with the EU is on its way. It is exactly the sort of compromise the country should be aiming at.

If Brexiteers want to reassure Remainers they will have to start talking specifics

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There was a certain inevitability about the Foreign Secretary Boris Johnson's speech yesterday. It was meant to reach out to Remainers by presenting a liberal case for Brexit, but instead it drew raspberries. Britain's polity is bitterly divided. It was always going to take more than a few speeches to change that.

Is there anything useful to be learned from this episode? One of the central themes of the speech was perfectly sound, if unwelcome to Remainers. The result of the referendum cannot be reversed, and Brexit is going to happen in some shape or form. The reason for that is basic politics. The leadership of the Conservative and Labour parties have both signed up to it. The Tories can rely on Democratic Unionist support. We've already had a general election following the referendum. There simply isn't the political support to reverse Brexit.

And as for another referendum, Mr Johnson made a perfectly sound point. Another period of political battle between the two camps will only make things worse. There is no sign of a major shift in opinion in either direction. Remainers are clutching at straws when they look at polls suggesting opinion has shifted. It was looking at the polls that got is into the mess in the first place.

That makes the case for Remainers to try and get used to the reality. But those facts don't make the pill any easier to swallow. What Mr Johnson tried to do on top of that was persuade Remain supporters that Brexit will not be as bad as they fear. And here the speech was a complete failure. He came out the same old platitudes and generalities that have been a feature of the Brexit campaign from the start. There have always been two prongs to the Brexit case. One is an appeal to conservative voters who oppose immigration and feel strongly that national sovereignty is a birthright that trumps any freedoms in the world beyond the country's borders. The second is an appeal to liberal types with the idea that post-Brexit the country can be a liberal haven, free from the restraints of EU obligations. The problem is that these two lines look dissonant. It is easy enough for Brexit supporters to concentrate on their preferred line of argument and ignore the others. For sceptics it is that very dissonance that worries them.

And to overcome that fear it will be necessary to address that dissonance. How? By moving on to the specifics. Which regulations do you want to dismantle to make us free? How will you satisfy the need for regulatory alignment promised to the Irish without becoming a vassal state of the EU like Norway? And how will the rights of young people to travel and work in Europe be secured? And so on. Mr Johnson did not begin to do this.

Only one government minister seems to have understood what needs to be done: Michael Gove, the Environment Secretary. He is trying to show us in concrete terms what opportunities leaving the EU might bring - for example in making the EU's clumsy system of farm subsidies much more focused.

In the absence of such substantive proposals the government gives the impression that it has not made up its mind and is putting off hard decisions. We are instead told that such detail might harm the country's negotiating position. But most of us suspect it is because of deep disagreements in the government, and not just between Brexiteers and closet Remainers, but between the Brexit liberals and their illiberal supporters.

It is a situation that is crying out for strong political leadership from somebody that has both vision and a grasp of detail, and from somebody that knows how to build and maintain political coalitions. That person is not our Prime Minister, Theresa May, nor is it the Labour leader Jeremy Corbyn. And yesterday's speech showed us that it is not Boris Johnson either.

Brexit: Britain will end up in the Customs Union

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This blog has been wrong about a lot of things. Especially the Labour Party. But one area where my record has been very strong, in spite of standing outside the conventional wisdom, is Brexit. This is encouraging me to be recklessly brave in making my next prediction: Britain will stay in the EU Customs Union, even if it will take another two years or more before that becomes apparent.

Before the vote last year, I was always worried that the Leavers would win. I felt that my most persuasive argument for Remain was not that Britain would be better off in the long run outside the Union (though I did think that), but that the process of extraction would dominate British politics for so long that progress on any other of the county's pressing issues would be halted. And thus it has proved. Poverty is growing, and Alan Milburn, the government's (Labour) adviser blames it on the Brexit effect. The government may riposte that "absolute" poverty is still on the way down, but that claim looks very doubtful; "relative" poverty is clearly getting worse, after decades of progress. Poverty is a subject I will return to - I am working my way through a very challenging study from the Webb Foundation, which will require a degree of reflection. But Brexit is throwing up urgent problems in almost every area of government policy. And where it doesn't, there is the indirect issue of distraction.

After the vote my first comment was that a long transitional period would be essential. A further prediction was that Northern Ireland would be the "surprise" issue that could derail the whole process, and it was the most important thing to get sorted out. This is now nearly consensus. , but at the time people were obsessing about whether Brexit would be soft or hard. The answer was in fact clear: soft in the short term, and then we'll see once we've all understood it a bit better.

More recently there seemed to be an impasse between the British position that we should proceed to trade talks with the EU now, and the EU position that the "divorce" questions be settled first. I suggested that the British would win out in the end. And so it is proving. It suits the British commentariat to say that it is the British that are caving in, but in fact it is the EU side that has moved substantively; they are having to settle for some reassuring words. The mystery was why it took Britain so long get there; the answer to that was maybe that a bit of theatre suited both sides. There is a snag, though; just when it all looked settled, the Northern Irish Democratic Unionists (the DUP) torpedoed it. That was my Irish caveat - and, I should add, I understand Irish politics, north and south, even less than the Labour Party. Still, this looks more like a glitch than a full stop - a result from the Prime Minister Theresa May's debilitating introversion that had left the DUP out rather than talking them to death - which is now what she will have to do. All that is required for the moment is a dose of fudge. The DUP may well create some real trouble later on, but now does not look the right moment.

I had drafted a blog a month ago saying that I thought the talks were on track to succeed in moving to the next step, just when everybody was saying it looked hopeless. I didn't post it because it was ended in a whimper. So what? Where was it all going? I now think I have the answer.

The firstly, I think Brexit will happen. Many Lib Dem friends hold on to the hope that the seeming chaos of the negotiating process, and the absence of any clear vision of the long term, means that the whole thing will collapse. But the negotiating machinery in Britain and the rest of the EU is in place, and officialdom has got used to the idea. It will happen, it may just not make as much difference, in the short run, as people thought. The way politicians deal with hard problems (I nearly wrote "modern politicians" but this is surely as old as the hills) is to string things out. The expression is "to kick the can down the road". You decide as little as possible for now, so that reality has more time to sink in, and hardened positions can soften. The consequences of this approach are not well understood by the commentariat. They talk as though you negotiate treaties as if you were buying or selling a house, which is the biggest thing that most of these people have had to negotiate for themselves. We are for ever hearing about this or that strengthening a negotiating position, and in particular how threatening to walk out makes you stronger. But it is nothing like selling a house. It is infinitely more complex; you have to live with, and do more deals with, your counterparty afterwards; and you can't simply choose to sell your house to somebody else. You have to keep the engine running, to switch the metaphor.

So complete collapse is unlikely, and Brexit nearly inevitable. Reversal would cause more problems (in the short term at least) than it would solve. Besides, the political conditions for it do not exist. There has been no seismic shift in British opinion, even if polling shows Remainers edging ahead. The Conservatives desperately want to hang on to power to keep Labour out, and keeping to the legal form of Brexit is essential to keep the party together. Labour would like to create trouble for the Conservatives, but do not want to be put on the spot. The desertion of Brexit supporting working class voters from Labour could torpedo their hopes of winning the next election. And power, for the Labour leadership, is much more important than Brexit.

But time is short. The priority now is to get that transitional deal up and running. Though the idea is to make as little difference as possible to current arrangements, beyond a few bits of carefully chosen and powerful symbolism, it will be hard enough. There will be no time to sort out the ultimate destination. Hard Brexiteers will continue to babble away about complete independence; the more pragmatic people will keep arguing for this or that aspect of the status quo. The truth is that the British governing class, and still less the public, have not understood the options properly, and not decided between them. And that is not surprising, given how big and complex it all is. We have to kick the can down the road. (Alas I had hoped to resist clichés in this blog, but I need to finish this piece).

So the process will drag on. Perhaps even the British people will be allowed a say in the process. Another referendum looks very unlikely - and probably not desirable. Trying to reduce everything down to "yes" or "no" has proved very unsatisfactory. But a general election during the transition process is another matter. An election is not due until 2022, which would be three years into the process, by which time many decisions will have been taken. But once the current government has delivered formal Brexit in 2019, it may find it hard to hang on. Brexiteers seem desperate to avoid any popular participation in the decision-making process, however - a role reversal from before the referendum. But the government's minority status, and its lacklustre leadership, will make it hard to hang on.

But where will we end up? A divided nation will at some point be desperate for a compromise, and one that makes the Irish border more workable. It is in fact quite clear what that compromise is: membership of the Customs Union. If it is good enough for a prickly and independent Turkey, why can't it be good enough for a prickly and independent United Kingdom? The government has ruled it out. But the whole process has been one of options being ruled out and then being ruled back in again. Brexiteers have a vision of Britain being a free-trading beacon, showing the rest of the world how it is done - and that would mean standing outside the Customs Union. But the British public are not interested in that vision; and, besides, the rest of the world has moved on. The massive expansion of world trade is coming to an end (except maybe within Asia and between Asia and Africa).

It may take a general election before before the British ruling elite reconciles itself to staying in the EU Customs Union. But I think that day will come.

Brexit is drifting into stalemate

Transitions are always hard. Honest Brexiteers always knew that about the UK's exit from the European Union. So it isn't surprising that pessimism about Brexit is fashionable in the metropolitan classes. Until recently I had dismissed it as just chatter: Brexit has its own momentum. Now I am not so sure.

Recently the focus on Brexit has been about a transitional deal - part of a phased exit from the union. This is an entirely sensible idea, and, this blog has argued from the beginning, practically inevitable. The EU is a massively complex thing, and 45 years of acquired institutional integration takes a lot of unpicking. Surely it is sensible to do so at a measured pace with democratic consultation along the way? But there is something strange about all this talk. Nobody is talking about what happens after the transition. Salespeople for airline flights are urged to sell the beach, not the flight itself. And yet Brexiteers have stopped selling the beach. Instead they keep talking about the past - the referendum and its supposedly decisive mandate: selling the airport after you've already been through it.

This is the latest sign of insecurity amongst the advocates of Brexit. The fact that they were arguing for so long against the idea of a transition period was an early sign. Now they reserve their passion for keeping the transition period short - and the need to avoid having a general election in the middle of it. The trouble is that a transitional arrangement looks too comfortable a place to inhabit; we might never work up the courage for that next brave step. As Janan Ganesh points out in today's FT, a country that cannot face down enough nimbys to expand Heathrow airport stands little chance of doing the brave things needed to make Brexit happen. "Leave now at the risk of economic chaos or leave late at the risk of never leaving. It is the Eurosceptic dilemma," he writes.

The truth is that the various optimistic visions of Brexit are wilting. There was never consensus amongst Brexiteers amongst them anyway. In particular the Prime Minister's idea of the oxymoronic "Global Britain" is collapsing. The emerging dispute between Britain and Canada and the USA over the aircraft producer Bombardier shows just how difficult that vision actually is. Just after Labour leader Jeremy Corbyn said that he wanted to leave the European Single Market because of its state aid rules, Boeing is trying to close Bombardier's factory in Northern Ireland on the grounds of excessive state aid. Boeing's case is a weak one, but it is a big company in a big country, and such companies have no ethical compunction about bullying. They simply want to squash a potential future competitor by using principles designed to foster competition rather than suffocate it. The American government is happy enough to play along. The mechanisms of the World Trade Organisation (another transnational limit on sovereignty) look inadequate. Anybody who thinks that India or China will be any easier to deal with (or indeed the EU from outside) is not living in the world as it is. Small powers need a transnational order to thrive. But transnational order is going out of fashion amongst the world's great powers.

Still, there are other visions for a post-Brexit Britain. They are of a more self-sufficient Britain. More complex manufacturing, such as the motor industry and aerospace, look doomed in the long-term outside the Single Market. But these are becoming less important to the whole economy. Modern technology is making smaller scale manufacturing easier. And the information economy is less bounded by the constraints of old-fashioned borders. A new meme on the political left (Jonathan Freedland in the weekend Guardian, repeated by Nick Clegg in today's FT), that you can't banish austerity outside the Single Market looks like nonsense to me. In the long term anyway. Britons might need to adjust their appetites on goods that are typically imported: cars and fossil fuels, for example, and things like foreign travel. But health care, social care, education, housing and employment support don't require a major trading economy to support them, even if they need to be adjusted around the edges a bit. Except, of course, that "austerity" is code for any kind of disruptive change. Full Brexit will mean more disruption. But few politicians seem up for selling that to the British public.

And so we drift into a political stalemate. The country remains locked in a 50-50 split as to whether Brexit is right or wrong. The forces of remain look in no shape to launch a counterattack, and are content to obfuscate and delay. They have always been averse to selling the beach anyway. I cannot see that formal Brexit can be stopped. The purgatory of half-in and half-out seems a fitting verdict on a failing political system.

The most important Brexit negotiation will be amongst the British people

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There is very little decent media coverage of Brexit here in Britain. Mainly it is two groups of opinionated people trying to annoy each other, or at least to keep up their own side's annoyance levels with the other side. Actually I have more time for the British negotiating effort than most Remainers, and more optimism that something sensible will emerge in the immediate aftermath. But Britain's long-term destination remains unclear. And that is only right in the circumstances.

Right from the start I predicted that the key would be a transitional arrangement whereby elements of the Single Market and the Customs Union (not the same thing) would continue for long after the formal exit date of 29 March 2019. The British government is inching towards this conclusion, as a series of position papers published over the summer makes clear. Over the weekend Labour backed this idea too. The logic is overwhelming.

The British way is often said to favour gradual evolution over revolution. British democracy emerged step by step, without a revolution like France or Russia. Britain's engagement with the European Union was similarly gradual. So gradual, in fact, that many Britons did not realise how much they had become attached to it until the Brexit referendum was lost. Of course this is exactly what opponents of Britain's participation had predicted all along - the takeover would be incremental until a federal United States of Europe emerged by stealth. It follows that Britain's disengagement is going to need to be equally gradual - or else we will have that destructive chaos that revolutions bring with them. The more so as there is no consensus vision on what a disengaged Britain should look like. Democracy takes time.

If Britons are coming to appreciate this, the other EU governments, and EU institutions, are being inscrutable. They insist that the arrangements for separation must be agreed before the terms of any future relationship are even discussed. The British government's position papers were an attempt to get the conversation about the medium-term moving in spite of this arbitrary approach. They may well have succeeded. EU leaders may dismiss these position papers, and in some cases deride them - but the agenda has moved on. That was all that was intended.

The EU side will never admit it, but this is because logic is overwhelmingly with the British government on this. The exit negotiations are focusing on three critical subjects: financial obligations, EU citizens living in the UK, and the Northern Ireland border. In each of these Britain's future relationship has an important bearing. This is most obvious in the case of Northern Ireland. This depends heavily on on future customs and migration arrangements. But the rights of EU citizens are tangled with the issue of the future role of the European Court of Justice and future arbitration arrangements. And even the financial obligations (the so-called "divorce bill") can be finessed if some parts of British membership effectively continue beyond March 2019, along with the sort of financial contributions made by Norway and Switzerland for access to the EU market. The EU negotiators will be forced to talk about these things.

The EU needs a deal on Brexit for at least two reasons. First is that commercial disruption could threaten jobs within member states - thought the Brexiteer claim that the other EU countries need Britain more than the other way round is nonsense. Second is the situation of EU citizens who are living in Britain, and the status of Britons living in other EU countries. A legal limbo would be a major headache for everybody. On the other hand the EU governments do not want Britain to continue with all the rights of EU membership and not the obligations. That will make them wary of a transitional deal. But given the precedents set by Norway (in the Single Market and European Economic area), Switzerland (who have similar rights based on a number of separate agreements) and Turkey (in the Customs Union but not the Single Market), it should not be hard to finesse this. Indeed people may ask what the point of Brexit was, and that will suit the EU governments  - in fact the point of Brexit, if there is one, will take time to emerge.

And meanwhile Britain must slowly decide what it actually wants.  There are three main competing visions, which I will name after their role models: Singapore, Switzerland and Japan.

The Singapore idea is favoured by quite a few of the Brexit-supporting elite - those businessmen who came out in favour of Brexit, supported by a number Conservative MPs, and one or two theoretical economists, like Patrick Minford. This is that Britain becomes a global trading entrepot, with a regulatory light touch, and a strong national focus on competitiveness and low taxes. But this is a fantasy, partly because of Britain's physical location and industrial hinterland - but mainly because there is no sign of democratic consent for this way forward. It would require an authoritarian state to implement (as it does in Singapore, after all) - and Britons do not like being dictated too - as the Brexit referendum showed very clearly.

Much of the rest of Britain's elite favour something of a Swiss solution. This combines a strong tradition of independence and democracy with a free trading relationship with the Union, established on an issue by issue basis, and not by a bulk package arrangement like the EEA. The relationship between Switzerland and the EU is not a smooth one, but by and large it works, and Switzerland prospers. But the Swiss do have to abide a whole raft of EU rules, not least over freedom of movement. It would also be a platform from which the UK may re-enter the EU in future - which is why so many Leave supporters dislike it. Personally, this is what I favour.

But most British voters who supported Brexit probably have something in mind that is much more Japanese, as do many Conservatives, probably including the Prime Minister, Theresa May. Japan is fiercely independent and conservative in its outlook. It maintains a strong separation from the countries on its neighbouring continent - China and Korea, in particular, with whom it has tense relations (though Japanese imperial expansion in the 20th Century accounts for much of that). Controls over inward migration are tight, even in the face of challenging demographics, and social cohesion is highly prized. Multiculturalism is not an idea that they take to. Governing institutions are paternalistic, and democracy is flawed, though not as badly as in Singapore. The Japanese may grumble at this, but not enough to change the system. How very British.

Britain is not Japan, and any Japanese path will have to have some very British characteristics. The first is that Britons may grumble about it, but the country has a strong multicultural dimension. This is a legacy of its Empire, much more than the EU. There is no turning back - but immigration can be slowed, and assimilation of minorities might be more muscular - though this will hardly lead to community cohesion. A further issue is economic. Japan has built up national powerhouses of manufacturing industry, notably in cars and electronics. They have levered their way into export surpluses, notwithstanding reluctant attitudes to free trade. This is a very different approach to Britain's, which has an open economy, even by European standards. Our manufacturing powerhouses have been sold off or run business models that are so globally integrated that the companies can hardly be called British (consider British Aerospace, at once part of European Airbus and trying to persuade the US armed forces that it is really American). Building something more closed and self-sufficient, in the style of Japan, will be slow and painful. Most people would not give much for Britain's chances - but with technology rapidly changing the way economies work, that may be excessively pessimistic - in the long run anyway.

So should Britain continue to be a part of an integrated European economy, albeit keeping more of it at arms length than now? Or should Britain stand alone and focus more on social cohesion? In London we, by and large, favour the former. In many other parts of England, and Wales, there is strong preference for the latter. That is what we will have to negotiate amongst ourselves, piece by piece. It will be a long journey. Britain's negotiation with the EU on Brexit is but a small part of it - and its main purpose is to buy us more time.

Theresa May’s Brexit moves from tautology to oxymoron but makes the best of a bad job

An oxymoron replaces a tautology. Theresa May, the British Prime Minister is contemptuous of intellectuals that try to weave policies into a wider, coherent narrative. Instead she concentrates on a series of tasks, whose solutions may clash with one another. In her speech on Brexit last Tuesday Mrs May moved her defining slogan on from "Brexit means Brexit" to "Global Britain". This last expression captures the essential idea that Britain can remain open to the world while being closed to it.

Predictably enough, the media coverage has been beside the point, lapping up the bait left for them left by the spin-doctors, without bothering to question the speech's real meaning. Last week I said that the government's strategy would be a hard Brexit via a soft one, with a General Election in between. That, more or less, is what this speech delivered.

The media has focused mainly on Mrs May's stated destination after the exit process is complete. That was always going to be a very hard form of Brexit, given her insistance on two red lines: control over immigration of EU nationals, and escape from the jurisdiction of the European Court. This is a perfectly fair interpretation of last year's vote. Some Brexit campaigners painted a picture of a "Norway option" of Britain staying in the Single Market while outside the political Union. But Remain campaigners, including me on many occasions, pointed out that this was nonsense. Mrs May is conceding to this obvious reality. A third red line is emerging: Britain wants to be free to negotiate separate trade deals with non-European countries, like the USA or China. So one of the main points interest of her speech was her hope that Britain could have a half-in/half-out relationship with the EU customs union. This looks very hard, but we can hardly fault it as an aspiration.

But, as I argued last week, the critical issue for Brexit is the transition, and Mrs May did have something to say about this. She talked of a "phased implementation" of Brexit: in other words, a transitional deal. She said very little about this, and nothing about how long the transitional period would be.  That is quite a big door she has left open.  This transition amounts to a soft Brexit for a limited period, and getting progressively harder over the years. This starts in 2019; there must be a General Election by May 2020, which will be quite early in the transition process. Politicians should be focusing on their stance in this election.

The strategy for Remainers who want to put off hard Brexit therefore becomes quite plain. The next parliament must prolong the transition process and renegotiate what comes afterwards. They will be caught in the same logical bind about membership of the Single Market, but they might be able to move the talk on to eventual re-entry.

But to reverse the tide of Brexit will require a shift in public opinion, with a large block of Leave supporters put off by the prospect of hard Brexit. At the moment, though, the acquiescence of Remain supporters looks more likely. This is helped by the behaviour of the UK economy since the vote. There is no sign of a serious economic impact, and forecasters are putting off their predictions of one. The chief economic effect of Brexit has been the lower pound, and this has been doing the job that advocates of floating currencies always maintained it would. Any loss of inward investment put off by Brexit has been made up for by other money tempted by the reduced price of British assets. It may be that property speculation is replacing business development and research, but in the short term what matters is the cash. And British consumers have seen no need to save more and spend less; consumer demand is robust. The balance of payments deficit may even be easing. My sense is that summer holidays in Cornwall are selling faster than usual. Britons may be worse off, but not enough for anybody to be seriously worried.

This is something of a Brexit honeymoon. When will it end? That will happen when, or if, the costs of exit become more concrete, with job losses and travel restrictions in particular. The government will, as it should, try to put these off. There will no doubt be a big focus on protecting the British motor and aerospace industries, which are particularly vulnerable. Skilful navigation of these pitfalls could head off any serious backlash - and if they do the Brexiteers will have won the economic argument, so far as most people are concerned. That may or may not happen, but for now the endless speculations of doom from the Remain camp aren't helping; it will the fate of real businesses and jobs that will win the argument either way.

But for the time being the focus will probably move away from business. The immediate focus of negotiations will be the terms of Britain's exit - the divorce settlement, and not the basis of the future relationship. Probably the most combustible part of this will be the status of Britons resident in other EU countries, and vice versa. So far such media attention has focused on people from EU countries living in Britain, who have become embedded in British society. Most Brexiteers feel that they should have full residency rights, but the ability of Britain's bumbling Home Office to design a bureaucratic process that can deliver this is very much in doubt.

Actually the more politically important case is British retirees who have moved to other EU countries (Spain is especially popular) and dependent on access to local health services. The government hopes that people who moved before a cut-off date (such as the referendum date) can preserve their current status. But the situation is not symmetrical, especially when you look at individual EU members. A deal should be easy with Poland, but what has Britain to offer Spain in return for continuing to look after a community that pays few Spanish taxes and demands increasing care costs? The prospect of thousands of British retirees coming home to use an NHS struggling to recruit foreign staff cannot be inviting.

It is with such matters that the British government will become absorbed over the next two years. It will be a hard slog, but Mrs May's plodding, practical, task-oriented, anti-intellectual approach may be just what is required. Expect many more tautologies and oxymorons.