Why Brussels is not buying Theresa May’s ‘No Deal’ minister bluff

Theresa May is to create a “No Deal” Brexit minister as part of the cabinet reshuffle, appointing a minister of non-cabinet rank in the Department of Exiting the European Union (DexEU) to make preparations for a catastrophic fallout with the EU.

The minister – tipped to be Steve Baker – will attend cabinet and will have a budget designed to lend credence to the idea that Mrs May really will walk away from the Brexit negotiations if she does not get what she wants. Really. She will.

This news is unlikely to go down well in Brussels where it was assumed that the December deal over the Brexit bill and expat rights (and a four-way fudge on Ireland) had finally laid such fighting talk to rest.

As one senior EU negotiator put it, the biggest EU take-away from December was that Mrs May and the Brexiteers had decided not that ‘no deal was better than a bad deal’, but rather that “any deal was better than no deal”.

The notion of the bill buying leverage only works if you believe the UK is really prepared to walk away before March 2019 without paying the EU a penny – but throughout this process Mrs May has made it abundantly clear she is not prepared to do this. And the EU knows it.

Put another way, the biggest prize in this negotiation was simply to sign the Article 50 withdrawal agreement on March 29 2019 and thereby take an irrevocable legal step to end the UK’s membership of the EU – pretty much whatever the price.

The cost of a hard crash-out would, according to Treasury long-term forecasts, cause UK GDP to be 7.8%-9.5% lower by 2031. Such numbers are boisterously dismissed as “project fear” on the hustings, but in the Cabinet Office they cannot be brushed off so lightly.

Which ultimately explains why the Prime Minister has engaged in an entirely rational and gradual series of climb-downs after first allowing the hardliners in her party to blow off steam.

Treasury forecast to 2031??? Seriously – are they having a laugh?

A Treasury forecast in May 2016, which focused “on the immediate economic impact of a vote to leave and the two years that follow”, asserted (in the foreword, p.3): “A vote to leave would represent an immediate and profound shock to our economy. That shock would push our economy into a recession and lead to an increase in unemployment of around 500,000. GDP would be 3.6% smaller. Average real wages would be lower, inflation higher, sterling weaker, house prices would be hit and public borrowing would rise”. And then (p.45): “The analysis shows that immediately following a vote to leave the EU, the economy would be pushed into a recession, with four quarters of negative growth.” WRONG!

The same Treasury, staffed predominantly by Oxford PPE graduates of less than 30 years of age, has been wrong over and over and over again. They have been wrong about the EMS. They have been wrong on what drives economic growth (in particular in how they have suppressed entrepreneurs in various ways). They have been wrong about the euro. They have been wrong about giving Gordon Brown such broad discretion in overspending, thus eventually tanking the economy.

They were wrong in not predicting the crash. They have been appallingly wrong (as many analyses, such as those performed by Civitas, have shown) about the alleged benefits of being in the Single Market and about the alleged disasters that would befall us if we voted to leave.

In light of this, why does anyone take ANY notice of the Treasury and its laughable, biased and (almost) always entirely incorrect forecasts? They are Remainers through and through – enough said.

I’m inclined to believe it is no so much Brussels buying Teresa the Appeaser’s no deal bluff as certain members of the government preventing her from falling for the EU’s “Resistance is futile, you will be assimilated” schtick.

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