Theresa May’s nerve will be tested as court complicates Brexit

Theresa May ‘is not just changing Britain’s ties with the EU; she has come to change Britain’.

The redirection of Britain and the remaking of British politics under Prime Minister Theresa May, seemingly a cautious, tough, down-to-earth conservative and patriot, now constitutes one of the decisive yet unpredictable events in Western politics.

Every aspect of Britain’s system — its values, institutions and policies — is subject to sustained pressure as the nation reverses four decades of history and moves to quit the European Union.

This week saw dual tension over Bank of England independence and at week’s end a High Court ruling that the government cannot exit the EU without parliamentary approval — in effect saying the executive’s power based on the royal prerogative must be subject to the supremacy of parliament.

This will not stop Brexit. That is driven by the people’s choice. But it is a huge embarrassment for May. It gives fresh heart and temptation to the powerful Remain lobby. It will accentuate Tory party divisions. Perhaps above all, it will drive the campaign against May in the cause of a “soft” Brexit that falls short of the faster and more sweeping “hard” exit she proposes.

May is not for turning and will appeal the decision to the Supreme Court. She will tell EU Commission president Jean-Claude Juncker she intends to face down any revolt and honour her pledge to begin the two-year exit process in March.

There is, of course, a fallback. If parliament delays or obstructs too much, May could call an election on her Brexit policy, secure a mandate — along with a certain increased majority — and impose her will on parliament. Her strength lies in her honouring the referendum vote.

This reminds us that while the US struggles over its bitter presidential election with little prospect of clear directional change, Britain under a new leader is pledged to a new destiny. It is rare in politics to see such change being imposed on the entire system, a product of the people’s vote, with parliament’s prior sentiment clearly being on the Remain side.

Britain will pay a price for leaving the EU, the great uncertainty being: how much, how damaging, and when? But this leads to the even greater unknown: has Britain stepped on to the escalator of inexorable decline or does such liberation lead to another sunlit uplands?

The great eruption has thrown up Britain’s second female PM, May, 60, a 19-year veteran of the Commons, far removed from her predecessor David Cameron’s Notting Hill fashionable set, in touch with provincial England, partly educated at state schools, then Oxford, a moralist and a Christian, daughter of a vicar, always ambitious, married to a businessman and childless, employed at the Bank of England before politics, devoid of rigid ideology, a successful home secretary who was tough on national security, worried about high immigration and cracked down on Islamists, known within the cabinet as being calm, stubborn, a stickler for detail, a control freak, empty of small talk, a touch distant, a rationalist and not a reactionary, pledged to an inclusive party, having warned her colleagues years ago the Conservatives risked being seen as “the nasty party”.

May became PM as the unity candidate. Opinions about her wildly fluctuate, as do opinions on virtually everything in Britain today. Yet there is near universal agreement about her three aims: to hold the Tory government together, to negotiate the best Brexit deal, and to avoid a recession that would doom her project.

She governs at a historical moment. That means immense opportunity yet grave risk. She can become a substantial leader or falter under the weight of the times. Yet she has an immeasurable gift: a ruined Labour Party led by a loathsome people’s movement protester, Jeremy Corbyn, detested by most of his parliamentary party, leading wags to declare Britain “a current example of a one-party state”. The assumption that May is a certain election winner next time gives her authority but runs risks with Conservative Party unity.

If May prevails, the Tories can reshape Britain for a generation, hold the middle ground, rebadge their party, redefine ties with the EU and rekindle faith in sovereign Britain. If May fails, if the government loses its way during the EU separation negotiations and investment falters, if markets conclude the EU exit a grand blunder, then Britain’s vulnerability with high debt and a high current account will trigger multiple crises, financial and political.

The downside scenario would be frightening: a government unable to meet the task and an opposition not fit to govern.

In the unpredictable dynamic after the court decision there appear to be three likely consequences (if the ruling is not overthrown on appeal). First, parliament must pass the law authorising the EU exit process to uphold the people’s will. Second, the internal stability of May’s government and the Tories will be sorely tested since this gives the kiss of political life to Remainers and will provoke, in turn, the populists to cry “betrayal”. It is no surprise right-wing UK Independence Party leader Nigel Farage warned at once that “betrayal may be near”.

Finally, while May has previously ruled out an election, it is a huge disciplinary weapon and threat in her hand.

The strength of May’s position should not be underestimated provided her own side stays rational. The truth is majority elite opinion on this issue was destroyed in one day on the Brexit referendum. The assumptions of the Tory government, Whitehall, finance and business, and cosmopolitan Britain were dissolved. Some have adjusted, others will take time and much pain, yet others will be irreconcilable forever. This was people power: the public issued shock instructions to parliament to reverse its ways, upsetting more than 40 years of EU membership.

The Tory heroes were destroyed. The glorious winners of the 2015 British election, the suave Cameron and his boy-wonder chancellor, George Osborne, are gone, swept away with the morning’s refuse, their record ruined in their epic miscalculation. Blink and you missed it.

A new Tory government rose from the ashes. Everyone operates within broken traffic. Detailed strategic plans are impossible given the unprecedented nature of Britain’s EU separation from a European system sinking into a deepening crisis over migration, weak economies, an untenable euro system and alarm over Russian adventurism.

If Hillary Clinton wins in the US, the world faces a remarkable situation: women leaders in America, Britain and Germany with Angela Merkel. The US message to Britain before the vote was explicit: don’t do this, we want Britain in, not out. But the British people told Barack Obama to get lost.

Clinton, if elected, needs to get involved in the European drama — that means strong security backing against Russian adventurism, insisting that Vladimir Putin pay a price for recklessness, and telling the EU it should settle for the best accommodation with Britain in terms of the nearest approximation to free trade.

The great trap for Britain is a Donald Trump victory. Trump has applauded Brexit. He sees Brexit as part of the populist movement linked to his candidature. May, no doubt, will recognise a mug menace when she sees him. Being part of Trump’s malevolent schemes would spell catastrophe for her.

Meanwhile, has any country ever been so confused about its new leader?

May, in truth, had a foot in both camps during the referendum. She drove Cameron mad with her lukewarm support for Remain yet stayed loyal to her boss. As Prime Minister, she is a ruthless enthusiast for the Leave implementation. Her message is that “Brexit means Brexit”, although nobody really knows how this is deconstructed.

In short, May intends to lead a different Conservative Party, different in two ways — a conservatism like that of Disraeli, where you listen to the people, and a conservatism based on a resolution of the European question: Britain is with Europe but not in Europe.

But Britain is about to get a terrible shock. It will find that being in the EU was a disguised bonus that increased, not diminished, its living standards and gross domestic product, as the British Treasury and Bank of England argued during the campaign. Under May and outside the EU, Britain will need to do more to hold its ground.

“Fairly quickly, Britain’s weaknesses outside the EU will be scrutinised more carefully than they were when it was inside, including its continuing high annual budget deficit and growing debt as well as its persistently high current account deficit,” says Robin Niblett, director of Chatham House.

The Brexit vote was a gamble based on a flawed assumption. The truth is that Britain has prospered from its status within the EU but outside the eurozone. Although quitting the EU to expand its opportunities, it is more likely to find them reduced.

The EU nations will continue to be Britain’s major trading partner. There will be no substitute for them. The risk is obvious: that Britain has weakened itself and done serious damage to the EU, given the UK accounts for about 15 per cent of its GDP and was a vital policy player.

The task facing May is daunting. The established political order in Britain and the EU is being redesigned in circumstances where it will be hard to avoid a loss-loss result, witness The Economist editorial before the vote headed: “Divided we fall”.

May is not just changing Britain’s ties with the EU; she has come to change Britain. Indeed she says the vote inaugurates a “quiet revolution” that means a once-in-a-generation change in how Britain is governed.

There are two competing views about May. Her warnings that the economy has been run for the interest of the few, that “we see division and unfairness all around”, that the better-off have been too focused on themselves and that she will ensure government steps up to “right wrongs” and challenge vested interests have led many people, such as the economics editor of Financial Times, Martin Wolf, to conclude that “May has buried Thatcherism”.

This suggests her vision is a repudiation of the 1980s Margaret Thatcher-Ronald Reagan pro-market revolution and that this is her real significance. May espouses the beneficial power of government in the cause of justice. Wolf ventures that she might herald as big a shift for Britain as the 40s embrace of socialism or the 80s reversion to free markets.

But Daniel Johnson, the editor of Standpoint magazine, says May is in Thatcher’s mould: moralistic, outside the Tory establishment, siding with the little people and the common man, a believer in enterprise, alert to the EU’s flaws, a British patriot and a believer in progress through hard work and responsibility. “None of Mrs May’s policies thus far would have seemed alien to Mrs Thatcher,” Johnson says. “She is on the side of people like herself, swots and strivers, not the silver-tongued and ­silver-spooned cliques who flourished in (and ultimately doomed) the Cameron era.”

May and her Chancellor, Philip Hammond, are softening Britain’s fiscal policy to take insurance in case the Brexit fallout begins to inflict tangible harm on the economy. The pound has already fallen near 20 per cent against the US dollar, revealing a serious confidence problem. Hammond will soften the absolute budget surplus target by 2019-20 espoused by Osborne, his predecessor.

While still seeking a balanced budget in the next parliament, Hammond’s aim is to give himself the option of a greater fiscal stimulus if needed. Frankly, it may be needed. His prudence is completely justified. Yet it exposes the cost of Brexit — a looser fiscal policy to cover the risk of economic downturn.

The furore this week over the future of Bank of England governor Mark Carney further exposes the institutional risks of Brexit.

Carney has been targeted by the Brexit mob because he had the audacity to spell out the cost of quitting the EU, thereby infuriating the Leave camp. May had openly criticised the bank’s policies yet needed Carney’s authority as governor for the transition.

In the end Carney agreed to stay an extra year until 2019 but has repudiated government efforts to persuade him to stick until 2021.

In short, Carney has reservations about the government and the government seemed to have reservations about both Carney and central bank independence.

Understand what is happening: this is a dangerous time for Britain at the level of its system of government. The most fundamental ideas relating to its political order are under stress and strain. The assumptions of the ruling class for four decades have been destroyed. The adjustment facing May is truly daunting. The task is to implement Brexit with a minimum of damage while aware that events might just spin out of control.

The line of attack May’s critics will deploy based on the High Court decision became apparent yesterday. They will stand on transparency. They will say May has no mandate for her tough line on immigration and moving ahead rapidly with a “hard” Brexit. They will urge delay, debate, re-examination. The Remain media will call on the Tory party and parliament to pass the law but minimise what they see as the damage from Brexit. How will May react? Surely only one way — from a position of strength. Anything less would be fatal.