Brexit and a Hung Parliament: Damage Limitation or a Better Outcome?

Kirsty Hughes | 6 June 2017

UK Parliament, Rennett Stowe, CC-BY-2.0

Some polls suggest the UK could face a hung parliament on Friday morning. Would smaller parties, including the SNP, Lib Dems, SDLP and Greens, then have a chance to ensure a soft Brexit – or even to stop Brexit – through supporting a minority Labour government?

With a Westminster vote on the Brexit deal not due until talks end in autumn 2018, it may be tricky to influence the new government’s negotiating strategy. Yet a minority government would need support in the Commons.

For Brexit, both the Great Repeal Bill – Labour would replace it with an ‘EU Rights and Protection’ bill – and a series of other bills from migration and trade to agriculture, tax and customs would need to be passed.

Crucially too, the UK’s new post-Brexit migration policy is likely to impact substantially on any future UK-EU27 trade deal – and on whether the inevitable Brexit damage to UK-EU trade is smaller or larger. So smaller parties would have some key routes to influence.

Would Labour mean a softer Brexit?

Labour suggests it would negotiate a Brexit deal that protects jobs and growth while also ending free movement of people and leaving the EU’s single market and customs union though ‘retaining their benefits’. But the EU27 has been very clear that there is no such deal – either you keep free movement and can be in the single market or you leave.

Certainly, a Labour minority government might mean a less confrontational approach to talks. Labour sees ‘no deal’ as the worst possible outcome. And its manifesto talks about a ‘presumption of devolution’ for EU powers returning to the UK in devolved areas – a strong contrast to the Tories.

But in the end, both Tories and Labour want the fullest possible access to the single market while not being inside it. Even with an EU27-UK trade deal (rather than no deal), UK goods exports to the EU could fall by 35% and services exports by 61% (according to the National Institute for Economic and Social Research). Unless Labour’s new migration policy is almost as open as free movement, it may not get a much better trade deal than the Tories.

Could the smaller parties ensure a soft Brexit – or no Brexit?

The SNP, Lib Dems, Greens and SDLP have all supported either the UK, Scotland and/or Northern Ireland staying in the EU’s single market, potentially through being in the European Economic Area. They support retaining free movement of people – and mostly too want to stay in the EU’s customs union. Some Labour MPs – even a few Tory MPs – might support a single market outcome too.

If these parties held the balance of power, they could refuse to pass the key migration and trade bills necessary for Brexit to go ahead by March 2019 unless the minority Labour government went for a soft Brexit. Would a minority Labour government agree to this – or would it offer other sweeteners instead?

The EU27 will have their own views here. If the UK wanted to join Norway in the EEA, that would be fine – even if the EU27 would find the UK giving up its vote and seat at the table, while still following EU rules, bizarre. But no third country has ever been in both the EU’s single market and customs union. It may not be on offer.

And what if a Labour government was determined to bring in a more controlled migration policy, or if Corbyn’s more Eurosceptic leanings meant he didn’t want to be in the EU’s single market?

A Second EU referendum?

The Lib Dems want a second EU referendum on the final Brexit deal – with staying in the EU as the alternative. Would Corbyn offer this in return for support? The SNP would then need to make a rapid decision on whether to support a second EU referendum too.

A second EU referendum in late 2018 or early 2019 would mean delaying any second independence referendum. But independence in the EU would be much more straightforward if the rest of the UK stayed in the EU or at least in the EEA, so supporting a second EU referendum could make sense for the SNP.

Scotland and Northern Ireland in the single market?

Alternatively, the SNP might push as its top demand its proposal that Scotland should get a differentiated solution, staying in the EU’s single market while the rest of the UK left. Scottish Labour MSPs have supported such a differentiated approach. The SDLP wants the same for Northern Ireland.

But would Labour in government argue they were seeking a soft trade deal, with an open migration policy, that was almost as good as the single market? And would the EU27 negotiate a complex deal whereby both Northern Ireland and Scotland had in effect a single market border with England and Wales?

Or an indyref2 deal?

Or would the SNP, as a condition of its Westminster support, demand agreement for a second independence referendum to be held in autumn 2018, once the talks are done? But unless the SNP holds the balance of power on its own, then Lib Dems and some Labour MPs would surely not support this, even if Corbyn was prepared to countenance it – at least not unless Lib Dem demands for a second EU referendum were met too.

Softer Brexit in a hung parliament

In the end, a hung parliament is most likely to lead to a softer Brexit via two possible routes. An open migration policy could lead to a less bad trade deal with the EU27. Or a choice for the UK to stay in the EU’s single market would limit the costs of leaving the EU substantially – while introducing a major democratic deficit.

One big political question would be whether the Lib Dems might get agreement for a second EU referendum. If so, the SNP may need a rapid rethink on a different second referendum – an EU one – if it holds the balance of power, with the Lib Dems, Greens and SDLP, this Friday.

Co-published with the National

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Scottish Centre on European Relations

Dr Kirsty Hughes is Director of the Scottish Centre on European Relations. She is a researcher, writer and commentator on European politics and policy, and she previously worked for a number of leading European think tanks.