Market Insights

Diary to an Election

As we await Boris Johnson’s likely move into 10 Downing Street, some Conservative MPs have suggested they would force a General Election by voting down their own Government in a no confidence vote, all in an attempt to avoid a No-Deal scenario. Although the former mayor of London has promised to try and negotiate a deal with Brussels, Mr Johnson has confirmed that he would abide by the 31 October deadline ‘’do or die’’, keeping the possibility of a No Deal Brexit firmly on the table.

This stance has understandably panicked those who want to avoid falling over the cliff edge into No Deal by default. They feel their ultimate weapon to stop Boris on this course of action would be the threat of bringing down his government.

The introduction of the Fixed-term Parliaments Act (FTPA) in 2011 removed the sitting Prime Minister’s ability to call an election at a time of their choosing – it is now up to Parliament. Absent the option of repealing the act entirely by a simple majority, there are two ways in which an early election may be triggered: at least two-thirds of the Commons votes in favour (as happened under Theresa May in 2017) or by the passage of a motion that “This House has no confidence in Her Majesty’s Government”. If this motion were carried, a 14 day period would follow in which confidence in the government could be re-established, either in a newly formed alternative government or in the incumbent government; if that fails, a General Election is called.

The current Conservative government has a working Commons majority of just four, including the backing of the Democratic Unionists. This could soon be reduced still further by the by-election that has just been announced for Brecon and Radnorshire on 1st August. This was largely a Liberal Democrat seat until 2015, and they’re expected to regain it for two reasons: 1) the by-election was triggered by a recall petition over the incumbent Conservative MP due to an expenses scandal and 2) that same MP is standing once again as the Conservative candidate. That’s before we even look at the resurgence of the Liberal Democrats in the national polls.

The threat of bringing down the government is therefore becoming more credible, requiring only two Conservative MPs to defy the party whip in a No Confidence vote.

But the timetable is against the anti-No-Dealers. An election would need to be triggered well before the 31 October deadline, in order to give enough time for the 14-day period under the FTPA, as well as the compulsory 25 working-day campaigning period. A vote would therefore need to be held as soon as MPs return from their summer recess, at least before 10th September 2019. After that date the Conference season recess also kicks in (specific dates TBC).

Instead, MPs could pass motions similar to the Cooper Bill, wrestling control of parliamentary time to mandate the Prime Minister to extend article 50 again. They could pass No Confidence motions with alternative phrasing, or with an explicit demand to ‘rule out no deal’, in an attempt to exert pressure on the PM. They could even pass a censure motion to hold Johnson’s pay to ransom.

Unfortunately, as Johnson-backer Dominic Raab has pointed out, these motions to stop a no deal Brexit would have ‘’zero legal effect’’. Only revoking Article 50 would remove the No Deal risk entirely. Even then that could be up for challenge from the European Court of Justice, whose recent ruling over revocation is that it must be “unequivocal and unconditional”.

If the No Confidence vote is passed, then surely that would force a change of direction?

Not if the Prime Minister doesn’t want it to. Under the rulings of the Fixed Term Parliament Act, he has two weapons up his sleeve constitutionally speaking:

  • It is only Her Majesty’s Government that can command confidence; therefore if Jeremy Corbyn wanted to form a new government, he would need to have been appointed Prime Minister by the Queen before testing the House in a fresh motion of confidence. If that doesn’t happen, and why would an incumbent PM give their opposite number the chance, then a caretaker government is put in place. (Callaghan continued as PM in a caretaker administration when the last vote of no confidence was lost by a government in 1979)
  • Dissolution of the government need not immediately follow the 14-day period and section 2(7) of the act allows the Prime Minister to recommend a suitable polling day to the Queen. With the Brexit clock ticking, Prime Minister Johnson could simply schedule an election for after the 31st October deadline.

Either of those courses of action would take a tremendous amount of chutzpah in the face of what would be a determinedly driven opposition. But the truth is that the opposition only have political pressure up their sleeves. This can work in their favour, but also against them. If they failed yet again to pass a Deal, then created chaos to force an election, it is not entirely clear they would be rewarded favourably by the electorate – nor that the voters would vote to Revoke rather than go for No Deal in an election that would effectively become a re-run of the Referendum.

Indeed, a ballsy Prime Minister might bypass the No Confidence vote altogether, calling for a dissolution of Parliament by the super-majority vote of two-thirds of the House, and daring the opposition to stop him.

We think the risk of an election in September/October is rising. It could benefit those trying to stop Brexit altogether, those trying to take power at any cost, and those trying to benefit from splintering the left wing vote as much as those trying to exploit the fragmentation of the right.

– Written by Catherine Fellows (Analyst) and Matthew Grant (Intern)

KO for Gove

  • And so it is Boris Johnson v Jeremy Hunt that will go to the Conservative membership ballot
    • Leaver v Remainer
    • Chaotic Personal Life v Family Man
    • Lifelong politico v Businessman
    • Shambolic v Smooth
    • Hated by Liverpool v Hated by Doctors
    • Classicist from Oxford University v PPEist from Oxford University
    • ex-Foreign Sec v Foreign Sec
    • Public schoolboy v Public Schoolboy
  • But it is really the first difference that will matter the most to the Conservative Party membership, and it is this which makes Team Boris so confident that he will win. The last Remainer Prime Minister didn’t work out too well…
  • Looks like Javid’s voters went to Johnson but then Johnson votes went tactically to Hunt (as 5 Javid MPs had publicly declared for Boris but he only picked up 3 votes).
  • Revenge for the Gove stabbing in 2016 has been served. With balance back in the Brexiteer force, expect Gove to work closely with Boris once (if?) he becomes PM

….And finally, thank you to the BlondeMoney team of analysts who worked very hard to make some strong predictions in an extremely volatile political environment. If you’d like to know more about their analysis or work with our database, please let us know.

The Weigh In

  • By 5pm today we will have the full list of candidates to be the UK’s next Prime Minister
  • Under the new rules, each candidate requires 8 MP supporters
  • Round 1 of voting by MPs will then take place this Thursday, 13 June, 10am-12noon. Result expected 1pm.
  • Here is the BlondeMoney forecast based on our MP-by-MP analysis:
  • And here is this support versus each candidate’s BM Brexit Rating (which runs from -15 for the most pro-Remain MP in the House of Commons, to +15 for the most pro-Leave)

We therefore conclude: 

  • Boris Johnson should immediately hit triple figures and burst into the lead. Johnson received a huge boost in the form of ERG leader Steve Baker’s endorsement, exemplifying that the Brexiteer wing of the party is on board.
  • Jeremy Hunt has emerged as the moderate alternative and is currently favourite to join Boris on the ballot. In receiving a surprise endorsement from Liam Fox, Hunt has shown the first signs of the broad appeal that will be necessary if he is to go all the way. The support of Amber Rudd has also boosted his credentials.
  • As illustrated by our Brexit rating chart, the bulk of support currently lies on the extremes of the party. But could a compromise candidate emerge?
    • Sajid Javid – Sitting almost perfectly between Johnson and Hunt, he could pick up votes from MPs hoping to keep the party united after a divisive leadership race.
    • Michael Gove – in recent media interviews, Gove has tried to soften his image as a hard Brexiteer and move himself towards the centre ground that Javid currently occupies. This has been somewhat successful as he has picked up endorsements from both Remainers like Nicky Morgan and more pro-Brexit MPs such as Richard Bacon.
  • If our predictions are correct, the field could shrink by nearly half after just one round of voting. If a unity candidate is to emerge, they will require a large proportion of support from the first eliminations in order to mount a serious challenge on Hunt and Johnson at the front of the pack. It is their supporters who will decide who wins the overall contest.
  • The real question here is whether middle-of-the-road Conservatives will look to Johnson or Hunt once their first preferences have left the race.
    • If polling continues to indicate that Johnson is popular among the membership, then they will rally to his side in the hope of currying favour once the contest is over.
    • If moderate MPs continue to make noises about resignation in the event of a Johnson victory, or of bringing down the government over the risk of No Deal, then Hunt will gain support as the man to keep the party together moving forward.
  • Whoever wins, note that the leading Brexiteer candidates are now promising potentially undeliverable tax cuts along with reopening the Withdrawal Agreement. Boris says he will withhold the £39bn divorce bill until the right deal is done. Meanwhile on the parliamentary time available until the new October 31st deadline, today would be equivalent to January 15th, when the first Meaningful Vote was held. Tick tock goes the Brexit clock, counting down to No Deal….

++ If you would like to see our full scenario analysis for who will become the next UK PM please email us if you haven’t already done so ++

European Parliament Elections – What to watch out for

Ignore headline hysteria about a populist takeover of the EU. Rather, today’s European Parliament elections should prove to be yet another chapter in the story of how the public’s faith in institutions is ebbing away, leading to more volatile policy-making ahead.

Watch out for how many seats are won by:

  • Orban’s Fidesz (current 11, expected 15)
    • Will he work with other populist parties?
    • Even if he doesn’t announce that he will sit with their grouping, he can use this sword of Damocles to hang over the head of the EPP and push policy in his direction
  • Farage’s Brexit Party (current 0 (although UKIP 24), exp 25)
    • Not only in terms of how it will affect UK politics but also how it impacts future Brexit negotiations
  • Macron’s La Republique en Marche (current 0, exp 21)
    • How much have the Gilets Jaunes protests taken their toll on Macron’s power?
    • Le Pen’s National Rally is expected to win 22 seats, so there will be some comfort for Macron if he can beat them into second place
  • The Greens (current 51, exp 55)
    • A good showing and we can conclude that broad discontent with institutions is driving European politics rather than populism per se

We will find out:

  • Can populist parties work together?
  • How strong is anti-establishment sentiment across Europe?
  • Is there any hope left for the historic major parties?

We already know:

  • These elections will deliver a more fragmented European Parliament, frustrating policy-making
  • Policies will be dragged towards the extremes as the historic centrist parties struggle to survive
  • The hegemony of France and Germany over the direction of Europe is waning, leaving an uncertain future ahead for the European Project
  • Italy is on course for a fiscal showdown with EU institutions

In one chart:

The legacy blocs of the centre-right EPP and centre-left S&D can only be propped up if the Alliance of Liberals and Democrats for Europe is saved by Macron (courtesy of Open Europe):


Forget Brexit

  1. Cross-party talks resume tomorrow but they are almost entirely irrelevant
    • Even if the leadership teams can agree on something, the lack of discipline within both parties leaves them unable to be sure if their own MPs will back it
      • Labour Deputy Leader Tom Watson has his own anti-Corbyn centrist “Future Group” numbering almost a third of Labour MPs ready for action. He has called for a second referendum as the “only way” to unite the country
      • Conservative leadership candidates are falling over themselves, with the race now being described by one MP as having “more runners and riders than the Grand National” – 18 at the last count
  2. The Brexit damage has been done.
    • The country did not leave on 29th March 2019, and, while a short delay could have been stomached, ballot papers for European Elections are now hitting door-steps across the country
    • Everyone is therefore unsurprised that Farage’s Brexit Party are storming ahead in the polls – now hitting 34% in the latest from Opinium:
    • Everyone is similarly unperturbed by this, given that UKIP were polling at the same level at the same point in the previous EU election campaign
    • But let’s compare the polling in a General Election.
      • Back in May 2014, it didn’t look great for the Conservative Party, with Labour in the lead, albeit by a small margin:
      • Here is the latest ComRes poll:
      • Yes, when the big bad UKIP threat forced David Cameron to pivot towards a referendum in order to win a majority in the 2015 General Election, the Conservative Party were panicking about polling around 32%. They are now polling under 20%. Farage’s Brexit Party is already decimating them. 
  3. This might just be a flash in the pan irritation. Conservative MP Damian Hinds certainly spun that line when he told the Andrew Marr programme today that ‘For some people, this is going to be the ultimate protest opportunity. Many people use the euro elections as a free vote, and this will be even more so this time’
  4. We think not. We think this is the beginning of the end of the Conservative Party and certainly the end of two party politics in the UK. This ushers in a secular shift towards more volatile and unstable governments in the decades ahead. 
  5. Note that the rise of Farage perversely makes Corbyn a more likely Prime Minister due to the vagaries of the First-Past-The-Post system. The brilliant Electoral Calculus website allows us to look at what the ComRes poll would look like in terms of seats:
  6. The Conservative Party are now more consumed with the best time to get rid of a leader that under their own rules they can’t remove, than seeing off the existential threat of the second coming of Nigel Farage (‘this time it’s terminal’).
  7. Time makes their disintegration inevitable.
    • Everyone wants to be leader but not right now, meaning in the vacuum the party can continue to fight with itself
    • It’s becoming impossible to coalesce around a replacement leader now that everyone thinks they can have a go. Even grassroots website ConservativeHome warns “There are too many leadership candidates”.
    • With Labour facing its own internal party management issues, the opposition is not there to provide a disciplining force on the Conservatives. Indeed, right now both parties are being pressed into working with one another rather than against
  8. Even deadlines are not strong enough deadlines to force action.
    • On June 15th, the PM faces an unprecedented motion of no confidence in her leadership at an Emergency General Meeting called by local constituency chairmen. But it is non-binding.
    • The Confidence-and-Supply arrangement signed with the DUP comes to an end next month. But who will Arlene Foster believe will be her partner in the months to come?

We warned in February over complacency that ‘the centrifugal forces spinning out towards No Brexit or No Deal are thought to provide a centripetal force to bring everyone back towards Theresa May’s Deal‘. The centrifugal forces will ultimately spiral out of control, whatever happens on Brexit. The pendulum has been set in motion.