Today in Brexit, Day 1,215

In which we explain how a bill becomes a law—and other Parliamentary quirks potentially confusing US investors today.

Today, Jacob Rees-Mogg—subject of merry memes, leader of the House of Commons and the chamber’s Honourable Member for the 18th Century—laid out the legislative agenda for the rest of the week. UK lawmakers will resume debating the Queen’s Speech, which set out the government’s program for this parliamentary session, with most focus on the National Health Service. Astute readers will notice the preceding sentences do not include the word Brexit. This is because Parliament managed to vote both for and against Brexit today, leaving Rees-Mogg and Commons Speaker John Bercow in a good-natured debate over whether Prime Minister Boris Johnson’s Brexit deal is in limbo, Purgatory or stasis. On paper, the UK is still scheduled to leave the EU on Halloween. Whether that actually happens is still a mystery. If it happens, whether it follows Johnson’s deal or not is also still a mystery. The situation is so fast-changing, we almost didn’t write this commentary. But we also thought a procedural explanation might help you, dear reader, put today’s headlines and handwringing in context.

For those who have not been following multiple UK news outlets’ live blogs since Saturday, here is your Previously on Today in Brexit recap. As we wrote last week, Johnson and EU negotiators reached a Brexit deal Thursday. Members of Parliament (MPs) were scheduled to vote on this deal on Saturday. It was to be a simple “up or down vote,” registering their approval of the terms before debating the EU Withdrawal Bill, which would enshrine Brexit into law. This “up or down vote” would have been binding, not “indicative.” However, MPs amended the bill to remove its binding status, setting up today’s vote on the EU Withdrawal Bill as the decisive yea-or-nay on the matter. Their reason for doing so: forcing Johnson to request an extension from the EU. He did so, with a catch, sending Brussels two letters. The first was an unsigned, perfunctory request for an extension in order to comply with UK law. The second was a signed, impassioned argument advising them not to grant the extension. As we write, Brussels has not announced its decision.

On Monday, Johnson mounted a last-ditch attempt at an up or down vote, but Bercow squashed it. This teed up today’s big vote on the EU Withdrawal Bill. It was two-pronged. The first measure was the terms of the deal. The second, the so-called “program motion,” set forth the timetable for finalizing and implementing the legislation, which was very short (three days, to ensure a Halloween exit). MPs approved the first vote, 329 – 299. This is the first time MPs have approved the terms of Brexit, making it a pretty big deal. However, the implementation program failed by a margin of 14—308 for and 322 against. In response, Johnson said his administration will “accelerate” its march to a no-deal Brexit. Previously, he had warned that if the program motion failed while the deal passed, he would pull the legislation and try for a general election.

Here, anyone not familiar with the inner workings of Parliamentary procedure will ask: Why would Johnson pull legislation that passed? The answer: What passed was not the final bill itself, but its Second Reading. Here’s a quick explainer of the UK’s legislative process for those unfamiliar:

  1. The First Reading is the presentation of the bill itself. There is no debate or a vote.
  2. The Second Reading includes a debate focused on the general principle of the bill, rather than its details. The vote at the debate’s end signals whether MPs agree to it in principle. A program motion usually accompanies this vote and sets out the timetable for the rest of the legislation process.
  3. Presuming MPs pass both, the bill then goes to committee for potential amendments, then to the full House for more amendments, and then to its Third Reading—the final debate, final chance for amendments, and final vote on the bill as amended.
  4. If passed, it then goes to the House of Lords, which either confirms or amends the bill and kicks it back to the Commons.
  5. Once the bill is passed, the Queen provides Royal Assent.

So, today, MPs basically said: “We approve of this thing in principle but want way more time to play with it and duct tape our pet peeves to it, and we want Brexit extended.” Those rejecting the fast timetable had myriad reasons for doing so, ranging from ensuring Northern Ireland wouldn’t be split off from the rest of the union to securing a second referendum to scuttling Brexit entirely. Some want to make minor tweaks, some want wholesale changes. Johnson doesn’t want the latter, and the EU doesn’t seem keen on going back to the drawing board either. Johnson and many others want Brexit to happen on Halloween or—at minimum—a short, “technical extension” to finish the last bits of paperwork after the EU Withdrawal Bill is passed. Hence his initial intent to pull the legislation and Rees-Mogg’s newfound focus on non-Brexit debates. However, in the hours since Tuesday’s vote, Johnson has been lobbying for a chance to ram Brexit through next week. European Commission President Donald Tusk is mulling everything over and considering the extension request.

Officially, according to Johnson, the EU Withdrawal Bill is “paused.” Bercow stated that meant the bill is “in limbo.” Rees-Mogg clarified that it was “in Purgatory.” Clarifying the clarification, Bercow offered this gem: The bill is “not on a journey, it is not progressing, it is not moving from one place to the other. It is static. But it is not a corpse.” You may chuckle if you like—we did.

From here, this could basically go one of two ways. Johnson could pull the legislation and try to get MPs to approve a general election. In that event, the EU would probably grant an extension. How soon—and whether—Brexit would happen after that would depend on which party won and whether they had a majority. Those are huge unknowns. Or, Johnson could concede to a short delay, give MPs the extra time they asked for, make Brexit finally happen, and then send voters to the polls. We guess a no-deal Brexit on Halloween also remains possible, though it seems highly unlikely based on how the winds are blowing.

Only time will tell what happens. It won’t surprise us if volatility continues alongside these political theatrics. Don’t let it knock you flat. Just stay cool and remember that at some point, this uncertainty will end, life will get back to normal, and businesses and investors can resume thinking long-term and taking risk.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.