ANALYSIS: UK Parliament, back with a bang

Important
SourceNewsquawk
SectionMarket Analysis

Overview

  • The UK Government lost a vote which has allowed Parliament to take control of the Parliamentary agenda, specifically securing the suspension of a rule which stated that only the government can create new laws. This vote followed on from PM Johnson losing his acting majority of one as Phillip Lee defected to the Liberal Democrats.

In Detail

  • In European hours, during a speech by PM Johnson, Tory MP Phillip Lee defected to the Liberal Democrats as such the Government lost their working majority of one. On this, it is worth highlighting that the majority was shaky at best as under former PM May’s government, members frequently defied party consensus (including Johnson himself).
  • House of Commons members seeking to stop a no-deal Brexit won a motion by 328 votes vs. 301 against, for the suspension of a Commons rule which stated that only the government can create new laws. This motion passed with the assistance of 21 Tory rebels (including former Chancellor Hammond) and subsequently government sources have confirmed that they will be removed from the Conservative party.

EU Rhetoric

  • EU Diplomats have reportedly stated that as Johnson has lost his majority it is futile for continue discussions, as they cannot be sure that whatever comes out of it will ever be translated into reality. As a reminder, the EU stance has been that if they are to provide an extension they need a clear roadmap of the UK’s reasons for doing so and the next steps, as long as there is evidence that the extension will result in progress.

Today’s Benn Bill/General Election

  • At around 1500BST MPs will see the presentation of the Benn bill, which aims to legally prevent the UK from leaving the EU without a deal, by calling for a Brexit extension until 31st January 2020 in the event that a Brexit agreement has not been passed by the 19th of October; except in the scenario that MPs vote for a no-deal Brexit. In the event that Europe agrees to this extension, the PM must immediately accept it and if an alternative date is proposed then Commons will have two days to reject this otherwise Johnson must accept it.
  • General consensus is that there is likely going to be a majority in favour of the Benn bill.
  • On the bill, reports indicate that 17 Labour MPs are planning to amend it by calling for the most recent version of former PM May’s deal to be placed before parliament. For reference, on its third passing through Parliament on March 29th May’s bill was rejected by 344 votes to 286.
  • In the event this bill passes the Commons it will then be rushed through the House of Lords and written into law prior to next week’s suspension of parliament. After which, UK PM Johnson is to call for a general election which under the Fixed Term Parliament Act requires a 2/3 majority in the commons. Regarding its passage through the House of Lords, reports have indicated that loyalists to the PM in the Lords have tabled 90 amendments to the oppositions motion in an attempt to significantly delay its passage.
  • Opposition party narrative has firmly stated that Corbyn would not provide the necessary support for a general election, until another Article 50 extension has been secured. Subsequently, recent reports indicate that the Labour party are not planning to prevent a vote on a snap election from happening, so if Johnson brings one forward it will go ahead. Though other reports have indicated that Labour will not back a general election on the PM’s terms.

Alternative Election Routes

  • Notwithstanding the aforementioned reports, in the event that Johnson cannot achieve a 2/3 majority for a general election there are a number of alternative methods available.
  • Some reports have suggested that the need for a majority can be avoided by Johnson passing a bill that says “notwithstanding the FTPA, we will have a general election on XX date”.
  • A no-confidence motion may be passed in the government; somewhat unlikely in the event that the Benn bill passes as the opposition would have secured their initial aims and as prior reports indicate this is seen as a last resort by the opposition due to their lack of conviction in securing a majority. Furthermore, such a motion would be unlikely to be supported by Tory rebels at this stage.
  • Finally, PM Johnson could theoretically call a no-confidence motion in his own government and order his party to abstain in the vote to ensure it passes.

Today’s Indicative Schedule

  • 12:00BST – Prime Minister's Questions (PM Johnson debut)
  • 13:00BST – Chancellor Javid will present the spending review (TBC)
  • 15:00BST (Approx.) – The Benn bill to force a delay to Brexit will be introduced and all stages of the bill must be undertaken in the House of Commons today
  • 19:00BST (Approx.) – Vote on the Benn bill
  • 19:00BST onwards – If this passes, there could be a vote on a general election today (with a 90 minute debate for this on the parliamentary agenda for the day)
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