May 18, 2017 / 3:17 PM / 5 months ago

Theresa May’s manifesto leaves Brexit wiggle room

LONDON (Reuters Breakingviews) - Theresa May has left herself some Brexit wiggle room. Unveiling the Conservative Party manifesto for Britain’s June 8 election, the prime minister made some aggressive-sounding noises on immigration and her willingness to leave the European Union without a deal. She also left herself space to negotiate a less damaging departure. Adherents of both a “hard” and a “soft” exit from the European Union will hear what they want – but only one will get it.

Britain's Prime Minister Theresa May's launches her election manifesto in Halifax, May 18, 2017. REUTERS/Phil Noble

As versions of Brexit go, the manifesto sounded pretty tough: Britain won’t be in the single market, the customs union, or pay substantially into future EU budgets. Yet what May wants – and what sounds the least-bad for the UK economy – is a new free trade deal on favourable terms for key UK industries like cars and finance. To the extent this is at all possible, that would require some kind of continuing oversight by the European Court of Justice, and some kind of exit fee. The manifesto rules neither out.

Investors had already made their bet. The pound has risen in trade-weighted terms since the election was announced, on the assumption that a bigger majority for May means a softer Brexit. Even so, in some respects the manifesto takes Britain in non-free market directions. If elected, May will take longer to erase the budget deficit, make pension provision less generous to her core older vote and cement the minimum wage for workers.

Meanwhile, on immigration May has been more transparent. In sticking to a commitment to shrink annual net migration from 273,000 to “the tens of thousands”, she is persevering with a measure that would be economically harmful and that has never been reached. Doubling a pre-existing levy on companies that hire overseas employees to 2,000 pounds per worker is a strange way to make a post-Brexit Britain attractive for foreign investment.

One explanation is that May is sanguine about hurting economic growth. Another is that she knows that immigration will exceed her target, but needs to pretend she can hit it because it is one of the reasons many Britons voted for Brexit. That could leave hardliners feeling short-changed after the election. But with a bigger majority, May might not need to care.

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