UK PM May faces no confidence threat, Indian-origin minister quits in fresh Brexit jolt

London, November 15

Embattled British Prime Minister Theresa May on Thursday faced a possible "coup" after Brexit Secretary Dominic Raab, Indian-origin minister Shailesh Vara and two other ministers resigned from her divided Cabinet over UK's "half-baked" divorce deal with the European Union.

Minutes after Vara stepped down as Northern Ireland minister, Prime Minister May was hit by a bigger blow as her Brexit Secretary Dominic Raab resigned from the Cabinet saying he "cannot in good conscience" support the draft of the withdrawal agreement with the 28-member bloc.

Amidst a spate of resignations, prominent Brexiteer Jacob Rees-Mogg directly challenged 62-year-old May in the House of Commons. He later submitted a letter of no confidence in her leadership of the Conservative Party.

May's opponents need 48 letters from Tory MPs to trigger the confidence vote. However, Brexiter Tory MPs are nowhere near the numbers they need (158) to defeat May in a confidence vote, British media reported.

Rees-Mogg told reporters that "coup" is the wrong word, as he is following legitimate means to try and oust the Prime Minister.

"Leaving the European Union is the most fantastic opportunity for the United Kingdom. This opportunity is being thrown away," he said.

"The problem is that the negotiations have given way on all the key points," the Conservative lawmaker said.

Another Conservative MP, Henry Smith has also submitted his letter, requesting a vote of no confidence in May.

Rory Stewart, a minister of state at the Ministry of Justice, attacked MPs attempting to trigger a leadership challenge against May, saying it "feels like a sort of coup d'etat taking place in Parliament."

Earlier, Vara, the Conservative Party MP for North-West Cambridgeshire, who has been a minister in the Northern Ireland Office since January, said, "We are a proud nation and it is a sad day when we are reduced to obeying rules made by other countries who have shown that they do not have our best interests at heart. We can and must do better than this. The people of the UK deserve better."          He attacked the draft withdrawal agreement which would form the basis of the UK's exit from the EU by March, 29, 2019 as a "half-way house with no time limit on when we will finally become a sovereign nation".

The resignation of Raab, the man involved with the actual drafting of the agreement with EU counterparts, throws Prime Minister May's leadership in turmoil.

Raab, who took charge as Secretary of State for Exiting the EU after his predecessor David Davis stepped down in protest over May's Brexit negotiations in July, said the proposed arrangement to avoid a post-Brexit border with Northern Ireland is a "very real threat to the integrity of the United Kingdom".

Raab's resignation was followed by another pro-Brexit minister, work and pensions secretary Esther McVey, announcing that she is resigning from the Cabinet over the issue. Another junior Brexit minister Suella Braverman quit over Brexit, shortly after her former boss Raab quit office.

The resignations are being seen as a sign of bigger troubles ahead for May, who defended the deal before belligerent MPs in the House of Commons.

Making a statement on the withdrawal agreement, dubbed the Outline Political Declaration, at the heart of the intensifying rebellion, May said she respected the views of her Cabinet members who chose to resign but delivering Brexit involves difficult choices.

"The choice is clear. We can choose to leave with no deal. We can risk no Brexit at all. Or we can choose to unite and support the best deal that can be negotiated," the defiant prime minister said.

While she claimed the Cabinet had collectively given its backing to her deal, many ministers had spoken out against it and were not entirely happy with the final text.

The biggest sticking point remains over what is termed as a Northern Ireland backstop, which leaves the EU with the option of keeping the whole of the UK within a common Customs Union if a future trading relationship fails to be thrashed out during the 21-month transition period, set to run until December 2021.

Opposition leader Jeremy Corbyn, the Labour Party leader, attacked Prime Minister May in his response to May's statement on Brexit to the House of Commons.

He said May's negotiations that resulted in Wednesday night's draft Brexit deal with the European Union had ended in a "huge and damaging failure". Corbyn demanded that the government should withdraw the deal.

"The government simply cannot put to Parliament this half-baked deal that both the Brexit Secretary and his predecessor have rejected," he said.

The markets also reacted sharply, with the British Pound falling heavily against most major currencies after Raab's resignation.

Northern Ireland's Democratic Unionist Party (DUP), which props up the minority Tory government, have also been vocal in their criticism, threatening to break their deal with the Conservatives and vote down the deal.

The fresh turmoil comes as Britain continues to try and thrash out the basis of its exit from the EU, after a referendum over its membership of the economic bloc resulted in a 52 per cent vote in favour of Brexit in 2016.

As the chaos within government circles gathers momentum, calls for a second "people's vote" over the issue of Brexit is also gaining ground.

Many criticised the draft deal, agreed with the EU on Tuesday, for making Britain a "vassal" state, beholden to the bloc's rules even after leaving on March 29.

Others said an agreement on the so-called backstop would tear Britain apart, leaving Northern Ireland all but in the EU's single market.

"It is ... mathematically impossible to get this deal through the House of Commons. The stark reality is that it was dead on arrival," Conservative lawmaker Mark Francois said.

It took an hour of parliamentary questions before she was asked a friendly, rather than hostile, one, with a Conservative lawmaker saying May had done the best she could.

But it was the backstop arrangement, which would see Britain and the EU establishing a single customs territory that spurred most of the criticism.

Less than five months until Britain leaves the EU, the resignations put May's Brexit strategy in doubt.

EU leaders are ready to meet on Nov. 25 to sign off on the divorce deal, or Withdrawal Agreement, but French Prime Minister Edouard Philippe summed up the uncertainty when he said events in London raised concerns about whether it would be ratified.

"We need to prepare ourselves for a no-deal Brexit," he said.

One eurosceptic lawmaker in May's Conservative Party said more colleagues were either putting in letters to trigger a no confidence vote in her leadership or were increasingly minded to do so. A challenge is triggered if 48 Conservatives write such letters. May could be toppled if 158 of her 315 lawmakers vote against her.

'Dead in the water'

Britain's opposition Labour Party said the government was "falling apart".

"Theresa May has no authority left and is clearly incapable of delivering a Brexit deal that commands even the support of her cabinet, let alone parliament and the people of our country," said Jon Trickett, a member of Labour leader Jeremy Corbyn's senior team.

Raab, 44, was appointed to the role of Brexit secretary in July after the resignation of his predecessor David Davis, who also quit in protest at May's Brexit strategy.

At the heart of Raab's criticism of May's deal was the belief that the pursuit of a customs union with the EU would be the "starting point" for talks on the future relationship with the bloc, "severely prejudicing" what Britain could achieve.

He said May's plan threatened the integrity of Britain and he could not support an indefinite backstop arrangement.

The backstop arrangement, to come into force if a future trade deal does not prevent the return of a hard border between the British province of Northern Ireland and EU-member Ireland, has been the main obstacle to a deal with the bloc and agreement of her ministers.

Northern Ireland's Democratic Unionist Party (DUP), which props up May in parliament, had threatened to pull its support from the minority government if the backstop meant the province was treated differently from the rest of mainland Britain.

"No democratic nation has ever signed up to be bound by such an extensive regime, imposed externally without any democratic control over the laws to be applied, nor the ability to decide to exit the arrangement," Raab said in his resignation letter.

Eurosceptics in May's party have long feared the prime minister was leading Britain towards a customs union with the EU, something that, they say, would mean a Brexit in name only.

Ian Blackford, the Scottish National Party's leader in the House of Commons, said the deal was "dead in the water".

‘Optimistic’

European lawmakers received the draft Brexit deal on Thursday and expressed optimism that they will be able to ratify it, despite the political crisis brewing in London.

"I think it is the best agreement we could obtain," said Guy Verhofstadt, leader of the liberal ALDE group and the European Parliament's pointman for Brexit negotiations.

The president of the parliament, Antonio Tajani, thanked chief EU negotiator Michel Barnier for concluding the deal, but noted that his body would have the "final word".

Both Tajani and Verhofstadt said the body would scrutinise the agreement and, in particular, insist on assurances that Britain will implement protections for EU citizens living there.

But they expressed satisfaction that the deal respects their priorities. 

However, not all EU states are happy with the draft deal. France led calls for changes to the draft deal on Britain's exit from the bloc, adding to May's uncertainty.

France spearheaded a group of states in raising objections to what has so far been agreed on fishing between the EU and UK after Brexit, diplomatic sources and EU officials said.

"On the draft agreement, several member states will ask for improvements on fishing," a diplomatic source close to the negotiations said, listing concern about the issue in France, Denmark, Spain, Portugal and the Netherlands.

Finland and Ireland were also worried about future fishing arrangements, other diplomatic sources told Reuters.

Britain's rich fishing waters are currently available to other EU states under mutual access arrangements with set quotas. While the EU has wanted to safeguard that scheme after Brexit, Britain wants to take unilateral control of its waters.

In the end, the draft Brexit deal leaves the case without a firm resolution at this stage. It says the two sides would try to agree on fisheries by July 2020, during the transition period after Brexit, to form part of an eventual new EU-UK trade deal.

The draft leaves fisheries outside of the single EU-UK customs zone that could be triggered if the sides find no other way to ensure an open Irish border—the so-called "backstop" mechanism that has long held up the overall agreement.

"Not all member states were very happy with that," an EU official said.

Sterling tumbles

The pound fell 1.5 per cent versus the dollar and was headed for its biggest drop this year against the euro after Brexit minister Dominic Raab and three other ministers resigned in protest against her plan.

Traders fear May's leadership is now in serious jeopardy.

"What concerns us is how many ministers seeing this news will be pondering if it is better to get their resignations in now rather than wait," said Nomura strategist Jordan Rochester.

"If several ministers go this becomes more difficult for Theresa May to hold her position," he added.

May said on Wednesday she had won over her divided cabinet after a five-hour meeting but the resignations fuelled a selloff, reflecting rising fear in the markets about a "no-deal" Brexit.

In volatile trading, the pound sank as low as 1.8 per cent to $1.2751, its second biggest drop this year. It dropped 1.5 percent to 88.57 pence versus the euro.

Markets had priced in some opposition to the draft deal negotiated by May but the latest round of resignations unleashed a fresh wave of volatility in UK assets.

That sent investors to the relative safety of government debt.

British financial regulators called major banks asking for feedback on market conditions because of sharp falls in the pound, sources said.

The prime minister showed little sign of backing down but senior Eurosceptic lawmaker Jacob Rees-Mogg said a number of letters of no confidence in May had been submitted to party officials.

Volatile

Concerns about a leadership challenge were reflected in the foreign exchange derivatives markets, where three and six-month gauges of expected volatility in the British currency spiked to their highest levels in two years. Extreme short-dated volatility indicators also jumped.

The brewing uncertainty about Britain's economic future was also shown in the money markets, where investors have all but priced out a rate hike by the Bank of England next year.

Britain is now more likely to either stay in the European Union or leave it in a "no deal" Brexit than depart under the terms presented by Prime Minister May, analysts from US bank Citi said.

"Over the next few days the very real prospect of a hard Brexit will likely ensure that the pound remains vulnerable," said Jane Foley, an FX strategist at Rabobank.

"Any turn of events in Westminster that appears to increase the risk of a general election would likely compound the vulnerability of the pound," she added. Agencies