Game theory is often used in business as a way of conducting strategy and planning, through mapping out interactions and outcomes between key decision makers. Normally it is meant to be analysed through a prism of self interested rational decision makers. In this context, whilst one can question the rationality of certain parties, it is still worth analysing what outcomes are most likely within a game theory model.

The first big point is whether this constitutes a symmetric or asymmetric model. In a symmetric model, everything is zero sum. Therefore the relationship between the Labour Party and Conservatives should be considered as such. The success of one is at the expense of the other.

An asymmetric model means that it is possible through collaboration for everyone to gain. This model is arguably most applicable to say the relationship between the UK and EU, i.e. a no deal Brexit would damage all sides.

So in the next instance, let’s analyse who the stake holders are:

  • EU 27 – Assuming the EU 27 continue to act in unison where their parliaments approve whatever Barnier agrees, for now one can treat them as the first protagonist.
  • UK Gov’t – The Government is constituted of the MP’s from the Conservative Party, along with members of the House of Lords. Overall there are approx. 100 MPs with cabinet positions. They are expected to always vote with the Government on any Government bill.
  • Conservative Party (ex Gov’t) – After that, there are approximately 210 Conservative MPs who are members of the party, where they are legally accountable to their constituents, equally are expected to vote with the Gov’t. It is interesting to note that with the TM confidence vote, over half of the backbench MPs votes no confidence in her, suggesting this is a split caucus, between those that sympathise with the ERG and others, who are loyal to TM.
  • DUP – The DUP is meant to support the Gov’t but this is only likely to happen if there is a resolution to the Irish question which is satisfactory for them.
  • Shadow Gov’t – For every minister, there is a shadow minister, whose job it is to hold the Government to account. Jeremy Corbyn as leader of the second largest party leads the shadow Government. Like with the Government, it is broadly expected that this block will have a unified policy position.
  • Labour Party (ex shadow Gov’t) – Also a split caucus, between those who are loyal to Corybn and the remainder, including the remnants from the Blair era. Chuka Umunna for example has been quite forthright in standing apart from the shadow Government.
  • SNP – Arguably this is the largest single voting block by party and relatively predictable. They can be relied upon to vote on the basis of whatever Sturgeon wants.
  • Lib Dems – As a pro EU party, the Lib Dems are broadly expected to maintain this position.

As an extra point of information, it is also worth noting that due to the 2012 elections act, a vote of no confidence in the Government can only be passed if 66%+ of the MPs vote for it. (This quite literally means a Government can hobble along indefinitely without passing any legislation, for the duration of the parliamentary term, where no legislation gets passed and nothing happens. However this legislation is untested within the context of a budget. The first duty of a government is to propose a budget that Parliament approves. In the event of a Government being unable to pass a budget, but still have sufficient support to remain in power, it is unclear what would happen.)

As a next step, lets apply the following logic. If we assume the primary motivation for a political party is power / influence to implement the policies they want, where their ability to do that, defines their success we see the following:

  • Theresa May has put herself in a position where she can only be successful if she manages to get her vision of Brexit approved by Parliament.
  • The ERG and their sympathisers have now made their position clear, that they want a clean Brexit, where her plan is incompatible with that, so she has to go, so will continue to undermine her. That means there is now a caucus of up to 117 MPs within the Conservative party who in principle act as a blocking vote for any motion.
  • The remainder of the Conservative party can be expected to vote with the Government. For them, success is defined by the Gov’t success.
  • For the DUP, success would be redefining the Irish border issue, so N Ireland is treated no differently than the rest of the UK.
  • Jeremy Corbyn has no ability to change policy whilst he leads the shadow Government, so their primary priority would be an election, to gain power. His vision of Brexit remains undefined.
  • With the remainder of the Labour party it is unclear what the definition of success is. However if we took their position as their priority is the best interests of their constituents, arguably their motivation is to secure a ‘soft’ Brexit.
  • The SNP have as their primary motivation a desire to secure and win another independence referendum, where in the short term, their priority is ideally for the UK to remain in the EU, otherwise to the minimise the economic disruption from Brexit.
  • The Lib Dems want the UK to remain in the EU, where they are championing a second referendum.

This all looks quite messy but actually the step by step process is pretty clear.

May goes back to Brussels and secures some additional concessions. (remember, the asymmetric nature of the UK / EU means there is benefit to do so) The question is whether they will be sizeable enough to win over either the remainder of her party, DUP or Parliament generally.

May puts the revised deal in front of Parliament, if it passes, she wins and the saga is over (for now.) If not, May has a choice between the following:

    1.   May can resign. Unlikely as it goes against game theory. Now the leadership challenge has been called and failed, she can not be forced to and has other options.

    2.   May can call an election and make it about her vision of brexit. Also unlikely as it also goes against game theory (there is too big a chance of handing power to the Labour Party, which is the ultimate defeat in this context.)

    3.   Parliament can call a confidence vote in May to force an election. To do this would require approximately 435 MP’s. Looking at the Parliamentary arithmetic, this would mean:

                                                               i.      Labour 257

                                                             ii.      SNP 35

                                                           iii.      Lib Dems 11

                                                           iv.      Plaid Cymru 4

                                                             v.      Green 1

                                                           vi.      Independent 7

                                                          vii.      DUP 10

                                                        viii.      NEEDED 110

    1.    What this means is, if all the people who voted NO CONFIDENCE in may (117) voted NO CONFIDENCE in the Gov’t, they could force an election. However, given that May would still be the leader of the Party, it would have no benefit, as according to game theory, if she is not obligated to resign, she will not. Therefore it is highly unlikely that this happens.

    2.    For the same reason, it is highly unlikely that Corbyn would call a no confidence vote, as he knows he can’t win it. According to game theory, not winning a no confidence vote acts to strengthen the position of TM, so he won’t.

    3.    However, whilst up to now JC has been coy about what the Shadow Gov’t policy on Brexit should be, inevitably, there will come a point where they need to state the position. This will be the next key moment. The only thing we do know is that Labour have set out six key tests for the post Brexit landscape. Interestingly there is one option that would allow for that, EFTA membership. (Factor EFTA membership allows for more control over migration than the EU, through the use of a migratory brake.)

    4.    By January 21, the Government is legally mandated to outline their Brexit plan, if their proposal has not succeeded. At that point Parliament has the power to amend the legislation to instruct Government on their next steps. At that point Parliament would have the following options:

                                                               i.      Parliament allows the Gov’t to run down the clock. The UK leaves the EU with no deal. This is the only scenario I can’t envisage.

                                                             ii.      Instruct Govt to revoke Art 50. Would be incredibly divisive and controversial. Also very unlikely, TM forces another election on this point where she fights a campaign on her plan and why revoking art 50 would be a betrayal. Ugly.

                                                           iii.      Parliament instructs the Gov’t to seek EFTA membership. Despite this honouring the referendum result, due to TM being opposed to free movement, this leads to a collapse in Gov’t. It is too big a defeat for her, so there ends up being an election, where she fights on a campaign of her plan and why FoM is wrong. Ugly.

                                                           iv.       Parliament instructs the Gov’t to seek a referendum on her deal, where they will approve it only with Public backing. Sterner is already on record as stating they would be ok with this approach, so this would command Parliamentary support. The only question then would be what is the counter option, which probably will come down to the position of the Shadow Gov’t.

    1.    Whichever of the above three options happens, the deadline would then need to be extended. Given the UK has the right to retract article 50 unilaterally, there is no scenario where the EU is difficult here. Realistically, one should expect an extension of article 50 for at least 3 months, maybe 6. (shorter if it is a general election, as they can be turned around much faster.)

So in conclusion, what game theory tells us about the next phase of Brexit, is that:

  • Assuming all actors are rational, there is no way the UK leaves the EU on march 29.
  • The House of Commons will not be able to get anything through unilaterally against the interests of the Government. TM would not allow it. Even if it is passed through the commons, it can be blocked in the HoL or the courts.
  • The UK may end up leaving, but for TM to get her vision of Brexit approved, she will need to win either another general election or referendum.
  • With both, there are significant risks for her. However, the referendum out of the two is less problematic and more likely, as it keeps the Conservatives in power regardless.
  • Therefore the only real question will be what the counter question will be. The TM deal or what exactly?

Time for the Labour Party to show their hand.

James Chaplin
@James_A_Chaplin
CEO

Related Posts

What would be the best Brexit for Jobs?   As we approach the Brexit end game, increasingly minds are focusing on what the optimal outcome is. For the recruitment industry, a Brexit that...
Applying the principles of chess to business   Also known as ‘the game of kings,’ Chess is one of the oldest board games, with a history that dates back over a thousand of years. One of...