MICHAEL WHITE: Theresa May is playing red-hot poker

I love this about politics. Sometimes they look invincible, then trip unexpectedly on the rug. May was just the opposite, but she has tenacity. That Birmingham conference speech (let’s not forget the Dancing Queen routine), combined with We-All-Know-Who’s vacuous ambition, gave her more breathing space. Humiliation in Salzburg? Forget it. Irish backstop? We can fix it. Even the DUP’s Arlene Foster is hedging her bets.

Suddenly there was all that positive mood music out of Brussels and other EU capitals about some sort of deal that would save us all – them too – from the avoidable harm of a no-deal Brexit. Next Wednesday’s two-day, make-or-break meeting of the Council of Ministers may prove to be neither: they often kick that can down the autoroute. The ‘both sides jump together’ deal would not be finalised until a November summit. May is wisely hosing down expectations.

What deal exactly? Well, variations on the usual variations. How about Chenada+? Norquers- ? Northern Ireland to remain aligned (good word) with the single market? The whole UK to stay inside a temporary (another good word) customs union? Vestigial off-border checks on the passage of goods? No one really knows, including the diplomatic sherpas doing the hard work.

It may all end in tears. But for the moment, it’s ‘game on’. Even the backbench Tory plotters around the European Not Much Research Group (ERG) stopped plotting for 24 hours or so after Theresa’s Abba moment, briefly aware how absurd their hollow posturing has looked to everyone else. Cranking back into betrayal mode this week, the neophyte Steve Baker flagged up 40 rebels willing to die in the Brexit ditch – or at the very least stymie this month’s budget.

More subtly, aid secretary Penny Mordaunt (whom I hold in higher regard than I do most of them) loudly declared her loyalty to May on Tuesday, thereby signalling her availability should anything happen to the PM. In doing so she also highlighted the ERG’s problem: not a shortage of wannabe PMs but the absence of plausible ones. Nice try, Penny, but the bad boys of Brexit won’t give you a clear run. Unmistakably, a mood of pragmatism is back, as we predicted here last week. ‘I don’t disagree with the ideology of the ERG, that’s where I come from,’ one anonymous minister bravely confided to the intrepid Sunday Times man, Tim Shipman. ‘But we’re also politicians, we’re not ideologues. We’re there to get things done.’ On Monday, Michel Barnier pulled back on publication of a potentially unhelpful draft of the post-Brexit EU/UK trade and security relationship. Good.

Let’s not get carried away. Wolfgang Munchau, the FT pundit team’s German Mr Gloomy, still insists we should worry about the extreme outcome, a no-deal, no-deal – not even the £40 billion withdrawal treaty divorce. That is a prospect so dire for Britain and its nearest EU partners that it would lead to a series of rapid multilateral and bilateral deals to keep planes flying and the M20 moving.

In response to that no-deal deals notion the highbrow ConservativeHome website, run by smart ex-MP Paul Goodman, warns that by March 29 the Juncker Commission will be packing its bags. At the same time the third pillar of the EU – the parliament – will be preparing for uncertain, five-yearly elections, minus the UK and Nigel Farage MEP (at last!), but with mini-me Farages popping up elsewhere. Thank goodness these sort of populists hate each other almost as much as they hate Brussels. Even Trumpite hate-monger, Steve Bannon, has found some right-wing Belgian no-hopers to back.

In these disruptive circumstances, argues ConHome’s Goodman, Martin (‘The Monster’) Selmayr, the Commission’s permanent secretary-general – the one who was illegally shoe-horned into the job last year – will wield immense power. A workaholic federalist, he does not like us, it is said, and is apparently particularly sensitive about the British media’s reporting of his grandfather’s 15-year sentence for war crimes at the end of the Second World War. Josef Selmayr, who served as a Wehrmacht Lieutenant-Colonel in the Balkans, later re-emerged to become Bonn’s head of counter-intelligence. Martin has been accused of tweaking Wikipedia references to his grandfather. Hmmm again.

So May has plenty of hurdles to overcome before she overtakes Gordon Brown at two years and 319 days in No.10, or the Duke of Wellington (one day longer) next summer. At the Brexit poker table Barnier, JC Juncker, Donald Tusk and Co still hold most of the aces, but they’re picking up low cards and a few jokers all the time. The politics of Romania and Latvia have now taken a geo-political turn for the worse, joining Hungary and Poland on the EU naughty step where Italy’s left-right populist coalition – Rome’s Corbyn-Mogg regime – is permanently camped. Bulgaria joins Malta with a troublemaking journalist’s murder to explain. Moscow is seeking to reassert its influence in the Balkans at the EU’s expense, yet another serious Project Fear which insular Brexiteers ignore.

Amid all this turmoil May hangs on. It reminds me of a story I heard last month, one which I have been unable to confirm. But here goes. After the cabinet’s Chequers meeting in July – the one which later saw Boris (‘polishing a turd’) Johnson join David Davis in the taxi queue – the prime minister is said to have called in Michael Gove for a chat.

‘Michael, what do you need for your department?’

Gove is said to have rattled off a version of the environment department’s lengthy wish list. It must have included all that money which will be needed to save British agriculture from the consequences of Brexit and all that free trade with Donald Trump’s swimming pool chickens. After this week’s renewed plea from Seoul about the urgency of saving the planet from climate ‘catastrophe’ Govey will need all he can get.

According to the gossip, May replied: ‘You can have it, Michael. Leave Hammond to me. In return I want you to go on the Marr show tomorrow morning and praise the Chequers formula.’

Which, on Sunday July 8, Gove – always this column’s Rascal to Watch – famously did. ‘I’m a realist and one of the things about politics is you mustn’t, you shouldn’t, make the perfect the enemy of the good. One of the things about this compromise is that it unites the cabinet,’ the shameless fellow explained.

In fact, it didn’t unite the cabinet for long. Davis quit that evening and Johnson the following afternoon, protesting that Chequers would reduce Britain to ‘the status of a colony’. That rings especially hollow this week when the Trump White House warned Canada that the revised Nafta deal the boss imposed on Ottawa and Mexico City will require them not to do similar trade deals with ‘non-market economies’ (ie China).

Ditto the EU and Japan. The post-war world of gradually-diminishing trade barriers is changing fast as neo-nationalism takes hold everywhere. Talking of which, the EU has been asking what’s happened to all that European cheese which Canada promised to let into its protected agri-market under the Canada/EU trade deal (Ceta) beloved of the ERG? The 5,333 tonnes rising to 16,000 over five years amounted to a paltry 1,821 tonnes in Year 1, most of that long-life Parmesan, not the perishable smelly stuff. Hmmm.

Never mind. The story serves to remind us that Gove is an operator, Johnson a bungler and Team May possibly smarter than it usually looks. Someone joked the other day that Jacob Rees-Mogg is playing chess while Boris is playing draughts. That flatters Rees-Mogg. I think he’s playing solitaire. Tim Shipman reports that when a reporter offered one of his ERG acolytes a modest £20 bet that Jacob would end up voting for May’s eventual deal, the cheapskate MP wouldn’t take one for the team and risk the twenty.

For the first time in a long time May has also treated herself to a purely political initiative of the non-Brexit kind. In an article for the Observer she appealed to ‘decent, moderate and patriotic’ voters on the centre left to defect from the Corbyn project and vote for her own ‘decent, moderate and patriotic’ Tory programme next time.

This is cheeky for several reasons. The Guardian reported last week that May’s whips have been making overtures to moderate Labour MPs in search of a Commons majority for whatever she may bring home from the latest series of crunch talks in Brussels. Perfectly sensible but certain to outrage woad-wearing purists on the ERG right and the Manichean Labour left, always on the lookout for traitors and saboteurs who are stabbing their unworkable proposals in the back.

Paranoia on the right was further fuelled when Nicola Sturgeon, canny first minister of Scotland, faced a similar challenge in terms of balancing octane-fuelled expectations of her activists with prosaic reality when the SNP conference convened in Edinburgh. She used it to suggest that her Westminster MPs could vote for a second referendum after rejecting May’s deal/non-deal, even without the promise of a second Scottish Indy referendum attached to it.

By insisting that all four UK nations must vote Brexit before Brexit can happen (the score in 2016 was 2-2) that scenario just might – might? – allow Scotland and the wider UK to stay in the EU. Or it might pave the way to independence, albeit cutting Scotland off from its main market and financial prop. Fanciful talk on both counts, I still think, but there is lots of it about.

May’s pitch to Observer readers was cheeky too because the woman near or at the top of an austerity-driven government for eight years was promoting her claims to represent ‘the many, not the few’ (copyright New Labour). She did so by parading her own compassionate policies on health, housing etc along with a ‘positive and optimistic’ vision of the post-Brexit future.

As everyone has noticed, either with satisfaction or alarm, her new promises of a post-austerity Britain don’t square easily with most economic predictions. The Eeyore-ish warnings from Philip Hammond and the admittedly-mixed messages coming from Bank of England’s Mark Carney insist that things will be tough – perhaps very tough – in terms of growth and tax revenues.

Yet Downing Street is signalling that the NHS will be better funded (by £6.5 billion a year) and that the cap on council house borrowing to build affordable homes will be lifted (£1 billion a year). Other goodies will be combined with such costly gestures as continuation of the eight-year freeze in fuel tax duties. That’s a flat contradiction of that hot air blowing out of Seoul about state and individual action to curb global warming. It also costs £800 million a year.

It presents an urgent challenge to chancellor Hammond for his October 29 budget (don’t forget May’s promises to Gove either). The FT reckons he has a £35 billion-a-year hole in the public accounts to fill by 2022-3. So his officials are scrambling around for savings because they know that higher recent tax receipts and lower borrowing are headroom that won’t last. More cuts in pension allowances for the better off? A delay in the promised higher tax threshholds for the poor? Alas, Brown and Osborne trousered most of the best stealth taxes.

The pension hit may be socially justified but may also have a knock-on effect on behaviour. There is evidence that the growing doctor shortage may be driven in part by GPs and other professionals retiring early, discouraged by the £1 million cap on their pension pots (it barely buys £40,000 a year now that annuity rates are so low), as well as staff shortages and other workplace pressures. Never mind they can come back to the NHS at higher freelance rates. Self-defeating, eh!

As for the poor, they’ve suffered more than they should in terms of cuts in welfare (7% between 2010-15 with more to come). Local and central government expenditure limits are down 14%, according to the IFS, 28% if you express it as a share of national income. Hammond’s ‘deal dividend’ talk depends on a softer Brexit than Canada+ would provide. Remember, the Brexit right is threatening to oppose nasty tax rises on Budget day.

As in her Birmingham speech – where she even threw a protective arm around Diane Abbott – the PM (who has a new and young speechwriter called Keelan Carr) laid off heavy abuse of the Labour leader, his record and agenda, though the former head of M16, Sir Richard Dearlove, did not on Sunday sofa TV.

May referred gently to the ‘flaws in Corbynism’ and to a ‘once-great party’ laid low. This is better wooing than savage assaults (which can safely be left to the tabloids) and probably less counter-productive than abuse, especially as Corbyn shies away from the personal stuff, preferring to berate more impersonal forces like capitalism, imperialism and conservatism.

Again, it highlights how fluid and unpredictable politics now are – here and everywhere. Banks and foreign-owned carmakers are making increasingly unsettling noises about what a bad Brexit outcome would mean for their presence in Britain. Emmanuel Macron and his team also strike a discordant note, though Macron’s own problems aren’t going away either: another cabinet minister quits and the young president gets caught in a silly ‘middle finger’ selfie on a foreign trip.

If that wasn’t enough to be getting on with, the IMF – normally an instrument of US imperial power in Corbyn-speak – did what struck me as a big favour to Labour on Monday when it suggested that the UK should loosen the purse strings on tax and public spending in the event of a hard Brexit.

While further downgrading its UK growth projections for 2018 – to 1.4% from 1.7% last year – and acknowledging that the public finances will be tight, the IMF seems to fear that lack of demand could be an even bigger problem for the economy. That’s what John McDonnell and his lieutenants have argued and can now claim to have the IMF’s blessing for as they promise to abandon the crude cruelties of universal credit (take a bow, Iain Duncan Smith) and shake the magic money tree in all directions.

Who’d have thought it? Yet just as the IMF inadvertently provides spurious cover for Labour’s spending spree it also puts equally innocent pressure on the Tory ERG crowd. The more Labour looks likely to win an early election, the harder it becomes for them to pull the plug on May.