ANALYSIS: ‘One concession too many’ - why the big Brexit customs row spells trouble for Theresa May

Posted On: 
2nd May 2018

Theresa May will gather her top Cabinet ministers today for the latest crunch meeting of her powerful Brexit war cabinet. With Brexiteers up in arms about Number 10’s plans for a post-exit custom system, Matt Foster talks to Tory backenchers and experts on both sides of the debate to find out what’s really going on

The Prime Minister is chairing the latest meeting of her Brexit war cabinet today
Credit: 
PA

Theresa May has been warned against making “one concession too many” as she gathers her Brexit 'war Cabinet' today in the latest attempt to thrash out the UK’s plans for a new customs system with the EU.

The Prime Minister will sit down with the likes of Chancellor Philip Hammond, Foreign Secretary Boris Johnson, Environment Secretary Michael Gove, and the newly-appointed Home Secretary Sajid Javid with the very future of her government hanging in the balance.

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On the table are two options for the future - a customs partnership in which the UK would collect tariffs on behalf of the EU, or a so-called "maximum facilitation" model - or max fac - which would use technological solutions to maintain smooth trade and, its backers say, remove the need for a hard Irish border.

Brexiteers say the first option is unworkable and would effectively leave the UK as the “taxman of Brussels” for years to come. David Davis is among those firmly against it, believing it will seriously hobble any free trade deals strck with non-EU countries after Brexit. The Brexit Secretary - this weekend rumoured to be mulling a resignation over the proposal - has already set out “very substantial” concerns to Mrs May about the “unworkable” proposal, a Westminster source told PoliticsHome.

But Remainers in the Cabinet say it gives the UK the best opportunity to maintain frictionless trade with Europe, and cause as little damage as possible to the UK economy.

PoliticsHome spoke to Conservative MPs, campaigners and experts to try and gauge the mood.

‘COMPLEX AND ABSURD’

As well as her own Cabinet, Mrs May is feeling the heat from the Tory backbenches. Peter Bone, the veteran eurosceptic MP who has caused headaches for successive Conservative leaders, told PoliticsHome that the partnership model was “extraordinarily complex”.

“We would have external duties set by the EU,” he said. “We would then collect that money for them - and if companies don’t happen to be selling their goods on [beyond the EU] they can apply for a refund after the fact. I mean - what a complex and absurd situation.”

Mr Bone - who is far from alone in his views - even claimed that the proposal is being pushed by “Establishment” figures close to the Prime Minister who are determined to see it fail in order to force the UK back into the orbit of Brussels.

“It would seem to me to be a plan to allow us very quickly to reverse our decision and become full members of a customs union because we’re already collecting all the taxes in the first place,” he said.

“I can’t see any advantages to it - and I just think it lays open the option very quickly to say, ‘Well, if you’re doing that you might as well stay in the customs union?”

Henry Newman, a former top adviser to the pro-Brexit Michael Gove who now heads up the Open Europe think tank, pointed out that a decision to back that model could spell serious trouble for Mrs May.

“The problem that she’s got is maintaining the support of the Conservative Party and - whatever the merits of the policy - if she loses control of that her position is under grave threat,” he warned.

“There’s a significant danger for her. Eurosceptics are saying very loudly that they don’t think the partnership option is a runner. And therefore there’s a question mark as to whether it’s very sensible going that far. I think it’s a very complicated system which will be difficult to negotiate and the EU side is saying that this isn’t a flyer and that this doesn’t work for Northern Ireland.”

The think tank chief said Downing Street’s favoured plans will end up being “very bureaucratic” for businesses at the sharp end, who will “essentially have to prove that goods are remaining in the UK in order to get a tariff rebate from the revenue”. He added: “It’s just a complicated mess - why would they actually bother doing it?”

‘SHE WILL PUT HER COUNTRY FIRST’

It's not just the views of die-hard Brexiteers like Mr Bone that Mrs May is having to take into account as she weighs up her options at today’s meeting: she’s also got to give the EU something it can work with and keep pro-Remain MPs in her own party on side ahead of crucial Commons votes.

A symbolic vote in the Commons last week allowed senior Tory Remainers like Nicky Morgan and Dominic Grieve to make clear their own support for a continued customs tie-up with Brussels.

And there is potentially more Commons trouble ahead for Mrs May, with 10 Conservatives already putting their name to a pro-customs union amendment to the forthcoming Trade Bill.

For MPs like Heidi Allen - representing the heavily pro-Remain constituency of South Cambridgeshire - the customs partnership plan being touted by Number 10 would go some way to allaying fears of a Brexit cliff-edge.

“The amendments that I’ve put my name to on the Trade Bill talk about ‘a customs union’,” she told PolHome. “That’s very different to ‘the’ customs union. It means a customs relationship. And that’s what the Prime Minister has been advocating since day one - some means of tariff-free trade and an obvious solution to the hard border in Ireland.”

Ms Allen warned that, without such a model, the economy is “potentially very, very vulnerable” while the risks to the Good Friday Agreement in Northern Ireland are “also very live”.

She said: “I ran a business before I came into parliament which my husband now runs - and three-quarters of our business is with Europe. I’ve seen how difficult trading with the rest of the world has been compared to the ease with which we’ve developed our business in Europe.

“And I think as a country we’d be absolute fools if we were turn our backs on the biggest business relationship that we have. The Prime Minister knows this too.”

As Joe Owen of the Institute for Government think tank made clear, however, EU member states - who will ultimately have to give their blessing to whatever Mrs May decides upon - are unlikely to be enthusiastic about either of the plans being touted by the UK.

“It’s far from clear what we are asking the EU to do under the new customs partnership,” he said. “Are we going to ask every EU member state to collect tariffs on our behalf as well? Convincing the likes of Poland and Portugal to make changes because the UK wants this new customs partnership seems to me like a pretty tall order.”

Mr Owen - whose think tank is not taking sides in the Brexit debate - pointed out that the government’s own papers on Mrs May’s favoured option weren't exactly overflowing with detail when they were first touted last year.

“On ‘max-fac’ you had a couple of pages. It drew on precedent. ‘Customs partnership’ was five paragraphs - two of them were context and caveat and the others were more suggestions than proposals.”

David Davis conceded last night that the European Commission had “pushed back on both” the partnership plan and “max-fac” option - seen as the solution by Brexit-backers but which also has little support in Brussels. That plan would see Britain accept the need for customs borders and use a technology-backed “trusted trader” scheme to try and minimise red tape at those borders - but critics say it still will not solve the highly-charged Northern Ireland problem.

Eloise Todd, who heads up the anti-Brexit Best for Britain campaign group, meanwhile cautioned remain-minded MPs against putting their faith in either plan - pushing instead for a fresh vote on the deal struck by Mrs May.

She told PolHome: “The customs union is the latest battle in a long-running fight over what Brexit will look like.

"There are some people are aiming for a soft Brexit - but any form of Brexit would leave Brits without a voice in Europe and having to implement rules which we have had no say in.

"That's why Best for Britain is fighting for the people of this country to decide between the Brexit outline May delivers to Parliament or opting to stay and lead in a changing Europe.”

‘VERY SERIOUS CONSEQUENCES’

As the Cabinet big guns gathered for the latest bout of talks to try and hammer out a compromise - Ms Allen had a clear message to the PM: stay the course.

The MP said: “My mum always had a kind of a constant refrain in life which was: ‘listen to the loudest voice in your head.’ Now you might choose to ignore it because you’re being bullied or persuaded. But the Prime Minister seems to me to be the closest thing to a civil servant that we will ever have in a Prime Minister.

“She will absolutely, 110%, put her country first and that will mean she drowns out the bullies and drowns out those that have different agendas and she will consider the prosperity of the people of this country and our economy.

“On that basis I think she will pursue the sort of deal that she’s always said she’s looking for which is something that has a very, very close customs partnership.”

But following that path will surely place Mrs May on a collision course with the Eurosceptics - who want to see her take a much harder line with Brussels over the issue.

“Sometimes you just have to stand up to people and say, well - we’re not going to accept that,” said Mr Bone. “This is what we’re proposing. And by the way, if you don’t accept it, we’re quite happy to walk away, keep our £39bn and be independent from March next year.”

He added: “If the plan is as reported then I think it would have very serious consequences. I think it would be one concession too many.”