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One of this site’s leitmotifs has been that Britain must be Ready on Day One for Brexit.  Greg Clark suggested last weekend that we won’t be ready even on Day 730 – that’s to say, as transition ends.

The reasons are not hard to grasp.  The longer the Government fails to agree a position on customs, the shorter the time left for it to negotiate one with the EU in the Brexit talks.  And the less time there is to strike an agreement, the more likely the talks are, according to one take on events, to end without a trade deal in place, even in outline.  This could lead to one of two outcomes.  Britain could leave the EU with no deal at all, bar arrangements to keep the trade and commerce basics in place.  Or Parliament could insist on the postponement of Brexit, either de jure (if the EU will agree to postpone Article 50), or else de facto (again, if the EU will agree it).  No-one can be sure.  But these uncertainties mean that the most dedicated Remainers and Leavers are, curiously, mulling taking the same course of action later this year, if there is a deal.  Some Remainers hanker after voting one down so that Britain can stay in the EU.  And some Leavers yearn to vote one down so that there is no deal, and we trade with the EU on basic WTO terms.  Readers will note that the former outcome would keep us in the Customs Union, at least in effect.

However, there is another factor at play that is at work already.

The longer the Government fails to agree a position on customs, the less time there is, pre-Brexit, for the civil service to prepare for life after the Customs Union.  And the less time there is to prepare, the longer Britain will have to stay in it, either formally or effectively, as a bridging position: the systems simply won’t be ready for anything else.  This is what the Business Secretary was getting at in his interview on The Andrew Marr Show last weekend.

Then there is a further finesse.

Cabinet Ministers tell ConservativeHome that the customs partnership model would take longer to prepare for than the customs maximum facilitation model – because businesses would be more intricately involved in the former, since it involves the reimbursement of tariffs (in some cases), plus tracking of the destination of goods.  One estimate is that the necessary systems to implement it might not be ready until 2025 or longer.  A lot can happen in seven years.  A Labour Government could be elected which decides to keep Britain in the Customs Union altogether.  A Conservative one might win on an entirely new manifesto to the same effect.

In short, the customs partnership model would make it more likely that Britain would stay in the Customs Union in some form for longer.  Were it eventually to be implemented, it would also pile something very close to Single Market membership on top of something rather close to Customs Union membership.  This is because a customs arrangement is not enough in itself to guarantee the status quo.  For that, one needs regulatory alignment.  One can see how all manufactures might thus be bundled into the first of Theresa May’s three baskets for regulation – roughly the plan put forward by the Institute of Directors.  This settlement would leave Britain in control of immigration, though more access to Britain for EU citizens would doubtless be bargained off against more access to the EU for British products.

That last bargain is not one of which we disapprove in principle.  But when the smoke clears from such an arrangement overall, it looks remarkably like EEA-lite.  No wonder some former Remainers in the Commons are urging the Government to go for EEA membership outright and have done with it.

Some Brexiteers will accuse senior civil servants of wanting exactly this EEA-type outcome from the start.  It can certainly be said that people who were very senior civil servants until very recently are in that ball park: this is the position of former permanent secretaries at the Treasury, the Foreign Office and the Department of International Trade.  But we have no windows through which to peer into other peoples’ souls.  And in any event, two other factors seem to us to be more important.  The first is the law of inertia: it’s easier, if you are a civil servant or anyone else, to stick with the status quo than strike out for change.  The second is more fundamental still.  Advisers advice, ministers decide.  And the latter they can’t make their minds up, don’t blame the former for delays.

Cheerfully ignoring our own strictures about other people, souls, and windows, how does this look to Cabinet members?  We pick out three.

The first is David Davis.  The Brexit Secretary wants to get on with leaving the Customs Union.  Hence his attachment to the maximum facilitation model.  Our sense is that its implementation would over-run transition but, we are told, by less than the customs partnership model.  Of the four committed Brexiteers in Cabinet, he seems the most likely to us to resign, since he could not represent abroad a policy in which he doesn’t believe.  But you never know.  Since the partnership model would make negotiating trade deals with non-EU countries more difficult, it also has big implications for Liam Fox.  Boris Johnson is venting his unhappiness.  Michael Gove is preoccupied with keeping Britain out of the direct jurisdiction of the European Court of Justice.

The second is Philip Hammond.  The Chancellor is keeping a very low profile.  It was Clark who went out to bat for the customs partnership last weekend, not the Chancellor – a particular target of the Brexiteers.  Since Hammond was a dedicated Remainer, we can assume that continued Customs Union membership, formal or informal, would not distress him.  The same must therefore apply to the delays in leaving that the customs partership model would bring.  The Chancellor’s defenders will point out that he committed an extra £3 billion for Brexit planning in his autumn budget.  His critics suggest it’s not enough, and accuse the anti-Brexit Treasury of dragging its feet.  Either way, it is important to note that Hammond is not disloyal to the policy of leaving the Customs Union – the Government’s position and one to which he is therefore formally committed.  The flavour of his take is more the old saying: “Thou shalt not kill; but needst not strive officiously to keep alive”.

The third is Theresa May – that riddle wrapped in a mystery inside an enigma, as Churchill said of Russia.  We give you two versions.

Version A is that while she stressed leaving the Single Market as early as October 2016, she didn’t commit to leaving the Customs Union until later – January of the following year.  There has always been a certain hestitancy.  According to this version of events, the Prime Minister’s Brexit priority is to gain more control of immigration.  She is not so committed to gaining the maximum headroom to strike trade deals with non-EU countries.  Her policy of customs partnership plus regulatory alignment and delayed customs union exit has thus been planned from the start.

Version B is that she has come to believe that the Commons is for the Customs Union, and will only accept something as close to it as, to customs union supporters, makes no real difference – namely, the customs partnership.  This reading of her position is that “nothing has changed” since Nick Timothy left Downing Street.  The Prime Minister is as committed to a full Brexit as she was when he was writing her speeches.  She simply believes that Parliamentary arithmetic is against her.  And there is an important electoral element in the mix: she is no longer afraid of UKIP campaigning against “Brexit betrayal”.

Her caculation of the Commons numbers may well be wrong.  We quoted a Cabinet Minister yesterday to this effect.  But one point is certain: the members of the crucial Cabinet sub-committee on Brexit negotiations want to support May, and keep Jeremy Corbyn as far from government as possible.  No-one is straining to resign.  It therefore may well be that some compromise is spatchcocked up for next week.  That is usually the way in these affairs.

But one cannot be sure.  Clark broke a Cabinet truce last weekend and Johnson has duly responded.  Most Conservative MPs don’t want a leadership challenge – particularly those in marginal seats, who look on these squabbles with horror – but the Prime Minister’s position is weak.  It is rare to find a Tory MP who can look one in the eye and claim truthfully to believe that she should lead the Party into the next election.  Over half our panel of party members think she should be gone by then.  This is not a secure home base for May.

344 comments for: The consequences of Customs Union indecision. How Britain could end up with EEA-lite – formally or informally.

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