UK Government continues to fudge the big decisions
The Chequers summit that was supposed to come to a firm conclusion about Britain’s post-Brexit positioning instead resulted in a fudge with everyone claiming victory. Leavers said ‘divergence had won the day’; Remainers that close alignment with EU is the starting point for a future deal. The Conservative Party’s fragile unity is only preserved by avoiding decisions on details that matter – especially how to avoid a hard border in Ireland.
However, it is becoming progressively more difficult for Mrs May to hold her divided party and government together. The Customs Union (CU) promises to be a critical flashpoint. Business wants the UK to remain part of the CU to ensure frictionless trade and with Labour’s new pro-CU position, there is now almost certainly a Commons majority which supports this, particularly with the growing recognition that it is the only way to avoid a hard border in Ireland.
Tory rebels including Anna Soubry and Nicky Morgan have now tabled an amendment to the Customs Bill that would mandate the government to push for a trade agreement that enables the UK to participate in a customs union with the EU after Brexit. The amendment, which is rumoured to have substantial support among Tory Remainers, is specifically drafted to enable Labour to back it. Jeremy Corbyn is due to make a key intervention on Monday which is likely to confirm his party’s support for future customs arrangements that mirror the current system.
Labour’s change of position has forced Theresa May to delay passage of the customs legislation, and is also denying Labour the opportunity to stage Opposition Day debates. Those are time-limited tactics and underline the political pressure the PM is under.
For Tory Brexiters, the customs union is a critical red line. It determines whether the UK is able to forge new trade deals around the globe. The Treasury has sought to find a compromise, suggesting a customs union for goods only. In theory that would leave the UK open to negotiate trade deals in services. But why would a third country which is strong in manufactures and weak in services agree a deal which excluded the former and included the latter? And on the key sector – agri-food – without which any US trade deal is impossible, Environment Secretary Gove says there will be no dilution of standards which would see American chlorine-washed chicken on our plates.
With that in mind the Institute of Directors recently proposed a ‘partial customs union would cover all industrial goods and some limited processed agricultural goods’. The Institute said that such an arrangement would ‘allow the UK the freedom to forge its own trade policy and seek free trade deals with other countries in areas not covered – meaning we could remove tariffs on most agricultural products from new markets’. Significantly, the IoD proposal was endorsed by former Tory leader, William Hague.
But putting agriculture on the sacrificial altar of any new global trade deal would have significant repercussions for farming and food manufacturing, touching sensitive political nerves especially within rural Conservative Associations where farming interests are prominent.
Tory fissures are widening with every passing day. The pro-Brexit European Reform Group of Tory MPs wrote to Theresa May earlier in the week setting out its own red lines which appear to be at odds with where the PM may end up. Since then Eurosceptics have been inflamed by a UK Government document that called for an open-ended transitional phase. News that the PM is preparing to concede on earlier statements restricting the movement of EU citizens in the transition are likely to increase their concern.
But when will the Tory Eurosceptics fight back? If they want to influence the UK’s approach to the negotiations then they need to move between now and June. The biggest threat they could pose would be a series of letters to Graham Brady MP, Chair of the 1922 committee, asking for a leadership election. Beyond that, they have the nuclear option in the autumn of forming an unholy alliance with Labour and other opposition parties to vote down any deal that Theresa May strikes. Both options risk opening the door to an early election and the emergence of Jeremy Corbyn as Prime Minister, which continues to be biggest factor keeping Theresa May in post.
As she prepares for her keynote speech next Friday, she may reflect that these are just the domestic tensions. Meanwhile, Brussels has made clear that the UK cherry-picking approach is unlikely to make much progress in its current form. At some point soon, something is going to have to give.