Brexit Update 4th May 2018

By May 16, 2018 Brexit Updates

Top 3 developments  

  • Cabinet unresolved on customs plan
  • EU supports Republic veto on trade talks
  • ERG warn of Government collapse

UK Update

Narnia delayed as Cabinet breakthrough scuppered

The newest addition to the Brexit Subcommittee, Home Secretary Sajid Javid, is said to have left the Prime Minister shocked after supporting a technological solution, called the maximum facilitation plan, at the customs border with the EU over her preferred customs partnership deal at a crunch meeting between the eleven members. The Home Secretary, who replaced Amber Rudd this week, supported Remain in the referendum, but soon after was credited with the line that ‘we are all Brexiteers now’, whilst declaring that pursuing a customs union was a pursuit of a ‘post-Brexit comfort blanket’. The customs partnership, if pursued, would install a dual customs regime in the UK and in light of reciprocity, also in the EU, which would mean those importing goods would be reimbursed any duties dependent on where the goods were delivered to.

The European Commission and many across the EU have labelled both proposals ‘magical thinking’ with technology seen as not advanced to the level needed to allay concerns, whilst the customs partnership is seen as unworkable given the cost and amount of work needed to implement a regime that has never been tried before – with EU states reluctant to incur added cost caused by what is deemed convenient for the UK. The Subcommittee is set to meet again in the next two weeks after May ordered new proposals to be brought forward that would gain the fuller support of the subcommittee, cabinet, party and ultimately Parliament who will need to be satisfied if an alternative to entering a customs union is to be pursued.

Max-Factor

The Government has faced successive defeats from the Lords this week as amendment after amendment to the EU Withdrawal Bill was passed, with a total of 10 now likely to be considered by the Commons when the Bill comes back in a process known as ping pong. The tenth amendment compels the Government to implement Brexit in a way that does not undermine the Good Friday Agreement or lead to a hard border with the Republic of Ireland, something the maximum facilitation arrangement or ‘Max-Fac’, where digital safeguards and trusted trader schemes are used, is interpreted as doing to an extent. The Bill clearly outlines what it sees as a hard border, with the idea of a digital border being roundly mocked by former EU Commissioner Lord Patten who cited WTO rules that require the EU to have a clear border with a country that is not a member of the EU’s Single Market. The Commons will consider the amendments, with the Government increasingly looking outgunned as increasing numbers of Conservative MPs move away from Government plans for an alternative solution, which have not yet been set out in detail.

Lord Patten warned against the Government pursuing an unworkable solution and turned against Jacob Rees-Mogg who told reporters that the Lords were ‘playing with fire’ by amending the Bill, saying that it was those who “blundered into the politics of Northern Ireland with a policy which is sometimes clueless and sometimes delinquent – with a can of petrol and a box of matches in the other hand” – a stinging and timely rebuke if there ever was one.

Galileo, Galileo Magnifico!

The dispute over future use of the EU’s Galileo satellite system hit a new low as Philip Hammond suggested sabotaging the €10bn project by disrupting the transfer of encryption technology from Britain after the EU refused to allow the UK military and intelligence services access to the satellites emergency capabilities – deemed critical for operations given the high level of accuracy of the system. The Government is said to have reacted furiously at the notion that the UK cannot be trusted with sensitive material linked to the Galileo programme after it leaves the EU, stating that if it does not gain access it will look elsewhere – including through the development of its own satellite. Philip Hammond, along with Defence Secretary Gavin Williamson and Business Secretary Greg Clark are leading the charge for retaining access, whilst also looking at the possibility of UK development of a new satellite that would ensure defence capabilities are maintained.

Calling in the chips

The highly influential European Research group has delivered a 30-page report to the Prime Minister spelling out its opposition to the Customs Partnership plan touted as the preferable of the two proposals for the Government to pursue. The 60+ Conservative MPs involved in the group pose a threat to the Government’s stability given the slim majority it holds thanks to DUP support. The report states that the Government risks collapse if it pursues the option that is deemed not to deliver a clean break from the EU, losing the support of Brexiteers. The ERG’s demands have thus far been placated, including on the transition period and divorce bill, after promises by key Brexiteers within cabinet including David Davis that the long-term goal of leaving the EU’s Single Market and Customs Union would still be achieved. However, the group now looks set to collect on those promises, leading to a headache for May as she tries to weigh the demands of all sides and gain the confidence of Parliament as key votes are brought forward.

Civil Defence

The Government chief whip and Theresa May’s Chief of Staff rebuked ministers this week after reported briefings by ministers against civil servants delivering Brexit. A number of claims have been made across departments that civil servants are seeking to disrupt Brexit, with Oliver Robbins, May’s chief EU negotiator said to have come under criticism from Brexit Secretary David Davis according to two Sunday newspapers. The attacks were described as ‘deeply unfair’. The Civil Service acts as the constant in an otherwise changing political environment, leading to many seeing it as holding institutional bias, with ministers complaining of a lack of positivity over Brexit. However, given the dauntless administrative task of removing the UK from EU institutions falls on to civil servants, the intervention for greater support is likely to be welcomed.

EU UPDATE

Irish Don Veto

EU member states have thrown their weight behind the Republic of Ireland, granting it an effective veto at next month’s European Council summit if a solution to the customs border impasse is not forthcoming. This would effectively halt bilateral negotiations between the European Commission and the UK on any future trade deal. Whilst the EU appears under no rush to agree a future free trade agreement, the UK Government is stressing the need for clarity before any final treaty between the two sides is agreed on the terms of the UK’s departure.

The European Commission is said to be keeping a keen eye on political events in the UK, with the UK Parliament looking increasingly to favour entering a customs union with the EU. Unless the Government puts forward a viable option that would satisfy Parliament, it is likely that a future vote on the Government’s Trade Bill will compel Theresa May to change course and back a customs union, threatening cabinet and indeed Government stability.

Smaller EU, Bigger Bill

Austria, Denmark, the Netherlands and Sweden have reacted angrily to the European Commission’s proposed budget for the EU’s 2021-2027 Multiannual Financial Framework (MFF). The proposals which ask states to contribute 1.14% of national GDP instead of 1%, also ask several states to lose the rebates they receive including the four outlined. Danish prime Minister Lars Rasmussen called for a smaller budget from a smaller EU, whilst Austrian Chancellor Sebastion Kurz saw the proposal as “far from an acceptable solution.” The proposals will be published in full at a later date and will be subject to scrutiny and wrangling from member states in the coming months and years as governments and interest groups seek to have their interests accounted for in the proposals.

Let them eat cake – in Brussels!

European Commission President, Jean Claude-Juncker, has called for Belgium to grant citizenship to around 1,100 UK nationals working for the EU in Brussels to prevent them losing their jobs under Article 49 which states that “an official may be required to resign” if they lose their EU citizenship. Under Belgian law, anyone legally resident there for 5 years and able to pass a language test can apply for citizenship, something Juncker hopes will be waived to retain UK staff who are unsure of what their future holds as the UK and EU negotiate how future relations will progress. The Belgian Prime Minister, Charles Michel, said his Government were looking at the “judicial possibilities” on the question, but also saw that Belgium’s citizenship law in the context of Brexit was “contradictory”, meaning Juncker’s request may very well fall short.