2 May 2018

Brexit Cabinet meets to discuss future customs arrangement with the EU

Prime Minister Theresa May will today chair the Brexit “war Cabinet” sub-committee meeting to discuss the different options for the UK’s post-Brexit customs arrangement with the EU. May, as well as Chancellor of the Exchequer Philip Hammond and Business Secretary Greg Clark, are expected to back the option of a new hybrid “customs partnership,” in which the UK would continue collecting tariffs at the level set by the EU.

Elsewhere, the Daily Telegraph reports that the European Research Group (ERG), led by Jacob Rees-Mogg, has in a 30-page memorandum urged the Prime Minister to rule out the “customs partnership” option and to choose the “highly streamlined” customs arrangement at the Cabinet meeting today. The ERG argues that a “customs partnership would end up substantially the same as a full customs union” as it would “demand regulatory alignment with the EU,” which would not allow the UK to “take back control” of its trade policy. The Conservative MPs who are part of the group reportedly consider withdrawing support for the Government’s Bills in Parliament, with an ERG source quoted warning, “The Prime Minister will not have a majority if she does not kill off the NCP [New Customs Partnership].”

Meanwhile, The Times warns that neither option to solve the customs issue will be ready by January 2021, citing a Whitehall source saying, “Neither of these things can work at the moment because we haven’t got a technology for them that works at the border.” The source warned that it would take three years to develop the necessary technology for the “maximum facilitation” option, and five for the “customs partnership.”

Separately, International Trade Secretary Liam Fox yesterday said, “I don’t think there is a customs union that could ever be acceptable,” arguing, “If we are in a customs union of any sort we will have less ability to shape Britain’s future than we have today. That is not what the public voted for…That’s worse than the position in which we found ourselves today in the European Union.”

Source: Financial Times The Daily Telegraph I The Daily Telegraph II The Times I The Times II

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EU concerned about both UK customs arrangement options, confirms David Davis

Brexit Secretary David Davis yesterday said that the EU has “pushed back” on the two proposals for customs arrangements put forward by the UK Government. Speaking at the House of Lords European Union Committee, Davis explained that the EU was concerned about the practical functioning of the “customs partnership” option and about the impact of exempting small traders in the “highly-streamed” customs arrangement option. Davis also said that he was “not at all sure” an agreement on the Irish border issue would be finalised by the June European Council Summit.

Elsewhere, speaking on the second day of his visit to Ireland, the EU’s chief Brexit negotiator, Michel Barnier, said the EU would be “open to any solution [to the Irish border issue] which would be able to maintain the Belfast Agreement in all its dimensions.” He said, “We have proposed one solution, the backstop, in our protocol; there could be another backstop. We have to discuss with the UK government.”

This comes as Brexit negotiations between UK and European Commission officials will resume in Brussels from Wednesday to Friday this week, with the focus expected to be on the Irish border issue.

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Downing Street: Government response to House of Lords defeats to be “robust”

Prime Minister Theresa May and Cabinet ministers have yesterday expressed “strong disappointment” over the House of Lords passing an amendment that would give Parliament a decisive say on the final Brexit deal. The Prime Minister’s spokesman said that the Government’s response would be “robust,” adding that it is “vital to ensure that the legislation is able to deliver the smooth Brexit which is in the interests of everybody in the UK” and that it is important to keep “the government’s hands open on [Brexit] negotiations with Brussels.” International Trade Secretary Liam Fox told BBC Radio 4’s Today Programme yesterday that “It is not acceptable for an unelected house to try to block the democratic will of the British people,” adding, “We can’t have a situation where the clearly expressed will of the people in a referendum is thwarted by effectively procedural devices that would keep us in the EU indefinitely.”

Elsewhere, the leader of the Labour Party, Jeremy Corbyn, argued that “Parliament must be sovereign on this matter and make the final decision,” adding that the vote would guarantee a “proper role” for Parliament in the Brexit negotiations.

Separately, Scotland’s Brexit Minister, Michael Russell, said that today’s debate on the devolution section of the EU (Withdrawal Bill) at the House of Lords is “very significant” for the dispute between Westminster and the Scottish Government over the state of devolved powers after Brexit. Russell added, “One way forward is for the UK Government to accept the amendments in the House of Lords…Were they to be passed in their entirety that would resolve the issue.”

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Benefits of European Economic Area have been misinterpreted in Brexit debate, says Icelandic Foreign Minister

Iceland’s Foreign Minister Gudlaugur Thór Thórdarson yesterday said that his country’s relationship with the EU has been misinterpreted during the Brexit debate, particularly arguing that Iceland’s membership of the European Economic Area [EEA] “has not been well represented and that has affected the popularity of the agreement.” Thórdarson said, “We have the best of both worlds, we can make deals wherever we like, we usually do it through Efta [the European Free Trade Association]… We also have bilateral agreements, for example we were the first Western national to sign a bilateral agreement with China,” adding, “It’s not true we take 80 to 90 percent of [EU’s] acquis, we have taken 13.4 [percent] since 1994.”

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International Trade committee warns against rushing in trade negotiations with the US unprepared

The House of Commons’ International Trade committee yesterday issued a report warning the British government against committing the “catastrophic error” of rushing into trade negotiations with the US without agreeing a “comprehensive trade strategy” prior to it. The chair of the committee Angus MacNeil said, “The economic benefits of a US deal are presently unproven… The Government appears to be engaged in an exercise in doublethink: on the one hand telling us that new trade deals will be the pot of gold at the end of the Brexit rainbow, while simultaneously saying it’s too soon to offer a realistic estimate of the possible contents or benefits a deal with its highest-priority target.” He warned, “Even in ideal circumstances, trade-offs will have to be made to get a comprehensive US deal… Will the Government, in their rush to secure the future of the UK services sector, sacrifice UK agriculture or manufacturing? What does the Government intend to do to help industries if they are negatively affected by this bargain?”

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Digitalisation of UK tax system delayed by Brexit

In an email sent out on 30 April, HMRC has announced that plans to replace traditional tax returns with digital versions, a revision originally expected to be implemented by 2020, will be indefinitely delayed in order to focus the department’s energies on Brexit. HMRC explains, “We have made the decision to delay plans to introduce further digital services for individuals, to release project capability to EU Exit work. This means halting progress on simple assessment and real time tax code changes.” The top priority for HMRC will now be developing a new customs declaration service in preparation for leaving the EU. The new service is expected to be in place by next January.

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UK government seeks to prevent transfer of key expertise in satellite programme to the EU

The British government would be taking steps to avoid that key British expertise in the cryptography protecting satellite system Galileo’s highly secure Public Regulated Service is transferred to the EU, the Financial Times reports. Following reports that UK companies might be unable to work on the encrypted system of Galileo from March 2019, the EU has offered British company CGI UK a contract to transfer its expertise in cryptography to the French Thales. However, the UK government would be considering offering CGI work to keep its expertise in the UK. An official informed on the plans is quoted saying, “We could not draw up a legal contract saying they [CGI] could not do the work in France or for the EU — it would have to be a gentleman’s agreement.”

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European Commission to reveal proposal for next long-term EU budget

The European Commission will today reveal its proposal for the next Multiannual Financial Framework, the EU long-term budget. Politico reports that the budget proposed is expected to amount to 1.279 trillion euros in current prices taking into account inflation. The figures would represent 1.11 percent of the EU27’s gross national income (GNI).

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Jacob Rees-Mogg: UK should strengthen its relation with the US post-Brexit

Following the announcement of US President Donald Trump’s visit to the UK in July, ERG chairman Jacob Rees-Mogg yesterday argued in an op-ed for The Times that the UK should develop a closer relationship with the US post-Brexit. He wrote, “Once we have left our alliance with the EU, the United States will be even more central to our foreign policy than it currently is,” adding, “Free from its ties to the EU, Britain will be able to co-operate more fully with the US in its global efforts.” Rees-Mogg added, “This opportunity is dependent upon Mr. Trump’s presidency,” and urged the British government “to offer the US something tangible… If that means presenting a free trade deal or suggesting a London-New York agreement on financial regulation, which would become the global standard, the duty of ‘sincere co-operation’ with the EU must not be an impediment.”

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Henry Newman: It’s time for the government to make a decision on customs

Writing in ConservativeHome, Open Europe’s Henry Newman argues, “Ditching the Customs Partnership option seems like a political no-brainer. Crucially, the EU side has already reportedly dismissed both of the UK options – Maximum Facilitation and a partnership. So it’s hard to hold up the partnership option as a way of ‘solving’ the Irish border issue. Equally, while the partnership option seemed like it could have been a mechanism a month ago for keeping potentially rebellious MPs onside, many of those are now aiming to force the Government’s hand towards a fully fledged customs union. If Cabinet back the partnership model, that won’t necessarily defuse the rebels.” He concludes, “If the Prime Minister jumps the wrong way on this crucial question, she risks losing the support of Brexiteers in Cabinet and undermining her very stability in the job.”