At Chequers today, the Cabinet will debate a freshly fudged variant of the UK’s plans to leave the European Union. If the proposals are agreed, future historians will see this as the moment the Prime Minister belied her “Brexit means Brexit” mantra and crossed her own red lines – with full Cabinet support.
These new proposals, driven by uber-Remain civil servants, would leave the UK in the EU‘s single market and customs union in all but name. Bizarrely, Britain would also collect customs duties on the EU‘s behalf – making an independent trade policy virtually impossible. The UK would be at the behest of EU rules with no influence in setting them and none of the growth-boosting advantages of escaping Brussels’ grasp. These plans are incoherent, economically disastrous and a fraud on the 17.4 million people who backed Brexit, our biggest ever act of democracy.
I’ve consistently argued for “clean Brexit”, with Britain leaving the single market and customs union altogether. If the single market is so good, why is our EU trade diminishing, in deficit and smaller than our trade beyond the EU? The US and China conduct hundreds of billions of dollars of EU trade without vast contributions or “freedom of movement” rules.
The protectionist customs union, meanwhile, puts high tariffs on the 85 per cent of the world economy beyond the EU, making food, clothing and footwear much dearer – items on which poorer UK households spend heavily. And with conflicting EU member interests blocking free trade agreements with the US, China and other big economies, Britain can better secure such deals alone.
In her Lancaster House speech and subsequent Article 50 letter, Theresa May backed clean Brexit. She then lost her nerve as well-funded Remainer lobbies dug in, agreeing a £39 billion “divorce bill” with no guarantee of a trade deal, handing Brussels huge leverage. Signalling that the UK might stay in “a customs union” was another enormous error.
Downing Street has consistently left unchallenged the scare tactics of “professional Remainers” – big businesses seeking ongoing EU protection, Brussels-funded think tanks and member states wanting UK cash. The Irish land border, for instance, already copes with differing currencies, duties and other tax rates. Outside the customs union there is no need for physical “hard border” posts that might inflame sectarian sensitivities – as confirmed by the head of HMRC, his Irish equivalent and a detailed study published by the European Parliament. Instead of explaining these realities, and arguing Britain’s corner, Mrs May has allowed Irish border falsehoods to warp her entire Brexit strategy.
She has similarly failed to counter claims it would be “disastrous” to leave the EU with no free trade agreement, using World Trade Organisation rules instead. Again, this is nonsense. Britain already conducts most of its trade outside the EU, largely under WTO rules. “It is not the end of the world if UK-EU trade is on the basis of WTO rules,” Roberto Azevedo, WTO Director General, told me in an interview for this newspaper. “It’s perfectly manageable.” That’s a vital insight because, unless “no deal” is seen as a viable option, the UK’s negotiating hand is seriously undermined – with Britain then forced to accept whatever trade deal the EU offers as March 2019 approaches, however heavily staked in favour of Germany and France.
The Government should have been making determined and very visible preparations for “no deal” – including more customs-checking capacity. The irony is that, behind the scenes, there has been considerable work. Last week the National Audit Office, in a barely-reported study, concluded that an ongoing HMRC upgrade that was happening anyway means Britain’s revamped customs service should be ready to cope with “no deal” from January 2019. Ministers should be shouting this from the rooftops, not only reassuring UK importers but conveying to Brussels that, if needs be, we can use WTO rules after Brexit, resulting in net transfers of tariff revenues from the EU to the UK, before cutting a more advantageous free trade agreement later on.
Instead of pursuing such rational strategies, Mrs May now wants the UK effectively to stay in the single market for goods, while facing greater restrictions on trade in services. This is totally lopsided – Britain is far better at exporting services (we run a £14 billion annual surplus with the EU) than goods (which show a £96 billion EU deficit). And proposals to “solve” the Irish border by tracking goods and collecting the EU‘s tariff revenues have already been rejected by Brussels.
Mrs May should just leave the single market and the customs union, with no deal if necessary, using WTO rules – a strategy the EU is powerless to prevent. By presenting absurd ideas, our “Mad Hatter” Prime Minister appears to hope her people will conclude Brexit is too hard and should be abandoned. If so, she doesn’t understand the country she purports to govern.
To read Liam Halligan’s piece for the Daily Telegraph in full, click here.