Britain will leave customs union, No 10 insists

Ministers move to reassure Tory Eurosceptics and calm fears of ‘handbrake turn’ on manifesto pledge

Britain is going to leave the customs union after Brexit, Downing Street insisted last night, as the Government moved to reassure probrexit MPS in the wake of reports that the Prime Minister’s team had concluded the UK may have to remain inside the free trade mechanism after all.

BRITAIN will leave the customs union after Brexit, Downing Street said last night, with Theresa May and other ministers expected to skip a Labour attempt in the House of Commons this week to stop the UK leaving.

The Government moved to reassure Eurosceptic Tory MPS in the wake of reports that Mrs May’s team had privately concluded that the UK may have to remain in the customs union after all.

Civil servants on Britain’s negotiating team were said to favour keeping Britain in a customs union to avoid a hard border with Ireland.

Leaving the customs union after Brexit – which would allow the UK to strike its own independent trade deals – was a Tory manifesto commitment.

However, one Sunday newspaper reported that an aide to Mrs May had told a meeting that the Prime Minister and her team “will not be crying into our beer” if parliament forced the Government to keep the UK in the EU.

A “war gaming exercise” even concluded that David Davis, the Brexit Secretary, and Michael Gove, the Environment Secretary, would not quit even if this were to happen.

A No 10 source said: “It remains the case that Government policy as set out in the Mansion House speech is for Britain to leave the customs union.”

Last night, Sajid Javid, the Communities Secretary, and Mr Gove spoke out to calm nerves among Brexiteers.

Mr Javid said that the public gave “clear instructions” at the referendum that included leaving the customs union, “an intrinsic part of the EU”, and the country signing its own trade deals.

Mr Gove said: “Sajid is right; the referendum vote was clear, we need to take back control of trade – that means leaving the protectionist customs union.”

Liam Fox, the Trade Secretary, is expected to say today that Brexit will “remove the regulation, bureaucracy and red tape that inhibit the free trade in services”.

Labour is planning to put pressure on the Government with a Commons motion to require “as an objective in negotiations … the establishment of an effective customs union”. But Tory MPS are likely to stay away from the debate and instead campaign in marginal seats ahead of May’s council elections.

One Eurosceptic source said this would make Thursday’s debate a “tumbleweed vote” with Labour MPS voting alone for their non-binding motion.

Mrs May will miss the debate to meet Mala Tribich, a Holocaust survivor, in Downing Street.

Ministers expect defeat in the House of Lords today when peers vote to keep Britain subject to the European Court of Justice after Brexit. More lost amendments are likely in coming days.

Ministers want to group all successful Lords’ amendments on the EU Withdrawal Bill into a single series of votes next month and force Tory MPS to overturn them, turning them into an effective vote of confidence in the Government, The Daily Telegraph has been told. A source said: “The amendments will probably be bunched together and come back at the end of May and the plan would be to rush through them all as quickly as possible.”

Jacob Rees-mogg, chairman of the European Research Group of Conservative MPS, said that staying in the customs union “would be not just a U-turn but a handbrake turn”. He said: “There is no indication that the Government is backing away from its manifesto commitment.”

Nicky Morgan, the former education secretary who is backing Labour’s motion, said the Tory party would not “entertain a leadership contest at the moment” if Eurosceptic MPS tried to force her out.

She told the BBC’S Sunday Politics: “Those who want to might have enough names to send in letters to the 1922 backbench committee chairman, but that’s about as far as it will get.”

Leaving the customs union doesn’t sound like much of a cause. After all, who wants to die in a ditch over beef tariffs or toy safety regulations? But appearances can be deceiving. This week, the House of Commons has a chance to overturn a major plank of Government Brexit policy. The chance has been handed to them by the Lords, who indicated last week that they want the Government to seek a customs union with the EU.

Most voters have little idea what a customs union is, but they probably would have a view on these questions. Now that we’re leaving, is it a good idea to outsource most of our trade policy to the EU? And is it consistent with the referendum result? The answer to both questions is surely no.

The best way to think of the customs union is as a fence between the EU’S common market in goods and the rest of the world. The fence consists of tariffs, quotas and goods regulations. For all its many continuing flaws, and for all our moaning, the design of the fence has been heavily influenced by Britain. As members of the EU, Britain has inspired and pushed for important measures such as the development of a single market and the pursuit of dozens of liberalising trade deals. We have played an important role in helping to design, maintain and develop the fence, ensuring that it was tolerably consistent with our national interests. Brexit will see us give up that role, meaning that it will inevitably develop in ways we don’t like.

Despite the country’s clear decision to give up a role in designing the fence, the Lords, Labour and some Tory MPS would have us remain inside it, as an entirely passive member of the fence club. Their worry is that leaving it will raise costs for British consumers and force a damaging restructuring upon businesses whose supply chains will suddenly become bisected by a new, British fence.

Labour’s proposed alternative, in which we leave the EU but maintain a role in EU trade policy, will never happen. So the serious argument is about trade-offs. Is it worth giving up all control over all regulations and tariffs on goods in order to avoid disrupting this piece of our EU trade? “If, as I believe, we will have to choose,” said one lord in a debate this year, “we must surely place a greater priority on being able to shape our own future than on preserving the status quo.” This lord was no diehard Brexiteer but the committed Europhile Lord Hill, who until 2016 was Britain’s commissioner in Brussels.

Lord Hill is not alone. He is joined by prominent Remainers such as Malcolm Rifkind, the former foreign secretary, and Lord Bridges, a Cameroon and former minister who quit David Davis’s Brexit department in despair at its indecision. All of them have concluded that it is untenable for Britain to hand control over such a large area of trade policy to a foreign power.

Many civil servants privately agree. This is because our officials spend much of their time using the rights and powers granted by EU membership to ward off repeated attacks on British business by rival member states, who seek to use Brussels regulation to give their own companies an advantage. Within the customs union but without EU membership, Britain is a sitting duck.

Imagine what this means in practice. Each time the EU enters a trade negotiation, it will have a rich source of costless concessions on the table. If South America demands that Brussels give up certain protections on geographically protected indicators such as champagne, cheddar or Scotch, without Britain at the table, which ones do you think will be the first to go? If the US wants Brussels to sacrifice animal welfare standards in return for some manufacturing access that Germany craves, do you think the EU will give it a second thought without Britain at the table, championing the cause?

Of course, Britain itself might be forced into any of these concessions during its own trade negotiations. But in such a situation, we would be giving them up for an advantage that relates directly to our own economy, such as better access for our services sectors. The EU’S members, whose economies are hugely different to our own, will have their own interests in mind, not ours. In such an environment, just imagine the toxic political discourse that will grow up around all trade and European matters.

The customs union doesn’t include services, so its advocates argue that Britain would still retain some control over trade policy. But without control over goods, this is meaningless. The deals Britain wants to do will involve offering up access to our enormous goods market in return for access for our services exporters. Inside a customs union, that is impossible.

The CBI and its allies also suggest that leaving is simply too expensive. This isn’t because of tariffs, which both the EU and UK want to keep at zero. It relates to customs paperwork: the checks that ensure goods comply with EU standards. Certain industries like car and drug-makers, which rely on the speedy shipment of goods back and forth, will suffer a cost from the introduction of new checks.

Quite how big an impact this will have is unknown. What we do know is that these cases are a minority. Normal supply chains aren’t so time-sensitive and, for most companies that already trade internationally, one more customs border won’t make much difference, since they already file the relevant information electronically. Smaller companies that aren’t used to dealing with customs will have to get used to the administrative burden, but once they’ve learnt how it works, it should only be about as annoying as a VAT return.

There is one powerful argument against leaving the customs union: it leaves us exposed to a world at risk of a trade war. If, indeed, global trade falls off a cliff in the next two years, it would be wise to reconsider the timeline on which we leave the shelter of the EU trading bloc. But that is not an argument for tying the Government’s hands today.

Two years ago, Britain voted to seize control of its governance. It is impossible to square that with a customs union. Leaving it might pose some risk, but it is the risk voters chose to take. Even for a Remainer like me, turning Britain into a passive participant in someone else’s trade policy is hard to stomach.