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Theresa May accused of being ‘held hostage by extreme Brexiteers’ as crucial customs decision 'shelved'

Jacob Rees-Mogg denies 'making threats' - despite 30-page report setting out why prime minister's 'customs partnership' plan is unacceptable

Deputy Political Editor

Wednesday 02 May 2018 10:42 BST

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Jacob Rees-Mogg on crucial customs decision: 'We are not in the business of making threats'

Theresa May is facing fresh accusations of being “held hostage by extreme Brexiteers” as a crucial decision on new customs rules after leaving the EU is set to be delayed again.

A clash on which alternative to the customs union the UK will pursue – which has the potential to spark cabinet resignations and a backbench revolt – will dominate a meeting of key ministers today.

But the prime minister is expected to keep both of Downing Street's options on the table, resisting fierce pressure from anti-EU Tories to dump her “customs partnership” idea.

David Lidington, Ms May’s effective deputy, said key decisions would be made “over the next few weeks” – appearing to confirm a choice on the customs model had been shelved.

It follows an overnight warning by the 60-strong European Research Group of anti-EU Tories, warning the government will “collapse” if the customs partnership plan is not abandoned.

Under the proposal, Britain would mirror the EU's customs regime at its borders and collect tariffs on behalf of Brussels – failing to deliver a clean break, Brexiteers protest.

Paul Blomfield, Labour’s shadow Brexit minister, said: “This is yet further evidence that Theresa May is being held hostage by the extreme Brexiteers in her own party.

The biggest issues facing UK on leaving EU

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1/8The biggest issues facing UK on leaving EU

The biggest issues facing UK on leaving EU

Post-Brexit immigration

workers sorting radishes on a production line at a farm in Norfolk. One possible post-Brexit immigration scheme could struggle to channel workers towards less attractive roles - while another may heighten the risk of labour exploitation, a new report warns.

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The biggest issues facing UK on leaving EU

Customs union

A key point in the negotiations remains Britain's access to, or withdrawal from, the EU customs union. Since the referendum there has been hot debate over the meaning of Brexit: would it entail a full withdrawal from the existing agreement, known as hard Brexit, or the soft version in which we would remain part of a common customs area for most goods, as Turkey does? No 10 has so far insisted that “Brexit means Brexit” and that Britain will be leaving the customs union, but may be inclined to change its position once the potential risks to the UK’s economic outlook become clearer.

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The biggest issues facing UK on leaving EU

Northern Ireland-Irish border

Though progress was made last year, there has still been no solid agreement on whether there should be a hard border between Northern Ireland and the Republic of Ireland. To ensure borderless travel on the island, the countries must be in regulatory alignment and therefore adhere to the same rules as the customs union. In December, the Conservative Party’s coalition partners, the DUP, refused a draft agreement that would place the UK/EU border in the Irish Sea due to its potential to undermine the union. May has promised that would not be the case and has suggested that a “specific solution” would need to be found.

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The biggest issues facing UK on leaving EU

Transition period

Despite protests from a small number of Conservative MPs, the Government and the EU are largely in agreement that a transitional period is needed after Brexit. The talks, however, have reached an impasse. Though May has agreed that the UK will continue to contribute to the EU budget until 2021, the PM wants to be able to select which laws made during this time the UK will have to adhere to. Chief negotiator Michel Barnier has said the UK must adopt all of the laws passed during the transition, without any input from British ministers or MEPs.

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The biggest issues facing UK on leaving EU

Rights of EU citizens living the UK

The Prime Minister has promised EU citizens already living in the UK the right to live and work here after Brexit, but the rights of those who arrive after Brexit day remains unclear. May insists that those who arrive during the transition period should not be allowed to stay, whereas the EU believe the cut-off point should be later.

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The biggest issues facing UK on leaving EU

Future trade agreement (with the EU)

Despite this being a key issue in negotiations, the Government has yet to lay out exactly what it wants from a trade deal with the EU. Infighting within the Cabinet has prevented a solid position from being reached, with some MPs content that "no deal is better than a bad deal" while others rally behind single market access. The EU has already confirmed that access to the single market would be impossible without the UK remaining in the customs union.

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The biggest issues facing UK on leaving EU

Future trade agreements (internationally)

The Government has already begun trying to woo foreign leaders into prospective trade agreements, with various high profile state visits to China, India and Canada for May, and the now infamous invitation to US President Donald Trump to visit London. However the UK cannot make trade agreements with another country while it is still a member of the EU, and the potential loss of trade with the world's major powers is a source of anxiety for the PM. The EU has said the UK cannot secure trade deals during the transition period.

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The biggest issues facing UK on leaving EU

Financial services

Banks in the UK will be hit hard regardless of the Brexit outcome. The EU has refused to give British banks passporting rights to trade within the EU, dashing hopes of a special City deal. However according to new reports Germany has suggested allowing trade on the condition that the UK continues paying into the EU budget even after the transition period.

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“Crunch time is coming on what our future customs arrangements with the EU should look like. However, the Tories appear more interested in issuing ultimatums and squabbling amongst themselves than acting in the national interest.”

Tom Brake, the Liberal Democrat Brexit spokesman, said: “The Prime Minister is kicking the can down the road in a desperate attempt to hold the widening fissures of the Tory party together. It cannot and will not work.”

The clock is ticking, because the EU has demanded answers on how future customs arrangements can avoid a hard border in Ireland by June - having rejected both of No 10's proposals.

The ERG has sent the prime minister a 30-page report setting out why her customs partnership is unacceptable, amid hints of withdrawing support for Brexit legislation unless it is scrapped.

Liam Fox, the Trade Secretary, has refused to rule out resigning over the controversy – and Boris Johnson, the Foreign Secretary, has also made a definitive break from the customs union a red line.

Jacob Rees-Mogg, the ERG’s leader, said the partnership plan was “deeply unsatisfactory, flawed and not get us out of the European Union, which is what people voted for”.

However, speaking on BBC Radio 4’s Today programme, he insisted he was “not in the business of making threats” to Ms May, adding: “There is no question of there being an ultimatum.

“It’s not a revolver, it’s not a duelling pistol, it’s an important contribution to the debate,” Mr Rees-Mogg said, of the ERG’s report.

The customs partnership would, if Britain cut tariffs in the future, see a new tracking system allow importers to claim back a refund from the government if their goods were destined for the UK market.

No 10 believes the plan offers the best hope of avoiding a hard border in Ireland, but it would be complicated to administer and could take at least five years to introduce.

Eurosceptics fear it is doomed to fail – which would allow the EU to push Britain into staying in a customs union even after the 21-month transition period.

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