The Government still isn't paying attention to what's most important – and immediate – about Brexit

While ministers believe 'the money' is their trump card, the EU may have a bigger one: the clock

David Davis appears to be reverting to the ‘have our cake and eat it’ approach to negotiations (PA)

In setting out its long-term proposals for a customs deal with the EU, the UK Government has put the cart before the horse. Its plan for a two-year transitional deal allowing existing customs arrangements to continue is sensible, and will hopefully provide some reassurance for an increasingly anxious business community. This follows a welcome intervention by the Chancellor Philip Hammond to head off the “clean break” favoured by hardline Brexiteers, which would have created a damaging “cliff edge” for business in 2019.

However, the Government’s document seems to be designed more for domestic political consumption – and the need to show a semblance of cabinet unity after ministers promoted their conflicting ideas – than the reality of the difficult negotiations with the EU. There are two options for a UK-EU customs regime after the “interim period”: a streamlined system using technology to limit bureaucracy, and a more ambitious partnership in which both parties would enforce each other’s rules, which the Government admits is “untested” as it does not exist anywhere in the world.

These ideas are an opening bid, a wish list in tune with Boris Johnson’s “have our cake and eat it” approach, under which the UK expects to walk out of the EU club and yet be allowed to continue to enjoy its benefits. When asked what the UK would give the EU in return, the Brexit Secretary David Davis reverted to the “German cars” argument, pointing out that the EU sells more to the UK than vice versa.

He will have to do better than that. It is obvious that the 27 EU countries will not allow the UK a pain-free exit; they will use Brexit to discourage other states from trying to cherry-pick their membership terms. Britain will have to pay a price for the close trading links it wants to keep, while naively expecting the EU to allow it to strike rival trade deals with non-EU nations.

Rather than gazing at the horizon, the Government should be prioritising the more pressing issues on which the EU is demanding progress before it will discuss a long-term deal: citizens’ rights, the UK’s divorce payment and the Irish border. Ministers will address the Irish question on Wednesday but, ominously, Mr Davis warned that the UK would not provide “a number” for the financial settlement by October or November. The Government should show more flexibility on this sensitive issue but is doing little to prepare the ground.

While ministers believe “the money” is their trump card, the EU may have a bigger one – the clock. Time is running out for an agreement, which will need to be struck by the autumn of 2018 to allow it to be approved by EU institutions by March 2019.

Buried in the Government’s document is the announcement that its Customs Bill will give it powers to operate standalone customs, VAT and excise systems in case there is no deal with the EU. While this is not ministers’ preferred outcome, the extra bureaucracy and costs it would involve should encourage the Government to strain every sinew to secure what Theresa May has called “a deep and special partnership” with the EU.

Avoiding the worst outcome of all – no deal – will require much more clarity from the Government, and quickly. Ministers will have to accept some painful compromises; the sooner they admit that, and stop dreaming about a one-sided agreement in which the EU allows the UK “frictionless trade” at no cost, the better.