Facilitated customs arrangement: what is Theresa May's latest Brexit plan and will it win cabinet approval at Chequers?

On Friday, the prime minister will ask her warring cabinet ministers to agree to her latest customs plan

Theresa May’s new “facilitated customs arrangement” is causing such a row in her cabinet, because the issue goes right to the heart of what kind of country Britain will be in the future.

To understand what it means, it helps to go back to the start of the prime minister’s efforts to solve what has become the problem most symbolic of Brexit’s difficulties.

For remainers and business people, customs arrangements after Brexit should allow trade and enterprise to occur as easily as possible with the EU, ideally meaning having the same tariffs as Brussels and the same regulations setting out what standards goods must meet.

Keeping an open border in Northern Ireland to try to maintain the peace won in the Good Friday Agreement is also key.

For Brexiteers, the goal is for the UK to sign free trade deals with other countries, possibly giving them favourable tariffs as part of the bargaining process, but that’s something you can’t do if the tariffs you set are pegged to the EU’s levels.

The problem for Ms May is that she has people adhering to both of these outlooks in her cabinet, many of them ready to resign and bring down her government if they don’t get their way.

So she maintained unity for a long time by saying the government would consider two customs options, one that was closer to the outlook of one group, and a second that pandered to the other.

The “new customs partnership” plan, favoured by remainers, would have seen goods coming into Britain charged the EU tariff on any particular item.

If those goods stayed in the UK, and the UK had agreed a trade deal to lower the tariff on that item, then traders would be able to claim refunds from HMRC on the difference between the EU and UK tariff.

But if goods were to come into the UK and then go on to Europe, the UK would pass tariffs that it had effectively collected on behalf of Brussels on to the EU.

Olly Robbins, Ms May’s Europe adviser who is steering negotiations, regards the partnership as a means of avoiding a hard border in Ireland, while keeping the UK out of the European customs union, thus achieving Brexit – close aides of Ms May had believed it to be “intellectually perfect”.

But Downing Street was warned that the new customs partnership proposal could collapse the government, with Brexit-backing cabinet ministers refusing to agree to it, claiming it would badly hinder the UK’s ability to gain trade deals.

The other initial option, viewed more favourably by Brexiteers, was known as “maximum facilitation”, or even “max fac”, and would have seen the UK outside any formal customs arrangement, setting and collecting its own tariffs.

But there would necessarily have had to be some controls at borders, including that between Northern Ireland and the Irish Republic.

The idea was that a “trusted trader” scheme and remote monitoring would limit physical infrastructure, but it would still essentially mean a hard border.

Businesses rejected the idea as being too damaging to the free flow of trade with the EU, while pro-EU Tories warned having a border in Ireland would break the Good Friday Agreement, risking peace.

So now we have the “facilitated customs arrangement”, FCA, proposal, which Downing Street is trying to sell as the best of the two previous options.

It would see all imported goods charged the UK tariff at the border, keeping Brexiteers happy, rather than the EU rate as in the “new customs partnership”.

To minimise friction at ports, goods would then be tracked, and if they were sent on to the continent, they would be charged the EU tariff with money passed on to Brussels.

The plan means that the UK can sign trade deals with other countries in which it promises to lower tariffs, but there is a catch for Brexiteers.

Britain would still promise not to deviate from EU standards, so we could not change regulations as part of any trade deal.

It is complex and there are many questions unanswered relating to how it would work in practice, before we even get to Friday’s meeting at Chequers.

And off course, it is not at all clear that the EU itself would agree to such a technically challenging solution.