Chancellor Philip Hammond has said that he wants a transition period after Britain leaves the European Union, during which time EU nationals will still be free to come to the UK and work, as long as they “register with authorities first.”
Mr Hammond said the UK would “leave the customs union and the single market on 29 March 2019” but that there was broad agreement in the Cabinet that a transitional arrangement would need to be put in place to avoid a Brexit “cliff edge”.
With the Prime Minister away on holiday, the Chancellor spelled out for the first time what a transitional period with the EU might look like, and that the Government would be seeking one.
“We need to deliver for the British people, business as usual, life as normal,” the Chancellor told the BBC’s Today programme.
“I hope we will be able to agree a transition which means goods will be able to flow across the border between the UK and the EU in much the way they do now.”
He added: “It will be some time before we are able to introduce full migration controls between the UK and the European Union. We have to put in place new infrastructure, new IT systems, new people. The Home Secretary and the Prime Minister have been clear this will take a while to put in place.”
Mr Hammond said the transition period would be expected to come to an end in time for the 2022 election.
“There will be a process between the date we leave the European Union and the date on which the new treaty-based arrangements between the UK and the European Union which we hope and expect to negotiate come into force,” he said.
“I can’t tell you a precise period of time because we haven’t had that discussion yet. It will be driven by technical considerations; how long it will take us to put the necessary arrangements in place. People have talked about a year, two years, maybe three years.
“I think there is a broad consensus that this process has to be completed by the scheduled time of the next general election, which is in June 2022, so a period of at the most three years in order to put these new arrangements in place and move us on a steady path without cliff edges from where we are today to the new long-term relationship with the European Union.”
Mr Hammond refused to confirm or deny reports that he had told business leaders the UK would seek a three-year transitional deal, described as an “off-the-shelf” arrangement similar to the European Economic Area (EEA) arrangements the EU has in place with Norway.
Mr Hammond said that the UK wanted to avoid the “cliff edge” scenario in which trading arrangements and other arrangements currently guaranteed by EU membership suddenly ceased to be, with nothing in their place.
“The day after we leave the EU people want to know that French and Spanish products will be on the supermarket shelves. If they want to go on holiday they want to know they can get on a plane and fly to their destination, that businesses can buy the components they need to protect jobs and prosperity.
“I can envisage a situation where we start immediately after our exit from the European Union with many arrangements very similar to how they were before, but moving steadily with the introduction of new systems, which will be our long-term relationship with the European Union.”
Mr Hammond acknowledged that “all of this has to be negotiated with the European Union”. The UK is currently four months in to the formal 24-month negotiating period and is a long way off even beginning the aspects of the negotiations that will deal with the future trading relationship.
Any transitional arrangement would make it essentially impossible for the UK to strike any trade deals with other countries around the world for as long as it was in place, which will irritate many hard Brexiteers, as will the stance on free movement.
Mr Hammond said he recognised that it may “take some time” to “negotiate trade deals with third countries” following claims by former EU trade commissioner Karel De Gucht that the UK would not be able to strike a trade deal with the US before it has left the EU or during a transitional period.
He said: “We recognise that it will take some time for us to negotiate trade deals with third countries. The important point is that we are able to get started on that process and during a transition period when we would hope to have continued access to the European market.”
Immigration minister and Brexiteer Brandon Lewis said on Thursday that free movement would end in March 2019. But Amber Rudd, the Home Secretary, later claimed that EU migrants would still be able to come as long as they registered with authorities.
The Chancellor was speaking after reports in the Financial Times that he had told business leaders the UK would seek a three-year transitional arrangement.
Mr Hammond is said to have told business leaders he initially wants an “off-the-shelf” deal with the EU that would maintain the UK’s current trading relationship with the bloc.
According to reports in the Financial Times, this would be followed by a second “implementation” phase while the final terms of a future trade deal were negotiated.
Allies of Mr Hammond told the newspaper the transition and implementation periods should end by 2022.
Mr Hammond has been an advocate of transitional arrangements between Britain’s exit from the EU in 2019 and any new trade deal coming into force, an approach that has caused tensions with senior Brexiteers in the Government.
Sources present at a meeting with Mr Hammond and business leaders at Number 11 Downing Street on Monday told the Financial Times the Chancellor was clear there was not enough time to negotiate a new bespoke trade deal before Britain’s exit in April 2019.
“He was very clear these were two different phases,” someone at the meeting told the newspaper.
Earlier this week Mr Hammond told ITV he hoped talks on a transitional deal could start in the autumn.
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