Ministers fail to reach agreement on customs proposals

3 May 2018

A much-anticipated meeting of the Brexit cabinet committee to consider Post-Brexit Customs arrangements ended inconclusively on Wednesday, according to reports.

According to the Daily Mail, the 11-strong committee was divided 6-5 against the Prime Minister’s preferred option of a close ‘customs partnership’, in which the UK would continue to manage tariffs on imports destined for the EU. It is thought that, apart from the PM, backers of the proposal on the committee are Greg Clark (Business Secretary), Philip Hammond (Chancellor), Karen Bradley (Northern Ireland) and David Lidington (Cabinet Office Minister). Opponents are understood to be David Davis (Brexit Secretary), Boris Johnson (Foreign Secretary), Liam Fox (International Trade), Michael Gove (Environment), Sajid Javid (Home Secretary) and Gavin Williamson (Defence). This latter ‘Brexiteer’ group is more supportive of the looser ‘max fac’ arrangement (see below). According to one report the Chief Whip, Julian Smith, has now been made a full member of the committee, and is on the PM’s side on this issue, making the balance 6-6.

However the committee made no final decision, with Politico reporting that ministers concluded that “urgent further work” on both proposals (see below), so that the Cabinet could “consider revised proposals.” Ministers were apparently united in agreement that the UK must not remain in a customs union with the EU.

Downing Street had earlier in the week received a 30-page attack on the customs partnership option from the influential European Research Group led by Jacob Rees-Mogg.

The two options being considered by ministers were set out by the Government in their August 2017 ‘Future Customs Arrangements’ paper –

A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on UK-EU trade as possible. This would aim to: continue some of the existing agreements between the UK and the EU; put in place new negotiated and unilateral facilitations to reduce and remove barriers to trade; and implement technology-based solutions to make it easier to comply with customs procedures. This is sometimes known as the ‘max fac’ option, short for ‘maximum facilitation’. This is the looser of the two options and generally favoured by ‘Brexiteers’. A new customs partnership with the EU, aligning our approach to the customs border in a way that removes the need for a UK-EU customs border. One potential approach would involve the UK mirroring the EU’s requirements for imports from the rest of the world where their final destination is the EU. This is the closer of the two options and is generally favoured by those would have preferred to stay in the EU, and see it as a nearest available alternative to staying in the customs union.

The EU is reportedly sceptical of the practicality of both options (officials have been quoted calling them ‘non-starters’) and does not share the UK's optimistic take on what can be achieved with technology.

What next? A UK government official quoted by Politico told them that the customs partnership model is now firmly out of favour and looks unlikely to make it to full Cabinet for consideration. A different official told Politico that, without a third way, both proposals are effectively “dead”. However Downing Street have said that both the options put forward so far by the UK are still on the table with the PM asking for more work to be done on both. Officials are reported as saying a ‘compromise plan’ could come within days, and that there is just one week to resolve the matter, with June’s European Council looming, and a need for significant progress toward a solution to the Irish border issue for Brexit talks to progress.

The Taxation (Cross Border Trade) Bill – known informally as the customs bill – and the linked Trade Bill remain paused in their parliamentary progress between committee and report stages, amid fears that the Government might lose a vote of MPs on the customs union.

George Crozier​ CIOT Head of External Relations