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Analysis

Chequers plan is dead. But what about son of Chequers?

by Hugo Dixon | 31.07.2018

The EU has effectively killed Theresa May’s Chequers’ plan. But could it agree to some other variation of Chequers, one even more miserable for the UK?

It may seem that there’s no basis to negotiate anything around the prime minister’s recent White Paper. The EU has made clear it doesn’t like its two central elements: a nightmarishly complicated customs arrangement; and a plan for the UK to stay in the single market for goods but not services or people.

Last Thursday’s press conference between Michel Barnier, the European Commission’s chief negotiator, and Dominic Raab, the UK’s new Brexit secretary, led some pundits to conclude that Chequers was dead and buried. But this is probably too hasty a conclusion for three reasons.

  • Both the UK and the EU want a deal. Even though it needs one less than we do, the EU would still be badly damaged if the whole relationship blows up.
  • It is hard to see May agreeing any deal that doesn’t bear at least some resemblance to her Chequers plan. She couldn’t, for example, agree free movement of people.
  • The EU would prefer to deal with May rather than Boris Johnson or another hardline Brexiter. It would also prefer her to Jeremy Corbyn, who has his own version of a cake-and-eat-it Brexit. It therefore doesn’t want to rock the boat by slamming her proposals too publicly.

None of this means there will be a deal. After all, the EU has its own red lines. In particular, it doesn’t want to undermine the integrity of the single market. But it does mean both sides are likely to try to find some fudged compromise – and one thing we know about Brussels is that it’s an expert in manufacturing fudge.

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Fudge for the FCA?

May wants a facilitated customs arrangement (FCA) where we would collect tariffs on behalf of the EU for goods entering the UK that ultimately find their way across the Channel. Barnier doesn’t like this because it would tangle industry in red tape; and it would involve subcontracting the authority to collect revenue to a foreign power which is “not subject to the EU’s governance structures”. The EU wants to “keep control of its money, law, and borders,” he quipped, mimicking May’s mantra.

But there’s still a possibility that the EU could humour May. It might say that she can introduce the FCA if and when she can show we have developed technology that allows goods to flow frictionlessly, and so long as we agree to subject ourselves to the EU’s governance structures when we collect revenue. In the meantime, we could stay in its customs union.

Such a proposal may seem like a bridge too far for May. But she has already proposed we should stay in the customs union for the post-Brexit transition period and for any post-transition “backstop” that may be needed to keep the Irish border open.

Perhaps she could spin something that ultimately gives us freedom to conduct our own trade policies – a prospect which Brexiters salivate over despite all the evidence suggesting we are able to cut better deals as part of a 28-country bloc with lots of clout. She might also be able to get it through the House of Commons since most MPs probably think staying in the customs union is the simplest solution anyway.

Single market fudge

The EU says the four freedoms in the single market – goods, services, people and capital – are indivisible. But it doesn’t always stick firmly to this principle. Switzerland, for example, has free movement of goods and people, but not services. And free movement of services within the EU is far from perfect anyway. What’s more, countries are free to impose some restrictions on movement of people – such as requiring people to register when they enter the country- while abiding by the principle of free movement, as MPs pointed out in a report published today.

So, in practice, the question is whether the EU is prepared to make some exceptions to its principles for the UK. One reason it may wish to do so is because it has a big trade surplus with us in goods, while we have a surplus with it in services. So a deal that allowed its goods to flow freely while hamstringing our services might suit it.

On the other hand, the EU is worried that we could gain an unfair advantage if we don’t follow all the single market rules. May has only proposed following existing EU rules for goods and state aid – and not lowering our social, environmental, competition and consumer standards. She wants the freedom to diverge if the EU changes its rules – while acknowledging that there will then be “consequences”.

And then there’s the knotty problem of free movement of people. The prime minister has said she is preparing a “mobility framework” without spelling out what it would be.

Is there some compromise that could square the circle on free movement? Could we agree to follow more single market rules but perhaps not all of them? Could the “consequences” of diverging be so severe that the EU would be happy to leave us the theoretical freedom to do so while knowing we wouldn’t in practice? Could we kick the can down the road so we follow rules for the time being but the prime minister can pretend that we will eventually be free to set our own? Nobody has come up with the recipe yet. But the fudge-makers’ skills shouldn’t be underestimated.

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Fudge for money

Apart from customs and the single market, there is money. May has already agreed to pay the EU £39 billion as part of our divorce settlement. But she says “vast” payments in the future will end, without defining what she means by vast.

The EU hasn’t yet asked us for money. But it would be astonishing if it allowed us access to the single market – even if only for goods – without us paying something.

So how could this be fudged? Well, the prime minister has already provided a hint by saying we will pay our share of the costs of the various EU agencies whose rules she wants to follow. Perhaps we could also pay to keep access to the EU’s science programmes, its Galileo satellite system, student exchanges and so forth. Then add in some payments to support poor EU regions. Before you know it the sums could be quite high. Maybe May could spin it all as payments for specific programmes that we as a sovereign nation think are in our interest rather than a membership fee.

What about the backstop?

It’s far too early to know whether something on these lines could be negotiated. Perhaps we will get some idea at the informal EU summit in Salzburg in September.

But the talks may not even get that far because the EU is insisting that we first nail down the Irish “backstop”, which is designed to keep the Irish border open if a future trade deal between the UK and EU doesn’t do the trick – and even if there isn’t any such deal.

The EU originally proposed a backstop that would cover only Northern Ireland. May didn’t like that as it could mean border controls in the Irish Sea. She countered with a proposal that covers the whole UK – but she also said she wanted it to last a maximum of one year. The EU didn’t like that, as it insists the backstop should apply in all circumstances.

Barnier is now using more conciliatory language saying the EU has “no objection in principle” to the idea of a backstop that covers the whole UK and that he wants to “de-dramatise” the Irish border issue. But nobody has yet come up with a convincing answer about how to square this particular circle – although Chris Giles in the FT has proposed a solution involving dollops of fudge at the Irish border, the Irish Sea and the Channel.

It’s quite hard to imagine how all these problems could be solved simultaneously. But even if they could, the prime minister would have an almost impossible task selling such a deal to her MPs. Hardline Brexiters, who already hate the Chequers proposal for turning us into a colony of the EU, would go apeshit if we have to follow more rules and pay money as well. Patriotic pro-Europeans wouldn’t like it either.

If such yucky fudge emerges from the talks, it’s essential that the people are given the chance to say “no” and stay in the EU.

Edited by Luke Lythgoe

8 Responses to “Chequers plan is dead. But what about son of Chequers?”

  • The Chequers deal was a dead duck even before it got to the EU for consideration. There was a falling out of ministers and demands from various other groups that underlined May’s impotence and the divisions that exist in her own party. How can any sane person continue to think we should be leaving the EU at all? What on earth is Corbyn thinking?

  • Well, I like fudge, particularly the Scottish variety. Speaking of which, if May comes back with no deal, how long do you think it will be before the Scots realise that they, who voted to stay in the EU, have been sold down the river. I think indyref2 is not far away. Barclays thinks so, too.

    Why are we doing all this ? Isn’t it plain to anyone with two brain cells (or even one) that exiting the EU in this day and age is an absolute own goal ? Maybe we could have made it work in the 80s or even the 90s, but now. The world is a very different place from when we joined 47 prosperous years ago. And the Empire is Loooooong gone. Mogg and the Moggites have their own agenda, which principally involves making them very, very rich (reflect on Moggs extensive Russian holdings, if you will) and they couldn’t care less about the total chaos that looms, since their wealth will protect them. Pity the poor fools who voted to leave, thinking they’d be looked after. HA !

  • Re the Irish border, how is it possible to reconcile freedom of movement with the UK proposals which seem to address only the passage of goods between the two countries and even then for a limited period apparently. FOM implies the freedom to live and work and cross the common frontier at will. The problem is surely insoluble.

  • I know that the purpose in writing pieces like this is to set out how unlikely any acceptable deal is and to bolster the case for a “people’s vote” which includes the option of staying in the EU. I am signed up to this but do please bear in mind that this makes it essential for the electorate to recognise how much EU membership benefits us. It does not help to allege that the EU side in the negotiations are part of the problem rather than seeking a solution which genuinely helps both sides albeit not providing some magic “cake and eat it” formula. Comments like “…. it does mean both sides are likely to try to find some fudged compromise – and one thing we know about Brussels is that it’s an expert in manufacturing fudge.” are profoundly unhelpful. If all this leads to no deal whatsoever, for which the brexiteers will be adept at blaming on the EU, then do not lightly assume that we pro-europeans would win any people’s vote even if we managed to get it agreed in the first place. We must accentuate the positive.

  • There’s no majority in parliament for a “no deal” WTO crash out. It would be catastrophic.

    The danger I see is that May and Barnier come up with a fudge and May somehow manages to get parliament to vote for it.

    Perhaps Mogg and co will take the Gove view – let’s leave with whatever deal (Norway for now etc) then scupper it later. Even if they are prevented from scuppering the deal later we’ve still left the EU! Our original Treaty agreement and all it’s advantageous rebates and opt-outs would be lost. Try getting back in then.

    The best thing therefore is to help to maintain stalemate and opposition to a deal in parliament so that the only possible Brexit is a “no deal” WTO crash out.

    Then the most likely possibilities are – parliament votes down any deal, halts the Brexit process and applies to extend or simply rescinds Article 50(2) notice because we haven’t met our constitutional requirements under Article 50(1) and either calls a People’s Vote (options: “no deal”, “fudge” or “remain”) – thereby splitting the leave vote into its component parts), or declares the 2016 referendum result invalid due to all the illegality and interference.

    Less likely would be a general election as the Tories are less likely to vote for that than they would a People’s Vote etc.

  • Has anyone anywhere ever produced any reliable evidence whatsoever that we stand to obtain any net benefit from leaving the EU Customs Union?

    Being able to make lots of trade deals on our own may sound as though we have some new independence, but since we can already trade with those same countries, what net benefits can we reasonably hope for from that? And would that even begin to compensate for losing all the trade arrangements we currently have with the EU27 and with the 50+ countries that have PTAs with the EU? For if leaving the CU brings us no commercial benefit, why do it at all, even applying ‘Leave’ ideology? The burden of proof of benefit from leaving the CU must surely lie on those advocating it.

  • The pity is that there appears to be no British politician in the position to lead us out of this shambles. May’s first instinct is to appease the hardline Brexit fanatics in her own party, and the hardliners see her as just a tool to get them over the 31st March 2019 finishing line, after which they can dump her. It would be good if there was a potential leader amongst the so-called Tory rebels, but there isn’t one. Grieve is too nice to be PM material, Soubry would probably alienate too many of her colleagues and Clarke is close to retirement. Amongst the Lib Dems, the most pro-European party, a more dynamic and younger leader than Cable is needed, with only Clegg potentially PM material, but he needs to get re-elected to Parliament. Which leaves us with Labour. A dynamic leader is needed who can get the message across loud and clear that Brexit is taking us into an economic backwater and international irrelevance. Of the current Labour MPs, Hilary Benn looks to be most capable, but then there is one other former MP, David Milliband, who if he wanted to, would have the vision, drive and widespread appeal, to steer this country away from the abyss. I wonder if he is considering making a come back.
    The tragedy is that there is probably a majority in Parliament who recognise that Brexit is a disaster in waiting, but are inhibited in their actions by the constraints of party loyalty.

  • Just to clarify that to have to register when you move to an EU country does NOT mean that it restricts the free movement of people.

    Also the EU has created the Shengen area (over 20 EU countries participate) where one can travel without showing any passport when entering the country of destination.