Prime Minister Theresa May faces a crunch meeting tomorrow as she attempts to keep her party onside amid grumblings of a leadership challenge and a growing backlash over her newly-revealed Brexit negotiating position.
May will meet Conservative backbenchers on the party’s powerful 1922 Committee to try to persuade them to back the plan, which would involve a customs union for goods alongside regulatory divergence for services.
The government will unveil a white paper on Thursday, giving more details on the model agreed by the Cabinet at last week’s away-day at Chequers, the Prime Minister’s Buckinghamshire residence. Government officials spent the weekend briefing MPs on the plans.
The white paper is expected to contain significantly more detail on the envisaged relationship for financial services, although it is expected that City firms will have a lower level of access to the EU market.
Prominent ministers who were part of Vote Leave during the EU referendum campaign including environment secretary Michael Gove and foreign secretary Boris Johnson assented to the plan, although Johnson reportedly described the latest proposals as “polishing a turd”.
While May appears to have so far succeeded in limiting the public divisions in her Cabinet, the Conservatives’ lack of a parliamentary majority means the government is vulnerable to rebellions. A number of Tory MPs were openly discussing the possibility of a vote of no confidence in May, though most critics were prepared to reserve judgement until the publication of the full white paper.
Labour shadow Brexit secretary Sir Keir Starmer said plans for a so-called facilitated customs arrangement are “unworkable” and a “bureaucratic nightmare”.
Hard-line Brexiters in the Conservative party warned the Prime Minister will not be able to pass a Brexit deal that follows the model set out by the Chequers document in parliament.
Philip Davies, an MP from the right of the Conservative party who backed Brexit, told City A.M. that the Cabinet’s model would “sink without trace”.
Davies said: “If the Prime Minister thinks there aren’t 10 Tory MPs to vote down the deal she’s in cloud cuckoo land.”
John Redwood, a prominent backbench Tory, said the principles expressed in the Chequers statement were agreeable, but added that “the difficulty is in some of the detail”. In particular the European Court of Justice’s still “ambiguous” role will have to be made “crystal clear”, he said, adding that he thought the government should table a comprehensive free trade agreement with the EU.
Despite the opposition to the negotiating position, City figures broadly welcomed the signs of progress, with the deadline for leaving the EU in March 2019 rapidly approaching and with the government yet to put its detailed plan to the EU in negotiations – although City A.M. understands that the broad outline of the proposals was floated with German chancellor Angela Merkel and Dutch Prime Minister Mark Rutte during meetings last week.
Sir Mike Rake, the former chairman of BT and ex-head of the Confederation of British Industry, said the agreement represented a “positive step forward” and would solve the “real urgent issue” of goods trade collapsing if there is a chaotic “no deal” Brexit. The government’s preferred option is “the customs union by other words”, he said.
The Cabinet agreement means the government will “live to fight another day” and give time for a better services deal, he said, although adding that it was “clearly a question of damage limitation”.
Mark Hoban, the former City minister who heads the Square Mile lobby groups’ efforts on post-Brexit regulation, said the challenge is now how the EU responds to the government’s position. The government’s plans for financial services are heavily informed by the City’s pleas for mutual recognition by the UK and EU of regulatory regimes.
“What has become clear is that automatic rule-taking doesn’t work for the UK,” he said.
Chris Philp, a Conservative MP, said the plans will describe an “independent tribunal for equivalence” of regulations, and that recent signals from the EU side appeared more “accommodating”.