The Customs Partnership proposal is bad politics, bad policy and a bad plan

The Customs Partnership proposal is bad politics, bad policy and a bad plan

Yesterday’s intervention by the Foreign Secretary, Boris Johnson, who called the Government’s proposed Customs Partnership “crazy”, has raised the Westminster political drama level to Defcon 2. It’s obviously unusual to have a senior minister criticising official policy. Talking heads soon popped up on television to criticise this “unprecedented” intervention, in some cases ignoring that Downing Street had sanctioned an appearance on Sunday by the Business Secretary, Greg Clark, who looked to be on the other side of the debate. On the Andrew Marr Show, Clark seemed to imply that only the Partnership model could protect thousands of manufacturing jobs.

Last week the Brexit Inner Cabinet committee considered the Government’s customs policy options. It’s remarkable that two options are still under consideration, at this late stage – well into the second half of the two-year Article 50 negotiation period. At that Cabinet committee, a majority of members spoke out against the Partnership proposal. But the question was not put to a vote and no decision was made.

Over the next few days, Downing Street let it be known that their plan was to press on with a re-packaged Customs Partnership, despite the objections raised in the Cabinet committee. Pushing ahead with the Partnership proposal is bad politics, bad policy and a bad plan. Downing Street hope either to persuade a Cabinet minister on the committee to change his mind, or to put the policy to full Cabinet. But they have not exactly been mending fences: some Downing Street employees have been quietly questioning the intelligence of certain ministers, who refused to back the Partnership option.

After Johnson’s intervention yesterday, Number 10 sought to insist that the Customs Partnership has been on the table since August and was agreed along with the rest of the Prime Minister’s Mansion House speech. That’s true to a point. The policy was introduced in the August customs paper but was there as the second option, which the paper itself described as “unprecedented” and “untested”. That paper gave little detail on the Partnership and indeed explicitly noted that a Partnership could take various forms.

At the time, I was assured by multiple political and official sources in Whitehall that the Partnership plan was there to placate the Chancellor, rather than as a serious policy option. By the time of Mansion House, the Partnership had become the first option for post-Brexit customs policy. But even in that speech, around twice as many words were devoted to outlining the merits and mechanisms of the alternative model as were given over to the Partnership.

If she presses ahead with the Partnership, over the heads of the Brexit-backers in her Cabinet, the Prime Minister risks a major rupture with her party over a policy which almost everyone agrees is questionable at best. Brussels termed it “magical thinking”; the Eurosceptic Jacob Rees-Mogg called it “cretinous”; former Downing Street Chief of Staff Nick Timothy has urged the Prime Minister to reject it, saying it carries “significant risks”; and Lord Kerr, who was the UK ambassador to the EU, said it was a “dead parrot”.

Worse still, Downing Street itself knows this parrot may not fly. Officials admit that they aren’t certain it would work. Some supporters believe it helps unlock the Irish border issue but that’s not universally accepted. David Davis has apparently written to the Prime Minister raising profound doubts about its legality. The real reason the Partnership is still on the table is that Downing Street believes it offers the best hope of forestalling a customs union rebellion in Parliament, rather than because of its inherent benefits.

And let’s be honest, this Partnership would hardly be balanced. In fact it would be lop-sided. The UK would continue to charge the EU’s customs duties on imports, even if some of those could later be refunded. The EU would not be charging UK tariffs.

Even its proponents inside Whitehall don’t think that the Partnership could work for many years. And the Partnership option is take it or leave it. If the EU agrees to proceed in the negotiations on the basis of a possible Partnership, they could reject it further down the line, leaving the UK empty handed.

Alternatively, the Maximum Facilitation customs model offers a range of different options which can be scaled up or scaled down. So-called ‘Max Fac’ means the UK and EU jointly agreeing to do as much as possible to minimise friction on the borders. The UK has put forward various ideas – such as increasing the number of Authorised Economic Operators (who are licensed to cross borders more easily) and exempting certain low-value traders from customs checks. The EU might rule some of the ideas out, but both sides could agree on different or modified options.

What’s the way through? Brexit-backing ministers may need to accept that leaving the Customs Union won’t be as quick or straightforward as many had hoped, not least given the lack of preparation by both the UK and EU sides. One way forward could be for the Government to consider – as Open Europe has previously proposed – delaying the timetable on the UK leaving the Customs Union. The standstill transition will end in 2020, but the UK could seek a Customs Union beyond that. Perhaps that would be enough to placate the concerns of some in Parliament, not least as some Labour MPs might back a looser customs arrangement.

The real reason why the drama is so heightened over this customs policy debate is that the Government has managed repeatedly to defer really defining its vision for post-Brexit Britain. Whatever choice is made here is becoming emblematic of the future direction of Brexit. So whatever decision the Prime Minister makes, she will inevitably disappoint one side of the party or the other. And therefore the heightened tensions over Brexit are unlikely to dissipate soon.