British Prime Minister Theresa May has been warned not to accept European Union plans which would leave the UK a “colony” of Brussels for two years after Brexit, as UK Chancellor Philip Hammond said a transition deal would “replicate the status quo”.
Mr Hammond said the deal sought by the Government would mean that, although “technically” the UK would not be in the customs union or single market, it would effectively keep the same rules, including on trade and immigration, during an implementation period until the terms of a new deal can be put in place.
Such a move would infuriate Tory Eurosceptics, with British Conservative backbencher Jacob Rees-Mogg warning that it would reduce the country to the level of a “vassal state”.
The EU’s guidelines for the next phase of Brexit talks were set out in Brussels yesterday after leaders of the 27 other members of the bloc agreed to move on to the second stage of the process covering a transitional period and talks on a future trade deal.
The four-page document sets out the EU’s guidelines for the next stage of negotiations, including the process for agreeing the terms of the transition period expected to last two years after the date of Brexit.
It makes clear that the EU expects the UK to observe all of its rules – including on freedom of movement – and accept the jurisdiction of the European Court of Justice (ECJ) during this time.
It also set up a potential clash with London over Theresa May’s hopes of negotiating early trade agreements with countries outside the EU, stating firmly that the UK will stay in the single market and customs union during transition and will “continue to comply with EU trade policy”, which bars deals by individual states.
Mr Hammond, in China on a trade mission, was asked whether firms should expect a transition deal where the UK is still participating in the single market, customs union and subject to the ECJ.
“In a word, yes,” he told Sky News. “What they should expect as a result of the agreement we’ve reached this week with the European Union is a transition, or implementation period, which will start at the end of March 2019, during which we will no longer be members of the European Union, we won’t technically or legally be in the customs union or in the single market, but we’re committed as a result of the agreement we’ve made this week to creating an environment which will effectively replicate the current status quo so that businesses can carry on trading with their commercial partners across the EU as they do now, borders will operate as they do now, and financial services businesses will be able to carry on conducting their business across borders as they do now.”
The restrictions imposed by the EU’s position were rejected by Mr Rees-Mogg, who said Ms May must not agree to them.
“We cannot be a colony of the European Union for two years from 2019 to 2021, accepting new laws that are made without any say-so of the British people, Parliament or Government,” he told BBC’s Newsnight.
“That is not leaving the European Union, that is being a vassal state of the European Union, and I would be very surprised if that were Government policy.”
The looming row over the terms of a transition deal comes after Ms May was given a boost after agreement within the Tory ranks means she looks set to avoid a second Commons defeat.
Behind-the-scenes efforts resulted in a compromise which is acceptable to would-be rebels who were set to reject Ms May’s plan to write March 29 2019 into law as the date of the UK’s departure from the bloc.
The Government is understood to be “looking closely” at the amendment tabled by Tory MPs from both sides on the Brexit divide which would give ministers flexibility to change the departure day if Parliament agrees.
Ministers have not formally supported the move but it would appear certain the Government will back the measure if it presented a way for Ms May to avoid another Commons reverse.
Former UK Cabinet minister Oliver Letwin, one of the architects of the compromise, said it would provide “exactly the same degree of flexibility in UK law” as Article 50 allows the European Union.
“I’m optimistic that we can find a sensible resolution to this particular rather small issue; we are then left with a much bigger question of negotiating a trade deal with the EU, which is a very difficult thing to do,” he told BBC Radio 4’s Today programme.
There was a “long way to go” before a final deal with Brussels could be agreed, he said.
“Some years back I described this as a game of multi-dimensional chess and I think it is like that because you have got 27 countries on the other side, you have got the Parliament, you have got the Council, you have got the Commission and then you have got all the complexities of politics in the UK.”
Cabinet ministers are due to discuss their preferred “end state” relationship with Europe for the first time on Tuesday, and pressure from Brussels is mounting on Ms May to deliver a detailed statement on her aims which the EU will regard as an adequate basis to enter swiftly into substantive talks.