Never has a European Council been so important to a British prime minister as this December’s is to Theresa May. In No. 10 there has long been a belief that if she can get ‘sufficient progress’ in the Brexit talks to move on to trade and the transition, it will provide her with a political adrenalin shot. This is why a reshuffle has been pencilled in for afterwards. But if she fails to achieve her aim at the December council, her premiership will be further destabilised.
The trouble is that when it comes to Brexit, the Prime Minister tends to postpone talking to her cabinet until as late as possible. It was only this week that the cabinet’s new Brexit strategy committee discussed how much the UK was prepared to offer to move things on. After those present promised not to leak anything, the committee did at least agree that the UK should offer significantly more money.
This offer of extra cash is meant to come with various safeguards to ensure that the EU does not bank the concession and then demand more, which is what No. 10 feels happened after May’s Florence speech. As one minister explains: ‘What everyone sees coming is getting screwed on the money in phase one and financial services in phase two.’ This is why Downing Street is trying to reassure people that no money will be handed over unless the final deal is deemed acceptable.
What is no nearer resolution is the kind of final relationship with the EU that the UK is aiming for. Boris Johnson hoped the government would have made more internal progress on this point. Instead, there have been only vague assurances that this matter — which is far more important than the money or the transition — will be discussed before the end of the year.
In the run-up to Monday’s meeting, No. 10 tried to assure ministers that the EU wouldn’t just be able to pocket the money on offer and move on. I am told that the plan was to make the offer clear privately to the EU Council president, Donald Tusk; the Commission president, Jean-Claude Juncker; the French president, Emmanuel Macron; and the German chancellor Angela Merkel. Only if all of them agreed that the offer allowed talks to move on to the next stage would the UK make it formal.
But there’s a hitch in this plan. Merkel, whose attempts to put together a governing coalition have just collapsed, is not free to get heavily involved in the Brexit negotiations. As one cabinet minister laments: ‘It is bad for us as it means there’s no bandwidth there.’ The fear in London is that with the Chancellery preoccupied, the German position will default to that of their Foreign Office, which is more federalist and more inclined to take the Commission line.
Some in No. 10, however, emphasise that they are unworried about the German situation. One senior figure says that Merkel was not proving much help anyway, so it won’t make much difference. An influential figure at the Department for Exiting the European Union points out that so far, the Macron government has proved more constructive on Brexit than the Germans.
It won’t just be the money that’s an issue at the December Council. Under its new Taoiseach, Leo Varadkar, the Irish Republic has taken a strident tone on the border and Brexit. (If British politicians talked about a majority of the Irish electorate the way Varadkar does about Brexiteers, they would rightly be chastised.) The Irish position is now that there must be a guarantee that Northern Ireland won’t diverge at all from the rules of the single market and the customs union. Essentially, this would have the effect of placing a customs border between Northern Ireland and the rest of the UK because this country is leaving both the single market and the customs union.
The Irish proposal is quite remarkable: it is a state seeking to divide its neighbour economically. This despite the fact that only 15 per cent of Northern Irish exports go to the Republic while 60 per cent go to the rest of the UK.
It is often said that this idea is a non-starter because of Theresa May’s reliance on the Democratic Unionist Party. But this is to miss the point. Even if she had a majority of 100, she could not accept an internal UK customs border. As one cabinet minister who supported Remain points out to me: ‘It is not just the hard right of the Tory party for whom this is non-negotiable.’
Inside government, there is mounting anger at the way that the Taoiseach and his team are behaving. One normally mild-mannered cabinet member tells me that Varadkar is ‘playing with fire’. Another complains that the Irish foreign minister Simon Coveney has his own leadership ambitions, so is making the situation even worse.
Dublin is taking a huge risk with its hardline approach. No decent UK government could agree to what it is demanding. It is therefore making the collapse of the Brexit talks more likely. If these negotiations do fail, the effect on Ireland’s economy would be dire. As one government source warns: ‘If we crash out, they crash even further.’
If the talks do move on to phase two in December, the UK government will have to quickly set out what it wants. Last weekend, Philip Hammond appeared to suggest that he was moving away from the idea of staying as aligned to the EU as possible in regulation. He suggested that one economic positive of Brexit would be the ability to pursue a different regulatory approach to fast-changing industries. But I understand that the current favoured approach in the Department for Exiting the European Union is for any divergence to be limited to the service sector.
There is a temptation to view the deal with the EU as the determinant of the UK’s future prosperity. But what Britain does itself will be far more important than the terms of our exit. This is why it is crucial that any trade agreement allows this country to go its own way on things such as gene editing, driverless cars and artificial intelligence.
The UK can become a leader in the technologies that will define the 21st century. But it won’t achieve that by blindly following someone’s else regulatory frameworks.
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