The question of the UK’s post-Brexit relationship to the EU customs union has become the focal point for the deepest crisis the Tory Party has ever faced: a crisis that is driving all the contradictions of Brexit to breaking point.
Theresa May’s government, which lost its parliamentary majority last year, is locked in a state of perpetual paralysis. Never before has a Tory government been so weak and divided. At every turn it faces rebellion from its large and influential, hard-Brexit wing, from its minority faction of Remainers, and from the DUP (Democratic Unionist Party) – all of whom have different and incompatible priorities when it comes to Brexit.
After the rejection of her “customs partnership” by hard-Brexit Tories, Theresa May now faces a trio of crises: a possible defeat in parliament over the UK’s membership of the customs union; the threat of a Eurosceptic uprising within her own party; and to cap it all off, an EU council meeting in June at which her Irish counterpart will likely demand a comprehensive proposal on the question of the Irish border.
Fiction of frictionless border
In December, Mrs May managed to stave off a crisis by coming to an agreement with the EU, under which the North and South of Ireland would maintain “regulatory alignment” in the event that no other means of avoiding a physical border were found.
Unfortunately for May however, this option would all but guarantee the retention of the North of Ireland in the single market and customs union while the rest of the UK leaves. Almost immediately after this was announced, the DUP made it clear that it would not accept any deal that involves “any form of regulatory divergence, which separates Northern Ireland economically or politically from the rest of the United Kingdom”.
Now, with pressure mounting from all sides, May must deliver a proposal that simultaneously takes the whole of the UK (including the North of Ireland) out of the EU customs union and single market, whilst avoiding the need for any form of visible border either across Ireland or in the Irish Sea. Such intractable problems call for creative solutions, and thus the ill-fated “customs partnership” was born.
May’s plan was that the UK would collect tariffs on goods crossing the Irish border that are destined for the EU without the need for any infrastructure on the border itself, whilst being free to set different tariffs on goods destined for the UK. This is not without its problems, however. First, there is the tiny snag that the “ambitious and untested” technology required to put the plan into practice does not in fact exist. And second, the slightly bigger snag: unless the UK maintains “regulatory alignment” with the single market, physical border checks would likely be necessary with or without this technology.
Michel Barnier, the EU’s lead negotiator, was less than enthusiastic, branding May’s proposal “magical thinking”, while May’s Dutch counterpart, Prime Minister Mark Rutte, simply said, “It would be better to say nothing at all.” Surprisingly however, the blow that laid May’s magical customs partnership to rest came not from Europe, but from within the prime minister’s own cabinet.
Suspicious that the so-called customs partnership would end up seeing the UK fall into a customs union by the back door, the hard-Brexiteers went on the attack. The European Research Group of 60 Tory MPs, led by Jacob Rees-Mogg, submitted a 30-page memorandum to the prime minister, demanding that she abandon her “undeliverable” project of a customs partnership. Sensing an opportunity for self-promotion, Boris Johnson also came out publicly to decry the plan as a “crazy system”, which would leave the UK “locked in the tractor beam of Brussels”.
Unfortunately for May, her other options are even worse. The preferred option of the hard-Brexiteers, of “maximum facilitation”, would not avoid a physical border in Ireland; it would “soften” it, using technology and trusted traders schemes to reduce infrastructure and disruption to a minimum. The likelihood that either the EU or the majority of the House of Commons would accept this is vanishingly low.
Predictably, facing yet another impasse, the prime minister has opted to kick the can down the road once more. On the basis of a new plan, agreed with her cabinet last week, the UK will now remain in a customs union with the EU beyond 2021 unless a better alternative can be found by that time. Meanwhile, HMRC, the UK’s customs authority, has already confirmed that the technology required for either of the Tories’ proposals will not be ready for the proposed cut-off date in January 2021, all but tying the UK to the customs union for the foreseeable future.
Ultimately, only two options are available: either a customs union in all but name, or a hard border in all but name. The same applies to the single market. May’s entire policy since Article 50 was invoked last year has been to straddle both options whilst trying to lull all sides with soothing tales of “a new and better model”, of a “Global Britain” and, of course, “a customs partnership”. But the reality of the situation is rapidly bringing matters to a head.
EU negotiators and heads of state, not least Ireland’s Leo Varadkar, are demanding that the UK finalises its proposal for solving the Irish border question before further negotiations can continue. This leaves the question of the UK’s post-Brexit transition hanging in mid-air, with less than a year to go before the UK crashes out of the EU on 29 March 2019. It is certainly possible that the European side of negotiations will use these point of extreme weakness to drive home further concessions in return for accepting May’s customs fudge.
But even this may not be enough to prevent a decisive showdown within the Tory Party. May’s business secretary, Greg Clark, has offered a sharp reminder of the interests of big business in Britain, stating that Toyota could choose to build a new plant outside the UK if any new barriers were to emerge between the EU and the UK. In fact, the uncertainty of the current situation alone could be enough to shift investment out of the UK as companies begin to make firm decisions about their plans.
Meanwhile, the government faces a crunch vote in parliament over its European Union (Withdrawal) Bill, which has so far suffered two defeats in the House of Lords on the question of remaining in the customs union in particular. It is possible that when the Bill returns to the House of Commons – an event May has already postponed in fear of defeat, but which may take place as late as October – the pro-European faction of the Tories could rebel and vote in favour of legally binding the government to negotiating a customs union with the EU post-Brexit, leaving the best laid plans of the hard-Brexiteers in tatters. Such a result would almost certainly provoke a bloodbath of epic proportions in the Tory Party and is something that May has been consistently trying avoid.
Already, some Tory MPs have started making noises about another snap general rlection in the Autumn, with some telling the Sunday Times newspaper:
“The numbers are against us and if we face repeated defeats when the Withdrawal Bill returns to the Commons, the only alternative will be to kick over the table and trigger a vote of no confidence in the prime minister, which will likely lead to another general election.”
For now, despite these threats, a snap election still remains unlikely because of the likelihood of Corbyn coming to power if the government collapses. But it cannot be ruled out that if enough of their red lines are crossed the Tory Brexiteers would be prepared to risk everything for the sake of achieving a hard-Brexit. In such a scenario even the apocalyptic outcome of a ‘cliff-edge’ Brexit, in which the UK simply tumbles out of the EU without a deal, becomes a real possibility.
More likely, May’s zombie government will continue to stagger on until the next general election in 2022, or until the ruling class considers the chaos caused by the Tories’ civil war to be a greater threat to its interests than a Corbyn government. In the meantime, all of the contradictions binding the government will continue to intensify.
Ultimately, May’s paralysis is not accidental. It reflects the impasse of British capitalism and of its most trusted party. Trapped by its economic decline relative to its competitors and the deep political crisis which was unleashed by the referendum in 2016, the UK can neither remain nor leave. Stuck between these mutually impossible poles, May can only attempt to stabilise the situation and delay the inevitable, but this will only prepare the way for an even greater crisis further down the line: a crisis that could destroy the Tory Party and even threaten the system as a whole.