Crunch Brexit talks hint at compromise within Tory factions

Theresa May's Brexit inner cabinet broke up last night after eight hours of talks, amid signs that the factions in her top team have stitched together a fragile compromise on a plan for Britain's future EU relationship.

But it is understood the plan does little to answer the question of the Irish Border, a theme that chancellor Philip Hammond believes will drive the cabinet ultimately to pursue a much closer future relationship with the EU.

The talks at Mrs May’s Chequers country retreat ended at 10pm on Thursday, with Brexiteers proclaiming that Britain was on course to make a clean break with the EU. “Divergence has won the day,” said one cabinet source.

But pro-Europeans also insisted that the talks had gone well. One person in the room said it would be wrong to say that divergence had “prevailed”, adding: “It was genuinely positive and substantial.”

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Another person at the Chequers meeting said: “It all finished rather positively. It seems like everyone thinks they got what they wanted.”

Mrs May will give a public exposition on her approach to Brexit in a speech next week, although there are already signs that Brussels is likely to reject outright her vision of a future trading relationship.

The 11-member Brexit cabinet committee was said by those at the Chequers meeting to have endorsed a proposal dubbed "Canada plus plus plus" by David Davis, the Brexit secretary.

Under the plan, Britain would seek to negotiate a free-trade agreement similar to the EU/Canada deal, but then try to embellish it by securing better access to the single market for goods and services through close regulatory co-operation.

Brexiteers seized on the broad agreement at Chequers that Britain should be able to set its own rules and regulations, allowing an “ambitious managed divergence” with the EU over time.

But Remainers, led by Philip Hammond, the chancellor, insisted that the starting point should be that Britain and the EU would have high levels of alignment.

One person briefed on the talks said that Britain would make a formal declaration committed to high standards in areas such as employment law, the environment and consumer protection, to preserve a level playing field.

The EU and UK would agree common regulatory goals, known in London as an “equivalence of outcomes”, but would be free to achieve those goals in different ways.

The “right to diverge” would be overseen by a dispute resolution mechanism, imposing market access sanctions if either side tried to disrupt the level playing field. There would be a mutual recognition of each other’s rules and regulators.

Those leaving Chequers last night were relieved that the proposal had secured a cabinet truce, at least for the time being, allowing Mrs May to give a speech next week to give some idea to the EU27 what she wants from Brexit talks.

But senior ministers admit that the Chequers talks were at a high level and left much detail to be resolved. It is once Mrs May moves into the detailed negotiations of her plan with the EU that her troubles could start.

Brussels has already rejected the hybrid model proposed at Chequers, a cross between a free-trade agreement and a Norway-style single market deal, arguing that Mrs May’s red lines mean she will be offered no more than a Canada-style FTA.

Pro-European Tory MPs and Labour are plotting to put down amendments in the House of Commons requiring Britain to stay in a customs union with the EU, a move which would drive a wedge into Mrs May’s government.

Mrs May led the discussions at Chequers on the future UK/EU relationship, while there were separate talks focused on the implications of Brexit for the automotive, agri-food and digital trade sectors.

The eight hours of talks, which started at 2pm, continued over dinner and finished at 10pm on the dot, as planned.

The Brexit negotiations cabinet committee comprised five pro-Remain ministers: Mr Hammond; home secretary Amber Rudd; Cabinet Office minister David Lidington; business secretary Greg Clark; and Northern Ireland secretary Karen Bradley

There were also five ministers favouring a harder form of Brexit: foreign secretary Boris Johnson; environment secretary Michael Gove; Brexit secretary David Davis; trade secretary Liam Fox; and Gavin Williamson, the defence secretary who backed Remain but has swung behind the Brexiteers.

Mrs May’s position as a low-key Remainer in the 2016 referendum puts her at the centre of the cabinet’s two factions; many Tory MPs acknowledge that she is uniquely well positioned to try to find a compromise to bind her feuding party together.

Julian Smith, chief whip, also attended the Chequers talks in recognition of the incendiary nature of the talks for party discipline. Mr Smith will also have the task of securing a Commons majority for an eventual EU/UK deal.

To give an insight into the EU's likely response, Tim Barrow, Britain's ambassador to the EU, and Ed Llewellyn, ambassador to Paris, were also invited to the country retreat in Buckinghamshire, alongside other policy and press advisers. – Copyright The Financial Times Limited 2018