Theresa May was scrambling to avoid a Brexiteer backlash after reports indicated she has agreed Britain might stay in the customs union deeper into the 2020s.
But according to reports in The Telegraph the cabinet agreed to the so called “backstop” option, which comes into play if none of the UK’s other preferred options for future customs arrangements are ready by the end of the transition period.
The “backstop” would see the UK staying aligned to the EU’s current customs union, until it has put in place the necessary infrastructure to implement a new customs policy, which officials have warned could be at least 2023.
But with the suggestion likely to anger Tory backbenchers demanding a clean break from the EU, Ms May said on Thursday: “No, we are not [climbing down].
“The United Kingdom will be leaving the customs union, we are leaving the European Union. Of course we will be negotiating future customs arrangements with the European Union and I have set three objectives.
“We need to be able to have our own independent trade policy, we want as frictionless a border [as possible] between the UK and the EU so that trade can continue, and we want to ensure there is no hard border between Northern Ireland and Ireland.”
Downing Street sources had earlier denied that any agreement had been reached at Tuesday’s meeting of the Brexit cabinet sub-committee, with the suggestion it had been signed off despite reluctance from Boris Johnson and Michael Gove.
The cabinet is currently deadlocked over what kind of customs relations to opt for in the future – either a “customs partnership”, preferred by Ms May, or “maximum facilitation”.
The partnership plan would see Britain collect tariffs on the EU’s behalf at ports and airports, passing on a share of the money to Brussels – then if the UK sets different tariffs from the EU, traders would claim refunds from HMRC for goods that stay in Britain.
Olly Robbins, Ms May’s Europe adviser, regards the partnership as a means of avoiding a hard border in Ireland, while keeping the UK out of the European customs union. Close aides of Ms May have also called it “intellectually perfect”.
But Downing Street has been privately warned that the customs partnership proposal could collapse the government, with the Brexit-backing European Research Group having organised a critical report backed by 60 MPs.
The group’s chairman, Jacob Rees-Mogg, has called the proposal “cretinous”, “deeply unsatisfactory” and argued that it would “not get us out of the European Union, which is what people voted for”.
The other option, also called “max fac”, is viewed more favourably by Brexiteers in both the cabinet and on the back benches and would see the UK outside any customs union, but with some controls at the border between Northern Ireland and the Irish Republic.
Backers say a “trusted trader” scheme and remote monitoring of the border would limit physical infrastructure.
But it would still essentially mean a hard border on the island of Ireland and critics claim this would break the Good Friday Agreement, risking peace in Northern Ireland.
With ministers unable to agree which to choose and the EU having already rejected both options, it is looking more likely that the UK will have to revert to the “backstop” option it agreed to in principle in December, that could see Northern Ireland remaining a part of Europe’s trading arrangements and a customs border drawn down the Irish Sea.
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But with the government’s DUP partners and the prime minister saying this would be untenable, it is possible that the whole of the UK would simply stay in alignment with EU arrangements.
A government spokesperson said: “We are leaving the customs union, freeing up the UK to sign and implement free trade deals around the world.
“In December we agreed that a backstop option to avoid a hard border between Northern Ireland and Ireland and protecting the constitutional and economic integrity of the UK should be translated into legally binding text in the withdrawal agreement.
“We stand by those commitments but the prime minister has been clear that in its current drafting, the EU’s version of the backstop legal text is unacceptable and we continue to negotiate.”