Brexit war Cabinet: Cutting through the customs union noise - know your max fac from your NCP

Catherine Neilan
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Protests As The British Prime Minister Triggers Article 50
Brussels wants an agreement in place by June - but the UK is working torwards an October deadline (Source: Getty)

Theresa May convenes her Brexit war Cabinet today, where her most senior ministers will debate which of the government's two customs union options it should take forward into the next round of negotiations.

Although a decision is unlikely today it is thought there will be a standoff between Remainers including chancellor Philip Hammond and business secretary Greg Clark over their preferred option of a customs partnership and Brexiters including foreign secretary Boris Johnson and Brexit secretary David Davis, who back the "max fac" solution.

But what is the difference between these two options, is there a third way, and how much time has the government got left to decide?

What is a customs partnership?

Also known as the hybrid model, the customs partnership as proposed by Theresa May in her Mansion House speech would see the UK collect tariffs on behalf of Brussels for goods that are travelling via the UK on their way to the EU. Businesses would be able to claim back any rebate if the goods stay in the UK.

It is favoured as a solution to the Irish border question, as there would be no hard customs border on the island.

However if there are significant regulatory differences between the two sides it could fail.

However it is deemed technically challenging and has been rejected by both Brussels and Brexiters such as Jacob Rees-Mogg, who said it was "completely cretinous".

What is a customs agreement?

Favoured by Brexiters, the “maximum facilitation” - or "max fac" - option would allow so-called “trusted traders” to cross the Northern Ireland and other EU borders freely, aided by technology.

It would reduce customs controls and barriers, making it as frictionless as possible. Goods would be electronically tracked and pre-cleared with tax authorities.

But there would need to be tariff checks, meaning it would not solve the Irish border question. This option has also been rejected by Brussels so far.

Are there any other options?

Number 10 has been unequivocal: there are two options on the table and they are the options that the government is looking at. The plan is to narrow that down to one option for future negotiations - however there is no guarantee that it will be accepted by MPs, or Brussels.

Remainer MPs are still hoping that the UK could rejoin a bespoke customs union with the EU after Brexit which would act in exactly the same way the current system operates. However, Brexiters argue this is a betrayal of the referendum result and would be the worst of both worlds, as it would prevent the UK from being able to strike its own free trade deals.

Failing a viable option, the EU and UK have agreed to a "backstop" proposal for Ireland, which could result in Northern Ireland remaining part of the customs union. Theresa May has ruled out any solution which would carve up the United Kingdom, however, which suggests that could result in staying in the customs union. Both sides have stressed they will avoid a hard border in Ireland at all costs.

How long do we have left to decide?

Arguably the deadline for a decision has already passed. Both options will require a lot of work - both at borders and in businesses.

The government has already been working to deliver a new, technologically advanced, customs system but delays on that front make it less likely things will be in place by the end of the transition period on New Year's Eve 2020.

Brussels is pushing for solutions, particularly regarding the Irish border, to be agreed by June - but David Davis yesterday stressed he and his team were working towards an "early October" deadline. Assuming an agreement is reached at that point, the final deal will be put to parliaments in the UK and EU, before implementation can begin.