Philip Hammond has revealed that Britain will seek a Brexit transition deal that “looks a lot like the status quo”, maintaining single market and customs union membership in all but name.
The chancellor’s comments come ahead of a planned speech by Theresa May, thought to be on September 22, in which the prime minister is expected to tell a European audience how she hopes to deliver a phased Brexit.
Mrs May’s team insists that she has always envisaged “an implementation period” after Brexit in March 2019, but the version articulated by Mr Hammond on Tuesday goes beyond what she originally intended.
The chancellor told the Lords economic affairs committee there was “general agreement that it would not make sense to ask business to face two sets of changes” — once in March 2019 and again when UK-EU relations reach their “end state”.
“That implies a transition, or interim, period would need to look a lot like the status quo, otherwise businesses will be making one set of changes at the beginning of the interim period and another set towards the end of it.”
Although Mr Hammond confirmed that Britain would legally leave the single market and customs union in March 2019, it would seek to negotiate almost identical trading arrangements. He has previously spoken of a transition lasting two or three years.
The transition envisaged by the chancellor would imply that Britain would carry on paying into the EU budget and abiding by European Court rulings, even as it lost any vote or influence over policies made in Brussels.
The position, which Mr Hammond has developed with David Davis, the Brexit secretary, over the summer, has been presented by the government as being wholly in line with Mrs May’s last big Brexit speech at Lancaster House in January.
Mrs May’s “phased process of implementation” was originally sold primarily as a technical exercise to allow business, EU member states and Britain to adjust to a proposed new relationship based on a trade agreement.
“This might be about our immigration controls, customs systems or the way in which we co-operate on criminal justice matters,” she said. “Or it might be about the future legal and regulatory framework for financial services.
“For each issue, the time we need to phase-in the new arrangements may differ. Some might be introduced very quickly, some might take longer.”
At no point did Mrs May say that she expected Britain to remain a de facto member of the customs union and single market for an undefined period after it formally leaves the EU.
Mr Hammond also told peers that HM Revenue & Customs was making contingency plans in the event of Britain leaving the EU without a deal and admitted that the timescale to prepare for new border controls was “challenging”.
He said there would be “significant disruption” at the port of Dover if trucks were required to stop for customs checks, even if they were held for a matter of minutes.
Meanwhile, the next round of negotiations over the UK’s departure from the EU, due to start on Monday, is to be postponed, clearing the way for Mrs May to make her Europe speech.
Downing Street is hoping to find a location in continental Europe at which the prime minister can make the speech on September 22. EU leaders, frustrated with the opacity of Mrs May’s Brexit strategy, will hope for more clarity.
London confirmed that both sides had agreed to start the next, fourth round of negotiations in the week starting September 25.
“Both sides settled on the date after discussions between senior officials in recognition that more time for consultation would give negotiators the flexibility to make progress in the September round,” the government said.