Brexit bombshell on Northern Ireland threatens to derail negotiations with Brussels

The British government is insisting on maintaining full control over state aid and customs, even if that means reneging on the international treaty it signed under a year ago, according to bombshell leaks that have lit up the political landscape.

Last night the Financial Times Brexit specialist Peter Foster got the scoop. He reported that the upcoming UK Internal Market Bill, due to be published this Wednesday, will include clauses that eliminate or override the legal force of parts of the EU Withdrawal Agreement in the event that Britain leaves the EU without a deal in December.

These clauses will focus on the Northern Ireland Protocol, which currently requires Northern Ireland to uphold some EU customs rules so as to avoid a hard border on the island of Ireland. In practice, the arrangement set out in the Withdrawal Agreement passed by Parliament in January would result in friction in the trade between Northern Ireland and the rest of the UK, as well as a regulatory border in the Irish Sea. The UK government will also have to notify Brussels of any state-aid decisions that would affect Northern Ireland’s goods market.

The Protocol, which was renegotiated and agreed to by Boris Johnson’s government last year, is now considered by some Brexiteers to be an unacceptable breach of British sovereignty. It has been described as a Trojan Horse, allowing the EU to influence the UK’s approach to customs; many state-aid decisions for English companies will have some effect on Northern Ireland, and thus must be declared and even negotiated.

The fallout from the leaked clauses has been substantial. Critics have argued that such a move would undermine Britain’s international reputation as a good-faith negotiator. “Who would want to agree trade deals with a country that doesn’t implement international treaties? It would be a desperate and ultimately self-defeating strategy,” one EU diplomat told Reuters this morning. Irish Foreign Minister Simon Coveney last night tweeted quite bluntly: “This would be a very unwise way to proceed.”

Leo Varadkar, the former Taoiseach, this morning responded with  suspicion, noting that in the last few weeks of a negotiation, “you can sometimes see a certain amount of posturing and sabre rattling.” He added that the Withdrawal Agreement exists to avoid a hard border in Ireland.

Number 10 insisted today that it is still committed to the Withdrawal Agreement, but said that ministers are working to ensure that the provisions in the Agreement work without cutting across British sovereignty.

But in taking a harder line Downing Street has come into line with senior Conservative backbenchers who have become increasingly concerned about the Agreement’s ramifications. Former Conservative leader Iain Duncan Smith last month said: “Whilst the UK wants to have a good trade relationship with the EU as a sovereign state, the EU has different ideas. They want our money and they want to stop up being a competitor. The Withdrawal Agreement sadly helps them.”

Veteran MPs David Davis, Sir Bill Cash and Owen Paterson have expressed similar sentiments in recent weeks.

The government is still committed to maintaining the Withdrawal Agreement if a deal is reached over the coming weeks. Both sides believe they have until mid-October to hash out a deal in time for the ratification process to take place. But the major stumbling blocks – over the UK’s level playing field obligations, fisheries, and financial markets – have yet to be overcome.

The UK’s insistence on having its own state aid regime, which Brussels fears would be used to undercut European businesses, has been a particularly thorny issue, and perhaps explains why the Northern Ireland Protocol’s state-aid requirements are now the focus of Downing Street’s attention. The government’s supporters argue that the EU has not requested a joint state aid regime with other countries it has signed trade deals with, such as Canada and Japan.

When the last round of talks concluded last month, UK Chief Negotiator David Frost condemned the EU for “still insisting not only that we must accept continuity with EU state aid and fisheries policy, but also that this must be agreed before any further substantive work can be done in any other area of negotiation, including the legal texts.”

Yesterday, Frost went further still, telling the Mail on Sunday that the UK is “not going to become a client state. We are not going to compromise on the fundamentals of having control over our own laws.” A long-time civil servant, Frost is also reported to be supportive of overriding parts of the Withdrawal Agreement in the event of a “no deal” scenario.

Heading into the eighth round of negotiations, which begin tomorrow, the Prime Minister released a statement making clear he was ready to walk away. “There needs to be an agreement with our European friends by the time of the next European Council on October 15… if we can’t agree by then, then I do not see that there will be a free trade agreement between us, and we should both accept that and move on,” he said, adding: “I want to be absolutely clear that, as we have said from the start, (no deal) would be a good outcome for the UK.”

Recent events and statements have shown just how far apart the two sides are. The stakes have become very high indeed.