This afternoon has provided a preview of just how difficult the next few weeks are going to be for Theresa May. First, we had word of a speech from Jacob Rees-Mogg, the new chairman of the European Research Group of Tory MPs, warning that the government’s whole tone on Brexit must change and that it mustn’t be treated as just a ‘damage limitation exercise’. Rees-Mogg also made clear that, to his group, close alignment with EU rules is unacceptable. Then the FT broke news of Philip Hammond telling a Davos audience that he only wanted ‘very modest’ changes to the UK’s relationship with the EU.
So as one Whitehall source put it to me, how can Theresa May square this circle? How can she set out an end-state that Hammond and the Brexiteers can live with?
It is hard to see how. Though I wonder if a deal by which the UK had the right to diverge, but the EU had the right to review the UK’s market access if it did so, might just be able to do that.
But whatever you think of Philip Hammond’s proposed end state, his remarks are a mistake. For Hammond talks about subtracting from the UK and the EU’s current arrangements to reach a mutually acceptable agreement. To many EU ears, this will sound like diluting the single market—something that they won’t accept. It would, surely, be more sensible to talk about building up from a free trade agreement. This is far more acceptable to the European way of thinking; look at how the Belgians and the Italians have publicly backed the idea of a CETA plus, plus deal.