Philip Hammond has been accused of trying to “appease” Brussels by saying a transitional deal after Brexit would mean the UK sticking to EU rules, including on immigration and the role of European judges.
The Chancellor said a transition deal would “replicate the status quo” and that, although “technically” the UK would not be in the customs union or single market, it would effectively keep the same rules during an implementation period until the terms of a new deal can be put in place.
The prospect of such a deal – set out in guidelines issued by the European Union – has infuriated prominent Tory Eurosceptics.
Former Brexit minister David Jones condemned the Chancellor, claiming he “appears only too ready to do Brussels’ bidding” by signalling acceptance of the EU’s position.
Ex-Tory leader Iain Duncan Smith accused Mr Hammond of “undermining” Theresa May while prominent backbencher Jacob Rees-Mogg said the EU’s position would reduce the UK to the status of a “colony”.
The EU’s guidelines for the next phase of Brexit talks were set out in Brussels on Friday after leaders of the 27 other members of the bloc agreed to move on to the second stage of the process covering a transitional period and talks on a future trade deal.
The four-page document sets out the EU’s guidelines for the next stage of negotiations, including the process for agreeing the terms of the transition period expected to last two years after the date of Brexit.
It makes clear that the EU expects the UK to observe all of its rules – including on freedom of movement – and accept the jurisdiction of the European Court of Justice (ECJ) during this time.
It also set up a potential clash with London over the Prime Minister’s hopes of negotiating early trade agreements with countries outside the EU, stating firmly the UK will stay in the single market and customs union during transition and will “continue to comply with EU trade policy”, which bars deals by individual states.
Mr Hammond, in China on a trade mission, was asked whether firms should expect a transition deal where the UK is still participating in the single market, customs union and subject to the ECJ.
“In a word, yes,” he said.
“What they should expect as a result of the agreement we’ve reached this week with the European Union is a transition, or implementation period, which will start at the end of March 2019, during which we will no longer be members of the European Union, we won’t technically or legally be in the customs union or in the single market, but we’re committed as a result of the agreement we’ve made this week to creating an environment which will effectively replicate the current status quo so that businesses can carry on trading with their commercial partners across the EU as they do now, borders will operate as they do now, and financial services businesses will be able to carry on conducting their business across borders as they do now.”
Mr Jones, a board member of the pro-Brexit Leave Means Leave campaign, said: “What is it about negotiating that Philip Hammond doesn’t understand?
“Once again, the Chancellor appears only too ready to do Brussels’ bidding and happily rule out a proper Brexit deal.
“Meekly agreeing to the EU’s demands that we are subject to their rules – and the jurisdiction of the European Court of Justice – for two years is completely unacceptable.
The Brexit Cabinet sub-committee is meeting on Monday ahead of a full Cabinet meeting on Tuesday and Mr Jones urged Brexiteers Boris Johnson and Michael Gove to “rein in the Chancellor and get him to abandon his bid to derail Brexit once and for all”.
Mr Duncan Smith said: “The Prime Minister made it clear in the House of Commons on Monday that the purpose of the implementation period is to implement progressively what has been agreed.
“The Chancellor’s comments today are not Government policy, which he should stick to. As it is, he is undermining the Prime Minister’s negotiations with the EU.”
Mr Rees-Mogg said Mrs May must not agree to the restrictions imposed by the EU’s position.
“We cannot be a colony of the European Union for two years from 2019 to 2021, accepting new laws that are made without any say-so of the British people, Parliament or Government,” he told BBC’s Newsnight.