No 10 contradicts Hammond over ‘off-the-shelf’ Brexit transition deal

Downing St spokesman at odds with what chancellor is believed to have told business leaders about post-2019 arrangements.

Downing Street has insisted that the UK will not seek an “off-the-shelf” model for a post-Brexit transitional period, contradicting the position Philip Hammond is believed to have expressed to business leaders.

The chancellor has been pressing for a simple transition arrangement to maintain trading conditions with Europe for at least two years after Brexit, mirroring arrangements the EU has with countries such as Norway and Switzerland giving them access to the single market.

However, on Monday a Number 10 spokesman said: “There were reports last week that we were looking for an off-the-shelf model, we are not looking for an off-the-shelf model. Precisely what the implementation model will look like is up for negotiation.”

It is understood that Hammond believes the UK cannot negotiate a bespoke transitional deal in the time available – nor would it make sense to enter into prolonged negotiations about a temporary arrangement.

The chancellor is reported to have told business leaders that the UK was seeking a “standstill” with full access to the single market and customs union, according to the Financial Times, as well as an “implementation phase” for new customs systems and immigration checks once a permanent deal is finalised with Europe.

A senior cabinet source privately used that same phrase – “off-the-shelf” – when describing an implementation deal to the Guardian last week, suggesting free movement between the UK and Europe would continue during that time.

The EU has previously said that during any transitional period, Britain would no longer have voting rights in the EU but would need to continue to pay budget contributions, accept rulings handed down by the European Court of Justice and accept free movement of citizens.

Two “off-the-shelf” models that could apply to the UK during the transition period include European Economic Area membership, like Norway, which includes single market access and exemption from some EU rules, though members pay budget contributions and accept free movement.

The Swiss model, membership of the European Free Trade Association (Efta), means access to EU markets for some but not all areas of trade, with no duty to apply EU laws apart from some trade regulations, though free movement also applies.

Downing Street also repeated an insistence that free movement would end when the UK leaves the EU, although it is understood that in practice a free flow of labour and travel is likely to continue during the transition.

“Free movement will end in March 2019. We have published proposals on citizens’ rights. Last week, the home secretary said there will be a registration system for migrants arriving post-March 2019,” the spokesman said.

“Other elements of the post-Brexit immigration system will be brought forward in due course. It would be wrong to speculate on what these might look like or to suggest that free movement will continue as it is now.”

The home secretary, Amber Rudd, made clear last week she expected EU citizens would be free to continue coming to the UK during the transition period, as long as they registered.

With the prime minister on holiday, the chancellor has made a series of interventions, including claiming that the UK’s relationship could look “similar in many ways” for some time after formally leaving the bloc in March 2019.

Separately, Hammond also denied that he wanted to turn the UK into a deregulated, low-tax economy, telling France’s Le Monde: “I often hear it said that Britain is considering participating in unfair competition in regulation and tax.

“That is neither our plan nor our vision for the future. The amount of tax we raise as a percentage of our GDP puts us right in the middle of the pack.” He argued that after Brexit, the country would keep a “social, economic and cultural model that is recognisably European”.

Number 10 said the prime minister still believed that “no deal is better than a bad deal,” adding that it was “obviously not in Britain’s interests to sign up to a deal which would punish the UK”.

The spokesman said: “What we are fully committed to doing is securing a good deal for Britain and for the European Union and we are making good progress towards it.”

Number 10’s intervention came as ministers Jeremy Hunt and Sir Michael Fallon sought to play down reports of cabinet splits, especially between Hammond and the international trade secretary, Liam Fox.

Hunt said the cabinet was “absolutely united” behind a gradual, business-friendly Brexit. The aim was “to avoid a cliff edge as we move to a new immigration policy,” Hunt said, arguing this would need a gradual implementation process.

Fox has insisted there is no cabinet-wide agreement on migration not being controlled after March 2019.

“If there have been discussions on that, I have not been party to them. I have not been involved in any discussion on that, nor have I signified my agreement to anything like that,” he told the Sunday Times.