Brexit: Government sets out plans for future customs system with EU

• Video report by ITV News Political Correspondent Emily Morgan

The Government has published proposals for the future trading relationship with the EU which includes a temporary customs union to avoid a "cliff-edge" Brexit.

The document published on Tuesday centres around two preferred options for a possible customs deal between the UK and the EU.

Option one: "A highly streamlined customs arrangement"

The UK would continue some existing arrangements with the EU while also introducing new arrangements that would mean a reduction or removal of barriers to trade. The document also says this option would involve "technology-based solutions" adopted for businesses to comply with customs procedures.

Option two: "A new customs partnership"

The other option outlined in the proposal is for a new customs partnership with the EU in which the UK would "align its approach to the customs border in a way that removes the need for a UK-EU customs border". One potential approach would involve the UK mirroring the EU's requirements for imports from the rest of the world where they will be consumed within the EU.

This means the UK would have to apply the same tariffs as the EU and impose the same rules on imported goods.

The Government acknowledge this option "is an innovative and untested approach" that would "take time to develop and implement".

The plans also include asking Brussels for a temporary customs union to help prevent chaos at Britain's borders after Brexit.

Brexit Secretary David Davis will ask Brussels for an "interim" period to allow a smooth switch over to the new trading regime that will be put in place once the UK leaves.

A time-limited transition, which Mr Davis told ITV News could be around two years, "will mean businesses on both sides of the Channel only have to adapt once to rule changes, the Department for Exiting the European Union (DExEU) said.

It comes after Chancellor Philip Hammond and International Trade Secretary Liam Fox said the UK would pull out of both the single market and the customs union in 2019.

Temporary arrangements could allow trade deals to be negotiated with other countries, something members of the bloc are forbidden from doing, while governments and businesses adjust to new arrangements.

Mr Davis told ITV's Good Morning Britain that securing the temporary arrangements with the EU would be "in both sides' interest".

"We sell them, the Europeans, about 230 billion euro of goods and services a year. They sell us 290 billion euro. So there are a lot of things there," he said.

Asked whether Britain would have to pay to stay in the customs union, he said: "What happens in that sort of interim period you will have to leave me to negotiate, I'm afraid, how we do it, but the aim is to bring to an end these huge £10 billion-a-year payments, bring that to an end now.

"We are still haggling with them over what we may owe them in the short term but we are going to bring the overall thing to an end.

"This is something that is in both sides' interest. Now you are right, there will be political push-back and that's what the negotiations will be about," Mr Davis added.

Addressing the matter of the border between Northern Ireland and Ireland, the document says the Government must "avoid a return to a hard border" and that "trade and everyday movements across the border must be protected".

The proposal states the Government's objective to "seek recognition of the unique circumstances of Northern Ireland" to make maximum use of the "UK's flexibility in relation to our own operation of the border."

However upon the publishing of the document, EU Chief Brexit Negotiator Michel Barnier sent a robust message that matters such as any future customs deal or relationship would not be discussed until other matters were addressed first.

Mr Barnier tweeted: "The quicker UK and EU27 agree on citizens, settling accounts and Ireland, the quicker we can discuss customs and future relationship."

While the European Parliament's chief Brexit negotiator Guy Verhofstadt tweeted: "To be in and out of the Customs Union and invisible borders is a fantasy".

Sir Keir Starmer, the shadow Brexit secretary, called the proposals "incoherent and inadequate".

"Instead, the Cabinet remain split on key issues and cannot decide between two very different but equally unachievable options," he said.

"The first proposal suggests 'a new customs border with the EU' could be introduced without disrupting trade; the second suggests a new borderless customs partnership could somehow be agreed while Britain also signs external trade deals.

"These fantastical and contradictory proposals provide no guidance for negotiators or certainty for businesses," he added.

Tom Brake, the Liberal Democrats Brexit spokesman said: "Even if they were agreed to by the EU, these proposals will only delay the economic pain caused by leaving the customs union.

"We still face the prospect of more red tape for businesses, longer queues at our borders and higher prices for consumers once the transition comes to an end.

However deputy director-general of CBI the British business representative Josh Hardie said he was "encouraged" by the proposals due to the time-limited interim period and a customs system as barrier-free as possible..

He added: "Business wants to see as frictionless a customs system as possible, with a strong emphasis on digital systems that make it easier to trade".

Adam Marshall, director general of the British Chambers of Commerce, said most businesses were more concerned about future customs arrangements with the EU than future trade deals.

He added: "At this stage, it is critically important to keep a number of different options open in order to achieve this goal.