Brexit: Brussels punctures optimism that deal is in sight

By Daniel Boffey and Jennifer Rankin in Brussels and Lisa O'Carroll in London

Brussels has sought to puncture an outbreak of optimism over an imminent Brexit deal, amid fears Boris Johnson has not secured the backing of key advisers and his party for the compromises needed in the final stretch of negotiations.

With the UK government yet to offer a way forward on the most contentious issues, and trust in Downing Street at a low ebb, senior EU officials treated with scepticism reports that the UK could see a way to secure a deal.

The EU’s chief negotiator, Michel Barnier, told ministers from the 27 member states this week that there was “a more open atmosphere at the negotiating table”, according to diplomatic sources in Brussels. But he had also emphasised that “substantial differences of opinion remain, particularly on a level playing field” – the issue of state aid to businesses.

While Downing Street is keen to move into intensive “tunnel” negotiations to allow both sides to be creative before emerging at the leaders’ summit on 15 October with a solution to the most intransigent problems, Brussels is not convinced the prime minister yet has the support of his colleagues to commit to what might emerge.

“We cannot trust this prime minister’s word, so the EU member states are not yet willing to go blind into a tunnel negotiation and see what happens,” said one source. “It will take more than David Frost [the UK’s chief negotiator] telling us Johnson wants a deal.”

When the next round of negotiations opens next week, the EU is hoping Frost will present a compromise proposal on the key issue of control of state aid to businesses. “There is better mood music but no substance yet from London to justify it,” one diplomatic source said.

The UK has insisted it will not go beyond the World Trade Organisation provisions on state aid, which would allow either side to take counter measures where trade had been unfairly distorted – a position that the EU does not believe offers sufficient assurances of fair competition.

Barnier had told the EU affairs ministers this week that “recent developments compel us to be more vigilant on enforcement and dispute resolution” in the trade and security deal, according to a senior diplomat.

The European council president, Charles Michel, tweeted on Friday: “From now on, we will better enforce the level playing field, in a market open to those who respect its standards. Whether they leave our union or want to move closer to it.”

EU leaders will meet at the end of next week to discuss foreign policy issues and to be briefed by Barnier. But sources downplayed any suggestion that the heads of state and government would make a decisive intervention.

EU officials were on Friday unsure how to read an article by the political editor of the Spectator, James Forsyth, which said Downing Street could see “a deal is coming into view” and extolling the benefits for Johnson’s premiership.

A UK government official rejected the hope of an imminent breakthrough saying “there remains a lot of work to do and either outcome is still possible” warning the EU had to be “realistic” in the coming days.

The official said the “differences on fisheries and the level playing field remain significant … if the gaps in these areas are to be bridged, the EU’s more constructive attitude will need to be translated into more realistic policy positions in the days to come.”

“Is this them preparing the way for a deal, or to blame the EU for a lack of flexibility,” asked one EU official. “There hasn’t been any major progress in the last informal talks. Maybe there will be a breakthrough but there isn’t anything there yet.”

EU officials have suggested that a deal on the further difficult issue of access by European fishing fleets to UK waters would, however, follow if agreement on state aid could be found before the leaders’ summit on 15 October.

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The internal market bill aims to enforce compatible rules and regulations regarding trade in England, Scotland, Wales and Northern Ireland.

Some rules, for example around food safety or air quality,  which were formerly set by EU agreements, will now be controlled by the devolved administrations or Westminster. The internal market bill insists that devolved administrations  have to accept goods and services from all the nations of the UK – even if their standards differ locally.

This, says the government, is in part to ensure international traders have access to the UK as a whole, confident that standards and rules are consistent.

The Scottish government has criticised it as a Westminster "power grab", and the Welsh government has expressed fears it will lead to a race to the bottom. If one of the countries that makes up the UK lowers their standards, over the importation of chlorinated chicken, for example, the other three nations will have to accept chlorinated chicken too.

It has become even more controversial because one of its main aims is to empower ministers to pass regulations even if they are contrary to the withdrawal agreement reached with the EU under the Northern Ireland protocol.

The text does not disguise its intention, stating that powers contained in the bill “have effect notwithstanding any relevant international or domestic law with which they may be incompatible or inconsistent".

The bill passed its first hurdle in parliament by 77 votes, despite a rebellion by some Tory MPs.

Martin Belam and Owen Bowcott

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One of the key indicators of the progress of the talks will be the future timetabling of the internal market bill and the promised finance bill, which has yet to be tabled.

The government intends to publish plans for the progress of the internal market bill, which threatens to override parts of the Brexit withdrawal agreement, through parliament at the end of next week. If progress of the bill is slowed down it will be seen as a temporary “removal of the gun from the table”, given the EU has threatened legal action if it has not been stood down by the end of next week, one insider suggested.

It is understood that “good progress” was being made regarding checks in the Irish Sea before the internal market bill blew talks off course. If a meeting between the Cabinet Office minister, Michael Gove, and his EU counterpart on Monday is successful, it could be used by the UK as a chance to claim “victory” over the EU and row back on the offensive elements of the internal market bill.

But the UK is keeping a further card in reserve in the form of the finance bill, which a source said “could look worse than the internal market bill” in terms of the withdrawal agreement’s Northern Ireland protocol, and potentially destabilise the trade and security negotiations. “Whether or not that is published soon will feed into the escalation or the de-escalation, of talks,” said the source.