Thread by @pmdfoster

NEW: 🚨🇬🇧🇪🇺🏴󠁧󠁢󠁳󠁣󠁴󠁿🏴󠁧󠁢󠁥󠁮󠁧󠁿🏴󠁧󠁢󠁷󠁬󠁳󠁿🚨Sources: Cummings seeks minimalist U.K. state aid regime without statutory U.K. regulator after #brexit - leading to fears of “free-for-all” in UK and probs for EU-U.K. deal. My @FT latest with ⁦@PickardJE Stay with me.⁩ 1/thread
on.ft.com/3hHgIjQ

@FT @PickardJE This is now the 'ground zero' for Brexit trade negotiations with the EU and how the UK 'internal market' will operate after the transition period ends on December 31.

It starts this month with the UK 'internal market' white paper, here.../2

assets.publishing.service.gov.uk/government/upl…

@FT @PickardJE You may recall it included plans to take back 'state aid' powers to Westminster which Scots/Welsh believed were devolved (they were outraged) and to enable govt to legislate for a unified UK state aid regime "should it decide to do so"

This was a key loophole /3

@FT @PickardJE Per sources hard Brexiters, led by Cummings, don't want a statutory regime. They want something "very vague and non-statutory, with a watchdog-type body that would only provide ‘persuasive force’ in the event of any egregious behaviour" or put another way a "free for all". /4

@FT @PickardJE This has caused some consternation in Whitehall since in theory it means Scotland/Wales can do what they like from Jan 1 2021 - and vice versa - with no Statutory Regulator to codify the UK state aid regime. Both lawyers and insiders say this is unworkable /5

@FT @PickardJE Per source familiar with plans: "the plan is an odd combination of reserving state aid [for control from London] but then agreeing to a free-for-all. They just want to be able to bung money at things and do not want UK internal market legislation cutting across that."/6

@FT @PickardJE There seem to be mixed views of where this policy would lead - Scotland could find itself either being out-subsidised by England, or subsidising egregiously ahead May Holyrood elections. Either way not a recipe for stability. /7

@FT @PickardJE The Govt points out that countries like Canada don't have a domestic regulator (but do have a trade deal with the EU)...which brings us onto the EU-UK trade deal part of this story....as @MichelBarnier
and @DavidGHFrost dine in London tonight.../8

committees.parliament.uk/publications/1…

@FT @PickardJE @MichelBarnier @DavidGHFrost So the question here, is can the UK have no statutory state aid regulator with teeth and still provide the "robust guarantees" that @MichelBarnier was demanding last week to unlock EU-UK trade talks /9
ec.europa.eu/commission/pre…

@FT @PickardJE @MichelBarnier @DavidGHFrost Recall that talks are deadlocked ("no progress" says Barnier) because the UK won't detail their new subsidy regime - even after the EU says it will step back from opening demand on ECJ oversight and dynamic alignment.

Remember the EU basically wants reassurances.../10

@FT @PickardJE @MichelBarnier @DavidGHFrost ...that it will not face unfair competition if it gives UK 'zero tariff, zero quota' access to the EU single market. It doesn't accept the Canada comparison because of the "size and proximity" of the UK makes it too much of a threat..../11

@FT @PickardJE @MichelBarnier @DavidGHFrost George Peretz QC @GeorgePeretzQC doubts the EU will do a deal without UK regulator. "Having a body issuing reports, saying ‘this was a bit naughty, don’t do it again’ in the place of a proper independent regulator with teeth is just not going to cut the mustard” /12

@FT @PickardJE @MichelBarnier @DavidGHFrost @GeorgePeretzQC So why won't Mr Frost table a regime?

Is he holding out for last-minute concessions? Is it just brinkmanship? Or are Cummings and co deadly serious? And will they stand their ground continuing to argue a 'basic' FTA only needs a 'basic' State Aid regime? /13

@FT @PickardJE @MichelBarnier @DavidGHFrost @GeorgePeretzQC Worth noting as an aside that this row have been raging for months - @andrealeadsom was clashing with Cummings on this in the autumn when Biz Sec, per three sources - but she got nowhere before she got the chop /14

@FT @PickardJE @MichelBarnier @DavidGHFrost @GeorgePeretzQC @andrealeadsom As a source familiar with those discussions recalled.
"If you're out [of EU], Dom would say, why would you tie yourself down to your own similar or same state aid regime as Brussels? His view was that once you've left, you should just do whatever you want." /15

@FT @PickardJE @MichelBarnier @DavidGHFrost @GeorgePeretzQC @andrealeadsom But would that argument hold IF that triggers a 'no deal' with the EU?

THAT'S what the September/October crunch will reveal?

Will @BorisJohnson overrule Cummings at the last, as he did last October?

Questions, questions. /16

@FT @PickardJE @MichelBarnier @DavidGHFrost @GeorgePeretzQC @andrealeadsom @BorisJohnson Or *perhaps* there is a point where the UK's FTA deal is SO emaciated (nothing on rule of origin, prof services, transport etc) that the EU caves to UK suggestion of just managing it through a dispute resolution mechanism that punishes distorting subsidies after the fact?/17

@FT @PickardJE @MichelBarnier @DavidGHFrost @GeorgePeretzQC @andrealeadsom @BorisJohnson You hear both sides speculating the other won't die on their version of this hill.

Will the EU really risk a 'no deal' when UK is asking for so little?

Will UK risk a 'no deal' when it could do a deal with the EU and still a fair amount? /18

@FT @PickardJE @MichelBarnier @DavidGHFrost @GeorgePeretzQC @andrealeadsom @BorisJohnson This comes down to a tustle between Mr Cumming's ideological aversion to the EU 'administrative state'....

And the EU's preparedness to do a 'no deal' and accept short-term disruption to avoid what it sees as long-term risk of being outflanked by UK? /19

@FT @PickardJE @MichelBarnier @DavidGHFrost @GeorgePeretzQC @andrealeadsom @BorisJohnson The govt is clear. It was @theresa_may that agreed to a CMA-style regulator, not @BorisJohnson

Per spox: “We have always been clear we will be moving away from the EU’s state aid rules to create our own, sovereign subsidy control regime.” /20

@FT @PickardJE @MichelBarnier @DavidGHFrost @GeorgePeretzQC @andrealeadsom @BorisJohnson @theresa_may I can still see ways a deal could be done - one idea mooted by @jamesrwebber is to put a 'floor' on state aid (say £50-£75m) before it becomes a UK/EU issue? That way there's quite a lot of wiggle room for Dom's pet projects...which brings us back to the UK stability point. /21

@FT @PickardJE @MichelBarnier @DavidGHFrost @GeorgePeretzQC @andrealeadsom @BorisJohnson @theresa_may @jamesrwebber As a figure from a devolved administration puts it, it sets up a world of "power politics" where an independent regulator is replaced by arm-twisting. As things stand, it looks headed for pretty choppy waters...on both home and EU fronts /ENDS