Theresa May, U.K. prime minister, drinks a glass of water during a news conference at number 10 Downing Street in London, U.K. (Photographer: Will Oliver/Pool via Bloomberg)

Inside Theresa May's Brexit War Cabinet, Where Tory Battles Rage

(Bloomberg) -- The prime minister and her inner circle refer to it simply as “The SN.” To everyone else it is Theresa May’s “Brexit war cabinet,” the group of senior ministers who set the U.K.’s course out of the European Union.

These eleven Cabinet members meet regularly in closely-guarded privacy to decide the detail of Brexit policies. On Wednesday afternoon, they convene once again to address an explosive question that could blow up May’s government.

What to do about the Irish border and the future customs arrangements between the U.K. and the EU? Unless a satisfactory answer can be found soon, it could be enough to derail the negotiations entirely, forcing Britain out of the bloc with no meaningful deal at all.

The key to understanding the dynamic in the room had been that half of them campaigned to stay in the EU during the 2016 referendum, while the other five support leave -- with the premier herself having the deciding vote.

All that changed this week.

Until she resigned as home secretary on Sunday, Amber Rudd was among the loudest voices in favor of keeping close ties to the EU. She’s been replaced by Sajid Javid, who is far closer to the pro-Brexit lobby, although he did -- reluctantly -- campaign for Remain two years ago.

First Round

Also on the pro-EU side are Chancellor of the Exchequer Philip Hammond and Business Secretary Greg Clark -- both have been keeping low profiles of late. Pro-Brexit ministers are led by Foreign Secretary Boris Johnson and Environment Secretary Michael Gove, both figureheads of the Leave campaign.

The two sides will make their cases but most of those close to the process are not expecting a final conclusion on what the new customs model should be on Wednesday. Cabinet Office Minister David Lidington told the BBC ahead of the meeting that it was simply the “first round” of a series of discussions, though some think a decision today is possible.

Whatever the SN -- for strategy and negotiations -- decides on customs, the method of making a decision is opaque. In the end the final say will rest with May. The system that she uses lends itself to a peculiarly British fudge.

The following account is based on observations from people familiar with the workings of the committee, who declined to be named discussing confidential processes.

First, individual cabinet ministers and their departments make their own submissions to May’s officials on the topics to be discussed. This time, David Davis’s Brexit Department and Liam Fox’s Department for International Trade sent in proposals on customs and future trade policy.

Their submissions are then collected by the Cabinet Office’s Economic and Domestic Secretariat, which fashions the various arguments into policy papers under the guidance of May’s most senior Brexit civil servants -- Oliver Robbins, her senior negotiator, and Jeremy Heywood, the cabinet secretary.

Often as late as the night before the meeting, these draft policy papers are then circulated to the Cabinet ministers who are members of the subcommittee. This leaves little time for the pro and anti-Brexit factions in the group to plot their respective lines of attack before the meeting takes place.

In the past, Johnson and Gove have been discussing their options. Hammond, May and formerly Rudd would also “caucus” among themselves, preparing for the meeting beforehand, according to some accounts.

Then comes the meeting itself. May often starts by asking Robbins to set out various options, running through the papers that have been circulated. She will then initiate a discussion. Ministers express their views -- often firmly.

Eventually, when the SN has reached an agreed position, it will be put before the full Cabinet for discussion and approval. At this stage, it’s unlikely to be overturned.

May Decides

In the past, according to one person familiar with previous meetings, critical details were only vaguely aired in SN meetings and ultimately decided by May and her closest aides. These included the precise range of the U.K.’s divorce bill -- between 35 billion pounds ($48 billion) and 39 billion pounds -- and the ongoing role of the European Court of Justice.

So ultimately it came down to May herself and her inner circle. These days that means three people: chief of staff Gavin Barwell, Robbins and Heywood.

Right now, though, May is facing a battle with pro-Brexit heavyweights over which one of its two customs options the U.K. should seek to agree to with the EU. They want her to agree to a streamlined customs arrangement, in which new technology and “trusted trader” schemes minimize the need for checks on goods at the border between the U.K. and Ireland.

Clean Break

These ardent Brexit backers want a clean break with the EU and fear that the other option on the table -- a close customs partnership -- would mean the U.K. remains bound by European tariff rules forever.

Under the partnership plan, British officials would collect the EU’s tariffs on its behalf and then refund any companies whose goods are not destined for end use in one of the 27 countries in the bloc.

It’s complicated and pro-Brexit Tories think it will ultimately lead to staying in the customs union by another name. This would stop Britain doing independent free trade deals with other countries like the U.S. and the Brexit campaign would see that as a betrayal of the referendum result.

In recent days, May’s team have been trying to convince Brexit supporters to back the idea of the close partnership option. But the leading euroskeptics on the SN -- Fox, Davis, Johnson and Gove -- are ready to fight to stop it.

All eyes will be on how Javid responds at his debut.

©2018 Bloomberg L.P.

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