Sunak has so far kept his Brexit talks trump card under wraps – but will he ever get to play it?

Enemies are circling, Brexiteers are already pronouncing it dead, and the DUP are warning it undermines the Union.

But as opponents line up to try and assassinate Rishi Sunak’s forthcoming deal with Brussels to rework Northern Ireland’s post-Brexit future, Sky News can reveal that Number 10 is yet to play its trump card.

Despite weeks of headlines and column inches about the talks, Downing Street has so far kept under wraps what some believe is perhaps the biggest negotiation win.

Far from giving ground to the EU, they think they have turned the tables and forced a concession.

In short, Westminster will set VAT rates, taxation and state aid policy in Northern Ireland, not Brussels.

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Mr Sunak has made addressing the disparity over VAT a priority ever since his last budget as chancellor, when Northern Ireland could not benefit from his decision to slash the tax on solar panels and other energy efficient purchases elsewhere in the UK because it must follow EU single market rules.

Downing Street is unwilling to reveal any change is coming publicly, insisting that “intensive” negotiations are still under way, giving them nothing yet to announce.

However, Sky News understands that the concession by Brussels is likely to feature at the heart of the reform package.

Some MPs have been alerted to the likely inclusion of this change, it is welcomed privately by senior DUP figures, and it is understood to be one of the three major changes at the heart of the Sunak deal with Brussels. The DUP’s only reservation is that they want to see the legal text to check the concession is as described.

It is not clear, however, whether it will be enough.

After months of official negotiations, what some see as basic errors – and an information vacuum – may have allowed too much of a head of steam to build up behind the opposition.

As a result, it is now unclear whether the changes hammered out with Brussels since December will ever be implemented.

Mr Sunak is facing splits amongst key allies over how and whether to proceed, with warnings that he’s not strong enough to face down his party and growing anxiety in Brussels that the first prime minister they have trusted since Brexit may be about to let them down.

The next few days could end up being the most consequential of his premiership.

What is in the forthcoming deal?

The patchwork of measures and agreements to change the Northern Ireland Protocol have been prepared in utmost secrecy.

Taken together, those involved say it required the EU to change its negotiating mandate and agree to alter the text of the Protocol – something Brussels said was not possible during the premierships of Boris Johnson and Liz Truss.

Under the Sunak proposals, three key changes to that arrangement are likely to be agreed.

The first has been well trailed: businesses that have signed up to a “trusted trader scheme” will be allowed to avoid all checks when moving goods from the GB mainland to Northern Ireland.

In exchange, the EU will be able to access “real-time” UK data on trade flows across the Irish Sea. The handful of companies who are not signed up to the trusted trader scheme would have to continue labelling and filling in paperwork as at present.

The second – known as the “Stormont Lock”, first mentioned in The Sunday Times – is designed to go some way towards addressing concerns that Northern Ireland will remain subject to EU single market rules under the jurisdiction of the European Court of Justice as the price of avoiding border checks between the North and the Republic.

Read more:
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It is very complicated, but essentially it will give Northern Ireland some of the rights also enjoyed by Norway – which is also out of the EU but in the single market, so it has a say on the rules being imposed by Brussels.

Under the terms of the proposed deal, the EU will have to give the UK notice of future EU regulations intended for Northern Ireland. The Joint Ministerial Committee will then be able to lodge an objection, which may then result in the EU voluntarily choosing to disapply the regulation in Northern Ireland.

Alternatively, the Speaker of the Stormont Assembly could put the issue to a vote, which could delay when the forthcoming regulation comes into force. If the EU decides to take legal action because of a failure to implement the rule, then a Northern Ireland court would have to rule on the issue first, resulting in further delays.

This movement is likely to be welcomed by some. But this is arguably the biggest area of compromise for Brexiteers and unionists, since it does not give the outright veto on future EU regulations, which is something the DUP want.

The third change is the one revealed at the start of this article: that control of the so-called level playing field of measures, like VAT rates and state subsidy policy, will revert to Westminster. For constitutionalists, this will be seen as an important change.

Almost complete for some time, according to sources, none of this package has been formally briefed to the parties or the public.

Number 10 insists that negotiations are live, but other government sources suggest there is almost no activity still going on, and the principles of the agreement are settled even if there is some haggling on wording still to do.

How the deal was done

Mr Sunak came into office wanting to establish a reputation for sorting out problems, particularly the poor relations with the EU and – to a lesser extent the US – over Brexit.

The PM wanted to ensure President Biden turns up in Northern Ireland for the 25th anniversary of the Good Friday Agreement this Easter, meaning he needed to do a deal to ensure the Stormont Assembly was back up and running by then.

For this to happen, the PM needed the DUP to agree to a deal on the Protocol, and then go back into powersharing with Sinn Fein in order to form a government.

So, one key objective throughout these negotiations has been for Mr Sunak to get the hardline unionists on board. It was always a tall order, but it was one he chose to attempt. But it is on precisely this issue that Number 10 took an extraordinary – and some think reckless – gamble.

Despite needing the DUP onside, they decided not to talk to them personally. They decided that they did not want them involved in any way in the negotiations or feeding in thoughts, fearing this would make the talks unmanageable, so they were shut out.

Senior DUP sources tell me there were “no backchannels” to try and scope out what they needed, which they said was a contrast even from the Theresa May era.

Instead, the UK negotiating team were told to look up the DUP’s seven tests for a Northern Ireland Protocol replacement – which feature prominently on their website and in speeches by leader Sir Jeffrey Donaldson – and find a solution to each one. One insider described it as the “spreadsheet approach” to the issue.

“We assumed that if you solve the problems in the seven tests, the DUP would be on board. That was certainly the presumption all the way along,” said one government source.

Then in an extraordinary moment three weeks ago, government sources started briefing the newspapers that the deal had successfully answered every one of the DUP’s tests, but without offering an explanation of how or why.

This entire approach flabbergasted the DUP. The tests were drawn up 18 months ago, in another political environment. They range from the broad – number four is “Giving NI people a say in their laws” – to the specific, such as number five, which states “No checks on goods between GB/NI”.

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They were devised after conversations with the Johnson government, and were not designed to have a binary answer. Whether the tests were met was to be judged by the DUP alone.

Yet now the government was briefing journalists that the DUP’s concerns had been soothed, and their objections dealt with, without even telling them how.

“These tests weren’t designed to be used in that way”, said one senior DUP member. “If we’d known they were going to assume this level of importance we would have rewritten them and sharpened them”, they said.

Meanwhile, the DUP baulking at the tests has caused huge anger in government. Privately, some accuse the party of game playing and moving the goal posts. The DUP retort that if the goal was to get them on side, they should have opened a dialogue with them in person.

This move worsened the politics, although both sides also acknowledge that however badly Number 10 may have handled this, there was perhaps no deal ever to be made that satisfied both the DUP and the EU.

The trouble is, Downing Street only now appears to be grappling with this outcome afresh, with Brexiteers rowing in behind the DUP to make clear they are going to oppose the deal outlined.

So what next?

It is unclear how the prime minister will proceed. He has three options: press ahead, fully renegotiate or abandon his plan.

If he presses forward in the face of DUP and ERG opposition, he could face trench warfare in the Commons, whether or not any deal is put to a vote.

Mr Sunak would try to become the first Tory PM since 2010 to take on the Eurosceptics and not lose – as David Cameron did ultimately in 2016, then Theresa May did in 2019.

Alternatively, Mr Sunak could fully resume the negotiations, which despite the rhetoric, are mostly on pause at the moment.

However, the EU is unlikely to give more, and cannot bow to the DUP demand that Northern Ireland is no longer bound by future EU rules – for fear of destabilising member states and Norway, which is also in the single market but not the EU.

Or Mr Sunak could abandon the reforms, which would make clear the limits of his power and raise questions about whether he was running a “zombie” regime locked in coalition with truculent and weary Tory MPs.

If he does not do a deal, he will also have to decide whether to press ahead with the Northern Ireland Protocol Bill, which would give the UK government unilateral power to rip up the Northern Ireland section of the original Brexit treaty.

Sky News understands that this is facing 90 amendments in the House of Lords, meaning that it is all but impossible to get through without resorting to the Parliament Act – the legislative nuclear option to override a veto by peers.

It is understood the PM is arguing against this in sessions with MPs, suggesting that a bitter parliamentary fight over the passage of the bill would reduce leverage with the EU rather than increase it as the ERG claim.

Mr Sunak has no easy options.

Once he is done with this, the next fight will be over legislation on migration, which some Tories believe will fail unless it goes further than is permitted by the European Convention on Human Rights – something that would enrage the EU all over again. The parade of Tory MPs raising this issue today in PMQs alone made clear the scale of the fight on that.

Meanwhile, within weeks, the privileges committee inquiry into whether former PM Boris Johnson lied at the despatch box will begin, with televised hearings raking over the wounds of one of the most painful episodes of recent Tory history.

The prime minister may have calmed things down, but there are toxic challenges ahead. Can he prove he’s not running a lame duck administration, or will it get worse?

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