Central figures in government – including the Prime Minister’s chief adviser Dominic Cummings – are pushing for a ‘light touch’ regulatory approach on state-aid for British businesses post-transition.

Level-playing field rules for state-aid have been one of the major EU demands in the negotiations for the future trade relationship and a major obstacle to progress in the talks so far.

Cummings and other leading Brexiteers are pushing against introducing legislation that would require the UK’s internal market subsidy regime for England, Scotland and Wales to be governed by an independent regulator, the FT reported yesterday (27 July).

Brussels objections

Michel Barnier – who dined with his UK negotiating counterpart David Frost yesterday evening ahead of informal talks this week – has repeatedly called for “robust guarantees” for level-playing field rules for state-aid.

However, an FT government source said that maintaining regulatory sovereignty over state-aid for UK businesses was so significant to the government it could “potentially derail the negotiations with the EU”.

Cummings is said to advocate having some “administrative principles” with a watchdog organisation providing “persuasive force” in the event of “egregious behaviour”.

However, he is against these principles having any statutory standing, giving the UK government legal sovereignty over the subsidies it could provide businesses.

Scottish and Welsh objections

The government announced its plans for the UK’s internal market after the transition earlier this month through a white paper.

However, Downing Street’s intention to reserve state-aid powers has been described by the devolved governments in Scotland and Wales as a ‘Westminster power grab’.

Not so mutual

Edinburgh and Cardiff have also spoken out against a mutual recognition scheme for standards, including for food and agricultural goods.

The devolved nations would be able to set their own standards but would nonetheless be required to accept products from elsewhere in the UK, even if they were made to lower standards.

The Scottish administration have said this would force it to accept contentious imports, such as chlorinated chicken, should the UK government reach a trade deal with the US.

Westminster has defended the system saying it would remove strengthen the coherence of the UK internal market without adding “unnecessary burdens”.