The Hammond-Rudd plan is beginning to soften May’s hard Brexit

Seven weeks after the election disaster, there is cautious optimism in Conservative circles that the Government is starting to function normally again. “We’ve stuck to the grid in the last week,” one senior Tory told me proudly, referring to the day-to-day media plan for ministers to set the agenda rather than merely react to events.

He didn’t see the irony in saying that all’s going well while Theresa May is abroad on a three-week holiday. (She must need a break more than the rest of us put together). What is interesting is that the running this week has been made by two pro-European Cabinet ministers who want a softer, more sensible Brexit than the hard version to which May officially clings.

Today Philip Hammond set out his plans for a transitional deal lasting up to three years after the UK leaves the EU in 2019. The Chancellor told BBC Radio 4’s Today programme the aim was to ensure “business as usual” and “life as normal” on the day after our exit to avoid a “cliff edge” for business and individuals.

In a pincer movement, Amber Rudd on Thursday outlined her thinking about EU migration after exit day. The most important part of the Home Secretary’s announcement was not the bit her department highlighted – a ludicrously overdue study of the EU workers the UK will still need by the independent Migration Advisory Committee. It was in Rudd’s letter to the committee, saying that a new immigration system would not be introduced “in a single step” but “gradually.” This means that a form of free movement will continue during the transitional phase, a necessary precondition before the EU grants the UK continued access to its markets, which Hammond believes is vital for business.

The Hammond-Rudd power play while the top cat is away did not all go according to plan. Brandon Lewis, the immigration minister, insisted that free movement will end in March 2019. Technically, he is right, but in practice would be proved wrong under his boss Rudd’s proposals.

The confusion stems from the Government sending contradictory messages to different audiences it needs to please: people who voted Leave last year; Brexiteer Tory MPs; business, desperate for some certainty about what happens in 2019 and the EU, which suspects a transitional deal is cover for the UK to keep the benefits of the single market while wriggling out of some of the obligations (such as free movement).

The good news is that the Hammond-Rudd initiative proves that the Government is belatedly listening to the business world. It was frozen out during May’s first year in office. Business was seen as the enemy because of May’s pledge to crack down on the worst excesses of capitalism in response to the referendum. Bosses who tried to talking to May about Brexit got her infamous “brick wall” treatment. But their voice needs to be heard if we are to limit the economic damage from Brexit.

May’s weakness after throwing away her majority means she couldn’t fire her Chancellor and that Rudd can finally emerge from May’s shadow at the Home Office. They have important allies in Damian Green, the de facto Deputy Prime Minister, and David Davis, the Brexit Secretary. Crucially, the Cabinet sub-committee overseeing the EU negotiations includes these four ministers, May and Boris Johnson.

The Foreign Secretary, keen on a clean break with the EU, is not yet signed up to the Hammond-Rudd approach but from the fog of Brexit, a Cabinet deal is starting to emerge. The pro-Europeans get a three-year transitional agreement from 2019, with much of the current EU relationship staying the same. In return, they accept that the UK will be fully outside the single market and customs union by the next scheduled election in 2022. To keep the EU onside, Britain would not sign any trade deals with non-EU countries before 2022, but could start to negotiate them.

This welcome outbreak of realism begs the question: would it be happening if May had won a majority of 80? Probably not, which is scary, but never mind.

There are still lots of fences to jump. The detail of the transitional deal remains fuzzy, and requires EU agreement. Ministers have little idea where May stands; since the election, her preoccupation has been survival. On her return, May needs to “take back control,” as somebody once said, get fully behind the Hammond-Rudd plan and soften the edges of her Brexit strategy.

And that’s just for starters. Cabinet ministers have not even begun to confront the biggest Brexit question of all: in the long-term EU-UK deal from 2022, do they aim to replicate EU membership without some of the bad stuff or to break out into a brave new world?

You can also listen to Andrew Grice talk about the future of the Labour Party and Brexit on our podcast here.