THE issue of a “level playing field” currently remains the most difficult sticking point in negotiations between Britain and the European Union, the government said today.

Answering Labour’s urgent question on the negotiations, Paymaster General Penny Mordaunt said that Britain would be prepared to leave the EU on “Australian-style terms” — similar to a no-deal scenario — when the transition period ends in just over three weeks.

The bulk of EU-Australia trade is currently done according to World Trade Organisation (WTO) rules.

A “level playing field” refers to imposition of EU rules regulating markets – such as over competition and permissible state aid – to prevent companies from one country gaining a competitive advantage over those from another. These rules place obstacles in the way of state intervention in the economy to prioritise strategic sectors, meet challenges such as climate change or drive regional development.

Ms Mordaunt said: “Familiar differences remain on the so-called level playing field, fisheries and governance.

“Of these, the level playing-field issue is currently the most difficult.”

Shadow Cabinet Office minister Rachel Reeves claimed that Labour would “hold the government to account whatever they bring back, deal or no deal,” though the party has not ruled out abstaining again.

Unite general secretary Len McCluskey warned Labour on Sunday not to “sit on the fence.”

Ms Reeves said that trading on WTO terms would mean 40 per cent tariffs on lamb exports, 10 per cent tariffs on car exports and a predicted fall in GDP of an extra 2 per cent next year.

Doug Nicholls, chairman of Trade Unionists Against the EU, argued that there would be long-term benefits of trading on WTO terms.

He told the Morning Star that a mutually agreed trade deal would be preferable, but that the EU is prioritising its own access to British waters for fishing and effectively keeping Britain in the single market in arguing for a level playing field.

Mr Nicholls said that WTO terms are more likely to allow the British government freedom to invest in infrastructure and that the coronavirus pandemic has stressed the need for a strong domestic manfacturing base.

“This is central to the chances of escaping a recession. We need to make as much here as possible and to be as self-reliant as we can be. It’s the more green and economical way,” Mr Nicholls said.