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The EU's chief negotiator has blown a hole in Theresa May's Brexit plan by declaring he “cannot and will not” accept her proposal on customs.

Michel Barnier rejected a "facilitated customs arrangement" under which tariffs charged at the border would be passed on to either the British or EU authorities depending on the destination of imported goods.

This was a key element of Mrs May's Chequers white paper published two weeks ago.

Mr Barnier appeared alongside new Brexit Secretary Dominic Raab at a press conference on Thursday following their second round of talks in Brussels.

He said: "The EU cannot and the EU will not delegate the application of its customs policy and rules and VAT and excises duty collection to a non-member who would not be subject to the EU's governance structures."

Any customs arrangement or union "must respect this principle", he added.

Anti-Brexit campaigners seized on the comments as proof Mrs May's exit strategy is "dead" and described the press conference as a "drive-by".

Mr Raab signalled that he is looking for compromise from Brussels in response to Mrs May's white paper, noting that the EU was able to take an "innovative" approach "when the political will has been there".

He added: "With ambition and pragmatism and energy on all sides, we can get there in October."

But Mr Barnier was defiant, bluntly rebuffing Mr Raab's suggestion that the UK might tear up its promise to pay a £39 billion "divorce bill" unless it got a good deal on future trade.

He told him that, while the commitment to a financial settlement made by Mrs May in December was not yet in its final legal form, the 27 remaining EU members and European Parliament regard it as "agreed for good".

He also made clear that Brussels still has reservations about Mrs May's proposed "backstop" arrangement for the Irish border, which would see the whole UK matching EU trade tariffs for a period if a trade deal is not reached by 2021.

"We have no objection in principle to this but we have doubts that it can be done without putting at risk the integrity of our customs union or commercial policy or regulatory policy," said Mr Barnier.

The Chequers agreement has been studied "carefully" and there are some areas of "common ground", he said.

"There are other points on which we have a problem because they contradict, they clash with, the European Council guidelines," Mr Barnier added.

"They contradict my clear negotiating guidelines. Indivisibility of the four freedoms, the integrity of the single market, these are key points.

"This is our main asset. We are not going to negotiate on that. The United Kingdom has known that from the outset."

Labour former Cabinet minister Ben Bradshaw, a supporter of the People's Vote campaign for a fresh referendum, said: "The white paper is dead. It has expired. It has ceased to be. It has gone to join the choir invisible."

Labour MP Virendra Sharma, who supports the anti-Brexit Best for Britain group, added: "This is the press conference equivalent of a drive-by."

Liberal Democrat Christine Jardine said the prime minister's white paper was "struggling to survive" .

Additional reporting by Press Association