EEYORE HAMMOND LAUNCHES PROJECT FEAR ( Pt2)

As Chancellor claims ‘no deal’ Brexit could wipe 10% off national income...

PHILIP Hammond was accused of reviving Project Fear last night as he warned that failing to reach a deal with the EU could wipe 10 per cent off Britain’s national income.

Triggering a major Cabinet split, the Chancellor wrote that a no-deal scenario would have ‘ large fiscal consequences’ and could mean an extra £80billion of borrowing.

Mr Hammond, nicknamed ‘Eeyore’ by critics for his gloomy view of Brexit, said the food industry and manufacturers could be hit especially hard. Leading Eurosceptic Jacob Rees- Mogg

compared the Treasury to a dog ‘returning to its vomit’ while Tory members of the Treasury select committee dismissed Mr Hammond’s predictions, pointing out how wrong his department had been about the immediate effects of the referendum.

Charlie Elphicke accused the Treasury of ‘reheating dodgy figures’ while fellow Conservative MP Simon Clarke said it was trying to con the public again with its ‘discredited Project Fear’.

And last night a Government source said: ‘On the day the Government delivered a sensible and practical approach to planning for a no deal scenario, the Chancellor decided to relaunch Project Fear. He’s not only letting his party down but also his country.’

The Chancellor has previously been criticised for his refusal to plan for ‘no deal’. Last year, he refused to set aside funding to prepare for such a scenario, saying he would only do so ‘when it’s responsible’.

Mr Hammond’s warning came just hours after his colleague Dominic Raab, the Brexit Secretary, delivered an up-beat message and dismissed ‘wild’ stories about the effect of leaving the EU without a deal. He published a series of technical papers detailing how the Government is preparing for the prospect of failing to reach an agreement with Brussels.

But his message was undermined by Mr Hammond, a diehard Remainer, who said a no- deal scenario would hit the food and drink industry as well as manufacturing and carmakers.

The Chancellor warned that the biggest negative impacts would be felt in the North East of England and Northern Ireland. Last night Mr Rees-Mogg said: ‘The Treasury once more regurgitates its failed attempt at Project Fear. As a dog returneth to its vomit, so a fool returneth to its folly.

‘The Treasury is desperate to stop Brexit. Everything the Treasury does has to be read in this light.’ The Cabinet rift opened up as:

÷One of the technical papers warned millions of people could face higher credit charges if Britain leaves the EU without a deal; ÷Health Secretary Matt Hancock told drug firms to stockpile six weeks’ worth of medicines;

÷Cabinet minister David Lidington said it could take until December to reach a deal – two months beyond the official deadline;

÷Former environment secretary Owen Paterson said Theresa May’s Chequers plan for Brexit was a ‘disaster’ for the fishing industry because EU rules would have to be obeyed for years.

Mr Hammond’s intervention came in a letter to Nicky Morgan, the Remain-backing Tory MP and chairman of the Treasury select committee. The Chancellor pointed to dis-

‘Better off in the long term’

puted provisional analysis, released earlier this year, which claimed Britain’s gross domestic product could be between 5 and 10 per cent lower in 15 years if there is no deal.

This also calculated that borrowing could be around £80billion a year higher by 2033/34 under a scenario in which Britain resorted to World Trade Organisation terms for trade after failing to reach agreement with the EU.

He also mounted a defence of the Government’s preferred approach, which was outlined in a white paper following a Cabinet summit at Chequers, by saying the economic and fiscal impacts of this would be ‘substantially better’ than no deal.

Mr Hammond wrote in his letter: ‘This January provisional analysis estimated that in a no- deal/WTO scenario, GDP would be 7.7 per cent lower (range 5.0 per cent to 10.3 per cent). This represents the potential expected static state around 15 years out from the exit point.’

Mr Hammond added: ‘Under a nodeal/WTO scenario, chemicals, food and drink, clothing, manufacturing, cars, and retail were estimated to be the sectors most affected negatively in the long-run, with the largest negative impacts felt in the North East and Northern Ireland.

‘The January analysis estimated that borrowing would be around £80billion a year higher under a nodeal/WTO scenario by 2033/34.’

Mr Hammond published his letter just hours after Mr Raab insisted the ‘vast majority’ of consumers will not even notice the impact of a nodeal Brexit.

He said: ‘I am absolutely clear that the UK will be better off outside of the EU in any scenario in the long-term.’

Mr Raab criticised scaremongering over a no-deal scenario, such as the suggestion that it could spark a ‘sandwich famine’ due to shortages of ingredients, or that the Army will have to deliver food.

Tory MP Mr Elphicke, a member of the Treasury select committee, said of Mr Hammond’s warning: ‘Here we go again with dodgy figures being reheated by the Treasury.

‘In the referendum the Treasury said … the country would plunge into a deep recession if we voted out. Instead Britain is growing faster than the EU.’

Fellow Conservative Mr Clarke added: ‘It’s unbelievable the Treasury continues to talk down our country by conning the public with their discredited Project Fear yet again.’