The PM needs to act like a leader and stop Hammond’s acts of ‘sabotage’
The problem is that the Treasury is run by someone who seems appalled at the whole idea of Brexit
No one bothers to ask Philip Hammond how he would vote if the European Union referendum was held again. The Chancellor has never tried to disguise his dismay at the referendum result, or that he feels his job is one of damage limitation. When he forces himself to be optimistic, it doesn’t last long. This week, he had intended to say that he backed the Prime Minister’s plans to prepare for Brexit talks ending in no deal – but he ended up talking about a cliff-edge Brexit, with aircraft unable to land in British airports. Such horrors are seldom far from his imagination. He seems convinced that it will all end very badly, and that the only question is when.
The talks, certainly, are not going well. There was no surprise that the latest set stalled yesterday, with Michel Barnier talking about “deadlock” as if this Westminster wrangling is to blame. Britain wants free trade, and is prepared to offer money – but the EU wants to agree about the money first, and talk trade later. It’s an odd way to conduct any negotiation, and many of our allies are amazed that we agreed to this sequencing. “You’ve made so few mistakes in your history,” one ambassador told a Cabinet member recently. “But agreeing to talks, in this way, is one of them.”
With each wasted month, the chances of talks failing seem to rise. This is why so many Cabinet members are nervous about Mr Hammond’s refusal to countenance such a scenario: no deal would be a disaster, he says, so he doesn’t want to waste taxpayers money studying it. But without a plan for no deal, his colleagues say, Theresa May would be forced to sign whatever Brussels gives her. And they wonder if this is precisely what Mr Hammond has in mind.
Oxford Economics keeps a running tally on the likelihood of Brexit outcomes, and puts the chances of no deal at 21 per cent, which is far from negligible. Government prepares for all kinds of unlikely things: nuclear strikes, Russian invasions, killer bird flu, a Corbyn government. In most contingency planning, the results are hard to imagine. But if Brexit talks fail, or if an agreed deal is vetoed by a faraway parliament, we know precisely what would happen in April 2019: we’d trade with the EU as we do with the United States. So, World Trade Organisation rules and mild tariffs. Preparations can start right away.
But the Chancellor has been arguing that such preparation would undermine the Prime Minister by making it look like Britain is negotiating in bad faith. His colleagues, however, say it’s quite the opposite: surely preparing for no deal is the surest way to guarantee a good deal. This point was made to him in private, months ago. Then in Cabinet a few weeks ago, in blunt terms by Sajid Javid and Jeremy Hunt, both of whom were successful businessman before entering politics. To them, this isn’t politics but an issue of basic competence – and the duty that government has to its citizens.
The compromise that Mr Hammond offered was setting aside £250million to allow Whitehall departments to plan for all Brexit scenarios – deal or no deal. But, to the fury of his colleagues, he has placed strict rules on how his (relatively modest) sum can be spent. Under a system set up by Gordon Brown the Treasury can micromanage other departments by setting conditions on every allocation of cash and Hammond is making sure that the “no deal” plans do not move beyond paperwork. So, yes, he’ll allow a report on how to expand the port at Dover. But not a penny is to be spent on computer systems, for example, that might help process this extra trade.
To a great many Cabinet members, this is not a compromise but sabotage. They believe Hammond is personally holding the government to ransom. He thinks his pro-brexit colleagues are itching for an excuse to walk out of talks and would activate a “no deal” plan as soon as it is complete. So this explains that latest round of government in-fighting, and fury so deep that Tories have been pulling out of television interviews lest they’re asked what they think of the Chancellor. At the heart of this lies fear, mistrust and dysfunction. It’s not a situation that prime ministers would usually tolerate. But most members of the Cabinet believe Mrs May is too weak to sack Mr Hammond – so anarchy rules.
This leads us to the extraordinary spectacle of a former Tory Chancellor, Nigel Lawson, saying that the current Tory Chancellor should be sacked. To the Brexiteers, the next few weeks in trade are crucial. All would like a good deal, but think the best way of talking about the upside of no deal. For example, Associated British Ports says that places like Hull and Southampton stand ready to take the strain off Dover, and could do with the extra investment. There’s talk about a Free Port in Belfast, to help the Northern Irish economy. It’s the kind optimism you won’t see from the Treasury.
The problem is that the most important Brexit department is not that for Exiting the European Union but HM Treasury. And if it’s being run by someone who seems appalled at the whole idea of Brexit, then this is a problem. If the Treasury won’t fund a “no deal” plan, there will be no plan –which weakens the whole government. To send David Davis to talks in Brussels under such circumstances is, as Geoffrey Howe might have put it, sending the opening batsmen to the crease only for him to discover that his bat has been broken by the club treasurer. As the captain looks on, helplessly.
As one of those tipped to succeed Mrs May puts it: “There is one root problem, in all of this, and that’s lack of leadership.” No other Prime Minister would tolerate such behavior from the Chancellor, at such a delicate time. Yet again, we hear the most calm and coherent voices coming from outside the Cabinet: Kwasi Kwarteng yesterday joining Jacob Rees-mogg and Dominic Raab in trying to make sense of the madness. If the Prime Minister can’t, someone else must.
This time last week, Mrs May was wondering if she can carry on as leader. The answer is that she can, but as long as she behaves like one. This means telling her Chancellor to make better preparations for a “no deal” scenario, or replacing him with one who will.