Hammond under fire for no-deal warning
PHILIP HAMMOND was yesterday accused of undermining Theresa May’s Brexit strategy after warning that leaving the European Union without a deal would have “large fiscal consequences” for Britain.
Dominic Raab, the Brexit Secretary, had attempted to play down the risk of a no-deal Brexit as part of a choreographed government strategy, saying the “vast majority” of consumers would not even notice the impact.
Within hours of Mr Raab’s speech the Chancellor published a letter to the Treasury select committee saying a nodeal Brexit could increase borrowing by £80billion a year by 2033.
The Daily Telegraph understands Mr Hammond published the letter without clearance from No10, which was infuriated by his intervention.
A Downing Street source said the analysis was “preliminary and very much a work in progress”, adding that No10 “does not clear ministers’ correspondence with fellow MPS”.
Mr Raab was also unaware of Mr Hammond’s intervention. A government source added: “This was a deliberate intervention by Philip, he knew exactly what he was doing.”
In his letter, the Chancellor highlighted a contentious cross-whitehall analysis that prompted claims of “Project Fear” when it was published earlier this year. He revealed the Government was planning to publish a new version of the analysis before the final vote on the Prime Minister’s Brexit deal.
The move angered pro-brexit Tory MPS. Jacob Rees-mogg, the senior Eurosceptic MP, said: “As a dog returneth to his vomit, so a fool returneth to his folly. The naysayers in the Treasury have consistently wanted to paint a bleak picture because they are frightened of taking responsibility for managing the economy without the crutch of the EU. It is a sign of their weakness.
“What Mr Hammond is doing is a reminder of why no one believes the politicised forecasts of the Treasury. The Treasury is desperate to stop Brexit. Everything the Treasury does has to be read in this light.”
Mr Raab yesterday published 24 contingency plans for a no-deal Brexit, which included warnings that online shoppers face higher card payments for buying products from companies based in the EU. The plans also suggested British citizens living in other parts of the EU could lose access to accounts held in banks in Britain, posing a particular threat to pensioners.
However, Mr Raab appealed for “calm” and said that despite the shortterm risks of a no-deal Brexit, the UK would still be better off in the long term than if it had remained in the EU.
“Even in a no-deal scenario there would be good faith. It is hardly in the interests of southern Spain to do harm to the UK pensioners out there,” he said. “For the vast majority of consumers in this country there is not going to be much change at all, if it’s noticeable.”
In his letter, the Chancellor said he expected the analysis to show that for “scenarios in which we have higher barriers to trade with the EU there will be a more damaging effect on the economy”. He added they were “conclusions many other credible external organisations have come to independently, including the IMF, the OECD, the LSE and NIESR”.
Nicky Morgan, the Tory chairman of the Treasury select committee, said: “Today’s letter to me from the Chancellor shows that ‘no deal’ would be a very bad deal for the UK and its citizens.”
What is the Government’s line on the impact of a no-deal Brexit? Yesterday, Dominic Raab told an audience that its effects, though substantial, could be ameliorated and that most consumers might not even notice it. Just hours later, Philip Hammond published a letter in which he predicted the financial impact of a no deal would be an utter disaster. So, which is it?
It’s harder to recall a government more inept at communications – and at a moment in history in which clarity is most desperately needed. The line on a no-deal scenario is as clear as mud. Mr Raab’s Brexit preparation papers, which he was officially releasing, have been alternatively sold as evidence of why we should avoid a no-deal Brexit at any cost or proof that Britain could control the damage, and perhaps even emerge stronger in the long-run. Mr Raab, who backed Brexit in the referendum, accentuated the positive: Britain should be “rising to the challenges and seizing the opportunities”. Mr Hammond, who opposed Brexit in 2016, reminded the world of a contentious analysis that put the cost to the economy at £80 billion per year.
If Mr Hammond thinks this will help sell the Chequers deal, which offers so many compromises in exchange for continued Single Market access, he is mistaken. The failure to nail down a line has to affect the negotiations in Brussels, and if the Europeans believe we are terrified of falling off a cliff edge, they needn’t budge an inch.
By contrast, if they thought – as could be inferred from Mr Raab – that Britain is both willing and able to walk away from the table, they might be more likely to grant concessions. Whatever good Mr Hammond thinks he is doing for business, he is, in the long run, making it harder to get a Brexit deal that truly suits the needs of the British economy.
Then there is the question of Theresa May’s authority. After Chequers, she declared that the principle of Cabinet responsibility had been restored – and, accepting that new reality, the opponents of Chequers, including Boris Johnson and David Davis, resigned.
If the Government’s official line now is, as Mr Raab stated, that no-deal Brexit is best avoided but could be weathered, then didn’t Mr Hammond explicitly and publicly contradict it? In which case, will Mrs May discipline him? Or is it a case of one rule for Leavers and another rule for Cabinet Remainers?