Chancellor warns EU: Don’t try to wound us
UK could slash taxes to tempt firms if Brussels refuses trade deal
PHILIP Hammond warned yesterday that the Government will come out fighting with tax cuts if the EU tries to wound Britain by refusing a trade deal.
In a tough stance backed by No 10, the Chancellor said the UK may be forced to change its economic model if it is locked out of the single market post-Brexit.
Theresa May will declare tomorrow that she is ready to pull the UK out of the single market, customs union and the jurisdiction of the European Court of Justice in a clean break with Brussels.
But, setting out her blueprint for global Britain, the Prime Minister will stress her determination to strike tariff-free trade deals with the EU that replicate the best aspects of our current arrangements – but without the free movement of workers.
Yesterday, Mr Hammond was asked by a German newspaper if the UK could become a tax haven by further lowering corporation tax in order to attract businesses if Brussels denies a deal.
In his strongest language yet on Brexit, the Chancellor said he was optimistic a
‘We’ll do whatever we have to do’
reciprocal deal on market access could be struck, and he hoped the UK would ‘remain in the mainstream of European economic and social thinking’. But he added: ‘If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term.
‘In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do.
‘The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged.’
Sources said Downing Street and Foreign Secretary Boris Johnson were aligned with Mr Hammond’s view. Last night the pound fell against the dollar, dropping below $1.20 for the first time since October. It was blamed on increased certainty the UK will leave the single market.
Mrs May has committed Britain to having the lowest corporation tax of the world’s 20 biggest economies. The intention is a rate of 17 per cent by 2020.
Labour leader Jeremy Corbyn said Mr Hammond’s comments were ‘ a recipe for some kind of trade war with Europe’. He told the BBC: ‘He appears to be making a sort of threat to (the) EU community saying, “Well, if you don’t give us exactly what we want, we are going to become this sort of strange entity on (the) shore of Europe where there’ll be very low levels of corporate taxation, and designed to undermine the effectiveness or otherwise of industry across Europe”.’ He claimed it would turn Britain into a ‘sort of bargain basement economy’.
Mr Corbyn continued to say he would prioritise the economy and access to free movement over curbs on immigration.
Last week Mrs May said Britain was leaving the EU and it was not a case of trying to decide which ‘bits’ to cling on to. Whitehall officials say the issue is whether the UK can find a way of replicating the free movement of manufacturing and pharmaceutical goods that is permitted under the customs union, while being free to strike its own trade deals.
Membership of the customs union prohibits Britain making its own free trade arrangements with other countries. Mrs May is expected to say she is being ambitious in seeking such deals, but outside of the constraints of the customs union and single market.
She is also expected to confirm that, once the Brexit deal is complete, she is open to a period of transition to give business time to adjust to the new regime. Comment and Dominic Lawson –