Hammond tells business chiefs MPS will stop no-deal Brexit
PHILIP HAMMOND told business leaders that the “threat” of a no-deal Brexit could be taken “off the table” within days, potentially leading to Article 50 being “rescinded”, a leaked recording of a conference call reveals.
The Chancellor set out how a backbench Bill could effectively be used to stop any prospect of no deal. He suggested that ministers might even back the plan when asked for an “assurance” by the head of Tesco that the Government would not oppose the motion.
He claimed next week’s Bill, which could force the Government to extend Article 50, was likely to win support and act as the “ultimate backstop” against a no-deal Brexit, as a “large majority in the Commons is opposed to no deal under any circumstances”.
A recording of the call, passed to The Daily Telegraph, recounts how the Chancellor, Greg Clark, the Business Secretary, and Stephen Barclay, the Brexit Secretary, spent nearly an hour talking to the leaders of 330 leading firms.
They included the heads of Siemens, Amazon, Scottish Power, Tesco and BP, all of whom warned against no deal.
The disclosure reveals the close nature of the relationship between the Treasury and some of Britain’s biggest businesses and how they appear to be working in tandem to block a hard Brexit. It will also add to suspicions that Mr Hammond has been orchestrating attempts to soften Brexit.
Mr Hammond assured the business leaders that the Government would stop spending money on no-deal preparations “as soon as we know we are not going there” and give businesses “a resumption of normal service”.
He indicated the Government was open to talks over the customs union by saying it could not go into discussions with other parties “waving flags with red lines on them”.
Mr Clark argued “we can’t have no deal” and said Theresa May would return to the Commons, following the defeat of her Brexit deal by a record margin on Tuesday, with “at least as close a trading relationship” as proposed under her original agreement.
However, Mr Barclay, a Eurosceptic, appeared to clash with his colleagues by warning that taking no deal off the table would “weaken the negotiation hand” with Brussels.
The Prime Minister last night won a vote of no-confidence tabled by Labour and invited the leaders of other parties to meet for talks. Jeremy Corbyn, the Labour leader, declined to talk while a no-deal Brexit remained on the table. Mrs May last night said she was “disappointed” but her “door remained open”.
Mrs May refused to rule out entering into a customs union with the EU, in an apparent softening of her stance, as EU leaders urged her to retreat on her “red lines”.
Mr Hammond’s conference call was held at 9.30pm on Tuesday, less than two hours after Mrs May’s Commons defeat. The Chancellor, Mr Clark and Mr Barclay hosted the 51-minute call from Downing Street.
In his opening remarks, Mr Hammond gave a clear “sequence” on how Article 50 could be extended.
He said: “Could we extend the Article 50 deadline to give us more time? The simple answer is that the EU would not consider the request for the extension … unless or until we have a clear plan to go forward. The sequence has to be first, to reach out to opinion across the Commons to establish the terms on which we can build a majority for a way forward.
“If necessary [we] go back to the EU to agree changes that are necessary to deliver that consensus. And at that time, if more time is going to be required, to negotiate that with the EU.”
He highlighted the cross-party Bill tabled by Nick Boles, the Tory MP, which would force the Government to extend Article 50 if a Brexit deal could be reached. MPS are expected to vote on an amendment that will pave the way for the Bill next week.
Mr Boles told The Telegraph that Mrs May would face a Cabinet revolt if she attempted to oppose his amendment.
During the conference call, Mr Hammond added: “I can simply, as a parliamentarian, say it is clear to me there is a large majority in the Commons that is opposed to no deal in any circumstances.” A Treasury source said Mr Hammond made clear that he was not advocating extending Article 50 during the call but explaining the process.
I won’t conceal the fact that the scale of the defeat this evening was a disappointment but not entirely a surprise.
I think the important thing is that the Prime Minister has responded to the vote this evening with a clear strategy to reach out across the House of Commons and to commit the Government to listening to the views of others in an attempt to establish what is needed to build a consensus in Parliament that allows us to deliver a negotiated deal.
We have made clear this evening that we will facilitate a confidence vote in the Government. Jeremy Corbyn has duly tabled a vote of no confidence which will be taken tomorrow. We are confident we will win the no confidence vote. We need to do that in order to establish the Government’s credentials as it were to take this forward.
Once the no-confidence vote has been completed the Prime Minister will call senior MPS from across the House and indeed other party leaders and talk to them about their aspirations for a realistic way forward.
We are short of time and we have to be clear that pursuing what we call unicorns – ideas that would involve fundamental renegotiation of the deal we have done with the EU – is not going to work. The Withdrawal Agreement will need to remain in place but there is flexibility to look at the terms of the Political Declaration on the future relationship.
The Government has already indicated that it is willing to accept amendments tabled by Labour members on workers’ rights and environmental protections.
The Government is absolutely clear that a negotiated deal is the right way forward to deliver Brexit, honour the referendum result and avoid the very significant political damage and disruption to trust in the political system that would be done if we did not honour the referendum decision, but to do so in a way that protects our economy, protects jobs and allows us to continue a very close partnership in both security and trade with our European neighbours.
I am going to try to pre-empt two obvious questions.
Could we extend the A50 deadline to give us more time?
The simple answer is that the EU would not consider the request for the extension of the Article 50 deadline unless or until we have a clear plan to go forward.
The sequence has to be that first we reach out across the Commons to establish the terms on which we can build a majority for a way forward.
If necessary go back to the EU to agree changes that are necessary to deliver that consensus. And at that time, if more time is going to be required, to negotiate that with the EU.
The second question is whether we can somehow take the option of no deal off the table.
Everyone on the call will be aware that a bill has been tabled today and amendments will be tabled on Monday by backbenchers from across the House which would have the effect of removing the threat of no deal.
I can simply, as a parliamentarian, say it is clear to me there is a large majority in the Commons that is opposed to no deal in any circumstances.
Stephen Barclay
I very much agree with the analysis that Philip has set out. In terms of the confidence vote, both the DUP and ERG have said that they will be supporting the Government in that confidence vote.
There will be a very active programme now of reaching out to parliamentarians and EU leaders in the coming days.
What we saw tonight is what Parliament is against.
But that was very much a coalition of people that do not agree. One of the issues we will need to test in coming days is what Parliamentarians are for as opposed to what they oppose.
In terms of no deal, clearly there is a lot of uncertainty at present. Whatever deal is agreed by Parliament will still need to have a withdrawal agreement and a backstop and will also need to be ratified.
That is why Cabinet took the decision in terms of the no-deal preparations that as a responsible Government we need to prepare, even though that is not where anyone wants to be.
We are working in the coming days to get a clearer sense from leaders across the House, and also in terms of how that will inform the next phase and what reassurance we could give to Parliament in terms of how we would work with them as we flesh out the political declaration.
Greg Clark
Perhaps I can start by saying to everyone on the line thank you for all the evidence and work you have done, especially contacting local MPS over the last few weeks as to what the reality you face is.
I am sure it is frustrating that not everyone has changed their minds accordingly, but I don’t think that is wasted. I think in the days ahead your needs and the way you have communicated them will continue to be influential.
The second thing is that all of us completely understand the seriousness and urgency of the situations that you face.
March 29 is a few weeks away. I know by talking to many of you who have already had to make decisions at the expense of more productive uses of the funds you have.
Our purpose in the next few days is essentially to reflect all the things you have told us. First that we can’t have no deal, for all the reasons you set out completely consistently.
Secondly we need to achieve a deal that allows us at least as close a trading relationship with the rest of the EU as in the agreement that has been negotiated. That is vital.
The third is that we need to come to a conclusion quickly. This can’t go on much longer. As Philip said it is evident that whatever the numbers tonight that was the first vote.
A lot of people had made prior commitments. But there is a very clear majority in the House not to have no deal, to have a relationship with the EU that will allow you to trade and prosper in future, and to bring this to a conclusion quickly.
The exercise and the commitment the Prime Minister made is to establish that, go beyond the Government and the Conservative Party and to put that group together and come back with a deal does work. Jurgen Maier, chief executive of Siemens UK Thank you very much for taking the time to give us this briefing. It is really, really important because I’m sure I’ll be speaking for quite a few of us our international boards are expecting an update from us this evening who are obviously watching these events closer than they have ever been.
We obviously share your disappointment in the scale of the defeat this evening.
As you know we at Siemens are very much behind the Withdrawal Agreement [and] can’t for the life of us understand why [this] got such a heavy defeat. But we are where we are.
The two questions I have, to try and give some confidence to my board, is Philip, you said that bills have gone in today that in effect will start to make it impossible or certainly block the chances of a no deal.
How strong a confidence can I really give that we aren’t going to go by default into a no deal.
My second question is can you say anything else about what you believe can be negotiated that would be substantially different and would allow cross-party consensus?
Hammond
Jurgen, on the first part of the question what has been tabled today is a backbench proposal backed from across the House.
We know it has been put together with active engagement from the clerks of the House.
It is properly drafted.
What it proposes to do is to create a parliamentary power to withdraw the Article 50 notice and to lay that on the table as a sort of ultimate backstop if the work the Government is doing in seeking to find a way forward fails to deliver.
My understanding is that amendments to the Government motion will be tabled on Monday.
Those amendments will be voted on in the course of next week. If that initiative by backbenchers is successful that would be clear to you within the space of the next two weeks certainly.
As to the question what changes might be required to build a consensus in Parliament and what can be negotiated, very clearly removing the Irish backstop arrangements cannot be negotiated.
There is no point in wasting a lot of time on that theme. But we have to approach this discussion with senior parliamentarians in other parties with an open mind.
It is for them to bring their ideas to us. Many of them, even within individual parties, will have significantly different ideas.
There is going to be a shake out process over the next couple of days when they try to work out among themselves how they can come together around credible proposals to put to the Government.
But it is very important we are in listening mode and open to receive ideas that will deliver a good negotiated and negotiable Brexit.
Doug Gurr, head of Amazon UK
You said Chancellor, that you thought there was a clear majority against no deal. We have already incurred quite significant costs. Is there anything you can do that would enable us to give any comfort to our global board that no deal can be ruled out.
Hammond
I can only emphasise what I have already said. This is a backbench initiative but it’s backed by some very senior parliamentarians. It will, as I understand it, run its parliamentary course over the next 10 days or so. By the end of next week we will have a clearer view.
Barclay
The best mitigation to the no deal risk remains the current deal. As Philip set out a number of colleagues opined on the agreement extremely quickly. Literally within minutes we had colleagues in Parliament giving their view on the 585 minutes.
To some extent people had committed very early on to a position in terms of the vote tonight. One of the issues will be to understand with those colleagues what further reassurance they are looking for, and to do so within the framework that is set by both our manifesto and also the Labour manifesto.
Both manifestos made commitments in this area. That is pertinent to issues such as the debate on customs union and international trade. The manifesto will be a framework but clearly we need to listen to colleagues.
The concern is, given the level of uncertainty, it is right we retain our level of preparation on no deal, but clearly getting a deal is the way to mitigate that risk.
Keith Anderson, chief executive of Scottishpower
Thanks again for taking questions.
My understanding is that in order to allow us to extend or ask for an extension to article 50 we would need to put legislation to Parliament.
I am wondering when the process is going to start to put that legislation through that would allow the UK Government to ask for an extension of Article 50 just in case we need it. Again that’s the kind of thing that would give businesses an awful lot of comfort, if the Government is seen to be taking action to try and prevent no deal.
Barclay
Within the House where there is a consensus people can move quickly. But one of the issues with no deal is that taking that off the table does weaken the negotiation hand from the UK perspective.
There is a balance to be struck. I am very conscious of the concerns that people on the call will have in terms of that. It is about preparing for that until we have a deal that allows us to take no deal off the table.
John Allan, chairman of Tesco and President of the CBI
The message from the Chancellor was that there would be a backbench amendment. Can we have an undertaking that the Government would do nothing to frustrate the progress of that if that is what the majority of the Commons wants.
Then I hear the Brexit Secretary saying that actually we have to keep the threat of no deal because it’s important to our negotiating position. I struggle to see how those two things can be reconciled. Perhaps someone on the call could reconcile them for me.
Hammond
Let me have a go. There is going to be a vote in the House of Commons. I am afraid what the Government thinks is not going to be the determining factor in the outcome of that vote.
My judgment is that there is a significant majority in the House of Commons against no deal. What this group of backbenchers has been doing is seeking to find a mechanism by which the House of Commons can express that view in a way which is binding and effective.
John Allan
Will the Government do nothing to frustrate the progress of that if that’s what the majority want.
How do you reconcile that with wanting to keep no deal as a negotiating weapon at the same time? I just think there’s an inconsistency between those two positions.
Hammond
Steve has pointed out what is an undeniable fact in negotiation. If you remove an option from the table that has consequences.
But in a sense that is not a decision for us to take. Backbenchers have tabled a draft bill and are taking this forward.
It will be the parliamentary arithmetic that determines what happens, not a decision by the Government.
The Government hasn’t yet looked at this in detail and decided on a formal position.
The point here is not dependent on the Government’s acquiescence in any way. This will be something that the House of Commons determines
Peter Mather, head BP in the UK
We have talked about some of the options. It doesn’t sound like the confidence vote will go the Labour Party’s way.
We have talked about reducing the possibility of no deal. We have also talked about the difficulty of achieving a breakthrough in the deal.
I just wonder whether all of this added together has in any way increased the sympathy or the lack of antipathy towards the idea of a second referendum.
Barclay
I think the issue with a second referendum is it’s presented as a way of ending the uncertainty.
But the risk with it is that it will actually prolong the uncertainty.
If you look at the first referendum the process took 13 months from start to finish.
It is difficult in the current climate to think that the House will view the legislation for a second referendum with good will and expedite it.
There will obviously [be] material questions in terms of what the actual question in the referendum would be.
Would it be two questions or three? What the spending limits would be, particularly following some of the litigation and revelations following the last referendum.
There would also be a practical issue in terms of the interaction with the European Parliament elections, which are at the end of May.
As Philip touched on earlier, the issue in terms of extension isn’t a unilateral decision for the UK.
That requires the consent of the other 27 member states. Revocation as the European courts made clear must
‘One of the issues with no deal is that taking that off the table does weaken the negotiation hand from a UK perspective’
‘The risk of a second referendum is that it will actually prolong the uncertainty’
‘There is absolutely no desire from a Government point of view to run down the clock. Quite the opposite’
‘The PM will reach out across Parliament to hear views and build that consensus’
be unconditional.
It is often mooted that a second referendum is a way of ending the uncertainty. It would actually lead to a significant period of further uncertainty.
Of course one cannot guarantee the result of that referendum either. One could have a prolonged period of uncertainty followed by a result not dissimilar to the first result.
For those reasons that is not the way forward. The key issue in the coming days will be to look where the consensus can be.
What we have seen up to this vote is a myriad of plans – Norway, Canada, various plans with a plus affixed – people thinking that WTO is a land of milk and honey and a perfectly benign landing position.
The vote crystallises the conversations that need to take place across the House.
Leo Quinn, chief executive of Balfour Beatty
Will we anticipate getting back to a normal, functioning Government? What we are seeing from industry is decisions are being delayed, we are seeing strategies not being confirmed.
In the construction industry for example, the future of HS2 is unclear, Heathrow confirmation that expansion plans will move forward – none of these are under our control.
And I know you will have heard this before, but the enemy of business is delay and procrastination.
The challenge I see facing construction across the UK over the next 12 months is that as decisions don’t get made and projects get pushed out, the industry is going to face what I would regard as a large scale restructuring whereby the industry cannot carry the capability and resources that are going to be so desperately needed in the next 12 months to five years. Despite Brexit we need to make some decisions to keep things moving forward. It is vitally important we get back to some form of normal Government.
Clark
Leo, everyone here is absolutely conscious of the need to bring this to a resolution.
I know from talking to those involved in this call just how much of a blight the uncertainty is for investment decisions. What you are now going to see over the next few days is a rapid acceleration.
Some of the resolutions the House of Commons passed required a response from the Government within three days rather than three weeks. You go straight from today’s defeat to a confidence vote tomorrow. It is all now going to move at a much more rapid pace.
To be frank with you it is a matter of great regret to me that we are in January in this situation rather than having resolved it long before.
I know this has caused real difficulties and imposed costs to you. All I can say is that from my part and my colleagues we will do everything we can to bring this to a resolution.
Within the next few days and weeks Parliament needs to do that so we can move on and you can get on with not having to think about these decisions.
Quinn
The biggest strategic issue is that it’s very difficult if not impossible to take a capability holiday.
Once resources have been lost from the industry or people retire from it it’s very difficult to persuade them to come back. We are at a very critical point.
Hammond
The key issue here is resource in Government. The Government has decided rightly that our number one operational priority at the moment has to be preparing for the contingency of a no-deal Brexit, something which all of us are seeking to avoid.
We can’t afford to be flat-footed in preparing for that contingency.
As soon as we know that we are not going there, and we can stop doing that preparation, those resources can be released back to their business as usual functions. That will allow the resumption of normal service that you are seeking.
But it has to be right that while there is any risk of a no deal outcome on March 29 the Government should be taking all the necessary steps to put contingency plans in place.
Richard Pennycook, chief executive of the Co-operative Group
It goes without saying that as you go into these conversations in Parliament with various groups over the next week or two if any of us collectively or individually can help in terms of the perspective of business you have only got to ask us.
Two questions. The first one, back to no deal. I’m sorry we can’t get away from it, but as others have said we are guiding stock-markets and boards on decisions around our contingency planning.
What I think I heard is whilst we should place some reassurance on the backbench motion which is coming forward, that is tempered by the fact that were we to withdraw Article 50 we can’t do it with our fingers tied behind our backs in order to buy time.
I just wonder how concerned are you that the press will therefore immediately leap to that being a no exit scenario, and therefore a difficult one for us to rely on as a business in our nodeal planning.
Second in relation to the clock ticking, for most of us in business whilst of course we are very sympathetic to the Irish border question for us no deal is actually not having an end state deal at the end of 2020. So many long term decisions are on hold until we have got that clarity.
Presumably there is no dialogue that can take place with the EU until such time as the withdrawal agreement has been signed, even if that takes another few weeks or months.
Hammond
Again I have to repeat this is a backbench initiative. The Government is not in control of this. I am only telling you what information I have been able to glean.
My understanding is that because the bill being brought forward will simply and solely rescind the Article 50 notice, the legal opinion that they have is that that will meet the test that the European Court of Justice has laid down for unilateral recision of an article 50 notice.
It is not within their power to mandate any future course of action, that would be for a Government to do. Their process and their bill simply withdraws the Article 50 notice.
Barclay
On the second point of the timing to end 2020 you will have seen in the language of the December Council and also in the recent exchange of letters from President Tusk and Juncker a number of commitments particularly around starting the next phase of discussion as soon as Parliament has agreed a meaningful vote and in terms of expediting the ratification process, both at the start and end of the timeline there is scope to speed things up.
There is a clear commitment in terms of injecting pace into those negotiations.
The Political Declaration a framework.
What we get against that, and for example in the letter from Richard Dearlove and Lord Guthrie, was on the one hand people saying the Political Declaration has no legal force.
You get other people saying that the Political Declaration has such legal force that it is going to compromise national security.
In the media there is often a dialogue saying that the Political declaration to some critics isn’t worth the paper it’s on. Those same critics say it will restrict what the UK can do to a severe degree.
What’s clear from the EU side is the backstop is uncomfortable for the EU themselves.
It is uncomfortable in terms of breaking the four freedoms, in terms of the fact access to fishing waters is stopped on day one.
There is a commitment to inject some pace. We stand ready to do that. Then of course there is the option to extend the implementation period by one or two years should we wish.
Clark
itself provides
Paula Vennells, chief executive Post Office and the nonexecutive director at Morrisons
I was wanting to turn to other stakeholders – colleagues, employees, customers.
I picked up two messages. One was that the Government is listening hard.
The other was that because of the clear opposition to a second referendum it is very keen to respect democracy.
Are there any other particular messages for colleagues, employees, customers? What will play out in the media will not be the balance of what we have heard tonight, that is for sure.
Obviously in terms of your colleagues some of them will be people who come from other European countries.
It is of particular importance to provide a reassurance there. Deal or no deal commitments have been given that they are needed, they are welcome, there is no reason why they should be concerned by their position.
The second [thing] is that although the numbers look like we are a long way from achieving a deal to a certain extent they are misleading.
They might suggest there is not an appetite for a deal. The truth is that quite a lot of those who voted against the deal did so because they have taken an initial view and we now are intending to be more pragmatic.
The other thing to say is that quite a lot of the people that voted against it didn’t want to see no deal, didn’t want to take away any of the aspects of the agreement that have been reached, they want it to go further.
It might be tempting to think this shows the Commons doesn’t want to do a deal. Actually in my view it shows the opposite. For quite a large number of people they want it to go further.
That I completely understand is something that is hard to translate and persuade people of. But it is the reality.
This reaching out is being able to understand what further additions, concessions – we talked about reassurances about workers’ rights, about environmental standards- these are people that had concerns that the deal wasn’t rigorous enough.
I do think there is not only a deal to be done there but that … at least it allows us to have the close relationship that has been proposed.
I think it’s pretty obvious that there is a big majority to avoid no deal.
They need to come together and crystallise into an agreement but the right ingredients are there.
You have played a really important role in shaping the deal that has been proposed.
Don’t be disheartened in thinking your advice has been rebuffed. Some members of parliament want to go even further in terms of a closer relationship. Our job is to crystallise that and make that happen.
Barclay
There is absolutely no desire from a Government point of view to run down the clock. Quite the opposite.
We recognise the importance of time from a business point of view. But there is also a legislative pressure in terms of Parliament and impact of time.
We are very conscious that the sooner we can get to a consensus the better.
I am very conscious that a lot of you have already been speaking to Members of Parliament.
One of the challenges we have had is that there has been a narrative of dismissing some of the practical issues around Project Fear rather than the real term consequences that people on the call will be very aware of.
We need to continue with those practical examples of the impact on your businesses to Members of Parliament. Emphasising that message to them is extremely helpful.
Carolyn Fairbairn, director-general of the CBI
I will just reinforce the message that is coming from businesses across the country about taking that [no deal] off the table. Just to reiterate how very important that will be.
I want to turn quickly to the consensus-building process, it’s very welcome. Two questions. How broadly across Parliament will you be reaching? Will that be all opposition parties, all leaders of the parties. Secondly how much flexibility can the Government show on this. Particularly some of the areas which have been very challenging like the customs union issue.
How much flexibility do you anticipate the Government will be able to show around the red lines you have.
Hammond
You have to let the PM do this in her way. Over the next couple of days it will become clear. It will be a comprehensive reaching out across Parliament to hear views and build that consensus across Parliament. It won’t take very long.
Secondly on the question of red lines we go into this discussion with Parliamentarians having just suffered a very large defeat for the deal we have put forward. There are many tactical reasons for that defeat. There are a lot of people who in the course of the debate have made clear they want to see a negotiated deal, just not the terms of this deal.
We now have to bring those people to a realistic understanding of what can be done, and what cannot be done. It wouldn’t be helpful to go into this discussion waving flags with red lines on them.
The appropriate way to go in would be without commitment but openminded and listening to what people have proposed to see where the weight of opinion in Parliament lies.
So far the process has delivered us some very clear understandings of what Parliament is against, but no clear understanding of what Parliament is for.
Barclay
The Prime Minister made clear in her response to the vote that reaching out will be with senior parliamentarians across the House.
The essence of that will be how one builds the trust. There is a log in the Withdrawal Agreement with which they agree – protection of citizens rights, the respecting of legal obligations, the avoiding of a hard border through the backstop are all issues that many on the opposition benches agree with.
But the issue of trust tends to crystallise around things such as ‘well we hear the Government when it says it doesn’t want a regulatory race to the bottom, but how do we have confidence around that in terms of some of the assurances on employment rights and environmental standards’
Vivian Hunt, managing partner at Mckinsey & Company
My question relates to the clarity of messages, and to what extent we can get some of these messages clear from the Prime Minister in a more of a balanced way. That would be very reassuring.
Barclay
In terms of the timeframe what was set out is that we have got the confidence vote tomorrow, the Prime Minister has made a commitment to come back to the House on Monday. There will be discussions over the weekend as part of the engagement we have touched on. The next milestone in the process will be on Monday.
Simon Blagden, Fujitsu
We all have a lot of stakeholders and will all be very happy to support the Government in reaching out to those. This has been very very helpful.