No more cash, says Chancellor
The Chancellor has warned Tory leadership candidates they will have no extra money to spend on campaign pledges if they allow a no-deal Brexit.
Philip hammond said the spare borrowing capacity that has been stocked up will be needed to combat the effects of leaving the EU without a deal.
Both Tory leadership candidates have been warned they will have no extra money to meet their spending pledges if they allow a no-deal Brexit.
Chancellor Philip Hammond said the “fiscal firepower” of spare borrowing capacity that has been stocked up will be needed to combat the effects of leaving the EU without a deal, leaving nothing for new spending.
Both Boris Johnson and Jeremy Hunt have made costly pledges as they vie to replace Theresa May as prime minister.
The warning came as Mr Hunt unveiled a ten-point plan to deliver Brexit and said he would decide on 30 September whether to call off talks with Brussels if he becomes prime minister.
His package of measures includes making £6 billion available to support farmers and fishermen who would be worst hit by a drop in exports to the EU. Mr Johnson has taken the more hardline approach on Brexit, saying it must take place by the current 31 October exit date, “do or die”. Mr Hunt has said he would ask for a delay if a deal was in sight.
Around £26bn of additional borrowing capacity has been kept in reserve by the Chancellor to prepare for Brexit.
Writing on Twitter yesterday, Mr Hammond said: “The ‘fiscal firepower’ we have built up in case of a no-deal Brexit will only be available for extra spending if we leave with an orderly transition. If not, it will all be needed to plug the hole a no-deal Brexit will make in the public finances.”
Mr Hunt has also pledged cuts to corporation tax at an estimated cost of £13bn per year in the short term and an increase in defence spending to cost an additional £15bn in four years.
Mr Johnson has signalled he would be prepared to increase borrowing to fund infrastructure projects.
He has also pledged to give a tax cut to earners on more than £50,000, a move which was criticised as benefiting the top 10 per cent of earners and costing a suggested £9bn.
However, he refused to commit to pay rises for public sector workers despite his cabinet backer Matt Hancock saying the leadership frontrunner would show them “some love”.
Shadow Chancellor John Mcdonnell said the candidates’ spending pledges “prove that austerity was a political choice for the Conservatives and not an economic necessity”.
Meanwhile, Mr Hunt said that if he did not think there was sufficient movement from the EU by the end of September, he would increase efforts to cope with a no-deal exit on 31 October.
“It is important that the EU knows that we will do what it takes to make a success of a nodeal Brexit,” he said.
“We won’t blink as a country. That no-deal Brexit is not going to be an opportunity for them to successfully turn the screws on our country.
“I will start engaging with the EU straight away, throughout August. Then, when we have published our plan for a deal we think we can get through Parliament by the end of August, we will start formal negotiations in September.”
Mr Hunt added: “There is a hard deadline in what I have said, by the end of September, I, as prime minister, will make a judgment as to whether there is a realistic prospect of a deal that can get through Parliament in the short-term.
“And, if my judgment is that is not the case, talks will stop and we will put our heads down and focus on no-deal.”
Under Mr Hunt’s plan, food producers would be treated like the financial services industry during the 2008 financial crash through a temporary No Deal Relief Programme.
He also set out plans to create a Cobra-style emergency committee to “turbocharge” Whitehall preparations for no-deal and keep Britain open for business in the event of World Trade Organisation tariffs coming into effect.
“You cannot leave the European Union on a wing and a prayer,” Mr Hunt said in a speech in London. He added: “If we could do it for the bankers in the financial crisis, we can do it for our fishermen, farmers and small businesses now.”
He said plans to keep goods flowing in and out of the UK, including emergency powers so ports and airports can coordinate nationally, will be led by a new national logistics committee led by the Department for Transport.
A no-deal Brexit Budget will also be prepared, including a corporation tax cut to 12.5 per cent, increasing the annual allowance to £5 million and taking 90 per cent of high street businesses out of rates.”
But Mr Johnson hit back, saying: “Preparations had already been made to come out on 29 March and we were very nearly there. Those were allowed to sag back again as a result of not coming out and that was a mistake.
“So it’s very important to have a hard deadline, to be absolutely clear about what we’re doing and to come out on 31 October.”
SNP deputy Westminster leader Kirsty Blackman dubbed Mr Johnson and Mr Hunt “the Thelma and Louise of Brexit”, saying: “It beggars belief that both are prepared to drive the UK economy off a Brexit cliff-edge, regardless of the catastrophic consequences for the economy and jobs.”