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Sat, 28 March 2020

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Philip Hammond sparks fresh Cabinet row over risks to UK of no-deal Brexit

Philip Hammond sparks fresh Cabinet row over risks to UK of no-deal Brexit
3 min read

Philip Hammond today risked a major Government bust-up as he warned leaving the EU without a deal could be devastating for Britain - in flat contradiction to a Cabinet colleague.

The Chancellor said crashing out of the bloc in March 2019 without arrangements in place to protect trade could have "large fiscal consequences".

His comments came just hours after Brexit Secretary Dominic Raab played down the risks of a no-deal Brexit, as the Government laid out proposals to help Britain cope with such a scenario.

The sensational intervention by the Chancellor is likely to anger anti-EU Tory MPs and exacerbate their fears he is not fully signed up to the cause. 

Ministers today published 25 technical notices laying out advice to businesses, public bodies and the public on how best to prepare for the possibility of Britain leaving the EU without a deal in March 2019.

Mr Raab said he acknowledged the short term challenges posed by quitting the EU without a deal, but he insisted the UK will be better off outside the EU in the long term.

However, in a letter to Treasury Committee chair Nicky Morgan, Mr Hammond pointed to Government analysis from earlier this year laying out the risk of “damaging” trade barriers.

“GDP impacts of this magnitude, were they to arise, would have large fiscal consequences,” he said.

“The January analysis estimated that borrowing would be around £80bn a year higher under a no deal/WTO scenario by 2033-34, in the absence of mitigating adjustments to spending and/or taxation, relative to a status quo baseline. 

"This is because any direct financial savings are outweighed by the indirect fiscal consequences of a smaller economy."

The Chancellor said the analysis was undergoing a “period of refinement” ahead of parliament’s vote on the final deal struck between Theresa May and the EU.

He added: “However, we expect 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 and public finances.

“These are conclusions that many other credible external organisations have come to independently, including the IMF, the OECD, the LSE and NIESR.”


Virendra Sharma, a Labour MP and supporter of pro-EU campaign Best for Britain said Mr Hammond’s comments showed the Government was “playing Russian roulette” with the economy.

“The Chancellor's bombshell letter today shows the chaos at the heart of government,” he said.

“Senior ministers don't seem to talk or even have a coherent plan. The government is totally split with only months till we are supposed to Brexit.”

Labour MP Chris Leslie, from the People’s Vote campaign said: “This Government is being pulled apart at the seams by Brexit, but it’s the country that will ultimately pay the price when it all falls apart.”

Meanwhile arch-Brexiteer Tory MP Jacob Rees-Mogg hit out at the Chancellor, telling the Telegraph: “As a dog returneth to his vomit, so a fool returneth to his folly.

“The Treasury is desperate to stop Brexit. Everything the Treasury does has to be read in this light.”

The 25 technical notices included warnings that credit card charges on the continent could rise, while UK citizens living in Europe could lose access to bank accounts and pensions.

Mr Raab said he was confident that “getting a good deal is, by far, the most likely outcome”, but recognised the “risks in the short term” of leaving without an agreement.


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