Philip Hammond sparks fury with claim UK could pay £36bn Brexit divorce bill without trade deal

Posted On: 
17th October 2018

Philip Hammond has been accused of reigniting "Project Fear" as he warned ministers Britain will still face a hefty Brexit divorce bill if it fails to secure a trade deal with the EU.

The Chancellor was branded 'cavalier' by Brexiteer Jacob Rees-Mogg.
Credit: 
PA

According to the Telegraph, the Chancellor told Cabinet colleagues that the UK would still be obliged to pay the majority of the overall £39bn bill without an agreement on trade.

The comments - based on legal advice given to the Treasury - stand in stark contrast to claims by Brexit Secretary Dominic Raab that the UK will "not pay the terms of the financial settlement" with Brussels if a deal cannot be reached.

John Major: Brexiteers will never be forgotten or forgiven

Donald Tusk demands 'concrete proposals' from Theresa May to break Brexit deadlock

Theresa May pleads with her Cabinet not to split over Brexit

Mr Hammond is reported to have told colleagues that Britain would still be on the hook for between £30bn and £36bn of the overall amount because it would be unlikely to win an international legal battle with the EU.

The warning was immediately pounced on by leading Brexiteer Jacob Rees-Mogg, who chairs the European Research Group of Tory backbenchers.

The MP said the Chancellor's stance was "simply wrong".

And he added: "It's a cavalier approach to taxpayers' money. I didn't realise the ending of austerity meant drowning the European Union in cash.

"The Treasury is so mired in Project Fear it wants to search out the weakest legal arguments for the most expensive outcome for the British taxpayer."

But a source close to Mr Hammond insisted the Chancellor was not being "a Remoaner" and said his stance on how much to pay the EU was "hardening".

BARNIER'S TRANSITION PITCH

The fresh row over the divorce bill came as Theresa May prepares to head to Brussels amid fading hopes of a breakthrough in stalled Brexit talks.

Britain had been hoping EU leaders would use the two-day European Council summit to recommend a special November meeting to seal a deal.

While the Prime Minister will still address the EU27 leaders before they hold dinner, the two sides remain deadlocked over plans to avoid a hard border between Northern Ireland and the Republic.

In a bid to break the impasse, the EU's chief negotiator Michel Barnier has reportedly said he would be open to extending the Brexit transition period - due to expire in December 2020 - by a year.

According to the Financial Times, the EU could grant an extension if the UK accepts a "two-tier" backstop solution on the Northern Ireland border.

"The extension is an example of how we could be flexible to help the British side if they want it," a diplomat told the paper.

A similar plan was reportedly backed by International Trade Secretary Liam Fox at a Cabinet meeting on Monday.

According to the Times, Dr Fox urged the Prime Minister to extend the Brexit transition period by a "few more months" in a bid to break the deadlock with Brussels.

Such a move would buy more time for a trade deal to be signed off, averting the need for the EU's backstop arrangement to kick in.

In a fresh sign of the pressure Mrs May is under to reject the EU's backstop plan, Attorney General Geoffrey Cox is said to have warned the Cabinet that the proposal would see Northern Ireland being “torn out of the UK” and leave Britain with "no leverage in future talks".