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Chancellor in warning over push towards specific Brexit outcome

Published 19/10/2016

Ministers were reportedly warned that leaving the European customs union risked a 4.5% fall in GDP by 2030
Ministers were reportedly warned that leaving the European customs union risked a 4.5% fall in GDP by 2030

Efforts to tie Prime Minister Theresa May to a specific form of Brexit are undermining Britain's chances of negotiating a successful withdrawal from the European Union, Chancellor Philip Hammond has warned.

His comments are likely to be seen as a lightly-veiled reproach to International Trade Secretary Liam Fox, who has made a very public push for a "hard Brexit" solution - which would see the UK leave the European single market and customs union.

The Chancellor also moved to allay City concerns that Brexit might prevent them recruiting highly-skilled foreign staff, telling the House of Commons Treasury Committee that address ing the concerns of the financial sector will be " a very high priority" for the Government in negotiations.

While regaining controls over the migration between the UK and EU was an essential part of Brexit, Mr Hammond said: "I cannot conceive of any circumstance in which we would be using those controls to prevent banks, companies moving highly-qualified, highly-skilled people between different parts of their businesses.

"That is essential for the smooth operation of our economy."

After days of press reports that other ministers privately see Mr Hammond as a drag on progress towards Brexit, the Chancellor told the committee that it was "no secret" there were differences of opinion within the Cabinet about the best way to proceed.

He condemned leaks from meetings of the Cabinet Brexit committee, saying it would be "far more helpful to this debate if we were able to conduct these internal discussions privately without leaks to newspapers".

And he insisted that it was not the Treasury which was undermining Brexit, as reports have suggested, but those trying to pin Mrs May down too soon to a preferred outcome for the two-year withdrawal talks under Article 50 of the EU treaties - which are due to begin before the end of March 2017.

Mrs May hinted that the 2019 deadline for withdrawal under Article 50 could be extended - something that could happen only with unanimous agreement of all 27 remaining states - telling MPs at Prime Minister's Questions that the process would take "two years or more".

Mr Hammond told the committee that Mrs May was operating within "two clear constraints" - that the UK will leaving the EU and will control migration".

"Beyond that, she needs the maximum possible space," he said. "My objective in supporting her is to ensure that she has the broadest range of options - properly costed and understood - and the maximum scope to deploy that broad range of options in what might be a wide-ranging negotiation.

"I would say that those that are undermining the effort are those that are seeking to close down that negotiating stance, seeking to arrive at hard decisions that we don't need at this stage.

"Keeping as many areas open, as many options open, as possible is the key to the strongest possible negotiating hand."

Mr Hammond did not deny reports that the Brexit Committee has been considering a Treasury paper produced ahead of the referendum, which warned that leaving the arrangement could risk a 4.5% fall in GDP by 2030.

But he cautioned that official estimates of the economic impact of Brexit dating from before the June 23 poll had been prepared on the assumption that the UK would trigger Article 50 immediately after a Leave vote, and that there would be no mitigating action from the Bank of England - both of which had been proved wrong.

Mr Hammond declined to say whether the Government wants to stay in the customs union, which would allow exporters and importers to trade tariff-free with European neighbours, but make it impossible for the UK to strike its own trade deals.

He accepted there had been some "very long, drawn-out" multilateral trade talks, but insisted that "n egotiating a straightforward bilateral trade deal ought to be a great deal simpler" for Britain outside the 28-nation bloc.

Until the Article 50 process is complete, he confirmed it was not appropriate for Dr Fox to enter into "any substantive negotiation with any third party".

The Chancellor came under attack from committee members for refusing to publish analysis being drawn up by the Treasury of the pros and cons of various potential Brexit deals.

Labour MP Rachel Reeves was backed by committee chair Andrew Tyrie as she said: "We can have a public debate, but it will be without the facts available to us.

"That will be a very poor debate and I think that is a disappointing decision by the Government.

"Taxpayers pay for the Treasury to do that work, Chancellor, and I think the public and parliamentarians deserve to see that work."

But Mr Hammond insisted: "It would not be sensible - however irritating I understand that is going to be to some people - to go into the negotiation with all of our potential negotiating positions, all of the building blocks of a negotiating position spelled out in public with the costs and benefits and consequences displayed for our interlocutors on the other side of the table.

"I can promise you the European Union will not be arriving at the negotiations with all the downsides as well as upsides of different negotiating positions set out for us to see."

He added: "We cannot have a public debate about what our negotiating position is going to be. If we were to do that, we would have no negotiating position."

Hungary's minister for foreign affairs and trade, Peter Szijjarto, told Channel Four News the EU needed to cut a "tailor-made" deal with the UK.

"From my perspective we need a tailor-made solution. So, no-Swiss-type, no Canadian-type, no Norwegian-type, we need to look for a tailor-made solution for cooperation regarding trade, economy, and investments between the UK and the EU.

"And the ideal situation would be, of course, free trade. Absolutely free trade between the UK and the EU, because currently there's absolutely free trade between UK and the rest of Europe."

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