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Economic future will have close links to EU – Chancellor

Philip Hammond says the UK must not reduce trade with European neighbours.

Britain’s economic future will remain “closely linked with the EU” following Brexit, Chancellor Philip Hammond has declared.

In his keynote speech to the Conservative conference in Manchester, Mr Hammond stressed the need for “careful and cautious” negotiation of Britain’s EU withdrawal in order to ensure that it does not reduce trade with European neighbours.

His comments put him at odds with hardline Brexiteers who have urged Theresa May to be ready to take the UK out of the EU without a divorce deal, and expose his differences with Foreign Secretary Boris Johnson, who has stressed the importance of a clean break with the remaining 27-nation bloc.

Mr Hammond acknowledged that the process of negotiating Brexit had created “uncertainty” and slowed business investment and economic growth.

And he accepted that the Government needs to tackle the problem of low pay and listen to the concerns expressed by many young voters who have turned to Jeremy Corbyn’s Labour Party.

But he delivered a stern broadside against Mr Corbyn’s “Marxist” policies, warning they threatened “not only our economic progress but our freedom as well”.

Denouncing the Labour leader as “a clear and present danger to our economic prosperity”, he said he relished the coming debate with “dinosaurs” who he branded “a political version of Jurassic Park”, telling Mr Corbyn: “Bring it on.”

A “wicked and cynical” Mr Corbyn was offering “superficially simple solutions to complex challenges”, but his policies would “inevitably lead us back to where Britain was in the late 1970s” when tax rates reached as high as 98%, the Chancellor warned.

He urged Conservative activists to take on the argument voiced at Labour’s conference in Brighton last week that the capitalist economic model which has held sway since the time of Margaret Thatcher had failed.

Contrary to the claims of shadow chancellor John McDonnell, the free market economy remained “the best system yet designed for making people steadily better off” and Britain’s economy was “fundamentally strong”, said Mr Hammond.

But he acknowledged the damage inflicted by the tortuous process of Brexit.

“We face an immediate challenge as we move ahead,” he told Tory activists. “The process of negotiating our exit from the EU has created uncertainty, so investment has slowed as businesses wait for clarity.

“So before we can reap the benefits of our strong economic fundamentals and the investment we are making in the future, we must remove this uncertainty.”

Mr Hammond, who campaigned for Remain in the 2016 referendum, said he respected the result and accepted the Government’s job was now to implement the decision of the voters.

But he added: “They didn’t vote to get poorer or to reduce trade with our closest neighbours and biggest trading partners.

“The British people have chosen independence over integration and as we implement their decision, we must use that independence in our nation’s best interest to protect our jobs, to strengthen our economy and to safeguard our prosperity.”

The Chancellor said: “Our economic future will remain closely linked with the EU for many good reasons, but our political future will be our own.

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The Chancellor's speech put him at odds with both the Prime Minister and Boris Johnson (Stefan Rousseau/PA)

“Our EU partners can go their way, we wish them well. But we will not join them on a voyage to ever closer union.”

In a barely-veiled rebuke to more gung-ho Brexiteers, he said ministers should not “downplay the difficulties nor underestimate the complexities” involved in “one of the most challenging tasks ever undertaken by a peacetime government”.

The Government must “pick our way carefully and cautiously across the difficult terrain of EU negotiation, to ensure we arrive in good order on the fertile plains at the other side”, he said, adding that “focus, determination and unity” would be needed to succeed.

Following the Conservatives’ loss of their overall majority in June’s election, Mr Hammond said it was important that the party “hear the concerns of a generation that feels excluded from the opportunities their parents enjoyed” due to job insecurity, low pay, soaring house prices, inflation and debt from student loans

Productivity growth had slowed to a “snail’s pace” in the wake of the 2008 financial crisis, leading to wages which were “just too low” in many sectors of the economy, said Mr Hammond.

“It isn’t that people aren’t working hard; rather that they are not producing as much through their hard work as their competitors manage to do,” he said.

“For some, it will feel like driving with your foot to the floor, but the handbrake half on.”

He confirmed plans to spend £10 billion to assist home-buyers through the Help to Buy scheme and £400 million to improve transport infrastructure in the North of England.

And he told Tory activists: “We need to listen to those fears and concerns, we need to acknowledge the weariness at the long slog back from Labour’s recession, the pressure on living standards caused by slow wage growth and a spike in inflation, the frustration among the young who fear that the combination of student debt and sky high rents and house prices will condemn them never to access the opportunities of property ownership their parents enjoyed.

“While we will dismiss Labour’s solutions to them, we must never dismiss the underlying concerns that the election articulated. We must listen to them and we must respond.”

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