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Hammond to wait until last moment before ‘no deal’ Brexit spending approval

The Chancellor said delays in moving talks on from the divorce deal to the transition were creating a “cloud of uncertainty”.

Philip Hammond has said he will wait until “the last point” before authorising spending on preparations for a “no deal” Brexit, as it emerged that £250 million of new money has been allocated from Treasury reserves to get Britain ready for EU withdrawal.

Theresa May told MPs at Prime Minister’s Questions in the Commons that the cash had gone to the departments for Environment and Transport, the Home Office and HM Revenue and Customs.

She was cheered by Brexit-backing MPs as she said: “Where money needs to be spent, it will be spent.”

Aides said the cash came on top of £412 million already spent on Brexit preparations.

Downing Street rejected suggestions that Mrs May’s comment was a slapdown to the Chancellor.

He used an article in The Times to say it would be “irresponsible” to turn on the tap now for spending on infrastructure which may be needed – such as lorry parks at Channel ports – if the UK and EU fail to reach an agreement by the official Brexit date of March 2019.

Committing money in next month’s Budget to preparations for a “no-deal” Brexit would divert cash away from priorities like the NHS, social care and education, and the investment may turn out to be unnecessary if talks in Brussels result in a good deal, the Chancellor said.

But he later told MPs that the Treasury was “prepared to spend when we need to spend” on contingency plans for “no deal” outcomes, including a possible “bad-tempered breakdown” in negotiations.

Mr Hammond told the Commons Treasury Committee: “We should look in each area at the last point at which spending can be given to ensure that we are ready for a day one ‘no-deal’ scenario. That’s when we should start spending hard-earned taxpayers’ money.

“Every pound we spend on contingent preparations on a hard customs border is a pound we can spend on the NHS or social care or education or deficit reduction. I don’t believe that we should be in the business of making potentially nugatory expenditure until the very last moment when we need to do so.

“We will be ready. We will spend the money in a timely fashion to ensure we are ready, but we will not spend it earlier than necessary just to make some demonstration point.”

The Government would need to decide at some point what was the “realistic” worst case it needed to plan for, but it would wait until the “last point” before committing funds, said Mr Hammond.

It was “theoretically conceivable” that planes could be grounded at UK airports on day one of Brexit, though “nobody seriously believes that that is where we will get to”, he said.

The Chancellor said there was a “need for speed” from the other 27 EU nations in agreeing a transition to the post-Brexit era, both to deliver certainty for businesses and to avoid wasteful government spending on contingency planning.

Delays in beginning talks on the future UK/EU trading relationship – caused by Brussels’ insistence that the divorce deal must be settled first – were creating a “cloud of uncertainty” which was acting as a damper on the UK economy, he said.

European Council president Donald Tusk indicated on Tuesday that he does not expect EU leaders to give a green light for the opening of talks on trade and transition at a crunch summit in Brussels next week, and suggested the move may even be delayed beyond the end of this year.

But Mr Hammond said early agreement would save businesses and governments from “having to make worst-case assumptions and acting on them in a way that would be damaging to their businesses, damaging to the UK economy, damaging to business partners in the other EU countries and damaging to the EU’s economy as a whole”.

He urged EU leaders to allow “at least exploratory discussions” to begin, warning that progress on the kind of interim deal proposed by Theresa May in her speech last month in Florence would mean “breaking out” of the negotiation structure set out by the European Commission.

“Our European partners need to think very carefully about the need for speed in order to protect the potential value to all of us of having an interim period that protects our businesses and citizens and allows investment and normal business activity – contracting and so on – to carry on,” said Mr Hammond.

He made clear Britain was preparing for the possibility that no deal would be reached.

“We have to consider the possibility of a bad-tempered breakdown in negotiations where we have non-cooperation, or a worst-case scenario where people are not necessarily acting in their own economic self-interest,” he said.

Labour MP Wes Streeting, a leading supporter of the Open Britain campaign against a hard Brexit, said: “Philip Hammond’s heart isn’t in this because he, unlike many in his party, at least recognises the terrible risks and pitfalls Brexit has left this country vulnerable to.

“It’s time he and the Prime Minister showed some leadership, took on the hardliners on their backbenches, and reversed their damaging decision to leave the single market and the customs union.”

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