Saturday , January 28 2023

Brexit deal will make us worse off, Chancellor Philip Hammond admits


Britain will be worse off under Theresa May's Brexit deal than if she stayed in the European Union, the Chancellor admitted today.

Philip Hammond confirmed that "in pure economic terms" the country will lose out under every possible form of Brexit.

"The economy will be slightly smaller in the Prime Minister's preferred version of the future partnership," he said.

His candid admission was backed up by a long-awaited official Government analysis of the long-term economic impact of different Brexit options. It showed:

  • Mrs. May's original Checkers proposals, which asked for "frictionless trade", would deliver a blow to the UK's GDP between 2.5 percent and 0.6 percent over 15 years, depending on the level of immigration after Brexit.

  • A deal without "frictionless trade", which would be closer to the outline deal on the table, would mean a bigger blow of between 2.1 percent and 3.9 percent.

  • Crashing out with no deal would be far worse, at a blow of between 7.7 percent and 9.3 percent, with the worst figure reached if net EU immigration was reduced to zero.

  • Under a Canada-style free trade agreement, which many Brexiteers prefer, would be a hit of between 4.9 percent and 6.7 percent.

  • A Norwegian-style membership of the European Economic Area, seen as the softest Brexit as it retains free movement, could mean a blow to the economy of just 1.4 percent.

The confirmation that Brexit will damage growth and earnings even under Mrs May's plans came as the Prime Minister was preparing to visit Scotland in the latest leg of his UK tour to drum up support

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In a series of media interviews, the Chancellor said "other ideas" could emerge if the Government loses the showdown vote on the deal on December 11, a clear hint that an option like EEA membership could gain traction.

Asked today if Theresa May would have to resign if she lost the Brexit Commons vote, the Chancellor did not deny it (AFP/ Getty Images)

Asked if Mrs. May would have to resign if she lost, the Chancellor did not deny it. He said: "I think the Prime Minister would want to sit down with the Cabinet and take stock.

"She would clearly have to recognize what had happened in Parliament. We do not know We would have to look at what the vote in Parliament was, who voted what way, whether other ideas were emerging. "

Pressed again on Mrs May's future if her deal is torpedoed, Mr Hammond said elliptically: "Nothing is agreed until everything is agreed, and nothing is known until everything is known."

Mr Hammond's comments were seized on by supporters of a second referendum. "It's a truly extraordinary admission that Mrs May's deal will cut tens of billions of pounds from our GDP," said Labor MP Owen Smith.

But Brexit-backers scoffed at the evidence. Former Breitch Minister Steve Baker said: "The reputation of Government economics is in the gutter."

Addressing fishermen in Scotland, Mrs. May will say her deal offers an "unprecedented economic partnership" with the EU, while escaping from the Common Fisheries Policy.

But during his half-round, Mr. Hammond repeatedly used the term "best .. negotiated deal" to describe it, implying there were better options that had not been negotiated.

Analysis: Just 13 days to go – PM's tour of UK could turn out to be her swansong

"It's all going to plan – Barnier's plan," said Brexiteer MP with the gallows humor infecting Westminster. But the question asked by backbenchers and ministers alike is: With two weeks before a life-or-death vote on the withdrawal deal, where on earth is the master plan of Theresa May?

She seems to have excluded much of the Cabinet from her thinking. Some ministers say privately they do not know if she has a Plan B while others, such as five Remain-backing ministers, are requesting support for Efta or a Norway-style EEA membership. Two, Business Secretary Greg Clark and Justice Secretary David Gauke, were spotted having a discreet breakfast with Jo Johnson, the pro-EU brother of Boris.

Senior Tories are baffled by Mrs May's decision to tour Wales, Scotland and Northern Ireland to sell her deal "over the heads of MPs" to the public. "It's a sideshow," said one rebel. "The only electorate that matters is the 650 MPs here." They are also surprised by how "incredibly relaxed" the party whips appear. The tactics from the 1993 Maastricht rebellions, when such were rife of backbenchers pinned to the walls by a burly whip nicknamed The Terminator, have gone. One MP tells of Brexiteers being invited for a "chat" at No 10 only to find a Remainer there too.

At the same time, Labor MPs say an attempt by Mrs. May's chief of staff Gavin Barwell to woo them fell flat because he focused on the backstop, a matter of more concern to the group of Jacob Rees-Mogg. Even ministers struggle to see how the whips could pull off a victory with the parliamentary maths so stacked against them. Many are instead pondering how bad the defeat would have to be to make a second attempted vote become impossible. Coming 25 votes short, for example, would be seen as a reversible defeat. But losing by 70 or more would look permanent.

But through the fog and false starts, the plan is emerging. From December 4, campaigning will step up a gear, with ministers pushing key messages every day in Commons debates. Some may be deployed to talk round specific groups, like Michael Gove (who will come out fighting on the Marr show this weekend) meeting Sensible Brexiteers. If a few rebels can be turned, the Brexiteers might start feeling the heat.

No 10 you have decided to accept the Commons' demand that amendments can be put on other options, including a second referendum and an Efta-type Brexit, before the main vote. Downing Street has a simple message: Only one deal on the table guarantees Brexit and minimizes economic damage.

The key vote seems to have been brought forward from December 12 to 11, creating a spare day which they think could be used to stage a confidence vote, with the fate of the entire Government riding on it. By this stage, market turmoil could persuade MPs to back the deal in a second vote for the sake of stability. As a last resort, Mrs. May may even name her retirement date, allowing a new PM to seek a new trade deal. With 13 days left until the vital vote, few would bet on victory for a PM whose UK tour may turn out to be her swansong.

Joe Murphy

He has opposed remaining in the EU, saying it would spark political ructions that hold back the economy anyway. "Divided countries are not successful," he said.

"There are many critics of the Prime Minister's deal but nobody has yet come up with a better plan," he told LBC.

Crashing out with no deal would leave the UK in "uncharted territory" and investment would suffer. "They are not scare stories," he said.

Today's cartoon by Christian Adams

City chiefs today issued a direct appeal to MPs to block a "no deal" outcome they said would severely damage the economy.

Stephen Jones, Chief Executive of UK Finance, said: "Avoiding a no deal cliff edge remains the absolute priority for the banking and finance industry.

"Despite the preparations that are being put in place, a no-deal cliff-edge Brexit would have devastating consequences for the UK's economy. The UK's Parliament now has the responsibility to ensure that this does not happen. "

The group, which represents more than 250 companies in the UK, has voiced support for Mrs May's Brexit proposals but concerns are growing that they will fail to get through Parliament.

Huw Evans, director general of the Association of British Insurers, said: "Parliament should do everything it can to avoid crashing out in March without agreement on the way forward.

"No deal would be bad for the country, bad for the economy and bad for our customers. It is absolutely critical this is avoided. Any future arrangement between the UK and the U.S. must recognize that the leading global insurance sector can not end up being rule takers. "

Catherine McGuinness, chairwoman of the policy of the City of London Corporation, added: "The recent progress made by the UK and the EU towards securing a withdrawal agreement is welcome but there is still some way to go before we cross the finish line.

"The non-deal Brexit would undermine financial stability by disrupting services provided by the City to households and businesses on both sides of the Channel. Securing a withdrawal agreement that delivers a transition period is vital to give the sector time to work through this complex process. "

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