Treasury publishes Hammond letter warning of costs of no-deal Brexit
Chancellor publishes letter to Treasury select committee after government release of 25 technical notices on preparing for no-deal Brexit
Chancellor Philip Hammond. Credit: Ben Birchall/PA
Philip Hammond angered pro-Brexit MPs yesterday after the Treasury published a letter from the chancellor warning of the economic consequences of leaving the EU without a deal.
The chancellor said crashing out of the bloc in March 2019 without arrangements in place to protect trade could have “large fiscal consequences”, referring to provisional analysis from the Treasury that showed government borrowing could be £80bn a year higher.
His comments came just hours after Brexit secretary Dominic Raab played down the risks of a no-deal Brexit, as the government laid out proposals to help Britain cope with such a scenario.
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Ministers yesterday published 25 technical notices laying out advice to businesses, public bodies and the public on how best to prepare for the possibility of Britain leaving the EU without a deal in March 2019.
Raab said he was confident that “getting a good deal is, by far, the most likely outcome”, but recognised the “risks in the short term” of leaving without an agreement. He insisted the UK will be better off outside the EU in the long term.
However, in a letter to Treasury Committee chair Nicky Morgan, Hammond pointed to government analysis from earlier this year laying out the risk of “damaging” trade barriers.
“GDP impacts of this magnitude, were they to arise, would have large fiscal consequences,” he said.
“The January analysis estimated that borrowing would be around £80bn a year higher under a no deal/WTO scenario by 2033-34, in the absence of mitigating adjustments to spending and/or taxation, relative to a status quo baseline.
"This is because any direct financial savings are outweighed by the indirect fiscal consequences of a smaller economy."
The chancellor said the analysis was undergoing a “period of refinement” ahead of parliament’s vote on the final deal struck between Theresa May and the EU.
He added: “However, we expect the analysis to show that for scenarios in which we have higher barriers to trade with the EU there will be a more damaging effect on the economy and public finances.
“These are conclusions that many other credible external organisations have come to independently, including the IMF, the OECD, the LSE and NIESR.”
Virendra Sharma, a Labour MP and supporter of pro-EU campaign Best for Britain said Hammond’s comments showed the government was “playing Russian roulette” with the economy.
“The chancellor's bombshell letter today shows the chaos at the heart of government,” he said.
“Senior ministers don't seem to talk or even have a coherent plan. The government is totally split with only months till we are supposed to Brexit.”
Meanwhile arch-Brexiteer Tory MP Jacob Rees-Mogg hit out at the chancellor, telling the Telegraph: “As a dog returneth to his vomit, so a fool returneth to his folly.
“The Treasury is desperate to stop Brexit. Everything the Treasury does has to be read in this light.”
The 25 technical notices included warnings that credit card charges on the continent could rise, while UK citizens living in Europe could lose access to bank accounts and pensions.
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