Hammond’s back-up plan for ‘no-deal’ Brexit [Sky News]
Philip Hammond has warned that the government will have to abandon the economic plans he will lay out in Monday’s budget, supposedly marking the end of austerity, in the event of a no-deal Brexit.
In an interview with Sky’s Sophy Ridge on Sunday, the chancellor said the proposals being announced on Monday afternoon were based on the assumption that there will be a Brexit deal and that, if that turns out to be wrong, there would have to be a new, emergency budget.
In a strong hint that this would involve significant tax cuts, pushing the UK towards a so-called Singapore-style economic model, Hammond said the government would need a “different strategy for the future”.
John McDonnell, the shadow chancellor, said he was shocked by the remarks, which he said showed Hammond was reverting to a plan first floated in January 2017 to turn to the UK into a corporate tax haven in the event of the EU refusing to cooperate on a trade deal.
In his interview, Hammond claimed he was “very confident” the UK would negotiate a deal with the EU including “frictionless access to European markets on a reciprocal basis”.
However, when asked what would happen if there was no deal, he replied: “If we don’t get a deal, if we were to leave the European Union without any deal – and I think that’s an extremely unlikely situation but of course we have to prepare and plan for all eventualities as any prudent government would – if we were to find ourselves in that situation then we would need to take a different approach to the future of Britain’s economy.
“Frankly we’d need to have a new budget that set out a different strategy for the future.”
Asked if there would be less money available for government departments, he replied: “We would have to wait and see what the situation was. If we if we left the European Union without a deal we would want to see how markets and businesses and consumers responded to that.
“And then, as any responsible government would, we would take appropriate fiscal measures to protect the economy, to prepare us for the future and to strike out in a new direction that would ensure that Britain was able to succeed whatever the circumstances we found ourselves in.”
Hammond did not elaborate on what “fiscal measures” he would introduce in the event of a no-deal Brexit, but economists expect he would introduce substantial tax cuts, funded by borrowing, to minimise the risks of recession, just as the Labour government did in 2008 when it slashed VAT.
The chancellor also did not spell out what he meant by a different economic strategy available to the UK in the event of a no-deal Brexit, but he seemed to be referring to a move towards a low-tax, low-spending, low-regulation economic model, of the kind favoured by some Brexiters on the Conservative right.
He floated this option last year, although more recently ministers have played down this as a possibility, stressing their commitment to maintaining workers’ rights and the welfare state.
In his interview, Hammond also declined to reject outright a suggestion that, even if there is a deal, the UK would be worse off after Brexit. When this was put to him, he said his job was to make sure that the country was better off.
He continued: “Over my lifetime, people’s living standards have almost doubled and we want to go on seeing that growth in living standards so that we can make good on our promise to the next generation that they too will be better off than their parents.”
Speaking on the same programme for Labour, McDonnell said he was “shocked” by Hammond’s comments. He said: ‘“[Hammond] seems to have accepted a no-deal Brexit, and he does want us to be like Singapore, a tax haven, which will undermine our manufacturing and I think put people’s living standards at risk.”