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Philip Hammond’s Brexit no-deal bind

11 October 2017

12:00 PM

11 October 2017

12:00 PM

Philip Hammond has got himself into something of a bind over planning for a Brexit ‘no deal’. The Chancellor has ruled out – at least for the time being – spending money on contingency plans for a scenario in which Britain walks away from the EU without an agreement. The problem with this strategy is that it undermines Theresa May’s ‘No deal is better than a bad deal’ approach. Put simply, how credible is the government’s line on being ready to walk away empty-handed if planning for such an outcome takes a back seat for now? It’s also surprising for the Chancellor to rule out preparing for a scenario seen as being a 50-50 bet by some of his colleagues in the Cabinet.

Another problem with the Chancellor’s explicit refusal to commit money to preparing for a ‘no deal’ was also exposed during his appearance in front of the Treasury Select Committee this morning. He told MPs the country would be ready whatever happens, but vowed not to ‘start committing substantial amounts of funds any earlier than we need to, in the hope that that no deal scenario will become something that we don’t have to plan for in the future.’

But Hammond’s ‘hope’ to avoid a Brexit ‘no deal’ will be interpreted in Brussels as a sign that the government really doesn’t think no deal is better than a bad deal. This risks repeating the mistake made by David Cameron: heading into negotiations with the EU determined to get an agreement, whatever form it may take. This is unlikely to end well for the government.

Hammond did admittedly concede that there may be a time when preparing for ‘no deal’ is worth spending money on. The Chancellor told the committee:

‘It will depend on the particular areas in question…there will be some areas where we need to start spending money in the new year if we can’t tell ourselves that we are moving steadily and pretty assuredly to a transition agreement.’

The fault with this approach is that if, come January, the Treasury does suddenly allocate funds to preparing for no deal, it will look panicked and rushed and do little to reassure those worried about Brexit. Better the government adopts a gentler approach now than a sudden change of tact in the new year. As David Jones, the former Brexit minister has pointed out, if no money is allocated to this scenario in November’s Budget it will leave the UK ‘scrambling’ to cope. The Chancellor is no stranger to ripping up a Budget announcement but his mistake here is being so explicit at ruling out something he should include.

The government is clearly pinning its hopes on Brexit talks at the EU summit on December 14 and there are signs to be optimistic that progress will be made. But in delaying contingency plans for a ‘no deal’ Britain will head into those talks with one of its cards – the threat of walking away – missing.

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