Yahoo Finance Hammond: no-deal Brexit will cost Treasury £90bn
The government’s own figures suggest the Treasury would face a £90bn “hit” from a no-deal Brexit, the UK chancellor said on Tuesday.
Philip Hammond also refused to rule out voting down a Conservative government in a no-confidence motion to stop Britain leaving without a deal, and hinted he may work with other MPs to block such an outcome.
The figures suggest a no-deal Brexit could blow open a huge hole in public finances as the government deals with the economic fallout of a sharp and sudden break from Britain’s biggest trading partner.
The chancellor said there would be “no money available” for longer-term tax cuts and spending hikes under a chaotic no-deal Brexit, in a thinly veiled attack on the two men running to be the next UK prime minister.
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Both Boris Johnson and Jeremy Hunt have confirmed their willingness to leave the EU without a deal if necessary, with Hunt’s plans for an emergency budget recently dominating headlines.
Hammond said in parliament it was “highly unlikely” he would remain chancellor under the next prime minister.
Many Brexit-supporting MPs are hostile to Hammond, who backed Remain in the referendum and has sounded a downbeat note about the impact of Brexit on the economy.
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“We’ve built up around £26-27bn of fiscal headroom and the purpose of having that headroom is precisely in order to protect the UK economy from the immediate effects of a possible no-deal exit,” the chancellor said in the Commons.
“But I have no doubt whatsoever that in a no-deal exit we will need all of that money and more to respond to the immediate impacts of the disruption of a no-deal exit, and that will mean there is no money available for longer-term either tax cuts or spending increases.
“But let me go further — the government’s analysis suggests that in a disruptive no-deal exit there will be a hit to the Exchequer of about £90bn.”
The “fiscal firepower” we have built up in case of a No-Deal Brexit will only be available for extra spending if we leave with an orderly transition. If not, it will all be needed to plug the hole a No Deal Brexit will make in the public finances.
— Philip Hammond (@PhilipHammondUK) July 1, 2019
Hammond said official analysis showed “all the regions, nations, and sectors of the UK’s economy” would suffer from lower output compared to either the status quo or prime minister Theresa May’s deal with Brussels.
Such significant costs would “have to be factored in to future spending and tax decisions,” he said in a clear message to Hunt and Johnson.
Replying to Labour’s shadow chancellor John McDonnell, Hammond said he agreed “it would be wrong for a British government to seek to pursue no deal as a policy.”
“I believe that it will be for the House of Commons of which I will continue proudly to be a member to ensure that that doesn’t happen,” he said.
Hammond warned earlier this week the “fiscal firepower” he had built up in preparation for Brexit would only be available if Britain and the EU agreed to a far smoother Brexit.
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