British Chancellor of the Exchequer Philip Hammond has warned the two contenders to become the country’s next prime minister that their expensive spending promises will be impossible to deliver if the UK crashes out of the European Union without a deal.
Jeremy Hunt and Boris Johnson, who are competing for the Conservative Party leadership, have both vowed to use a fiscal cushion built up by the government to soften the economic blow from a potentially disruptive Brexit.
“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,” Hammond tweeted.
“If not it will all be needed to plug the hole a no-deal Brexit will make in the public finances.”
Later, in an interview with the BBC, Hammond said Britain had built up a reputation for fiscal responsibility and had to live within its means.
“People have to be honest about the consequences of either spending more money or of cutting taxes,” he said, warning of the “temptation to get into a bidding war”.
“I think they need to be very careful about setting out these ambitions.”
Hunt and Johnson – Britain’s current foreign secretary and his immediate predecessor – are competing for the votes of about 160,000 Conservative Party members across Britain. The winner, to be announced July 23, will replace Theresa May as party leader and prime minister.
Both are wooing the largely pro-Brexit Tory grassroots by promising to take Britain out of the EU – without a divorce deal if necessary – while also cutting taxes and boosting spending on public services and infrastructure projects.
Three years on from Britain’s 52-48 per cent vote to leave the EU, Britain’s departure has been delayed twice after Parliament rejected on three occasions the divorce terms May’s government agreed with the bloc. Most economists say leaving without an agreement would severely disrupt trade between Britain and the EU, plunging the country into recession.
Polls suggest a large majority of Britons oppose a no-deal Brexit – but most members of the Conservative Party support it, and shrug off the warnings of economic turmoil.
Johnson is the front-runner, favoured by many Conservatives for his popular appeal and his staunch support for Brexit. He says leaving the EU on the currently scheduled date of October 31 is a “do or die” issue and has threatened to withhold an agreed £39 billion ($71 billion) divorce payment unless the EU offers changes to the current withdrawal agreement. The EU says it will not renegotiate.
Hunt, who campaigned to remain in the EU during Britain’s 2016 referendum battle, also says he’s prepared to leave without an agreement if he can’t secure a better deal from the 27 other EU nations.
Hunt said the government had stored up “around £26 billion of headroom,” and he would use part of it to help farmers, the fishing industry and small businesses likely to be hit by the effects of a no-deal Brexit.
“It is important that the EU knows that we will do what it takes to make a success of a ‘no-deal’ Brexit,” Hunt said in a speech on Monday. “We won’t blink as a country. That ‘no-deal’ Brexit is not going to be an opportunity for them to successfully turn the screws on our country.”
Asked how he would pay for his plans, Johnson told reporters that “the money is there … We also think there is room to make some sensible tax cuts as well, and we will be doing that too.”
Johnson, meeting voters, said his plans were carefully costed and the impact of leaving the EU without a deal would be “very, very small”.
Critics – including senior members of the Conservative government – say the promises made by Hunt and Johnson are fantasies. Hammond, who advocates retaining close ties with the EU, stressed that the money being earmarked by the two candidates “will only be available for extra spending if we leave with an orderly transition.”
Kirsty Blackman, economy spokeswoman for the opposition Scottish National Party, said Johnson and Hunt “have become the Thelma and Louise of Brexit – prepared to drive the UK economy off a Brexit cliff-edge”.