‘Like a dog returning to its vomit’: Hammond faces fury from Brexiteers for pushing ‘Project Fear’

Chancellor Philip Hammond is facing Brexiteer fury today after warning that no-deal Brexit could wipe up to 10 per cent off the UK’s national income.

The astonishing intervention by the Chancellor came just hours after Cabinet colleague Dominic Raab unveiled a raft of government plans designed to kill off ‘scare’ stories about the consequences of crashing out of the bloc.

Triggering a major Cabinet split, the Chancellor wrote that a no-deal scenario would have ‘large fiscal consequences’ for Britain and could mean an extra £80billion of borrowing.

Mr Hammond said the food industry and manufacturers could be hit especially hard with Northern Ireland and north-east England the regions worst affected. 

Tory Eurosceptics were incandescent, with Jacob Rees-Mogg accusing the Chancellor of ‘regurgitating’ Project Fear.

‘As a dog returneth to its vomit, so a fool returneth to its folly,’ he said. 

Downing Street sources also made clear Theresa May’s displeasure by confirming that Mr Hammond’s letter was not cleared with her before being published.

Cabinet Office minister David Lidington tried to play down the row this morning, insisting that Mr Hammond had merely been highlighting ‘provisional analysis’ that the Treasury had published earlier this year.

Mr Lidington, speaking to BBC Radio 4’s Today programme, said the data was ‘nothing new’ and that Mr Hammond was ‘absolutely committed’ to the objectives that the Government had set out in the Chequers agreement.

He said: ‘This is provisional analysis that the Treasury published back in January this year and I think all Philip was doing was simply referring back to that in response to a senior member of Parliament.’ 

Brexiteer members of the Treasury select committee dismissed Mr Hammond’s predictions, pointing out how wrong his department had been about the immediate effects of the referendum, while Charlie Elphicke accused the Treasury of ‘reheating dodgy figures’.

Mr Hammond’s dire warning came just hours after his colleague Dominic Raab, the Brexit Secretary, delivered an up-beat message and dismissed ‘wild’ scare stories about the effect of leaving the EU without a deal.

He published a series of technical papers detailing how the Government is preparing for the prospect of failing to reach an agreement with Brussels.

Mr Raab suggested most consumers would not notice the impact of a ‘no deal’, and rejected suggestions people would not be able to enjoy sandwiches after Brexit.

He also warned Brussels to put ‘lives and livelihoods’ ahead of politics and make compromises to reach a deal with the UK.

But his words were undermined just hours later by Mr Hammond, a prominent Remain supporter, who said a no-deal scenario would hit the food and drink industry as well as manufacturing and carmakers.

The Chancellor warned that the biggest negative impacts would be felt in the North East of England and Northern Ireland.

Mr Rees Mogg, said: ‘The Treasury once more regurgitates its failed attempt at Project Fear.

‘As a dog returneth to its vomit, so a fool returneth to its folly. The Treasury is desperate to stop Brexit. Everything the Treasury does has to be read in this light.’

The Cabinet rift opened up as:

• One of the technical papers warned that millions of people could face higher credit charges if Britain leaves the EU without a deal; 
•  Health Secretary Matt Hancock told drugs firms to stockpile six weeks’ worth of medicines; 
• Cabinet minister David Lidington said it could take until December to reach a deal – two months beyond the official deadline of October; 
• Former environment secretary Owen Paterson slammed Theresa May’s Chequers plan for Brexit as a ‘disaster’ for the fishing industry because EU rules would have to be obeyed for years.

Mr Hammond’s intervention came in a letter to Nicky Morgan, the Remain-backing Tory MP and chairman of the Treasury select committee.

The Chancellor pointed to disputed provisional analysis, released earlier this year, which claimed Britain’s gross domestic product could be between 5 and 10 per cent lower in 15 years if there is no deal.

This also calculated that borrowing could be around £80billion a year higher by 2033/34 under a scenario in which Britain resorted to World Trade Organisation terms for trade after failing to reach agreement with the EU.

Mr Hammond noted that scenarios involving higher barriers to trade with the EU are expected to have a ‘more damaging effect’ on the economy and public finances.

He also mounted a defence of the Government’s preferred approach, which was outlined in a white paper following a Cabinet summit at Chequers, by saying the economic and fiscal impacts of this would be ‘substantially better’ than no deal.

Brexit Secretary Dominic Raab had suggested Britain’s failure to secure a working arrangement with the EU prior to its departure on March 29, 2019 ‘would not be doomsday’

Mr Hammond wrote in his letter: ‘This January provisional analysis estimated that in a no-deal/WTO scenario, GDP would be 7.7 per cent lower (range 5.0 per cent to 10.3 per cent) relative to a status quo baseline.

‘This represents the potential expected static state around 15 years out from the exit point.

‘The analysis did not estimate the path the economy and different sectors might take under no deal and the potential for short-term disruption.’

Mr Hammond added: ‘Under a no-deal/WTO scenario, chemicals, food and drink, clothing, manufacturing, cars, and retail were estimated to be the sectors most affected negatively in the long-run, with the largest negative impacts felt in the North East and Northern Ireland.

‘GDP impacts of this magnitude, were they to arise, would have large fiscal consequences.

‘The January analysis estimated that borrowing would be around £80billion 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.’

Mr Hammond published his letter just hours after Mr Raab insisted the ‘vast majority’ of consumers will not even notice the impact of a no-deal Brexit.

The Brexit Secretary said: ‘I am absolutely clear that the UK will be better off outside of the EU in any scenario in the long-term but I recognise the risks in the short-term.

‘I think there is good reason to think that even in a no deal scenario there would be good faith. If you look at the example of pensioners, it is hardly in the interests of Southern Spain to do harm to the UK pensioners out there.

‘You would expect cooler heads prevailing. For the vast majority of consumers in this country there is not going to be much change at all, if it’s noticeable.’ 

Mr Raab criticised scaremongering over a no-deal scenario, such as the suggestion that it could spark a ‘sandwich famine’ in the UK due to shortages of ingredients, or that the Army will have to deliver food supplies.

‘Let me reassure you all that, contrary to one of the wilder claims, you will still be able to enjoy a BLT after Brexit,’ he said.

He also warned Brussels not to be ‘vindictive’ in its negotiations, calling on the EU to be more ‘responsible’.

‘We are raising this issue with the EU, to impress upon them our joint responsibility to work together to minimise any harm to UK and European citizens and businesses,’ he said.

‘Those lives, those livelihoods, on both sides, should be put ahead of any narrow political interests.’

In his letter to Nicky Morgan, Mr Hammond said: The January analysis estimated that borrowing would be around £80 billion 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’

EU Commission spokesman Alexander Winterstein hit back, saying: ‘We don’t operate according to concepts of vindictiveness or forgiveness.

‘We are working very hard continuously, from day one, for the orderly withdrawal of the UK from the European Union.’

Mr Hammond’s intervention came days after it was claimed that some of the ‘no deal’ papers had had to be rewritten because the Treasury had made the original versions too gloomy.

Last night critics asked why the Chancellor had chosen to issue his letter on the day Mr Raab was publishing his papers.

Last night Tory MP Charlie Elphicke, a member of the Treasury select committee, hit out at Mr Hammond.

‘Here we go again with dodgy figures being reheated by the Treasury on the very day the government publishes its plan for trading on global deal terms,’ he said.

‘In the referendum the Treasury said everyone would lose their jobs and the country would plunge into a deep recession if we voted out. Instead Britain is growing faster than the EU and we have record employment.

‘It’s time the Treasury started to believe in Britain and focus on the opportunities for global trade. That’s why we need to Chuck Chequers and seek an advanced trade deal – first with the EU and then the world over.’

Fellow Conservative MP Simon Clarke, also a member of the Treasury committee, added: ‘Before the referendum the Treasury said the economy would nosedive with GDP 3.6 to 6 per cent down. They said 500,000 to 800,000 jobs would be lost.

‘They were completely wrong. Instead we have record jobs with 32.4million in work while unemployment is at a 42 year-low.

‘It’s unbelievable that the Treasury continue to talk down our country and our economy by conning the public with their discredited Project Fear yet again.’ 

Government reveals Brexit No Deal Doomsday plans: Ministers admit online shoppers and tourists visiting EU could face millions of pounds in credit card charges… and we could even run out of SPERM

James Tapfield, Political editor for MailOnline

Ministers unveiled a raft of plans today to prevent ‘no deal’ Brexit causing carnage – admitting that credit card charges could rise and expats could be locked out of pensions.

There are even concerns of shortage in donated sperm as imports from Denmark might be hampered, and dramatic health warning photographs on cigarette packets will have to be replaced as the EU holds the copyright. 

Danish semen made up almost half of all non-British male reproductive material imported to the UK in 2017, a paper from the Department of Health and Social Care revealed. 

The potential pitfalls of failure to strike a deal with the EU were spelled out in documents that warned losing access to shared IT systems could mean millions of pounds in extra charges for online shoppers and tourists visiting the bloc.

Ex-pats could also struggle to access pensions and accounts administered by UK-based banks, while medicines could be delayed by regulatory upheaval. 

Launching the first tranche of 25 ‘technical notes’ on the consequences of no deal, Dominic Raab tried to play down the picture they painted, insisting the government was just making sure Britain was ‘ready’.

The Brexit Secretary also stressed he was still ‘confident’ an agreement would be reached. 

Brexit Secretary Dominic Raab (pictured giving his speech in Westminster today) dismissed ‘doomsday’ scenarios about the consequences of failing to strike a broad trade deal with the bloc

Mr Raab said there did have to be a blueprint for how to ‘wind down our membership’ of the EU with the minimum possible ‘disruption’

Among the main points in the dump of documents issued by ministers today are:

• British consumers could face ‘increased costs and slower processing times’ for euro transactions and ‘the cost of card payments between the UK and EU will likely increase’. More VAT could be charged on parcels coming into Britain from EU firms.
• An extra six weeks of medicines will be stockpiled on top of the current level of three months to avoid any disruption. Batch testing and EU certifications will also be recognised to reduce bureaucracy. 
• New picture warnings could be introduced on cigarette packs ‘as the copyright for the existing picture library is owned by the European Commission’. 
• British firms are being urged to ‘consider whether you will need advice from the Irish government about preparations you need to make’ in case of no deal. 
• Organic food producers face a ‘cliff edge’ of exporting to the EU only if certified by a body approved by the European Commission, with certification taking up to nine months after Brexit. 
• The government will commit to underwrite EU funding for aid and other projects that could be withdrawn.

In his speech, Mr Raab said the Government would not risk triggering a tit-for-tat battle with Brussels by imposing new border checks or travel restrictions.

He said: ‘I remain confident a good deal is within our sights, and that remains our top, and overriding, priority. If the EU responds with the level of ambition and pragmatism, we will strike a strong deal that benefits both sides.

‘But, we must be ready to consider the alternative. We have a duty, as a responsible government, to plan for every eventuality.

‘These technical notices – and the ones that will follow – are a sensible, measured,and proportionate approach to minimising the impact of no deal on British firms, citizens,charities and public bodies.’

He added: ‘They will provide information and guidance. Our overarching aim is to facilitate the smooth, continued, functioning of business, transport, infrastructure, research, aid programmes and funding streams.

‘In some cases, it means taking unilateral action to maintain as much continuity as possible in the short term, in the event of no deal – irrespective of whether the EU reciprocates.’

Mr Raab said the UK, in the event of a no-deal, would ‘diverge when we are ready, on our terms’ from the European Union.

The Brexit Secretary stressed there was already planning talks between the Bank of England and the European Central Bank for a no-deal scenario and called for talks to begin on data protection and between port authorities.

Credit card charges and online shopping  

One document released today considers the risks facing UK banking and payments customers if the Government fails to clinch a trade agreement that covers financial services.

In the case of a no-deal Brexit, UK-based payment service providers would lose direct access to the EU’s payment infrastructure. 

Customers, including businesses using providers to process payments in euros, could also ‘face increased costs and slower processing times for euro transactions’, the Government paper warned. 

‘The cost of card payments between the UK and EU will likely increase, and these cross-border payments will no longer be covered by the surcharging ban,’ it added. 

The ban prevents businesses from charging customers for paying by the likes of PayPal or debit or credit cards, which Treasury earlier this year characterised as ‘rip-off fees’. 

Consumers shopping in the EU or buying online from an EU company with a UK card, could be hit with surprise charges on their purchases, with some retailers charging more than the cost of processing payments. 

Consumers shopping in the EU or buying online from an EU company with a UK card, could be hit with surprise charges on their purchases, with some retailers charging more than the cost of processing payments

The Treasury estimated that surcharging cost Britons around £166million in 2015. 

The EU surcharge ban came into force in January. The Government said it is looking to align domestic law around payments with rules already set up in the EU in hopes of remaining a member of the Single Euro Payments Area. 

However, that would only ensure that ‘lower value euro transactions are processed in the same amount of time as they are today’, meaning larger payments may still face delays. 

Consumers would face another potential cost increase when online shopping, with parcels arriving in the UK no longer liable for Low Value Consignment Relief (LVCR) on VAT. 

Medical supplies face checks and delays  

The pharmaceutical industry should ensure they have an additional six-week supply of drugs in the event of disruption caused by a no-deal Brexit, the Health Secretary has said.

Matt Hancock has told drug companies that supply chains for products could be affected by changes to border processes and stockpiles would be needed to cope with potential delays.

Hospitals, GPs and community pharmacies in the UK do not need to stockpile additional medicines and doctors should not write longer prescriptions, he said.

Patients should also be advised that they do not need to store additional medicines at home.

Steve Bates, chief executive of the UK Bioindustry Association (BIA), said the request would be ‘a massive challenge’ for the industry.

In a letter to pharmaceutical companies, Mr Hancock said: ‘In the unlikely event we leave the EU without a deal in March 2019, based on the current cross-Government planning scenario we will ensure the UK has an additional six weeks’ supply of medicines in case imports from the EU through certain routes are affected.

‘This is the current planning assumption but will of course be subject to revision in light of future developments.’

He asked companies ‘to ensure they have a minimum of six weeks’ additional supply in the UK, over and above their business as usual operational buffer stocks’ by March 29.

Mr Hancock said the ‘same risk exists in the EU’ and countries such as France, Germany, Belgium and the Netherlands will also need to prepare for disruption.

In an open letter to NHS staff, Mr Hancock said hospitals, GPs and community pharmacies in the UK ‘do not need to take any steps to stockpile additional medicines, beyond their business as usual stock levels’.

He added: ‘Local stockpiling is not necessary and any incidences involving the over-ordering of medicines will be investigated and followed up with the relevant chief or responsible pharmacist directly.

‘Clinicians should advise patients that the Government has plans in place to ensure a continued supply of medicines to patients from the moment we leave the EU.

Matt Hancock has told drug companies that supply chains for products could be affected by changes to border processes and stockpiles would be needed to cope with potential delays

‘Patients will not need to and should not seek to store additional medicines at home.’

Mr Bates said: ‘We have stressed and recognise that endeavouring to deliver on this in less than 200 days will be a massive challenge for industry and the MHRA (Medicines and Healthcare products Regulatory Agency) alike.

‘Given that over 150 BIA members are actively involved in clinical development in the UK we will pay particular attention to the implications of this work with regard to ongoing clinical trials.

‘A ‘no-deal’ Brexit would mean the biggest dis-integration of the complex regulated medicines market in Europe in terms of regulation, cross-border movement of goods, comparative pricing and intellectual property.

‘On behalf of patients we encourage all participants to be as prepared as possible for a scenario industry really does not want, but we should be under no illusions that this will be easy or smooth.’

The papers also raised the alarm about a potential sperm donor shortage and restrictions on transferring other biomaterials.

One points out that the UK imported 3,000 sperm samples from Denmark last year, along with smaller quantities from other countries in the bloc. 

‘UK licensed establishments working in this area, such as hospitals, stem cell laboratories, tissue banks and fertility clinics would continue to work to the same quality and safety standards as they did before exit but some would need new written agreements with relevant EU establishments,’ the paper said. 

Expats could lose access to pensions 

UK citizens living in Europe face the possibility of losing access to their pension income and other financial services, according to technical papers on no-deal Brexit preparations. 

Lending and deposit services, insurance and annuities – which people rely on for a regular pension income – are among the financial products which expats could struggle to access, according to the documents.

One said that ‘in the absence of action from the EU, EEA-based customers of UK firms currently passporting into the EEA, including UK citizens living in the EEA, may lose the ability to access existing lending and deposit services, insurance contracts (such as life insurance contracts and annuities) due to UK firms losing their rights to passport into the EEA’.

Insurers said millions of customers, including pensioners overseas, could be affected. 

The papers said the Government has committed to putting unilateralaction in place if necessary to resolve issues as far as possible on the UK side.

For UK-based customers who access banking, insurance, investment funds and other financial services with EEA firms currently passporting into the UK, temporary permissions will enable these firms to continue to provide these services to UK customers for up to three years after exit – allowing firms time to apply for authorisation to continue operating in the UK, the documents said.

 British expats in Europe face losing access to their pension income and other financial services, according to technical papers on no-deal Brexit preparations

Banking red tape could mean EU clients lose UK-based services  

The technical papers also echoed warnings from the Bank of England which earlier this summer said the EU needed to do more to prevent Brexit causing havoc in financial markets.

The Government said clients across the European Economic Area would no longer be able to use the services of UK-based investment banks, while cross-border contracts may no longer be valid.

It puts a key industry at risk, with financial services having contributed more than a quarter of the UK’s services exports to the EU, accounting for £27 billion out of £90 billion in 2016.

A number of banks have made efforts to secure licences and offices in EU financial hubs to continue serving clients on the continent.

Lending and deposit services, insurance and annuities – which people rely on for a regular pension income – are among the financial products which expats could struggle to access, according to the documents.

One said that ‘in the absence of action from the EU, EEA-based customers of UK firms currently passporting into the EEA, including UK citizens living in the EEA, may lose the ability to access existing lending and deposit services, insurance contracts (such as life insurance contracts and annuities) due to UK firms losing their rights to passport into the EEA’.

Insurers said millions of customers, including pensioners overseas, could be affected. 

The papers said the Government has committed to putting unilateral action in place if necessary to resolve issues as far as possible on the UK side.

For UK-based customers who access banking, insurance, investment funds and other financial services with EEA firms currently passporting into the UK, temporary permissions will enable these firms to continue to provide these services to UK customers for up to three years after exit – allowing firms time to apply for authorisation to continue operating in the UK, the documents said.

This means these firms will be able to continue as before if they receive authorisation covering the full scope of services they currently provide.

The UK’s savings safety net, the Financial Services Compensation Scheme (FSCS), protects money held by customers of UK-authorised firms when firms go bust, including some products with EEA firms.

Regulators will consult this autumn on arrangements for coverage to continue, the documents said. 

Mr Raab (pictured with Michel Barnier in Brussels this week) said he was still ‘confident’ there would be an agreement – but the government was taking steps to ‘protect the UK’

Farming subsidies guaranteed but ‘cliff edge’ for organic produce 

Government moved to reassure landowners they would continue to get farming subsidies, currently controlled by the EU, in the case of no-deal, until new agriculture legislation is brought in.

The funding will remain at existing levels until the end of this parliament, expected in 2022, for the whole of the UK, a technical notice on payments reiterates.

People receiving subsidies will have to conform to the same standards and rules, including on-site farm inspections, in order to receive the payments.

But organic food producers will face a ‘cliff edge’ over exporting to the European Union in the event of a no-deal Brexit, farming leaders warned.

According to technical guidance published by the Government, UK businesses would only be allowed to export to the EU if they were certified by an organic certification body approved by the European Commission.

But UK organic bodies will not be able to apply for recognition until after Brexit – and approval could take up to nine months to secure.

The National Farmers’ Union (NFU) said the situation for organic produce served as a warning on future trade in all food and agricultural products between the UK and the EU.

On organic produce, the Government said it was exploring ‘alternative approaches’ to speed up the process.

The Government expects to negotiate an arrangement which would allow free movement of organic produce between the UK and EU, because European regulations will remain in UK law.

Logos on packaging would also need to change, with the EU organic label in the shape of a green leaf of stars stripped off, though UK labels would remain.

Graphic cigarette warnings could disappear  

Stark images of blackened lungs and dead bodies on cigarette packets would disappear under a no-deal Brexit.

Copyright for the current images is owned by the European Commission so the UK could no longer legally use them and new images would need to be created.

A no-deal Brexit would also mean new systems to register tobacco and e-cigarette products, according to a technical paper on labelling tobacco products.

The paper states: ‘If there’s no deal we would introduce new picture warnings for tobacco products as the copyright for the existing picture library is owned by the European Commission.

‘Manufacturers will need to ensure that tobacco products which include picture warnings produced from Exit Day onwards will be labelled with new picture warnings.’

New regulations would be needed to give the Government power to update domestic legislation in response to emerging threats, changing safety and quality standards and technological advances.

A consultation will be held in September on labelling and notification.

The paper adds: ‘Inevitably under a no-deal scenario, the close working relationships that exist with our European partners would not be the same.

‘The UK will, of course, continue to play an active role in the World Health Organisation Framework Convention on Tobacco Control.’

Dramatic health warning photographs on cigarette packets will have to be replaced as the EU holds the copyright (file picture)

Brexit deal not likely until end of the year, says Cabinet minister 

Cabinet Office minister David Lidington (pictured in Edinburgh today) said he was not surprised by Michel Barnier playing down the prospects of agreement before November

There is unlikely to be a Brexit deal until the end of the year, a Cabinet minister suggested today.

Cabinet Office minister David Lidington said he was not surprised by Michel Barnier playing down the prospects of agreement before November. 

He said: ‘I was Europe minister for six years, I have seen enough of these negotiations to know that these deadlines slip.

‘I think there definitely will need to be an agreement by the end of 2018.’

However, speaking during a briefing with reporters in Edinburgh, Mr Lidington added that he did not believe the March date for Britain’s exit from Europe would be pushed back.

‘Article 50 is a matter of EU law, it is not a matter of political judgment,’ he said.

‘I think there is a real pressure from the end of the year because, with the European Parliament going into election mode it will just become more difficult to get enough MEPs in a plenary from January onwards to have the numbers to pass the super majority that is needed.

‘And you’ve got to get legislation through Westminster as well to implement a withdrawal agreement.’

He added: ‘I just don’t think that seeking to extend Article 50 is going to help… the Treaty is absolutely clear that it is two years or when a withdrawal agreement is reached or ratified if that is earlier.’

Earlier, Mr Raab told BBC Radio 4’s Today programme he wanted to move on from the ‘latest incarnation of Project Fear’.

‘Some of those promoting the worst scare stories around no deal… are assuming that the EU will act in a vindictive way,’ he said. 

‘I’m still confident a good deal is within our sights,’ Mr Raab said. 

‘We have got agreement on about 80 per cent of the issues. 

‘We have made clear that if negotiations don’t achieve the optimum outcome we will continue to be a responsible European neighbour and partner.’

Playing down the threat of shortages in hospitals, Mr Raab said a stockpile of 200 medicines already exists, thanks to longstanding arrangements with pharmaceutical companies to cope with disruptions at the border, such as strikes by French lorry drivers.

‘There are potential issues around the border in the worst case scenario,’ he said. 

‘So it’s right, too, we will be working with industry around stockpiling of medicines for a working assumption of six weeks.’

Mr Raab admitted that talks remain deadlocked over the Northern Irish border, with the UK continuing to press for a bespoke customs agreement on goods and services.

‘They’re still asking questions and probing the proposals, but that’s good,’ he said.

‘They are not knocking them away in principle – they are asking questions on the practical detail.

‘They understand very clearly that we will not allow a customs border or any other form of border to be drawn down the Irish Sea.’ 

Shadow Brexit secretary Keir Starmer dismissed the documents as a distraction, saying a no deal would be ‘catastrophic’.

He said: ‘A no deal Brexit would be a complete failure by the Government to negotiate for Britain. These documents should not distract us from that.

‘No deal would be catastrophic for people’s jobs, the economy and for the border in Northern Ireland. It is irresponsible for anyone to casualise no deal.’

Simon Lewis, chief executive of the Association for Financial Markets in Europe (AFME), said: ‘The consequences of a no-deal Brexit scenario could mean prolonged disruption to the smooth functioning of Europe’s capital markets, which would affect investors, borrowers and savers across Europe and beyond.

‘The financial services industry is keen to see both negotiating parties agree on a deal which locks in an agreement on a transition period and the future trading relationship in order to minimise the risks to financial stability.’