Philip Hammond's Brexit optimism at the Tory conference wasn't as convincing as he thought – we all know where he really stands

The chancellor is too shrewd a politician to push the truth of the dangers of leaving the EU too far down the necks of his fellow Conservatives, but we can all see the evidence

Tuesday 02 October 2018 10:48
Treasury’s initial forecast about a no-deal Brexit would 'not have changed radically,' says Philip Hammond

The chancellor, Philip Hammond, has suggested to the Conservative conference, and the wider public, that he is an optimist. This previously unseen facet of his personality will be handy when the time comes for him to stump up for Brexit. Hard, soft, Norwegian, Swiss, Canadian, bespoke, no-deal, Chequers – the possible variations on the Brexit theme remain dazzling in their variety and complexity. All, one way or another, will be economically damaging. It is only a question of how much.

So Mr Hammond, in his upbeat way, told us that, as part of the preparations for a no-deal scenario, he will “maintain enough fiscal firepower to support our economy if that happens”. Tellingly, he did not care to put a figure of the extent of that – entirely unnecessary – expenditure.

Emboldened, Mr Hammond went further, and posited a “deal dividend”, “when” – such faith – the prime minister comes back from some all-night summit with a signed piece of paper. This was sleight of hand. As Mr Hammond hinted, the “bounce” will be one of relief that things will not turn out quite as badly as markets have already “priced in” to the various possibilities. It is emphatically not a “Brexit dividend” that will produce some boost to the UK economy that it would not have enjoyed if the UK had decided to stay in. As Mr Hammond’s own Treasury estimates have constantly suggested, Brexit arrives with a penalty, not a bonus.

In normal times chancellors’ speeches to a party conference are long on eye-catching initiatives and short on navel-gazing. Given his lack of fiscal freedom of manoeuvre, and given also the unexpected virility of the Labour challenge, Mr Hammond has had to invert the usual pattern. Thus, he confined himself to some minor business-friendly policies, the small change of his budget, but chose instead to pose some wider, almost philosophical challenges to the Tories.

He warned then that they cannot be the “no change” party, and if they were then Jeremy Corbyn would seize his chance. He asked his audience what they can say to, and do for, people not convinced that “21st-century capitalism” is delivering rising living standards for them. He recognises – it is becoming a truism – that globalisation and economic change has created a mood of disappointment and frustration. In this fertile ground, Brexit and Corbynism have taken root.

Mr Hammond also dreamed, almost like John Lennon, about the brighter, sunnier future. He painted a portrait of a Britain where cars no longer pollute; where cures for cancer were being found; where “you are able to order and 3D print a product at home, instead of waiting for it to be delivered”. He also, though, pointed out that, if you work for a delivery firm or as a taxi driver, those possibilities can feel more like threats than exciting opportunities.

Against the chancellor’s measured “pragmatic” approach, other Conservatives have sounded distinctly unworldly and dogmatic. The foreign secretary, Jeremy Hunt, set the tone at the weekend, complaining, in a strange intervention, that the European Union risks turning itself into a Soviet prison. Dominic Raab, the secretary of state for leaving the EU, painted the negotiations with Michel Barnier in similarly combative terms: “I find it hard to believe that they would, for narrow political ends, seek to punish Britain in such a crass and counterproductive way.”

These are mere debating points.

It seems to have escaped most of Her Majesty’s ministers that Britain is soon to become a “third party” for the EU, and its relative strength in wrenching concessions out the EU is entirely conditioned by the relative size of the two parties. The 27 remaining members of the EU have a GDP and population roughly 10 times that of the UK. The vast majority of their trade is with each other. They cherish the single market and customs union. They fail to see, as they have consistently said, why one ex-member of the EU should benefit from all of these economic advantages and benefits while opting out of freedom of movement for workers. The EU, and Ireland, have the right to order their borders as they wish. It has nothing to do with spite or punishment.

Apart from her armed forces and some contributions to the budget – some at least anyway required under a moral and legal obligation to honour Treaty commitments – Britain has few cards to play. It is that, rather than some diabolical schemes hatched in Brussels, or the timidity of Theresa May, that accounts for the predicament the UK now finds itself in. These are the harsh realities behind diplomacy. Mr Hammond is too shrewd a politician to push those truths too far down the necks of his fellow Conservatives, but he would have done the country a favour if he said in public what he and the Treasury plainly think in private. As things stand we are left with his attempts to be visibly enthused by Brexit. It is not an entirely convincing act.

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