Chancellor of the Exchequer Philip Hammond has sparked division and anger in the Conservative Party by claiming in a letter that borrowing would be £80 billion per year higher as a result of a No Deal Brexit. In his letter to Nicky Morgan MP, he explained:
“This January provisional analysis estimated that in a no deal/WTO scenario GDP would be 7.7% lower (range 5.0%-10.3%) 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.”
“GDP impacts of this magnitude, were they to arise, would have large fiscal consequences. 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. This is because any direct financial savings are outweighed by the indirect fiscal consequences of a smaller economy.”
Certainly not ideal, if it were true, but not all his Westminster colleagues are on board. Tory MP Marcus Fysh has claimed it’s just “anther instalment of dodgy project fear,” and Jacob Rees Mogg so eloquently explained that it would not be as “absurdly frightening as the chancellor of the exchequer thinks it may be,” and:
“As a dog returneth to his vomit, so a fool returneth to his folly.”
He also explained that Hammond was reminding people why nobody believes the politicized forecasts of the Treasury any more. These are fighting words. A Tory Member of Parliament has explicitly called the Treasury “desperate to stop Brexit,” and suggested that their forecasts should be treated with a pinch of salt.
That’s where independent forecasting comes in. We can’t trust everything the government says, and we can’t consider everything the treasury says to be gospel. It’s not. There is a political motive here, and the Treasury has proven to be wrong in the past. As has the CBI.
This divide between reality and scaremongering has been revealed at a deeper level of government, too. Mogg is a backbench MP, but there are two governmental departments that appear to be giving out different messages. Sky News says that the Treasury told them the Brexit Secretary was shown Hammond’s letter two weeks ago and agreed for it to be published today – but sources over at the Department for Exiting the EU (DEXEU) categorically deny the claim.
Philip Hammond has made it perfectly clear that there is a divide within the party and within the government – and I suspect that whichever way Brexit goes, the party will remain divided.
If we leave on WTO terms, the Anna Soubry types will scream bloody murder. If we leave under the Chequers deal, there’ll be a Jacob Rees Mogg or Boris Johnson-inspired rebellion within the Tories. And they’ll have the members they need to support them in ousting Theresa, thanks to Leave.EU’s recently trojan horse operation. Thousands of Aaron Banks and UKIP-supporting activists have joined the party in the last few days, and that’s likely to deepen the cracks in this rift, and ultimately sign a death warrant for Remain MPs in the Tories.