Theresa May has been undermined by her chancellor. There are now two Brexit strategies at the heart of government, writes Seema Malhotra MP
This week at Mansion House, the chancellor Phillip Hammond gave an extraordinary speech that made it quite clear that he had given up the pretence that the government approach of a hard Brexit was the correct course. He fundamentally challenged the government’s own white paper. This has now confirmed that not only has Theresa May’s parliamentary majority gone but her credibility and authority has gone too, even in her own cabinet.
I am glad to hear that the chancellor has listened to parliament and business on this issue. Labour’s shadow minister for international trade Barry Gardiner described Hammond as ‘now following our playbook of jobs-first Brexit, fair and managed migration and no deal being a bad deal’.
This should have always been the case that the economy and prosperity was at the very heart of the negotiations. People did not vote to become poorer.
Only in April, the exiting the European Union committee report recommended a transitional agreement. Business, across all sectors, is now making it clear that there will have to be a transitional arrangement in place post-March 2019 to allow additional time to address tariff and non-tariff barriers, regulatory and labour issues.
The Society of Motor Manufacturers and Traders, the trade group for British car industry, have now also called upon the government to make sure that is in place to stop a ‘cliff edge’ scenario happening for their sector. The cliff edge would mean failing back on to World Trade Organisation tariffs and quotas, and in turn in the short-term could be catastrophic for major industries and sectors. The car industry alone would have a 10 per cent tariff placed upon it and could increase cost of making a car in United Kingdom by £2,400.
The chancellor also advocated that it would be would be necessary for transitional measures to protect key industries. We also need to stay within the customs union at least for a duration – and membership of a reformed single market should not be ruled.
May has repeatedly said ‘no deal is better than a bad deal’ – without any economic assessment to show that is the case. Her chancellor has now distanced himself from that statement. For this chancellor to be worried about the economy suggests we could be seeing the end to austerity – though his speech gave little away on this front. What the Tories have shown is that we cannot cut our way to prosperity. Given Mark Carney’s grave economic warning just after the chancellor’s speech, saying, ‘weaker real income growth [is] likely to accompany the transition to new trading arrangements with the EU’, now is the time for additional investment in productivity and skills which will be vital to our long-term national prosperity.
The government should be ensuring the protection of our key strategic industries, such as the financial services industry which contributes over £124bn to our economy and one million jobs. This includes the securing of passporting rights, enabling the UK to freely trade in the EU or EEA areas. In addition, our relationship with the European Investment Bank should continue. Industry needs stability and predictability to plan ahead and make long term decisions.
The speech has highlighted the tangible and visible strain and struggle between No 10 and No 11. There are now two Brexit strategies at the heart of the government. For a government in negotiations, they seem to struggle to talk to their next door neighbours never mind our neighbours in Europe. For our jobs and prosperity, the government should now drive forward with an agenda that engages the British people meaningfully in the debate and implications of the choices being made, and put Britain’s economic interests first – not those of the Conservative party. The mandate of hard Brexit has been well and truly rejected and the time for a change of course has come.
Seema Malhotra is member of parliament for Feltham and Heston. She tweets at @SeemaMalhotra1
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