Theresa May will aim to strike a defiant tone in her upcoming Brexit speech on the risks to the rest of the EU of giving Britain a raw deal, echoing the combative approach taken by the chancellor.
In a speech by the prime minister on Tuesday that will be watched closely in EU capitals, Downing Street is keen to impress that there are potentially lucrative economic opportunities elsewhere, weeks before the UK is expected to trigger article 50.
Philip Hammond, in an interview with German newspaper Welt am Sonntag, warned that Britain would “do whatever we have to do” to regain competitiveness and appeared to accept that the UK was prepared to become a tax haven if necessary.
The chancellor was responding to a suggestion that “the impression on the European continent is that your government sees the future business model of the UK as being the tax haven of Europe”.
Hammond said “most of us who had voted remain would like the UK to remain a recognisably European-style economy, with European-style taxation systems, European-style regulation systems etc. I personally hope we will be able to remain in the mainstream of European economic and social thinking. But if we are forced to be something different, then we will have to become something different”.The Labour leader, Jeremy Corbyn, said the comments suggested the threat of “some sort of trade war” with Britain’s EU partners, and accused Hammond of wanting to turn the UK into a bargain basement economy. “It really doesn’t seem to me to be a very sensible way forward,” he said.
Brexiters in the cabinet believe the government would be better placed to reach ambitious trade deals with countries outside the EU, including the US, if it were not tied into existing arrangements.
The pound hit a fresh 31-year low in the wake of reports on May’s speech, falling below $1.20 in trading on Sunday night. One analyst warned that sterling will go on a market “roller-coaster” following claims that the UK will seek a hard Brexit.
So far, EU leaders have been united in saying there will be no “cherry picking” of legislation, suggesting that May will not be able to impose strict limits on immigration while retaining the economic benefits of EU membership.
In his interview on Sunday, the chancellor reiterated the government’s view that the Brexit vote was a signal that voters would like to see tougher controls on immigration. “We are aware that the message from the referendum is that we must control our immigration policy,” he said.
Hammond’s intervention came after Mark Carney, the Bank of England governor, told the Treasury select committee the greatest risks to financial stability from an unruly Brexit were for other EU members.
The prime minister’s speech at Lancaster House in London on Tuesday will be analysed carefully in financial markets for signs that the government has abandoned the idea of remaining in the single market. Sterling fell sharply after May’s party conference speech in October, in which she appeared to signal a hard Brexit. The pound, which hit a 31-year low against the dollar after the referendum, will be under further pressure if May rules out staying in the single market.
There has been no decision about whether to publish a document setting out May’s approach to Brexit negotiations or let the prime minister’s speech stand as the plan, as she promised to MPs.
Over the weekend, the Brexit select committee, chaired by the Labour MP Hilary Benn, but including the key leave-campaigning Conservatives Michael Gove and Dominic Raab, called for the government to publish a formal white paper setting out its priorities for when talks begin.
The government is awaiting the result of the supreme court appeal on whether it must consult parliament before triggering article 50, beginning the formal divorce process with the EU. A verdict is expected within a fortnight.
May is likely to emphasise Britain’s enthusiasm for pressing ahead with negotiating trade deals with countries including the US.
In his interview, Hammond said the Brexit vote was not a sign that Britain has chosen to take a more isolationist stance and rejected the comparison with the forces that swept Donald Trump into the White House.
“I can’t speak for what is going on in the US, that is a different political movement. But in my judgment, it would be a mistake to read the Brexit vote as being part of the same strand of thinking that has formed in the US. If you look at the media and the reporting during the Brexit referendum campaign, there was no anti-trade rhetoric. It was the exact opposite,” he said.
