British Treasury chief Philip Hammond on Monday warned the two contenders to become the country’s next prime that their expensive spending promises will be impossible to deliver if the U.K. crashes out of the European Union without a deal.
Jeremy Hunt and Boris Johnson, who are competing for the Conservative Party leadership, have both vowed to use a fiscal cushion built up by the government to soften the economic blow from a potentially disruptive Brexit.
But Hammond said that unless Britain made an orderly exit from the EU, the government’s “fiscal firepower . will all be needed to plug the hole a ‘no-deal’ Brexit will make in the public finances.”
Hunt and Johnson — Britain’s current foreign secretary and his immediate predecessor — are competing for the votes of about 160,000 Conservative Party members across Britain. The winner, to be announced July 23, will replace Theresa May as party leader and prime minister.
Both are wooing the largely pro-Brexit Tory grassroots by promising to take Britain out of the EU — without a divorce deal if necessary — while also cutting taxes and boosting spending on public services and infrastructure projects.
Three years on from Britain’s 52%-48% vote to leave the EU, Britain’s departure has been delayed twice after Parliament rejected on three occasions the divorce terms May’s government agreed with the bloc. Most economists say leaving without an agreement would severely disrupt trade between Britain and the EU, plunging the country into recession.
Polls suggest a large majority of Britons oppose a no-deal Brexit — but most members of the Conservative Party support it, and shrug off the warnings of economic turmoil.
Johnson is the front-runner, favored by many Conservatives for his popular appeal and his staunch support for Brexit. He says leaving the EU on the currently scheduled date of Oct. 31 is a “do or die” issue and has threatened to withhold an agreed 39 billion-pound ($50 billion) divorce payment unless the EU offers changes to the current withdrawal agreement. The EU says it will not renegotiate.
Hunt, who campaigned to remain in the EU during Britain’s 2016 referendum battle, also says he’s prepared to leave without an agreement if he can’t secure a better deal from the 27 other EU nations.
Hunt said the government had stored up “around 26 billion pounds ($33 billion) of headroom,” and he would use part of it to help farmers, the fishing industry and small businesses likely to be hit by the effects of a no-deal Brexit.
“It is important that the EU knows that we will do what it takes to make a success of a ‘no-deal’ Brexit,” Hunt said in a speech on Monday. “We won’t blink as a country. That ‘no-deal’ Brexit is not going to be an opportunity for them to successfully turn the screws on our country.”
Critics — including senior members of the Conservative government — say the promises made by Hunt and Johnson are fantasies. Hammond, who advocates retaining close ties with the EU, stressed that the money being earmarked by the two candidates “will only be available for extra spending if we leave with an orderly transition.”
Kirsty Blackman, economy spokeswoman for the opposition Scottish National Party, said Johnson and Hunt “have become the Thelma and Louise of Brexit . prepared to drive the U.K. economy off a Brexit cliff-edge.”q