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Analysis

Chancellor admits economy could fall off cliff end-2020

by Luke Lythgoe | 06.03.2018

Philip Hammond knows a 21-month transition period isn’t long enough. It only delays the Brexit cliff edge until the end of 2020. But a longer stopgap, or what the government dishonestly insists on calling an “implementation period”, would mean more years as a vassal state and yet more payments to the EU without a say on how they are spent – and that’s not good either.

The chancellor exposed part of this dirty secret to MPs yesterday. In evidence to the European Scrutiny Committee over the money he’s spending on Brexit contingency planning, he said that “once we reach an implementation period deal I would expect that we would then be able to stand down planning for a no deal exit in 2019”. But he added: “We may very well have to continue with planning for a no deal exit at the end of the implementation period as a contingency.”

Striking the kind of comprehensive trade deal the government wants with the EU won’t be easy. These kinds of negotiations typically take years. The best guess is we’d need five.

But contingency “planning” to cushion the blow if we fall off a cliff at the end of 2020 isn’t good enough. The government should seek to negotiate a longer transition period with the EU, or at least the ability to extend the planned 21-month period if need be.

To be fair, it did put out a negotiating document last month saying that the transition period “should be determined simply by how long it will take to prepare and implement the new processes and new systems that will underpin the future partnership.” But in the same breath, it said it thought all it needed was around two years.

It’s now time to be “straight with the people”, as Theresa May pretended she was being in her Mansion House speech last week, and admit we’ll probably need more than two years. She should also fess up that this would mean more years following the EU’s rules without having a vote on them, and more years paying into its budget. Given that we would lose our famous budget rebate, that would be about £12 billion net for each extra year on top of the £39 billion we’ve already agreed to pay.

If the people don’t like that, there is of course an alternative: just cancel Brexit.

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Edited by Hugo Dixon

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