It could be used to preview what the Government would do in the event of no deal.
No-deal planning shouldn’t just be about logistics but about how the UK would respond economically to this challenge.
Philip Hammond could announce that if it is no deal, the UK would slash to zero tariffs on manufactured goods from all around the world, bring in complete tax relief on all business investment for the next three years and cut capital gains tax.
The EU, which does not want a hyper-competitive economy 26 miles off its coastline, would notice. It might make it more prepared to do a decent deal with this country.
But there is little sign of such an approach being planned.
Hammond will praise the resilience of the British economy and be upbeat about its prospects. But he will say little that will make the EU sit up and take notice.
What makes all this so frustrating is that Hammond used to understand how powerful this threat was.
Back in January 2017, on a visit to Germany, he warned that the UK would change its economic model to become more competitive if it couldn’t get a deal from the EU.
But Hammond rowed back from this pledge six months later in an interview with the French press.
To make matters worse, Hammond has held back money for no-deal planning. The Treasury feared that if you gave Brexiteers a plan for no deal, they would take it. But the result is that the UK’s negotiating position has been MASSIVELY WEAKENED.
The EU look at us and conclude we are not ready for no deal, so there is little risk of us walking away from the table.
Theresa May has thrown Hammond a few hospital passes ahead of Monday’s Budget.
Her announcement of a huge spending boost for the NHS and the end of austerity has left him with little room for manoeuvre. It is hard to see how he can deliver on public expectations on what the end of austerity means.
Better-than-expected tax receipts have taken some of the pressure off him, though. I understand the Budget will contain several hundred million more for social care.
Cabinet colleagues also expect Hammond to put more resources into universal credit. There will also be measures to revive the high street.
Even those secretaries of state who get on with Hammond think this will be his last Budget. Theresa May is expected to attempt a big reshuffle once the Brexit deal is through Parliament.
If she is going to give her Government a fresh post-Brexit feel, which those close to her believe is her best chance of saving her job, she will have to shake up her Cabinet and that will mean a new Chancellor.
This is a moment in our history that calls for boldness.
But Hammond is an instinctively cautious politician.
His successor will need to be much more daring if the Tories are to stop John McDonnell from being the next Chancellor but one.
May’s hopes rest on EU trade deal
WHEN Boris Johnson and David Davis quit the Cabinet, it was meant to lead to a more united Government position. But the Cabinet is now as divided as it ever was, as shown by this week’s fractious meeting.
The nub of the issue is that Jeremy Hunt and Sajid Javid want the UK to have the unilateral right to get out of the backstop, which would – at the very least – keep Northern Ireland tied into the EU’s customs bloc and regulatory rules.
Theresa May, though, thinks the EU won’t agree to that. She is reluctant to bring the whole negotiation crashing down over this issue.
One of those close to Mrs May tells me: “Jeremy and Saj won’t get what they want.”
So how will Mrs May get this plan past her Cabinet and the Commons? The hope is that the EU will agree to a mechanism for ending the backstop that will provide political cover. At the same time, No10 hope the UK/EU plan for their future relationship will win people over.
I am told there is nothing in the political declaration that is incompatible with a Canada-plus-style free-trade deal with the EU. Mrs May told a meeting of Tory MPs this week: “At the heart of that future relationship will be a good trade deal, better than CETA [the Canada deal].”
In Whitehall, there is particular satisfaction that the text provides for regulatory equivalence for financial services and data – both of which are regarded as UK negotiating wins.
But this political declaration is, of course, not legally binding.
As well as holding out the carrot of the future relationship, there will be warnings of the economic AND political consequences of no deal.
At Cabinet this week, David Lidington, Mrs May’s No2, predicted that no deal would be another Black Wednesday moment for the Tories.
And David Gauke, the Justice Secretary, warned that voters would see the economic damage of no deal as self-inflicted and blame the Government for it.
Norway out of trouble
THE idea of the UK temporarily joining the European Economic Area after Brexit is gathering steam in Tory circles.
The idea, known as Norway for Now, is coming to be seen as a possible way out of the Brexit impasse and one that could keep the Tory party together. “The idea is very much on the dancefloor,” one leading Tory tells me.
Interestingly, the most powerful Brexiteer faction in the Tory party, the European Research Group, is inviting Norway for Now’s principal Tory advocate, Nick Boles, to come and talk to them about it.
- “WE’VE never been further away from the 48 letters. But we’re also closer to winning the confidence vote [against the PM] than before,” one of the Tories trying to oust Theresa May tells me.
What explains this paradox? Well, the violent language used by some of Mrs May’s critics has made Tory MPs keen to distance themselves from them; meaning MPs are even more reluctant than before to send letters demanding a vote of confidence.
But at the same time, the quiet sense of despair felt by many Tory MPs and ministers is growing.
Look what we could be part of
AS the Brexit negotiations become ever more complex, it is easy to lose sight of the big issues.
But the stand-off between the European Commission and the Italian government over its budget is a reminder of the Eurozone’s deep structural flaws.
There are three possible futures for the Eurozone – all of which would cause big problems for the UK if it stayed inside the EU.
THE FIRST is that the Eurozone integrates enough politically to make its currency work. At this point, the bloc would come to completely dominate the EU.
THE SECOND is that there continues to be a series of sticking-plaster solutions to the euro’s problems, leading to slow growth in Europe.
THE THIRD is that the whole thing blows up, causing a financial crisis.
When you remember this, you see why we are in the Brexit negotiations in the first place.
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