The chancellor, Philip Hammond, has said Britain could transform its economic model into that of a corporate tax haven if the EU fails to provide it with an agreement on market access after Brexit.
In an interview with the German newspaper Welt am Sonntag, Hammond commented that if Britain was left closed off from European markets after leaving the EU, it would consider leaving behind a European-style social model, with European-style taxation systems, European-style regulation systems and become something different.
Asked to clarify his remark, the chancellor told his German interviewers: We could be forced to change our economic model and we will have to change our model to regain competitiveness.
And you can be sure we will do whatever we have to do. The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged.
Hammond’s rhetoric seemed to be at odds with the message he tried to convey to his German counterpart during last week’s trip to Berlin, namely that the UK had no desire to disrupt the EU during its divorce from the bloc.
Philip Hammond told Welt am Sonntag: We will change our model, and we will come back, and we will be competitively engaged.
In the interview with the Sunday newspaper, Hammond also emphasised that restricting immigration would be the British government’s priority during negotiations. We are aware that the message from the referendum is that we must control our immigration policy, he said.
Unlike in previous interviews, the chancellor would not be drawn to give a guarantee that highly skilled workers from the EU would still be allowed to settle and work in the UK. Assuming you hold a German passport you can travel to the UK to do business and to travel, of course, he said. The question is about the freedom to travel for work, the freedom to settle and the freedom to establish a business.
Recent reports suggest that the prime minister, Theresa May, is looking into restricting access for EU workers for every sector and every skill level.
The chancellor however rejected his interviewers’ suggestion that with the UK and the US, two countries that were traditionally the leading champions of capitalism and free trade were now turning their back to the world.
I would reject that emphatically, Hammond replied. 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.
Hammond said he was hopeful that the terms of Britain’s exit from the European Union and the terms of its new status could be discussed in parallel once Theresa May’s government had triggered article 50 in the spring.
The treaty is clear that the negotiation of an exit agreement has to take account of the future relationship between the parties. To do that we have to talk about the future relationship. So we would expect that we would discuss the topics in parallel, the chancellor said.
At the same time, he conceded that it could be necessary to create an interim deal to cover the period between Britain leaving the EU and the full introduction of a long-term future arrangement between the UK and the EU.
In such a case we would have to decide what happens in the period between leaving the EU and the commencement of such an agreement in the interim period.