Jeremy Hunt has rallied behind Theresa May in a bid to halt a fresh Tory civil war over Europe - as the Bank of England Governor admitted the Brexit vote had cost the UK “tens of billions” in growth.
Amid growing speculation of a leadership challenge, the Health Secretary denied the Prime Minister had been “timid” and tried to play down claims that Chancellor Philip Hammond was plotting a soft Brexit.
Furious Tory backbenchers, Downing Street sources and Cabinet ministers all hit out after Hammond suggested on Thursday that Britain and the EU would move only “very modestly” apart after the UK quits the bloc in March 2019.
Brexit Secretary David Davis is set on Friday to insist in a major speech that the UK will still be able to sign free trade deals with non-EU countries even during a two-year transition period after Brexit.
And Hunt told Radio 4’s Today programme that May was still determined to deliver on the wishes of the 17 million people who voted Leave.
“Anyone who uses the word timid about this Prime Minister is absolutely wrong,” he said.
“This is the Prime Minister who gave us absolute clarity after the Brexit vote that we were going to get back control of our laws, our borders and our money - the most profound strategic decision that any Prime Minister needs to make.”
However, Bank Governor Mark Carney risked fresh backbench Tory criticism when he told the BBC that there had been a substantial “short term” hit to the British economy in the wake of the 2016 EU referendum.
Carney appeared to side with Hammond, declaring that “the deeper the relationship with Europe…the better it’s going to be over time for the UK economy”.
He also quantified for the first time the scale of the hit to the economy caused by the Brexit vote.
“What it works out to is tens of billions of pounds lower economic activity. The question then is how do we make that up over time by growing above potential,” he said.
“We’re in a position today where the economy is about a percentage point less in size than we expected before the vote - at this point - by the end of the year it will be probably two percentage points below.”
Carney said that the UK had to “consciously recouple” itself with the booming world economy, but admitted that in the “short term” companies are holding back on investment plans as they wait to see what Britain’s trade relationships will be after it leaves the EU.
Hunt tried to seize on Carney’s more positive remarks, while moving to heal the rifts caused by Hammond’s remarks.
Amid heightened rumours that more Tory MPs support a vote of no confidence in May, following a botched reshuffle and lack of policy ideas, the Health Secretary insisted she had “the resilience and the determination to get things right”.
“The key issue here is not the extent of divergence [from EU rules] but the freedom to diverge. The point that Philip Hammond was making, that has been slightly overshadowed, is…we actually start with 100% alignment.
“And that means, and this is the crucial point that he was making, that we should be able to expect very limited and possibly no changes to access as a result of the free trade deal that we negotiate.
“The big thing that is happening that is absolutely not modest is that we will be able to take a sovereign decision as a country as to where our regulations do or don’t diverge. That’s the big change next March.”
As former Cabinet minister Owen Paterson called on the government to be bolder about Brexit’s ‘opportunties’, Hunt echoed Michael Gove’s suggestion that a future Government could ditch close alignment with EU rules if it wasn’t working out.
“What people like Owen rightly argue is that what is absolutely critical is not the exact nature of the free trade deal that we have but our sovereign control and the control of this government and future governments to change that deal,” Hunt said.
In his speech in Middlesbrough on Friday, Davis will say: “As an independent country, no longer a member of the European Union – the United Kingdom will once again have its own trading policy.”
He was to stress that while the UK will replicate the effects of the EU customs union during the “implementation period”, this “should not preclude us from formally negotiating – or indeed signing – trade agreements”.
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