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Brexit news: Philip Hammond set to unlock millions for no-deal preparations if EU rejects PM's attempts to save her proposals

Philip Hammond earmarked £3 billion last year to fund preparations for a no-deal Brexit: AFP/Getty Images
Philip Hammond earmarked £3 billion last year to fund preparations for a no-deal Brexit: AFP/Getty Images

Chancellor Philip Hammond is getting ready to unlock hundreds of millions of pounds for no-deal preparations in the next few days if Theresa May’s attempts to save her Brexit deal are rejected by the EU.

Mr Hammond earmarked £3 billion last year to fund preparations for a collapse in negotiations but much of the money has yet to be allocated or spent.

Ministers in the departments that would be most affected by a chaotic Brexit are keen to increase spending as insurance against a breakdown and to show the EU that Britain is serious about being unable to ratify a withdrawal agreement unless there is movement on the backstop.

A Government source told the Standard: “The Chancellor knows what needs to be done and if action is necessary then you will see decisions very soon.”

The Prime Minister met with European Commission President Jean-Claude Juncker to discuss Brexit yesterday (REUTERS)
The Prime Minister met with European Commission President Jean-Claude Juncker to discuss Brexit yesterday (REUTERS)

This comes at the same time as it emerged senior ministers are discussing an emergency “Plan B” in which Britain would attempt an “orderly” exit to World Trade Organisation terms if talks break down altogether.

The proposal, which is said to have growing agreement among senior Cabinet figures, is emerging as an 11th-hour attempt to avoid no deal.

Mrs May is facing a leadership contest (Jeremy Selwyn)
Mrs May is facing a leadership contest (Jeremy Selwyn)

The new option, being described as the “orderly exit” model, halves the money sent to the EU in a divorce settlement to £20 billion.

A Cabinet source said today: “This plan involves moving onto World Trade Organisation terms to negotiate free trade deals as a third country.

“The £20 billion involves paying for an implementation period to avoid a cliff edge through no-deal.”

Crucially the proposal would uphold citizens rights agreements but there would be no political declaration or a backstop arrangement on Northern Ireland’s border with Ireland.

The EU is “desperate” financially, the source said, so would want to take the £20 billion offer to avoid no-deal.

The current divorce settlement is £39 billion but it is understood £20 billion is a bare minimum figure, relating to outstanding monies Britain owes the EU.

The “orderly exit” plan would also force the EU into working harder to develop a solution that avoids a hard border in Ireland, the source said.

Under this arrangement the Government would still work towards a trade deal with the EU by December 2020.