Britain will get a Brexit “deal dividend” if it is able to agree good terms with Brussels to leave the European Union, Philip Hammond has said
The chancellor said the last 10 days had seen “a measurable change in pace” in Brexit negotiations and that now there was "a real sense now of engagement from both sides."
But he said the positive progress towards a deal did not conceal the fact that there were still have some big differences left to resolve.
Mr Hammond said: "If we're able to get to a good deal for Britain as we leave the European Union, then, as I said in Birmingham last week I believe there will be a dividend - a deal dividend for us."
He said the deal the UK were currently trying to negotiate with Brussels would deliver better higher economic growth than otherwise forecast.
Mr Hammond, who is currently attending the International Monetary Fund's annual meeting in Bali, is due to present a crunch Budget – the last currently due before the UK quits the EU next March – at the end of October.
The idea of a “Brexit dividend” has previously been floated by Prime Minister Theresa May, who suggested it as a way to part-fund a £20.5 billion-a-year boost to the NHS budget.
But its validity has been questioned, including from within the Conservative Party.
Mr Hammond spoke the day after the Office for Budget Responsibility (OBR) warned that the UK’s economy and public finances are likely to be weaker as a result of the Brexit vote than they would have been if the country have decided to stay in the European Union.
A discussion paper by the Budget watchdog also indicated that a no-deal Brexit could have a “severe short-term impact” on the economy and potentially lead to a sharp fall in asset prices.
Mr Hammond said securing a finalised withdrawal agreement at next week’s Brussels summit would be “highly ambitious”.
He told CNBC: “Well, it is very ambitious and I am not conducting the negotiations.
“There are people in Brussels right now working hard at this.
“But I think what is very clear is that we have to make significant progress by the time of the October council to show that we are on track, that we are moving forward and that it would be, if we don’t reach a deal in October, at least we are making sufficient progress that everyone can see it is sensible to come together again in November for that last push to get there.”
Shadow chancellor John McDonnell said: “This all smacks of good old-fashioned spin. It looks like Hammond is desperate to save his and the Prime Minister’s skins by dressing up a classic ‘put it off’ fudge as a deal, which will fail to provide the long-term security and certainty investors and businesses need.
“It appears that Hammond is planning a few tax conjuring tricks in the Budget to kid people that austerity is over when the reality is that the vast bulk of the cuts are still rolling out. We need a Chancellor not a conjuror.”