Time likely to be too tight for referendum before end of October, says chancellor

Philip Hammond has played down the possibility that the UK could use the delay to Brexit to hold a second referendum and stressed that he still expects Britain to leave the European Union.

Speaking in Washington, the chancellor said time would be too tight to hold a confirmatory vote before the new deadline of the end of October unless it was triggered over the coming weeks.

Hammond said the damage caused by continued uncertainty – including problems attracting suitable candidates to replace Mark Carney as the governor of the Bank of England – meant it was vital that the Brexit issue was resolved as quickly as possible.

The chancellor was speaking as cross-party talks continued in Westminster. May’s de facto deputy, David Lidington, and the environment secretary, Michael Gove, met Labour’s shadow chancellor, John McDonnell, for talks both sides described as “productive”.

“Talks are going on, constructive, so we are hopeful and positive. We are working out a timetable, there is a fair amount of detailed work that will go on for the next week or 10 days and then we will see where we are at,” McDonnell told reporters afterwards, adding, “we’ll see by the end of next week how far we’ve got”.

Asked whether he had raised the prospect of a referendum on Brexit, he said: “It’s always on the table of course, we raise that at each meeting.”

Some Labour MPs, including Clive Lewis, who is a member of McDonnell’s shadow Treasury team, are adamant the party should not sign up to any deal without a confirmatory vote attached.

“Any Brexit deal passed through parliament must be ratified by a public vote – this has to be the bottom line of negotiations, no ifs no buts,” Lewis wrote in his local paper, the Eastern Daily Press, on Friday.

Hammond warned continued Brexit deadlock would put at risk his plan to announce the results of a long-term spending review in the autumn budget – previously billed as the “end of austerity”.

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“If we get a deal through parliament in the next few weeks I expect to conduct a full three-year spending review of resource spending and a longer review of capital spending,” he said. “If we don’t get a deal done, it probably makes it inappropriate to do a long-term spending review.”

The chancellor warned that Brexit had damaged Britain’s reputation as a place to do business. Asked about the possibility of a second referendum, he said: “It’s a proposition that could and, on all the evidence, is very likely to be put to parliament at some stage.”

But the chancellor said the government was opposed to a confirmatory referendum and would not support one.

Noting that it would take six months to organise a referendum, he added: “It is unlikely, at a technical level, whether there would be enough time.

“I know some papers have been saying that the EU gave us an October extension so there would be time for a confirmatory referendum but if that had been the motive they would have given us longer. It looks tight to me.

“If in a couple of months time you were putting a bill through parliament you would be struggling to do it – even if you wanted to – in the time available.”

Hammond said the council’s decision to grant the UK an extension to late October had not made it more or less likely that a confirmatory referendum would be held, because the issue would be decided by parliamentary arithmetic.

“It depends on where the Labour party ends up. The Labour party is deeply split and will have to make up its mind where it stands.”

A spokesman for the People’s Vote campaign insisted a poll could be held in as little as three months, if agreement could be reached in parliament. “It’s a question of political will,” he said.

Jeremy Corbyn will seek to gloss over his party’s divisions on Brexit in a speech in Wales on Saturday.

In phrases reminiscent of Theresa May’s Downing Street statement blaming MPs’ squabbling for the failure of her Brexit deal, the Labour leader will express sympathy with voters who are exasperated with the “arcane procedure” and “alien language” of Westminster politics.

“Real politics comes from the ground up. Real politics is about the nitty gritty of life in your community, on your street. It’s about the reality of your life at work,” he will say.

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The chancellor said the process of finding a replacement for Carney – who will leave the Bank of England next January – is under way. He said that he regretted the Brexit issue had not been first resolved.

“It is blindingly obvious that there may be some candidates who might be deterred because of the political debate around Brexit.”

Carney has come in for criticism from some Conservative MPs over the Bank’s Brexit forecasts and his warnings of the dangers of a no-deal outcome. Hammond said it was unavoidable that the governor of the Bank of England would get involved in the Brexit controversy. “Some candidates might not want to be exposed to the political debate.”

Asked whether Brexit had damaged Britain’s international reputation a place to do business, Hammond said: “It has damaged it, no question. Investment has been delayed and some has been diverted.”

The chancellor said a speedy resolution to Brexit would unleash pent-up investment. Companies were sitting on a £750bn cash pile and had delayed buying new equipment because of the uncertainty. “Once the coast is clear and the uncertainties around access to markets is resolved I expect a very substantial increase in business investment.”