Rachel Reeves was accused on Tuesday of trying to reverse Brexit after she called for the UK to start following swathes of Brussels' rules again. In a major speech, the Chancellor described closer alignment with European Union regulations as the 'right course for our country'. She also claimed that Britain's departure from the EU had caused 'deep damage' to the economy, citing disputed research that the 'hit' is equivalent to as much as 8 per cent of GDP. But on Tuesday critics said returning to alignment with EU regulations amounted to giving up the control that voters demanded in the 2016 referendum.

Robert Jenrick of Reform UK said: 'We should be taking full advantage of Brexit, for instance by abolishing VAT off energy bills to cut people's bills. 'Instead, Reeves is desperate to give up control and leave our economy at the mercy of Brussels.' Former minister Sir Simon Clarke, now chairman of the Onward think-tank, said: 'Labour promised they would respect Brexit, but less than two years into government, the Chancellor is betraying the whole point of leaving by accepting rule-taking status in a whole swathe of sectors.' Shanker Singham, chairman of the Growth Commission think-tank, said: 'Hardwiring into UK law any regulations which are costing EU economies dear would be a monumental act of [expletive].'

Delivering the Mais Lecture at Bayes Business School in the City of London, the Chancellor claimed 'Brexit did deep damage', raising costs for businesses and prices for shoppers as well as shrinking markets for exporters. She quoted 'independent studies' that indicate 'GDP impact could be as much as 8 per cent'. A recent paper by the National Bureau of Economic Research, a US think-tank, estimated that, by 2025, 'UK GDP per capita was 6-8 per cent lower than it would have been without Brexit'. But economist Julian Jessop said the figure was flawed, as it was reached by 'comparing UK growth since 2016 with mismatched groups of other countries and assuming any shortfall can only be due to Brexit'. Ms Reeves went on to say that 'where it is in our national interest to align with EU regulation we should be prepared to do so'.

Under her new National Interest Principles, alignment will happen if it boosts growth and preserves national security. She did not list the areas where alignment with EU regulations should happen but indicated it would cover most industries. Ms Reeves insisted: 'I believe absolutely that closer alignment is the right course for our country, a course chosen as a sovereign nation, a course chosen in our national interest.' She added: 'We will not be rejoining the single market and customs union or bringing back free movement of labour.' It came as MPs and MEPs who sit on the UK-EU Partnership Council urged both sides to 'raise, significantly, the level of ambition for a shared agenda'.

In particular they called for the UK and EU 'to develop structured frameworks for EU-UK defence industrial co-operation'. In her speech, the Chancellor acknowledged the uncertainty caused by the war in the Middle East, saying: 'I know that this is an anxious moment.' But she pushed back against suggestions that Britain could bring forward a target of lifting defence spending to 3 per cent – something the Daily Mail has been campaigning for.