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Budget 2018: Austerity to continue for five more years if Britain leaves EU with no deal, Philip Hammond warns

Austerity will proceed for 5 extra years if Britain crashes out of the EU with no deal, Philip Hammond signalled, in a Budget warning to MPs threatening to vote down Theresa May’s Brexit plans.

The chancellor unveiled a Price range giveaway that reduce income tax, introduced a tax on the tech giants and conceded to stress to assist the victims of the bungled universal credit shake-up.

However, most importantly, Mr Hammond made clear the prime minister’s promise that “austerity can be over” would solely be met in full if Britain sidesteps financial injury from Brexit and the rising danger of leaving the EU with no settlement subsequent March.

Spending would rise by 1.2 per cent per yr from subsequent yr, he introduced – however instantly acknowledged the £20bn for the NHS would gobble up all the additional money.

All different departments would solely “maintain tempo with inflation”, a Treasury supply mentioned, earlier than including, tantalisingly: “If there’s a superb deal, there’s a rise”.

It seemed to be a transparent warning to MPs that plunging Britain into the chaos and injury of a no-deal Brexit would extend the ache of austerity for years to come back.

Some key departments – masking spending on the police, the courts and advantages – are nonetheless heading for cuts in day-to-day spending till 2022, the Price range e book confirmed.

Labour seized on the Price range and plans for subsequent yr’s spending evaluate as proof that “the pledge to finish austerity was a damaged promise”.

“It’s now clear austerity just isn’t over, the cuts to social safety will proceed and Philip Hammond gave no assurances that departments received’t face additional cuts,” mentioned John McDonnell, the shadow chancellor.

The revered Resolution Foundation assume tank, mentioned: “The chancellor has considerably eased – however not ended – austerity for public companies. Nevertheless, powerful instances are removed from over.”

It warned that, after different spending protections for defence and international support, the plan “in all probability means extra cuts for different departments”.

And the Child Poverty Action Group seized on the failure to finish the four-year freeze on household advantages – cuts in actual phrases – as proof there was no “substance to the declare that austerity is over”.

The criticism got here after a Price range dominated by the spectre of Brexit which, Mr Hammond has acknowledged, may wreck his authorities’s financial plans.

He was in a position to announce – and spend – an £11.6bn windfall from rising employment, increased tax revenues and decrease debt curiosity funds, totally on the NHS, which is able to obtain an additional £7.9bn in 2019-20 alone.

There was excellent news for staff, with hikes within the earnings tax-free allowance – to £12,500 for the 20p charge and £50,000 for the 40p charge – introduced ahead a yr to subsequent April.

The minimal wage will improve by four.9 per cent subsequent April, to £eight.21 an hour, there was £160m for counterterrorism police and £400m for faculties to purchase “little extras”, an outline that sparked fury from hard-pressed academics.

And a digital services tax will increase £400m a yr from the likes of Amazon and Facebook from April 2020, after Mr Hammond accused different nations on dragging their heels on worldwide motion.

However, strikingly, Mr Hammond refused to echo Ms Could’s pledge that austerity would quickly be “over’, as an alternative telling MPs it was “coming to an finish”.

And he confirmed he was contemplating one other emergency Price range subsequent yr, if the Brexit talks fail, by “upgrading” what would in any other case be a low-key Spring assertion.

The chancellor has not confirmed even a 1.9 per cent spending rise, which stays a “forecast” depending on the Brexit end result.

In the meantime, the unbiased Office for Budget Responsibility (OBR), was withering in regards to the danger from failing to attain a easy Brexit, an occasion with out “precedent”.

“A disorderly one may have extreme short-term implications for the financial system, the change charge, asset costs and the general public funds,” its Price range report mentioned.

In his speech, Mr Hammond pointed to the “pivotal second in our EU negotiations” as he set out a “five-year path for departmental useful resource spending”.

And he pointed to the prize of spending £15.4bn of funds put aside to protect in opposition to a foul Brexit, plus “a lift from the top of uncertainty”.

“Get it proper, and we won’t solely defend Britain’s jobs, companies and prosperity however we may also harvest a double-deal dividend,” he argued.

Total, he introduced £103bn of additional spending deliberate for the following 5 years, growing the deficit by £10.9bn subsequent yr – regardless of a acknowledged coverage of eliminating it.

The OBR mentioned the chancellor had deserted his plan to attain a balanced price range by the center of the following decade, largely to handle the NHS’s funding disaster.

In the meantime, the prospect of the Democratic Unionist Get together voting down the Price range – as threatened – appeared to decrease with a promised £1bn of spending for Northern Eire.

The Impartial has launched its #FinalSay marketing campaign to demand that voters are given a voice on the ultimate Brexit deal.

Sign our petition here

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