WATCH: Philip Hammond hints he could rip up Theresa May's 'end to austerity' pledge under no-deal Brexit
4 min read
Philip Hammond has said he would be forced to ditch Monday's Budget if Britain leaves the European Union without a deal - risking Theresa May's pledge to bring austerity to an end.
The Chancellor, who has previously put an £80bn price tag on a no-deal Brexit, said quitting the bloc without an agreement would require a "different approach" and a "different strategy" from the tax-and-spend plan he is set to unveil this week.
The move risks a fresh split with Downing Street, which has heaped pressure on the Chancellor to turn on the spending taps to make good on the Prime Minister's Tory party conference claim that austerity is "over".
Number 10 has previously insisted that ditching austerity would happen regardless of the outcome of Brexit talks.
But Mr Hammond told Sky News' Sophy Ridge: "If we don't get a deal, if we were to leave the European Union without any deal - and I think that's an extremely unlikely situation, but of course we have to prepare and plan for all eventualities as any prudent government would - if we were to find ourselves in that situation then we would need to take a different approach to the future of Britian's economy.
He added: "We would need to look at a different strategy. And frankly, we'd need to have a new Budget that sets out a different strategy for the future."
Mr Hammond has been under intense pressure to ease the decade-long squeeze on public spending, with Theresa May pledging an extra £20bn-a-year for the NHS within the next five years and Tory backbenchers demanding a U-turn on cuts to the beleaguered Universal Credit scheme.
But the Chancellor said Monday's Budget - which is expected to include a major cash boost for Britain's roads, broadband services and armed forces - was based on the assumption "of a deal being done with the European Union and us continuing to able to trade on reasonable terms with our closest neighbours in Europe".
Asked whether that meant a no-deal Brexit would mean less money for government departments, he replied: "We would have to wait and see what the situation was if we left the European union without a deal.
"We would want to see how markets and businesses and consumers responded to that and then, as any responsible government would, we would take appropriate fiscal measures to protect the economy, to prepare us for the future and to strike out in a new direction that would ensure that Britain was able to succeed whatever the circumstances we found ourselves in."
'BLACK HOLE'
The warning that a no-deal outcome could prompt a major fiscal rethink was pounced on by anti-Brexit campaigners, with Liberal Democrat MP Layla Moran of the Best for Britain group saying there was a "Brexit black hole at the heart of this Budget".
She added: "Tomorrow the Chancellor will go through the motions and announce money for this and that but all the while knowing they might not be able to deliver it.
"This Government cannot deliver a good Brexit deal, it couldn't even negotiate it's way out of a paper bag. Gone are the days of long term economic plans and have been replaced by short term Brexit scams."
Conservative Brexiteer Jacob Rees-Mogg - who has frequently accused the Treasury of painting an unnecessarily gloomy picture of Britain's post-Brexit prospects - meanwhile urged the Chancellor not to wait to set out a public spending strategy for a no-deal.
He told Sky News: "I would have throught it would be better to take the opportunities ahead of us now rather than waiting."
He added: "This sounds like an approach where policy decisions would be made to embrace Brexit and I'd be very much in favour of that being done on Monday rather than waiting a few months."
'THROW FISCAL COMPETENCE AWAY'
The row over what a no-deal Brexit would mean for tomorrow's Budget came amid a fresh briefing war between allies of the Chancellor and 10 Downing Street.
Sources close to the Chancellor accused Mrs May's team of “indiscipline” after Mr Hammond was effectively bumped into the spending spree by the PM's Conservative conference speech promising "better days ahead" after years of austerity.
One told the Sunday Times: "The issue is that while she thinks spending is key to survival, he knows it isn’t.
"He knows that if we throw fiscal competence away to try to buy votes, a) it won’t work; and b) we will lose on the grounds of inconsistency."
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