A no-deal Brexit will not mean the spending announcements made in Monday’s autumn budget will be scrapped, Number 10 has said, in what is a flat contradiction of claims made earlier by the Chancellor.
On Sunday, Philip Hammond used high-profile TV interviews to warn that the budget was dependant on Theresa May securing a deal with Brussels.
Ministers could be forced to tear up plans for the economy and take a “new direction” if talks break down, Hammond told Sky News’ Sophy Ridge.
But on Monday, May’s official spokesman appeared to rubbish the assertion that a no-deal Brexit would spark an emergency budget.
“What the Chancellor was pointing out in relation to a budget was that if economic circumstances change, he would consider economic interventions. That’s what you would expect any sensible Chancellor to do,” the spokesperson said.
Labour said the contradictions showed the budget had been “plunged into chaos” before it even started, with Shadow Chancellor John McDonnell tweeting the UK had “never seen anything like this”.
The Office for Budget Responsibility said in March that there was £15bn “headroom” in Hammond’s plans which could be deployed in the event of a no-deal exit.
The PM’s spokesman rejected suggestions that this might mean reversing spending decisions announced in the autumn Budget, expected to include a £2bn increase in mental health funding and almost £30bn for roads.
“All of the spending commitments that the Chancellor will set out today are funded irrespective of a deal,” said the PM’s spokesman.
“What the Chancellor said yesterday was that he would use the fiscal reserves that we have built up through hard work and sound economic management to ensure that Britain will succeed whatever the circumstances.
“The Chancellor has spoken on numerous occasions about having maintained what he would describe as ‘fiscal firepower’ which he will be able to use in the event of a no-deal scenario.”
All of the spending commitments that the Chancellor will set out today are funded irrespective of a deal.
Downing Street spokesman
Labour was quick to seize on the split between No 10 and No 11. A spokesman for the party said: “Tory budgets are usually plunged into chaos after the Chancellor sits down, not before he even stands up.”
After weeks of turmoil over Brexit, Tory MPs will be looking to the Chancellor to raise party morale with his annual financial statement on Monday – expected to be the last Budget before Britain leaves the EU.
Hammond is expected to respond to May’s declaration in her Conservative Party conference speech that the era of austerity is finally ending, with a cautious loosening of the public spending purse strings.
The announcement in October prompted renewed accusations from Labour that ministers are preparing to turn Britain into a low tax, low regulation offshore economy, modelled on places such as Singapore.
Hammond insisted that was not the outcome he expected and he remained confident there would be an agreement with Brussels.
The Chancellor goes to the Commons buoyed by an estimated £13bn windfall due to better-than-expected Government borrowing figures.