Philip Hammond warns of economic gloom if UK crashes out of the EU without a deal

Posted On: 
13th March 2019

Britain's economy will face "significant disruption" if the UK crashes out of the EU without a deal, Philip Hammond has warned.

The Chancellor updated MPs on the Treasury's latest fiscal forecasts and policy tweaks.
Credit: 
PA

The Chancellor said that unless Parliament can pass some kind of withdrawal agreement, jobs will be lost, wages will be lower and prices in shops will soar.

But Mr Hammond said an "orderly" departure from the European Union would allow him to finally end austerity by freeing up billions of pounds to be spent on public services, cutting taxes and bringing down the national debt.

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His comments came the day after the Government was again thrown into crisis when MPs rejected Theresa May's reworked Brexit deal by 149 votes.

The Chancellor said annual government borrowing will fall to £13.5bn by 2023/24, it's lowest level in 22 years, with debt as a proportion of GDP falling to 73% over the same period.

However, he was forced to downgrade his economic growth forecasts from 1.6% to 1.2% this year, before upgrading it for 2021 onwards.

He said: "The progress we have made will be at risk if we cannot secure a smooth and orderly exit from the EU and a transition to a new partnership that protects the complex trading relationships businesses have built up over 45 years and on which so many British jobs depend.

"I hoped we would do that last night, but I am confident that we, as a House, will do it over the coming weeks. Leaving with no deal would mean significant disruption in the short- and medium-term and a smaller, less prosperous economy in the long-term, than if we leave with a deal.

"Higher unemployment; lower wages; higher prices in the shops. That is not what the British people voted for in June 2016."

Calling on MPs to agree a deal, Mr Hammond said: "If we leave the EU with a deal and an orderly transition to a future economic partnership we will see a deal dividend: An economic boost from recovery in business confidence and investment.

"And a fiscal boost from a reduction in the minimum necessary level of fiscal headroom once the risk of a no deal exit is removed. Giving us real choices as we use the spending review to decide how much of this deal dividend we can prudently release, and how we would share it between increased spending on public services, capital investment in Britain’s future prosperity and keeping taxes low, while continuing to keep debt falling.

"Real terms increases in public spending; record investment in Britain’s future; more jobs than ever before; higher wages and lower taxes meaning increased take-home pay, and for the first time in a generation debt going down; That, Mr Speaker, is what I mean by an end to austerity."

IDEOLOGICAL

But responding for Labour, Shadow Chancellor John McDonnell attacked the Government's economic record, accusing it of bringing down borrowing by slashing vital publis services.

He said: "Outside of the Westminster bubble, outside of the narrow, wealthy circles in which the Chancellor moves, nine years of Conservative government have meant nine years of hardship.

"And today the Chancellor has the nerve to tell those who have suffered most at the hands of his Government, that their suffering was necessary. If austerity wasn’t ideological, why has money been found for tax cuts for big corporations while vital public services have been starved of funding?

"Austerity was never a necessity, it was always a political choice."