Philip Hammond: Johnson and Hunt campaign pledges would lead to spending cuts or tax increases
Boris Johnson and Jeremy Hunt would be forced to either cut spending or raise taxes to pay for their big-money campaign spending pledges, Philip Hammond has warned.
The Chancellor said the Tory leadership hopefuls were putting at risk the Government’s “reputation for fiscal responsibility”.
Both candidates have so far unveiled a series of promises costing billions of pounds in the race to succeed Theresa May as Prime Minister.
Mr Johnson has said he will cut taxes for higher earners, speed up the rollout of super fast broadband and increase spending for schools.
Meanwhile, Mr Hunt has vowed to spend £20bn slashing corporation tax and helping farmers and fishermen in the event of a no-deal Brexit.
But speaking to the BBC, Mr Hammond said both men were planning to spend more than the “fiscal headroom” he has set aside to help the UK cope with leaving the EU.
He said: “The promises that have been made so far greatly exceed the fiscal headroom.
“So they would either require borrowing to be increased way beyond the Government's cap on borrowing, or they'd require cuts in spending somewhere else, or they require increases in tax somewhere else.”
The Chancellor said there was no “pot of money sitting in the Treasury” as the candidates seemed to be suggesting.
He added: “My concern is that this Government has built up a reputation for fiscal responsibility and the British people have worked incredibly hard over a decade now to rebuild our public finances and I think it's very important that we don't throw that away.”
Mr Hammond said Mr Johnson and Mr Hunt appeared to have entered into a “bidding war” over tax cuts and spending increases.
“We can't do both and if we're not careful all we end up doing is borrowing more, spending more on interest instead of on our schools and our hospitals and our police and delivering a bigger burden of debt to our children and our grandchildren,” he said.
“I don't think either of the candidates would want to do that, that is not what the Tory party is about, but we just need to sometimes stop and think about what we're doing.”
The Chancellor added: “I think all candidates in any election or competition have policies that they want to put forward.
“Many of the policies that the two candidates are proposing in and of themselves are sensible and interesting ideas.
“But we have to live within our means and people have to be honest about the consequences of either spending more money or of cutting taxes. That will have implications for borrowing or for spending and taxes elsewhere.”
Mr Hammond’s intervention was his second of the day and demonstrated his concern that his legacy could be ruined after his expected departure from the Cabinet when the new Tory leader takes over.
On Monday morning, he tweeted: “The 'fiscal firepower' we have built up in case of a No-Deal Brexit will only be available for extra spending if we leave with an orderly transition. If not, it will all be needed to plug the hole a No Deal Brexit will make in the public finances.”
Labour's Shadow Chancellor John McDonnell said: "The spending promises being thrown around by both Johnson and Hunt once again prove that austerity was a political choice for the Conservatives and not an economic necessity."