RISING prices, job losses and falling wages would be the result of a no-deal Brexit, Philip Hammond warned in his Spring Statement yesterday.
The economy and Britain’s ‘standing in the world’ have been damaged by the political paralysis over withdrawal from the EU, the chancellor said.
Figures from the Office for Budget Responsibility predicted growth for this year of 1.2 per cent, revised down from its previous estimate of 1.6 per cent.
Mr Hammond said he expected to see ‘significant disruption in the short and medium term’ if nothing was done to stop a no-deal by default on March 29.
And he forecast that crashing out would also mean a ‘smaller, less prosperous economy in the long term’.
Warning of ‘higher unemployment, lower wages, higher prices in the shops’, he told MPs: ‘That is not what the British people voted for in June 2016.’ The chancellor, who campaigned for Remain, held back from splashing the cash after previously saying he had to keep funds in reserve to help the country cope with no-deal disruption.
But his Spring Statement mini-budget did include an extra £100million to help police tackle violent crime.
He said the government would guarantee £3billion of borrowing by housing associations in England, to help them build 30,000 affordable homes.
And he said girls at secondary schools would get free sanitary products.
Mr Hammond said leaving the EU with an agreement would allow him to spend more freely and deliver a ‘deal dividend’.
He has previously spoken of a ‘double dividend’, saying that an orderly Brexit would prompt firms to go ahead with investments that have been put on ice.
But John McDonnell (pictured), the shadow chancellor, said firms were being driven to bankruptcy by the uncertainty over future trade.
He said Mr Hammond’s offer of a dividend was a ‘bribe’ intended to ‘cajole’ MPs into backing Theresa May’s deal with the EU after it was rejected for a second time on Tuesday.
The Labour frontbencher also said the chancellor was guilty of ‘callous complacency’ over austerity. ‘He turns up today with no real end or reversal of austerity and to threaten us that it can only end if we accept this government’s bad deal over Brexit,’ Mr McDonnell said.
In addition to the downgrade of its growth forecast for this year, the OBR predicted 1.4 per cent next year and 1.6 per cent in each of the following three years.
But it did offer Mr Hammond some cheer by revealing income tax and national insurance revenues had been £11billion higher than expected, because of wages oustripping inflation.
It means the chancellor is on track to meet his fiscal targets with £26.6billion to spare, an increase on the £15.4billion that was being forecast at the time of the autumn Budget.
Treasury sources hailed it as an ‘extraordinary’ indication of how well the economy is performing.
But the CBI warned the rosy picture could be ruined by a no-deal. ‘This year’s forecast downgrade brings the danger of no-deal to the UK economy sharply into view — it must be avoided,’ said its chief economist Rain Newton-Smith.