No-deal Brexit will destroy pledge to end austerity warns chancellor as he delivers Spring Statement

Philip Hammond warns of ‘higher unemployment, lower wages, higher prices in the shops’ – rather than an end to austerity – if UK crashes out of EU

The chancellor Philip Hammond slashed the UK’s growth forecast for this year, as he warned MPs his pledge to end austerity would be in tatters if they continue to block a Brexit deal.

Delivering a low-key Spring Statement, Mr Hammond sought to emphasise the message that more cash for public services and tax cuts would flow only if a no-deal Brexit was avoided.

Promising a “deal dividend”, he told the Commons: “The progress that we have made will be at risk if we can’t secure a smooth and orderly exit.”

Mr Hammond announced that borrowing would be £3bn lower than he predicted in the autumn, as the public finances improved, and that the economy was forecast to grow in each of the next five years.

The 1.2 per cent growth in 2019 would be “faster than Germany” – but it is a significant downgrade on the 1.6 per cent set out in last October’s Budget.

There was no mention of the punishing benefits freeze, suggesting Mr Hammond had ignored cross-party pleas to axe it before its planned expiry in 2020.

In two eye-catching announcements, the chancellor pledged free sanitary products for girls in secondary schools and colleges and £100m for extra police overtime to tackle the “epidemic” of knife crime

He confirmed “a full three-year spending review before the summer recess”, to be concluded in the autumn, despite the huge uncertainty surrounding the damage from Brexit.

Mr Hammond also diverted from Theresa May’s script by urging MPs to vote later to “remove the threat” of a crash-out Brexit and back an Article 50 extension – arguing it would help MPs to agree a “compromise” deal.

Speaking in the Commons, he insisted there was “good news” on the economy, with borrowing this year at 1.1 per cent of GDP and forecast to reach £13.5bn in 2023-24, its lowest level in 22 years.

He dangled the carrot of more money for “public services, capital investment and keeping taxes low” in the spending review to follow.

But he warned: “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.”

John McDonnell, the shadow chancellor, accused Mr Hammond of a “toxic mix of callous, brutal complacency over austerity and its grotesque incompetence over the handling of Brexit”.

“Teachers are having to pay for the materials their pupils need, working parents are struggling to manage as schools close early and their children are sent home.

“Five-thousand of our fellow citizens will be sleeping in the cold and wet on our streets tonight. Young people being stabbed to death in rising numbers.

“And, the chancellor turns up today to threaten us that austerity can only end if we accept a bad Brexit deal.”

Mr Hammond also announced:

* A £3bn affordable homes guarantee scheme, to support delivery of around 30,000 homes.

* A “future homes standard” setting out the end of fossil-fuel heating systems in all new houses from 2025.