Phillip Hammond said leaving without a deal with the EU would undermine plans for additional spending and tax cuts, delivering his annual speech at Mansion House last night.
“A damaging no-deal Brexit would cause short-term disruption to our economy, soaking-up all the fiscal headroom we have built,” Hammond told delegates.
“There is a choice,” Hammond explained: “Either we leave with no-deal or we preserve our future fiscal space – we cannot do both”.
The chancellor announced in the Spring Statement in March the government’s spending envelope was £26.6bn – higher than the £15.4bn forecast – which he promised to include in the next Spending Review, so long as Brexit happened with a deal.
Hammond said the nation’s public finances have been “painstakingly rebuilt” over the past nine years of austerity.
Indeed, data from the Office for National Statistics from April showed a 17-year low in public borrowing.
But Hammond claimed that the fiscal headroom he has built up would only be available to use in the event of a “smooth and orderly” exit from the EU.
He also warned that leaving with no-deal would pose a threat to the union of the United Kingdom.
He said: “I cannot imagine a Conservative and unionist-led government, actively pursing a no-deal Brexit; willing to risk the union and our economic prosperity, and a general election that could put Jeremy Corbyn in Downing Street, to boot.
“And I will not concede the very ground we stand on. I will fight, and fight again, to remake the case for pragmatism and, yes, for compromise in out politics – to ensure an outcome that protects the union and the prosperity of the United Kingdom.”
