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Philip Hammond warns of 'sharp challenge' ahead of Autumn Statement

Published 20/11/2016

Philip Hammond will deliver the Autumn Statement
Philip Hammond will deliver the Autumn Statement

Chancellor Philip Hammond will warn those expecting substantial giveaways in his Autumn Statement that the economy is facing a "sharp challenge" after Brexit.

Mr Hammond said Wednesday's mini-Budget will help "just about managing" families " who work hard and by and large do not feel that they are sharing in the prosperity that economic growth is bringing to the country".

Labour has urged him to reverse George Osborne's cuts to universal credit (UC), which critics say will leave precisely those working families up to £1,300 worse off by 2020.

Mr Hammond stressed he needs "headroom" in the public finances to deal with the economic impact of Brexit, with forecasts predicting slower growth and "eye-wateringly" large debt.

He is reportedly facing a £100 billion black hole in the public finances.

Asked if he would reverse the UC cuts, the Chancellor told BBC One's Andrew Marr Show forecasts were "pointing to a slowing of economic growth next year and a sharp challenge for the public finances".

"There are a range of reasons for that and we've got to make sure that what we do is responsible, that everything we do is compatible with building resilience in our economy as we go into a period where there will be some uncertainty around the negotiation over our exit from the EU and focus on making sure that our economy is match-fit for the opportunities and the challenges that will lie ahead."

Mr Hammond added: "We have to maintain our credibility - we have eye-wateringly large debt, we still have a significant deficit in this country and we have to prepare the economy for the period that lies ahead.

"I want to make sure that the economy is watertight, that we have enough headroom to deal with any unexpected challenges over the next couple of years and, most importantly, that we're ready to seize the opportunities of leaving the European Union."

Former work and pensions secretary Iain Duncan Smith quit the cabinet in March over the UC cuts, complaining of Mr Osborne's "salami slicing" of the welfare budget.

Shadow chancellor John McDonnell has now urged Mr Hammond to reverse the cuts alongside reductions in disability benefits that will leave some claimants £30 a week worse off.

He also revealed Labour would support an increase in the 40p tax threshold from £45,000 next year to £50,000, a move promised in 2014 by David Cameron to take millions of middle-income families off the higher tax rate.

The shadow chancellor said: "It looks as though the threshold will be increased on Wednesday by the Government and we would support that.

"It's to people some of whom need a tax giveaway at the moment because the mismanagement of the economy by the Conservatives is hitting them hard.

"What we need is a long-term strategy. This Autumn Statement, we're going back to giveaways and gimmicks again."

Mr Hammond has already revealed the Autumn Statement will contain £1.3 billion of improvements to Britain's roads.

Ahead of the launch of the Government's industrial strategy in the coming weeks, Mr Hammond is due to prioritise high-value projects that can be built quickly and make an immediate economic impact.

The Chancellor has already ditched Mr Osborne's goal of generating a budget surplus by 2020 but warned those hoping he will borrow large sums of money to invest in productive infrastructure that he remains "highly constrained" by the need to bring down the deficit.

Mr Hammond told ITV's Peston On Sunday: "We have a very large debt, we have a very large deficit and anybody who tells you that we can borrow without limit and to do all the good things of course we'd all like to do is not telling you the truth.

"We are highly constrained in how we can approach this and we must do it cautiously and appropriately."

The Government has already announced plans to ban pension cold calls which can leave people open to scams which trick them out of their life savings and is reportedly expected to approve another freeze in fuel duty until April 2018.

The Sunday Telegraph claimed Mr Hammond was set to crack down on staff perks like gym memberships and mobile phone contracts which are offered to workers willing to forgo part of their salaries in return.

The move would help the Treasury raise more money in income tax receipts and national insurance contributions, the newspaper said.

According to the Sunday Mirror, he will use the Autumn Statement to hint at a temporary reduction in VAT from 20% to 17.5% to come in his Budget in March, the Sunday Mirror reported.

Confederation of British Industry (CBI) president Paul Drechsler backed Mr Hammond's plans for greater infrastructure spending.

Mr Drechsler told Sky News's Murnaghan programme: "I think that the Chancellor will make exactly the right call to ensure that we maintain stability, confidence in the UK and boost growth at a time when there is uncertainty."

The Liberal Democrats urged Mr Hammond to use the Autumn Statement to pump £4 billion of "emergency" funding into the NHS and social care.

Former coalition health minister Norman Lamb said: " Everyone knows that the service is going to need more money, above and beyond the increases in funding made by the coalition government."

The Road Haulage Association backed the investment in roads, with chief executive Richard Burnett describing it as "welcome news".

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