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Austerity will continue for five more years if Britain crashes out of the EU with no deal, Philip Hammond signalled, in a Budget warning to MPs threatening to vote down Theresa May’s Brexit plans.

The chancellor unveiled a Budget giveaway that cut income tax, announced a tax on the tech giants and conceded to pressure to help the victims of the bungled universal credit shake-up.

But, most significantly, Mr Hammond made clear the prime minister’s promise that “austerity will be over” would only be met in full if Britain sidesteps economic damage from Brexit and the growing risk of leaving the EU with no agreement next March.

Spending would rise by 1.2 per cent per year from next year, he announced – but immediately acknowledged the £20bn for the NHS would gobble up all the extra cash.

All other departments would only “keep pace with inflation”, a Treasury source said, before adding, tantalisingly: “If there’s a good deal, there’s an increase”.

It appeared to be a clear warning to MPs that plunging Britain into the chaos and damage of a no-deal Brexit would prolong the pain of austerity for years to come.

Some key departments – covering spending on the police, the courts and benefits – are still heading for cuts in day-to-day spending until 2022, the Budget book showed.

Labour seized on the Budget and plans for next year’s spending review as proof that “the pledge to end austerity was a broken promise”.

“It is now clear austerity is not over, the cuts to social security will continue and Philip Hammond gave no assurances that departments won’t face further cuts,” said John McDonnell, the shadow chancellor.

The respected Resolution Foundation think tank, said: “The chancellor has significantly eased – but not ended – austerity for public services. However, tough times are far from over.” Read more

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