Chancellor, preparing for autumn statement, says he needs ‘headroom’ in finances to meet Brexit challenges

Philip Hammond has admitted that the government is facing a “sharp challenge” in the face of Brexit and cautioned against any unexpectedly generous windfalls for families who are “just about managing”.

In a round of interviews ahead of his autumn statement on Wednesday, the chancellor said he needed “headroom” in the public finances to deal with the economic impact of leaving the EU – with forecasts predicting slower growth – and “eye-wateringly” large debt.

Campaigners have called on Hammond to reverse George Osborne’s cuts to universal credit, which critics say will leave struggling working families up to £1,300 a year worse off by 2020.

Asked if he would do so, Hammond told BBC1’s The Andrew Marr Show: “I’m not going to go into details of the autumn statement that I shall make on Wednesday, but you’ve seen the forecasts, the range of independent forecasts. We’ll get the OBR’s forecast on Wednesday.



The Observer view on the autumn statement | Observer editorial Read more

“Many of those forecasts are 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.”



He was keen to emphasise the challenges of rising inflation and fluctuating markets because of Brexit uncertainty. He is also reportedly facing a £100bn black hole in the public finances.



“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,” the chancellor told Marr.



“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.”



Don’t teach Brexit schoolkids about Tennyson: teach them maths Read more

In a hint that he would offer some help to the so-called Jams – “just about managing” – on Wednesday, Hammond said he would support people “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”.

He gave away few clues, however, as to what form this help would take.

Appearing on the same programme, the shadow chancellor, John McDonnell, told Hammond to reverse universal credit cuts alongside reductions in disability benefits that would leave some claimants £30 a week worse off.

“Universal credit, we’re hoping on Wednesday the government will reverse that.

“We’re also hoping in the first stage of our reversal of austerity, he will ensure the employment support allowance, £30 a week cut to disabled people, who are desperately seeking work, will be reversed,” he said. “That will be a first stage and I’m hoping the government will do that on Wednesday. If they don’t, we will.”

McDonnell said Labour would support an increase in the 40p tax threshold from £43,000 next year to £50,000, a move David Cameron promised in 2014 to take millions of middle-income families off the higher tax rate.

He 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.”

In terms of infrastructure, Hammond will announce a £1.3bn injection of funding for Britain’s roads on Wednesday, it emerged this weekend.

McDonnell, however, said it would not be enough to generate the growth necessary to get the economy moving. “All of the infrastructure I’ve heard the government is supposed to be announcing are press releases we’ve had already,” he said.