Philip Hammond has described the prospect of a no-deal Brexit as “unlikely”, as he cautioned MPs over the “likely shock” of such an outcome.
The Chancellor insisted the Government has the tools available to support the economy should the UK leave the EU without an agreement, but said careful fiscal interventions would be needed to avoid simply triggering price rises.
He also told MPs he will outline his “vision for Britain’s future” during his Spring Statement on March 13, which will take place in the same week that the Commons is expected to vote on Theresa May’s deal, no deal and extending the Article 50 process.
Mr Hammond cited uncertainty as the reason why “a huge amount of pent-up” investment in the UK has not gone ahead since the 2016 EU referendum, adding a vote for Mrs May’s deal will “unleash” it.
Speaking at Treasury questions, Mr Hammond told the Commons: “In the what I now think unlikely event of a no-deal exit, the Government has both fiscal and monetary tools available to it to support the economy, but of course the likely shock would be on the supply side of the economy and we would have to be careful in fiscal interventions that were made that they didn’t merely stimulate inflation.
“So if we were to find ourselves in that situation, we have the firepower and we have the clear intent to intervene to support the economy.”
Shadow chancellor John McDonnell challenged Mr Hammond to “find a backbone” to stand up to the PM and Brexiteer colleagues in the European Research Group (ERG).
He said: “Seven days ago he was forced to publish the Government’s assessment again of a no-deal Brexit, how much it would cost this country.
“And it was in today’s prices nearly £200 billion. How much of a threatened cost to this country will it take this Chancellor to find a backbone to stand up to the Prime Minister and the ERG to prevent a no deal or a bad deal?
“Or is the Secretary of State for Work and Pensions (Amber Rudd) the only Cabinet minister willing to put country before career?”
Mr Hammond replied: “Dear oh dear, as (he) knows very well, I’ve been working tirelessly to ensure that we avoid a no-deal exit, that we leave the EU in a smooth and orderly fashion to a new negotiated partnership that allows our complex and important trade relationships to continue to flourish in the future, that is what I spend every working day doing.”
Earlier, the Chancellor also said: “I will be making a Spring Statement to the House next week (March 13) in the context of some very important decisions that the House will be making about our exit from the European Union, and I will be setting out my vision for Britain’s future.”
After Independent Group former minister Chris Leslie raised concerns about the impact of a “disastrous” Brexit on the UK’s new technology sector, Mr Hammond replied: “My view is that we have a huge amount of pent-up investment that has not gone ahead over the last two-and-a-half years because of uncertainty.
“Once we can provide clarity to British business about our future, and we do that by supporting the deal that the Prime Minister will be bringing forward next week, we will unleash that investment and we will allow Britain to achieve its rightful potential as one of the world’s leading technology powers.”