Chancellor expected to give upbeat assessment of post-Brexit economic prospects

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Philip Hammond is expected to deliver an upbeat assessment of Britain's economic prospects after Brexit in his first Budget as Chancellor, despite admitting that more austerity is in the pipeline as he battles to get the deficit down.

The Chancellor will say that he is ready to take further "difficult decisions" on tax hikes and spending cuts to get the books into balance, even though he recognises that many voters are still feeling the pinch 10 years on from the financial crash of 2007/08.

But he will insist that the Government's economic programme is laying the foundations for a "stronger, fairer, better Britain" outside the EU and will promise to do everything he can to help ordinary working families.

Acknowledging the concerns of many parents that their children will not get the same opportunities in life that they enjoyed, he will say the Government is investing in young people's chances to go to a good school and get the qualifications they need for the jobs of the future.

Mr Hammond received an eve-of-Budget boost on Tuesday as a leading international think tank upgraded its forecasts for UK economic growth.

The Paris-based Organisation for Economic Co-operation and Development (OECD) said it now expected growth of 1.6% this year - up from the 1.2% it was predicting in November.

The increase is expected to be reflected in a similar rise when Mr Hammond unveils the latest official forecasts from the Office for Budget Responsibility in his Commons statement on Wednesday.

But while some analysts have calculated that higher tax receipts could give him a £45 billion windfall over the next five years, the Chancellor has insisted there will be no Budget giveaway.

While he has signalled extra support for hard-pressed local authority social care services and firms hit by big rises in business rates, it is expected the measures will be paid for through limited tax rises.

Speaking at the weekend, Mr Hammond made clear his priority was to build up a war-chest to deal with the uncertainties surrounding Brexit, saying he wanted to ensure there was enough "gas in the tank" for the coming years.

The potential for turbulence was underlined by the OECD which - despite raising its UK growth forecast for this year - left its prediction that it will fall back to just 1% in 2018 unchanged.

"UK growth is expected to ease further as rising inflation weighs on real incomes and consumption, and business investment weakens amidst uncertainty about the United Kingdom's future trading relations with its partners," the OECD said.

Mr Hammond is reported to be preparing to announce an additional £1 billion for social care in England over the next two years, but is expected to resist demands from Labour and the British Medical Association for a large cash injection for the NHS.

It is thought ministers will argue that creating extra social care places will help to ease the pressures on the NHS, ensuring vulnerable patients can be discharged more quickly once they have been treated, freeing up hospital beds.

At the same time it is expected that Mr Hammond will herald a wider reform of the way the needs of the elderly are funded in a rapidly-ageing population.

Faced with a threatened revolt by Conservative MPs, ministers have already indicated there will be measures in the Budget to mitigate the impact on firms facing large rises in business rates as a result of the latest revaluation.

While the Government argues the majority of companies will see their rates fall or remain unchanged, the Institute for Fiscal Studies has estimated firms in London will see an average rise of 11%, taking £800 million a year out of the capital.

One option said to have been under consideration for increasing taxes to pay for the measures is raising the national insurance class 4 rate, paid by the self-employed, by 3p in the pound, bringing it in line with the 12% tax rate paid by employees, which could bring in about £1 billion.

In what will be his first and last spring Budget, having announced last November that he intended to move to autumn budgets in future, Mr Hammond is also reported to have been looking at a possible increase in duties on alcohol.

Ahead of Wednesday's statement, Mr Hammond has already set out plans for £500 million for additional spending on schools in England, with £320 million for 140 new free schools - including new grammar schools promised by Theresa May.

There will be a further £500 million to boost science and innovation with support for electric vehicles, robotics and artificial intelligence.