The Chancellor says the “warning signals” about the economic damage sparked by Brexit must be heeded, after some Tory MPs attacked the forecasts as nonsense.
Philip Hammond insisted he was right to be gloomy about “a slightly more rainy day” to come, because of the huge uncertainties created by EU withdrawal.
In post-Autumn Statement interviews, the Chancellor defended his decision to plan for a slowdown – also referring to the “headwinds” threatening the country.
The comments came as pro-Brexit Conservative MPs and newspapers launched a furious onslaught on the independent Office for Budget Responsibility (OBR) for its economic forecasts.
Iain Duncan Smith, the former Cabinet minister accused the OBR of putting out “another utter doom and gloom scenario”, on the back of past failures.
He said: “The key thing is that the OBR has been wrong in every single forecast they've made so far. On the deficit, on growth, on jobs, they've pretty much been wrong on everything.”
And another former minister, John Redwood, said: “Their forecast is too low, their borrowing forecast is too high, and we will get good access to the single market once we are out of the EU.”
In his Autumn Statement, Mr Hammond himself blamed Brexit for wiping out 2.4 per cent of economic growth expected by 2020.
He revealed that Britain will borrow an extra £122bn by 2022 – of which almost £58.7bn is a “black hole” opened up directly because of the uncertainty created by EU withdrawal.
And debt as a proportion of GDP is forecast to reach 90.2 per cent in the year 2017-18, spiralling close to £2trillion.
Asked if the OBR was wrongly mired in gloom, Mr Hammond hit back, telling BBC Radio 4’s Today programme: “What we should do is we should look at what the report is projecting.
“We should certainly not ignore that, we should look at it as one of the possible range of outcomes that we need to plan for.”
It was right to put more money aside “for the possibility of a slightly more rainy day next year and the year after, as the OBR suggests. We have now got more fiscal firepower”, he said.
In a separate interview with Sky News, he said: “It makes sense – given the warning signals coming from the OBR report – to keep a little bit of firepower in the locker.
“If there is a slowdown next year, we have got enough capacity to support the economy, to project jobs, to ensure the economy can get through any headwinds it encounters.”
Asked, by the BBC, if the failure to control the nation’s debt was a “moral failing” – as the Conservative 2015 election manifesto stated – Mr Hammond replied: “No.”
He also refused to accept that people will necessarily be poorer next year, because of rising inflation, arguing that depended on whether firms passed on their higher costs.
The Resolution Foundation think-tank is warning that families face harsher austerity than under George Osborne – a couple with two children, where the main earner works full-time on the National Living Wage, is £1,780 worse off overall.Reuse content