Leaving the European Union without a deal would leave Philip Hammond with no choice but to rip up his plans for the economy and would require a new Budget, he admitted today.
On the eve of the Budget, Mr Hammond warned that a new economic strategy would have to be adopted if there was no Brexit deal agreed upon when the UK leaves in March 2019.
“If we were to leave the European Union without any deal […] then we would need to take a different approach to the future of Britain’s economy,” he told Sky News’ Sophy Ridge on Sunday.
He said that he believes leaving without a deal is “an extremely unlikely situation but of course we have to prepare and plan for all eventualities as any prudent government would”.
In the event of a no-deal, Mr Hammond said the Government “would need to look at a different strategy and frankly we’d need to have a new Budget that sets out a different strategy for the future.”
“We would want to see how markets and businesses and consumers responded to that,” he added.
"Then, as any responsible government would, we would take appropriate fiscal measures to protect the economy, to prepare us for the future and to strike out in a new direction that would ensure that Britain was able to succeed, whatever the circumstances we found ourselves in."
The Chancellor also hinted he would use his Commons statement on Monday to provide additional funding to smooth the transition to Universal Credit amid warnings low-income families are being driven into debt.
"I've already put over £2 billion pounds, over the last two Budgets, into smoothing that transition," he said.
"We continue to look at how this process is working and if we find cliff edges and difficulties, frictions in the move from the old benefits system to Universal Credit then of course will always try to smooth those out and be pragmatic about it."
On Sunday, Shadow Chancellor John McDonnell accused Mr Hammond of "callous complacency" over the Budget and the future as he called on the Government to halt the roll-out of Universal Credit.
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He told the Sophy Ridge on Sunday programme: "I'm saying to other political parties that if he doesn't halt the roll-out of Universal Credit we've got to vote this Budget down, we've got to stop him forcing people into poverty in this way."
Mr McDonnell said he was "really shocked" about the Chancellor's comments on Brexit, adding: "He's gone back to what he said some time ago, which is basically he seems to have accepted a no-deal Brexit and he does want us to be like Singapore, a tax haven which will undermine our manufacturing base and, I think, put people's living standards at risk."
Additional reporting by Press Association.
