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  1. ITV Report

Theresa May denies Philip Hammond's Budget has paved way for early general election

  • Video report by ITV News business and economics editor Joel Hills

Theresa May has dismissed suggestions that Monday's Budget has paved the way for an early general election.

The chancellor used Monday's statement to announce a £100 billion loosening of the purse-strings, with income tax breaks for 32 million voters, help with business rates for the High Street, support for Universal Credit and the promise of increased public spending over the coming years.

Shadow chancellor John McDonnell was among those to suggest the move could signal an election is on the horizon, telling ITV's Good Morning Britain: "The Tories usually do this. If a general election is coming, what they'll do is they'll splash out some money and then if they win the election they then start cutting it back again."

But asked about the claim at a press conference in Oslo, Mrs May said: "We are not preparing for another general election. That would not be in the national interest."

Mrs May is in the Norwegian capital for the Northern Future Forum summit of north European states and will later address the Nordic Council.

Mr Hammond's suggestion that the Budget signalled austerity is coming to an end has also faced scrutiny, but Mrs May defended the claim.

She said: "Austerity coming to an end isn't just about more money into our public services, it's about more money in people's pockets as well."

"The message of yesterday's Budget is that the hard work of the British people has paid off."

The spectre of a no-deal Brexit hung over the 72-minute statement, with the Office for Budget Responsibility (OBR) warning that failure to reach agreement with Brussels would hit the economy hard.

A disorderly Brexit “could have severe short-term implications for the economy, the exchange rate, asset prices and the public finances”, warned the Government’s independent forecaster.

“The scale would be very hard to predict, given the lack of precedent.”

And a respected economic thinktank, the Institute for Fiscal Studies (IFS), said the Chancellor has taken a "gamble" with the public finances which could lead to higher borrowing and debt in coming years.

The IFS said Mr Hammond may have "painted himself into a corner" by using a windfall from revised borrowing forecasts to fund increased spending on the NHS.

And it warned that tax rises are "all but inevitable" in the longer run to pay for the pressure on the NHS of Britain's ageing population.

Despite Mr Hammond's claims that the economy has "turned a corner" on the way to the end of austerity, IFS director Paul Johnson said that Monday's Budget was "no bonanza" for public services other than the NHS.

Mr Johnson said: "Many public services are going to feel squeezed for some time to come. Cuts are not about to be reversed.

"If I were a prison governor, a local authority chief executive or a headteacher I would struggle to find much to celebrate. I would be preparing for more difficult years ahead."

Mr Hammond insisted he has "sufficient firepower in my locker" in case there is a no-deal Brexit and said measures announced "will go ahead whatever happens" with the negotiations.

Mr Hammond said the Budget "stands in its own right" whatever happens with Brexit.

"The measures that I announced yesterday will go ahead whatever happens," Mr Hammond said. "I'm confident that we will get a good deal with the EU. If we do get that deal there will be a dividend from that deal that will enable us to put a bit more into the pot for the spending review that happens next year."

He added: "I also kept sufficient firepower in my locker in borrowing capacity terms to be able to intervene and support the economy if anything happens - not just a no-deal Brexit, it could be anything - which means the economy needs more support over the coming years."

Mr McDonnell said the Chancellor could not keep dodging the issue of whether Britain will get a deal with the EU.

"He's got to come down now firmly and say we need a deal that protects the jobs in the economy," Mr McDonnell said.

The Labour MP said his party would not support the Budget in the House of Commons, where debate on the proposals is taking place on Tuesday.

Mr McDonnell told ITV News: "It's not good enough on Universal Credit, he should have halted it and looked at how the system is operating because this will still force people into poverty.

"We're facing the worst winter health crisis that we've ever seen and it certainly isn't enough money for the health service.

"We can't support a budget that actually is simply saying that austerity is going to continue on almost permanently."

Credit: PA Graphics

Setting out his income tax cuts, Mr Hammond said the personal allowance will rise to £12,500 and the higher rate threshold will rise to £50,000, both from April 2019.

The changes had been due to come into force in 2020.

Mr Hammond said it would put “£130 in the pocket of a typical basic rate taxpayer”. The Treasury calculated the cumulative effect of increases in tax thresholds since 2010 at £1,200 for basic rate payers and £1,800 for those paying the higher rate.

The IFS said the rise in income tax thresholds would benefit the wealthy more than those less well-off, with a typical higher rate taxpayer gaining £176 a year and a basic rate payer gaining just £24.

And it said that, even after the injection of around £2 billion a year into Universal Credit, there would be "millions of losers" from the introduction of the new benefit.

On Tuesday, Mr Hammond defended the income tax move from criticism that it only benefits those at the top end of the scale.

"You have to look at all these measures together as a package," the Chancellor said. "It's the people at the bottom end that benefit proportionately the most from the overall package of measures."

The Chancellor set out a five-year plan for departmental spending which will see Whitehall budgets rise by an average of 1.2% a year.

Detailed figures made clear that the lion’s share of this extra funding will go to the Department of Health to pay for a £20.5 billion boost to NHS spending, while other departments see their budgets rise in line with inflation.

The IFS said the rise in income tax thresholds would benefit the wealthy more than those less well-off, with a typical higher rate taxpayer gaining £176 a year and a basic rate payer gaining just £24.

And it said that, even after the injection of around £2 billion a year into Universal Credit, there would be "millions of losers" from the introduction of the new benefit.

Downing Street insisted the spending pledges were fully funded, irrespective of the outcome of Brexit talks.