As he revealed economic growth forecasts had been cut to 1.2 per cent from 1.6 per cent, he urged MPs to rule out a no-deal Brexit in another crunch vote in the Commons scheduled for Wednesday night.
A previous vote on Tuesday against the prime minister’s Brexit deal meant uncertainty hangs over the economy, the chancellor said.
“We cannot allow that to continue. It is damaging our economy and it is damaging our standing and reputation in the world,” he said.
Mr Hammond, who has hinted he could resign if the UK crashes out of the EU, told the Commons that MPs have the choice to remove the threat of an “imminent no-deal exit”.
MPs have the chance to map out the way forward to a deal that can be collectively supported, Mr Hammond said.
“We have huge opportunities ahead of us he said,” praising Britain’s universities and technology companies.
“We are the fifth largest economy in the world, a proud successful outward-looking nation with no boundaries to what we can achieve”.
But he warned that “leaving with no deal would mean significant disruption… and a smaller and less prosperous economy in the long term than if we leave with a deal.”
He made clear that if there was a Brexit deal, he would spend some of the £26.6bn “headroom” he expects to have in the Autumn Budget.
However if no deal is voted through he implied that the money would disappear due to a big hit to the economy.
Delivering some good news for the chancellor, the Office for Budget responsibility revised up its forecast for wage growth to 3 per cent and Mr Hammond said another 600,000 jobs would be created by 2023.
But shadow chancellor John McDonnell attacked the chancellor’s record on the economy, jobs and wages.
The government had broken the “historic link between securing a job and taking yourself out of poverty”, he said.
The Conservatives have created a “large-scale jobs market of low pay, long hours and precarious work”, he said, adding that average wages are still below where they were ten years ago and 4.5 million children are living in poverty.
Business groups reacted with disappointment to Mr Hammond’s speech. Edwin Morgan, interim director general of the Institute of Directors, said: “Warm words and proposed consultations are not enough for businesses at a time when confidence is rock bottom and investment plans are eroding away, and many will find it difficult to tread water until more decisive action at the Autumn Budget.
“While a ‘no deal’ would wreak certain havoc for many firms, we must also avoid being lulled into thinking an exit deal alone is a substitute for providing a real economic impetus that lowers costs, spurs productivity growth, and supports businesses as they adjust to Brexit, whatever its form. Indeed, the fact that the OBR lowered its forecast for GDP growth this year – based on a smooth exit from the EU – highlights just how much the economy is set to fall below its potential, even in a relatively benign scenario.”
We’ll tell you what’s true. You can form your own view.
At The Independent, no one tells us what to write. That’s why, in an era of political lies and Brexit bias, more readers are turning to an independent source. Subscribe from just 15p a day for extra exclusives, events and ebooks – all with no ads.