Jeremy Corbyn-led coalition would put UK growth at risk, Philip Hammond warns

JOE MURPHY, NIcholas Cecil
Danger: Philip Hammond today warned an IMF meeting that a coalition would harm the economy: Getty Images

Chancellor Philip Hammond today claimed that Britain’s economic growth would be in danger if Jeremy Corbyn gains power in coalition with the Scottish National Party.

Speaking before a meeting of the International Monetary Fund in Washington, the senior Cabinet minister was expected to warn of the risks of an unstable coalition.

He was expected to claim that it would be a “grave risk” to the economy if the rival parties attempted to negotiate their way through the complexities of a Brexit deal.

However, fears of a Brexit economic slowdown — whoever is in No 10 — grew today as “really dire” retail sales showed the biggest fall for seven years in the three months to March as rising living costs ate into household spending.

The Office for National Statistics said sales fell by 1.4 per cent over the three-month period and sank well below expectations to drop by 1.8 per cent on the month to March.

Howard Archer, chief UK economist at IHS Markit, said: “This is a really dire retail sales performance — there is no other word for it.”

The Tory charge of a possible post-election coalition was fuelled by a report in the Labour-backing Mirror newspaper that quoted a “senior source” saying the party would cut a deal with other Opposition parties in a hung Parliament.

Labour leader: Jeremy Corbyn (PA)

“Our number one goal is to deny the Tories a majority, and that is not beyond the realms of imagination,” said the source. “If we can take say 40 seats off them — and we’re only talking overturning small majorities — then we can be somewhere near parity.

“And if the Lib Dems do well too, the Tories will be out of government. Who is going to be able to cut a deal (with the other parties) over Brexit, us or them?”

The claims flew in the face of Mr Corbyn’s insistence that he is not considering deals. Earlier this week he said that he would not enter into a formal coalition with the SNP.

His official spokesman said: “Labour is campaigning to win every seat. The only deal we will do is with the electorate, to be a government for the many not the few.”

Mr Corbyn stuck to his anti-austerity theme in his keynote address, accusing the Prime Minister of “breaking promises to 10-year-olds” this morning.

He used a speech in Bristol to say school overcrowding was on the increase, with 51,548 children in London alone being taught in classes of more than 30 last year.

He said: “Broken promises and failure — that’s the Conservative record on schools. Soaring class sizes mean children crammed into classrooms, with teachers frustrated that they can’t give them the attention and education their deserve.”

He added: “Theresa May should be ashamed that her government is breaking promises to 10-year-olds.”

The Conservatives have seized on shadow Chancellor John McDonnell’s proposal of bigger tax bills for people earning more than £70,000 to £80,000.

However, senior Labour MP Liam Byrne today suggested fiscal reforms should focus on wealth taxes rather than higher levies on income.

Mr Byrne, who as Chief Secretary to the Treasury famously left a note for the incoming coalition government in 2010 saying that “there’s no money”, told BBC radio: “The big picture in tax reform over the last 10 to 15 years has been the spectacular rise of the stock market since 2010, which is up about 40 per cent, the big increase in the property market, up about 25 per cent since 2010 — but the absence of wealth taxes. So if you look over the last 15 years, taxes on wealth have been pretty stable at about one, one and a half per cent of GDP.

“So despite the huge increase in asset prices ... wealth taxes are still an absolutely tiny fraction of the tax base and that is probably one of the biggest priorities for reform.”

However, a Labour source said: “Mr Byrne does not speak for the campaign, and he was clearly expressing only his personal views.”