Philip Hammond will face a fight for his political life at this week’s budget after he was accused of being hopelessly out of touch for claiming there were “no unemployed people” in the UK.
The chancellor found himself at the centre of a damaging row over the gaffe as he prepares for a difficult budget on Wednesday at a time of worsening economic forecasts and uncertain Brexit negotiations.
Hammond insisted he had been making a point that new technologies do not always lead to job losses and promised he had not forgotten the 1.4 million unemployed people in the UK.
But the accusations he is detached from economic reality came at a bad time for the chancellor: he is under pressure to help Theresa May turn the Conservative party’s fortunes around with eye-catching policies aimed at younger voters.
Hammond has tried to focus on his promises of higher investment in science and technology, such as driverless cars, better transport links and a major housebuilding programme. However, Conservative MPs are likely to be disappointed at the cautious nature of the proposals, even though any controversial measures would be difficult to pass in the House of Commons with May’s tiny DUP-backed majority.
The row over Hammond’s comments on unemployment is only expected to add to pressure on May from Tory MPs to move him from his post after the budget. He has already come under attack from senior Brexit supporters in the Conservative party who believe he is not sufficiently committed to leaving the EU.
Asked by ITV’s Peston on Sunday whether he would still be in his job after the budget, Hammond ducked the question but said he had spent the last year listening to predictions of his own demise that had not come true.
Hammond was accused this week by Nick Timothy, the prime minister’s former chief of staff, of being politically tone deaf and lacking a burning desire to change people’s lives for the better. Hammond defended himself, saying: “Nobody would be in politics if they didn’t have a desire to change people’s lives for the better.”
However, his comments about the lack of unemployed people immediately led to charges that he is too removed from people’s lives. Labour swiftly launched an attack video targeting him on social media.
Hammond made the error as he tried to downplay worries about new technologies, such as driverless cars, causing unemployment. “It’s a simple choice: either we embrace change or we try to hide from change and we allow ourselves to slip behind,” he told the BBC’s Andrew Marr Show. “I remember 20 years ago we were worried about what would happen to a million shorthand typists in Britain as the personal computer took over. Nobody has a shorthand typist these days. Where are all these unemployed people? There are no unemployed people. We have created 3.5m jobs since 2010. This economy has become a jobs factory.”
In fact, there are about 1.42 million unemployed people in the UK and many more who are underemployed and would like more hours.
John McDonnell, the shadow chancellor, said: “The chancellor thinks there are no unemployed people in this country. Completely out of touch.”
Vince Cable, the Liberal Democrat leader, said: “It underlines just how out of touch the Conservatives are with millions of Britons who are living on the breadline.”
Hammond was later pulled up on his comments. He did not apologise but stressed he had been talking about the government’s record of creating jobs. He told Robert Peston on ITV: “Of course I didn’t mean [there is no unemployment]. There’s 1.4 million unemployed people in this country and that’s 1.4 million too many. But we have record low levels of unemployment. It hasn’t been this low since the 1970s.
“But the point I was making to your former colleague Andrew Marr is that previous waves of technological change have not resulted in millions of people being long-term unemployed. They have been reabsorbed into the workforce.”
A Treasury spokeswoman later added: “Unemployment is at a 40-year low. But as the chancellor made clear, there are still 1.4 million unemployed people in this country and that’s 1.4 million too many. By embracing and leading the next technological revolution we can lower that number still, and British workers can take up the higher skilled, higher paid jobs of tomorrow.”
At the budget on Wednesday, economists will be looking for signs that Hammond is getting to grips with not just the housing crisis but Britain’s productivity problem, slow growth and stagnant wages below inflation.
A report by the Centre for Economic Performance published on Monday says households are already more than £800 a year worse off as a result of the vote for Brexit. It claims the average household is paying £404 a year extra due to price inflation and the average worker has lost £448, the equivalent of one week’s pay, due to a stagnation in wage growth.
According to the report, the largest inflationary effects have been on product groups with high imports. These include bread and cereals; milk, cheese and eggs; coffee, tea and cocoa; beer and wine; furniture and furnishings; and jewellery, clocks and watches.
