PHILIP Hammond has warned a No Deal Brexit will force him to rip up the budget, and with it a promised end to austerity, in order to address the economic shock.

The Chancellor said his tax and spending plans assumed the UK would strike a free trade deal with Europe, and if that didn’t happen there would be a new, emergency budget.

He said the UK would have to “strike out in a new direction” and that the restructuring of the economy would involve a “fairly major transition”.

His Labour shadow, John McDonnell, said he was “shocked”, and claimed Mr Hammond’s answer to No Deal was to turn the UK into a Singapore-style low-regulation tax haven.

Mr Hammond, a key Remain supporter in the cabinet, was speaking on the eve of his third budget, and the last before the UK is due to leave the European Union next spring.

In an interview with Sky’s Sophy Ridge on Sunday, he said that, despite the current impasse with Brussels over Brexit and the Irish border, his budget was based on there being a deal.

While he thought a chaotic No Deal remained “extremely unlikely”, he added: “If we were to find ourselves in that situation then we would need to take a different approach to the future of Britain’s economy. We would need to look at a different strategy and, frankly, we’d need to have a new budget that set out a different strategy for the future.”

He said that if there was No Deal, the UK would see how markets and businesses and consumers responded, then 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”.

On BBC 1’s Andrew Marr Show, Mr Hammond later said No Deal would be a jolt to business.

He said: “If our businesses are no longer able to trade with European Union neighbours, if their supply chains are cut off, they will have to find different markets and different ways of doing business. The economy will change. It will have to restructure itself over a period of time and that will be a fairly major transition.”

Despite Theresa May saying in her Tory conference speech earlier this month that austerity “is over”, the Chancellor downplayed an immediate end to spending restraint.

He said the main change would be in next year’s medium-term spending review, though he did hint at extra cash today for the troubled Universal Credit benefit reforms.

Mr McDonnell said he was “really shocked” by the Chancellor’s remarks on No Deal.

He said: “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.

“We’ve got to ensure that there is a deal, and the best way of doing that is Theresa May negotiating a proper deal that protects jobs and the economy.

“If she can’t do that she should step to one side because there’s too much at risk… let Labour get on with the negotiations or have a general election and let the people decide.”

Brexiter Tory MP Jacob Rees-Mogg dismissed the Chancellor’s warning as “Remoanerism”, and said the country should embrace a new economic model now instead of waiting.

He said: “The Treasury has been the bastion of Remoanerism since the referendum and indeed before. It came out with all these lunatic forecasts... I think there is an element within the Treasury that is still grumpy about Brexit, and that’s a pity.”

Among the measures Mr Hammond is expected to announce this afternoon are:

* an extra £2bn a year in real terms for mental health south of the border by 2023/24

* a £28.8bn major roads fund for major routes, plus £420m for local pothole repairs

* a £1.5bn package to help the high street, including £900m in business rates relief

He is also expected to find extra cash for defence, social care, and rural broadband.

Much of the extra spending on England is expected to generate so-called ‘Barnett consequentials’ for Scotland.

There are also likely to be changes on the income-raising side of the ledger.

Mr Hammond has his sights on the “eye-wateringly expensive” tax relief on pensions enjoyed by middle and high earners, and has raised the prospect of a digital tax on internet giants such as Facebook, Google and Amazon.

Derek Mackay called for a “meaningful uplift” in money for public services and the halting of the Universal Credit roll-out while its problems were fixed.

The SNP Finance Secretary told the BBC’s Sunday Politics Scotland: “The Prime Minister said austerity is going to end and I’m saying to the UK Government: show me the money.”

The Scottish Tories demanded the SNP put extra money coming to Scotland under the Barnett formula because of English health spending into the Scottish NHS.

But Mr Mackay said he would need to see if the Barnett consequentials resulted in a net increase in Holyrood’s budget, or were offset by cuts elsewhere.

Shadow Scottish Secretary Lesley Laird said unless Mr Hammond ended austerity it would expose the Prime Minister’s conference speech “a cruel lie” to families in hardship.

She said: “Thousands of people across Scotland will be looking at the Budget today with hope after Theresa May’s vow to end austerity earlier this month.

“If the Chancellor fails to make good on his government’s promise then the Prime Minister’s remarks will be exposed as a cruel lie to the most vulnerable people in our society.

“Labour has outlined five key policies for ending austerity in today’s Budget which will boost Scotland’s economy and protect the vital public services we all rely on.

“Mr Hammond must halt the botched national roll-out of Universal Credit immediately and implement Labour’s 10 emergency measures to alleviate the suffering of thousands who are already in receipt of it.

“The next Labour government will invest a transformational extra £70 billion in Scotland over a decade. The Chancellor must match that at the very least or it will be clear for all to see that only Labour can be trusted to deliver for Scotland.”

Scottish LibDem leader Willie Rennie called for an overhaul of inheritance tax, capital gains tax and pension tax relief, a freeze on whisky duty, and an end to the benefits freeze.

He added: “No Budget can compensate the country for the huge financial Brexit blackhole that the Conservatives are set on delivering. An exit from Brexit would be good for business, wages and jobs.”