There’s big drama in the House of Commons right now -- MPs have narrowly voted for an amendment rejecting the idea of Britain leaving the EU without a deal, by just four votes.

That’s a fresh blow to Theresa May, and possibly makes a Brexit extension even more likely.

It’s also creating quite a lot of chaos in Westminster, as the government’s plans take another hit... although this vote doesn’t, on its own, prevent Britain crashing out on teh 29th.

Andy Sparrow has all the action here:

Professor Costas Milas of Liverpool University reckons the Chancellor may actually have more flexibility to spend and borrow than the OBR has estimated.

The OBR predicts annual GDP growth rates of 1.2% in 2019, 1.4% in 2020 and 1.6% in 2021. Contrast this with the Bank of England’s predictions (made only last month by the Bank’s February 2019 Inflation Report) of 1.2% in 2019, 1.5% in 2020 and 1.9% in 2021. Why is OBR so much more pessimistic than the Bank of England for 2020 and 2021?

In fact, under the assumption of lower Brexit-related uncertainty (let’s call this the ‘deal dividend effect’) the Bank predicts even higher GDP growth rates of 2.2% in 2020 and 2.3% in 2021.

If the Bank is correct and the OBR is wrong in its assessment, then the Chancellor appears to be underestimating the benefits of a deal dividend at a very critical time with further parliamentary voting taking place both today and tomorrow. Alternatively, the cynical reader might conclude that the OBR has already taken into account the adverse (‘sledgehammer’) effects of the tariffs announced today...

This char shows how the UK’s government’s borrowing requirements have fallen, giving more headroom to borrow within the fiscal rules.

Melanie Baker, senior economist at Royal London Asset Management, explains how this boosts the war chest that can be opened if no-deal Brexit is avoided.

That largely reflects projections of higher income tax receipts (higher earnings growth assumptions) and lower debt interest spending (reflecting lower market expectations of rate rises). The amount of ‘headroom’ in the fiscal numbers therefore rose (i.e. the extra net spending the Chancellor could engage in before breaking the fiscal mandate) from £15.4bn to £26.6bn.

The OBR did warn though that, in the event smooth Brexit is achieved, market interest rates and debt interest payment projections may rise again, i.e. reducing that headroom.

Extending Article 50 by a few months would have a damaging impact on the UK’s economy, and erode the chancellor’s headroom to borrow and spend more.

So argues Danielle Haralambous, UK analyst at The Economist Intelligence Unit:

Even though the OBR has slashed its economic growth forecast for 2019, there’s been a marked improvement in the UK’s fiscal ratios, creating more headroom for the Chancellor to loosen fiscal policy if required and allowing him to stick to his declaration of an “end to austerity”. However, there’s a big cloud hanging over these projections, as they all are all conditional on a smooth end-March Brexit transition that parliament pretty much ruled out last night.

Mr Hammond expressed a hope that the negotiated Brexit deal will still be passed in the coming weeks, but that is unrealistic. We don’t expect a “no deal” scenario, but an extension of Article 50 that will compound the current uncertainty associated with Brexit and probably mean a deterioration in the forecasts and slightly less fiscal room for manoeuvre by the Autumn Budget.

My colleague Aditya Chakrabortty says Philip Hammond’s spring statement had one large flaw -- a massive vacuum where the chancellor should have put some new policies.

Ah, but what about Brexit uncertainty pinning Hammond in? Not good enough....

You would not have guessed from listening to him that the economy is on the brink of recession, that local councils are going bust, that schools across the land are sending parents begging letters for cash. Analysis by the TUC shows that by 2024, spending on public services will still be £500 lower per person than it was in 2009.

Hammond claims that all he needs is a deal on Brexit to open the sluice gates and get spending, but there is no logical connection between the two. The UK has its own currency, and interest rates are barely off the floor. Now is the time for a government to spend on public housing, on schools and on a welfare system that doesn’t treat claimants as scammers and idlers. Sadly, it won’t be this government.

Here are some of our Spring Statement news stories:

Philip Hammond made much play of his Brexit war chest - the £26bn of extra spending that will be possible within the government’s fiscal rules, and the boost to business confidence.

But it’s too late to avoid damage to the economy, says Michael Izza, chief executive of ICAEW (Institute of Chartered Accountants).

“As to be expected after last night’s vote, the Chancellor’s statement provided little sunshine to cut through the Brexit fog.

“If there is a managed deal, we can expect a significant Brexit dividend with businesses investing, consumers more confident and an uptick in the market. However, much damage has already been done as a result of the ongoing uncertainty. Businesses have taken decisions to relocate assets and cancel planned investments, which are unlikely to reversed even if a deal is reached.

Adam Jackson, director of public affairs at Grant Thornton UK LLP, says Philip Hammond has hinted at the likely priorities of this summer’s spending review (assuming’s he’s still chancellor at that stage)

• taking on ‘digital giants’ (such as Amazon, Google, Facebook) with an investigation into competition in digital advertising and confirmation that the UK will press ahead with a digital services tax despite it being dropped as an EU-wide proposal (it has not been dropped by a number of EU countries such as France, Spain and Italy)
• confirming that housing investment and Northern Powerhouse transport infrastructure remains a priority
• measures to tackle climate change, including mandating zero fossil fuels in all new build homes from 2025

Jackson adds:

“These felt like placeholders; a possible government programme if the UK ever completes the interminable current phase of Brexit decisions.

The Treasury says the spring statement offered several new spending and policy commitments for Scotland, which included a £65m share of the £260m on offer in the new Borderlands growth deal which will straddle the English and Scottish border.

Coincidentally boosting the electoral fortunes of the Conservative MPs who have seats on either side of the border, the Treasury said it meant that regional partnership would be getting a total of £362m.

Edinburgh University will get £79m for a new “Archer 2” supercomputer, “providing researchers with a fivefold increase over the current computing capacity, paving the way for new discoveries in pharmaceuticals, climate science and aerospace.”

There would also be reviews of whether the aggregates levy, which is now devolved to Scotland, benefits devolved areas sufficiently; reforms to how VAT is claimed back by government departments after an embarrassing row over a VAT bill for Police Scotland; and efforts to boost oil and gas decommissioning industries.

Torsten Bell, Director of the Resolution Foundation, says the government has the firepower to end austerity, if it wants to:

“In a speech light on policy, the Chancellor used a £30bn windfall from the OBR to promise sunny uplands if Parliament delivers a smooth Brexit in the months ahead.

“The Chancellor’s £26bn of fiscal firepower is more than enough to bring austerity to an end in the Spending Review later this year. This marks a major shift as the debate in British politics moves to focusing on how much more we should spend, rather than how deeply to cut.

“But despite an improvements to the public finances driven in part by particularly fast earnings growth for high earners, austerity will continue for just about managing families, who face a £1.8 billion hit from the benefit freeze in just three weeks’ time.”

This chart, from the Office for Budget Responsibility’s new report, outlines how future interest tax receipts have strengthened while debt repayment costs have fallen.

The spring statement is being criticised for not providing more help to fight poverty and support poorer families.

Here’s a video clip of the chancellor announcing that fossil fuel heating systems will be banned by 2025, from new homes.

And here’s a reminder that his predecessor tore up plans to make homes carbon neutral, back in 2015.

Back in parliament, Chuka Umunna MP has pointed out that Britain’s economy had been expected to grow at over 2% per year, before the 2016 referendum.

Today’s growth forecasts - just 1.2% this year, picking up to 1.6% in 2021 - are sluggish and unimpressive, Umunna points out.

Philip Hammond tells MPs (well, those who have hung around in the chamber) that the OBR’s recent downgrade of likely UK productivity growth is to blame.

Hammond is being criticised for not ending the freeze on benefits (which means the will continue to shrink in real terms).

Heidi Allen MP, who quit the Conservatives to join The Independent Group, says it makes a mockery of ‘compassionate’ Conservatism.

Alison Garnham, chief executive of Child Poverty Action Group, says the government is failing the poorest.

“Struggling families are desperate for an end to the freeze on working age benefits, but this Spring Statement leaves them out in the cold once again. Already the freeze has saved the Treasury more than was ever intended, so there can be no ongoing justification for these ‘stealth cuts’ that mean that the poorest in society have borne the heaviest burden from paying off the deficit.

“Today, the Chancellor could have sent a lifeline to low-income families. That he didn’t is evidence of Ministers’ refusal to confront the reality that families have been left with too little money to live on after three long years of stagnant incomes and rising prices. Funding sanitary products for girls in schools may help with one small area of expenditure, but this will have a minimal impact on poverty overall. It leaves in tatters the prime minister’s claim that austerity is over.

Hammond’s call for MPs to build a ‘consensus’ to prevent a no-deal Brexit has caused a stir at Westminster.

Is he suggesting giving up on Theresa May’s deal, in favour of a new plan that could be backed by Labour?

Labour’s shadow Chancellor, John McDonnell, responded to the spring statement by blasting the government’s record:

The Chancellor has the nerve to tell those who have suffered most at the hands of his Government, that their suffering was necessary.

If austerity wasn’t ideological, why has money been found for tax cuts for big corporations while vital public services have been starved of funding?

Austerity was never a necessity, it was always a political choice.

So when the Chancellor stands there and says that the end of austerity is in sight, talks of a plan for a brighter future – how can anyone who has lived through the last nine years believe him?

This is a Government that has demonstrated a chilling ability to completely disregard the suffering they have caused.

To talk of changing direction after nine years in office is not only impossible to believe, it’s also much too late.

Too late for the thousands who have died while waiting for a decision on their Personal Independence Payments. Too late for families who have lost their home due to cuts in housing benefit. Too late for young people losing their lives to knife crime after youth clubs have shut down and police numbers fallen, whatever he has been forced into announcing today.

He also urged Hammond to help remove the threat of no deal:

Of course Brexit looms large over everything we discuss.

Even today, the Chancellor has tried to use the bribe of a deal double dividend or threat of postponing the spending review to cajole MPs into voting for the government’s deal.

Publication of the tariffs this morning is clearly part of this strategy.

This is a calamitous strategy. It is forcing people into intransigent corners.

What we need now is the Chancellor today to commit to vote to take no deal off the table.

Then to join me in discussing the options available, including Labour’s deal proposal and yes, if it requires it, taking any deal back to the public.

Yael Selfin, chief economist at KPMG, has bad news for the government -- it doesn’t currently have enough firepower to handle a no-deal Brexit.

So it would have to tear up its borrowing and spending plans, if Britain crashes out without a deal.

Some reaction from Hammond’s side of the House:

But opposition MPs are predictably less impressed:

Another rumour is confirmed, as Hammond announces £100m of extra funding to tackle knife crime.

The money will go to violence reduction units, and for more police overtime. That follows heavy lobbying from the Home Secretary Sajid Javid.

Hammond has confirmed that he is taking action on period poverty.

The Treasury will fund the provision of free sanitary products in schools from the next school year [as we reported last weekend].

On the environment, Philip Hammond says fresh standards will be introduced for new housing, to mandate the end of fossil fuel heating by 2025.

He also announces a new review into the link between biodiversity and growth.

Plus, the government will designate a further 445,000 square kilometres of ocean around Ascension Island as a Marine protected area.

On housing, Hammond announce a £3bn “affordable homes guarantee” scheme.

The chancellor also announces £45m to the European Bioinformatics Institute for genomics research.

There’s also £81m in a new Extreme Photonics Centre in Oxfordshire to develop a new types of laser. “Cutting edge technology”, grins the chancellor (whose gags haven’t been up to their usual standard)

Hammond announces £79m for Archer 2, a new supercomputer based at the University of Edinburgh, which is five times faster than previous models.

Capable of 10,000 trillion calculations per second, hopefully it’s fast enough to solve the backstop issue, he jokes (this is no time for puns, chancellor)

Hammond says PhD level roles will be eliminated completely from visa caps - as part of a push to stimulate research and development in the UK.

The government will, as expected, open a consultation on how to replace PFI contracts.

Hammond also announces a review of low pay in Britain

Philip Hammond’s Brexit War Chest has grown to £26.6bn, up from around £15bn, thanks to the lower borrowing forecast by the OBR.

Hammond announces £260m of funding for the Borderlands region (areas in Southern Scotland and the North of England).

Hammond says he wants Britain to embrace the technology of the future, so it can “slay the twin demons of low productivity and low wages”.

The upcoming spending review will focus spending on raising productivity, he adds.

Leaving Brexit without a deal would deliver a significant short-to-medium term hit to the productive capacity of the UK economy, the chancellor warns.

Hammond also says it is “just wrong” to think there is a simple way of coping with the consequences of no deal.

Any fiscal and monetary response would have to be carefully calibrated so as to not simply cause inflation, he explains.

Hammond also warns that the progress in repairing the UK economy will be at risk if it cannot agree a “smooth and orderly” exit from the EU.

On borrowing, the 2018-19 deficit will be 1.1% of GDP, Hammond says, down from the 1.2% expected in the October budget.

Hammond says the UK will create another 600,00 new jobs by 2023.

The OBR has also revised its wage growth up, to at least 3% each year.

The chancellor has tweeted.... saying he’ll make announcements on infrastructure, technology, housing, skills, and green energy today.

Chancellor love to produce a crowd-pleasing surprise or two on these occasions. Brexit uncertainty, though, means any rabbits will probably stay firmly inside Hammond’s hat.

We may hear about the ‘Brexit dividend’ today, but how much do taxpayers actually hand to the EU?

A new website lets you find out -- enter your salary, and it calculates how much of your income tax heads to Brussels. Spoiler alert, it might be less than you think.....

[Reminder: other levies, such as corporation tax, also help fund the UK’s bill for EU membership]

Prime Minister’s Questions is underway now. Our Politics Live blog is tracking all the action:

Philip Hammond told the cabinet this morning that the spring statement will set out measures to support an open and competitive economy, according to Theresa May’s spokesman (via Reuters).

Hammond also said it will confirm the resilience of the UK economy, and the progress made “repairing the public finances”....

Philip Hammond has emerged from Number 11 Downing Street, and headed to the House of Commons to deliver the spring statement (after Prime Minister’s Questions).

As it’s not the budget, we didn’t get a photoshoot with the traditional red box. Just a polite smile for the cameras.

Bloomberg Economics have calculated that the chancellor’s war chest - money set aside for a no-deal Brexit - has swelled to over £20bn.

That’s up from £15bn in last autumn’s budget, thanks to strong tax receipts in January. If Britain leaves the EU under the withdrawal agreement, it could be spent elsewhere.

Bloomberg’s Jess Shankleman explains:

U.K. Chancellor of the Exchequer Philip Hammond could next week offer the country an extra 5 billion pounds ($7 billion) to end austerity, but only if Parliament backs a Brexit deal with the European Union.

Hammond is expected to receive the windfall to his Brexit war chest when he presents his Spring Statement on Wednesday. He says backing Prime Minister Theresa May’s deal would release extra cash for public services that’s currently held in reserve to mitigate the fallout from a no-deal split.

Alison Thewliss, SNP Treasury spokesperson, says Philip Hammond should announce an emergency budget today, to protect the UK from Brexit confusion.

I fear such an emergency fiscal event might be needed if Britain crashes out on the 29th March. In the meantime, Hammond will probably keep his powder dry (while hinting at a spending boost if Brexit goes more smoothly).

Once upon a time, the Conservative party promised to eliminate Britain’s budget deficit by 2015. They failed (of course), and are now aiming to wipe it out by the middle of the next decade.

But we have seen progress on cutting government borrowing. Last October, the OBR estimated that net borrowing could drop to £25.5bn for 2018-2019, down from £153.1bn in 2009-10 after the financial crisis.

As this chart from RBC Capital Markets shows, Britain’s net borrowing requirement are on track for their lowest level since 2002-03.

You could argue that this is prudent management of the economy (at least compared to the handling of Brexit). But you could also argue that there is freedom to borrow more to invest, and to tackle the public sector funding crisis.

No arguing with this statement, from our parliamentary sketch writer.

Rupert Harrison of investment giant Blackrock (and a former chief of staff for George Osborne) says the spring statement forecasts don’t mean very much.

Harrison told Sky News that they’re effectively ‘fantasy forecasts’, due to Brexit uncertainty.

If we do get a no-deal Brexit, Philip Hammond will be spending a lot more money on emergency measures.

If we get some lifting of the uncertainty, I think there will be more money for public services.

Claire Walker, co-executive policy director at the British Chamber of Commerce, says there are worrying signs in the economy. Brexit has already driven business investment down, so Hammond needs to help.

This is an opportunity to send a strong and supportive message to businesses at this very tricky time, even though there’s a limit to what he can do.

Although Hammond’s hands are rather tied, MPs are still hoping to hear some good news in the spring statement.

Labour’s Alison McGovern says the chancellor must do more to tackle the problems with universal credit:

At the budget, the Chancellor made a big show of accepting changes to the work allowances in universal credit that he argued would help address some of the Osborne-era cuts. In essence, this was just making the cut somewhat less punitive. Hammond has some way to go if he is to make sure that no one is worse off under the new system.

The two-child policy remains in place, for example, and we still haven’t had a vote on managed migration. Given that this is allegedly ‘not a fiscal event’, we can assume there is not much hope.

Her colleague Marsha de Cordova has also lobbied the Treasury to help severely disabled people who have lost out under UC.

Liberal Democrat MP Layla Moran wants to see fresh education funding (but isn’t holding her breath).

Conservative Guy Opperman would like to see more funding for the Borderlands (the region covering Southern Scotland and Northern England), after the Scottish Government’s pledged £85m overnight.

The Financial Times says Philip Hammond will launch a consultation into new ways to fund Britain’s infrastructure.

This follows Hammond’s decision to end the discredited PFI scheme in last October’s Budget. That creates a question of how the government can team up with the private sector to pay for major project, such as new hospitals and roads.

This will show that Hammond’s looking to the future. However, we already know that business investment has been hit by Brexit - major companies will be reluctant to take on potentially risky contracts until they have clarity over the UK’s future.

Philip Hammond is expected to take action on another important issue - period poverty.

Following pressure from campaigners, the chancellor will fund a scheme to make free sanitary products available from September.

My colleague Heather Stewart reported:

The chancellor will announce that he is asking Damian Hinds, the education secretary, and Penny Mordaunt, minister for women and equalities, to design a scheme that would be implemented in all secondary schools in England.

The scheme is expected to mirror one already in place in Scotland. It is understood that the Treasury has not yet carried out a detailed costing, but when the Scottish equivalent was announced last year, it was expected to cost £5m.

Full details of the funding will be announced in the spending review, expected later in the year – but Hammond is expected to make clear that the Treasury will fund it in full, and that availability will not be restricted, for example, to those students eligible for free school meals.

Labour deputy leader Tom Watson has welcomed Hammond’s plan to give consumers more control over their data held by Big Tech:

The Sun is reporting that Hammond will unveil a £100m funding package for the police, in response to the surge in knife crime.

They say most of the new cash will be spent on new violent crime units in seven worst affected UK areas -- London, the West Midlands, South Yorkshire, West Yorkshire, South Wales and Manchester.

The money will also help pay for police officers overtime.

The Sun says:

It is a major victory for Home Secretary Sajid Javid, who demanded the cash after the surge in knife killings this year.

Chancellor Philip Hammond had offered a new package of £50 million but Mr Javid held out for more.

Here’s our preview of what to expect today:

We’ll be tracking the spring statement here, while Politics Live focuses on Brexit: