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Philip Hammond will present a Budget on Wednesday to protect Britain’s finances from a short-term Brexit shock and boost the sluggish growth rate, but the chancellor’s allies admit that some Conservative MPs are waiting for him to fail.

At Westminster there is a mood of pessimism among many Tory MPs who believe that Mr Hammond — seen as the cabinet’s principal advocate of a “soft” Brexit — will fail to transform the economy or the government’s fortunes.

Mr Hammond and Theresa May have clashed over housing policy in the run-up to the Budget, with the prime minister frustrated over his refusal to fund a housebuilding spree and over recent media performances.

Mr Hammond’s team admit the chancellor has felt penned in by worsening growth forecasts, the political constraints imposed by a tiny Commons majority and the willingness of Eurosceptic Tory MPs to seize on any mistake to try to oust him.

One ally of the chancellor said: “It feels like the walls have been going up around us.” Another said of the chancellor’s Tory critics: “They are waiting for him to fail, the pressure is extraordinary. It’s ludicrous to be honest.”

Mr Hammond will stick to his fiscal rules and use his limited room for manoeuvre to fund measures to boost housing, to help young people buy their first homes and to bolster Britain’s productive potential by spending on research, skills and infrastructure.

He has briefed loyal MPs on the Budget in the hope that they will defend the package but one government official admitted that the overall impression was of “incremental reforms”. “It’s fine — as far as it goes,” the official said.

The chancellor’s “balanced” package will include a £42m investment in teacher training and a £177m investment in maths teaching, a recognition of the need to raise the productivity of the future workforce.

The Treasury said the Budget would “ensure the economy is fit for the future by investing for the long term, while supporting families across the country today”. Public sector pay restraint and tough universal credit rules will be loosened.

But Mr Hammond, who recently chose “fiscal” as the most appropriate word to describe himself, has told colleagues he will not abandon borrowing rules adopted only a year ago in order to fund a big increase in public spending.

The chancellor says Brexit is casting a shadow over the economy and that markets would react negatively to any sense that he was losing his grip on the public finances. He has committed to running a deficit of less than 2 per cent of GDP by 2020-21.

Mr Hammond’s problem in his first set piece autumn Budget — now the central fiscal event of the year — will be proving that the often modest measures in his red box rise to the challenge of meeting the huge societal issues identified by Mrs May.

The prime minister has promised to tackle the “burning injustices” of society and to fix “the broken housing market”, while a “senior government source” last month appeared to be setting Mr Hammond up for a fall in a briefing to the Sunday Times.

“This budget has got to be big, it’s got to be powerful, it’s got to be revolutionary,” the person said. “Saying it’s got to be brave is really understating it. People are very clear that this is basically the last chance.”

Nadine Dorries, who last month argued that Mr Hammond should quit because of what she called “sabotage” over Brexit, said she would reserve judgment until after the Budget speech. “But he does need to pull a big rabbit out of the hat tomorrow.”

Higher than expected public sector borrowing in October will not derail better public finances this year but the Office for Budget Responsibility’s new assessment of lower productivity growth will force the government to borrow more than it hoped towards the end of the decade and beyond.

Economists expect a significant cut in the government’s £26bn margin for error against its fiscal rules in 2020-21, which will grow over time, highlighting the lack of sunlit uplands in the economic forecast.

Paul Johnson, director of the Institute for Fiscal Studies said: “Mr Hammond’s challenge is that we’ve had the worst decade of income, earnings and productivity growth and he remains constrained by the economic and fiscal situation amid a mass of uncertainty caused by Brexit”.

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