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Philip Hammond was accused of being “out of touch” on Sunday after the chancellor asserted that there were “no unemployed people” in Britain, just days before his autumn Budget.

The chancellor has long been viewed by prime minister Theresa May’s inner circle as having a “tin ear” on politics, and his mis-step came as he faces increasing pressure to stabilise and re-energise the Conservative government in Wednesday’s Budget.

Mr Hammond said on Sunday that his Budget would be “balanced” and deliver fiscal discipline alongside investment in housing, research and public services, adding: “We are not deaf.”

But Mrs May’s team was left perplexed when Mr Hammond told the BBC’s Andrew Marr Show that Britain was a “jobs factory” that had adapted extremely well in responding to technological change.

He said there had been predictions of mass unemployment when the personal computer rendered a million shorthand typists obsolete, saying: “Where are all these unemployed people? There are no unemployed people.”

Mr Hammond later told ITV’s Peston on Sunday that he had not forgotten the 1.42m people unemployed in Britain and that he had simply been making the point that Britain had “record low levels of unemployment”.

But John McDonnell, the shadow chancellor, said Mr Hammond was “completely out of touch”.

Relations between Mr Hammond and Mrs May are icy. The prime minister had intended to sack the chancellor after the snap general election in June but was unable to carry out her plan after the Conservatives lost their parliamentary majority.

More recently, the two have been at odds in the run-up to this week’s Budget, with Mr Hammond refusing to sanction a massive increase in public spending on housing and Mrs May stopping him from loosening planning restrictions for building on protected sites.

Last week, Nick Timothy, Mrs May’s former co-chief of staff, said the chancellor lacked “a burning desire to change people’s lives for the better”.

But the chancellor said on Sunday that he had been listening to predictions of his political demise for months and insisted that his Budget would help to improve the country.

“Nobody would be in politics if they didn’t have a desire to change people’s lives for the better,” he said.

Mr Hammond said he wanted to help young people get on to the housing ladder and that the Budget would attempt to create conditions where housing completions of 300,000 a year would be “sustainable”. The latest official figures, published on Thursday, showed 217,000 houses were built in 2016/17, up from 186,000 the previous year.

£5bn

Predicted additional funding for housing likely to be announced in the Budget

But the Budget is unlikely to represent a “game changing” moment for housing sought by Mrs May and will not deliver the £50bn government investment demanded by Sajid Javid, the UK communities secretary. Some people close to the government have indicated there will be a £5bn package of additional funding for housing.

Mr Hammond said on Sunday that his plan would include “a raft of measures”, including more training in the construction sector, the building of more local roads and a clean-up of contaminated sites.

“Simply pouring money into the housing market will make the problem worse if we don’t tackle the real supply shortages,” he said.

£50bn

Investment in housing demanded by Sajid Javid

The chancellor is also reportedly eyeing a cut in stamp duty for first-time buyers, which is seen in the Treasury as a crucial measure to start rebuilding support for the Tories among younger voters.

Mr Hammond also admitted at the weekend that the NHS was “under pressure” and that Britain’s public servants were operating under “difficult circumstances”, but he remained adamant that any increases in public sector pay must satisfy the government’s fiscal rules.

The chancellor’s allies say his principal objective on Wednesday will be to deliver a Budget that builds confidence in Britain and its economic policy, and avoids the fate of recent financial statements that have rapidly unravelled.

In July 2015, George Osborne, Mr Hammond’s predecessor, announced plans to cut £4.4bn in tax credits for working families but had to scrap the proposals months later after MPs and peers objected.

In March 2016, Mr Osborne backtracked on £1bn a year of cuts to disability benefits, known as personal independence payments, following the resignation of the welfare secretary, Iain Duncan Smith.

And in March of this year, Mr Hammond himself took only a week to abandon a proposal to raise National Insurance contributions for some self-employed workers.

The chancellor acknowledged on Sunday that there were people waiting for him to fail. “If you stick your head above the parapet, there will be people who take potshots at it,” he told ITV.

Asked if he would still be in the job in a few weeks’ time, he said: “That’s not for me to decide, of course.

“I spent most of the year listening to predictions of my demise. In the meantime I’m just getting on with the job.”

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