Tory leadership: Philip Hammond in warning over no-deal budget 'hole'

Boris Johnson and Jeremy Hunt have been warned by the Chancellor that there will be no extra cash to meet their spending pledges in the event of a no-deal Brexit.

Chancellor Philip Hammond has warned both Tory leadership contenders over their spending plans

Philip Hammond told the Tory leadership contenders that the "fiscal firepower" that has been stocked up will be needed entirely to counteract the effects of departing without a deal.

Both candidates have made costly pledges as they vie to replace Theresa May as prime minister.

"If not, it will all be needed to plug the hole a no-deal Brexit will make in the public finances."

Foreign Secretary Mr Hunt and frontrunner Mr Johnson both say they are prepared to take the UK out of the EU without a deal.

Mr Johnson has taken a more hardline approach, saying the exit must happen by the Halloween deadline "do or die", but Mr Hunt said he would ask for a delay if a deal was in sight.

Mr Hammond's warning comes after Mr Hunt prepared to announce a £6 billion war chest to handle a no-deal Brexit.

Mr Hunt has also pledged cuts to corporation tax at an estimated cost of £13 billion per year in the short term and an increase in defence spending to cost an additional £15 billion in four years.

Mr Johnson has signalled he would be prepared to increase borrowing to fund infrastructure projects.

He has also pledged to give a tax cut to earners on more than £50,000, a move which was criticised as benefiting the top 10% of earners and costing a suggested £9 billion.

However, the frontrunner in the Tory leadership race refused to commit to pay rises for public sector workers despite his cabinet backer Matt Hancock saying the leadership frontrunner would show them "some love".

Speaking during a visit to a Kent garden centre, Mr Johnson said: "I certainly think that you need to have decent pay in the public sector."

Pressed several times on Mr Hancock's comments, he declined to make a concrete pledge.

"It's very important when you're in charge of a great public service, whether it's the police or transport, you've got to make sure - or local government - you've got to make sure that you understand their cares and their needs.

"And the only way to get the reform that you sometimes need in public services is to be their champion."