Prepare for turbulence ahead, Hammond warns big business

Philip Hammond has pledged to borrow more and maintain EU funding after Brexit for projects that prove to be value for money as he warned of the possibility of “turbulence” ahead.

In a significant reset of economic policy, the chancellor yesterday consigned the fiscal rules of his predecessor, George Osborne, to the dustbin, promising a new framework to guide the public finances at the autumn statement, which would return them to surplus in the long term.

The chancellor used his speech to offer a new guarantee to continue payments of any multi-year EU grants secured by British businesses and organisations before withdrawal, provided they are judged to have passed a new test of national interest.

Meanwhile, he made a broad promise to “support” business after Brexit, but did not specify how. “When the process is over, we are ready to provide support to British businesses as they adjust to life outside the EU,” he said.

This could be seen as an offer to help companies such as Nissan, which has demanded extra financial support from government to offset the costs of Brexit. It also represents a potentially multi-billion pound offer to business at a time when the public finances are squeezed.

The chancellor underlined the point and warned that while the UK economy faces a “rollercoaster” ride over the coming two years, he was ready to take “whatever steps are necessary to protect this economy from turbulence”. He hinted that this could include tax cuts to stimulate economic activity, telling delegates that “fiscal policy may also have a role to play” alongside interest rate reductions to boost confidence.

Mr Hammond said that action was needed to increase productivity, invest in infrastructure and tackle the “dangerous” gap between London and the “left behind” regions of the UK, in order to ensure that withdrawal from the EU was not “the end of an era” but “the beginning of a new age”.

TREASURY PROMISES

  • The Treasury will offer a guarantee to bidders whose projects meet UK priorities and value-for-money criteria that if they secure multi-year EU funding before Brexit, those payments will be guaranteed after Britain has left the European Union
  • The Treasury will no longer target a surplus at the end of this parliament

He will also reveal new fiscal rules on November 23 in the autumn statement. Yesterday he vowed to eliminate the deficit “at the appropriate time”. The move will set him up for a clash with Liam Fox, the international trade secretary, who said last night that the chancellor should set a date to help “maintain the confidence of international investors”. Mr Hammond also pledged to borrow to invest in targeted infrastructure projects, a change from Mr Osborne, who fought the general election in 2015 rejecting Labour’s plan for similar investment.

In media interviews yesterday, Mr Hammond was asked about figures from the Institute for Fiscal Studies that suggested he could knock up to 4 per cent off Britain’s gross domestic product. He told the BBC Radio 4 Today programme that the central forecast remained of a negative impact on the UK economy from Brexit, but said that there was not going to be recession. “That’s not a one-off hit that’s going to take the economy into recession or anything like that. This is spread over a period of 15 years in most forecasters’ expectations. That’s the central prediction of economic forecasters and we have to take what they say seriously. That doesn’t mean we have to accept it.

“Our job is to try to head off those outcomes, but we can only head them off if we’re honest about the fact that they may be out there.”

PHILIP HAMMOND PLEDGED £220 MILLION OF SUPPORT TO TECH INNOVATION

  • £100 million to extend the biomedical catalyst fund to stimulate the transformation of revolutionary science into deliverable healthcare interventions
  • A further £120 million to nurture the tech transfer offices that put universities and entrepreneurs together to move the science from the lab to the factory

On immigration, he said that it would be “entirely a matter for the British people, the British parliament” to decide on rules for migrants’ entry into the UK.

Asked if this might mean visas for people travelling to and from the UK, he said: “No one wants to see British tourists going to Spain having to get a visa to go there. Most people in this country would think that would be absurd and that’s not the outcome we are looking for.

“It’s entirely for us to decide how we manage the control of our own border, and it’s entirely for us to decide what deals we do with other countries.

“We can assume that countries will seek reciprocity with us — if we want a certain arrangement for British people in France, we can expect that France will want the same arrangements for French people in relation to Britain.”