Philip Hammond's first test is of little interest

Written by Tom Smithard on 4 August 2016 in Diary

The new chancellor provided a typically low-key response to the Bank of England's record-breaking announcement.

Philip Hammond has a reputation as a low-key politician with a slightly dry personality who can be trusted as a safe pair of hands – a particularly useful skill-set as he navigates the UK away from a Brexit-inspired slowdown.

The new chancellor is cast in the same mould as his predecessor-bar-one, Alistair Darling, who also followed on from an all-powerful and media-savvy treasury chief willing to roam over other policy briefs while coveting a move next door.

Hammond’s first test today – responding to the Bank of England decision to cut interest rates to a record low of 0.25% – may not quite be at the same level as Darling’s, who had to deal with the enveloping maelstrom of a global financial crisis, but he will be hoping his understated approach will inspire greater confidence in the markets.

The measures launched this afternoon by Bank of England chief Mark Carney are in fact strikingly similar in scope to those launched in 2008 as banks collapsed on both sides of the Atlantic, if not in scale.

A cut in the base rate is combined with a £60bn increase in quantitative easing, a £10bn purchase of corporate debt and a long-term scheme to support the banks.

In a further move to generate confidence in the economy in the light of the Brexit vote, the Bank of England cut growth predictions but stopped short of forecasting a recession.

Growth in 2017 is now forecast at 0.8%, down from a previous forecast of 2.3% in May, with referendum-related expectations of higher unemployment, falling house prices and shrinking business investment.

In light of that, Hammond will have his work cut out as he prepares an autumn statement that “resets” Osborne’s fiscal policy to deliver Theresa May’s new industrial strategy, growing Britain “from rural areas to our great cities”.

Today he welcomed the decision of the Bank’s monetary policy committee, saying:

“The vote to leave the EU has created a period of uncertainty, which will be followed by a period of adjustment as the shape of our new relationship with the EU becomes clear and the economy responds to that. It's right that monetary policy is used to support the economy through this period of adjustment … As recent figures on jobs and growth have shown, we enter this period of adjustment from a position of economic strength. And the governor and I have the tools we need to support the economy as we begin this new chapter and address the challenges ahead." 

Having had experience heading up the foreign office, defence and transport over the past six years without ever courting scandal, Hammond’s reputation as a safe pair of hands is well established.

Known by some colleagues as ‘Spreadsheet Phil’, the chancellor has one key difference from recent predecessors. He is worth an estimated £8.2m after a previous career in business – in the medical equipment and property development industries. Osborne’s wealth is inherited while Darling worked in law and Gordon Brown as a journalist before getting elected.

Picture by: Kirsty Wigglesworth/AP/Press Association Images

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