UK’s new Chancellor of the Exchequer rules out emergency budget

London (AFP) – Britain’s new Chancellor of the Exchequer Philip Hammond on Thursday ruled out an emergency budget in response to economic turbulence triggered by the country’s vote in favour of exiting the European Union.

Hammond told media that a budget would not be submitted before the British autumn, adding that London’s key financial sector must retain access to the EU single market following Brexit.

Ahead of last month’s EU referendum, Hammond’s predecessor George Osborne suggested that an emergency budget would be required in the event of a Brexit vote because of the risk of recession.

However, he quickly ruled out such an event despite the country voting on June 23 to quit the bloc — and has now quit the government following Hammond’s appointment.

New Prime Minister Theresa May on Wednesday appointed Hammond to replace Osborne as chancellor of the exchequer.

Osborne was the architect of the past six years of British austerity and a close friend of former prime minister David Cameron, while both had campaigned for Britain to remain in the EU.

Hammond, who had been foreign minister in the outgoing government of Cameron, told various media outlets Thursday that there would be no emergency budget.

May “made clear we will do an Autumn Statement (budget) in the usual way, in the autumn, and we will look carefully over the summer at the situation”, Hammond told Sky News.

Speaking to the ITV channel, he said that financial markets “need to know we will do whatever is necessary to keep the economy on track”.

– Bank of England meeting –

Hammond added that he was meeting Thursday with Bank of England governor Mark Carney to assess Britain’s economy.

It comes as the BoE prepares to announce whether it will cut its main interest rate to a new record low level under 0.50 percent to curb the economic fallout from Brexit.

Following the referendum the pound slumped to a 31-year-low against the dollar, before rebounding slightly. While a weak pound helps exporters, it makes imports more expensive, which in turn can push up inflation.

But while a cut to the BoE’s interest rate may help to boost business investment, it risks further weakening the pound according to analysts. 

“There has been a chilling effect,” on markets since the referendum, Hammond told BBC radio Thursday.

“We have seen business investment decisions being paused because businesses now want to take stock, want to understand how we will take forward our renegotiation with the EU.”

Businesses “want to know on what terms they will be able to sell into the single market of the European Union once Britain is outside that Union”, he told the BBC.

Hammond added that during Brexit negotiations with the EU, the government needed “to ensure access to the European Union single market” for London’s financial services.

“It’s not only in London’s interest, it’s in the interest of the EU as well. London provides a crucial financial service,” he added.

Osborne had said following the referendum result that he would seek to slash corporation tax over fears of an exodus of companies from Britain.

Hammond though would not be drawn Thursday on Osborne’s pledge to cut Britain’s levy on company profits to under 15 percent from 20 percent currently.

Following the referendum, Osborne also scrapped the government’s promise for a budget surplus by 2020.

Hammond told the BBC on Thursday that the Conservative government had “to reduce the deficit further, but looking at how and when and at what pace we do that and how we measure our progress in doing that, is something that we now need to consider in light of the new circumstances that the economy is facing.”