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No emergency budget despite chilling effect of Brexit, says Chancellor Hammond

Published 14/07/2016

Philip Hammond leaves 10 Downing Street after being appointed Chancellor of the Exchequer
Philip Hammond leaves 10 Downing Street after being appointed Chancellor of the Exchequer

The vote to quit the European Union has had a chilling effect on the British economy but there will be no emergency budget, Chancellor Philip Hammond has said.

Speaking on his first full day at the Treasury after being appointed as George Osborne's replacement on Wednesday, Mr Hammond said the referendum result caused an economic "shock" and did not rule out the possibility of an economic slowdown.

But the new Government will do "whatever is necessary to keep the economy on track" and the pace of deficit reduction could be curbed, he suggested.

Mr Hammond told the BBC Radio 4 Today programme: "We will face some challenges in the short term in managing the economy. It has had a shock as a result of the decision on June 23 to leave the European Union.

"That has shaken confidence, it has caused many businesses to pause investment decisions that they were making.

"The challenge for us now is to send signals of reassurance about the future as quickly and as powerfully as we can to the international investment community, to British business and to British consumers so we can get those decisions starting to be made and investments starting to flow into the UK."

Mr Hammond said that investment, job creation and business confidence had all been hit since the referendum result.

"There has been a chilling effect. We have seen an effect in markets, 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, what our aspirations are for the future trading relationship between Britain and the European Union."

Mr Hammond used his first morning in the job to meet Bank of England governor Mark Carney.

When pressed on whether he still believed in deficit reduction, he said the economy was "entering a new phase".

"Our economy will change as we go forward in the future and it will require a different set of parameters to measure success," he told Today.

"Of course we have got 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."

Asked whether he expected a post-referendum recession, Mr Hammond told Sky News: "I will today have a series of meetings with the key economic leaders, starting with the governor of the Bank of England this morning, so that's an assessment I will want to make for myself over the coming hours."

He added: "The number one challenge is to stabilise the economy, send signals of confidence about the future, the plans we have for the future, to the markets, to businesses, to international investors.

"Britain is open for business. We are not turning our back on the world. We are determined to maintain our outward-looking stance and we are determined to maintain the prosperity of our people and keep on growing the economy and creating jobs in the future, and that's the message I want to get out there today.

"We will do whatever we need to do to restore that confidence and to keep Britain as an attractive destination for businesses to invest and create jobs."

Mr Hammond told ITV's Good Morning Britain that the markets "need signals of reassurance".

"There is no plan for an emergency budget, as Theresa May made clear. There will be an Autumn Statement in the normal way and then there will be a Budget in the normal way, he said.

"But the markets do need signals of reassurance, they need to know we will do whatever is necessary to keep the economy on track."

Mr Hammond signalled he may be willing to take advantage of low interest rates to borrow to invest in infrastructure .

He told ITV News: "Borrowing when the cost of money is cheap has some great attractions, but this country is already highly indebted and we need to be very careful about the signal we send to markets about our intentions, so it's about getting the balance right and making sure that we borrow and invest wisely where we can make big impacts on Britain's productivity and thus get a return on that investment that will be to the benefit of the Exchequer."

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