Hammond was recently rumored as having sought resignation after a conflict with other members of the cabinet over his disagreement with the ‘hard’ Brexit scenario, proposed by Prime Minister Theresa May, and providing the ties with the EU severed by April 2017.
Hammond’s speech is seen as a move to encourage investors, and to demonstrate that Her Majesty’s cabinet is putting a substantial effort into determining the best solution for the Brexit case.
Hammond is known as an opponent of the ‘hard Brexit’, assessing the role of foreign skilled workers as beneficial for the UK’s economy, advocating the BOE’s accommodative monetary policies, and upholding the idea of trade agreement with the EU. In his speech he, however, said tighter border control is necessary, but in order to support domestic growth and labor market, the cabinet would need to employ a more flexible approach to the process of separation with the EU.
"As we approach the challenge of getting net migration figures down to the tens of thousands it is, in my view, essential that we look at how we do this in a way that protects our economy and protects the vital interests of our economy," Hammond told the MPs.
Hammond addressed the issue of developing a position for the looming negotiations with the EU, which, in the Chancellor’s mind, is not subject for public discussion as providing the UK’s counterparts with the awareness of the political developments in the Albion. The UK would gain greater bargaining power for the negotiations by focusing on the matters seen as beneficial for the British economy and finance. Less important issues, such as movement of skilled workforce across the UK’s border, might be omitted from the Brexit agenda, Hammond suggested.
"I cannot conceive of any circumstances in which we would be using those migration controls to prevent banks, companies moving highly qualified, highly skilled people between different parts of their businesses," he said. Voting in support of Brexit, the British public, the Chancellor reiterated, was not concerned by the immigration of "computer programmers, brain surgeons, bankers". The immigration restrictions should apply to those foreigners competing for "entry level jobs", he said.
"Those that are undermining the effort are those that are seeking to close down that negotiating space, seeking to arrive at hard decisions that we don’t need to make at this stage," Hammond said. "Keeping as many options open as possible is the key to the strongest possible negotiating hand."
Monetary policy has recently been another major issue in UK politics.
PM May, supported by former New Tory leader William Hague, criticized the BOE’s decision to cut rates in order to spur lending in an economy, which is not facing any signs of a downturn requiring any monetary easing at all. OM May had warned of the “bad side effects” of lower rates, whilst Hague described the lower-rates regime as “steadily more unpopular and counter-productive.”
Hammond, in his speech, reiterated the independence of the BOE from national politics, saying that there are "no plans to change the way that monetary policy is delivered," adding: "Monetary policy is independently determined. That will continue to be the case."
The expectations of a fiscal stimulus are supported by the perception of Hammond favoring money injections into the economy. The internal debate over economic policies in HM’s cabinet is becoming increasingly public.
PM May had said at the Conservative conference in Birmingham that "people with mortgages have found their debts cheaper and people with savings have found themselves poorer. A change has got to come and we are going to deliver it." The PM’s view suggests she is eyeing greater austerity in terms of broader economic policies that would require a joint action from the BOE and the Exchequer.
However, Chancellor Hammond’s assessment of stimuli is different: "There will be a lot of people there today who may not own assets but do have a job that they wouldn’t otherwise have had."
