Philip Hammond explained that increasing productivity would be the “elixir” that would pave the way for “higher wages, higher quality public services, and a brighter future”, speaking in London today.
But Mark Carney, the governor of the Bank of England, also warned at the event that financial markets had marked down the UK’s economic prospects in the face of Brexit.
“Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU,” he said.
Hammond dismissed the idea of raising taxes to pay for public services because he said it leads to “slow growth, undermines competitiveness, and costs jobs”.
He also ruled out increased borrowing because he said it was “asking the next generation to pay for something that we want to consume, but are not prepared to pay for ourselves”.
Before Carney spoke, Hammond sought to reassure businesses over Brexit.
He said the government would pursue a departure from the EU which “prioritises British jobs and underpins Britain’s prosperity”.
Hammond laid out three key aims, which were:
- securing a comprehensive agreement for trade in goods and services
- negotiating mutually beneficial transitional arrangements to avoid unnecessary disruption and “dangerous cliff edges”
- agreeing frictionless customs arrangements to facilitate trade across borders – including the maintenance of the open Irish border.
He said there would “almost certainly” need to be an implementation period as the UK left the Customs Union, where the current rules would remain in place until new long-term arrangements are up and running.
On the topic of migration he said Britain still needs to access global talent and stressed “we seek to manage migration, we do not seek to shut it down”.
Hammond said the government would seek to continue to use funds from The European Investment Bank and its offshoot the European Investment Fund for as long as the UK remained a member of the EU.
The speech came after the Office of National Statistics recently published figures, which showed that inflation had hit 2.9% while wage growth stood at 1.7%, indicating a squeeze on earnings.
Carney said at the event he did not believe it was the right time to raise interest rates.
