Philip Hammond’s successor must tell hard truths on Brexit

Last week, Philip Hammond, UK chancellor, was seen packing his bags at No 11 Downing Street, his tall frame bent over an open car boot with a green suitcase inside. He has said that if Boris Johnson is chosen as prime minister at 11.45am on Tuesday, he will resign the next morning rather than be sacked or accept a place in a cabinet that might be asked to embrace a no-deal Brexit.

It will mark the departure from the cabinet of someone who has been determined to spell out the economic damage of no deal. Mr Hammond has said he will try to rally support against that prospect from the backbenches and hinted he might even vote against the government in a no-confidence motion if it were pursuing a withdrawal from the EU without a deal.

He will have support in parliament, from the likes of Dominic Grieve on the Conservative side and Keir Starmer on Labour’s, who are dedicating their waking hours to trying to block a no-deal Brexit. Yet it is striking how isolated a figure Mr Hammond has cut in the cabinet.

Chancellors have often been unpopular with their colleagues. They must make sure that government budgets add up while prime ministers get the credit for extra spending. All the same, Mr Hammond has made few friends or allies even though, at the end of his tenure, employment is at record levels and wages are growing faster than inflation, while the deficit is low by historic standards. He has been loathed by the Brexit camp for warning of economic damage, and resented by the other wing for not turning on the spending taps and decisively “ending austerity”. Theresa May, frustrated on both counts as she tried to bridge the rift in her cabinet, barely had a working relationship with him for the past year.

It is one of the curious features of Brexit that economics has had almost no purchase on the arguments. It has been a battle of values, not evidence. Economic warnings from the Treasury before the referendum (when Mr Hammond was still the foreign secretary) also appeared to have little effect on the result — or even backfired, portrayed as “Project Fear”.

Mr Hammond has the support of the vast majority of economists in warning that putting obstacles into the relationship with the UK’s largest trading partner will be damaging, that other relationships will not compensate, and that a speedy US trade deal is unlikely. He has pointed out, too, that under a no-deal scenario it would be impossible to anticipate which industries would be most disrupted and how much emergency help the UK government would need to give because it depends on the response by the EU, France and Ireland. He is right, too — a point Rory Stewart made eloquently in his pitch for the Tory leadership — that no deal doesn’t mean the UK would not do a deal with the EU; just that it would happen after its withdrawal.

But those warnings put Mr Hammond on a collision course with pro-Brexit colleagues in the cabinet who complained about his “miserable demeanour” — in contrast to the unwavering optimism about leaving the EU, which is Mr Johnson’s clearest promise. Meanwhile, other ministers have accused him of having a political tin ear, deaf to the strain of austerity on public services, people’s lives and support for the Conservative party. They saw the impact of the cuts on justice, police, social care and local government and wanted him to ease up.

Last summer Jeremy Hunt, playing to Mrs May’s wish to give the NHS a 70th anniversary “birthday present”, deftly extracted a further £20bn a year by 2023 from her. That ate up almost all the room Mr Hammond thought he had for the November Budget, leaving other public services flat. He managed to squeeze out a bit more for housing and small shops on high streets, and to ease the application of universal credit.

But his message was clearly that while austerity was coming to an end, “discipline will remain”, at least until the shape of Brexit became clear. If Mrs May’s deal went through, he would be able to allow more spending, but if Brexit went wrong, more would have to be clawed back.

It is the fate of the chancellor often to seem like the only grown-up in the room, enforcing the spending constraints that others don’t want to know about. The next occupant of the post inherits from Mr Hammond some welcome improvements in the economy but also the huge uncertainty of Brexit.

It matters that he or she is prepared to acknowledge the economic implications of Brexit as the manner of leaving the EU becomes clear and to convey that to the new prime minister, whether or not the message is welcome.

The writer is director of the Institute for Government, a think-tank