Even by the accelerated standards of modern politics, this is fast. Three months after the Chancellor was appointed, the Treasury has had to deny that he has threatened to resign. No. 10, for its part, has had to declare that the Prime Minister has ‘full confidence’ in Philip Hammond. It is telling that neither felt that they could just laugh off the reports. So what is going on?
The most innocent explanation is that Westminster is still adjusting to the return of normal relations between Downing Street and the Treasury. David Cameron and George Osborne did everything but actually merge the two. Indeed, until the coalition came along, they planned to work out of the same office in No. 10. Even with Nick Clegg in government, Osborne attended the two key daily Downing Street meetings. The Conservative pair never disagreed with each other in public, or even in cabinet. And this bond has continued even after they left office. Cameron asked his former communications director Craig Oliver to make sure that Osborne came out of his book on the EU referendum well. The closeness of this relationship meant that whoever succeeded Cameron and Osborne as the residents of Downing Street would be seen as more distant from each other. So ministers are taken aback to hear Hammond airing his own, different views in cabinet.
But that is only part of the story. Brexit has exacerbated the institutional tensions between the Treasury and the rest of the government. When it comes to Britain leaving the European Union, the Treasury is most concerned with the short-term economic implications, while No. 10 is looking at the broader political picture. Both Hammond and Theresa May might have campaigned for Remain, but they are now coming at the exit negotiations from different perspectives.
In terms of a deal, the most contentious issue is how open the UK labour market will be to EU nationals. If you want the closest possible economic ties with the EU, as Hammond does, then you want that answer to be ‘very’ — particularly if you represent a department that is intensely relaxed about immigration. But May is a former Home Secretary who believes that the Leave vote was largely driven by a desire for control over who comes into this country. She also remains committed to getting immigration down to tens of thousands, a target that will be very hard to reach even outside the EU.
The Treasury, which had become the most important department in Whitehall for dealing with the EU, is also attempting to defend its own turf against the new Brexit departments. Layered on top of this is Hammond’s view that the Brexiteers haven’t paid enough attention to the detail and are far too confident about how easy it will be to do a deal and safeguard the interests of the City.
Hammond doesn’t suffer fools gladly; he also gives the impression that he thinks lots of people — including some colleagues — are fools. He is undoubtedly academically able; he has a first from Oxford in PPE, and even one of his Tory critics says that he is ‘head and shoulders above the rest of the cabinet intellectually’. But he isn’t particularly good at hiding it when he thinks others aren’t at his level. It would be wrong, however, to see the current turbulence as purely being about Hammond versus the Brexit ministers.
However much he and they might disagree over the speed, ease and terms of exit, there is something else going on too. In the days after 23 June, Hammond was quick to tell people that those who had voted to leave had voted for a Britain where the returns on capital would have to be higher than before, because that is what it would take to keep us an attractive place for international investors. This is very different from May’s emphasis on making the economy work for ordinary working-class people.
In economic terms, Hammond is a dry right-winger. So far, he has kept to the same script as No. 10 on such questions, even accepting May’s push for workers on boards. But his (in the words of one of those present) ‘fearless’ intervention when the cabinet committee on industrial strategy discussed new rules on foreign takeovers is a sign that he isn’t afraid to speak up when he thinks government policy might be threatening the UK’s standing as an open economy.
Another source of unhappiness for Hammond was May’s criticisms of the Bank of England’s monetary policy in her conference speech. I am told that they caused ‘serious trouble’ between the two. It was striking that on a trip to New York straight afterwards, Hammond made clear he would like to extend Mark Carney’s term as governor.
Is Hammond the victim in this briefing war? Is he the realist warning of the economic and reputational consequences of decisions that too many others in government are relaxed about? Well, the Chancellor certainly doesn’t surround himself with aggressive advisers or a parliamentary posse. He also doesn’t have designs on the top job. But this whole round of excited chatter about the state of the cabinet started straight after Tory conference. It is worth noting that in Birmingham, the gossip in the bars every evening was about what Hammond was saying in private meetings about the Brexit ministers. It was this that turned the temperature up on this story so rapidly — and Hammond should take his share of blame for that.
Calming down the current situation is essential for the stability of the May government. It can ill afford to lose its Chancellor, and the departure of any of the Brexit ministers would call into question May’s pledge that ‘Brexit means Brexit’.
Ministers treating each other with more respect would be a helpful step. But the most important thing is for the Prime Minister to give more of a lead. One of the reasons that ministers are squabbling so much is that even in the cabinet no one is quite sure what kind of Brexit deal May actually wants. A sense of direction from the top would help bring the government to order.
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