The Chancellor has insisted that the Bank of England will obtain its independence in terms of monetary policy and has suggested that immigration controls imposed after Brexit might not apply to bankers and other skilled workers.
Philip Hammond told the Commons Treasury Select Committee that the Government had no plans to change the way monetary policy was set, after he was pressed by MPs over Theresa May’s apparent criticism of the Bank at the Conservative Party conference, when she said there had been "bad side effects" from quantitative easing and record low interest rates.
"Monetary policy is independently determined, that will continue to be the case," he said.
"My understanding is that what the Prime Minister was trying to say is that we recognise that monetary policy… has a distributional impact. And to the extent the government believes that distributional impact needs to be addressed or corrected we also have tools that are available to us to do that."
The Chancellor also indicated that banks and other companies may not face restrictions on moving foreign staff into the UK once migration controls are in place after the country leaves the EU.
"I cannot conceive of any circumstances in which we would be using those controls to prevent banks, companies, moving highly qualified, highly skilled people between different parts of their businesses," Mr Hammond said.
He argued that the public’s migration concerns were not focused on "computer programmers, brain surgeons, bankers, senior managers", but on people entering the country and "competing for entry level jobs".
Banks and other financial services firms are worried that Brexit will result in the loss of their passporting rights, which allow them to do business freely across the EU’s single market and have helped transform London into a global financial centre.
The Chancellor said that his discussions with firms had demonstrated that companies are being "realistic" about the potential loss of passports "and are looking at other options".
However, he added that so-called equivalence provisions in forthcoming financial regulation, which could allow the UK firms access to the single market after Brexit as long as the country’s rules mirror those in Europe, "would not be a stable basis on which to plan long term" in the absence of a deal on financial services.
It came as Simon Kirby, the City minister, told MPs that Mr Hammond had made the case for the City importance following Brexit "loud and clear" at Cabinet. It followed accusations that the Chancellor was "undermining Brexit" and rumours he had threatened to step down.
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