Philip Hammond has resigned as chancellor of the exchequer this afternoon (July 24), one in a string of cabinet resignations following Boris Johnson’s Conservative party leadership win.
Mr Hammond, who had previously announced he would step down as chancellor if Mr Johnson was to become prime minister, wrote to Theresa May this afternoon, stating he believed her successor “must be free to choose a chancellor” who is “fully aligned with his policy position”.
He had campaigned fiercely for remain throughout the EU referendum and has since warned against a no-deal Brexit throughout his time in office — an outcome Mr Johnson has not ruled out.
In his parting letter, Mr Hammond warned the new government to “use wisely” the “genuine choices” between increased public spending, reduced taxes, higher investments and paying off the deficit after a “decade when the aftermath of the 2008-09 recession meant we had no choices”.
He also said it had been a privilege to serve as Mrs May’s chancellor and spoke of the “proud achievements” he had contributed to over the past years.
Following Mr Hammond’s resignation, Sajid Javid MP, current home secretary, is rumoured to become the next chancellor with Jacob Rees-Mogg MP, chairman of the European Research Group and backbench MP, tipped to become Mr Javid’s secretary.
Others have suggested Lizz Truss MP, current chief secretary to the Treasury, could become the next chancellor.
Mr Johnson is expected to appoint his cabinet later today (July 24).
Tom Selby, senior analyst at AJ Bell, said Mr Hammond’s legacy was a mixed affair, from the “good” move to boost workers through income tax reform, to the “bad” slashing of the dividend allowance, to the “ugly” clash with senior doctors over the tapered allowance.
Mr Selby said Mr Hammond’s income tax reforms had represented a “significant boost for workers” as it saved middle earners hundreds of pounds per year, but noted his failure to address the doctors’ pensions issue “contributed to the crisis currently engulfing the NHS”.
Mr Hammond lowered workers' income tax bills by raising the personal allowance from £11,000 to £12,500, giving workers £1,500 more tax-free income. He also raised the point at which higher-rate income tax kicks in from £42,600 to £50,000.
Concerns about doctors’ and teachers’ pensions meanwhile hit the headlines when it emerged doctors were refusing shifts to avoid high tax bills. The government is currently consulting on how to fix the issue but has refused to tinker with the tapered annual allowance that has widely been blamed for having caused the problem.
Looking forward, Steven Cameron, pensions director at Aegon, said he hoped the next government focused on social care, pensions allowances and income tax thresholds.
He said: “Top of our list is the pressing need to deliver the long overdue promise of a new deal on social care funding.
“There must be an increased commitment to central government funding to remove the current postcode lottery, and a cap on the overall amount anyone will have to pay themselves, allowing people to plan ahead and protect inheritance aspirations.”
He added it was important to ensure tax rules were fit for the future and did not penalise those saving for retirement — such as in the doctors’ pensions issue — as well as ensuring tax breaks for those earning above the higher rate threshold didn’t negatively affect pension tax relief.
Ricky Chan, director and chartered financial planner at IFS Wealth & Pensions, said the main thing he wanted from a new chancellor was stability.
He said: “I’d like to see more clarity within pensions — and for pensions to be left alone for a while. Governments always want to raise some funds from pensions but it needs stability at the moment."
Mr Chan added it made it hard to plan if prime ministers and chancellors kept making changes to tax systems, but noted he hoped any changes would “not just help the super rich and wealthy”.
Yesterday, FTAdviser asked advisers which issues they hoped the new prime minister would tackle in his time in the top spot.
The tapered annual allowance, and end to regulatory changes and a simplification of income tax featured high up the agenda.
Other ministers to have resigned over Mr Johnson's leadership include Rory Stewart, previously development secretary and one of Mr Johnson’s competitors for leadership, alongside justice minister David Gauke.
Mr Stewart had already announced he would not be able to serve in Mr Johnson’s cabinet, while Mr Gauke said he believed he could most effectively make the case against a no-deal Brexit “from the backbenches”.
Anne Milton, minister for education, stood down yesterday after announcing she had “grave concerns” over a no-deal Brexit and that she “sincerely hoped” the UK would have left the EU with a deal back in March.
David Liddington, minister for the Cabinet Office and chancellor of the Duchy of Lancaster, became the fourth cabinet minister to resign, saying it was the “right moment to move on” after 20 years on the front bench.
imogen.tew@ft.com
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