By David Milliken and Ana Nicolaci da Costa
LONDON (Reuters) – British finance minister Philip Hammond said on Tuesday the Bank of England would take the first steps to help steer the economy through its Brexit shock, and possible budget measures would not come until later this year.
Hammond, who was named as chancellor of the exchequer by Prime Minister Theresa May last week, also declined to confirm whether he would follow through on his predecessor George Osborne’s plan to make further cuts to corporation tax.
In a question-and-answer session with lawmakers, Hammond said the central bank would take any immediate action to alleviate Britain’s Brexit slowdown, while he would spell out new fiscal plans in the autumn.
“The initial response to this kind of a shock must be a monetary response delivered by the Bank of England,” Hammond said. “And the governor, in announcing that interest rates were not to be lowered last week, did make it clear that the Bank is developing a monetary package that it will announce in due course.”
The BoE said on Thursday it was working on a possible package of measures to be announced on Aug. 4 to cushion the expected blow from last month’s referendum vote to take Britain out of the European Union.
Many economists expect the BoE will halve its already record low Bank Rate to 0.25 percent and possibly revive its bond-buying program. Some have also speculated that the Bank might buy bonds issued specifically to fund infrastructure spending.
In his remarks to parliament, Hammond said Britain needed a new framework to tackle its budget deficit, which he said was “very large” and needed to be addressed.
Britain’s budget deficit stands at around 4 percent of gross domestic product, down from more than 10 percent in 2010 but still among the largest of rich nations around the world.
Asked whether he would stick with a proposal made by Osborne shortly after the referendum to lower Britain’s corporation tax rate to below 15 percent, Hammond said his focus would be to boost business investment.
“(When) we look at the corporate tax environment, we will not just be looking at headline rates, we will be looking at what the marginal effective rates of corporate tax are for investors in the UK,” he said.
A business survey on Monday showed that the chief finance officers of some of Britain’s biggest companies were now less willing to invest than during the 2008 financial crisis.
Hammond reiterated his aim of protecting Britain’s huge financial services industry from the Brexit fallout by securing its continued ability to provide services across the EU, and he said Britain would not be open to “asset strippers” seeking to buy companies in the country.
But he defended SoftBank’s $32 billion purchase of British chip design company ARM on Monday, saying the Japanese technology company had committed to invest more in Britain.
(Additional reporting by Andy Bruce; writing by William Schomberg; editing by Giles Elgood)