UK Markets closed

Sajid Javid favourite to be chancellor as Philip Hammond says he'll quit

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Britain's home secretary Sajid Javid. Photo: Toby Melville/Reuters

Home Secretary Sajid Javid has emerged as the favourite to be the next UK Chancellor, after current Treasury head Philip Hammond pledged to quit if Boris Johnson becomes Prime Minister.

Bookmaker Paddy Power is offering odds of 1/3 on Javid becoming the next chancellor, while betting exchange Smarkets has him on odds of 2/5. The Betfair exchange offers odds of 8/15, according to Oddschecker.com.

Javid, who has been Home Secretary since April last year, has a strong CV to take on the brief of public finances. He is a former investment banker and held junior positions in the Treasury in the early years of David Cameron’s government. Javid was also business secretary between 2015 and 2016.

Other contenders include Liz Truss, who is currently chief secretary to the treasury, and health secretary Matt Hancock. Sources have told Yahoo Finance UK that Truss is more likely to be made business minister. Book makers also give arch Brexiteer Jacob Rees-Mogg an outside chance.

‘I intend to resign’

Chancellor of the Exchequer Philip Hammond. Photo: WIktor Szymanowicz/NurPhoto via Getty Images

Speculation as to who will take the Treasury’s top job come after current Chancellor Philip Hammond vowed to quit if, as expected, Boris Johnson becomes Prime Minister this week.

“It’s very important that a prime minister is able to have a chancellor who is closely aligned with him in terms of policy,” Hammond told the BBC’s The Andrew Marr Show on Sunday. “I therefore intend to resign.”

Boris Johnson has signalled he would be willing to take the UK out of Europe without a deal in October if he can’t strike a better withdrawal agreement with the EU.

Hammond has consistently warned that a no deal Brexit would be disastrous for the British economy and warned last month that it could even risk breaking up with UK.

READ MORE: Hammond: no-deal Brexit will cost Treasury £90bn

Hammond said last week he would “not exclude” voting against the government to block a no deal Brexit.

“The new UK PM this week will have a lot of political headwinds to face with Chancellor Hammond saying over the weekend that he will immediate resign if the overwhelming favourite Boris Johnson gets the job,” Deutsche Bank strategist Jim Reid and team wrote in a note to clients on Monday.

“The weekend press in the UK was also full of further speculation that Tory remainers will do all they can to limit the chances of Mr Johnson leaving the EU without a deal. A fascinating three and a bit months ahead for the UK.”

‘Looser’ spending

Boris Johnson is the frontrunner to become Britain's next prime minister. Photo: Peter Nicholls/Reuters

Johnson is facing off against foreign secretary Jeremy Hunt to succeed Theresa May as the leader of the Conservative Party and likely next Prime Minister. Johnson is seen as almost a certainty to land the top job over his rival. The winner of the contest is expected to be announced on Tuesday.

Javid campaigned to be the next Conservative Party leader but was knocked out of the race after reaching the final four. He has since backed Johnson, saying he was “better placed” than Hunt to deliver Brexit.

Whoever the next Chancellor is, analysts expect them to loosen the purse strings and abandon Cameron-era spending and budget pledges.

“The Conservatives are desperate to improve their poll ratings and public support for austerity has crumbled, so we expect Mr. Hammond’s successor to replace the existing fiscal rule with a looser constrain,” Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said in a note to clients on Sunday.

He said that borrowing could rise by 1% of GDP under even a modest scenario.

READ MORE: Boris Johnson and his Tory rivals could take UK on a borrowing spree

Hammond, who has been chancellor since 2016, has already overseen a loosening of the strict budget targets that defined George Osborne’s chancellorship.

Hammond was nicknamed “spreadsheet Phil” for his attention to numbers above all else and economist Andrew Sentence, who was a former member of the Bank of England Monetary Policy Committee, told BBC Radio 4’s Today programme that Hammond was “a very sober and sensible figure.”

“Obviously the big cloud of Brexit and all its potential impacts was hanging over Philip Hammond all the time he was chancellor,” he said.

Hammond supported Britain remaining in the European Union and has been repeatedly criticised by Brexiteers for being seemingly too down beat about the prospects of Brexit.