From Santa Sunak to Auste-Rishi
Philip Fisher is disheartened by the Chancellor's latest pronouncement but still believes that nimble accountants can do well.
The Victorian era enjoyed a love hate relationship with Dr Jekyll and Mr Hyde but they were merely fictional characters.
On Wednesday, we had official confirmation that the man this country has come to love and desire as its next Prime Minister, Santa Sunak who likes nothing better than doing “whatever it takes” to make us all happy, had transformed himself into Auste-Rishi - the austerity fiend.
However much he might deny the “A” word, Rishi Sunak’s statement to Parliament sows the first seeds of a return to the pain of financial constraint, cutting almost every departmental budget in sight, in a desperate hope to minimise tax increases and try to bail out the sinking ship.
While he was being young, handsome and generous, everyone loved Rishi. Perhaps his popularity peaked in August as fans devoured cheap meals, not realising that in doing so they were helping to spread coronavirus and engender the current lockdown.
Naysayers such as Paul Johnson of the Institute for Fiscal Studies were constantly attempting to remind us that there is no such thing as a free lunch but vast numbers of punters stuffed themselves rather than listening.
The deficit now appears to be higher than the country’s annual gross domestic product, while sources of income such as tax revenues have been considerably diminished due to lockdowns and lack of business profitability. What is already a massive rise in unemployment will only keep increasing.
Even Mr S and the Office for Budget Responsibility have reluctantly concluded that it will take to 2025 to recover and, viewed in retrospect, that may be overly optimistic.
There seems to be an economic trope that the only ways to get back on to an even keel are either to cut spending a.k.a. austerity, or to increase taxation. Beyond that, we merely get into the fine tuning.
With a freeze on much of public sector pay and a cut to the overseas aid budget, Mr Sunak has made his intention clear to pursue austerity.
Before readers start cheering at the prospect of avoiding tax hikes, the scale of this black hole (sorry for mixing metaphors but that is the job of a journalist) is so huge that the only way out will be to consolidate more and more austerity measures with as many stealth taxes as the Chancellor can find, then chuck in a load more tax rises that are less stealthy.
While the situation might seem dire at first glance, it is actually far worse than that. Even the Governor of the Bank of England, Andrew Bailey believes that the economic hit as a result of a badly mastered exit from the European Union is likely to be more significant than even the deadliest virus in living memory.
What does this mean for the profession? First of all, we need to get through the next few months, with the country in various stages of lockdown, clients struggling to survive and our own profitability hit hard.
That could mean difficult decisions on staffing and property, questions about how much we support ailing clients and, in the fullness of time, strategic choices regarding the best way to boost revenues in the teeth of a full-blown recession.
There will undoubtedly be opportunities for those that are nimble. As previously suggested in these columns, they could include tax planning strategies to mitigate some of the worst of the future rises. Indeed, it may be sensible to begin thinking about these as soon as possible to get ahead of the competition and possibly beat new anti-avoidance measures.
Next, business recovery is likely to be the boom area of our sector over the next 5 to 10 years, though firms will need to operate judiciously to avoid trying to rescue businesses that are too far gone and can’t afford the fees.
Beyond that, good, sensible and prudent operating strategies should help us to see out the worst of the current instant recession and prosper going forwards.