Sajid Javid replaced as Chancellor less than a month before Budget
With less than a month before his first Budget, Sajid Javid has resigned as Chancellor of the Exchequer, making way for his replacement Rishi Sunak.
Sajid Javid still had four weeks to put the finishing touches to his Budget when he was called to Number 10 and asked to sack his team of advisers. Javid refused and instead resigned from his position as Chancellor in what has become a shock cabinet reshuffle.
Javid’s shock exit was the culmination of brewing tension between the former Chancellor and Number 10. It finally came to a head today when the Prime Minister demanded Javid replace his special advisers with Number 10 special advisers, but the former Chancellor responded: “no self-respecting minister would accept those terms.”
And with Javid handing over the keys to Number 11, he becomes the shortest-serving Chancellor since Iain Macleod – lasting just seven months.
According to Westminster rumours and political kite-flying, Javid had planned to use the Budget to axe, or at least scale back, entrepreneurs' relief and there had been calls for a radical overhaul of inheritance tax.
As soon as Javid departed Number 10, the pressure of delivering the first post-Brexit Budget now falls to his replacement: Rishi Sunak, the until recently chief secretary to the Treasury.
Meet the new Chancellor
With only a month to either cobble together Javid’s Budget or start from scratch, AccountingWEB readers will have a particular interest in the newly appointed chancellor.
In 2015, Sunak was elected in William Hague’s old seat. A leave supporter in the 2016 referendum, Sunak has since become a rising star in the Conservative Party, as his prior appointment as the chief secretary to the Treasury demonstrated.
While it’s too early to judge how he’ll fare, the MP for Richmond in Yorkshire does have form in following Javid's footsteps - and sharing a love of Star Wars (picture below). Like the former Chancellor, Sunak embarked on a career in the City. While Javid climbed the ranks with Deutsche Bank, Sunak found equal success as an analyst for Goldman Sachs and then as a hedge fund manager.
Despite similarities, tax lecturer Giles Mooney noted the key difference: "Sajid Javid believes in lowering debt with fewer tax cuts... Rishi Sunak is far more likely to cut taxes and keep debt levels high. He is a huge supporter of the city... and has spoken about the benefits of encouraging business via a top-down trickle to benefit workers."
— Rishi Sunak (@RishiSunak) December 20, 2019
His role in the Treasury may help him get off the ground running, but whether Sunak continues with Javid’s plans to have another Budget later in the year remains to be seen.
Accountancy profession reacts
Eyes from the accountancy profession will be closely watching the new Chancellor. Sunak inherits a number of tricky financial conundrums such as the loan charge, Brexit and IR35 reforms. Unsurprisingly then, before Sunak even stepped foot into Number 11, IR35 campaigners have urged him to have a last-minute rethink.
“With IR35 reform rapidly approaching, it’s vital that Rishi Sunak succeeds where Sajid Javid failed,” commented Seb Maley, the CEO at Qdos. “We urge the new Chancellor to act immediately and halt the introduction of needless and short-sighted changes to the off-payroll working rules.”
AccountingWEB readers also joined the chorus. An Any Answers discussion was started shortly after the announcement with members considering the effect, if any, this will have on the off-payroll proposals and MTD.
With reports suggesting that Sunak was Dominic Cummings’ chosen chancellor, AccountingWEB regular Justin Bryant theorised what this could mean come the Budget: “This will make things like a wealth tax and scrapping entrepreneurs relief more likely (if not in this Budget, then another one) as he's desperate to cling on to his newfound mates up north by rebalancing the country's wealth with extra spending.”
However, Sunak’s appointment was greeted favourably elsewhere in the profession. The AAT’s Phil Hall praised Sunak’s recent work with the professional body on its proposal for a stamp duty surcharge on overseas investors.
Very pleased @RishiSunak appointed as the new Chancellor. @RishiSunak did great work on the @YourAAT proposal for a #StampDuty surcharge on overseas investors. @YourAAT looks forward to working with him, is always here to help and wishes him every success at @hmtreasury
— PhilHallAAT (@PhilHallAAT) February 13, 2020
The AAT had campaigned for an additional tax on overseas residential property investors for almost two years following its 2017 member survey, which indicated that 78% of its members support the imposition of an additional tax charge on overseas residential property investors.
There was also a reshuffle for Westminister’s representatives from the accounting profession. Chartered accountant and former Deloitte, Alok Sharma was drafted in as the secretary for state for business, energy and industrial strategy (BEIS); meanwhile, former management accountant Liz Truss remains in her role as secretary for state for international trade.