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Rishi Sunak will deliver a budget next week in the shadow of a pandemic, following Britain’s painful divorce from its biggest trading partner and with its public finances, on its own, under “enormous strain.”
But the chancellor, in an interview with the Financial Times, insisted that he can see a brighter future and that his second budget since he was appointed last February will help build an “economy of the future” characterized by agile vaccines and fintech entrepreneurs.
Sunak supported Brexit and now has to show that it can work. He knows he cannot expect much help from the EU, which has shown no interest in opening its markets to the City of London, but still insisted that Brexit is an opportunity.
He said that the UK after Brexit would be an open country. “It’s a place driven by innovation, entrepreneurship, taking the agility that we have after leaving the EU and putting that to good use, be it in vaccines or fintech,” he said.
Sunak’s budget on Wednesday will attempt to develop the government’s slogan of “rebuild better”; Britain’s successful vaccine scientists and new-tech twentysomethings will be the poster children for this new approach.
While large, profitable companies are expected to face a sharp rise in their corporate tax bills – part of Sunak’s push to restore fiscal discipline – the chancellor will focus on companies for which profits are a distant dream.
On Friday he told the FT that he would launch a new fast-track visa scheme to help Britain’s fastest-growing companies recruit highly-skilled workers, as part of a push to build an “agile” economy after Brexit.
He said he wanted to help “scale” sectors like fintech to compete for the best global talent. The new visa system, he added, would be “a business card for who we are.”
Next week, Sunak will publish a report by Lord Jonathan Hill, Britain’s former EU commissioner, on the City of London’s listing scheme, to make it more attractive to fast-growing tech companies.
“We want to make sure this is an attractive place for people to raise capital – we’ve always been good at it,” Sunak said. “We want to stay at the forefront of that.”
The chancellor confirmed that Hill will look at whether London can be a rival to New York as a place for so-called Spacs, the modern blank check vehicles that companies seek to buy and go public with.
He declined to speculate on what Hill will recommend, but gave a general clue that he supports radical reform. “Do we want to continue to be a dynamic and competitive place for people to raise capital? Yes, we do, ”he said.
The loss of some business from the city, including trading EU stocks, to Amsterdam has reinforced criticism of the government for its negotiation of a trade deal that focused heavily on fish, but hardly ever on financial services. .
Last summer the Treasury filled out hundreds of pages of questionnaires from Brussels on its regulatory plans for the City, but Britain is still awaiting a series of “equivalency” resolutions that would allow British companies to trade in the single market. It could be a long wait.
When the FT asked French President Emmanuel Macron this month if he was in favor of Brussels granting “equivalence” to UK financial services rules, he simply replied: “Not at all. I’m completely against it. “
Sunak insisted that he has not given up and that the Treasury remained “constructive and open” in the talks with Brussels. But he added: “We live in a competitive world. It’s no wonder other people care about your interests. “
Sitting in his meager Treasury office, stripped of all clutter, wearing his typical bright white shirt, Sunak said, “We just have to focus on what we have under control. I have enormous confidence in the future of the City of London and, more generally, in financial services. “
At the age of 40, Sunak has only been on the job for a year. “When I got the job, I had three weeks to budget,” he recalls. “I really thought at the time that it would be the hardest thing I would have to do professionally in my life.” But that was before the full-blown pandemic hit the UK.
“That budget turned out to be probably the easiest thing I ever did in my first year on the job. It’s been a rough year, dealing with something that no one has had to deal with before. There was no playbook. We had to move at speed and scale. “
His critics argue that handing over £ 280 billion of borrowed money to support the economy may not have been that difficult either (Sunak’s approval ratings are still very high) and that the really difficult part is yet to come: dealing to rebuild the economy and the shattered public. finance.
Conservative MPs are eager that Sunak’s innate fiscal conservatism could lead him to make unwanted inroads into the finances of central conservative voters and businesses, just as the economy begins to reopen.
The chancellor is expected to freeze income tax thresholds, pushing people into higher tax bands as their salary increases. Another “stealth” move – freezing the allocation of life pensions at just over £ 1 million for the rest of parliament – was reported in the Times on Friday and was not denied by the Treasury.
And in the meantime, Sunak will continue to rack up debt over the summer to protect the economy from what it hopes will be the latest Covid-19 lockdown. He said he is “proud” of what the support measures have achieved so far.
“I’m going to continue like this,” he said. “Some 750,000 people have lost their jobs and I want to make sure that I give them hope and opportunity. Next week’s budget will do that. “
