‘Johnson is the CEO in this relationship. I’m the finance director’
Rishi Sunak insists that as Chancellor his close relationship with No10 allows him to deliver results for Britain at a critical moment
Sitting with the second most powerful politician in the country, in an expansive office at the heart of Her Majesty’s Treasury, it isn’t the first comparison that springs to mind. But speaking in his first newspaper interview since becoming Chancellor, Rishi Sunak says he sees his role as a mere “finance director” working under a chief executive – who, in this case, happens to occupy 10 Downing Street.
The characterisation both typifies the humility for which the 39-year-old is known among colleagues, and illustrates the new relationship that Boris Johnson has created with the
Treasury ahead of the first budget of his premiership. Sajid Javid, Mr Sunak’s predecessor, dramatically quit after being told that his team of advisers would be sacked and replaced with No 10 appointees in a joint economic unit. Mr Sunak, who was appointed on the same day, has had three weeks to prepare for the budget due to take place on Wednesday.
Sipping a glass of squash in between putting the final touches to the budget, Mr Sunak, who co-founded a large investment firm before entering politics, insists that the new group of advisers is, in fact, “all my team”. He insists that a “good working relationship” with No 10 is “an inherently good thing”.
“We’ve got an ambitious agenda that we want to deliver. We’re much better able to deliver that properly, effectively, quickly, if we’re working closely together. So I don’t see any issue with that at all. In terms of the team, they’re all my team. And the relationship has been excellent.”
He adds: “As you would expect, I come from a business background, and the idea that a finance director would be somewhat not working closely with the CEO of a company is very strange to anyone in the business world. I don’t think it should be any different here.”
As a result of the looming coronavirus epidemic, Mr Sunak has rewritten parts of Wednesday’s budget to focus on providing “economic security” in the face of potentially major turbulence, as well as delivering on the individual pledges in the manifesto that helped gain the Conservatives an 80-seat majority.
The economic crisis that could result from a major outbreak of the virus would be a daunting moment for any Chancellor – let alone one who has risen to the role after less than five years as an MP. But Mr Sunak, who previously served as Chief Secretary to the Treasury, effectively Mr Javid’s deputy, insists that he is “well prepared” for whatever may come.
“Of course it could be a challenge,” he says. “But I’m not daunted by that. I don’t think we should be daunted by that as a country. We rise to challenges, we will meet them, we’re well prepared for them, we’ll get through them and we’ll emerge on the other side stronger.”
The country is in a “pretty strong position economically” with positive figures on employment, wages and inflation, “after the uncertainty of the past three years had been removed by the election result”.
The Chancellor says he will use Wednesday’s statement to reveal “various policy options to help support vulnerable people, public services and also businesses”. Mr Sunak is planning for a “supply shock” as workers fall ill, as well as retailers taking a hit if “people are at home... and they’re not out and spending money in the normal way that they would”.
The Treasury is drawing up “targeted” measures to help manufacturers and shops with “cash flows” in the event of such a shock, Mr Sunak reveals – suggesting a possible expansion of the Time to Pay initiative, which allows firms to spread tax payments over months or years.
“The main issue is lots of people might be ill, and therefore not be able to be at work,” Mr Sunak says. “That impacts the productive capacity of your economy. If you’ve got a manufacturing plant and they can’t make their widgets because they don’t have people to make it, but the business is fundamentally a good business, it’s a sound business... we need to look at what are the interventions that we need to help bridge through a difficult period.
“That’s where we might look at some targeted options to help ease the strain on businesses’ cash flows for a certain period of time to help them get through to the other side.”
He adds: “Obviously, alongside the supply shock there will likely be an impact on demand if people are at home, and it gets to that period, and they’re not out and spending money in the normal way that they would.”
The measures the Government takes, and when they are deployed, will depend on medical and scientific advice on the likely effects of the outbreak and when it is forecast to peak.
“We want to be one step ahead of it so we’re doing everything in advance. That said, this is still emerging, we’re taking advice from the experts. At this point, I think the best thing to say is, we are well prepared... we stand ready to do whatever is required, and the best practical advice for everyone is just carry on and wash your hands.”
Mr Sunak avoids saying whether he could return to the dispatch box for a further, emergency budget, simply stating: “Governments can always respond at any point in time.”
He also declines to confirm until Wednesday whether he will abide by his predecessor’s fiscal rules, which keep a tight limit on additional day-to-day spending or tax cuts. Mr Javid had come under pressure to loosen the rules in the face of spending demands from No 10.
“More generally, I strongly believe in the importance of fiscal responsibility,” Mr Sunak says.
Where he is more forthcoming is in his ambition to bring down taxes by the end of his time in No 11 – identifying the tax system as playing a “big part” in economic growth.
He hints that the budget will deliver on the Tory manifesto pledge to increase the discount that small retail businesses pay on their business rates from 33 per cent to 50 per cent, as well as a “more fundamental review of the entire business rates system”.
He is also “aware of ” and “looking at” objections to transaction taxes such as stamp duty – an issue that could rear its head in a future budget.
Setting out his plan for growth of the economy, Mr Sunak adopts Mr Johnson’s language of “levelling up” the country, including with major infrastructure investments such as funding for broadband, roads and rail, to help “people to access better economic opportunities”.
He discloses that he is doubling funding for flood defences to £5.2billion, in a move he says will better protect 336,000 properties in
‘In terms of the team, they’re all my team. And the relationship has been excellent’
‘Having a lower tax, simpler, fairer, flatter tax system is something that can drive growth’
England over the next six years. He also talks of the importance of “human capital”, or investing in training of current and future workers as a “bottom up” way of achieving growth.
He is “looking with interest” at work by the Office for National Statistics which could see current spending on areas such as education and health reclassified as “investment”, allowing him much greater flexibility within the fiscal rules.
On tax, he says: “Having a lower tax, simpler, fairer, flatter tax system is something that can drive growth. As we contemplate a new future outside the European Union, where we have the freedom to do things differently, that provides, quite frankly, an exciting opportunity.”
Mr Sunak cites the example of free ports, the tariff and tax-free zones that he is planning for up to 10 areas of the country, having championed the idea as a backbencher.
An “exciting” package of measures to boost economic activity in ports could include lifting existing planning regulations to make construction in ports such as Humberside “faster” and more effective. More broadly, he sees tax cuts as “an ingredient for driving growth over time”.
“I want to see, over time, lower rates of tax, because I just believe that it’s nice for people to be able to keep more of their own money. I think that’s good for them and I think that’s good for driving economic growth.”
Since replacing William Hague as MP for Richmond (Yorks), Mr Sunak has lived in a village outside Northallerton in his North Yorkshire constituency, with his wife Akshata, the 40-year-old daughter of a billionaire Indian entrepreneur, and their two young daughters. With the budget out of the way, the family will, he confirms, move into the flat above No 10, where his neighbour will be the man he likens to his chief executive.