On 13th February 2020, in major cabinet reshuffle in UK, Mr. Sajid Javid announced his resignation from his position as the chancellor of the exchequer and was replaced by Mr Rishi Sunak. In other changes, Brandon Lewis was promoted to Northern Ireland secretary from his previous position as a security minister. Mr Stephen Barclay was appointed as the new chief secretary to the treasury, who was previously also the Brexit secretary. Amanda Milling was made the new chairman of the conservative party, while also holding a position of the member of the Cabinet as a minister without a portfolio. Some other changes included Penny Mordaunt coming back to the government by being appointed the paymaster general, Christopher Pincher appointed as the minister of state in the ministry of housing, while Andrew Stephenson was appointed the minister of state at the transport department and James Cleverly was appointed as the joint minister of state for the Foreign Office and the Department for International Development.
What does Javid’s resignation mean?
Sajid Javid’s exit as chancellor of the exchequer has left a herculean task for his successor, Rishi Sunak, with just over three weeks’ time to get ready and come up with the budget, that Mr Boris Johnson has promulgated to be the dawn of a new era in terms of the spending by the British administration. The new chancellor, who, after assuming his position, became only the second youngest person to hold the position in more than a century. He since July last year had been working as the chief secretary to the Treasury, will be expected to take lots of ambitious policies to the culmination, which also include those aimed at putting the nation and the region at the same level.
The budget was long anticipated to invigorate the economy before new trade deal of action and implementation is agreed with the EU27 by the end of this year. Now Sunak is expected to be well aware of the issues Javid was dealings with the Boris Johnson’s special advisor Dominic Cummings, as well as the other members of the Prime Minister’s Office.
The issues that could be prioritised by the new chancellor
- Taking over from popular figure – Sunak’s time in the City as a hedge fund manager must have made him aware about the requirement for a procedure to adapt to change in ownership position. A week ago, Downing Street had said the one of the top colleague of the PM was working “practically full time” on all the inclusions of the budget and what ought to be focused in the spending audit of the government, hence coordinating with the demoralised staff is going to be a big challenge for the new occupant of the job.
- The Spending – Cummings has been looking for a large part of the budget to be made available for the Science and large Infrastructure projects, and not just the High Speed 2 project, which he was not a supporter of. Mr Cummings has also been a loud and avid supporter towards increasing the income levels in the country, to a level from which the people can start contributing towards the national insurance, making affordable healthcare possible, a policy that Boris Johnson feels strongly about and wants to implement at the earliest. The basic idea is to increase the income levels to £12500 per year from the current threshold of £8632 per year, for the payment towards the National Insurance Contributions.
- Tax Structure – Johnson’s special advisor Dominic Cummings also wants the ‘idle rich’ to be taxed, but the impact of this will have to be studied by the new chancellor and his department. Similarly, all the other tax policy demands from the prime minister’s special advisor would have to be analysed thoroughly by Rishi Sunak as he would have to understand all the consequences of implementing such policies. One of the major concerns in Javid’s reign were these demands from Cummings, and this will also be a test for the new chancellor.
- Trade Deal – The Treasury department of the United Kingdom is in the final stages of talks to ensure a trade deal with the EU27 by the end of this year. Javid supported PM’s view that without large concessions by the bloc, the UK will be going to implement import tariffs on European Goods and Services. Mr Sajid Javid additionally tried to focus on protecting the City, something Cummings was a little less eager about apparently, wanting to make fishing rights a big issue in terms of negotiations.
- Digital Services tax – One of the biggest issues faced by the previous chancellor was the pressure of the United states of America’s administration regarding the delaying of a digital tax, which has basically been prepared to tax digital services providers and some of the biggest tech companies of the world such as Google, Facebook, Amazon and Apple. The previous chancellor refused to adhere the US dictate and it will be a test for Sunak as well. The UK administration has already overlooked the US’ advise to not work with Huawei’s 5G technology, and this will be another important issue for the treasury to show their strength.
How have the Pound Sterling prices responded to this news?
On 13th February 2020, after the announcement of the changes in the cabinet, the British Pound had surged against the Euro, now an advance for a half year straight, taking the GBP/EUR conversion scale back up to 1.20, offering those eyeing to purchase Euros their best incentive since a very small period of losses in December. The recovery in the Pound following the December General Election was anyways for a short interval one and inquiries will be posed with respect to whether the present jump that is being seen right now will be short term or will the rally extend further. Sterling’s price growth comes in the midst of progressing shortcoming in the Euro as well as on the back of EU27 being backed against a wall in terms of trade negotiations with the United Kingdom.
At the time of writing this report, on 14th February 2020, 08:07 A.M GMT, the Pound Sterling was trading at a price of €1.2045, an increase of around 0.1384 per cent as compared to previous day’s closing price. This price was a tad lower (0.07 per cent) of the weekly and monthly high of the pound sterling at €1.20532, closing another excellent week in comparison to the dollar.