The UK could see a rise in spending, a slashing of tax rates and a shake up of pension rules over the next months as Sajid Javid gets the keys to the Treasury and moves into Number 11.
The former home secretary and once managing director of Deutsche Bank was appointed as chancellor of the exchequer by the UK’s new prime minister, Boris Johnson, alongside other cabinet members yesterday afternoon (July 24).
Mr Javid, who originally ran against Mr Johnson in a leadership bid, backed Remain in the EU referendum but is widely considered a eurosceptic.
He was appointed as previous chancellor Philip Hammond resigned yesterday, telling Theresa May her successor “must be free to choose a chancellor” who is “fully aligned with his policy position”.
As he takes over a top spot in politics, what can advisers expect?
1 No tax increases
Neither Mr Javid nor Mr Johnson have suggested an increase in taxation to pay for increased public spending. In fact, both have opted for tax breaks.
In the election race, Mr Javid backed a cutting of the basic rate to help lower-paid workers but told The Telegraph he could also slash the rates for high earners in a no-deal Brexit scenario to inject “dynamism” into the economy.
Early in his leadership campaign, Mr Johnson promised to raise the 40 per cent income tax threshold from £50,000 to £80,000 which would benefit the top 10 per cent of earners to the tune of almost £2,500 a year.
Dave Penney, director at Invest Southwest, said: “There is a consensus that an injection of various stimuli will be needed immediately post-Brexit.
“With the personal allowance having been raised to such a high level at such great cost, but to the massive benefit of the lower paid, I would be surprised if basic tax rates were fiddled with too.”
Mr Hammond had lowered workers' income tax bills by raising the personal allowance from £11,000 to £12,500, giving workers £1,500 more tax-free income.
2 A potential pensions shake up
As home secretary, Mr Javid recommended scrapping auto-enrolment if Britain were to leave the EU without a deal.
He said such a move could give businesses a breather in a potentially tough time and could help the economy tick over.
Auto-enrolment, which means employees over the age of 22 are automatically enrolled in their employer’s pension scheme, was introduced in late 2012 and to date 10m employees have been enrolled into a workplace pension.
Alan Chan, director at IFS Pensions & Wealth, said: “This would be disastrous and a foolish move.”
He said such a policy would completely undo “all the good progress achieved by auto-enrolment since October 2012”.
He added: “Let’s remind ourselves why it was introduced in the first place: people weren’t saving enough for retirement and too reliant on the state.
“Scrapping it would send out the completely wrong message and tell the British public that it wasn’t such a big deal any way.”
3 More spending?
Throughout Mr Javid’s time at the Home Office and while bidding for Tory leader, he spoke highly of the importance of public services and of investing in the UK’s society.