WHEN Rishi Sunak stood down as the UK’s chancellor last week, he lamented that it “may be my last ministerial job.” Yet within three days, the former hedge fund manager was a frontrunner to replace Boris Johnson as prime minister (PM).
He’s been joined in the leadership race by Sajid Javid, another former highflyer in the City of London, after the pair’s resignations, minutes apart, spelled the end of Johnson’s tumultuous spell in Number 10.
People close to the pair have said they didn’t plan their exits in unison, and they’re certainly not working together now. Javid, the former health secretary, on Monday poked fun at candidates who had a “logo or a slick video ready to go,” after Sunak released a three-minute reel on his life and times. The former’s committed to tax cuts, while the latter is determined to balance the books. The Times has reported that Javid resisted pressure to stand aside to give Sunak a clear run.
Their backgrounds in finance could improve the fortunes of an industry that was largely sidelined during years of Brexit negotiations — and there are early signs that voters, whose living standards are yet to recover from the 2008 financial crisis, are increasingly willing to support wealthy politicians from the City.
Javid spent over 17 years at Chase Manhattan and Deutsche Bank AG, where he earned about £3 million a year, headhunters told Bloomberg News at the time. He publicly defended the industry at a time when “banker bashing” was easy political capital.
“I see a financial services sector that paid more than £65 billion in taxes last year,” he said at an awards ceremony run by newspaper City AM in 2015. “I see an industry that provides work for more than 2 million people in every corner of our country.”
Deutsche Bank’s job cuts at the time were a “tragedy,” he added, while he attacked the public perception of bankers. “I don’t see ‘parasites,’ I don’t see a problem that needs solving,” Javid said. “I see talented, hard-working, dedicated men and women at the top of their game.”
A staunch defender of free markets, Javid has promised to cut corporation tax to 15% from the current rate of 19% if he is elected leader. While the move would be projected to cost the Treasury more than £10 billion a year, Javid cited the Laffer curve theory — that lower tax rates can lift revenues — during interviews on Sunday.
Sunak, who is now campaigning for fiscal prudence after raising corporation tax and National Insurance during his time as chancellor, has been more coy about his pre-Westminster career.
A graduate of Oxford and Stanford, Sunak began his career at Goldman Sachs Group Inc. before spending three years at The Children’s Investment Fund, run by billionaire philanthropist Chris Hohn. He later joined his former TCI colleague Patrick Degorce’s hedge fund Theleme Partners.
Team Sunak’s launch video took aim at “comforting fairytales,” in a veiled jibe at the high-spend, low-tax policies associated with Johnson. While the video tells the story of the Sunak family and their life in Britain, it makes no mention of his career in finance and, specifically, hedge funds — nor the extraordinary wealth of his wife, the Indian heiress Akshata Murty.
Sunak is expected to kick off his campaign in earnest on Tuesday with a pledge to only reduce taxes “once we have gripped inflation.”
Despite these differences, considerably more unites than divides the former bankers. Both are instinctively market liberals and keen to deliver post-Brexit reforms to boost finance, the country’s most lucrative industry.
Voters, particularly in key seats in Labour’s former “Red Wall” strongholds, may disagree, especially if the cost of living squeeze and energy crisis intensify this winter.
“If either Sunak or Javid was Tory leader, those things would become a fairly significant negative,” said Mike Smithson, the author and founder of politicalbetting.com, referring to their image as wealthy City types. “Labour would focus very hard on those things. But for now, they’re not Johnson – and anything negative pales in comparison to his record.”
Iain Anderson, founder of Cicero, a communications firm spanning Westminster and the City, believes there has been some improvement in the public’s perception of finance.
“I think things have changed somewhat,” he said. “Banking was seen to support small businesses during the pandemic.”
Attitudes to the City have thawed in recent years, according to polling firm Ipsos Mori. In 2013, just 21% of people said they trusted bankers to tell the truth. By last year, this had risen to 43%, far ahead of government ministers and politicians in general, who are trusted by just 19%.
And after Johnson’s unruly manner of governing, people could be willing to back level-headed politicians with a track record in business. Anderson believes Sunak’s prudent approach to the public finances has helped to drive his political revival.
“He’s got something to say about fiscal credibility,” Anderson added. “The Conservatives’ trump card has always been sound money, and that’s been lost through Johnsonian ‘spend spend spend’.”
Sunak has made a remarkable comeback from his time in Johnson’s government. He was fined in April for breaking Covid rules. In the same month, Sunak endured intense criticism after it was revealed that he used to hold a US green card and that his millionaire wife had reduced her UK tax bill by adopting a non-domicile status.
Javid also disclosed around the same time that he was a non-dom when he was working abroad as a banker — a status that he’s declined to set out in detail during the leadership race, according to an interview with the Telegraph.
During this furor, the odds on Sunak becoming the next party leader and PM were as remote as 69/1, according to Betfair. In recent days the odds have been drastically cut to 2/1, with Javid the seventh favorite at around 43/1. Whatever the optics of a highly wealthy ex-hedge fund manager who used to hold a US green card, they appear to have been pushed to one side.
“As we’ve seen at Westminster, the herd is powerful,” Johnson said last week as he stood on Downing Street and delivered his resignation. “And when the herd moves — it moves.”
The momentum remains firmly behind Sunak, with a good chance that the Conservatives head into their autumn conference with at least one former City boy at the helm. — Bloomberg