New chancellor Rishi Sunak challenged over hedge fund past

Labour questions past City dealings citing former close associate’s participation in tax avoidance scheme

The new chancellor Rishi Sunak has been challenged by Labour to provide more details about his former career as a City hedge fund manager before entering politics.

Following Sunak’s rapid promotion to replace Sajid Javid in the wake of the former chancellor’s dramatic resignation on Thursday, Labour said the new chancellor had questions to answer over his past career and business dealings.

In a challenge from John McDonnell, the shadow chancellor, Labour said Sunak’s former close associate Patrick Degorce had participated in a multimillion-pound tax avoidance scheme.

Degorce and Sunak both worked for the Children’s Investment Fund Management, a hedge fund run by the billionaire Sir Chris Hohn, which also had links to companies in the Cayman Islands, Labour said. This week the EU has added the British overseas territory to its blacklist of tax havens. Use of tax havens is legal.

However, Degorce was also the founder of Theleme Partners, a hedge fund which Sunak helped to start in 2009. Degorce was ordered to repay about £8m in tax after he was found to have used a film investment partnership tax avoidance scheme.

McDonnell said: “Clearly Mr Sunak has questions to answer about his past activities and associations.”

A Treasury source said: “We will take no lectures from the Labour party, who seem to be stuck playing the same old political games rather than listening to what the public wants. The chancellor is focused on levelling up and delivering on the promises made to the British in last years election.”

Labour’s demands for more information about Sunak’s past career came as the government was unable to say on Friday whether the forthcoming budget would still go ahead as planned on 11 March following Javid’s unexpected departure.

Experts said that the government must still put forward a finance bill – which typically comes alongside the budget – in order to continue collecting taxes from workers and businesses in the next financial year.

Gemma Tetlow, chief economist at the Institute for Government thinktank, said: “I was somewhat surprised the question was raised [about the budget going ahead]. Presumably the budget planning process is pretty advanced already.”

As chief secretary to the Treasury before his rapid elevation to chancellor, Sunak had been central to the preparations as the key minister responsible for gathering budget submissions from Whitehall departments.

Despite growing expectations for a rise in government spending following his promotion, it is understood that Sunak had warned several departments in the past few weeks that the Treasury had to remain within strict limits.

The new chancellor has previously talked-up the importance of spending rules. Speaking at an event held by the rightwing Centre for Policy Studies thinktank at the autumn Tory party conference in October, he said: “There’s a very strong moral underpinning for why we think we should run sound finances.”

However, he also warned that dry, accountant-like and wonkish language used by previous Tory chancellors risked alienating voters. Ending austerity and splashing additional funding on transport projects was a priority, he said, adding: “We’ve got to a place where borrowing is under control so its right to invest in what people care about.”

Economists said the new chancellor could break with the restraint of the past in order to please his benefactor, Boris Johnson, as Sunak had hitched his career to Johnson by handing him support to become prime minister last year.

The pound rallied to a two-month high on Thursday amid growing expectations for a spending splurge.

Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, said: “The PM has a ‘yes man’ in position at the Treasury, who won’t resist pressure to spend more, if the economy starts to buckle under the strain of Brexit.”

Sunak attended his first cabinet meeting as chancellor on Friday and addressed staff at the Treasury in an internal meeting. He also said in a tweet that he had a “shared mission – to unite and level up the country” as chancellor.

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A backer of Brexit, Sunak is a keen advocate of freeports – special economic zones with lower tax requirements or border controls – as a means to promote growth in different parts of the country.

Following in the footsteps of George Osborne as a chancellor from a northern seat – yet who also grew up in the south, attended public school and Oxford university – Sunak has previously spoken about the importance of narrowing the north-south divide and fixing Britain’s lopsided economy.

Sarah Longlands, director of IPPR North, a left-leaning thinktank based in Manchester, welcomed his appointment as an opportunity to tackle regional inequality.

“The new chancellor’s first budget next month needs to give the north a chance to take control by devolving significant budgets to the north and investing in the region’s cities, towns and rural areas,” she said.

A spokesman for TCI Fund Management declined to comment. The Guardian contacted Theleme Partners and the Treasury declined to comment. Sunak’s parliamentary office did not respond to a request for comment.


Richard Partington Economics correspondent

The GuardianTramp

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