New UK Chancellor of the Exchequer Zahawi promises economic growth

LONDON, July 6 (Reuters) – Britain’s new finance minister, Nadhim Zahawi, pledged on Wednesday to rebuild and grow the struggling economy and said he would look at all options to do so, including possible tax cuts.

Zahawi, who moved from the education ministry to the Treasury on Tuesday after Rishi Sunak resigned in protest against embattled Prime Minister Boris Johnson, said “nothing is off the table”.

But he also faced questions in his first media interviews in office about whether he would even have a chance to steer the economy out of its impending slowdown, given Johnson’s weakened hold on power.

Other government ministers who left their posts on Wednesday included Health Secretary Sajid Javid and Junior Chancellor of the Exchequer John Glenn, who was in charge of the City of London. Read more

Britain’s economy has lost momentum as inflation moves towards double digits and is forecast to be weaker than other major industrialized economies next year.

Bank of England chief economist Huw Pill said he does not expect economic growth in the next year or so as households face the highest inflation in 40 years. Read more

As well as the challenge of skyrocketing energy and food costs, Britain is also struggling to adjust to life after Brexit.

TAX CUT COMING?

Zahawi, widely credited in the Conservative Party for successfully overseeing the rollout of a COVID-19 vaccine in Britain, said 2023 was shaping up to be “really tough” and he would focus on the cost-of-living squeeze he faces upright households.

Zahawi hinted at action to ease personal taxes and rethink Sunak’s plan to raise business taxes next year.

“Nothing is on the table. I’ll look into everything. When boards invest, companies invest, they invest for the long term and they really compare corporation tax rates,” he told Times Radio.

Many conservative lawmakers have called for tax cuts, and Sunak has ordered the finance ministry to look at options that would boost weak business investment ahead of the autumn budget statement.

Government forecasts predicted in March that public borrowing would fall to 1.9% of GDP next year – leaving some room for tax cuts – but the outlook for growth and inflation has since worsened.

Zahawi said his priority was to fight inflation – something that could be worsened by tax cuts – and also stressed the need to fix public finances after his predecessor spent about 400 billion pounds ($479 billion) , to cushion the economic blow from the coronavirus pandemic.

“We just came out of the equivalent of a world war. We need to restore the economy and return to growth,” he said, adding that the government would have to be careful with public sector wage increases, which could lead to higher inflation.

“The important thing is to get inflation under control, to be fiscally responsible,” he told Sky News.

Zahawi was appointed after Sunak quit in protest at Johnson’s “standards” and citing differences over economic policy with the prime minister.

The main opposition Labor Party said chaos at the top of British politics was contributing to the economy’s problems.

“The pound fell again yesterday. The pound is weak because the government is weak. And the weak pound means energy costs, the price of petrol and diesel go up and up and up,” said Rachel Reeves, Labour’s finance ministerial candidate. ($1 = 0.8356 pounds)

Additional reporting by William James, Farooq Suleiman and David Milliken; screenplay by William Schomberg and David Milliken, editing by Elizabeth Piper, Angus McSwan and Bernadette Baum

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