New British Chancellor of the Exchequer Nadhim Zahawi yesterday said the British government needed to rebuild and grow the UK’s struggling economy, and he would look at all options to do that including the possibility of tax cuts.
“I will look at everything, there is nothing off the table,” he told Sky News when asked whether he wants to cut taxes.
The economy is showing signs of a slowdown as the UK heads for double-digit percentage inflation and it is forecast to be weaker than other big industrialized economies next year.
Photo: AFP
Zahawi, who moved from the British Department of Education to his new post to replace Rishi Sunak, said that next year was shaping up to be tough.
He would focus on the cost-of-living squeeze facing households, Zahawi said the day after taking office.
He also hinted at a rethink of Sunak’s plan to increase taxes on businesses next year.
“Of course I will be looking at where else I can make sure the economy remains competitive and dynamic with our European neighbors and the rest of the world,” he told the BBC.
However, Zahawi also stressed the need for “fiscal discipline” and said the government would have to be careful about increases in public sector pay, as this could further drive inflation.
“The important thing is to get inflation under control, be fiscally responsible,” he told Sky News.
He also said it was important to remember the increase in debt servicing costs.
Zahawi was appointed after Sunak quit the job in protest at British Prime Minister Boris Johnson’s “standards” and citing differences with him over economic policy.
Separately, Bank of England Deputy Governor Jon Cunliffe said the economy is slowing, but probably not headed for the kind of serious recession it suffered more than a decade ago.
“This is a very different type of shock to the financial crisis, and the financial crisis was followed by a very deep and very long recession,” Cunliffe said in an interview on BBC Radio 4’s Today program.
“What we expect is, the cost of living squeeze will hit people’s spending, and that will start to cool the economy. We can see signs that the economy is already slowing,” he said.
Cunliffe suggested that stagnation might follow.
“We forecast over the next year or so that economic growth will be essentially flat,” he said. “That’s a very different picture to the picture we saw from 2009 to 2011. It’s a picture of a slowing economy where people cut back on spending.”
The central bank would act forcefully if necessary to prevent inflation from becoming embedded in the British economy, Cunliffe added.
Additional reporting by Bloomberg
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