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New UK finance minister Zahawi pledges to boost economy By Reuters

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New UK finance minister Zahawi pledges to boost economy By Reuters


© Reuters. Nadhim Zahawi speaks during a press conference during the United Nations Climate Change Conference (COP26) in Glasgow, Scotland, UK, November 5, 2021. REUTERS/Phil Noble/Files


William Schomberg

LONDON (Reuters) – Britain’s new finance minister Nadhim Zahawi pledged on Wednesday to rebuild and grow the struggling economy, saying he would consider all policy options, including possible tax cuts.

Zahawi, who took over the Treasury on Tuesday after Rishi Sunak resigned in protest against embattled Prime Minister Boris Johnson, said “nothing is impossible” of”.

But given Johnson’s waning grip on power, the former education secretary also faces questions about his chances of steering the economy out of a slowdown.

Other government ministers to resign include Health Minister Sajid Javid and John Glenn, the junior finance minister in charge of the City of London.

With inflation in the double digits, the UK economy has lost momentum and is expected to grow weaker than other large industrialised economies next year.

Bank of England chief economist Huw Pill said he didn’t expect any economic growth for the next year or so as households faced the highest inflation in 40 years.

Britain is also struggling to adjust to life after Brexit.

Economists said both the appointment of Zahawi and the possibility of a new prime minister raised the prospect of faster economic growth, with the Bank of England likely to raise interest rates further in response.

“Potential medium-term gains could make the recent stagnation from the new Conservative leadership race worthwhile,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

A more pragmatic approach to relations with the EU would boost exports and investment by companies, he said.

Tax cuts coming?

Zahavi, widely praised among the Conservatives for his successful oversight of the UK’s COVID-19 vaccine rollout, said 2023 would be “very tough”.

Zahavi hinted at measures to ease personal taxes and reconsider Sunak’s plans to raise corporate taxes next year.

“Nothing is impossible. I’ll look at everything. When boards invest, companies invest, they invest for the long term, and they do compare corporate tax rates,” he told TIME Radio.

Many Conservative MPs want tax cuts, while Sunak has been looking for ways to boost lackluster business investment.

According to official forecasts in March, the government may have some room to cut taxes. But the UK’s growth and inflation outlook has deteriorated since then.

Zahavi said his priority was fighting inflation – which tax cuts could fuel – and he also stressed the need for a 400 billion pound ($479 billion) response to the coronavirus pandemic in the wake of Sunak’s Repair public finances.

“We just emerged from a world war. We have to rebuild the economy and get back to growth,” he said.

Zahavi was appointed after Sunak resigned in protest over Johnson’s “standards” and disagreements with the prime minister over economic policy.

The opposition Labour Party said the political chaos had exacerbated the economic problems.

“The weak pound is because of a weak government. And a weak pound means rising energy costs, petrol and diesel costs,” said Rachel Reeves, Labour’s future finance minister. ($1 = £0.8356)

(Additional reporting by William James, Farouq Suleiman and David Milliken; Writing by William Schomberg and David Milliken, Editing by Elizabeth Piper, Angus MacSwan and Bernadette Baum)

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