Nadhim Zahawi emerging from Number Ten after his appointment as Chancellor
The new Chancellor will seek some early fixes, but is also eyeing the bigger prize, writes TERRY MURDEN
From the moment he got the call from Downing Street, Nadhim Zahawi knew he was likely to leave with one of two jobs in Cabinet that had earlier been made vacant. The now former UK Education Secretary must have also known that his chances of ultimately replacing the man who summoned him had just been significantly enhanced.
Mr Zahawi, who replaces Rishi Sunak as Chancellor, will certainly have accepted the job after extracting concessions from a much weakened Prime Minister. These will have included a list of demands to prevent further resignations within the Cabinet and the wider offices of government. Indeed, Mr Johnson is now much more at the mercy of those who stay loyal to him.
A package of early tax cuts, possibly including fuel duties and VAT, and more incentives for business investment, have surely edged close to the top of the new Chancellor’s agenda.
The big question is whether he has correctly identified the medicine required to cure the ills of the economy or those of the Tory party. Perhaps one may lead to the other. It may also help to lever Mr Zadhawi into the top office.
He arrived in Britain as a nine-year-old Kurdish refugee after fleeing Saddam Hussein’s brutal regime with his family. He did not speak English but his credentials as a successful businessman were soon in evidence as he went on to set up the polling firm YouGov and build a £100 million property portfolio.
His prospects certainly look more favourable than those for the economy, with the Bank of England issuing more dire warnings and seemingly lacking confidence in interest rates to do the trick. So a package of fiscal reforms looks likely.
Mr Zahawi’s challenges are clearly mountainous; from the rising cost of living to the prospect of a flattening economy falling into recession.
Economists such as Paul Johnson of the Institute for Fiscal Studies argue that a VAT cut would be the wrong solution as it would best work at times of high unemployment and low inflation – the opposite of today’s problem.
However, it would play well to disgruntled Tory backbenchers and the wider business community who are looking for a short-term fix, and to Mr Johnson who would hope to benefit if the Chancellor can at least stop the economy from sliding further into trouble.
The market will be keen to know if Mr Zahawi intends to bring forward some of his predecessor’s plans for the autumn budget and possibly reverse the more unpopular measures, including higher corporation tax. Such a move would not only bring some comfort to rattled businesses and investors, it would help shift public attention away from speculation over Mr Johnson’s future.
If not, then at least he may have put himself in a good position to replace him.
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business