LONDON (AFP) – Britain’s new Finance Minister Nadhim Zahawi, has inherited a cost-of-living crisis that risks pushing the United Kingdom (UK) economy into recession.
The former education minister was parachuted into the Treasury late on Tuesday after predecessor Rishi Sunak’s shock resignation over the culture of scandal plaguing Prime Minister Boris Johnson.
Johnson also lost his health minister, Sajid Javid.
Zahawi takes charge with UK inflation at a 40-year peak of 9.1 per cent, a level set to hit double figures this year on soaring energy and food prices according to the Bank of England (BoE).
“I’ve got to make sure we get through… (this) inflation, which can be a really painful thing if we let it get out of control,” the 55-year-old told Sky News yesterday.
The self-made millionaire co-founded the prominent polling company YouGov and was active in local Conservative politics in London before becoming an MP in 2010.
The BoE on Tuesday warned that the global economic outlook had “deteriorated markedly” owing to runaway prices fuelled by Russia’s invasion of Ukraine.
The central bank has hiked British interest rates five times since December in a bid to tame inflation.
The UK government has meanwhile sought to ease the financial pain with a raft of measures, including a slight reduction on fuel tax.
However, critics said the moves fall well short of what is needed to help cash-strapped households and businesses. “You don’t go into this job to have an easy life,” Zahawi added yesterday.
“You make some tough decisions every day. And sometimes it’s easy to walk away but actually, it’s much tougher to deliver for the country.”
Zahawi denied threatening to quit the government if not given the top Treasury job. “I want to make sure that not only do we rebuild the economy, we’ve got to grow the economy,” added the new chancellor of the exchequer.
Zahawi refused to comment to reporters as he left a meeting in 10 Downing Street on Tuesday, including on whether he would uphold Sunak’s pleas for fiscal discipline against Johnson’s free-spending instincts.
In early London trading yesterday, the benchmark FTSE 100 stocks index jumped 1.6 per cent and the pound steadied against the dollar.
The FTSE had tumbled almost three percent and sterling slumped nearly two per cent against the dollar on Tuesday on growing fears of a global recession.
“Political risks do not seem to be having a major impact on UK assets,” noted Markets.com analyst Neil Wilson. “There are far too many bigger things on our minds right now – inflation, the economy slowing down, strikes.”
Britain is in the midst of nationwide strikes – affecting in particular the transport sector – as wages are eroded by the rocketing inflation.
Teachers and workers in the state-run National Health Service are mulling whether to join aviation, legal and railway staff in walking out.