Business experts have called on Nadhim Zahawi to help the poorest workers in order to aid the UK’s economic recovery as he starts his tenure as Chancellor.
It comes after Rishi Sunak stepped down from the role on Tuesday, in the aftermath of the row surrounding the Prime Minister’s former deputy chief whip Chris Pincher.
In Mr Sunak’s resignation letter, he said he could not agree an economic strategy with Boris Johnson because their stances are “fundamentally too different”.
Paul Drechsler, former head of the CBI and current chairman of London First and the International Chamber of Commerce, called on the new Chancellor to improve confidence by addressing the cost-of-living crisis head on.
“We have a decline in investment, decline in exports, economic growth falling off, inflation rising, poverty escalating.
“I would say the most important thing to do is feed people that are hungry. That is a burning platform at the moment.”
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, agreed.
She said: “Those on the lowest incomes will be hit much harder by the cost-of-living crisis than those on the highest wages, and will see far more damage done to their overall financial resilience.
“This owes much to the fact they have far less wiggle room in their budgets, so they’re struggling to cope with rises in the cost of essentials.
“With less to fall back on, they’re more likely to wipe out any lockdown savings and turn to borrowing.
On Wednesday, Mr Zahawi hinted that the planned corporation tax hike could be halted and said “everything is on the table” when asked about potentially cutting taxes.
Numerous experts have suggested the Prime Minister is likely to move for tax reductions soon in the hope it will win round party support.
Nimesh Shah, chief executive at Blick Rothenberg, said: “I expect Boris Johnson and his new Chancellor Nadhim Zahawi to call an emergency Budget before the summer recess to make a series of tax announcements.
“Rishi Sunak had already confirmed a 1% cut to the basic rate of income tax to 19% in April 2024.
“I believe the new Chancellor Nadhim Zahawi will bring forward the cut to April 2023 and increase it to 2%.”
However, JP Morgan’s Allan Monks raised concerns over further tax-cutting measures, saying: “We have been sceptical about the prospect for a broad-based tax cut in the near term.
“In addition to potentially adding to inflation concerns, Johnson would need to act very quickly to deliver this.”
Speaking at the Liaison Committee, Mr Johnson said “one of the benefits of Brexit is you can cut VAT on fuel”, before suggesting the new Chancellor might consider it.
Education Select Committee chairman Robert Halfon urged the Prime Minister to slash either fuel duty or VAT, as he said the situation has become “unsustainable”.
The PM recognised the “pressure is there” and told Mr Halfon “I hear you loud and clear”, before adding: “One of the benefits of Brexit is you can cut VAT on fuel.”
The Tory MP for Harlow pressed him further, saying: “Do you recognise that you need to slash it? You need to literally cut it by a significant amount because this is unsustainable.
“It’s hurting our frontline services, it is hitting our bus services, it is hitting transportation, and it’s hurting our businesses as well.”
Mr Johnson replied: “I hear you loud and clear. So, we have a new Chancellor, we will see where we get to all that.”