New UK Finance Chief Zahawi Inherits Economic Crisis
Britain’s new finance minister, Iraqi-born Nadhim Zahawi, has inherited a cost-of-living crisis that risks pushing the UK economy into recession.
The former education minister was parachuted into the Treasury late 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 percent, 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 Wednesday.
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 Wednesday.
“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 Tuesday, including on whether he would uphold Sunak’s pleas for fiscal discipline against Johnson’s free-spending instincts.
In early London trading Wednesday, the benchmark FTSE 100 stocks index jumped 1.6 percent and the pound steadied against the dollar.
The FTSE had tumbled almost three percent and sterling slumped nearly two percent against the dollar 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, postal and railway staff in walking out.
Zahawi won widespread praise for overseeing Britain’s pandemic vaccines rollout.
But like Sunak, his private wealth has drawn adverse attention, including when he claimed parliamentary expenses for heating his horse stables in 2013.
Zahawi was born in Baghdad to a Kurdish family who moved to Britain when he was a child, not speaking any English.
He has credited the poems of Philip Larkin for helping improve his knowledge of the English language before going on to study chemical engineering at University College London.
Zahawi is MP for Stratford-on-Avon, which includes William Shakespeare’s birthplace Stratford-upon-Avon.