Nadhim Zahawi, the new UK chancellor, is to review the British government’s plans to raise corporation tax from 19p to 25p from next April.
Zahawi was appointed as the UK’s finance minister on Tuesday night after the resignation of his predecessor Rishi Sunak, health secretary Sajid Javid and eight other junior members of the government.
With Boris Johnson battling for his future as prime minister, Downing Street wants the chancellor to consider introducing tax cuts – and reversing tax rises – in an attempt to win back public support, despite Britain’s fragile public finances.
Zahawi told Times Radio on Tuesday that he could roll back the corporation tax rise planned for the spring. “When boards invest, companies invest, they invest for the long term and they do compare corporation tax rates,” he said. “So I will look at everything.”
The chancellor also told Sky News that he would look at “everything” in terms of corporation tax to make the UK “as competitive as it can be”.
The tax rise was designed to raise £17bn a year to help repair the public finances after the UK government borrowed hundreds of billions of pounds to get the country through the Covid-19 pandemic. It has been partly offset by a “super-deduction” designed to encourage companies to step up their capital investment.
Sunak said in his resignation letter that he could not agree an economic strategy with Johnson, who is known to dislike the looming tax rise on business.
“In preparation for our proposed joint speech on the economy next week, it has become clear to me that our approaches are fundamentally too different,” he said.
A close ally of Zahawi said that he had taken the job out of a duty “to fix some of woes” with the economy.
One senior government insider suggested the new chancellor would be pursuing a different economic strategy to Sunak: “For the next stage, we need a plan for growth and not just balancing the books.”
Zahawi told Sky News on Monday that “sometimes it’s easy to walk away”.
“You don’t go into this job to have an easy life,” he said. “You make some tough decisions every day.