Nadhim Zahawi, the new UK chancellor, is to review plans by the UK government to raise corporation tax from 19p to 25p from next April.
Zahawi was appointed UK finance minister on Tuesday night after the resignation of his predecessor Rishi Sunak, Health Secretary Sajid Javid and eight other junior cabinet members.
As Boris Johnson battles for his future as Prime Minister, Downing Street wants the Chancellor to consider introducing tax cuts – and reversing tax hikes – in a bid to win back public support , despite the fragility of British public finances.
Zahawi told Times Radio on Tuesday that he could cancel the corporate tax hike planned for the spring. “When boards of directors invest, companies invest, they invest for the long term and they compare corporate tax rates,” he said. “Then I’ll watch everything.”
The Chancellor also told Sky News he would look at “everything” in terms of corporation tax to make the UK “as competitive as possible”.
The tax hike was aimed at raising £17billion a year to help fix public finances after the UK government borrowed hundreds of billions of pounds to get the country through the Covid-19 pandemic. It was partly compensated by a “super-deduction” intended to encourage companies to accelerate 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 impending corporate tax hike.
“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 he took the job off a duty “to fix some issues” with the economy.
A senior government official suggested the new chancellor would pursue a different economic strategy than Sunak: “For the next stage, we need a growth plan and not just balancing the books.”
Zahawi told Sky News on Monday that “sometimes it’s easy to walk away”.
“You don’t come into this job to have an easy life,” he said. “You make tough decisions every day.