(Bloomberg) -- UK Chancellor of the Exchequer Nadhim Zahawi said he’s working on additional measures to help households and businesses with soaring energy bills.
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The proposals will help the country’s incoming prime minister “hit the ground running” after a leadership vote in the governing party concludes next week, Zahawi said in an interview with Bloomberg Television on Monday. He said smaller businesses, in particular, will likely need assistance as a result of the energy crisis engulfing the UK and other European countries.
Zahawi’s remarks come as economic headwinds build against the UK, with the Bank of England predicting a recession lasting more than a year amid surging inflation. Adding to the gloom, the regulator Ofgem on Friday said a price cap on domestic energy bills will rise in October to nearly triple last winter’s level, piling misery on Britons already struggling with a cost-of-living crisis.
Zahawi is hamstrung in what he can do to help consumers because of a government pledge not to make major fiscal decisions while a leadership contest plays out to decide who’ll succeed Boris Johnson as prime minister next month. He is working on policy options that the two remaining contenders, Liz Truss or Rishi Sunak, could implement if they win power.
Truss, the strong favorite, has vowed to cut taxes and take green levies off energy bills, but has so far failed to detail how she’ll help the lowest earners and pensioners who’ll benefit the least from her plans. Meanwhile Sunak has pledged more support for those groups, but has yet to say how much.
Zahawi, who backs Truss, may end up being one of the UK’s shortest-lasting chancellors, even if the foreign secretary does emerge victorious. That’s because Business Secretary Kwasi Kwarteng is strongly tipped by Tory insiders to be Truss’s chancellor. Zahawi only took office in July after Sunak quit the post, helping to trigger a slew of ministerial resignations that led to the prime minister’s own downfall.
Asked whether more public spending to help with the energy crisis will worsen inflation, Zahawi said the UK has some room for additional capital expenditures, and will maintain fiscal discipline. He also backed the Bank of England’s efforts to tame prices.
“I am confident that the governor has the tools available to him to be able to also bear down on inflation,” the chancellor said, also noting that the bank is independent.
The winner of the leadership contest will be announced Sept. 5 and take over from Johnson the following day.
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