Labour criticises chancellor’s trip to US for ‘chinwag’ | Nadhim Zahawi

Nadhim Zahawi will spend what are likely to be his final few days as chancellor in the US on a fact-finding trip to discuss measures to tackle soaring energy costs.

Zahawi, who took over as chancellor eight weeks ago and is likely to be replaced if, as widely expected, Liz Truss is unveiled as the next Conservative leader, will also discuss the Ukraine war and cooperation on financial services.

He said he wanted to “work closely with my allies on the common challenges we face to create a fairer and more resilient economy at home and abroad” during the visit to New York and then Washington DC.

However, Zahawi will at most be able to gather ideas for possible future policies to be potentially implemented by a new chancellor, widely tipped to be Kwasi Kwarteng, the business secretary, if Truss takes over from Boris Johnson.

The outcome of the Conservative leadership contest will be announced next Monday, with the winner expected to formally take over as prime minister a day later.

While Johnson has pledged not to take any major decisions that would tie the hands of his successor, the lack of action amid the leadership contest, during which the prime minister has taken two holidays, has led to criticism that ministers have gone missing before an imminent national crisis over energy bills.

Labour argued that Zahawi’s US visit would change little. James Murray, the shadow financial secretary to the Treasury, said: “Families across the country are desperately worried about the massive rise in energy bills that is on the way but we’re stuck with this do-nothing Tory government. Now we discover the chancellor is jetting off to an international chinwag.”

Labour is seeking to put pressure on Truss over what it says is an unclear and often contradictory set of proposals from her camp to tackle energy bills, which are due to rise by 80% in October, with another steep increase expected in January.

Truss has not ruled out direct help for households over energy bills but she has refused to set out what this might include, and has repeatedly stressed that her priority is tax cuts rather than what she has termed “handouts”.

She has committed to suspending green levies on energy bills and reversing the recent rise in national insurance, intended to finance the clearing of the post-Covid NHS backlog and to reform social care.

Over the weekend it was reported that she could also cut VAT by 5% or more as a way to save people money, or even cut income tax.

However, critics have pointed out that income tax or national insurance cuts would disproportionately benefit the better-paid and not assist those relying on pensions or benefits, while essentials such as food are zero-rated for VAT.

Paul Johnson, the director of the Institute for Fiscal Studies, said an approach based on tax cuts was simplistic and risked pushing up the cost of borrowing.

“You clearly can’t do all of this without completely crashing the public finances,” he told the Times. “This simplistic mantra that you cut taxes and the economy grows more, that you cut taxes when you have a big deficit and high inflation, and you don’t do it with any other part of the plan, is quite worrying.”

Pat McFadden, the shadow chief secretary to the Treasury, said the lack of clarity from Truss was causing extra worry for people.

“The more different ideas spill out of the Tory leadership contest, the clearer it becomes that neither candidate has a plan to deal with the cost of living crisis,” he said. “It is energy prices that are driving this crisis. It is energy prices that are driving people to despair as they worry how to make ends meet. This flip-flopping by Liz Truss, floating one policy idea after another, is causing the country unnecessary worry about their bills.”

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