Nadhim Zahawi will spend what are likely to be his last days as chancellor in the United States on a fact-finding trip to discuss measures to tackle rising energy costs.
Zahawi, who took over as chancellor eight weeks ago and is likely to be replaced if, as expected, Liz Truss stands as the next Tory leader, will also discuss the Ukraine war and financial services cooperation .
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 that will potentially be implemented by a new chancellor, widely tipped to be Kwasi Kwarteng, the business secretary, if Truss takes over from Boris Johnson .
The result 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 vowed not to make any major decisions that would tie his successor’s hands, the lack of action amid the leadership contest, during which the prime minister has taken two vacations, has sparked criticism that ministers have disappeared ahead of an imminent national crisis over energy bills.
Labor argued that Zahawi’s visit to the US 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 are stuck with this Tory government which it does nothing. Now we find that the chancellor takes off for an international chin.”
Labor is seeking to pressure Truss over what it says is a set of unclear and often contradictory proposals from its camp to tackle energy bills, which are due to rise by 80% in October, with another big rise expected in January
Truss has not ruled out direct help for households with energy bills, but has refused to outline what that might include and has repeatedly stressed his priority is tax cuts rather than what he has called ” contributions”.
He has pledged to suspend green rates on energy bills and reverse the recent rise in National Insurance, aimed at funding the backlog of the post-Covid NHS and reforming social care.
It was reported over the weekend that it could also cut VAT by 5% or more as a way to save people money, or even reduce income tax.
However, critics have pointed out that cuts to income tax or national insurance would disproportionately benefit the highest paid and would not help those reliant on pensions or benefits, while essentials such as food is zero-rated for VAT.
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Paul Johnson, the director of the Institute for Fiscal Studies, said an approach based on tax cuts was simplistic and risked increasing the cost of borrowing.
“You clearly cannot do all 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 that with any other part of the plan, is quite troubling.”
Pat McFadden, the shadow chief secretary to the Treasury, said Truss’s lack of clarity was causing additional concern for people.
“The more different ideas emerge from the Conservative leadership contest, the clearer it becomes that neither candidate has a plan to deal with the cost-of-living crisis,” he said. “It’s energy prices that are driving this crisis. It’s energy prices that are making people desperate as they worry about making ends meet. This Liz Truss flip-flop, floating a one political idea after another, is causing the country unnecessary worry about its bills.”