British Chancellor vows to fight inflation

Nadhim Zahavi, the new chancellor, pledged on Tuesday to lower inflation and eliminate tax-cut borrowing in a sign that he will continue the fiscal policies of his predecessor, Rishi Sunak.

In his first speech since his appointment, Zahavi will also support Sunak’s plan to radically overhaul post-Brexit financial regulation to ensure the UK remains “one of the most dynamic financial centers in the world.”

Sunak resigned earlier this month in protest of outgoing Prime Minister Boris Johnson’s leadership style and economic policy controversy, especially Johnson’s insistence on tax cuts.

Zahavi was quickly called to replace Sunak, but the new chancellor, in a speech at a City of London mansion, will insist that fighting inflation remains a top priority for the government.

“The country needs to be confident that we can and we can get inflation under control,” he said.

“That means securing robust public finances to avoid further increases in demand, helping households as they cope with the biggest price increases in a generation.”

Zahavi’s tenure as chancellor may not be long; by September 5, a new prime minister will be appointed, who will most likely appoint his chosen one as chancellor.

In the interim, Zahavi’s speech at the mansion will show that Sunak’s policies will continue not only in fighting inflation but also in overhauling the city’s regulation.

Zahavi will say: “We want the UK to remain the most open, inclusive, welcoming, competitive, safe and transparent place to do business in the financial services industry in the world.”

It pledges to repeal “hundreds of surviving EU laws and replace them with a coherent and flexible approach to financial regulation that suits us.”

A financial services bill is due to be released on Wednesday, in which the government insists that regulators treat “growth and competitiveness” as secondary goals, along with maintaining financial stability and sound institutions.

It will also contain conflicting powers allowing ministers “call” regulatory decisions with which they disagree, a move that has sparked strong disagreement with the Bank of England.

Andrew Bailey, the head of the Bank of England, insisted on the importance of preserving the independence of regulators: on Tuesday he will also address a banquet at the Mansion House.

Sunak, as part of his bid for Tory leadership, said he sees Brexit as a chance to shift the responsibility for regulation to parliament rather than “faceless regulators”.

Zahavi will say that reforming the EU Solvency II the regime that applies to insurers is an early example of the government’s new approach. Solvency II, which was introduced when the UK was part of the EU, determines how much capital companies must have and where they can invest.

The chancellor will say he wants British insurers to have “greater flexibility to invest in long-term assets such as infrastructure”.