Former chancellor Rishi Sunak has promised to deliver “the largest cut to income tax” in 30 years if he succeeds in the Conservative leadership election.
The leadership hopeful, who contests the run-off against incumbent foreign secretary Liz Truss, has said that under his premiership the basic rate of income tax would be cut from 20 per cent to 16 per cent by the end of the next Parliament.
Tax has been a major bone of contention in the contest so far, with Sunak having been a standout exception from other candidates in his approach of cutting taxes later rather than in the immediate term.
Sunak had already outlined plans to cut income tax by one penny in April 2024, with his latest pledge of removing a further three pence in the pound adding to his “radical” but “realistic” vision for tax policy.
Once again talking-up the need to temper inflation before cutting taxes, Sunak told the BBC: “I want to make sure that we can pay for it (tax cuts), I want to make sure that we can do it alongside growing the economy.
“I don't think embarking on a spree of excessive borrowing at a time when inflation and interest rates are already on the rise would be wise.”
However, the larger income tax cut of an additional three pence would not come until December 2029 at the latest, and supporters of his leadership rival have argued that households cannot wait such an amount of time for the tax burden to be alleviated.
Some of Truss’ backers in the leadership race have argued that Sunak’s adversary would “cut taxes in seven weeks, not seven years”, accusing Sunak of announcing further plans for future tax cuts in a bid to regain momentum in the contest.
Sunak has refuted the claims, arguing that the pledge of future cuts was “entirely consistent” with the approach his campaign has been fought on.
He has also told the BBC of his ambitions to do “radical and different” things around economic policy, adding that he had already “ripped up” the fiscal rule-book during the Covid-19 pandemic to provide support to people and businesses.
Truss, on the other hand, has promised that she would reverse the National Insurance increase triggered back in April, halt a planned corporation tax hike, and introduce a temporary suspension of green levies on energy bills, should she be elected.
Both candidates have fiercely attacked each other’s tax policies, with Sunak arguing that Truss’ plans to slash tax now would “tip millions of people into misery” while Truss said that Sunak’s continued approach of higher taxation in the here and now would only shrink the economy.
Simon Clarke, the chief secretary to the Treasury, has thrown his support behind Truss in the leadership contest, emphasising that British families need help with the cost-of-living crisis “now”.
Clarke said: “We cannot afford to wait to help families, they need support now. Liz will cut taxes in seven weeks, not seven years.”
The current chancellor, Nadhim Zahawi, is also backing Truss to be the next prime minister, saying that the UK needed a “booster attitude to the economy, not a doomster one”.
Zahawi wrote in the Telegraph: “We are in a national economic emergency, and we need more than words. We need delivery, and Liz will be the delivery prime minister.”
The chair of the One Nation Conservatives group of Tory MPs, Damian Green, is one of Sunak’s backers, who says that his fiscal policy vision will make “a real difference to the lives of millions.”
“That’s what I think we need in the next prime minister,” Green added.
Ballot papers have now been sent to the Conservative party members to enable them to cast their vote on who will be the next prime minister.
The winner of the contest will be announced on September 5.
