Rishi Sunak sought to burnish his tax cutting credentials in the race to be the next UK prime minister with a new pledge to slash income tax in the next parliament.
The former chancellor, who is facing foreign secretary Liz Truss in the Conservative party leadership contest, announced on Sunday he would cut the basic rate of income tax in 2024 from 20 per cent to 19 per cent., followed by further cuts to eventually reach 16 percent by 2029.
Sunak initially resisted tax cuts in the contest, instead standing on a platform of “sound money” and tackling inflation. But, sstruggling to make headway against Trussthe former chancellor announced last week he would cut VAT on energy bills to ease the cost of living crisis.
He described the latest plans as a “radical vision” but also “a realistic one” that harked back to Margaret Thatcher’s tax cutting agenda in the 1980s. Sunak also made a coded attack on Trusswho has pledged £30bn of tax cuts as part of her pitch to Tory party members.
He said: “I would urge them to treat with caution any vision that doesn’t involve any difficult trade offs and remember that if something sounds good to be true — then it probably is.”
But Simon Clarke, chief secretary to the Treasury who is backing Truss’s bid, criticized the long term nature of Sunak’s plans. “We cannot afford to wait to help families, they need support now. Liz will cut taxes in seven weeks, not seven years,” he said.
One Truss campaign insider said: “It’s welcome that Rishi has performed another U-turn on cutting taxes, it’s only a shame he didn’t do this as chancellor when he repeatedly raised taxes.”
Sunak’s team said on Sunday that the cut was affordable. Each cut of one percentage point costs £6bn and the calculations were based on the UK economy growing at 1.7 per cent a year during the next parliament.
These rates of growth were forecast by the Office for Budget Responsibility for the year after 2024.
But the fiscal watchdog also forecast that even with the first income tax cut in 2024, the tax burden would remain at a level not seen since the aftermath of the second world war.
Lower income tax rates in subsequent years would also not necessarily see the overall tax burden falling, but remaining stable at a high level after the tax increases imposed by Sunak in recent budgets.
The suggestion it would be easy to cut taxes also made no allowance for the pressures on public services in coming years and from high inflation, which will make the budget calculations more difficult for the chancellor in the next parliament.
Torsten Bell, director of the Resolution Foundation, said that even with £30bn a year of tax cuts, higher than Sunak’s plan, taxes overall would still be higher than at any time since the early 1950s.
“Saying you’re a tax cutter is all well and good, actually cutting them in the 2020s is another thing entirely, given long-term structural pressures,” he wrote last week.
Meanwhile, a new poll of Conservative councilors suggested that the leadership race was tighter than other recent surveys. Savanta ComRes said that 31 percent of councilors supported Truss and Sunak on 29 percent.
Mel Stride, the former Treasury minister and a key member of Sunak’s campaign team, said “anyone thinking that this will be a coronation should think again.”
The two contenders will go head to head for the second leadership hustings for Tory party members in Exeter on Monday. Two further events will be held in Cardiff on Wednesday and Eastbourne on Friday.