Rishi Sunak promises biggest income tax cut in 30 years | Former chancellor vows to slash basic rate from 20pc to 16pc, as he fights to overcome Liz Truss’s lead in Tory leadership contest
Rishi Sunak promises biggest income tax cut in 30 years | Former chancellor vows to slash basic rate from 20pc to 16pc, as he fights to overcome Liz Truss’s lead in Tory leadership contest
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Rishi Sunak has promised the biggest income tax cut in 30 years, vowing to slash the basic rate from 20 per cent to 16 per cent if he becomes prime minister.
In a major announcement as he battles to close the gap to frontrunner Liz Truss, the former chancellor pledged to deliver the change by the end of the next parliament.
The move would mean millions of households paying a fifth less in income tax. Someone earning the average UK salary of £32,000 would save about £777 under the plans.
Mr Sunak’s campaign argued that the move was consistent with his previous stances, given the tax cut would only be adopted once inflation drops and would not be funded by borrowing.
But a Truss campaign source dubbed the move a “flip-flop” aimed at winning votes from Tory members, after three weeks of fiercely criticising his rivals for promising major tax cuts.
Mr Sunak said: “What I’m putting to people today is a vision to deliver the biggest income tax cut since Margaret Thatcher’s government.
“It is a radical vision but it is also a realistic one and there are some core principles that I’m simply not prepared to compromise on, whatever the prize.”
But Simon Clarke, the Chief Secretary to the Treasury, who is backing Ms Truss and held his post under Mr Sunak, countered: “Liz will cut taxes in seven weeks, not seven years.”
Postal ballots in the race to replace Boris Johnson as Conservative Party leader and prime minister start being sent out on Monday, giving Tory members the chance to vote early in the race before the result is announced on Sept 5.
The campaign battle so far has been dominated by differences on economic approach between Mr Sunak and Ms Truss, the Foreign Secretary – most notably on taxation.
Mr Sunak has argued that bringing down inflation should be the priority, insisting that big tax cuts must wait. Ms Truss has vowed tax cuts this year to trigger economic growth, paid in part by more borrowing.
Now Mr Sunak, who has been consistently lagging behind Ms Truss in opinion polls of Tory members, has unveiled a promise to deliver a major personal tax cut if he wins.
While in the Treasury, the former chancellor had promised to cut the basic rate of income tax from 20 per cent to 19 per cent by 2024. The change is already government policy.
He is now promising to drop that down to 16 per cent by the end of the next parliament – the period between the next general election and the one after that.
It is the second major tax cut announced by Mr Sunak in a week, coming after he vowed to scrap VAT on household fuel bills for a year. He is also promising a major new investment tax cut this autumn, replacing the so-called “super deduction”.
The timing of the income tax cut in part depends on when the next election is held. If it takes place in May 2024, as widely expected, the next parliament could run to 2029 – although it may end sooner.
Mr Sunak hopes to drop the basic income tax rate by one percentage point each year from 2024, according to a campaign source, meaning it would fall to 16 per cent around 2027.
It costs about £6 billion for every percentage point drop in the basic income tax, meaning the extra three percentage point reduction being promised would cost £18 billion.
It would be the largest cut to income tax since the late 1980s, when Lord Lawson slashed the basic and higher rate when he was chancellor under Margaret Thatcher’s premiership.
**‘I never make promises I can’t pay for’**
High earners will save less proportionally than low earners from the change, given that some of their income falls into the higher income tax rate of 40 per cent – which Mr Sunak is not proposing to change.
The Sunak campaign is arguing that the cut will be funded by extra tax revenues generated by the economic growth currently forecast between 2024 and 2027 and will not involve any more borrowing.
Mr Sunak said: “Firstly, I will never get taxes down in a way that just puts inflation up. Secondly, I will never make promises I can’t pay for. And thirdly, I will always be honest about the challenges we face. Because winning this leadership contest without levelling with people about what lies ahead would not only be dishonest – it would be an act of self-sabotage that condemns our party to defeat at the next general election and consigns us to a long period in opposition.
“There is no more serious choice than the one now facing Conservative members – to decide the person who leads our country at home and abroad during difficult times. As they turn to that decision, 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 Mr Clarke responded: “People are facing the biggest cost of living crisis in decades and the tax burden is at its highest level in 70 years. We cannot afford to wait to help families, they need support now.”
A Truss campaign source went further: “It’s welcome that Rishi has performed another U-turn on cutting tax. It’s only a shame he didn’t do this as chancellor, when he repeatedly raised taxes.
“Unfortunately it’s a case of ‘jam tomorrow’. People need tax cuts in seven weeks, not in seven years. He has also made it conditional on getting growth first – knowing full well that his corporation tax rises are contractionary. The public and Conservative Party members can see through these flip-flops and U-turns.”
Ms Truss has promised to cancel the planned rise in corporation tax from 19 per cent 25 per cent due in April, reverse the 1.25 per cent National Insurance increase that kicked in this spring and lift the green energy levy imposed on consumers’ bills for two years.
The Sunak campaign has argued that his tax cuts would not need more borrowing and debt would still keep falling as a percentage of GDP each year. Ms Truss has said “fiscal headroom” would cover some of the £30 billion cost of her tax cuts, but argued the Covid-19 debt should be reduced over a longer period than Mr Sunak is proposing.
Politicians often U-turn on their policies after winning an election but here we have one U-turning in the middle of his campaign.
And for the people on a pittance already below the annual personal allowance?
This idiot just raised NI, does he really think the tory membership are that stupid?
So he admits that he’s been doing a terrible job?
Rather see the personal allowance get raised to be honest.
They’re both in Dreamland if they see themselves as fit to lead. We need radical change to save our country, not the Token Black Vs Mental Aunt eviction night special.
This is starting to look like a student class president election, over promising and under delivering
Yes drop the lower rates, but increase the top rates to compensate. Otherwise, all we get is a cut in funding for thing we need.
Any income tax cut will be ate up by price rises and we’ll be no better off
The next 2 years are going to be even shitter than the last 3 years, which were even shitter than the previous 3 years, which were much shitter than the 4 years before then.
Wait, I think I spot a trend
Wow, so the knives are out now? I never thought that Liz Truss was a credible opponent, but maybe I am mistaken? Her casual and not so casual racism, her homophobia etc seems to appeal to the party membership.
It’s the Richy Magic Money Tree.
I don’t want to pay less tax – I want those who earn millions to pay an appropriate amount
So much for trying to be the fiscally sensible one. I could have told him from the beginning that being sensible, realistic and calm doesn’t win modern elections. Least of all Conservative Party elections.
Cool. HOW ARE WE GOING TO PAY FOR IT?
WHAT KEY SERVICE THAT WE ALL USE IS GOING TO GET THE CHOP?
These are the brain dead obvious questions our worthless media should be asking but don’t. While the gormless people who go “oh cool free money for doing nothing” nod along about great the Tories are while their roads turn to gravel, the libraries are sold off to build apartments and murders go unsolved because the neighbourhoods one cop got made redundant…
Bored of conservatives, they lack integrity and strength.
You say ‘Tax Cuts’, I hear ‘Bankrupt the public purse’.
I really, really don’t get why no one is proposing a windfall tax on petrol companies and a freeze on the cap. This seems such an open goal for the next election. Voters from all parties will love it. Oil companies can be told ‘everyone is suffering, you must also do your bit’. They’re not going to leave the country, 1 billion profit instead of 10 is still 1 billion profit. The Tories won’t lose generous donations, since the rest of the industry will love it. There’s no real prospect of doing that setting a precedent, as the situation is clearly exceptional. Even rich toffs will love it, it’s not like it’s cheap to heat a mansion.
As I said, I really don’t get it.
I’m happy to pay taxes if it means public services get properly funded. Having more money doesn’t mean much when I have to pay £30+ to get a train.
Pretty sure if this goes on long enough they’ll both be promising free kick an immigrant days to all party faithfull.
Pair of typical horrible lying tory fuckers. This timeline sucks
I will never vote Tory – even if they make crazy promises they have no intention of keeping. They are fundamentally opposed to the regular person and even basic ethics.
Even if this tax cut went ahead they would claw it back immediately elsewhere – from the low earners and benefit claimants and not high earners or business
Tories seem *obsessed* with cutting taxes being the only way people are going to be able to save money to deal with the cost of living crisis.
But thanks to their previous policies on minimum income thresholds, don’t we already have an economy where huge numbers of workers, especially those struggling most right now, barely pay any tax anyway if they pay any on their income at all? How is saving £10 to £100-odd on their annual tax bill going to lift up someone who’s having to subsist on mouldy bread and the odd tin of beans?
Honestly they are just so fucking completely out of touch it hurts. We are witnessing the complete collapse of the modern Tory ideology in real time, we love to see it.
We’re always being told the country can’t afford this and that and the other…how is drastically cutting income tax going to help? The streets are already filthy and full of litter, libraries and various other services closing and being cut back, councils struggling desperately, NHS basically collapsing…
A few more quid in your pocket doesn’t mean much when your local government has basically failed and you can’t get a dentist or doctors appointment, can’t get a police person when you need one, and your streets are filthy and depressing.
What are these idiots actually on?
Every government since 1979 has cut taxes to buy votes. The result of these tax cuts include an underfunded NHS, the police give you a crime number instead of turning up, the fire brigade might have an available appliance and an ambulance may get to you sometime that day. I could go on and on. Essentially, the tax cuts cost us more than the few quid each year we save.
He just wants to become leader no matter what – SunAk has no morals or beliefs, just like boris