Home Business Rishi Sunak Vows 20% Cut to UK Income Tax Within Seven Years

Rishi Sunak Vows 20% Cut to UK Income Tax Within Seven Years

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Rishi Sunak, trailing in the race to become the next UK prime minister, committed to reducing personal taxes by 20% within seven years in a move he described as the largest cut to income tax in three decades.

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(Bloomberg) — Rishi Sunak, trailing in the race to become the next UK prime minister, committed to reducing personal taxes by 20% within seven years in a move he described as the largest cut to income tax in three decades. 

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The announcement comes at a critical juncture in the race to succeed Boris Johnson. On Monday, the 175,000 Conservative grassroots members receive their postal ballots to elect Sunak or Liz Truss as the party’s next leader and prime minister. They’re both anxious to secure support before the summer vacation starts in earnest, with the winner announced Sept. 5. 

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Sunak said he would cut the basic rate from 20p in the pound to 16p — amounting to a 20% tax reduction and drawing accusations from Truss’s camp of “flip flops and u-turns” on the issue. When he was chancellor of the exchequer, Sunak announced a one-penny cut to income tax in April 2024. A further 3p reduction would come by the end of the next Parliament, as late as December 2029.

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“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,” Sunak said in a statement. “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.”

Blue on Blue

Tax has dominated the bitter race to become the premier, during which Sunak has repeatedly called Truss’s tax-cutting plans “comforting fairy tales.” Sunak has accused Foreign Secretary Truss of being “dishonest” with voters with promises of sweeping tax cuts and engaging in an “act of self-sabotage that condemns our party to defeat” at the next general election. He said he would make sure inflation is under control before cutting taxes. 

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But the Truss campaign appears to be in the ascendancy, with polls of party members putting her clearly ahead. The endorsement of senior Conservatives over the weekend only added to the sense of her pushing ahead. Former leadership candidate, the centrist Tom Tugendhat, endorsed her on Saturday saying her proposed cuts were based on “true Conservative principles.”

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“We cannot afford to wait to help families, they need support now,” the Chief Secretary to the Treasury Simon Clarke, and a key Truss ally, said in a statement. “Liz will cut taxes in seven weeks, not seven years.” 

A member of her campaign team, who declined to be named, said the public and Conservative Party members can see through Sunak’s u-turns.

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Sunak’s change of heart on tax last week — promising to temporarily slash VAT on energy bills — has not led to any noticeable difference in the polls. However, the ageing membership of the Tory Party is notoriously hard to reliably question and there was some good news for Sunak. A survey of Tory local councilors by Savanta ComRes put Truss on 31% and Sunak on 29% among 511 local Tory politicians.

Brutus

The campaign has been characterized by bitter personal attacks. On Sunday, ministers criticized Nadine Dorries, one of Truss’s backers, for sharing a doctored image of Sunak wielding a knife behind Johnson’s back. The culture secretary re-tweeted an image of the prime minister, depicted as Julius Caesar, about to be stabbed in the back by Sunak, in the role of Brutus. That’s because it was Sunak’s resignation that sparked Johnson’s downfall.

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Tory MP Robert Buckland, a supporter of Sunak, told BBC radio on Sunday that people focusing on personality rather than issues “should wind their neck in.” Business minister Greg Hands, also part of the Sunak camp, called on Truss to disown the behavior of Dorries, noting that MP David Amess was stabbed to death less than a year ago at his constituency surgery in Southend, Essex. 

“It is very, very bad taste — dangerous even,” he told Sky News.

On Monday, Truss is set to pitch herself as the “education prime minister” with a plan that includes replacing failing academies with “a new wave of free schools” and improving math and literacy standards. 

She will also promise to tackle labor shortages in farming, partly caused by post-Brexit freedom of movement restrictions, with a short-term expansion to the seasonal workers program allowing more fruit-pickers into the UK.

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