August 8, 2022
Sunak announces long-term plan to cut income tax

Rishi Sunak sought to burnish his tax-cut credentials in the race to become Britain’s next prime minister with a new pledge to reduce income tax in the next parliament.

The former chancellor, who is facing Foreign Secretary Liz Truss in a Conservative Party leadership contest, announced on Sunday that he would cut the basic income tax rate from 20 percent to 19 percent in 2024, with further cuts eventually reaching 16 percent. percent by 2029.

Sunak initially opposed tax cuts in competition, instead standing on the platform of “sound money” and tackling inflation. But, struggling to move against the truss, the former chancellor announced last week that he would cut VAT on energy bills to cushion the cost of living crisis.

He described the latest plans as a “radical vision” but also “a realistic one” that harkened back to Margaret Thatcher’s tax cut agenda in the 1980s. Sunak also launched a coded attack on the truss, which has promised a £30bn tax cut as part of his pitch to Tory party members.

He added: “I urge them to treat any approach with caution that doesn’t involve any hard trade-offs and remember that if something sounds too good to be true – it probably is.”

But Treasury Chief Secretary Simon Clark, who is backing Truss’s bid, criticized the long-term nature of Sunak’s plans. “We can’t wait to help the families, they need support now. Liz will cut taxes in seven weeks, not in seven weeks,” he said.

A One Truce campaign insider said: “It is welcome that Sage has made another U-turn on cutting taxes, it is only a shame that he did so as chancellor when he repeatedly raised taxes. did not do.”

Sunak’s team said on Sunday that the cuts were cheap. Each reduction of one percentage point cost £6bn and the calculations were based on the UK economy growing at 1.7 per cent per annum during the next parliament.

These rates of growth were forecast by the Office of Budget Responsibility for the year after 2024.

But the fiscal watchdog has also predicted that even with the first income tax cut in 2024, the tax burden will not be seen at post-World War II levels.

Even lower income tax rates in subsequent years did not necessarily drop the overall tax burden, but remained high following the tax hikes imposed by Sunak in recent budgets.

The suggestion that it would be easier to cut taxes did not relieve pressure on public services and high inflation in the coming years, which would make budget calculations more difficult for the Chancellor in the next parliament.

Resolution Foundation director Torsten Bell said that even with a £30bn a year tax cut in excess of Sunak’s plan, the overall tax would still be higher than at any time since the early 1950s.

“Saying you are a tax cutter is all well and good, actually cutting them in the 2020s is another thing entirely, given the long-term structural pressures,” he wrote last week.

Meanwhile, a new poll of Conservative councilors suggested that the race for leadership was tougher than other recent polls. Sawanta Comres said 31 per cent councilors supported Truss and Sunak at 29 per cent.

Mel Stride, a former Treasury minister and a key member of Sunak’s campaign team, said: “Anyone thinking this will be a coronation should think again.”

The two contenders will face off in Exeter on Monday to elect a second leadership for Tory party members. Two more events will be held in Cardiff on Wednesday and in Eastbourne on Friday.

Leave a Reply

Your email address will not be published.