Tory leadership contender Rishi Sunak has vowed to slash the basic rate of income tax from 20p to 16p in the pound by the end of the decade, in the latest attempt to revitalise his campaign for No 10.
Boasting of the “biggest income tax cut since Margaret Thatcher’s government”, the former chancellor said the £18bn commitment will be delivered by the end of the next parliament if he wins the contest.
But it was immediately seized on as “another U-turn” by a source in his rival Liz Truss’s campaign team, who criticised the policy, saying it was “jam tomorrow”. They added: “People need tax cuts in seven weeks, not in seven years.”
It comes as 160,000-plus Tory members are set to begin receiving their ballot papers to vote for Boris Johnson’s successor, with the foreign secretary widely seen as the favourite after attracting major endorsements.
Over the weekend, however, Mr Sunak’s allies insisted that the contest was still “all to play for”, while Ms Truss, who is ahead in polls of party members, played down claims that she has a clear lead in what she called a “very, very close race”.
Tax has been a bitter dividing line between the candidates, with Ms Truss vowing to make cuts from “day one”. She has already promised more than £30bn worth of measures, including reversing April’s hike in national insurance, temporarily suspending the green levy on energy bills, and scrapping a corporation tax hike.
Last week, Mr Sunak fiercely criticised her proposals, warning in televised debates that the foreign secretary risks inflicting “economic misery” on millions and fuelling inflation – a claim she dismissed as “scaremongering” and “Project Fear”.
On Sunday, in a thinly veiled swipe at his rival, Mr Sunak urged members to “treat with caution any vision that doesn’t involve difficult trade-offs, and remember that if something sounds too good to be true, then it probably is”.
Mr Sunak has instead set out a long-term commitment to cut the basic rate of income tax from 20p to 16p in the pound by the start of the next parliament. It builds on his pledge as chancellor to bring the rate down to 19p by April 2024 – a move that it is estimated will cost the Treasury around £5bn.
The next parliament will begin after the country’s next general election, potentially giving Mr Sunak until December 2029 to fulfil his pledge to cut income tax to 16p in the pound – costing the Treasury a further £18bn.
Mr Sunak claimed: “What I’m putting to people today is a vision to deliver the biggest income tax cut since Margaret Thatcher’s government. It’s 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.”
He added: “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.”
But a source in Ms Truss’s campaign said: “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.”
The move comes just days after Mr Sunak performed a major U-turn, making a promise to cut VAT on domestic energy bills if he becomes prime minister, in an attempt to alleviate rocketing energy prices as the cost of living crisis continues.
Given Mr Sunak’s comments earlier this year that a VAT cut would “disproportionately benefit wealthier households”, it was widely seen as a sign of panic in his campaign, as Ms Truss picked up momentum.
Since Friday, the foreign secretary has won the backing of defence secretary Ben Wallace – a popular figure among the Tory grassroots – as well as former leadership contender Tom Tugendhat and former cabinet minister Brandon Lewis. It is reported that the chancellor, Nadhim Zahawi, will also endorse her in the coming days.
But Mr Sunak’s campaign spokesperson claimed on Sunday: “This contest is all to play for. Rishi is getting out there every day, visiting association after association across the country, to meet members and earn every vote. The race has only just begun.”