No tax cuts until late next year under Rishi Sunak

Rishi Sunak arriving at a hustings event on Thursday - Reuters/Peter Nicholls
Rishi Sunak arriving at a hustings event on Thursday - Reuters/Peter Nicholls

Rishi Sunak does not expect to cut personal taxes until at least autumn 2023 if he becomes prime minister, it emerged on Thursday, as he claimed Liz Truss was misleading the public by promising an immediate giveaway.

The former chancellor fears inflation will not start to fall until next summer at the earliest and has restated his argument that bringing down taxes before then would worsen the problem.

But Ms Truss, the Foreign Secretary, on Thursday claimed Mr Sunak’s approach risked driving the economy into recession, as she announced plans for a new tax cut for stay-at-home carers. She has already pledged more than £30 billion in tax reduction, funded through borrowing.

In a blow for Mr Sunak, new polling showed that just 38 per cent of Tory members who have a view would vote for him in the contest, compared to 62 per cent who would back Ms Truss.

The tax and spend clashes defined the first full day of campaigning after the Tory leadership candidates were whittled down to a final two. The focus is now on party members, who will pick the winner.

Mr Sunak has not promised a major tax cut beyond one to encourage investment this autumn. However, Ms Truss has vowed to reverse the National Insurance rise and scrap the corporation tax increase coming in the spring.

It is understood that if he becomes prime minister, Mr Sunak would not be minded to announce a major personal tax cut in the autumn Budget or Spring Statement, because of the inflation threat.

In an LBC interview, he criticised Ms Truss’s tax cuts plan, saying increasing debt would not be “moral” and could fuel inflation, driving up the cost of mortgages.

Mr Sunak said: “Wouldn’t my life be easier if I just sat here and [said] ‘I’m going to do this lovely sounding thing and this lovely sounding thing’? But that wouldn’t be leadership.

“I think it would damage trust, because part of rebuilding trust is for the Government and politicians to deliver the things that they say. And sitting here and promising you a bunch of things that I don’t think are right or deliverable would be wrong.”

Earlier in the day, Ms Truss had argued the opposite, saying her tax cuts would not fuel inflation and were needed to avoid recession.

She said: “What is not affordable is putting up taxes, choking off growth and ending up in a much worse position. Many international bodies, including the OECD, say that our current policy is contractionary, it’s likely to lead to a recession.”

In a swipe at Mr Sunak’s electability she added: “I think the problem is that if we continue with our current economic policy, which is forecast to lead to a recession, it will be very hard for Conservatives to win an election.”

The Truss campaign also unveiled a new tax cut promise, proposing that a couple should be allowed to share their personal income tax allowances if one of them is taking time off work to look after children or be a carer. The move would save a household up to £2,514 a year.

Both candidates gave broadcast interviews on Thursday – including Ms Truss’s first of the race – in a change of campaigning approach as the pair try to win over party members nationwide rather than just Tory MPs.

The two will clash in a head-to-head debate on Monday before the first of a dozen in-person membership hustings on Thursday evening.

The YouGov poll of Tory Party members found 63 per cent said they trusted Ms Truss but only 48 per cent said the same of Mr Sunak – an indication that his role in Boris Johnson’s departure could be a factor in the race.

The results putting Ms Truss in the lead are similar to other recent membership polls and explain why Mr Sunak believes he is now the underdog, despite getting the most votes from Tory MPs in the first phase of the leadership contest.

There is limited time to change the dynamics of the race, with postal ballots being sent out in 10 days – allowing for early voting – and the result being announced on Sep 5.