Rishi Sunak, who is in the final runoff to be Conservative leader and the next UK prime minister, does not envisage being able to cut personal taxes until the fall of 2023 at the earliest.
The former Chancellor of the Exchequer has said repeatedly during the leadership campaign that he would not cut personal taxes until inflation is under control. Sunak’s conclusion -- based on Treasury analysis -- is that that won’t happen on a consistent basis until the middle of next year, according to a person who spoke on condition of anonymity.
A spokesperson for Sunak had no immediate comment.
Based on the usual timing of Budget statements and the UK’s April-April tax year, Sunak’s position could mean any changes might not take effect until Spring 2024 -- though a faster timeframe is not impossible.
It’s a risky stance for Sunak as he tries to persuade about 175,000 grassroots members of the ruling Conservative Party to back his bid for the top job in British politics over Foreign Secretary Liz Truss, who has made about 34 billion pounds ($41 billion) of tax cuts the central pledge of her campaign.
Truss has repeatedly attacked Sunak’s record as chancellor in Boris Johnson’s administration, accusing him of choking off growth by raising the tax burden during a cost-of-living crisis. Her key ally, Cabinet minister Jacob Rees-Mogg, even labeled Sunak a “socialist chancellor” following his heavy public borrowing to fund pandemic bailouts for workers and businesses.
Leadership Spat
“What I am not is the continuity economic policy candidate, because I think that is where we didn’t get it right and we haven’t got it right,” Truss told BBC Radio 4 on Thursday, taking another clear swipe at Sunak.
Sunak has put the UK tax burden on track to be at its highest level in 70 years. Next year, corporation tax will rise to 25% from 19%, while he has also raised national insurance by 1.25 percentage points to pay for health and social care.
Truss has vowed to scrap both those tax rises, as well as take a green energy level off consumer energy bills. She told the BBC she had opposed the rise in National Insurance in private Cabinet discussions but had lost the argument.
But according to the person, Sunak thinks government polling shows that Tory demands on taxes are at odds with the position of mainstream voters, who generally aren’t calling for immediate cuts. Sunak is likely to try to use that to frame himself as the candidate most likely to responsibly fend off the threat of inflation -- currently at a four-decade high.
The former chancellor has stood out in the Tory contest by warning against what he calls unfunded, “fairytale” tax cuts that risk further fueling inflation. In Sunday’s televised debate, he hit back at Truss’s policies, likening her “something-for-nothing economics” to “socialism.”
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