Despite an unwieldy line-up of candidates that has been variously likened to the Grand National, Wacky Races and even Ben Hur, the Tory leadership contest is this weekend centred mainly on two candidates and one subject – tax.
Liz Truss is hoping to unite the Right of the party behind a ‘stop Sunak’ campaign that will be focused on the same small-state principles espoused in the 1980s by Ms Truss’s political hero, Margaret Thatcher.
Boris Johnson will likely cheer on the Foreign Secretary in her battle against Rishi Sunak, who has been through a year-long fight with him over the economy.
Boris-supporting Jacob Rees-Mogg gave a flavour of the Johnson camp’s views in the first Cabinet meeting after Mr Sunak’s resignation last week, when he described him as a ‘socialist chancellor’ who had raised the tax burden to its highest level in 70 years.
In his Friday leadership launch, Mr Sunak downplayed the possibility of tax cuts. He argued that cutting taxes is irresponsible before public finances are better.
The division is most starkly represented by Mr Sunak’s unpopular National Insurance rise of 1.25 per cent, to pay for the NHS and social care reform, which the former chancellor insisted on when Mr Johnson demanded the money for it.
Sunak said that he would not borrow money to finance it and instead suggested that a new tax be created to help pay it. Relations between the top two members of the government were strained by the issue.
Ms. Truss is pledging to stop the increase in this discussion. In anticipation of critics asking how it would be funded, given the need to balance the country’s books after Covid, she argues that the pandemic was a ‘once-in-a-century event’ and it should be treated as a form of war debt to be paid back over the course of ten years.
Former chief secretary of the Treasury, Mr Sunak would also propose to cut corporation taxes. Yesterday’s row was reported by Mr Johnson and Mr Sunak. The plan increase in the rate to 25 percent by 2023 was allegedly resisted by Mr Sunak.
Ms. Truss will join the debate and promise to end the rise. In anticipation of critics asking how it would be funded, given the need to balance the country’s books after Covid, she argues that the pandemic was a ‘once-in-a-century event’ and it should be treated as a form of war debt to be paid back over the course of ten years
Sunak downplayed the idea of possible tax cuts during Friday’s leadership launch. This was because it would be irresponsible for the government to reduce taxes while the finances are improving. Former defence secretary Liam Fox, one of Mr Sunak’s supporters, defended the approach yesterday, saying: ‘We can cut taxes when we cut our spending’
The new Chancellor Nadhim Zhawi was reported to have said to his colleagues that within hours after starting, Treasury officials informed him that Mr Sunak refused to accept their request for the tax cut.
One colleague said: ‘Rishi would go around blaming Boris for high taxes, whilst privately making sure that they stayed high.’ A source close to Mr Sunak describes this as ‘total b*******’.
Johnson could have jointly announced with Zahawi that corporation taxes were being reduced if he had not been forced into resignation. A source close to Mr Zahawi said: ‘Nadhim and the PM were aligned on the need to reduce our huge tax burden and were intending to outline the ways to do it. Rishi had been a huge roadblock – he had gone native in the Treasury.’
In his Friday leadership launch, Mr Sunak downplayed the possibility of tax cuts. He said that cutting taxes is irresponsible before improving the state of the public finances.
Liz Truss is hoping to unite the Right of the party behind a ‘stop Sunak’ campaign that will be focused on the same small-state principles espoused in the 1980s by Ms Truss’s political hero, Margaret Thatcher
Former defence secretary Liam Fox, one of Mr Sunak’s supporters, defended the approach yesterday, saying: ‘We can cut taxes when we cut our spending. What we can’t do is borrow more to spend – we have got £83 billion this year we are spending on debt interest, our highest on record. We shouldn’t be putting up taxes to spend more. So what I actually want to see is someone who has actually got a plan to see the spending of the Government controlled over time.’
But Mr Rees-Mogg said: ‘I will not be endorsing Mr Sunak for prime minister. I belong to a party that believes in low taxation and the former chancellor has talked about low taxation and delivered higher taxation.’
An ally of Ms Truss said last night: ‘We need someone who unites the Red and Blue Wall and will deliver a Conservative economic agenda. Liz ticks both those boxes in a way that other likely candidates can’t.
‘She has a great delivery record and would drive difficult economic reforms through Whitehall in line with her low-tax, free-market principles. She’s our best chance of winning the next election.
‘Colleagues see her as the person who can give the party its identity back and run a proper Conservative government capable of winning elections on a Conservative platform. This offers a glimpse of the direction she’d take the economy in.’