Taxation has turned out to be the main issue dividing the two candidates in the current Conservative Party leadership contest. While Rishi Sunak wants to hold off making tax cuts until after the cost of living crisis has been tackled, Liz Truss wants immediate reductions. She believes cutting taxes will not cause further rises in inflation for consumers.
But setting aside concerns that tax cuts risk accelerating price increases by giving people and businesses more money to spend, these strategies also don’t account for the need to address the current crises facing the UK. In addition to an underfunded health service, households need more help with skyrocketing energy costs this winter. This will require large increases in government spending in the immediate future. Britain will need to pay for this either by borrowing more or raising taxes, not lowering them.
