Tax has become one of the biggest talking points during the Conservative leadership contest despite the fact that we’ve spent the past two years living through a pandemic, and are currently experiencing a cost of living crisis that has seen inflation knock on the door of 10%.
Former chancellor Rishi Sunak has been accused of being un-Tory like for raising National Insurance in his time at Number 11. But he has claimed his opponent, Liz Truss, is spouting fantasies by promising to cut taxes and increase borrowing when inflation is already so high.
The problem for both is that the future economic growth as predicted by the OECD looks fairly stagnant in the UK. Only Russia has a worse forecast among G20 nations.
Read more: Rishi Sunak vows to take 4p off income tax - within seven years
What is Rishi Sunak’s tax plan?
Rishi Sunak’s most recent tax pledge is to cut the basic rate of tax from 20% to 16% by the end of the next parliament. This has led to accusations of being a "flip flopper".
Sunak came into the contest pitching himself as the fiscally responsible candidate and even branded his rival's tax-cutting plans as “morally wrong”. Sunak has claimed his own tax cut, which will cost around £6 billion a year, will be paid for by economic growth.
The former chancellor has also said he wants to scrap VAT on energy bills for a year, saving households £160. He previously resisted calls to do so when he was chancellor.
What is Liz Truss’ tax plan?
Liz Truss’ tax plans are not as detailed as Sunak’s, but would appear to be more popular than the former chancellor given her current healthy lead in head-to-head polls among Tory members. Truss has said she wants to bring in tax cuts from day one, and promised a total of £30 billion worth of reductions in taxation – which she plans to fund through borrowing, in the short term at least.
The foreign secretary also wants to scrap the planned 6% rise in corporation tax to be brought in next year, a Sunak policy, and also dial back the National Insurance hike that was brought in to fund increased NHS spending. As well as this, Truss has said she will review the UK’s inheritance tax system and scrap the green levy on energy bills for two years.
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