Rishi Sunak vows to slash income tax by 2029 in Tory leadership 'U-turn'

Former chancellor pledges to cut taxes while Liz Truss outlines plans to ‘unleash British farming’

Former chancellor of the exchequer Rishi Sunak is a candidate to replace Boris Johnson as British prime minister. PA

Rishi Sunak arrives at an event in London to launch his campaign to be the next Conservative leader and prime minister. Reuters

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British Prime Minister Boris Johnson and Rishi Sunak use hand sanitiser during a visit to Pizza Pilgrims in West India Quay, London Docklands, as lockdown rules eased in June 2020. Getty Images

Rishi Sunak on Monday denied accusations of "flip-flops and U-turns" after promising a drastic tax cut within seven years, in a last-ditch attempt to persuade Tory members to make him Britain's next prime minister,.

Mr Sunak promised to cut the basic tax rate from 20p on the pound to 16p by the end of the next parliament, meaning 2029 at the latest, in what he described as the largest cut to income tax in 30 years.

The announcement, as Tory members start receiving their ballot papers this week, came with Mr Sunak trailing his rival Liz Truss in the polls and put under pressure by her more ambitious tax-cutting plans.

Ms Truss bolstered her position in recent days by winning high-profile endorsements from cabinet ministers Ben Wallace and Nadhim Zahawi, as well as eliminated leadership candidate Tom Tugendhat.

Allies of Ms Truss described the tax announcement as a U-turn after Mr Sunak had previously made a point of preaching realism and warning against "comforting fairytales" promised by rivals.

"It’s welcome that Rishi has performed another U-turn on cutting tax, it's only a shame he didn’t do this as chancellor when he repeatedly raised taxes. The public and Conservative Party members can see through these flip flops and U-turns," said a Truss campaign source.

Speaking to BBC Radio 4's Today programme, Mr Sunak said the cuts would be funded by economic growth he hopes to foster in the coming years, but was not the same as slashing taxes now in a way that might worsen inflation.

He cited business tax reforms, encouraging more investment and innovation, reducing regulations on data, financial services and life sciences, and the use of free ports as ways to generate the required growth.

"People should know that that’s where I want to take the economy. I want to make sure that hard work is rewarded," he said.

"It’s entirely different to doing things right now that would make the situation far worse and endanger people’s mortgages. This is a set of tax cuts that come in over time, and the way you pay for them is both growing the economy and indeed being disciplined with the growth in public spending."

The former chancellor suggested Ms Truss was being dishonest with voters with promises of sweeping tax cuts and engaging in an “act of self-sabotage that condemns our party to defeat” at the next general election.

The policy builds on Mr Sunak's previously-announced 1p cut to income tax in April 2024. The deadline for taking off the additional 3p ― the end of the next parliament ― could be as late as December 2029.

But Ms Truss’s proposals appear to have convinced many of the party faithful who will elect the next leader ― with polls suggesting she has a clear lead over Mr Sunak ― and a growing number of senior Tory MPs, with Tom Tugendhat saying her proposed cuts were based on “true Conservative principles”.

In announcing his new personal tax policy, Mr Sunak again emphasised the need to control inflation before reducing taxes and suggested his rival’s plans would fuel inflation.

Candidates Rishi Sunak and Liz Truss at the Conservative Party leadership election hustings at Wembley Arena, London. This was the final hustings attended by Tory Party members who will vote for the new leader and next prime minister. EPA

Liz Truss addresses Conservative Party members at Wembley Arena. AP

Mr Sunak puts forward his case to be leader while speaking at Wembley Arena. Bloomberg

Mr Sunak visits his family's old business, Bassett Pharmacy in Southampton, while on the campaign trail. Reuters

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Liz Truss at a Conservative Party leadership campaign event in Belfast. Getty

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Rishi Sunak speaks during a campaign visit to Cluny Castle in Inverurie, Scotland. Getty

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Rishi Sunak during a visit to St John's Wood Synagogue, north London. PA

Liz Truss at the Conservative Party leadership election hustings in Cheltenham. EPA

Rishi Sunak during a hustings event in Cheltenham. Reuters

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Rishi Sunak arrives for the Darlington hustings. Getty

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Mr Sunak speaks at the University of Exeter in south-west England. AP

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Mr Sunak meets Tory members at Fontwell Park Racecourse. Reuters

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Ms Truss speaks as Conservative Member of Parliament Tom Tugendhat looks on at a Conservative Party leadership campaign event at Biggin Hill Airport. Getty

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Ms Truss speaks at the hustings event in Leeds. AFP

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Ms Truss outside Downing Street in London. Reuters

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Ms Badenoch, Ms Mordaunt, Mr Sunak, Ms Truss and Mr Tugendhat before the live television debate. PA

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“What I’m putting to people today is a vision to deliver the biggest income tax cut since Margaret Thatcher’s government," he said.

“It is a radical vision but it is also a realistic one and there are some core principles that I’m simply not prepared to compromise on, whatever the prize.

“Firstly, I will never get taxes down in a way that just puts inflation up. Secondly, I will never make promises I can’t pay for. And thirdly, I will always be honest about the challenges we face.

“Because winning this leadership contest without levelling with people about what lies ahead would not only be dishonest, it would be an act of self-sabotage that condemns our party to defeat at the next general election and consigns us to a long period in opposition”.

The 1p income tax cut he announced at the Spring Statement is fully costed and paid for, according to Mr Sunak’s campaign.

Each subsequent penny off, which would cost about £6 billion ($7.3bn) a year, would be funded through tax receipts generated by forecast economic growth and would not lead to an increase in the debt burden.

The former chancellor’s U-turn on tax last week, when he promised to temporarily slash VAT on energy bills, seemingly failed to give him any significant boost in polling of Tory members since.

“We cannot afford to wait to help families, they need support now. Liz will cut taxes in seven weeks, not seven years,” said Chief Secretary to the Treasury Simon Clarke, who is backing Ms Truss.

“It’s welcome that Rishi has performed another U-turn on cutting tax, it’s only a shame he didn’t do this as chancellor when he repeatedly raised taxes," a Truss campaign source said.

“He has also made it conditional on getting growth first – knowing full well that his corporation tax rises are contractionary.

“The public and Conservative Party members can see through these flip-flops and U-turns.”

Meanwhile, Ms Truss has pledged to “unleash British food and farming” to improve the nation’s food security.

The Tory leadership hopeful said she would “remove onerous EU regulations and red tape” if she becomes prime minister, without going into much detail on which laws she would abolish.

She also promised to tackle the labour shortages in farming, partly caused by post-Brexit freedom of movement restrictions, with a short-term expansion to the seasonal workers scheme.

The programme, first launched in 2019, temporarily allows 40,000 overseas workers into the UK for seasonal roles in the horticulture and poultry sectors.

A recent government report said that labour shortages “caused by Brexit and accentuated by the pandemic” were badly affecting the food and farming sector, often forcing farmers to leave fruit rotting in the fields and cull healthy pigs.

Ms Truss said she would also work to address longer-term skills shortages and hurdles to the adoption of labour-saving technologies.

The former environment secretary vowed to replace EU law that restricts the development of farming infrastructure and technology, including the use of agricultural drones and precision breeding technologies.

Ms Truss, who is due to meet farmers on a campaign stop in the south-west of England, said: “The pandemic and cost-of-living crisis have shown it is more vital than ever for us to ensure we have a high-quality and affordable supply of British food.

“As a former Defra [Department for Environment, Food and Rural Affairs] secretary of state, I understand the challenges faced by farmers, and they can trust me to deliver the changes they need.

“I will cut the red tape that is holding them back and hitting them in their pocket.”

Meurig Raymond, former president of the National Farmers’ Union, said: “I share her vision of a competitive, profitable and sustainable farming sector underpinned by investment in the latest technology and innovation, and a proportionate and flexible approach to regulation.”

A video of Ms Truss during her time as environment secretary went viral when she gave an enthusiastic speech about opening pork markets during the 2014 Tory Party conference.

She caused further hilarity by saying that two thirds of cheese sold in Britain was imported, with an unusually emphatic delivery of the line: “That is a disgrace.”