He is now promising to reduce this to 16 per cent by the end of the next parliament – the period between the next general election and the next election. It is the second major tax cut Mr Sunak has announced in a week, after pledging to scrap VAT on household fuel bills for a year. He also promises a major new investment tax cut this autumn, replacing the so-called “excess allowance”. The timing of the income tax cut depends in part on when the next election is held. If it takes place in May 2024, as widely expected, the next parliament could run until 2029 – although it may end earlier. Mr. Sunak hopes to cut the basic income tax rate by one percentage point each year starting in 2024, according to a campaign source, meaning it will drop to 16 percent around 2027. It costs around £6bn for every percentage point drop in basic income tax, meaning the extra three percentage point cut he promises would cost £18bn. It would be the biggest cut in income tax since the late 1980s, when Lord Lawson cut the basic and top rate when he was chancellor under Margaret Thatcher.
“I never make promises I can’t pay for”
High earners will save proportionately less than low earners from the change, given that some of their income falls into the top 40 per cent income tax rate – which Mr Sunak is not proposing to change. The Sunak campaign argues that the cut would be funded by extra tax revenue generated by the economic growth currently projected between 2024 and 2027 and would not involve any more borrowing. Mr Sunak said: “Firstly, I will never cut taxes in a way that just raises inflation. Second, I will never make promises I can’t keep. And third, I will always be honest about the challenges we face. Because to win this leadership contest without leveling with the world about what comes next would not just be dishonest – it would be an act of self-sabotage that dooms our party to defeat at the next general election and leads us into a long period of opposition. “There is no more serious choice than the one Conservative members now face – to decide who will lead our country at home and abroad through difficult times. As they approach this decision, I would urge them to approach any vision that does not involve difficult compromises with caution and remember that if something sounds too good to be true – it probably is.” But Mr Clarke hit back: “People are facing the biggest cost of living crisis for decades and the tax burden is at its highest level for 70 years. We can’t afford to wait to help families, they need support now.”
