British PM candidate Sunak vows 20% income tax cut by 2029

He said that he would fund the move by growing the economy, being disciplined with public spending

By Reuters

Published: Mon 1 Aug 2022, 1:10 PM

Rishi Sunak, trailing in the race to become Britain's next prime minister, has vowed to slash the basic rate of income tax by 20 per cent— by the year 2029— in a potentially make-or-break throw of the dice by the former finance minister.

Sunak, once seen as the favourite to replace Boris Johnson, when he helped steer the economy through the ravages of the Covid-19 pandemic, has struggled against his rival, Foreign Secretary Liz Truss, who has pledged immediate tax cuts.

He said that he had remained focused on tackling inflation, but once that was achieved, he would follow through on an already-announced plan to take 1 pence off income tax in 2024, and then take a further 3 pence off by the end of the next parliament, likely around 2029. The two pledges would take the income tax from 20p to 16p.

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According to him, the plan would mark the biggest income tax cut since the time of Margaret Thatcher.

"It is a radical vision but it is also a realistic one," he said in a statement late on Sunday, a day before Conservative Party members are due to start receiving their ballot papers to vote for the party's new leader.

Sunak told BBC Radio on Monday that he would fund the tax cut by growing the economy, and being disciplined with public spending.

Britain's hunt for a new prime minister was triggered on July 7, when Johnson was forced to announce his resignation following months of scandal. Conservative lawmakers have whittled a field of candidates down to Truss and Sunak, with an announcement of the decision by party members due on September 5.

With inflation surging to a 40-year high of 9.4 per cent and growth stalling, the economy dominated early stages of the contest, with Sunak arguing that Truss' plan to reverse a rise in social security contributions and cancel a planned rise in corporation tax would only stoke inflation further.

"I don't think embarking on a spree of excessive borrowing, at a time when inflation and interest rates are already on the rise, would be wise," Sunak said.

He explained that each penny cut from the rate of income tax would cost around £6 billion ($7.3 billion) a year, a figure that he said would still allow Britain's debt-to-GDP ratio to fall, if the economy grows in line with official forecasts.

Truss has maintained that tax cuts are needed now to give the economy a shot in the arm. A recent poll by YouGov showed that Truss held a 24-point lead over Sunak, among Conservative Party members.

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