As part of the leadership battle to become Prime Minister, both candidates are pledging an array of tax cuts. That said, the highest level of inflation in over 40 years is casting doubt on their promises to reduce tax. Recent figures highlight inflation has increased by 10.1% in the last year (as of July 2022). The soaring cost of living is leading to increases in government spending on debt, pensions, and benefits. The result of this mean there is little left in the budget to reduce taxes.
In addition to the increased cost of living, the Bank of England has also warned a long recession is imminent. They also warn of huge increases in energy bills as we approach the colder months.
Here we look at what each candidate is promising in terms of reduction in taxes.
Tax Cuts Promised by Liz Truss
Truss has promised almost £40 billion a year in tax cuts. These are as follows: –
- To scrap the National Insurance Rise. This would cost £13 billion a year.
- To cancel the planned Corporation Tax Increase. This is expected to cost £17 billion a year.
- To put a pause on the green levies associated with energy bills. This would cost £8.5 billion a year.
The estimated cost of her pledges – £38.5 billion a year.
Tax Cuts Promised by Rishi Sunak
Sunak was integral in all of the tax cuts that have already been promised. As Chancellor, he was a key stakeholder in all of the decisions that have already been made. Any change to his own policies is considered by many as problematic. As part of his leadership campaign he has pledged to: –
- Take 3p off income tax by 2029. This would cost approximately £19 billion per year
- Decrease VAT on energy bills in domestic properties from 5% to 0%. This would cost £4.3 billion a year.
The estimated cost of his pledges – £23.3 billion per year.
Who Will Pick The Next Prime Minister?
The Conservative Party members will pick the winner. To be eligible to vote members must have joined the Tory party by 3rd June 2022. Members can vote either online or by post. It is estimated over 160,000 people will be eligible to vote. During the last leadership campaign, 160,000 people cast their votes. The Tory party claim this number has increased since.
When We Will Know Who Will Be The New Prime Minister?
The ballot will close at 5pm on 2nd September 2022. Sir Graham Brady will announce the winner a few days later on 5th September. If one of the candidates drops out of the race before then, we will of course know who the new Prime Minister is earlier.
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