Tax taking centre stage in Tory leadership battle at ‘perilous’ time for UK businesses
It was predictable that the candidates for Number 10 would put tax at the heart of their pitches. But the details are as varied as the individuals themselves.
Some are promising quick wins. These include Liz Truss, who has said she will reduce taxes immediately on appointment.
Also in this camp are Tom Tugendhat, who wants to scrap recent increases in national insurance contributions, and Sajid Javid, who will reduce fuel duty by 10p per litre and bring forward the 1p cut in income tax.
Others, such as Grant Shapps, have focused on cancelling the planned hike in corporation tax from 19 to 25 per cent, with Jeremy Hunt going even further with a proposal to reduce the rate to 15 per cent.
There is then a further grouping who, while shorter on detail, have still said that their goal is to reduce taxes in general terms. This group includes Kemi Badenoch, Suella Braverman and Penny Mordaunt.
Without doubt, all these candidates are appealing to Tory preferences for low taxation. They all implicitly acknowledge that taxes have simply been too high under Rishi Sunak, the recently departed chancellor. Taxes now stand at their highest rate since the 1940s, a position that Conservative leaders now see as incompatible with their values and a barrier to economic growth – even if it was amusing to hear Jacob Rees-Mogg greet Mr Sunak’s resignation with the jibe that he was a ‘socialist chancellor’.
Indeed, of all the declared candidates, Sunak now stands alone in not leading with tax cuts. He has said that these would be ‘comforting fairy tales’.
Although he has not detailed his alternative view, it is hard to see how he will back-track from his tax-and-spend policies now. In this way, he is clear that he thinks his measures can stimulate economic growth and deal with the cost of living crisis. But, in continuing the policies he pursued while chancellor, he will risk the disapproval of the Tory base, which in turn could imperil his shot at the top job.
Business leaders to whom I am talking are almost unanimous in their view that taxes are currently too high. The recent increases in national insurance contributions for employers and employees have been particularly painful. Coupled with the planned increase in corporation tax, it is a perilous time for businesses and their ability to invest and create employment. So, as the race for Number 10 hots up, the expectation of imminent tax cuts for individuals and businesses, and the economic stimulus they will create, is likely to be too attractive to dismiss.