Leadership contenders jostle over tax cut promises
The Prime Minister Theresa May officially steps down as the leader of the Conservative Party today (Friday), but will remain as Prime Minister until her successor is chosen. She announced her resignation two weeks ago, saying it was a matter of deep regret that she had been unable to deliver Brexit. Tax is a battleground in the leadership contest. A number of candidates and putative candidates have called for tax cuts, both generally and specifically.
Boris Johnson (Odds at Paddy Power: 8/15)
The former Mayor of London and leadership favourite launched his campaign with a promise to both cut taxes and increase spending on schools and the police. He suggested he could ‘cut some taxes and you get more money in’ to pay for his campaign pledges, but there were no specifics.
Postscript: since this blog was published, Boris Johnson has pledged to cut income tax bills for people earning more than £50,000 a year if he wins the race to succeed Theresa May ass PM. The former foreign secretary told the Telegraph he would use money currently set aside for a no-deal Brexit to raise the 40 per cent tax rate threshold to £80,000. More on this here.
Michael Gove (10/1)
Gove was among Conservative MPs who backed proposals in think tank Onward’s Firing on all cylinders report that outlined a ‘trickle-up’ economic approach would see corporation tax lowered and other taxes cut. The report says corporation tax, which is currently 19 per cent, should eventually be cut to 12.5 per cent, in line with Ireland, to stimulate investment and productivity. Other taxes on businesses could be cut even further in the poorest areas to create jobs, the report said.
Postscript: since this blog was published, Michael Gove says he wants to replace VAT after Brexit if he becomes PM. On his economic plans, he said: "It would mean reducing the regulations which hold business back, cutting and reforming taxes - such as business rates - which put pressure on small businesses and undermine our high streets, using the opportunity of life outside the EU to look to replace VAT with a lower, simpler, sales tax," he added. More on this here.
Jeremy Hunt (7/1)
Hunt also backed the Onward report (see above) and said he would copy Donald Trump's tax-cutting agenda to ‘turbo-charge’ the economy. He said: "Look at the headroom that we now have in the economy, the £26bn that we know the Treasury has now, which is keeping a business war chest for a no-deal. Use it right away.” The Foreign Secretary wants to cut UK corporation tax to 12.5% from the current 19%, bringing it into line with Irish levels.
Andrea Leadsom (10/1)
The former Commons Leader’s pre-politics career was in finance, as a banker and fund manager, but she has said little about tax in her leadership campaign so far.
Rory Stewart (25/1)
The Secretary of State for International Development set out ‘six points for our economy’ in a campaign video: retain UK’s reputation for economic competence; prioritise spending on public services; bring forward infrastructure investment urgently; prepare people for skills of the future; shareholder economy; and make the UK a place where business can flourish. Stewart said he wants to boost spending on research and development; make it easier to start new businesses by simplifying tax code and cutting red tape. He took a swipe at rival candidates, saying: “Candidates that are advocating a no-deal Brexit as well as tax cuts will -- in one afternoon in October -- lose us a reputation that we have spent 300 years building”.
Dominic Raab (33/1)
The former Brexit Secretary has vowed to cut the basic rate of income tax by a penny each year ‘as Nigel Lawson did in the 1980s’. He has also called for the National Insurance threshold to be raised to £12,500, mirroring the level of earnings at which people start paying income tax. But he said cutting taxes for those on higher incomes ‘would not be my first priority’. Raab proposed to fund the tax cut partly by closing down or merging government departments.
Sajid Javid (33/1)
The Home Secretary indicates that he is willing to scrap the 45 pence rate of income tax in a bid to inject more ‘dynamism’ into the economy. He argues that income tax cuts can pay for themselves, highlighting increased tax revenues in the wake of George Osborne’s decision to scrap the 50 pence rate of income tax. He says: "If it can be demonstrated that a further cut in the additional rate can raise more taxable revenues that should be looked at. If I was Prime Minister, my intent would be to do as much as I can to keep cutting taxes on personal income."
Matthew Hancock (66/1)
The Health Secretary said he would end business rates for small businesses on high streets altogether, and pay for it by an increase in the new digital services tax. He also plans to dip into the £26 billion Brexit buffer set aside by Philip Hammond. His business rates plan is part of a wider economic policy which includes raising the national living wage to £10.21 by 2022.
The other three declared candidates at the present time are Esther McVey (100/1), Mark Harper (200/1) and Sam Gyimah (not listed).
Conservative MPs will vote in a number of ballots, beginning on Thursday, to whittle the candidates down to two MPs. Members of the Conservative party will then vote for a winner. The plan is to do all this by the end of July.
By Hamant Verma