British PM candidate Rishi Sunak vows to slash 20% income tax by 2029

Rishi Sunak said each penny cut from the rate of income tax would cost around 6 billion pounds ($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.

Image courtesy: Reuters

London: 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% by 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 to 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.

Sunak said he 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 income tax from 20p to 16p.

Sunak said 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 on Sunday, a day before Conservative Party members are due to start receiving their ballot papers to vote for the party`s new leader.

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 Sept. 5.

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

Sunak said each penny cut from the rate of income tax would cost around 6 billion pounds ($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 argued that tax cuts are needed now to give the economy a shot in the arm. A recent poll by YouGov showed Truss held a 24-point lead over Sunak among Conservative Party members.

Nadhim Zahawi backs Truss as next Conservative Party leader 

British finance minister Nadhim Zahawi formally endorsed Liz Truss to be the next Conservative Party leader, The Telegraph reported on Sunday. Foreign secretary Truss "will overturn stale economic orthodoxy and run our economy in a Conservative way," Zahawi wrote in The Telegraph.

Zahawi, who took over as finance minister from Rishi Sunak early July, was eliminated from the UK leadership contest in the first vote after he failed to get the required minimum of 30 votes. Attorney General Suella Braverman and Chair of Parliament`s Foreign Affairs Committee Tom Tugendhat, who were both eliminated from the race, are also backing Truss in the leadership contest.