When a new Prime Minister is eventually in place, the reality for them and their Chancellor is likely to be very different to the euphoria surrounding the current leadership contest.
With the country’s tax burden at its highest for 70 years, many of the Conservative leadership contenders have opened their campaigns leading with pledges around cutting tax.
In a notable slight against the front-runner to be next Prime Minister, Rishi Sunak, the remaining candidates have said that they would reverse the main measures Sunak had introduced during his 2 ½ years as Chancellor. These include reversing the 1.25% National Insurance increase (the Health & Social care levy), cancelling the planned increase to Corporation Tax to 25% from April 2023, and Penny Mourdant offering to increase the basic and higher tax thresholds by inflation.
Rishi Sunak is the obvious outlier in the race, ruling out tax cuts until the public finances improve. This is a risky leadership campaign strategy, but he is the closest to the detail of the public finances and suggests the other candidates should heed his warning.
A new Prime Minister and their Chancellor will have a difficult job on their hands. Promises of wild tax cuts could be enough to put new occupants into Downing Street, but the price will be eye-watering, with estimates putting the total cost of the candidates’ promises so far at £330 billion.
While short-term tax cuts will offer some respite to working families combatting the current cost of living crisis, the fiscal stimulus will undoubtedly fuel further inflation and do nothing to tackle the nation’s debt which is as much as the size of the UK economy.
A fiscally responsible former Chancellor may not offer the change the public desires, but it may be right for the long-term future of the UK economy.
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