Within a few hours of starting bidding Conservative leadership Following Boris Johnson’s resignation last week, senior candidates have promised a drastic tax cut that threatens to leave a black hole in Britain’s finances.
The economy is set to be a decisive issue in the competition to become Britain’s next prime minister, Johnson Government Approach For those who want to pursue investment in public services and supply-side reforms
Former Prime Minister and current favorite Rishi Sunak is Coded attack on Tories He submits an unrealistic oath that he describes as a “comfort fairy tale.” In the video that started his campaign, he asked: “Do we face this moment with honesty, seriousness, and determination?”
Snacks have not yet established a complete economic base, but as Prime Minister, he is expected to claim that his approach was responsible. “He will tackle inflation, grow our economy and cut taxes,” his campaign said. He wants to unleash growth by taking advantage of the new freedom Brexit has given us and the new spirit it can give us. “
However, some other candidates, in particular, have proposed significant differences from the snack policy. Former Secretary of State Sajid Javid, Former Secretary of State Jeremy Hunt Foreign secretary Liz Truss previously planned to launch the campaign on Monday.
Other candidates like Prime Minister Nadim Zahawi, Tom Tugendart, chairman of the Foreign Affairs Special Committee, and Sula Braverman, president of the lawyer, talked about the need for tax cuts, but have no plans.
The tax cut pledge is designed to appeal to 358 Tory lawmakers who begin picking candidate candidates on Wednesday before the last two candidates are voted by party members.
research According to Britain in a changing European think tank, Conservative lawmakers suggest that they are to the right of Tory members and even to the right of voters on economic issues such as inequality and taxes.
Paul Johnson, director of the Institute for Fiscal Studies think tank, said the size of the pledge by some of the candidates is not easy to raise money. “Everyone wants a lower tax [the candidates] We need to be clear about the results, “he said.
He added that candidates would face two difficult choices to fund their pledge. “For example, using that margin for tax cuts almost certainly means a significant real reduction in public wages,” he said. “Of course, you can borrow more, as opposed to a conservative manifesto. It can be risky in a high inflation environment.”
A Financial Times analysis of pledges from key candidates shows how much each will cost.
With a promised cost of £ 49.4 billion, Javid has adopted the highest tax cut to date. The former Prime Minister has proposed reducing the corporate tax rate by 1% annually until it reaches 15%. As Prime Minister, Snack planned to increase the rate from 19 percent to 25 percent next April.
According to the HM Revenue & Customs ready calculator, the cost of a 15% corporate tax rate compared to a 25% corporate tax rate is £ 34 billion annually. This shows a wide range of cost estimates for tax cuts.
Javid also promised to cancel the government’s planned increase in national insurance. This will raise £ 18 billion annually by 2025-26, but canceling the raised threshold will reduce costs (£ 13 billion annually by 2025-26). To pay donations.
His other proposals include carrying forward the income tax cut planned for 2024 to next year, spending £ 6 billion annually from 2024 to 25, and further reducing fuel taxes. .. diesel.
Assuming the fuel and income tax proposals are temporary, the total cost of the tax cut Javid package will be between £ 47 billion and £ 52 billion annually, or about 2 percent of GDP.
In an interview with The Sunday Telegraph, Javid defended his approach. “Some people say that you can’t cut taxes until you grow up. I think that’s wrong. I think it’s a fundamentally flawed analysis. I don’t think you can grow until the tax cuts are done.”
Hunt didn’t go to Javid when he sought leadership. The proposal cost a total of £ 39 billion. He immediately reduced corporate tax to 15%, cost £ 34 billion, and proposed a five-year business-rate vacation in the country’s most disadvantaged areas. This cost depends on how the area is defined.
Hunt’s allies said his tax cuts would “unleash the growth that has long been lacking in our economy. The tax cuts of large Irish companies in the 90s created the” Celtic Tiger “economy. Jeremy does the same in the UK. “
However, by reducing the corporate tax to 15%, the effective average tax rate after the allowance is taken into account will cause the UK to violate the minimum global corporate tax rules of the new OECD agreement.
This will allow other countries to collect tax revenues from their profits in the UK, effectively eliminating incentives for foreign investment from low interest rates while losing Exchequer money.
Dan Niedel, founder of the think tank Tax Policy Associates, said the UK tax cuts are “totally meaningless” because London “give up tax revenues to other countries.”
Truss has not yet promised a corporate tax cut, but the government’s national insurance will cost £ 13 to £ 18 billion annually by 2025-26, depending on whether the payment base has also been revoked. I promised to cancel the withdrawal.
An ally with truss said her marketing “will provide a departure for the economy.” She does, among other things, quick and smart spending reviews. Liz’s second and third priority is economic growth. She will be bold about the supply-side reforms that the Tory government has long promised, and Liz will do. “