UK PM race: Rishi Sunak vows to cut 20% basic income tax rate by 2029

Rishi Sunak claimed that the plan would be the largest income tax cut since Margaret Thatcher's time.

London, First Published Aug 1, 2022, 9:14 AM IST | Last Updated Aug 1, 2022, 9:15 AM IST

Rishi Sunak, who is trailing in the race to become Britain's next prime minister, has promised to slash the basic income tax rate by 20 per cent by 2029, in a potentially game-changing move by the former finance minister.

Sunak, who was once considered the favourite to succeed Boris Johnson as Foreign Secretary when he helped steer the economy through the COVID-19 pandemic, has struggled against Foreign Secretary Liz Truss, who promised immediate tax cuts.

Sunak said he was still focused on reducing inflation, but once that was accomplished, he would carry out an already-announced plan to cut one penny from income tax in 2024 and then another three pence by the end of the next parliament, likely around 2029.

The two promises would reduce income tax from 20 p to 16 p.

Sunak claimed that the plan would be the largest income tax cut since Margaret Thatcher's time.

"It is a radical vision, but it is also a realistic one," he said in a statement released on Sunday, a day before Conservative Party members began receiving ballot papers to vote for the party's new leader.

Britain's search for a new prime minister began on July 7, when Johnson was forced to resign after months of scandal. Conservative lawmakers have narrowed the field of candidates to Truss and Sunak, with a decision by party members expected on September 5.

The economy took centre stage in the early goings of the debate as inflation surged to a 40-year high of 9.4 per cent and growth stalled. Sunak claimed Liz Truss's proposal to roll back increases in social security contributions and cancel scheduled increases in corporation tax would fuel inflation further.

As per Sunak, each penny reduced from the income tax rate would cost roughly 6 billion pounds ($7.3 billion) annually, a sum that would still allow Britain's debt-to-GDP ratio to decrease provided the economy expands as predicted by government estimates.

As per the recent YouGov poll, truss has maintained that immediate tax cuts are necessary to boost the economy.

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