Tory leadership race: Zahawi pledges 2p income tax cut within two years

Chancellor vows to slash spending if he gets top job as rival Liz Truss says she would cut taxes ‘from day one’

Nadhim Zahawi has promised to cut income tax by 2p within two years if he becomes prime minister and condemned what he called the excessive taxation and spending of the government in which he remains the chancellor.

In another ramping up of what Labour has called an uncosted tax cutting “arms race”, Zahawi told Conservative activists that he would also reduce tax as a percentage of national income every year he was in power.

Earlier, Liz Truss also joined the race by promising in a Telegraph article she would “start cutting taxes from day one” if she took over from Boris Johnson as Tory leader and thus prime minister.

The foreign secretary, the 11th MP to enter the contest, said this would include reversing the increase to national insurance, introduced to pay for reforms to social care, and blocking an increase in corporation tax.

Speaking an event in Westminster organised by the Thatcherite group Conservative Way Forward (CWF), Zahawi, the former education secretary who took over at the Treasury after Rishi Sunak resigned last week, seemingly condemned the taxation policies he endorsed while in Johnson’s cabinet.

The work of the CWF, which has produced a charter for lower taxation and a smaller state, which Zahawi has endorsed, was “like the first buds showing on a spring morning after a long winter”, the chancellor said.

“It is a sign that finally, after too many years of tax and spending skyrocketing, the political landscape is once again coming back to the sensible policies championed by Margaret Thatcher,” he said.

Zahawi, who carried on with his speech even after a woman fainted with a loud crash in a packed and sweaty basement venue in the Churchill War Rooms, said he would cut income tax from 20p to 19p next year, and 18p in 2024.

He added: “Let me be clear: tax as a percentage of GDP will fall year on year if I become prime minister. That is a promise.”

He also promised to suspend all VAT and green levies on energy bills for two years to help people with energy costs.

In an earlier interview with Sky News to launch his campaign, Zahawi said he would finance tax cuts by getting every government department to cut their costs by 20%.

Asked by Sky reports about his financial and tax affairs, including that propriety and ethics officials alerted Downing Street to a HM Revenue and Customs “flag” before he was made chancellor, Zahawi said: “So I was clearly being smeared.”

Speaking at the same event the attorney general, Suella Braverman, called for “robust and radical” policies, including to shrink the state, but noted that factors like an ageing population made this complex.

“You can’t cut public services just like that when so many people depend on them,” she said, calling for reforms to public institutions and stronger families and communities.

In a speech in Gateshead on Monday morning, the Labour leader, Keir Starmer, condemned the rush to cut taxes among Tory leadership candidates, calling it an “arms race of fantasy economics”.

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Kwasi Kwarteng, the business secretary and a supporter of Truss, told BBC Radio 4’s Today programme that such tax cuts would require reductions in public spending, but declined to say how.

“I’m not going to specify cuts at the moment because we’ve got a leadership contest,” he said. “I’m sure that detail will be forthcoming as the leadership contest progresses.”

Other candidates already in the race include Sunak, who has ruled out immediate tax cuts; Jeremy Hunt, the former foreign secretary; the former minister Kemi Badenoch, who was endorsed on Sunday night by Michael Gove; Sajid Javid, the former health secretary; the ex-defence secretary Penny Mordaunt; the transport secretary, Grant Shapps; and the senior backbencher Tom Tugendhat.

Rehman Chishti, the MP for Gillingham and Rainham who became a junior minister for the first time last week after 12 years in the Commons, has also joined.

The 1922 Committee of backbench Tories will set the rules for the first part of the race, in which the field will be whittled down to a final two, to be chosen between by party members. The committee is meeting on Monday evening to finalise these.

Amid concern at the number of candidates, hopefuls may need to have 25 or more nominations to even enter the ballot of MPs, up from eight when the race was last held in 2019, with a hope of reducing the field to two in as little as a week.

ITV will host the first candidates’ debate on 17 July followed by Sky News s on 18 July.


Peter Walker Political correspondent

The GuardianTramp

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