Tory contenders warned on tax cuts
CONSERVATIVE candidates vying to replace Boris Johnson have been warned that a bidding war of unfunded tax cuts could lead to even higher inflation.
Chancellor Nadhim Zahawi pledged yesterday to cut income tax in 2023 and 2024 and abolish green levies on energy bills for two years.
Attorney General Suella Braverman argued there is “no alternative but radical tax cuts” amid a cost-of-living crisis as rivals sought to match each others’ bids.
Foreign Secretary Liz Truss pledged to cut taxes “from day one” while billing herself as an experienced candidate to set herself apart from opponents with less Cabinet experience.
Jeremy Hunt, who has been both health and foreign secretary, expressed a desire to “cut all taxes” in an interview with BBC Breakfast. But Tory former chancellor Lord Lamont warned of the leadership contest descending into a “Dutch auction” and that “unfunded, irresponsible tax cuts” would drive up interest rates.
A row also broke out among the campaigns, with Robert Jenrick criticising rivals for pledging unachievable tax cuts at a time when the party’s “credibility” is under strain.
The former Cabinet minister, who is backing ex-chancellor Rishi Sunak, told Times Radio that “announcing fantasy tax cuts to help get through a leadership election, I think, is unwise”.
Labour leader Sir Keir Starmer accused the Tories of plucking £200 billion of uncosted commitments from the “magic money tree” in an “arms race of fantasy economics”.
Lord Lamont told Radio 4’s World at One programme: “I’m increasingly concerned because I think there is a danger that this leadership election is going to descend into a sort of Dutch auction of tax cuts which are not necessarily affordable, not necessarily rightly timed.
“There is a danger at this point when the public finances, the amount we are borrowing, is not in a strong state.”
The Conservative peer added: “You can’t grow your way out of inflation, you’re just likely to add to it if you attempt to do that.
“I don’t suppose many people want to see interest rates above the level of inflation but if we start giving unfunded, irresponsible tax cuts the Bank of England will be faced with difficult choices indeed.”
Eleven candidates have entered the race so far.
Sajid Javid, the former chancellor and health secretary, is one of them but yesterday refused to give details about which jurisdictions he has previously paid taxes in.
Mr Javid insisted that he had always been “transparent” with the tax authorities.
In a campaign launch in central London yesterday, the Bromsgrove MP revealed plans to woo Tory colleagues and grassroots activists with a promise of tax cuts and an ambitious house-building programme as he said that Conservatives were facing a “wake up and smell the coffee” moment.
But questions about his former tax arrangements overshadowed part of the launch, with Mr Javid declining repeatedly to get into specifics about where he has previously paid tax.
Mr Javid had previously disclosed that for six years while working as an international banker and before entering politics he was non-domiciled for tax purposes.
But under questioning from reporters, he refused to give details of where he had been domiciled for tax purposes.
“I believe I’ve been open and transparent about this. I’ve set out before this campaign that, because... before politics my job was an international job, I travelled a lot,” he said. “And I am certain that I’ve never had an issue with HMRC. I’ve never had a tax investigation. I’ve always been transparent, fully transparent, with the tax authorities.”