Chancellor Nadhim Zahawi has insisted cutting taxes “isn’t a fairytale” in a swipe at his leadership rival Rishi Sunak, as he set out his pitch to the Conservative membership.
The remarks from Mr Zahawi — appointed chancellor after Mr Sunak’s resignation last week — came after he set out plans to reverse a planned hike in corporation tax and slash VAT from energy bills.
In a campaign video on Tuesday, the Tory leadership hopeful said: “We need to reduce the burden of tax. I believe cutting taxes isn’t a fairytale, but rather a critical step to tackle the cost-of-living crisis”.
Taxation has become a key dividing issue between Mr Sunak, the former chancellor who has advocated restraint until the economy improves, and other candidates who have floated immediate tax cuts if they win the race to succeed Boris Johnson in No 10.
Liz Truss, the foreign secretary, another of the 11 candidates vying to replace the prime minister, has vowed to start cutting taxes “from day one” and would reverse April’s national insurance hike.
But in his own campaign launch today, Mr Sunak will tell his supporters: “We need a return to traditional economic values — and that means honesty and responsibility, not fairytales.”
“My message to the party and country is simple: I have a plan to steer our country through these headwinds,” he will add. “Once we have gripped inflation, I will get the tax burden down. It is a question of ‘when’, no ‘if’”.
Speaking on BBC Newsnight, the former Tory chancellor Ken Clarke, appeared to back Mr Sunak’s stance, stressing that some Tory leadership hopefuls were peddling “populist nonsense” with major tax pledges.
He said candidates needed to show they are willing to take the “tough, necessary decisions” in the face of the “worst economic crisis we’ve had for at least a generation” and the possibility of a recession.
He suggested immediate tax cuts could boost demand and result add to the inflationary pressures facing the country, adding: “I would like to see tax cuts, of course I would from the present extraordinary levels, but when the economy has been put into a state when you can responsibly afford them”.
“Difficult decisions are required now, not more populist nonsense on top of what we’ve sometimes heard already,” he added.
Lord Clarke’s comments were echoed yesterday by another former Conservative chancellor, Lord Lamont, who warned the leadership contest risked descending into a “Dutch auction” and that “unfunded, irresponsible tax cuts which are not necessarily affordable, not necessarily rightly timed”.
