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Rishi Sunak has rejected bringing forward his promised income tax cut as he battles to win over Tory members leaning to the tax-slashing leadership favourite Liz Truss.
The former chancellor – whose pitch is “fiscal responsibility” – is nevertheless under pressure to accelerate his planned 1p reduction off the basic 20p rate from spring 2024 to autumn 2023.
The move would be an attempt to nullify what is thought to be Ms Truss’s central appeal to the Conservative grassroots, who will choose the next leader and prime minister.
But it would risk undermining Mr Sunak’s stance as the candidate who can be trusted with the nation’s money, in contrast to his rival’s “fairytale” economics as he puts it.
A source in the Sunak camp said he does not expect to be able to cut personal taxes until autumn 2023 at the earliest – and that they would be unlikely to kick in until April 2024.
That would fit with the timetable set out in March, at his spring statement, when the then-chancellor unveiled a pre-election sweetener for the poll expected in spring 2024 – the 1p cut to 19p.
Mr Sunak said it would come in “from 2024”, the Treasury adding: “This will be delivered in a responsible and affordable way, while continuing to meet our fiscal rules.”
The Sunak camp is now suggesting the test will be when roaring inflation has been tamed, not spending and borrowing rules – which could make the announcement of the cut possible late next year.
Mr Sunak has admitted he is the outsider in the battle for No 10, despite winning the support of 137 Conservative MPs, a sizeable lead on the foreign secretary’s 113.
A poll this week of Conservative members gave Ms Truss a healthy lead of 54 to 35 per cent over her rival, before hustings begin next week.
Mr Sunak is also vulnerable to the anger of some Tory members that he helped trigger Boris Johnson’s departure – by resigning – while Ms Truss stood by him.
And his reputation has not fully recovered from the controversy over his wife’s non-dom tax status, or the revelation he a US green card while chancellor.
But Ms Truss’ tax plans – unfunded cuts of at least £30bn – are hugely controversial, a row fuelled by her claim that they would cut, rather than increase, inflation.
Vowing to take on Treasury “orthodoxy” and the economic consensus, the race favourite insisted the package was “not a gamble” and would not drive up inflation already standing at 9.4 per cent.
But economists are warning they would not push up prices and risks a return to 1970s-style inflation.
Dr Jo Michell, associate professor of Economics at UWE Bristol, told The Independent: “The tax cuts she’s proposing are more likely to be inflationary so, on balance of probability, her comments are false.
“It’s certainly a gamble – saying the plan has no risk [of increasing inflation] is ridiculous.”
