Conservative manifesto: Rishi Sunak's gamble on tax cuts 'problematic', think tank says

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The Conservatives’ election manifesto is “problematic” because it rules out reforming taxes such as council tax and capital gains tax, the director of an independent think tank has said.

Rishi Sunak took the axe to national insurance as he sought lift-off on Tuesday for the Tory party’s election campaign.

The Prime Minister vowed to lop a further 2p off the main rate by 2027. In a surprise announcement, he also promised to completely abolish the main rate of self-employed national insurance to reward “risk takers” who set up their own businesses.

The tax-cutting package, which also includes changes to child benefit, pensioners’ triple lock plus, and moves to help home buyers get onto the property ladder, was expected to total £17.2 billion by 2029/30.

Mr Sunak said: “We are now cutting taxes for workers, parents and pensioners.”

But Paul Johnson, the Institute for Fiscal Studies (IFS) director, said the party is “ruling out all sorts of changes” to tax when “frankly there needs to reform”.

Speaking to BBC Radio 4’s PM programme he said: “Not only are they saying they won’t raise the main rates of income tax, national insurance and VAT, but they are ruling out all sorts of changes to council tax, taxation of pensions, capital gains tax, inheritance tax, all sorts of things where frankly there needs to be reform, and there needs to be change.

“And I presume that part of the reason they’re doing that is to try to get the Labour Party to agree with that level of commitment not to do stuff, which would not be good for tax policy making over the rest of the parliament.

“So it’s not so much what they say they will do, but it’s what they’re ruling out which is the most problematic part of the manifesto.”

He added: “They are not telling us how they would either actually cut government spending on local government or social care or the justice system or whatever it is, but neither are they telling us where they would find extra money to avoid those cuts. This is all … against a slightly implausible baseline.”

Mr Johnson warned Tory promises may not be up to addressing key economic challenges.

“The trouble is the policies that have been spelt out are not up to the challenge of saving £12billion a year,” he said.

Mr Johnson added: “What the manifesto did not tell us was where the £10 to £20 billion of cuts to spending on unprotected public services, as implied by the March Budget, might come from. Indeed the billions of savings from cutting Civil Service numbers and the rest noted in the manifesto have been earmarked to fund the additional defence spending, and would come on top of those cuts.”

Meanwhile the shadow chancellor accused the Prime Minister of “cosplaying Liz Truss” and said the Tories will not follow through on their pledge to lower National Insurance.

Speaking at a London press conference responding to the Tory manifesto on Tuesday, Rachel Reeves said: “[Rishi Sunak] said he was the antidote to Liz Truss.

“Instead, he’s cosplaying Liz Truss by again doing what the Conservatives did in that mini-budget with £71billion of unfunded commitments.”

She added that the Tories are “not going to cut national insurance”, but if they do, it would mean “£4,800 more on your mortgage”.

Unveiling his manifesto at the Silverstone race circuit, near Northampton, Mr Sunak sought to put clear blue water between his party and Labour after his campaign was knocked off track by his D-Day 80th anniversary blunder of not staying in France for the international leaders’ ceremony.

Tax cuts

The centrepiece was tax cuts as he trumpeted the Conservatives as the party of Margaret Thatcher and her tax-cutting chancellor Nigel Lawson.

The premier stressed the main rate of national insurance had already been lowered from 12 per cent to eight, with the two 2p reductions in the autumn statement and Budget. Mr Sunak said: “We will go further in the coming years, meaning that by 2027 we will have halved national insurance to six per cent: saving an average worker on £35,000 more than £1,300.”

He hailed this as “progress” towards the “long-term ambition to abolish the double tax on work when it is economically responsible” to do so. Mr Sunak then turned to the self-employed.

“They are the risk takers, the people who graft hard to a make a living, who get our economy growing,” he said. “They embody that most Conservative of virtues: the desire to build something, to create wealth and opportunity.” He was to add: “So, in the next parliament we will scrap, entirely, the main rate of self employed national insurance.”

At the Spring Budget, the Office for Budget Responsibility said that despite the NI cuts, the overall tax burden on Britain was set to rise towards close to a post-war high of 37.1 per cent of GDP by 2028/29, mainly due to stealth taxes through freezes on thresholds including on income tax.

Labour

The PM seized on the fact that many voters say they still do not know what Labour’s Sir Keir Starmer stands for. Mr Sunak said: “If you’re concerned about what Starmer isn’t telling you, don’t vote for him.” The PM stuck to the Tory claim that a Labour government would mean a £2,094 hit to households despite the Treasury distancing itself from the £38.5 billion total figure, on which it was based and independent fact checkers condemning it.

The UK’s statistics watchdog has also criticised its use as the £2,094 figure is a compilation over four years, a fact not being made clear by ministers. Labour slammed the Tory manifesto as the “most expensive panic attack in history” with “scattergun and unfunded commitments”.

Housing

Mr Sunak set a target of 1.6 million new homes in the next parliament, partly by speeding up planning on brownfield land in inner cities. Stamp duty will be ditched for first-time buyers purchasing a home valued at up to £425,000.

A “new and improved” Help to Buy scheme would help people get onto the property ladder. “From Macmillan to Thatcher to today, we Conservatives are the party of the property-owning democracy,” the PM said. Landlords would also get capital gains tax relief if they sold their property to tenants.

Immigration

The Tories, if re-elected, would introduce a migration cap set by Parliament, with a “plan to halve migration”.

Mr Sunak insisted that deportation flights to Rwanda would take off “within weeks”, however the Government has so far failed with its flagship pledge despite repeated promises with more than 10,000 asylum seekers and economic migrants having crossed the Channel in “small boats” so far this year.

The Prime Minister stuck to his line that if “forced to choose” between Britain’s security and the jurisdiction of the European Court of Human Rights, he would opt for the former.

Funding

The Conservatives appear to be significantly basing their tax-cutting plans on saving about £12 billion from the growing welfare bill, as well as £6 billion from clamping down on tax avoidance, both by 2029-30. However, independent experts have questioned whether these aims will be achieved.

Families

Working parents would get 30 hours of free child care a week from when their child is nine months to when they start school.

Child benefit would be reformed so that any family earning less than £120,000 a year would be eligible.

Funding for “rip-off” degrees would be cut and used to pay for 100,000 “high quality” apprenticeships.

The controversial national service for young people would be introduced.

Public services

NHS funding would increase in real terms every year. Eight thousand new police officers would be recruited. But ministers stopped short of denying that some departments could see budget cuts amid the expected tight public finances.

Foreign policy and defence

Mr Sunak promised to increase defence spending to 2.5 per cent of GDP by 2030, a timeframe Labour is yet to commit to.

“The axis of authoritarian states — Russia, China, Iran, North Korea — must know that their attempts to destabilise our world will not succeed. Now is the time for bold action, not an uncertain Prime Minister,” he said.

D-Day

Mr Sunak appeared to acknowledge his mistake over the D-Day ceremony, and the views of many voters struggling to get by in the cost-of-living crisis, with polls showing the Tories some 20 points behind Labour, with Reform UK on the rise. He said: “I am not blind to the fact that people are frustrated with our party, and with me.”