London Daily

Focus on the big picture.
Tuesday, Oct 27, 2026

Tory leadership: Do rivals tax pledges add up?

Tory leadership: Do rivals tax pledges add up?

Promises to cut taxes have become the dominant theme so far of the race to succeed Boris Johnson as Conservative party leader. But how are the plans costed and do they make economic sense?

Under current government plans, the total tax burden is set to reach its highest level since the 1940s, according to official forecasts.

The Tory leadership candidates are promising to reduce it but haven't specified whether they would pay for any shortfall in government finances with extra borrowing or cuts to public spending, instead emphasising that they would spur growth and thus increase government revenues.

Lord Lawson - a former Conservative chancellor - has warned: "There is a danger that this leadership election is going to descend into a Dutch auction of tax cuts which are not necessarily affordable."


Corporation tax


This is a direct tax on the annual profits of businesses - essentially, a form of income tax for companies.

The tax rate is currently 19% but from next April - under a decision by former Chancellor Rishi Sunak - it is due to increase to 25%.


Who wants to change it?

The newly appointed Chancellor Nadhim Zahawi has promised to scrap next year's corporation tax rise.

Jeremy Hunt - former foreign secretary - has gone further, suggesting he would reduce corporation tax to 15% in the autumn budget, due in October.

Liz Truss has said she wants to "keep corporation tax competitive".

Economic analysis

The economic think tank, the Institute for Fiscal Studies (IFS), has been crunching the numbers. IFS economist Stuart Adam calculates that:

*  cancelling the rise from 19% to 25% would cost £17bn a year

*  reducing the rate to 15% would cost another £14bn a year

The IFS says though that this potential £31bn annual cost doesn't allow for whether the corporation tax cut could lead to increased investment in the UK, which could make the final bill "substantially lower - though not enough for the tax cut to pay for itself".


Income tax


The basic rate of income tax is currently 20p in the pound and is paid on earnings between £12,571 to £50,270.

This rises to 40p in the pound for earnings above £50,270 and 45p in the pound for earnings over £150,000.

Former Chancellor Rishi Sunak announced a reduction in the basic rate to 19p but not until 2024-25.

Who wants to change it?

Nadhim Zahawi wants to bring the income tax cut forward by one year, making it 19p in 2023.

He would then reduce it to 18p in 2024.

"That will give households back £900 a year on average," he claims.

Economic analysis

According to IFS economist Stuart Adam, bringing the income tax cut forward to 2023-24 would cost a "one-off" £6bn.

It's thought reducing it further would cost another £6bn.


National Insurance


National Insurance (NI) is a tax on earnings and self-employed profits - paid by all workers, until they reach the state pension age.

Since April, they have been paying more in NI - an extra 1.25p in the pound. The rise - announced by Mr Sunak - was to fund health and social care.


To try to ease the impact of the changes, Mr Sunak raised the threshold - at which people start paying NI - to £12,570. But some of his leadership rivals say this isn't enough.

Who wants to change it?

Ms Truss and Tom Tugendhat - chairman of the foreign affairs committee - want to scrap April's NI rise.

Economic analysis

Reversing the NI rise would cost about £13bn a year, according to the IFS's Stuart Adam.

Carl Emmerson, deputy director of the IFS, said cuts to personal taxes such as NI "certainly won't be paying for themselves". He said while such tax cuts would put "more money in people's pockets", they risked contributing to inflation.



Fuel duty


This is a tax - along with VAT - included in the price of petrol, diesel and other types of fuel.

The price of fuel has increased dramatically in the UK - following the war in Ukraine - adding to the cost of living pressures.


UK fuel duty is currently 52.95 pence per litre for petrol and diesel. In the 2022 Spring Statement, the government announced a temporary cut to fuel duty of five pence per litre.

Who wants to change it?

Mr Tugendhat has pledged to cut fuel duty by 10 pence per litre.

Trade Minister Penny Mordaunt has said she would cut VAT on fuel in half, from 20% to 10%.

Trade minister Penny Mordaunt has been MP for Portsmouth North since 2010.


Economic analysis

Fuel duty brings in a lot of money for the government - an estimated £26.2bn in revenue in 2022-23, according to the Office for Budget Responsibility (OBR).

The government said that April's five pence per litre cut would cost £2.4bn - so any further reductions would be in the billions.

Caroline Mullen and Greg Marsden, transport researchers from Leeds University, argue that cutting fuel duty would only benefit the wealthiest in society.

"In 2019, the highest income group in the UK drove an average of 4,893 miles per year, more than three times that of the lowest income group.

"If it is the least well off that the fuel duty cut is aimed at protecting, then the tax system or benefit adjustments would surely be more targeted and effective," they said.


VAT on energy bills


VAT is payable on goods and services. The standard rate is 20% but VAT on domestic energy bills is currently 5%.

When the UK was a member of the EU, this could not be reduced further. During the 2016 EU referendum campaign, Boris Johnson and Michael Gove said that "when we Vote Leave, we will be able to scrap this unfair and damaging tax". But this has not happened.

Who's proposing what?

Suella Braverman has called for VAT on energy bills to be cut further.


Economic analysis

Getting rid of the 5% tax would cost the government about £1.7bn a year, according to HMRC estimates.


What about the other candidates?


Rishi Sunak - the former chancellor - has launched his leadership bid, saying: "Once we have gripped inflation, I will get the tax burden down. It is a question of 'when', not 'if'."

He hasn't come out with detailed tax cuts yet but says he wants "radical reforms" to the way businesses are taxed.

Kemi Badenoch says "I'm committed to reduce corporate and personal taxes" but hasn't given any more details.

Newsletter

Related Articles

0:00
0:00
Close
Education or Indoctrination? The Growing Debate Over Religious Participation in British Schools
Germany's Vanishing Shopfronts: The Silent Collapse of the Businesses That Built Its Cities
Transport for London Unveils Expanded Zero-Emission Bus Fleet to Meet Capital Air Quality Targets
Higher Education Institutions Face Deepening Financial Strain Amid Declining International Student Enrolment
Automotive Industry Leaders Criticize Government Tax Policies and Urge Action on Retail Consumer Confidence
Environment Agency Issues Flood Alerts Across Scottish and English Waterways Following Heavy Rainfall
Independent Audit Highlights Persistent Security Vulnerabilities Across Legacy Government Digital Portals
Northern Ireland Political Leaders Clash Over Westminster Funding Allocations Ahead of Autumn Budget
Ethnic Minorities in England Face Significant Disparities in Routine Breast Cancer Diagnosis Rates
National Police Chiefs Report Alarming Surge in Domestic Abuse Cases Fuelled by Expanding Illegal Cocaine Market
Government Announces Two Hundred and Twenty Million Pound Pothole Funding Boost for Local Highway Authorities
China Issues Formal Warning Over Potential United Kingdom Restrictions on Chinese Electric Vehicles
British Defence Ministers Sign E5 Pact to Enhance European Military Capabilities and Industrial Cooperation Within NATO
United Kingdom Business Activity Expands at Fastest Pace in Eight Months According to S&P Global Flash Survey
Chancellor John Healey Prepares Major Devolution Package and Bank Profit Surcharge Ahead of Upcoming Autumn Budget
National Health Service Consultants in England Announce Two-Day Strike Action Scheduled for November
Major Clean-Up Under Way Across Britain Following Destruction Caused by Consecutive Storms Austen and Boelo
KEY TRENDS TO WATCH
Declassified Intelligence Files Reveal British Security Services Monitored National Health Service Founder
British Government Launches Sweeping Regulatory Crackdown on High-Risk Cosmetic Procedures
Scottish National Party Demands Ban on Using Scottish Revenues to Fund English Nuclear Energy Projects
Mayor of London Initiates Landmark Pedestrianisation of Oxford Street to Revitalise Global Retail Hub
British Judges Granted Expanded Legal Powers to Punish Convicted Killers Who Refuse to Attend Sentencing
United Kingdom Poised to Miss Reduced International Aid Spending Targets Ahead of Fiscal Review
Surging Cocaine Consumption Drives Record Drug Fatalities and Rising Crime Rates Across Britain
Department of Health and Social Care Announces One Hundred and Forty Million Pound Boost for Urgent Care
British Services Sector Records Strongest Growth in Eight Months Despite Broader Economic Uncertainty
United Kingdom Retail Sales Suffer Unexpected Decline as Consumer Confidence Plummets
Greater Manchester Mayor Andy Burnham Urges National Debate on Restoring European Union Free Movement
Deep Cabinet Divisions Emerge Over Controversial Approval of North Sea Fossil Fuel Projects
United Kingdom Government Urges Citizens to Stockpile Essential Supplies in National Resilience Pivot
Storm Boelo Kills Two People and Cuts Power to Tens of Thousands Across Great Britain
Critical Software Flaw Forces Dozens of United Kingdom Government Services Offline Amid Mass Security Warnings
UK Consumer Confidence Tumbles Amid Rising Energy Costs and Global Commodity Price Pressures
North Sea Transition Authority Approves Production from Jackdaw Gas Field to Bolster Domestic Energy Security
Storm Boelo Leaves Tens of Thousands of Households Without Power Across Scotland and Northern Ireland
UK Government Launches National Be Ready Campaign Urging Households to Prepare Three Days of Emergency Supplies
Department for Environment Food and Rural Affairs Implements Stricter Water Quality Regulations for British Rivers
Welsh Government Launches Major Renewable Energy Initiative to Expand Offshore Wind Capacity Along the Coast
Northern Ireland Executive Reaches Final Agreement on Comprehensive Regional Infrastructure Modernization Plan
Office for National Statistics Reports Moderate Increase in British Retail Sales Driven by Autumn Discounts
Scottish First Minister Announces Emergency Housing Strategy to Tackle Severe Homelessness Across Urban Centers
Automotive Industry Leaders in the United Kingdom Urge Government Support for Electric Vehicle Manufacturing Transition
United Kingdom and European Union Initiate High-Level Negotiations on Post-Brexit Defense and Security Pact
National Health Service England Introduces Sweeping Digital Reforms to Reduce Hospital Waiting Lists Nationwide
Chancellor of the Exchequer Outlines Emergency Fiscal Measures to Address Local Government Funding Crises Across England
Bank of England Governor Warns of Persistent Inflation Pressures Impacting Interest Rate Decisions in the United Kingdom
UK Conservative Party Suspends Former Electoral Candidate Following Undercover Investigation
Actors and Writers Condemn British Anti Terror Legislation Targeting Activist Groups and Free Speech
Central Bank and Treasury Monitor Inflation Risks as International Monetary Fund Upgrades United Kingdom Growth Forecast
×