Mr Sunak played down the prospect of imminent tax cuts in his leadership launch on Friday, on the grounds that it is irresponsible to cut taxes before the public finances have improved

Despite an unwieldy line-up of candidates that has been variously likened to the Grand National, Wacky Races and even Ben Hur, the Tory leadership contest is this weekend centred mainly on two candidates and one subject – tax.

Liz Truss is hoping to unite the Right of the party behind a ‘stop Sunak’ campaign that will be focused on the same small-state principles espoused in the 1980s by Ms Truss’s political hero, Margaret Thatcher.

The Foreign Secretary is likely to be cheered on in her fight by Boris Johnson, who bears the scars from a year of running battles with Rishi Sunak over the economy. 

Boris-supporting Jacob Rees-Mogg gave a flavour of the Johnson camp’s views in the first Cabinet meeting after Mr Sunak’s resignation last week, when he described him as a ‘socialist chancellor’ who had raised the tax burden to its highest level in 70 years.

Mr Sunak played down the prospect of imminent tax cuts in his leadership launch on Friday, on the grounds that it is irresponsible to cut taxes before the public finances have improved

The division is most starkly represented by Mr Sunak’s unpopular National Insurance rise of 1.25 per cent, to pay for the NHS and social care reform, which the former chancellor insisted on when Mr Johnson demanded the money for it. 

Mr Sunak refused to pay for it by borrowing money, and said that instead a new tax should be introduced to fund it. The issue soured relations between the two most senior members of the Government.

Ms Truss will step into this debate by pledging to cancel the rise. In anticipation of critics asking how it would be funded, given the need to balance the country’s books after Covid, she argues that the pandemic was a ‘once-in-a-century event’ and it should be treated as a form of war debt to be paid back over the course of ten years.

The former chief secretary to the Treasury would also cut corporation tax, which it was reported yesterday was the subject of a row between Mr Johnson and Mr Sunak last weekend. Mr Sunak allegedly refused point black to reverse the planned increase to 25 per cent by 2023.

Ms Truss will step into this debate by pledging to cancel the rise. In anticipation of critics asking how it would be funded, given the need to balance the country’s books after Covid, she argues that the pandemic was a ‘once-in-a-century event’ and it should be treated as a form of war debt to be paid back over the course of ten years 

Mr Sunak played down the prospect of imminent tax cuts in his leadership launch on Friday, on the grounds that it is irresponsible to cut taxes before the public finances have improved. Former defence secretary Liam Fox, one of Mr Sunak’s supporters, defended the approach yesterday, saying: ‘We can cut taxes when we cut our spending’

New Chancellor Nadhim Zahawi is understood to have told colleagues that within hours of starting the job, he was told by Treasury officials that Mr Sunak had resisted their calls for the tax to be cut. 

One colleague said: ‘Rishi would go around blaming Boris for high taxes, whilst privately making sure that they stayed high.’ A source close to Mr Sunak describes this as ‘total b*******’.

If Mr Johnson had not been forced to resign, he would have made a joint announcement with Mr Zahawi on Tuesday that corporation tax was being cut. A source close to Mr Zahawi said: ‘Nadhim and the PM were aligned on the need to reduce our huge tax burden and were intending to outline the ways to do it. Rishi had been a huge roadblock – he had gone native in the Treasury.’

Mr Sunak played down the prospect of imminent tax cuts in his leadership launch on Friday, on the grounds that it is irresponsible to cut taxes before the public finances have improved.

Liz Truss is hoping to unite the Right of the party behind a ‘stop Sunak’ campaign that will be focused on the same small-state principles espoused in the 1980s by Ms Truss’s political hero, Margaret Thatcher

Former defence secretary Liam Fox, one of Mr Sunak’s supporters, defended the approach yesterday, saying: ‘We can cut taxes when we cut our spending. What we can’t do is borrow more to spend – we have got £83 billion this year we are spending on debt interest, our highest on record. We shouldn’t be putting up taxes to spend more. So what I actually want to see is someone who has actually got a plan to see the spending of the Government controlled over time.’

But Mr Rees-Mogg said: ‘I will not be endorsing Mr Sunak for prime minister. I belong to a party that believes in low taxation and the former chancellor has talked about low taxation and delivered higher taxation.’

An ally of Ms Truss said last night: ‘We need someone who unites the Red and Blue Wall and will deliver a Conservative economic agenda. Liz ticks both those boxes in a way that other likely candidates can’t.

‘She has a great delivery record and would drive difficult economic reforms through Whitehall in line with her low-tax, free-market principles. She’s our best chance of winning the next election.

‘Colleagues see her as the person who can give the party its identity back and run a proper Conservative government capable of winning elections on a Conservative platform. This offers a glimpse of the direction she’d take the economy in.’

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By Jon Doe