(Bloomberg) — Rishi Sunak defended his surprise vow to scrap value added tax on domestic energy bills and denied being inconsistent on fiscal policy as he sought to burnish his economic credentials in the race to become the UK’s next prime minister.
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Sunak dismissed VAT cuts earlier this year when he was Chancellor of the Exchequer, saying they’d disproportionately benefit the wealthy. But on Friday, he told Channel 4 that while he stood by that analysis, the measure was now “pretty much the only lever left” to help millions of households in October.
Batting away claims of a U-turn from allies of his rival in the race to replace Boris Johnson, Foreign Secretary Liz Truss, Sunak said he only announced the move earlier this week when it became clear that bills were forecast to be “a few hundred pounds higher” than when he last announced support.
The former chancellor has admitted he’s the underdog in the leadership contest, but is seeking to portray himself as the safest pair of hands to steward the economy through the current cost-of-living crisis. On Friday, he implicitly took a swipe at Truss’s £34 billion ($41 billion) of planned tax cuts, saying the economy didn’t need a “sugar rush boom that will make us all feel better for months, but then it runs out of control.”
Sunak U-Turn on Tax Suggests UK Leadership Campaign in Trouble
Sunak announced his VAT plan after spending the early stages of the race eschewing immediate tax cuts and insisting a cautious approach to the economy was essential to avoid stoking inflation. Veteran interviewer Andrew Neil told him he was “consistently inconsistent” on his tax promises, pointing as well to him repeatedly refusing to bring in a windfall tax on energy companies – only to eventually announce such a levy in May.
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“We did not know how high and how long oil prices would stay at those levels for,” Sunak said. “When it was clear that this situation was going to last longer and be more severe, I took the decision.”
Sunak is trying to make inroads into Truss’s wide polling lead among Conservative Party members as the pair embark on a series of hustings across the UK over the summer, with the winner announced Sept. 5. But closing the gap is a struggle, and Truss’s vow to cut taxes as soon as she takes office appears to have gone down well with her party.
Her pledges include reversing the national insurance hike Sunak brought in as chancellor to help fund the National Health Service, and cancelling his proposed rise in corporation tax next year.
Sunak’s faltering campaign suffered another setback late Friday as Tom Tugendhat, chairman of the foreign affairs select committee, threw his backing behind Truss.
“Liz’s plan for the economy is founded on true Conservative principles of low tax, a lean state and bold supply-side reform,” Tugendhat, who stood as a centrist candidate to replace Johnson, wrote in the Times.
In the interview on Friday, Sunak also:
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Said he was “silly” to say in a documentary filmed when he was a teenager that he had no working class friends
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Pledged to create more than 100 surgical hubs to bring National Health Service waiting lists down
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Said the government needed to make its Rwanda deportation program work
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Said he’d learned from the experience of the row earlier this year over his wife’s tax status, “and I’m confident that that experience has actually made me better suited to now lead”
(Adds that Tugendhat will support Truss)
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