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UK Prime Minister Rishi Sunak and Labour leader Sir Keir Starmer on Sunday squared up for a “fight” over tax cuts and the size of the state, as they laid down the battle lines for a general election that must be called this year.
Sunak said the Conservatives would cut taxes on “work”, paid for by shrinking the size of the state relative to economic growth, including curbs to welfare spending.
Starmer, meanwhile, gave his most defiant defence yet of his plan to spend £28bn a year by the end of the parliament on green energy projects, a scheme that Sunak says will require higher taxes.
The prime minister said last week his “working assumption” was that he would call a general election in the second half of 2024. The Spring Budget on March 6 is expected to include significant tax cuts.
Sunak told the Sunday Telegraph newspaper that he wanted to focus tax reductions on providing an incentive to work, citing the 2p National Insurance cut announced in the Autumn Statement that took effect on January 6.
“I believe in the nobility of work,” he said. “I believe that a society where people are working hard should be one where their hard work is rewarded.” Tory strategists expect chancellor Jeremy Hunt to use his Budget to cut income tax.
Hunt said on Saturday that the Budget would focus on boosting growth, in comments that suggested he was unlikely to prioritise inheritance tax cuts, which have been demanded by some Tory MPs.
However, Tory officials said cuts to inheritance tax — a levy described by Hunt as “pernicious” — were not off the table and that all tax decisions would be taken nearer the time of the Budget.
Starmer appeared to draw a line under months of retreat over the party’s flagship economic plan to spend £28bn on investment in a green energy revolution.
“The Tories are trying to weaponise this issue — the £28bn — it’s a fight I want to have,” Starmer told Sky News, arguing that Labour’s low-carbon investment plan would cut domestic bills and boost security of energy supply.
He said any borrowing plans would have to comply with the party’s fiscal rules, which aim to cut debt as a share of gross domestic product, but he said the investment was integral to Labour’s plan to boost growth.
“If they want that fight on borrow to invest, I’m absolutely up for that fight,” Starmer said, adding that the only way to deliver tax cuts for working people was to increase Britain’s growth rate.
Labour has been backpedalling on its £28bn “green prosperity plan” in recent months, pushing the investment target back until the end of the next parliament.
Last week Starmer said the target was not a commitment but a “confident ambition”. The party has estimated that the extra spending would ultimately by about £20bn, because £8bn of spending has already been planned by the Conservatives.
The Labour leader said his party would also look to cut taxes on working people but that could only be achieved if the economy was growing at a faster pace.
Starmer accused Sunak of putting off an election until the autumn so that the prime minister, who entered Downing Street in October 2022, would be able to say he had held office for two years. “He’s putting vanity before country,” the Labour leader said.
Anticipating a brutal battle over tax in the election, Starmer said: “The prime minister is floating tax cuts but he’s doing that in his own self-interest. They are desperately thrashing around, trying to find dividing lines to go into the election.”