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Rishi Sunak, prime minister, will on Monday claim that Britain enters an expected election year “pointing in the right direction”, as he put the promise of tax cuts at the heart of his attempt to revive Tory fortunes.
Sunak is attempting to emulate John Major’s unlikely 1992 Tory election win by deploying the same core message: that a weak economy is turning and that voters would be taking a risk by switching to the Labour party.
But Labour leader Sir Keir Starmer said he was ready for a “fight” with Sunak over tax policy and the size of the state, arguing his party was ready to borrow to invest to boost the growth potential of the economy.
Meanwhile, Sunak’s optimistic plan risks being knocked off course by Tory rebellions over oil and gas drilling, disquiet over the Rwanda asylum plan and a series of problematic by-elections.
Sunak, on a visit to Lancashire on Monday, will set out his pitch for an election which he expects to call in the second half of 2024, by which point he hopes interest rates will be falling and new tax cuts kicking in.
He will admit that “2023 was not easy”, but insist: “This government has made progress. At the start of this year, we are pointing in the right direction.
“The choice is whether we stick with the plan that is starting to deliver the long-term change our country needs or go back to square one with the Labour party; where there is no plan, no progress, where taxes, debt and borrowing are increasing, and the country is going in the wrong direction.”
Sunak said the Conservatives would focus on cutting taxes on “work”, funded by shrinking the size of the state relative to economic growth, including curbs on welfare spending.
Tory strategists expect the Spring Budget to include significant reductions to levies on income, at a time when overall tax levels are rising to their highest level since the second world war.
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.”
Chancellor Jeremy Hunt said on Saturday that the Spring Budget would focus on boosting growth, in comments that suggested he was unlikely to prioritise the inheritance tax cuts that have been demanded by some Tory MPs.
However, Tory officials said reductions in IHT — 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.
Meanwhile 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 energy security.
He said any borrowing plans would have to comply with the party’s strict fiscal rules, which aim to cut debt as a share of gross domestic product. But he maintained the investment was integral to Labour’s plan to drive 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 economic 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 amount to an extra £20bn, because £8bn had 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.
Sunak’s election year is littered with political danger. On Monday, MPs will debate legislation to facilitate annual licensing rounds for North Sea oil and gas drilling, with a number of Tory MPs expressing concern.
Chris Skidmore, former energy minister, last week resigned as an MP in protest, triggering a by-election in his Kingswood seat, one of three potential by-election contests facing Sunak in the first half of the year.
On Sunday, the Tories selected Helen Harrison, the partner of disgraced ex-Wellingborough MP Peter Bone, to fight that seat in a by-election. Harrison is a local Conservative councillor.
A third contest could be held in Blackpool South where local MP Scott Benton is facing a 35-day suspension from parliament for allegedly breaching lobbying rules.
Tory rightwingers are seeking to “tighten up” Sunak’s legislation to facilitate removals of asylum seekers from the UK to Rwanda and the prime minister faces difficult local elections in May.
The Conservatives trail Labour in the polls by an average 18 points, but Sunak’s advisers maintain the prime minister genuinely believes he can turn the party’s dire situation around.
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