UK's Sunak pledges £17bn in tax cuts, but questions remain over funding

(Sharecast News) - Embattled UK Prime Minister Rishi Sunak has promised almost £17bn in tax cuts in an effort to kick-start his faltering election campaign that sees his Conservative Party trailing badly in the polls ahead of the vote on July 4. A re-elected government would cut national insurance again with an ultimate aim to axe the levy altogether and reintroduce a help-to-buy scheme for people seeking to purchase a home, according to the party's manifesto published on Tuesday.

The abolition pledge was the only new fiscal measure announced in the document, along with the widely leaked promise of a 2p cut from employee national insurance contributions (NICs) to 6p from April 2027 coming at a cost of more than £10bn annually, and worth about £450 a year to someone on average earnings of around £35,000.

However, they would also lose £150 from continued freezes to income tax and NICs thresholds, according to independent calculations.

"Our long-term ambition, when it is affordable to do so, is to keep cutting national insurance until it's gone," the document stated.

There were also promises to cut stamp duty on house purchases and guaranteeing that the state pension would not be subject to income tax.

Costings outlined in the 76 page document said that by 2029-30, the measures would come to more than £17bn a year in total, with most going towards the promised halving of employee NI rates, while a further £2.6bn would cover the abolition of self-employed NICs.

NICs for employees have already been cut to 8p from 12p in the past year, although the freeze on tax thresholds and allowances mean the overall tax burden is set to rise in the next parliament, with millions either paying more or dragged into the lower band as a result of Tory policies.

The calculations used to fund the pledges were also called into question, with the manifesto outlining a claim that £12bn could be saved by cutting social security payments with another £6bn from a tax avoidance and evasion crackdown.

However, the widely-respected and independent Institute for Fiscal Studies said the goal would be "difficult to the extreme" to achieve.

IFS director Paul Johnson described the package as "definite giveaways paid for by uncertain, unspecific and apparently victimless savings. Forgive a degree of scepticism".

There was also an undefined £1.2bn annual saving from what were only described as "quango efficiencies" and £550m from cutting 5,500 National Health Service managers. A promise to permanently abolish stamp duty for first-time buyers on homes worth less than £425,000 will cost £590m.

Economists have queried the reliability of funding from these potential "savings". Welfare spending has actually risen under the Conservatives, while the Revenue & Customs department, responsible for tax collection is chronically understaffed.

"The trouble is the policies that have been spelt out are not up to the challenge of saving £12bn a year. Some have already been announced and included in the official fiscal forecasts; others are unlikely to deliver sizeable savings on the timescale that the Conservatives claim," Johnson added.

Sunak trails the main opposition Labour Party in the polls by at least 20 points and needs a policy boost to make an impact with voters after a shambolic start to an election campaign that many of his MPs did not want in the first place, given the Tories' dire standing with the electorate, a stuttering economy, failing public services, and the worst living standards and highest tax burden since the Second World War.

Matters were not helped by his early departure from the 80th anniversary D-Day commemorations in Normandy last week to do a television interview. The decision outraged many, including members of his own cabinet who said it was disrespectful to the veterans who died in the campaign fighting the Nazis.

He also faces further potential unrest from the hard and far-right of his party who will be unhappy with the absence of a promise to leave leave the European Convention on Human Rights.

Reporting by Frank Prenesti for Sharecast.com