Nadhim Zahawi, the UK chancellor and a contender to be the next prime minister, has said he will abolish next year’s planned increase in corporation tax if he wins the Tory leadership contest.
Under his predecessor Rishi Sunak, the tax was due to rise from 19 per cent to 25 per cent in April, generating an additional £17bn a year.
But speaking at a Tory party leadership campaign event at the Churchill War Rooms in Whitehall, Zahawi said he had “set the wheels in motion to abolish the planned corporation tax rise”.
Zahawi also announced plans to cut the base rate of income tax to 19p in 2023 and 18p in 2024 if he is elected the next Tory leader. “That will give households back £900 a year on average,” he said.
He also said he would cut both value added tax and green levies from energy bills for two years.
The promises would amount to tax cuts worth tens of billions of pounds and prompted fresh jitters about a black hole in the public finances, although Zahawi said he could find savings by cutting government spending.
Shadow chancellor Rachel Reeves described the Tory leadership race as a “festival of irresponsibility” since the 11 candidates had promised £330bn of tax cuts between them.
However, outgoing prime minister Boris Johnson has made it clear that no change in government policy will happen during the eight weeks in which he is running a caretaker administration.
Most of the candidates for the Tory leadership have pledged tax cuts with the exception of Rishi Sunak, who has declared that the corporation tax rise is necessary as part of a fiscally prudent approach to the public finances.
Former Tory chancellor Lord Norman Lamont told the BBC he was worried about the contest turning into a “Dutch auction of tax cuts” which may not be affordable.
“There is a danger at this point when the public finances, the amount we are borrowing, is not in a strong state,” he said. “Debt could spiral upwards from 100 per cent of GDP to eventually double that if we don’t have tight control of our finances.”
Meanwhile, Zahawi declared that reports he is being investigated by HM Revenue & Customs over his finances were a “smear”.
“I’ve always declared my taxes. I paid my taxes in the UK. I will answer any questions HMRC has of me, but I will go further. I’m going to make a commitment today,” he said. “If I am prime minister, I think the right thing to do is to publish my accounts annually.”
However, the chancellor separately made clear that his promise to publish annual tax returns only applied to future years and not the period when he was a successful entrepreneur before entering politics.
Interviewed by Sky News in the morning, he was asked about his promise to release his tax returns. “If prime minister I will publish them going forwards . . . I don’t think being retrospective is right,” he said. “I was in business, came out of that, of course I’m now in politics.”
Zahawi made his estimated £100mn fortune as co-founder of polling firm YouGov.
Balshore Investments, based in Gibraltar, was previously described in YouGov annual reports as “the family trust of Nadhim Zahawi’s family” and owned a stake in the company worth over £20mn before it was sold down by 2018.
Zahawi said he has never had an interest in Balshore Investments and that neither he, his wife, nor their children are beneficiaries. Instead, a spokesperson said that his father, Hareth Zahawi, who lives abroad, owned Balshore.
