The race is on. Will Rishi Sunak or Liz Truss be our next Prime Minister?
As both have diverging views on taxation, the outcome could be significant.
Rishi Sunak has promoted his cautious, let us control inflation and repay government debt before we start to ease tax rates. At present, his only offer to relax taxes is a 1% drop in basic rate Income Tax from April 2024.
Liz Truss on the other hand, want to reduce Corporation Tax and reverse the National Insurance increase introduced by Mr Sunak. She has promised an emergency budget when elected to enact these measures.
Consequently, Conservative members have a pretty clear-cut choice to make.
Cutting taxes assumes that businesses will use any cash savings to invest in their businesses and consumers will spend any increase in take home pay. In both cases, investment and increasing consumer expenditure should expand GDP, taxable profits, and the overall tax-take.
But will hard pressed businesses react in this way? Or will they hoard any cash savings to repair exhausted reserves and build rainy day funds?
Consumers are more likely to mirror this behaviour by reducing debts – paying off credit cards – and saving for the next challenge; be that further increases in utility bills or general shopping-basket price hikes.
What we need is economic stability, and what we may be facing is a further change, depending on who moves into number 10 from the 5th of September.