Sunak Faces Late Tory Revolt Over Manifesto on Tax Cuts

(Bloomberg) -- Rishi Sunak faced last-minute calls by cabinet ministers to add new tax cuts and a tougher migration policy to the Conservative manifesto after early drafts provoked disquiet over the lack of big-ticket pledges that might prevent a heavy defeat in the UK general election.

Most Read from Bloomberg

The British prime minister is due to publish his policy platform for the July 4 vote on Tuesday, at an event that is widely-seen as one of his last chances to shift public opinion, which has changed little since he called the vote just under three weeks ago, suggesting Labour is heading for a landslide victory that would put its leader Keir Starmer in Downing Street.

The Conservatives are promising to cut “a suite” of taxes, according to a party statement issued late Monday. The manifesto will include previously announced plans including a long-term ambition to abolish national insurance and promises not to increase taxes on pensions nor to change the number of council tax bands, and to raise the income threshold at which child benefit is withdrawn from households.

The party’s electoral offer, which was shared with cabinet ministers last week, will also include another two-percentage-point reduction in the national insurance payroll tax, a cut to stamp duty on property purchases by first-time buyers and protection for pensioners from having to pay income tax, according to people familiar with the matter, who requested anonymity disclosing internal party discussions.

The manifesto to be published Tuesday “does continue to cut people’s taxes, because I believe in a country where people’s hard work is rewarded,” Sunak said in a BBC interview late on Monday. “This election is about building on the progress that we’ve made, delivering a secure future for everyone, where their taxes are cut, their pensions are protected, migration is coming down, and we get to net zero in a more sensible way.”

But some of those who had seen the provisional policies said they offered little to capture voters’ attention and shore up the Conservative vote. Some ministers were urging Sunak’s aides to improve the offer at the end of last week, and while there have been no signals that their demands on tax and immigration will be met in the final document, some alterations have been made in recent days following those conversations, the people said.

In his BBC interview, Sunak was forced to concede that net immigration remains “too high,” that buying a first home has become harder under the Conservatives and that he’s failed to reduce the number of patients waiting for National Health Service treatment — one of his key promises to voters.

When it was put to him that the UK’s total tax bill had risen by £93 billion ($118 billion) a year under his watch as Chancellor of the Exchequer and then premier, despite his cuts to national insurance payments, he replied: “you’re right about the overall tax burden.” He insisted that the average worker in Britain faces the lowest tax rate on their earnings for over 50 years.

The prime minister also repeated his apology for making an early exit from the D-Day commemorations in Normandy last week.

One of the people described the draft manifesto as long, dense and lacking a retail offer, after being controlled by a very small team of aides. They suggested there was a danger of a mistake comparable to former premier Theresa May’s manifesto in 2017, which derailed her election campaign by proposing to make people pay more of the costs of social care, a controversial pledge that was branded the “dementia tax.”

Other policies in the document include measures to restrict mobile phone social media usage for teenagers and a promise outlined in the first few days of the campaign to reintroduce mandatory National Service for 18 year-olds.

The Conservative campaign did not respond to a request for comment.

Labour enjoys a lead in excess of 20 points, according to Bloomberg’s composite poll, a rolling 14-day average using data from 11 polling companies. The margin has slightly increased since Sunak called the election just under three weeks ago, suggesting Tory policies announced so far have done little to shift the dial.

Multiple Tory lawmakers said they were disappointed that no pledge to cut or abolish inheritance tax was included in the manifesto proposals shared with them. One said they hoped Sunak had changed his mind on that tax over the weekend and would include the policy on Tuesday. The best hope the Tories had was that Sunak’s aides were holding back other policy announcements in order to spring a surprise, another said.

Still, expectations even among Tory lawmakers that Sunak can find a game-changing policy is low. Internal conversations about the manifesto in recent days were difficult and chaotic as Sunak and his chief policy aides, James Nation and Will Tanner, wrestled with the demands of other advisers and Tory lawmakers, the people said. There is frustration that Sunak appears set on proposing a third national insurance cut, after two at the last two fiscal events failed to move opinion polls. One Tory aide said repeating the move was the definition of insanity.

Yet Sunak is in something of a bind. Other major new tax cuts could risk a lack of credibility and lead to comparisons with his market-roiling predecessor Liz Truss, while a much stronger immigration policy could upset Tory moderates and split the party.

Some aides and lawmakers on the right have called on Sunak to harden his position on the UK’s membership of the European Convention on Human Rights, which right-wingers blame for the failure so far of the Tory government’s policy to deport asylum seekers to Rwanda, a measure designed to deter migrants from crossing the English Channel in small boats. However, language on the ECHR in the draft manifesto would not satisfy the demands of the right, people familiar with the matter said.

(Updates with details of Conservative manifesto starting in third paragraph.)

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.