Tory leadership contender Liz Truss announces she would axe planned hike in corporation tax

Scrapping planned hike could cost around £16 billion

(Getty Images)

Liz Truss has announced she would scrap a planned multibillion-pound hike in corporation tax if she wins the race to succeed Boris Johnson in No 10.

The foreign secretary, who has previously vowed to cut taxes from “day one” if she wins the Tory leadership contest, also said there would be a “temporary moratorium” on the green energy levy.

But one rival campaign dismissed the announcement as part of a “bidding war” for voters after Ms emerged in third position in the second ballot of Tory MPs in Westminster on Thursday and is struggling to gain momentum ahead of Rishi Sunak and Penny Mordaunt.

Earlier this week, the cabinet minister revealed she would reverse April’s national insurance hike, insisting she had fought against the policy in Mr Johnson’s government.

Seeking to put a clear dividing line between others in the race who have refused to set out immediate tax cuts, Ms Truss said she would axe the planned increase in corporation tax, which is set to rise from 19 to 25 per cent in 2023.

But scrapping the policy, which was announced by former chancellor Mr Sunak her rival in the race, would cost the Treasury around £16 billion.

Speaking at a digital hustings event hosted by Conservative Home on Friday, Ms Truss said: “We immediately need to start putting money back into people’s pockets, we know families are struggling to make ends meet at the moment.

Tory leadership contenders take part in digital hustings hosted by Conservative Home (Conservative Home)

“I would reverse the national insurance rise, I opposed it in cabinet at the time because I thought it was a mistake, I think it’s even more of a mistake now when we’re facing such strong economic headwinds.

“I would also have a temporary moratorium on the green energy level to cut £153 from people’s energy bills.

“And I would also not do the corporation tax hikes because I think it’s vitally important that we’re attracting investment into our country.”

During the hustings event Mr Sunak argued he would only enact tax cuts when inflation is under control.

“The most impressing economic challenge we are facing is inflation - inflation is the enemy that makes everybody poorer and it must be the Government’s priority to get a grip of it,” he said.

“I’m not going to do anything that puts that at risk, so I will deliver tax cuts but I will do so responsibly after we’ve got a grip of inflation.”

Ms Mordaunt said she was making few commitments on tax because “this contest is not the right place to do it”.

“I’m not going to set out plans for corporation tax or any other of those taxes until we have a proper fiscal event,” the trade minister added.