Rishi Sunak has unveiled a £2.4 billion tax break to help secure the support of pensioners, while Labour set out to woo business leaders on Tuesday.
The Prime Minister promised to increase the income tax personal allowance for pensioners, giving them a tax cut worth around £95 in 2025-26, rising to £275 in 2029-30.
The policy will cost £2.4 billion a year by 2029/30 and will be funded by clamping down on tax dodgers – the same pot of money which will help pay for Mr Sunak’s plan for new mandatory national service for 18-year-olds.
Labour said it was a “desperate move” from a party which was “torching” what was left of its claims to economic credibility.
Sir Keir Starmer’s party meanwhile was busy wooing business leaders, with shadow chancellor Rachel Reeves promising to lead “the most pro-growth, pro-business Treasury” in the UK’s history in a speech at a Rolls Royce plant in Derby.
“Today, I want to put forward a simple proposition: that this changed Labour Party is today the natural party of British business,” she said.
Ms Reeves also promised to “never play fast and loose with the public finances”.
She said Labour would not announce any additional tax rises during the election campaign and ruled out holding an emergency budget if Labour won the election, saying she would not hold a fiscal event without a forecast from the Office for Budget Responsibility – a process that would take 10 weeks.
Ms Reeves urged voters to “pass judgement” on the Conservatives, saying they had “failed on the economy”.
Labour’s own claims to economic credibility received a boost with a letter signed by 121 senior business figures including chef Tom Kerridge and Wikipedia founder Jimmy Wales in The Times.
But Treasury Chief Secretary Laura Trott said Labour would “tie businesses in red tape” with “French-style union laws”.
Mr Sunak’s new tax policy would see the age-related allowance rise in line with the increase to the state pension under a “triple lock plus” guarantee.
That would mean that both the state pension and the allowance – the amount that can be earned before being liable to income tax – rising by inflation, average wages or 2.5%, whichever is highest.
This will guarantee in legislation that the pensioners’ personal allowance will always be higher than the level of the new state pension.
Mr Sunak said pensions had risen by £900 this year thanks to the triple lock and said the Conservatives would now cut pensioners’ taxes by around £100 next year.
But Paul Johnson, director of the Institute for Fiscal Studies said the “£100 saving next year is mostly just avoiding a £100 tax increase, rather than an actual giveaway”.
Mr Johnson later told BBC Radio 4’s Today programme: “Pensioners used to have a bigger personal allowance than people of working age – it was the Conservatives who got rid of it.”
Asked if it makes fiscal sense, he said: “The overall cost is about two and a half billion a year by the end of the Parliament, that’s not a very big number, but of course, these promises are beginning to add up.”
Torsten Bell, chief executive of the Resolution Foundation think tank which focuses on living standards, said the sales pitch is about keeping those on basic state pension out of tax, but the “biggest beneficiaries of another tax system complication will largely be better-off pensioner households”.
Shadow paymaster general Jonathan Ashworth said: “Why would anyone believe the Tories and Rishi Sunak on tax after they left the country with the highest tax burden in 70 years?”
Elsewhere on the campaign trail, Nigel Farage called for Mr Sunak to debate him, as he set out Reform UK’s campaign agenda at an event in Dover. The former Ukip leader said he would also be willing to debate Sir Keir.
Mr Farage, who has declined to stand as an MP, launched Reform’s campaign at a yacht club on the Kent seafront.
Speaking to the PA news agency, he ruled out electoral pacts or coalition agreements, adding: “This is now a six year plan. This is our first big election. It’s the place to try to spearhead into Parliament. We’re building a campaign for the 2029 general election.”
Meanwhile, Liberal Democrat leader Ed Davey took a plunge from a paddleboard during a campaign stop in Lake Windermere to highlight the sewage crisis.
