Rishi Sunak has said he will cut the basic rate of income tax from 20% to 16% by the end of the next parliament if he becomes prime minister.
This would amount to a 20% tax reduction, he said – the “largest cut to income tax in 30 years”.
But supporters of his Tory rival Liz Truss have accused the ex-chancellor of a U-turn on the issue and said that people cannot wait for tax cuts.
Conservative Party members will start receiving ballot papers later.
The winner of the leadership contest will be announced on 5 September, with Mr Sunak and Ms Truss competing for the No 10 job.
Mr Sunak said the policy is part of his “radical” tax vision, but it builds on his previously-announced 1p cut to income tax in April 2024.
He said he will take a further 3p off by the end of the next parliament, which could be as late as December 2029.
Supporters of Ms Truss said she would “cut taxes in seven weeks, not seven years”, as she has pledged to scrap April’s National Insurance rise, cancel a planned corporation tax rise and temporarily suspend green levies on energy bills.
‘Controlling inflation before cutting taxes’
In announcing his latest tax policy, Mr Sunak emphasised the need to control inflation before cutting taxes, adding that doing so now would make the situation worse and “endanger people’s mortgages”.
He told BBC Radio 4’s Today programme: “I want to make sure that we can pay for it, I want to make sure that we can do it alongside growing the economy.”
He said that his income tax cut pledge was “entirely consistent” with his campaign so far and denied that his plan was aimed solely to boost support for his campaign.
“I don’t think embarking on a spree of excessive borrowing at a time when inflation and interest rates are already on the rise would be wise,” Mr Sunak said.
Taxes have dominated the Tory leadership race, with the candidates clashing during the debates.
Last week, Ms Truss said tax rises brought in by Mr Sunak would lead to a recession – but Mr Sunak told the foreign secretary that her tax cut plan would “tip millions of people into misery” and cost the Conservatives the next election.
Chief Secretary to the Treasury Simon Clarke, who worked closely with Mr Sunak but is now backing Ms Truss, said: “We cannot afford to wait to help families, they need support now. Liz will cut taxes in seven weeks, not seven years.”
A source in Truss’ camp said: “It’s welcome that Rishi has performed another U-turn on cutting tax, it’s only a shame he didn’t do this as chancellor when he repeatedly raised taxes.
“He has also made it conditional on getting growth first – knowing full well that his corporation tax rises are contractionary.”
In addition to taxation, the candidates’ records in government have been under scrutiny.
Answering claims that he was “backstabber”, a reference to his resignation from Boris Johnson’s cabinet, Mr Sunak told the Today programme that there was a risk of fellow MPs looking back at the last few months with “rose-tinted glasses”.
He said that the government had “found itself on the wrong side of a very serious ethical issue”, adding that more than 60 MPs had resigned.
“After a lot of deliberation and months of standing by the PM, I was one of them,” he said, also citing a difference of opinions on the economy.
As ballot papers start dropping through the letterboxes of Conservative members, it’s widely accepted that Liz Truss is ahead.
She had some significant, high-profile endorsements at the weekend to add to her sense of momentum.
But Rishi Sunak’s team are adamant they are still in the race. Tory MPs I’ve spoken to in recent days highlight that many members are still making their minds up.
Mr Sunak has been on the back foot when it comes to tax policy. His pitch for caution has been too pessimistic, his critics say.
He will be hoping that his pledge today will do something to address that.
He wants to be seen as an instinctive low tax Tory – who will reduce them when it’s safe to do so.
But he is facing criticism from some who think he is changing plans to reflect the debate.
He was criticised last week for announcing cuts to VAT on fuel – which he didn’t introduce when he was chancellor.
Sources close to Liz Truss accuse him of “flip-flopping” again today on tax.
More MPs have revealed who they are supporting in the leadership contest.
Chancellor Nadhim Zahawi, who replaced Mr Sunak in No 11 when the leadership hopeful resigned from Boris Johnson’s cabinet last month, is backing Ms Truss.
Mr Zahawi – who put himself forward for the top job before crashing out at an early stage – said “we need a ‘booster’ attitude to the economy, not a ‘doomster’ one”.
“We are in a national economic emergency, and we need more than words. We need delivery, and Liz will be the delivery prime minister,” Mr Zahawi wrote in the Daily Telegraph.
In response, Mr Sunak told the Today programme that he wanted to do something “radical and different”, adding that he “ripped up the rule book” on fiscal policy during the pandemic.
In other pledges, Ms Truss also promised to tackle the labour shortages in farming, with a short-term expansion to the seasonal workers scheme.
Meanwhile, Damian Green, chair of the One Nation Conservatives group of Tory MPs, has come out in support of Mr Sunak.
“Rishi can actually conjure up a solution which makes a real difference to the lives of millions of people and that’s what I think we need in the next prime minister,” Mr Green told Radio 4’s Westminster Hour programme.