Rishi Sunak has set a trap for Labour at the next election

Rishi Sunak may or may not be prime minister by then, but he has set out the terms on which the next general election will be fought. There was something almost retro about the obsession with the basic rate of income tax – which has bedevilled British politics since Margaret Thatcher’s time – but that is what the 2024 election will be about.

Gordon Brown once raged at Tony Blair that he had “stolen my effing Budget” by pre-announcing a big rise in NHS spending in 2000. It was a mark of Sunak’s desperation today that he stole his own Budget for the autumn of next year, announcing now a cut in income tax to come into effect in April 2024, the month before the most likely date of the next election.

Perhaps he doesn’t expect to be chancellor by then, in which case he may as well try to take credit for the tax cut in advance. But the greater significance is that it will be a challenge to Labour. Sunak cannot be sure when the election will be or who will lead the Conservatives into it. The Dissolution and Calling of Parliament Bill is about to receive the royal assent, which means that whoever is prime minister will have the power to decide the date of the election. The Tories want to have the option of going to the country next year, although 2024 is still more likely.

But whoever or whenever, the tax cut will be a central feature of the election campaign. If the election is before the tax cut, the Tories will say that Labour cannot be trusted to deliver it; if the election is afterwards, they will accuse Labour of intending to reverse it.

It is a desperate and cynical tactic, and likely to be effective. No wonder Rachel Reeves, the shadow chancellor, didn’t mention it in her reply. Thanks to higher than expected tax receipts, Sunak has been able to turn the corner from raising taxes to the highest peacetime level to outflanking Labour as a tax-cutter at the next election.

Today’s mini-Budget was an exercise in tactical ruthlessness. It offered nothing extra for people on benefits apart from another half-billion for the hardship fund administered by local councils. The Treasury has held its tough line on waiting and seeing what happens to the Ukraine war and energy prices. But in the meantime, people who are not in work will only get the £150 council tax rebate for bands A-D and the £200 repayable discount on energy bills.

For those who are in work, though, Sunak executed a political manoeuvre so adroit that even his own side didn’t really appreciate it. Many Tory backbenchers have been calling for weeks for him to abandon the big tax rise – next month’s national insurance increase to pay for the NHS backlog – because it coincides with a sharp rise in inflation. The chancellor confirmed that the rise would go ahead, but he also announced a rise in the level at which national insurance contributions are payable, to the same level as the income-tax threshold – a rise which more than wipes out the increase in contribution rates for 70 per cent of workers. Only the highest paid 30 per cent will end up paying more, and even they will be paying less than they were expecting to.

Sunak performed a U-turn in broad daylight in the middle of the House of Commons and pretended he was driving straight ahead.

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You might think he’d want to take the credit for not putting most people’s taxes up, so in that sense today’s performance might have been a bit too clever. But by the time of the election he will be able to sell a story of not having put up visible taxes for most people – and then fighting on the simple policy of a cut in income tax.

The invisible taxes are another matter. The Tories developed a telling line against Gordon Brown for imposing “stealth taxes”, but Sunak has learnt from him. Today’s statement failed to mention a huge tax increase on graduates, with little-understood changes to the rules for student loans. Nor did it mention next year’s big pre-announced increase in corporation tax. Both changes will generate the cash to pay for the electioneering income tax cut.

The cynicism is hardcore. State benefits and pensions will have their value eroded by inflation this year before bouncing back as the inflation uprating catches up. Inflation will also eat into the value of earnings, and the fall in real disposable income this year will be the deepest since comparable records began in the 1950s, according to the Office for Budget Responsibility.

But then it will bounce back in 2023-24, the pre-election year. Get the pain over now, and hope that people are feeling better off by the time they vote, with a cut in income tax to drive the point home. Labour should be worried.