Rishi Sunak plots tax and stamp duty cuts to win back voters after by-election drubbing

Rishi Sunak is considering several eye-catching tax cuts to win back Tory voters after two by-election drubbings this week.

The prime minister is said to be looking at raising the threshold for the higher rate of income tax, which would lower payments for five million higher earners.

And he could pledge to slash stamp duty or abolish inheritance tax in the next Conservative manifesto, in a bid to shore up support for the party.

The plans emerged after Sir Keir Starmer cast himself as the heir to Sir Tony Blair after his party clinched two major by-election victories in Tory safe seats – a result that he jubilantly declared a “game-changer”.

Political scientist and pollster Professor Sir John Curtice said Mr Sunak was facing a heavier defeat than Sir Tony’s 1997 landslide. Former Tory chancellor George Osborne warned that the Tories faced electoral “armageddon”.

Around 5.6 million people pay the higher rate of income tax on earnings over £50,271, with The Daily Telegraph reporting that Tory strategists believe “many of them vote Conservative and would be boosted by the tax cut”.

Meanwhile, The Times reported Mr Sunak and chancellor Jeremy Hunt are looking at cutting either inheritance tax or stamp duty on homes.

One senior Tory told the paper that reducing stamp duty would be “aspirational” and boost the economy by making it cheaper for people to move house while appealing to middle-aged voters who have deserted the party.

The tax cuts would come with a significant price tag, with stamp duty payments raising about £10.1bn for the Treasury in 2021-22, while inheritance tax raised about £6bn.

But, in the wake of the historic by-election losses, Downing Street and Treasury officials are said to want to set up “dividing lines” with Labour.

The record-breaking losses sparked yet another round of bitter Tory infighting. While those on the right accused Mr Sunak of being in “denial” and pushed him to be “braver” on culture war issues and tax, moderates pleaded with the PM against a further lurch away from the centre.

Speaking to broadcasters as he prepared to fly back to the UK from meeting leaders in the Middle East, Mr Sunak admitted the by-elections produced “obviously disappointing results” but it was “important to remember the context”.

He said: “Mid-term elections are always difficult for incumbent governments. And of course, there are also local factors at play here.”

The prime minister added that he remained “committed to delivering on the priorities of the British people” after the defeats.

Mr Sunak said he would “keep on” with his five priorities, which include halving inflation and stopping migrants in small boats crossing the English Channel.

A Downing Street spokeswoman declined to comment on the reports and added: “I wouldn’t be able to speculate ahead of a fiscal event.”