Five Tory leadership candidates clashed with Philip Hammond last night as they backed a report calling for radical tax cuts and steep increases in spending.
Michael Gove and Jeremy Hunt were among the contenders to endorse the report – by a centre-Right think tank – which calls on the Government to ‘turn on all the taps’.
It says ministers should boost school spending to record levels, recruit thousands more police officers and slash corporation tax to Irish levels.
The report, which also calls for a significant slowdown in the pace of austerity, was also supported by Matt Hancock, Sajid Javid and Esther McVey.
Five Tory leadership candidates clashed with Philip Hammond (pictured yesterday) last night as they backed a report calling for radical tax cuts and steep increases in spending
But yesterday morning, Mr Hammond warned that ‘radical’ tax cuts could be unaffordable.
In a strongly-worded intervention, the Chancellor cautioned against the ‘reckless promises of the populists’.
Mr Hammond also hinted in a separate interview for Sky News that he might rebel against his own party and collapse the Government if it was the only way to stop a no-deal Brexit, in an implicit threat to candidates such as Boris Johnson who have said Britain will leave ‘deal or no deal’.
The report by the Onward think tank suggested a significant loosening of Mr Hammond’s rules to hold down debt as a share of GDP – saying it will unlock £190billion.
Under current plans, government debt is set to fall from 83 per cent to 73 per cent GDP in the next five years.
Report author Neil O’Brien, a Tory MP, said a new rule should aim to have debt flat or falling as a share of GDP, rather than reduce it so quickly. His report listed six key tax-and-spend priorities, such as increasing the number of police and prison places, and taking per-pupil school funding to a record high.
Michael Gove (left) and Jeremy Hunt (right) were among the contenders to endorse the report – by a centre-Right think tank – which calls on the Government to ‘turn on all the taps’
Mr O’Brien said future chancellors should set a roadmap to cut corporation tax to the Irish rate of 12.5 per cent, and suggested raising the National Insurance threshold to £13,000 for people with children – a tax break that would be worth £1,100 for a two-earner couple.
The report also called for changes to the benefit system to increase incomes for low-wage working households by up to £4,300 a year.
Mr O’Brien said: ‘It’s time to turn on all the taps and make sure poorer families and poorer areas really feel the benefit of a growing economy.’
Environment Secretary Mr Gove said: ‘We need to show that it’s the Conservatives who offer the best alternative to Jeremy Corbyn as we set out a positive vision for the future of the UK.’
This diagram shows where the various Tory leadership candidates stand on Brexit
Health Secretary Mr Hancock said they had to deliver high pay and raise living standards to ‘keep the hard-Left out of Downing Street’ and ‘win the case for capitalism’.
He also committed to raising spending on research and development to 3 per cent of national income by 2025.
Mr Hunt, the Foreign Secretary, who has already suggested cutting corporation tax to Irish levels, said: ‘This is an inspiring vision.’
Insisting that the Tories will only succeed with a ‘positive, uniting vision’, Home Secretary Mr Javid added that the report was ‘a really important contribution’.
Miss McVey, the former Work and Pensions Secretary, said: ‘This has exactly the type of thinking we need to rebuild our Party, reconnect with the public and take the fight to Corbyn’s Labour Party.’
A survey of how Britons might vote in a general election shows the main political parties in joint third place – behind the pro-Remain Lib Dems and Nigel Farage’s Brexit Party
Leadership contender Dominic Raab has already pledged to cut income tax by a penny a year, which critics claim would cost £25bn.
But Mr Hammond said: ‘On the Left, the Labour Party characterises business as the real enemy. On the Right, the argument for radical tax cuts, deregulation and smaller government is gaining ground – just as our population demographics are making them harder to do.’
He said a gap had opened up in Britain and other developed countries between the ‘theory of how a market economy and free trade creates and distributes wealth, and the reality experienced by many ordinary people’.
Mr Hammond added: ‘We ignore that gap at our peril because if we do not address it, it will be filled with reckless promises of the populists.’