Why do voters give no credit to Sunak for cutting taxes?

Rishi Sunak wants to make the election about tax, or more precisely that the Tories would cut taxes and Labour would raise them.

There are a number of challenges for him with this approach, the most obvious one being that the Tories in government have raised the burden of tax - the share of national income taken by the Treasury in taxes - to its highest level since the early 1960s.

In that sense, he and the Tories have a credibility problem.

But this is to hide a different truth of what has happened to the tax paid by those in the middle of the earnings spectrum in direct taxation.

Because the most important tax fact that nobody knows - even though no lesser person than the chancellor said it in his last budget - is that the “average earner” is paying less in direct income taxes than at any point since 1975, after the four percentage point cuts in national insurance Hunt made this year.

This is not propaganda. It is endorsed by the Institute of Fiscal Studies (IFS), which recently wrote that these tax gains would persist even after years of the Tory government moving millions of people into high tax brackets by freezing thresholds.

"By 2027-28, after another three years of real-terms cuts to tax thresholds, the net effect of income tax and NICs changes since 2021 for the average full-time earner will be a tax cut of £140 per year," the Institute said.

"Overall about a third of employees will still be better off as a result of all these changes: the 9 million earning between about £32,000 and £55,000 per year."

By 2027-28, after another three years of real-terms cuts to tax thresholds, the net effect of income tax and NICs changes since 2021 for the average full-time earner will be a tax cut of £140 per year. Overall, about a third of employees will still be better off as a result of all these changes: the 9 million earning between about £32,000 and £55,000 per year.

And this tax gain obviously takes no account of the £10bn National Insurance cut Sunak will today say he will execute if he were to remain Prime Minister after July 4.

So why aren’t the Tories and Sunak getting any political credit? Why do Tory MPs tell me they despair that today’s manifesto pledge to cut National Insurance again will do nothing to move the dial for them?

There are a few reasons. First, anyone earning less than £32,000 or more than £55,000 has been a loser. They may not be the average taxpayer but they are the majority (by the way, those on highest earnings and businesses are paying a lot more tax, and the tax take from VAT has risen considerably).

Second, and as the IFS also points out, the proportion of retired people paying tax is now higher than for working people. This reflects the growth in the earnings of those over 65.

But these supposedly core Tory voters are unlikely to feel grateful to Sunak for the taxes they pay - though Sunak is hoping to buy them back by promising in the manifesto that he would update their tax-free allowance in line with inflation to protect its “real” value.

Finally, as far as living standards are concerned, there has been a much bigger story than tax over the past 14 years since the Conservatives have been in government, namely that living standards have flat-lined because of a collapse in the growth of productivity (our output per hour worked) and in earnings growth.

Tax is only one of the determinants of living standards. And even though - as today’s labour market stats show - earnings are at last rising faster than inflation again, millions of people are either not feeling it or don’t feel any reason to thank Rishi Sunak.

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