How Sunak can save his stumbling campaign

He has the widest support among MPs. He easily beats any other candidate with the voters, and is the only one consistently ahead of Sir Kier Starmer in the polls. He has experience, a fluent manner on TV, and as his slick campaign has reminded everyone, he is the most professional campaigner among the politicians left in the race. Against an often underwhelming, inexperienced group of rivals, the former Chancellor Rishi Sunak should be a certainty to become leader of the Conservative party, and so Prime Minister, by the autumn. There is just one catch: his stubborn attachment to raising corporation tax – when in truth, ditching that policy would be the one sure way of rescuing his stumbling campaign.

The Tory leadership contest has so far been dominated by promises of tax cuts, more tax cuts, and, er, a few more tax cuts on top of that. The only real surprise is that no one has promised to abolish inheritance tax yet, but maybe they are saving it for the leadership hustings. The only exception is Sunak, sticking to his formula of fiscal responsibility, and determined to make sure the public finances are back on track, inflation is under control, and spending coming down again, before he cuts taxes. And even if he does shift a little, his campaign is briefing that income taxes will be cut rather than the planned increase in corporation tax from 19 to 25 per cent scheduled for next year.

That surely is a mistake. If Sunak wants to cut a tax, it is the levy on business that should be scrapped first. Why? First, it is the most damaging. It was always a bizarre decision to raise the UK’s rate of corporation tax at precisely the moment when leaving the European Union and its Single Market was already making this country a significantly less attractive place to do business.

No one can avoid the increases in national insurance, and the windfall tax on energy companies is hard to wriggle out of, but companies can easily escape what will be a relatively high rate of tax by simply basing themselves somewhere else.

Second, the Treasury will get the money back anyway. If companies keep more of their profits, they will pay it out in higher dividends to their shareholders, or higher wages to their staff, where it will be taxed all over again, and usually at a higher rate.

Finally, Sunak needs at least one big gesture. You can’t keep talking about how you are a low-tax Tory when you happen to have been the Chancellor who took taxes up to the highest peacetime levels for the last 50 years. It stretches credibility too far. At some point, he has to demonstrate that he is pro-enterprise and pro-business. If not now, then when? In truth, Sunak’s caution on tax may well cost him the leadership – and if it does, it will be the crazy commitment to hiking corporation tax that will have done the most damage.