Penny Mordaunt branded current VAT thresholds a “barrier to growth” as she suggested Jeremy Hunt had not yet gone far enough to support small businesses.
In a leaked recording, the Leader of the Commons said increasing the rate at which firms started paying the tax was “top of my list”, warning the current system risked deterring them from hiring new staff and opening longer hours.
Mr Hunt increased the VAT threshold from £85,000 to £90,000 in March’s Budget in a move he said would help tens of thousands of companies.
But at a gathering of Tory activists in Enfield the following month, in a recording of which was passed to The Telegraph, Ms Mordaunt appears to dismiss the scale of the Chancellor’s tax cut.
Her remarks are likely to be interpreted by some as a criticism of Rishi Sunak and Mr Hunt’s policymaking as speculation swirls about her potential leadership ambitions if the Tories lose the general election.
The MP for Portsmouth North ran for the top job in the summer and October 2022 Conservative Party leadership contests.
Speaking at a fundraising dinner and drinks event at the Enfield Conservative Association in north London, Ms Mordaunt was asked what more the Conservatives could do to help small businesses.
She replied: “So if you ask all of my colleagues, they’ll all have different lists. My list, top of it, is VAT thresholds for small businesses.
“If we’ve got businesses that are ceasing to trade because they’re coming up against those thresholds and they have to do so much more in order for it to be worthwhile in doing that, or taking the risk or employing another person. That can’t be right.
“So we did this a little bit in the Budget, Jeremy Hunt was moving in the right direction, but it was only by about £5,000. It’s these things that are a barrier to growth that we need to address. So that would be top of my list, but there are many other things.”
Ms Mordaunt added: “If we’ve got any money going, that we can do a bit more for people, I think it needs to go into supporting business as opposed to anything else.”
‘I’d like more backing for business’
The Commons Leader doubled down on her calls for Mr Hunt to raise thresholds at future fiscal events when approached for comment.
“The biggest ask I have made in recent budgets is to increase and taper VAT thresholds,” she told The Telegraph.
“Why? Because that is what my small businesses say would help them most. We have started to do that as the recovery has allowed.
“I’d like more backing for business which is why I’ll be voting Conservative. Labour would saddle business with more burdens and destroy jobs.”
The Telegraph revealed in March that Ms Mordaunt had made 40 trips to Tory association events across the UK since Mr Sunak became Prime Minister.
The following day, she wrote a letter to this publication to clarify the real figure was actually more than 70 before going on to defend the trips, arguing they helped see off the electoral threat posed by Labour.
In a meeting with Mr Hunt before the Budget, she told him the Government’s “first duty” was to protect Britain amid a backlash over the lack of extra funding for the Ministry of Defence.
Mr Sunak subsequently committed to spending 2.5 per cent of GDP by the end of the decade to “meet the challenge of an increasingly dangerous world”.
Support for national service
Ms Mordaunt also broke ranks to back the idea of a British national service last year following the publication of a report by Onward, a centre-Right think tank.
The proposal has since been adopted as part of the Tory manifesto, with Mr Sunak mooting a flagship policy under which every 18-year-old would either spend a year in the military or volunteering in their community.
Sir Edward Troup, a former top civil servant who is advising Labour on tax, has previously suggested that the threshold for VAT registration should be halved, meaning that hundreds of thousands of small businesses would be affected by the levy.
Sources close to Ms Mordaunt noted the comments were not an election intervention and were made more than a month ago at a local party fundraiser.
They added that while all Conservatives wanted to reduce the tax burden on business, Ms Mordaunt understood the need to work within the boundaries of current economic conditions.
