By Geoffrey Smith
Investing.com -- Rishi Sunak and Liz Truss will run off against each other in the final stage of the contest to become leader of the U.K. Conservative Party - and, by extension, the next U.K. Prime Minister.
A final round of voting on Wednesday by Tory Members of Parliament gave Sunak 137 votes and Truss 113, eliminating the third candidate Penny Mordaunt, who got 105 votes.
The final decision will be taken by the nationwide membership of the Conservative Party, with a vote to be held by September 5th.
The pairing represents a surprisingly clear divide on fiscal policy, with Sunak having built his campaign on a platform of responsible deficit management, and Truss having promised accelerated tax cuts in order to spur growth, which she says has been harmed by the tax increases imposed by Sunak in the last year.
Sunak's last budget had raised national insurance contributions on the self-employed and also increased taxes on corporate profits - albeit at the same time as offering a big expansion of tax-free allowances for business investment. During his time as Chancellor of the Exchequer, Sunak has also resorted extensively to freezing various tax-free allowances.
Truss, who is currently Foreign Secretary, has said she would reverse the NI contribution hike and corporation tax hike, as well as suspend the green levy on consumers' fuel bills. In televised debates over the last week, she has not offered much detail on how those cuts would be funded.
In the same debates, Sunak had stressed that he too would cut taxes, but "will do so responsibly after we’ve got a grip of inflation.”
In his final appearance in the House of Commons as Prime Minister on Wednesday, Johnson characteristically backed Truss's call for lower taxes, despite having signed off on all of Sunak's increases. Johnson had come to power with a promise of reducing inequality between the U.K.'s regions, winning thousands of votes on the hope of increased government spending in deprived parts of the country, which have typically voted for the left-wing Labour Party in the past.
Sterling was unmoved by the news by 12 PM ET (1600 GMT), the pound was down 0.1% against the dollar at $1.1987, while the yield on the benchmark U.K. 10-Year government bond fell 3 basis points to 2.15%