The business secretary said current economic policy “isn’t going to cut it” and Sunak’s campaign is warning against “magic fixes” as taxes remain the main dividing line in the race for conservative leadership.
Foreign Secretary Liz Truss and former Chancellor Rishi Sunak, the two candidates vying for prime minister, will be put to the test again at a Conservative meeting in Eastbourne on Friday night.
The economy and rising cost of living have been central to the debate so far, but the backdrop grew stronger on Thursday, with the Bank of England warning that the UK faces two years of falling household incomes. , with inflation rising to over 13%. and the economy is on the verge of plunging into the longest recession since the financial crisis.
Kwasi Kwarteng, business secretary and supporter of the Truss campaign, criticized the former chancellor’s record, saying that raising taxes is “adding insult to injury.”
He told Sky News: “I think the problem we have is very simple. I think we have inflation that is, as you say, squeezing people’s income, but we also have a growing tax burden.
“I never understood why we are going to help people. How are we going to help people by raising their taxes? Especially when your daily store, your costs, are going up.
“What is very clear to me from what the Bank of England said yesterday is that more of the same, just getting on with our economic policy for the moment is not going to cut it, it is not going to help us get out of this. difficulty.”
He added: “Telling people their real income is being squeezed and I’m going to raise their taxes, I think is just an insult to injury. You are not really dealing with the problem, and the way to deal with the problem is to have a slightly more flexible fiscal approach.”
But a Sunak supporter, former Cabinet Minister Liam Fox, told the broadcaster that borrowing money to implement tax cuts would now be taking a “risk” with the economy and warned against “magic fixes”.
The last time we actually, in a situation like this, cut taxes, borrowed money to fund tax cuts, it was under Ted Heath and it didn’t work out.
Dr Fox said: “There is an element of global inflation to deal with here. The question is how do we do it? My opinion is that you deal with inflation first. Get control of loans. Then you take the steps to help the economy grow. And then you start thinking about reducing taxes.”
He described the global factors at play, saying: “The question in the race for leadership, therefore, is to stick with what is a traditional conservative response to that, or to try something completely different and take a risk with the economy?
“The last time we actually, in a situation like this, cut taxes, borrowed money to fund tax cuts, it was under Ted Heath and it didn’t work out well.”
He continued: “It’s not going to be easy, and I think that’s a key difference between the candidates in this election because it’s… do you really say it’s going to be difficult and be honest with the British people? Or do you pretend there are magic solutions?”
Asked about Truss’ claim that a recession is not inevitable, Fox said: “I think it is inevitable given what is happening in the global economy.”
Former housing secretary Robert Jenrick, also supporting Sunak, told BBC Radio 4’s Today programme: secondly, not to proceed with a corporate tax hike for the 30% of the biggest companies, which strongly favors very profitable businesses like your BPs or Persimmons – that doesn’t seem like the right focus right now.”
CBI Director General Tony Danker, speaking on BBC Radio 4’s World at One programme, said: “Each candidate is choosing their worst evil to focus on first. But the problem with stagflation is that you can’t choose between fighting inflation or fighting recession, you have to face both.
“So that’s the number one challenge for candidates, not choosing which inflation or recession they care more about, but coming up with a plan that tackles both.”