Liz Truss’ “dangerous” tax-cut plans risk fueling inflation, an ally of Rishi Sunak suggested, as candidates for the Conservative leadership traded blows ahead of the next televised debate.
Conservative MP Mel Stride, who chairs the Treasury Committee of the Commons, warned that large-scale unfunded tax cuts could make the problem “far worse” and insisted that a “measured” approach was needed.
But former Conservative foreign minister Sajid Javid defended Truss’ plans and said they would not necessarily fuel inflation or increase borrowing.
The Secretary for Foreign Affairs, Ms. Truss, promised to “start cutting taxes from day one” with a new budget and spending review that would reverse April’s increase in national insurance and next year’s corporate tax hike from 19% to 25%.
On the other hand, Sunak has presented himself as the fiscally conservative candidate who will “deliver tax cuts that drive growth” in a “responsible” manner.
The former chancellor said her rival to become the next prime minister would further raise interest rates by raising mortgage payments with her plans.
But Truss responded by saying “we can’t tax our way to growth” and insisting his plans wouldn’t raise prices further.
The exchanges came before the Bank of England raised interest rates to the highest level in nearly three decades on Thursday, from 1.25% to 1.75%.
Bank analysts also warned that Consumer Price Index (CPI) inflation will hit 13.3% in October, the highest in more than 42 years, if regulator Ofgem raises the maximum price on energy bills to around £3,450.
Truss and Sunak are expected to be further challenged in their approaches when they participate in a Sky News debate starting at 8pm on Thursday.
Stride, chairman of the Treasury Committee of the Commons, told BBC Radio 4’s Today programme: “What we must do now is avoid fueling inflation and make the problem even worse.
“One of the ways to make the problem significantly worse is to introduce large-scale unfunded tax cuts worth tens of billions of pounds.”
He added: “The big decision, fiscally, here is around taxes. You have to do it sparingly and on time, but not start moving forward with tens of billions of unfunded tax cuts now.
“I think that would be really very dangerous.”
He also insisted that Sunak would “absolutely not” give in, despite polls suggesting he is far behind Truss.
Former President Javid, who backed Truss on Wednesday, warned that it would be “riskier” not to cut taxes.
Of Truss’ plans, he told the Times Radio that the Office for Budget Responsibility forecasts had around £31bn of “fiscal space” by 2024/25 “so that’s the first thing you can use to make tax cuts.” now”.
Lowering the planned corporate tax increase from 19% to 25% in April would not affect the inflation figures, he added.
“It’s not inflationary not to go ahead with a tax increase,” he said.
“I don’t buy this argument that the things Liz is proposing are somehow going to lead to higher inflation. In the long run, they’re going to help fix the economy and that’s the most important thing.”
Former Conservative Chancellor Lord Lawson of Blaby said Sunak was “guided by the principles of Thatcherism” in his attempt to ensure that the current generation “pays its own way” rather than “sealing” the next with greater debt.
Writing in the Telegraph, Lord Lawson added: “While Liz Truss has many strengths, her plans now include approximately £60 billion in unfunded spending/tax cuts – and her message of
assurance about the associated inflationary risk is, to me, uncomfortably reminiscent of the Conservative government’s mistakes of 50 years ago.”
He reflected that Conservative Chancellor Anthony Barber’s 1972 budget was popular but led to “years of inflationary nightmare”.
Former Conservative Chancellor Lord Clarke of Nottingham also suggested that Truss’ plan for immediate tax cuts “risks contributing to the problem”.
He told BBC Radio 4’s World At One: “I don’t think the tax cuts are very relevant at the moment. I think the aid targeted at the poorest and least well paid is justified – they have already been a part of it and I think they may have to do more.”
Elsewhere, Attorney General Suella Braverman likened the diversity, equality and inclusion “industry” to the “witch hunters of the Middle Ages” in supporting Truss to continue her work to combat “pernicious identity politics”.
Mrs. Braverman, writing in the Daily Mail, said she has urged authorities to drop equality training in her department.
She said: “I was horrified to find that hundreds of government attorneys spent nearly 2,000 hours of their taxpayer-funded time last year attending lectures on ‘micro-incivilities’, different ‘lived experiences’ and ‘how to be a straight ally’ , courtesy of the lesbian, gay, bisexual and transgender rights organization Stonewall.”
Mrs. Braverman added: “Well, I told my employees to discard it. We really should take this divisive mentality seriously and call it what it is: a new religion with a new priestly caste.
“Some fanatics believe that. Like the witch hunters of the Middle Ages, they wear the inquisitor’s garb and never tire of rooting out unbelievers.”