Round 1: Heavyweights in bruising tax cuts clash
SHE SAYS: He’ll start a recession HE SAYS: Interest rates will go up
LIZ Truss and Rishi Sunak traded blows over tax yesterday as she warned his plans could trigger a recession – and he claimed her proposals would drive up interest rates.
As the final stage of the Tory leadership contest got under way, both remaining candidates set out their stalls on the economy – and warned that their opponent’s plans would end in disaster.
Miss Truss vowed to ‘bulldoze’ the Whitehall machine to drive through a package of tax cuts and economic reforms.
Setting out her credentials to be Britain’s next PM, the Foreign Secretary said she was determined to shake up the economic consensus. And she pledged to take on the Whitehall establishment, nicknamed the ‘Blob’, which has been blamed for obstructing change for years.
‘We need someone with the grit to take on the Whitehall machine and drive through change... I will bulldoze through to get things done,’ she said. Miss Truss has sought to establish clear
‘We need to unleash investment’
blue water between her and Mr Sunak by pledging tax cuts worth more than £35billion.
By contrast, a senior source on Mr Sunak’s campaign warned that personal tax cuts would have to wait until inflation has been ‘gripped’ – a process he fears may not happen until the autumn of next year.
The former chancellor has accused Miss Truss of pursuing ‘fairy tale’ economics by pursuing big unfunded tax cuts at a time of soaring inflation. A Sunak campaign source said: ‘You have already seen Keir Starmer picking up these lines to attack us with. If the idea takes hold that unfunded tax cuts are OK then we have lost our most important dividing line with Labour – we would be screwed at an election.’
Last night, Mr Sunak warned that Miss Truss’s plans could trigger a rise in interest rates, pushing up families’ mortgages. He told LBC Radio that her proposals ‘would be inflationary’ and a ‘ huge borrowing spree would only make it worse’, piling pressure on the Bank of England to raise interest rates.
‘If the idea is that everyone’s mortgage rates should be much higher than they are today, I’m not sure that that’s a great solution for people,’ he said.
Mr Sunak described his plans as ‘common sense Thatcherism’, saying that the former Tory PM brought runaway inflation under control before cutting taxes. He said he would cut the tax burden but said it was ‘reasonable and right’ to get debt down first.
But Miss Truss hit back, saying that the economic consensus pursued by the Treasury for years ‘hasn’t delivered growth’.
She told BBC Radio 4’s Today programme: ‘We have had a consensus of the Treasury, of economists of the Financial Times and other outlets peddling a particular type of economic policy for the last 20 years but it hasn’t delivered growth.
‘I know about the Treasury from having worked there. They do have an economic orthodoxy. And they do resist change. And what people in Britain desperately need now is change. We need to unleash investment in our country.’ Miss Truss has pledged to scrap Mr Sunak’s controversial hike in national insurance and abolish his plan to raise corporation tax from 19 per cent to 25 next year.
She said her tax cuts would ‘decrease inflation’, adding: ‘It’s not a gamble, it’s an economic reality that the higher taxes you have the more growth is choked off. What is the gamble is what we’re doing at the moment because, currently, the UK is projected to head for a recession.’