Javid backs Liz’s tax cut plan despite ‘ black hole’ warning

SAJID Javid has defended Liz Truss’s proposed tax cuts – despite claims that new economic forecasts will blow a ‘black hole’ in her plans.

The former chancellor admitted rampant inflation was ‘scary’ but denied the cuts would contribute to inflation, arguing ‘it is a lot riskier not cutting taxes’.

Miss Truss’s campaign to become prime minister has been anchored around pledges to reverse the increase in National Insurance contributions and cancel the planned rise in capital gains tax, costing a combined £30billion.

But the Office of Budget Responsibility is expected to provide an update on the health of the public finances which will slash the hoped-for £30billion of headroom for tax cuts by as much as half.

This is due to a sharp rise in the cost of

Government borrowing. An ally of Rishi Sunak said this meant Miss Truss had ‘a bigger black hole than Jeremy Corbyn’ in her economic plans.

Earlier this month Mr Javid announced his backing for Miss Truss and claimed Rishi Sunak’s plans would lead Britain ‘sleepwalking into a big-state, high-tax, low-growth, social democratic model’.

He told The Times yesterday: ‘People rightly say to me… “Isn’t cutting tax risky at a time like this?” Any major economic decision comes with risk. But it’s a lot riskier not cutting taxes.

‘Our taxes are the highest in almost 70 years. Prior to the financial crisis, our average growth rate was around 2.7 per cent, but in the last decade, it’s been around 1.7 per cent. Some would say “You can’t cut taxes until you get the growth” That’s the wrong way around. You need to cut taxes to kickstart the growth.’

As health secretary, Mr Javid defended the increase in NI – known as the Health and Social Care levy – as ‘right and fair’. But yesterday he claimed reversing it would not have an impact on inflation.

He said: ‘For an average worker it’s about a £240 saving a year. That numbers £15billion.

‘When you’ve got a £2trillion-plus economy, there is not a single economist going to tell you that’s going to have any meaningful impact on inflation.’

The Sunak campaign pointed to comments made by the boss of the Institute of Fiscal Studies, Paul Johnson, who said ‘now is not time for big tax cuts, which could themselves make inflation worse’.