Truss and Sunak allies trade blows over tax plans ahead of Sky debate

Liz Truss’s “dangerous” tax cut plans risk stoking inflation, a Rishi Sunak ally suggested, as the Tory leadership contenders traded blows ahead of the next television debate.

Conservative MP Mel Stride, who chairs the Commons Treasury Committee, warned that large-scale unfunded tax cuts could make the problem “very significantly worse” and insisted a “measured” approach is required.

But Tory former chancellor Sajid Javid defended Ms Truss’s plans and said they would not necessarily fuel inflation or ramp up borrowing.

Foreign Secretary Ms Truss has pledged to “start cutting taxes from day one” with a new budget and spending review that would reverse April’s rise in national insurance and next year’s corporation tax hike from 19% to 25%.

In contrast, Mr Sunak has pitched himself as the fiscally conservative candidate who will “deliver tax cuts that drive growth” in a “responsible” way.

The former chancellor has claimed his rival to become the next prime minister would further drive up interest rates, raising mortgage payments, with her plans.

But Ms Truss countered by saying “we cannot tax our way to growth” and insisting her plans would not drive up 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%.

The Bank’s forecasters also warned that Consumer Prices Index (CPI) inflation will hit 13.3% in October, the highest for more than 42 years, if regulator Ofgem increases the price cap on energy bills to around £3,450.

Ms Truss and Mr Sunak are expected to be challenged further on their approaches when they take part in a Sky News debate from 8pm on Thursday.

Mr Stride, chairman of the Commons Treasury Committee, told BBC Radio 4’s Today programme: “What we must do now is avoid stoking the inflation and making the problem even worse.

“One of the ways you can make the problem very significantly worse is by coming forward with large-scale, tens of billions of pounds’ worth, of unfunded tax cuts.”

He added: “The big decision, fiscally, here is around tax. You have to do it in a measured way and at the right time but not start coming forward with tens of billions of unfunded tax cuts right now.

“I think that would be really quite dangerous.”

He also insisted Mr Sunak would “absolutely not” concede despite polls suggesting he is a long way behind Ms Truss.

Former leadership hopeful Mr Javid, who endorsed Ms Truss on Wednesday, warned it would be “riskier” not to cut taxes.

On Ms Truss’s plans, he told Times Radio that Office for Budget Responsibility forecasts had around £31 billion of “fiscal headroom” by 2024/25 “so that’s the first thing you can use to make tax cuts now”.

Dropping the planned increase in corporation tax from 19% to 25% in April would not affect the inflation figures, he added.

“It is not inflationary to not go ahead with a tax increase,” he said.

“I don’t buy this argument that the things Liz is proposing, somehow they are all going to lead to higher inflation. In the long term they are going to help to fix the economy and that is the most important thing.”

Conservative former chancellor Lord Lawson of Blaby said Mr Sunak was “guided by the principles of Thatcherism” in his bid to ensure the current generation “pays its own way” rather than “saddling” the next with greater debt.

Writing in the Telegraph, Lord Lawson added: “While Liz Truss has many qualities, her plans now reportedly comprise approximately £60 billion of unfunded spending/tax cuts – and her message of
reassurance about the associated inflationary risk is, to me, uncomfortably reminiscent of the missteps of the Tory government of 50 years ago.”

He reflected that Tory chancellor Anthony Barber’s budget in 1972 was popular but led to “years of inflationary nightmare”.

Conservative former chancellor Lord Clarke of Nottingham also suggested Ms Truss’s plan for immediate tax cuts runs “the risk of contributing to the problem”.

He told BBC Radio 4’s World At One: “I don’t think tax cuts are terribly relevant at the moment. I think targeted help for the poorest and less well-paid is justified – they’ve done some of that already and I think they may have to do more.”

Elsewhere, Attorney General Suella Braverman compared the diversity, equality and inclusion “sector” to the “witch-finders of the Middle Ages” as she backed Ms Truss to continue her work to fight “pernicious identity politics”.

Ms Braverman, writing in the Daily Mail, said she has told officials to scrap equality training in her department.

She said: “I was horrified to discover that hundreds of Government lawyers 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 charity Stonewall.”

Ms Braverman added: “Well, I’ve told my officials to scrap it. We really must get serious about taking on this divisive mindset and call it out for what it is: a new religion with a new priestly caste.

“Some zealots believe in it. Like the witch-finders of the Middle Ages, they don the outfit of the inquisitor and never tire of rooting out unbelievers.”