Tory leadership hopefuls clash over economy as energy bill debt crisis looms - but minister insists ‘help is coming’

22 August 2022, 01:33 | Updated: 22 August 2022, 06:20

Tory leadership rivals Liz Truss and Rishi Sunak have clashed once again over their economic plans to deal with the cost of living crisis.

Liz Truss will plunge the economy into an "inflation spiral" if she does not choose between her unfunded £50 billion tax cuts or providing cost-of-living support, Mr Sunak's campaign warned on Sunday.

The campaign said the Foreign Secretary would increase borrowing to "historic and dangerous levels", and place public finances into "serious jeopardy", if she attempts both.

It comes after Ms Truss, the frontrunner to be the next PM, signalled she could help firms and households with soaring energy bills with direct support this winter.

She was looking at assistance "across the board" despite in the past insisting she was focused on tax cuts rather than what she termed "giving out handouts".

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Mr Sunak's campaign said: "Following weeks of rejecting direct support payments as 'handouts', Truss supporters have slowly woken up to the reality of what winter brings. They now say that they will provide people with help - but what help, for who, when and how it will be paid for remains a mystery.

"The reality is that Truss cannot deliver a support package as well as come good on £50 billion worth of unfunded, permanent tax cuts in one go.

"To do so would mean increasing borrowing to historic and dangerous levels, putting the public finances in serious jeopardy and plunging the economy into an inflation spiral."

The row comes ahead of Ofgem's announcement on Friday when the regulator is expected to hike the cap on energy bills from £1,971 to around £3,600.

To combat the spiralling costs, plans to enable households to get discounts on electricity bills if they cut use at peak times are expected to be announced within the next two weeks.

Read more: Energy bills could spike to £6,000 next year, experts warn

Read more: Britain's pubs, cafes and restaurants shuttered as energy costs push them to the brink

Labour says Parliament must be recalled to tackle soaring energy costs

Business Secretary Kwasi Kwarteng vowed over the weekend that "help is coming" to deal with the crisis throughout winter.

Work is urgently under way on "the best package of measures" so that the next Prime Minister can "hit the ground running" as soon as they take over, Mr Kwarteng said.

The Truss supporter made it clear that a future windfall tax was off the table, instead saying he would prioritise domestic energy production.

Earlier on Saturday, there were also fresh warnings that energy bills could soar even higher in April to £6,000, crippling families across the UK.

Writing in The Mail on Sunday, Mr Kwarteng said: "No country is immune from rising prices – least of all Britain. I understand the deep anxiety this is causing.

"As winter approaches, millions of families will be concerned about how they are going to make ends meet.

"But I want to reassure the British people that help is coming."

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Meanwhile, there are concerns that a winter debt crisis is looming, with more than 1.7m households poised to cancel direct debit payments to energy supplier, according to polling from the I.

Around one-in-seven energy users who pay via direct debit have either already decided (four per cent) or are likely to (10 per cent) cancel their payments, the BMG research suggests.

There are fears among consumer groups that the soaring cost of bills could push people into debt or on to more expensive energy plans as a result.

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Energy firms have been urged not to chase customers for debt they cannot pay, while the Government has been told to provide extra support for those struggling with the crippling costs.

A scheme expected to be announced within two weeks will allow people to save cash if they avoid high-power activities, such as cooking or using washing machines, when demand is high, it is understood.

There are hopes it can be put in place for winter for those who have smart meters installed.

"We are developing a new service that will be available for consumers to benefit from across this winter and will be announcing further information soon," a spokesman for National Grid ESO - which will run the scheme - said.