Rishi Sunak has launched his strongest attack yet on the economic policies of rival Liz Truss, claiming her £30bn plans for unfunded tax cuts risk fueling inflation and raising rates of interest
His attack came as a new poll of Tory party members gave Truss a significant lead in the race to become prime minister.
Taxes and spending have become the key battleground in the bitter fight, with Sunak insisting that cutting taxes immediately, as Truss has promised, would risk exacerbating the cost of living crisis.
The YouGov poll of Tory members published on Thursday put Truss significantly ahead, 62% to 38%. With ballots expected to be cast in the coming days, candidates will participate in 12 contests across the country before the result is announced on September 5.
Sunak has repeatedly presented himself as the candidate willing to have a “grown-up conversation” about the economy instead of spouting what he has dismissed as “fairy tales.” Asked about the impact of Truss’ tax cut plans, Sunak said: “Yes, I think it would be inflation.”
With inflation already at a 40-year high, he told LBC: “My strong view is that if the government does a lot of borrowing, it will only make this situation worse. And that will mean the problem will last longer “.
He noted the potential impact on homeowners, saying: “It will drive up mortgage rates, if interest rates have to go very high to deal with that.”
Mr Truss doubled down on his insistence that his tax cut plans, which include reversing the recent rise in national insurance and scrapping a rise in corporation tax, were affordable and would “reduce inflation”.
Speaking on a campaign visit to Peterborough, Truss told reporters he would still implement Boris Johnson’s social care cap, which the rise in national insurance was meant to fund.
“We can afford it within our budgets. We didn’t have to do the National Insurance hike. It’s still the case that, with my plans … we can start paying off the debt in three years,” he said.
The cap, due to be reached next year, will limit the amount a person is forced to spend on their own care to £86,000.
With both candidates claiming they are in the best position to beat Keir Starmer’s Labor party, Truss also claimed Sunak’s tax rises risked causing a recession that could lose the Tories the next election.
“I think the problem is that if we continue with our current economic policy, which is predicted to lead to a recession, it will be very difficult for the Conservatives to win the election,” he said.
Truss also said he would seek private sector sponsorship to fund a new Royal Yacht, a £200m project Johnson had planned to pay for with taxpayers’ money.
“I support the idea of promoting our trade around the world. What I would be looking at is getting investment in a yacht that is looking for the private sector to help, making it financially viable,” he said.
Labor insisted neither candidate would offer a fresh start after 12 years of Conservative government. Shadow chief secretary Pat McFadden said: “Both Rishi Sunak and Liz Truss offer more of the same. They are the continuity candidates. Neither has a plan to tackle our stagnant economy – in fact , both have presided over it.”
Daisy Cooper, deputy leader of the Liberal Democrats, said: “While Rishi Sunak and Liz Truss argue with each other, people are suffering because of the tax rises they brought in. We are stuck with a zombie government and campaign-focused ministers of leadership. instead of doing their job.”
Liz Truss at her campaign office in London. Photograph: Tayfun Salcı/Zuma/Rex/Shutterstock
Analysis by the Institute for Fiscal Studies (IFS) suggested that Truss’ promises would ultimately lead to cuts in public spending. “They will mean higher borrowing or less public spending, or some combination,” he said.
Responding to Truss’s suggestion that he could rewrite the government’s tax rules to pave the way for more spending, the IFS analysis added: “In this context, it is always important to remember that no matter what a chosen set of self-imposed tax rules may allow in the short term, in the end, lower taxes mean lower spending”.
Former Conservative Chief Secretary to the Treasury David Gauke said he was concerned about Truss’ plans. “What worries me the most is, what does it do for the sustainability of public finances?” he said
He said spending cuts would be extremely difficult in the current circumstances. “The spending pressures are immense and will only increase,” he said. “The next election, I suspect, will be fought more on public services than tax rates.”
As well as highlighting his promises of tax cuts, Truss pledged to review the possibility of treating households as a single entity for tax purposes, to incentivize stay-at-home parents and carers.
Speaking during a visit to Little Miracles, one of a network of largely self-funded centers that care for children with disabilities and life-limiting conditions, he said he would specifically review the taxation of families.
“Working families are the foundation of a stable society, and one of my top priorities as Prime Minister would be to ease the tax burden on families. Not only do they look after themselves, but they also build communities, charities and even companies,” he said.
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Labor MP Stella Creasy said: “Families across this country are crying out for affordable childcare so they don’t have to choose between their careers and their children. Instead of helping them and investing in provision, Liz Truss seems to think that taxes should be used to make women stay at home. This shows you that this Tory party wants to take Britain back to the 1950s, not help everyone prosper in the 2020s.”
In his interview with LBC, Sunak repeatedly stressed his family’s relatively humble background and described himself as a “practicing Hindu”, saying he had recently returned to the temple his family still attends in Southampton.