Truss extends lead despite tax cuts concern
Liz Truss’s has extended her lead in the race for the Conservative Party leadership despite warnings from her rival and a think tank over her tax-cutting plans.
Former Chancellor Rishi Sunak said her “unfunded” £30 billion package of tax cuts would mean a “huge borrowing spree” and said inflation and interest rates would rise further.
He told LBC: “My strong point of view is if the government goes on a huge borrowing spree that is only going to make the situation worse.
“If we don’t get a grip of inflation now it will make families poorer in the long run, I want to avoid that at all costs.”
However, he is mistrusted by large swathes of the Tory membership who want to see lower taxes and believe that by resigning he destabilised the government.
Ms Truss’s plan to reverse the planned corporation tax increase, scrap the increase in national insurance and the energy levy has proved a vote winner among members, though it has raised concerns among economists and tax experts.
The Institute for Fiscal Studies said the cuts would boost growth but not by enough to pay for themselves.
The think tank warned of a “deterioration in the quality” of public services if, as she has suggested, Ms Truss puts tax cuts ahead of protecting services against rising inflation in her emergency autumn budget.
Ms Truss dismissed the “consensus of the Treasury, of economists”, accusing them of “peddling a particular type of economic policy for 20 years” that “hasn’t delivered growth”.
She said: “What people in Britain desperately need now is change. We need to unleash investment in our country,” the candidate insisted, arguing that her tax cuts would boost “the supply side of the economy.
“The reason we have inflation is it’s a supply shock, combined with a slightly loose monetary policy over time.”
One tax adviser added some weight to her argument by noting that total tax receipts are up by £90.5 billion in the 12 months to June, over the prior year.
Paul Haywood-Schiefer, a senior manager at Blick Rotherberg, said: “HMRC has received £737 billion in a 12-month period which is quite a significant take when compared to the last few years.
“Given inflation, we could see higher takes in VAT, fuel duties and annual tax receipts topping £800bn. This strong performance could give the incoming PM and Chancellor some flex around future tax cuts.”
Concerns over Ms Truss’s policies appeared to have little adverse affect on her poll rating, according to a YouGov poll.
The first grassroots survey since the final two candidates were selected found that 62% backed the Foreign Secretary and 38% favoured Mr Sunak, excluding those who said they did not know. It means Ms Truss has increased her lead by four points.
Nationalists seized on her comments today that there had been no growth for the past 20 years.
SNP Shadow Chancellor Alison Thewliss said: “This is a stunning admission from a serving Tory Cabinet minister that Westminster control has caused decades of economic failure – and the UK is now heading for a recession on the watch of this Tory government.
“Liz Truss is unwittingly making the case for Scottish Independence.”