Liz Truss and Rishi Sunak were grilled on their economic plans this week, just hours after the Bank of England warned that the UK will fall into a prolonged recession.
After the Bank said inflation will surge above 13%, causing the worst squeeze on living standards for more than 60 years, the two Conservative leadership hopefuls faced questions from party members during a Sky News debate.
Sunak said he would “prioritise gripping inflation, growing the economy and then cutting taxes”, while Truss said there was a need “for the bold economic plan that I am advocating”.
The foreign secretary said her proposed tax cuts could avert the looming recession. “What the Bank of England has said today is, of course, extremely worrying. But it is not inevitable,” she said. “We can change the outcome, and we can make it more likely that the economy grows.”
Truss blamed the government’s decision to raise the tax burden to the highest level since the 1950s for pushing the economy towards a recession. She plans £30bn worth of tax cuts and said she would start to implement them “from day one”.
She has promised to reverse Sunak’s plans to increase corporation tax from 19% to 25%, while also scrapping green levies on energy bills and a national insurance rise, saying these steps would help avert the downturn and prevent a recession.
Summing up her approach, Truss insisted that “you simply cannot tax your way to growth”.
Sunak said that Truss’s economic strategy would pour “fuel on the fire” and cause “misery for millions”. The former chancellor has “repeatedly said that the nation must balance its books,” said The Telegraph. He has also warned that “borrowing your way out of inflation isn’t a plan”.
However, he said, there are “of course” measures that can be taken to counteract a recession. “It’s not the tax burden that is causing the recession. That’s simply wrong. What’s causing the recession is inflation.”
He insisted he has a plan to grow the economy, adding that “it all starts with not making the situation worse, because if we just put fuel on the fire of this inflation spiral, all of us, all of you, are just going to end up with higher mortgage rates, savings and pensions that are eaten away, and misery for millions”.
He has instead pledged to cut taxes over time and make the UK “the most prosperous place in the world”.
The Spectator’s Katy Balls said that Sunak was “by far most confident when talking about the economy”, but The Telegraph said earlier this week that he is “wrong to say that there is no alternative to the economic policies he espouses”. The paper praised Truss for her “Thatcherite response to the challenges the country faces”.
For the Conservative members, said ITV’s Robert Peston, the situation is quite straightforward on this issue. Their choice for their leader and the UK’s next PM would be between “lower immediate taxes with Ms Truss or lower immediate interest rates with Mr Sunak”.
Even so, he added, “neither Mr Sunak or Ms Truss are promising anything that would persuade the Bank of England the UK can escape a significant recession, a significant contraction in national income, this year”.
For both, the risk is that they end up alienating voters, said the BBC political correspondent, Alex Forsyth. “While the wannabe PMs keep exchanging blows on the finer points of fiscal policy,” she said, “many worried families and businesses [will be] simply wondering whether the help on offer will be anywhere near enough – or what more may come”.