Liz Truss defends £30bn tax cuts as ‘affordable’ in bid for No 10

Rival Rishi Sunak was understood not to be forecasting tax cuts until at least autumn next year.

21 July 2022

Liz Truss has defended her tax cut plans costing at least £30 billion a year as “affordable” as the economic policies of the Tory candidates for prime minister came under scrutiny.

Former chancellor Rishi Sunak was understood to not be envisaging cutting personal taxes until at least autumn next year to avoid fuelling inflation.

But Ms Truss, the Foreign Secretary, promised an emergency budget to reverse the national insurance hike immediately under her proposals to drive growth.

The financial plans of the final candidates for prime minister were growing ever more divided as they battled for the votes of the Tory membership required to win the race for No 10.

Foreign Secretary and Tory leadership candidate Liz Truss speaks to the press during a visit to the children’s charity Little Miracles in Peterborough, to speak about the cost-of-living pressures and her vision to ease the burden on families
Foreign Secretary and Tory leadership candidate Liz Truss speaks to the press during a visit to the children’s charity Little Miracles in Peterborough (Stefan Rousseau/PA)

Robert Joyce, the deputy director of the Institute for Fiscal Studies (IFS) think tank, put Ms Truss’s tax cuts at “more than £30 billion per year – and possibly considerably more”.

The plans “mean higher borrowing or less public spending, or some combination”, he said, though their impact remains unclear because Ms Truss’s plans are “yet to be fleshed out”.

“Without spending reductions, the tax promises would likely lead to the current fiscal rules being broken, and Ms Truss has hinted that the fiscal rules may change,” Mr Joyce added.

But Ms Truss defended her plans to scrap the scheduled corporation tax rise and suspend green levies on energy bills as “not a gamble”.

“My plans do not exceed the headroom. I’m very clear that they are about £30 billion worth of costings, and those are affordable within our current headroom,” she told broadcasters during a visit to Peterborough.

“But what is not affordable is putting up taxes, choking off growth, and ending up in a much worse position.”

Conservative leadership election timetable
(PA Graphics)

In his pitch to Conservative members after MPs selected the final two candidates, Mr Sunak argued that only he is capable of beating Labour in a general election.

But Ms Truss hit back by saying the Tories would struggle to win under the current economic policy written by Mr Sunak when he was in No 11.

Ms Truss said: “I think the problem is that if we continue with our current economic policy, which is forecast to lead to a recession, it will be very hard for Conservatives to win an election.

“We are in economic difficulty, the whole world is in economic difficulty. It’s not time for business as usual.”

Mr Sunak has vowed not to cut taxes until the soaring rates of inflation are under control, fearing that such a move could make the crisis worse.

Liz Truss and Rishi Sunak
Rivals Liz Truss and Rishi Sunak (PA)

It emerged on Thursday that he does not believe he would be able to cut personal taxes until at least autumn 2023, a view that is likely to further anger the Tory right.

The IFS noted that his plans see tax heading towards its highest sustained level in 70 years.

Mr Sunak insisted he was a “Thatcherite” as he sought to address the concerns of Tory members that he backed a high-tax, large state approach.

Some fear that Mr Sunak may have blown his chances by resigning as chancellor, in a move that has angered some Conservatives by helping bring about Boris Johnson’s downfall.

Ms Truss insisted she would have liked Mr Johnson to have carried on as Prime Minister, describing his record as “extremely positive”.

Mr Sunak was the parliamentary party’s favourite, winning 137 votes to Ms Truss’s 113 among Tory MPs.

But bookmakers placed the Foreign Secretary as the frontrunner, with early indications suggesting she is more popular with Tory members ahead of a summer of campaigning.

A small, unrepresentative poll of 730 members on Wednesday and Thursday again saw Ms Truss in the lead.

Some 49% of respondents said they would back the Foreign Secretary, while 31% chose Mr Sunak. The rest were undecided or said they would not vote.

The pair battled to win the support of local politicians on Thursday when they took part in a private hustings for the Conservative Councillors’ Association.

They will then tour the UK to take part in 12 hustings for the Tory members who will vote for their next leader, with the result being announced on September 5.

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