Liz Truss vows to ‘immediately’ cut taxes to tackle cost-of-living crisis

The Tory leadership contender wants to accelerate the reversal of the National Insurance rate rise by six months.

07 August 2022

Liz Truss has pledged to “immediately” cut taxes if she wins the race for No 10, accelerating the reversal of the National Insurance rate rise by six months.

The Tory leadership contender said she would use a September emergency budget to scrap the increase brought in by her rival Rishi Sunak when he was chancellor.

She would seek to implement the change within days, rather than wait until April in line with usual Treasury rules, it is understood.

Conservative leadership bid
Liz Truss speaks at Solihull Moors FC as part of her Tory leadership campaign (Jacob King/PA)

But Mr Sunak has contrasted his “clear-eyed realism” with Ms Truss’s “starry-eyed boosterism”, arguing that her promised tax cuts would further fuel inflation and fail to help the most vulnerable.

The two candidates vying to replace Boris Johnson as prime minister continue to clash over their plans to help households with spiralling bills after the Bank of England warned that the UK would fall into the longest recession since the financial crisis, with inflation set to soar to more than 13%.

There are growing calls for the new premier to urgently increase the amount of support available to the most vulnerable families, with a new report commissioned by former prime minister Gordon Brown suggesting Government help has failed to address their needs.

Ms Truss vowed to “immediately” address the cost-of-living crisis by lowering the tax burden.

“Despite the Bank of England’s stark assessment this week, I do not believe in resigning our great country to managed decline or accepting the inevitability of a recession,” the Foreign Secretary wrote in The Sunday Telegraph.

“I would hit the ground running by bringing in an emergency budget, charting a firm course to get our economy growing in order to help fund our public services and NHS.

“I would use this to immediately tackle the cost-of-living crisis by cutting taxes, reversing the rise on national insurance and suspending the green levy on energy bills”.

The Foreign Secretary earlier insisted tax cuts, not “handouts”, would help families with skyrocketing fuel bills this winter.

She told the Financial Times: “Of course, I will look at what more can be done.

“But the way I would do things is in a Conservative way of lowering the tax burden, not giving out handouts.”

Mr Sunak hit back at her comments, saying: “It’s simply wrong to rule out further direct support at this time as Liz Truss has done, and what’s more, her tax proposals are not going to help very significantly people like pensioners or those on low incomes who are exactly the kind of families that are going to need help.”

But trade minister Penny Mordaunt denied that Ms Truss has ruled out expanding direct payments to people.

Ms Mordaunt, a former Tory leadership candidate who has now thrown her weight behind the Foreign Secretary, told Sky News: “It’s not that she’s ruling out all future help, that’s a misinterpretation of what she said.

“What she is looking at though is enabling people to keep more of the money that they earn.

“It makes no sense to take money off of people and then to give it back in very, very complicated ways.

“We need to simplify this and we need to ensure that households are as resilient as possible and stopping taking large sums of tax on people is one way of doing that.”

Penny Mordaunt
Penny Mordaunt has backed Liz Truss in the Tory leadership race after being eliminated herself (Victoria Jones/PA)

Ms Mordaunt also said Ms Truss is “right” to put forward an emergency budget, “both in terms of addressing the cost-of-living issues, but also to really get growth back into the economy”.

“It’s all very well alleviating a problem and the squeeze that people are feeling but we’ve got to get growth back into the economy if we don’t want that to become the norm.”

She also argued that tax cuts “don’t have to be inflationary”, in response to Mr Sunak’s argument that tax cuts would further drive up prices.

In an interview with The Times, Mr Sunak said: “The priority for me is to not do things that make it worse and I think putting £40 billion plus and borrowed money into an economy that’s seeing an inflation spiral does risk making it worse.

“It might be OK but I think it means taking a gamble with people’s savings, their pensions, their mortgage rates, it’s not a gamble I’m prepared to take so I don’t want to make it worse.”

The former chancellor told the newspaper the public deserved “clear-eyed realism and not starry-eyed boosterism”.

Gordon Brown
Former prime minister Gordon Brown has called for the UK Government to implement an emergency budget to help struggling families (Jane Barlow/PA)

Both candidates faced calls from Mr Brown to agree an emergency budget with Mr Johnson this week or risk “condemning millions of vulnerable and blameless children and pensioners to a winter of dire poverty”.

“The reality is grim and undeniable: a financial timebomb will explode for families in October as a second round of fuel price rises in six months sends shock waves through every household and pushes millions over the edge,” the former prime minister wrote in Sunday’s Observer.

The new report, carried out by Professor Donald Hirsch at Loughborough University, found existing Government support for low-income households has fallen short of offsetting the losses they face, with some families up to £1,600 worse off a year.

The additional £1,200 offered to the poorest in society this year will fail to compensate for three major blows to their income from October 2021 to October 2022, the analysis suggests.

Tory MP Damian Hinds conceded the package of support Mr Sunak drew up as chancellor was not enough in these “extraordinarily difficult times”, and suggested more would come if he becomes prime minister.

The supporter of Mr Sunak told Sky News: “Things have been getting worse even since that was put into place in terms of projections for energy bills are going to be in future and he’s been clear that more may well be needed and and he is ready to do that as required.”

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