Liz Truss will plunge the economy into an “inflation spiral” if she does not choose between her unfunded £50 billion tax cuts or providing cost-of-living support, her Tory leadership rival has warned.
Rishi Sunak’s campaign said the Foreign Secretary would increase borrowing to “historic and dangerous levels”, and place public finances into “serious jeopardy”, if she attempts both.
The comments came after Ms Truss, the frontrunner to be the next prime minister, signalled she could help firms and households with soaring energy bills with direct support this winter.
She was looking at assistance “across the board” despite in the past insisting she was focused on tax cuts rather than what she termed “giving out handouts”.
A statement from Mr Sunak’s campaign said: “Following weeks of rejecting direct support payments as ‘handouts’, Truss supporters have slowly woken up to the reality of what winter brings. They now say that they will provide people with help – but what help, for who, when and how it will be paid for remains a mystery.
“The reality is that Truss cannot deliver a support package as well as come good on £50 billion worth of unfunded, permanent tax cuts in one go.
“To do so would mean increasing borrowing to historic and dangerous levels, putting the public finances in serious jeopardy and plunging the economy into an inflation spiral.”
The row comes ahead of Ofgem’s announcement on Friday when the regulator is expected to hike the cap on energy bills from £1,971 to around £3,600.
The former chancellor’s team also seized on reports that Ms Truss is not planning to ask the independent Office for Budget Responsibility (OBR) for a forecast ahead of the emergency budget she is planning for next month.
“It’s no wonder they want to avoid independent scrutiny of the OBR in their emergency budget – they know you can’t do both and it’s time they came clean about that now,” Mr Sunak’s campaign said.
Ms Truss’s economic vision and her reported plans for the OBR, which is required to produce two forecasts a year, was coming under increasing attacks from Tory critics.
Lord Griffiths, the Conservative peer who served as Margaret Thatcher’s head of policy, said: “The Bank of England’s devastating outlook for the economy contrasts with Liz’s optimism – for her to now prevent the OBR doing proper analysis of the facts would seem to indicate complete loss of confidence in the policy she is advocating.”
Conservative heavyweight Michael Gove warned in an article for the Times that Ms Truss was on a “holiday from reality” with her plans for tax cuts during an economic crisis as he endorsed Mr Sunak.
Mr Gove, who served as levelling-up secretary until being sacked by Boris Johnson before his resignation as Tory leader, said Ms Truss’s vision puts the “stock options of FTSE 100 executives” before the nation’s poorest.
Business Secretary Kwasi Kwarteng, a close ally of Ms Truss who is tipped to be her chancellor, insisted there would be fresh support this winter as energy bills soar.
“I understand the deep anxiety this is causing. As winter approaches, millions of families will be concerned about how they are going to make ends meet,” he wrote in the Mail+.
“But I want to reassure the British people that help is coming.”
Ms Truss was expressing optimism for the economy, saying there is “too much talk that there’s going to be a recession” as she insisted an economic slump is not inevitable despite the Bank’s forecast.
In an interview with the Sun on Sunday, she said she was looking at help “across the board” in a hint that there could be more support for businesses and households.
So far, she has focused on cutting taxes, such as an immediate reversal of the national insurance hike, while Mr Sunak has focused on trying to bring soaring inflation down.