It comes after the Bank of England warned the UK would fall into the longest recession since the financial crisis.

06 August 2022

Rishi Sunak has contrasted his “clear-eyed realism” with the “starry-eyed boosterism” of his Tory leadership rival Liz Truss, suggesting her tax-cutting ambitions would mean taking a “gamble” with people’s savings and pensions.

The two candidates vying to replace Boris Johnson as prime minister have continued to clash over their plans for the economy after the Bank of England warned this week that the UK would fall into the longest recession since the financial crisis, with inflation set to soar to more than 13%.

Mr Sunak has argued that inflation must be brought under control before taxes are lowered, saying Ms Truss’s promised unfunded tax cuts would further drive up prices.

In an interview with The Times, the former chancellor 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 okay 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.”

He told the newspaper the British people deserved “clear-eyed realism and not starry-eyed boosterism”.

But Ms Truss has claimed a recession is “not inevitable”, describing her plans as the best way to avert one.

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

During a campaign visit to Solihull on Saturday, the Foreign Secretary told reporters: “What I’m about as a Conservative is people keeping more of their own money, growing the economy so we avoid a recession and the best way to do that is lower taxes, but also unleashing investment into our economy.”

She hit out at Mr Sunak’s economic legacy as chancellor, saying: “Under the plans at present, what we know is Britain is headed for a recession.

“That is not inevitable, but we need to avoid that by making sure our economy is competitive, that we’re encouraging businesses to grow and that we are keeping taxes low.

“Having the highest taxes for 70 years is not going to deliver that economic growth and it’s leading our country to a recession.”

Mr Sunak condemned his rival’s recent threat to review the Bank of England’s remit, saying such a move would be “worrying” and likely to “spook international investors”.

Speaking after the biggest interest rate rise in 27 years, he told The Times that the bank had not been alone in underestimating “both the scale and the duration of inflation”, adding: “I believe in an independent central bank and I believe they should act forcefully to grip inflation”.

Ms Truss has pledged to reverse the National Insurance hike, pause green levies on energy bills, and scrap a planned corporation tax rise.

Her supporter Jake Berry, chairman of the Northern Research Group of Tory MPs, defended her proposals and denied they would lead to higher inflation.

He told Times Radio: “People on the lower incomes will be absolutely terrified, quite correctly. So, the idea that enabling people to keep more of their own money will suddenly turn them into sort of spendthrifts, I, frankly, think is complete and utter nonsense.”

Conservative leadership bid
Rishi Sunak, pictured at a campaign event in Edinburgh, says the race is not yet determined (Jeff J Mitchell/PA)

The Foreign Secretary earlier insisted tax cuts, not “handouts”, would help families with spiralling 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.”

Responding to her comments, Mr Sunak said: “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.”

Elsewhere, the former chancellor set out his plan to reform post-16 education, including phasing out university degrees that do not improve students’ “earning potential”, creating a Russell Group of world-class technical colleges and introducing a British Baccalaureate that would prevent 16-year-olds from dropping maths and English.

Ms Truss and Mr Sunak are seeking support from Tory members to be elected the next party leader and prime minister. Voting has begun, with the result to be announced on September 5.

Mr Sunak said his approach to trying to make up ground against Truss is to “love bomb” the party faithful by criss-crossing the country and meeting hundreds a day.

The race is not yet decided, he told The Times, saying: “I am probably the underdog in this thing … but it does not feel like the polls when I’m out and about”.

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