What Rishi Sunak predicted about Liz Truss’s ‘fairytale’ economic plans

Former chancellor warned of ‘inflationary spiral’

Rishi Sunak is reported to be avoiding Conservative party conference this year, so that Liz Truss can "own" the unfolding economic chaos.

The former chancellor and leadership candidate can certainly claim some reasons to be sanguine.

He warned repeatedly that her strategy was not a good idea, well before the IMF and Bank of England were forced to intervene.

As Ms Truss pledged tax cut after tax cut to win over Tory members, Mr Sunak suggested they could do real economic damage.

During a leadership debate on 15 July Mr Sunak accused his rival of "fairytale economics" by promising unfunded tax cuts.

“Liz, we have to be honest. Borrowing your way out of inflation isn’t a plan, it’s a fairytale," he said.

But Ms Truss was unconvinced, and responded with a conservative slogan: “You cannot tax your way to growth.”

Mr Sunak elaborated on his criticism later in the campaign.

On 21 August Mr Sunak's campaign team put out a statement warning that Truss's economic policy could cause an "inflationary spiral".

“The reality is that Truss cannot deliver a support package as well as come good on £50bn worth of unfunded, permanent tax cuts in one go," Mr Sunak's spokesperson said.

"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.

“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.”

As planned, Ms Truss's chancellor Kwasi Kwarteng avoided any scrutiny from the Office for Budget Responsibility for his mini-budget.

The unfunded tax cuts were not well received by the markets.

The impact was immediate: Sterling crashed to record lows against the dollar and government borrowing costs surged.

Increasing import costs are likely to add to inflation across the board, worsening the cost of living crisis.

The Bank of England is now expected to increase interest rates to 6 per cent by the end of the year, pumping up costs for mortgage holders and making business investment more difficult.

Mr Sunak is far from the only person to have warned in advance against Ms Truss's strategy, but he certainly rejected her approach during the Tory leadership campaign.