Liz Truss rejects ‘handouts’ as solution to cost-of-living crisis

Tory leadership contender’s tax cut plan will not help the hungry, warns business leader

Conservative leadership frontrunner Liz Truss has said she would help people deal with the cost-of-living crisis by lowering taxes, not giving “handouts”.

With household energy bills expected to soar to more than £3,500 in October, the government is facing growing calls for a repeat of former chancellor Rishi Sunak’s £30bn package to ease the impact of price rises earlier this year.

But Ms Truss downplayed the significance of warnings from the Bank of England of 13 per cent inflation and the longest recession in a generation, telling Tory activists: “Forecasts are not destiny.”

She told the Financial Times that as prime minister she would “look at what more can be done” to help families facing spiralling fuel bills this winter.

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

Her approach was challenged by a former president of the CBI, Paul Drechsler.

The business leader told BBC Radio 4’s Today programme: “I would say to anyone who’s running for the role of prime minister that thinking about a policy or a tax change is just not going to be good enough in September when people are already being hit by these escalating energy costs.

“Anyone who’s talking about taxation is not going to deliver a quick solution if I’m hungry and can’t heat my house... If I’m hungry in September, no tax change in the world is going to help me.”

Mr Sunak, who is Ms Truss’s rival in the race to succeed Boris Johnson as PM, last night doubled down on his warning that her promise of immediate tax cuts risks fuelling price rises.

The foreign secretary has said that if she enters Downing Street in September, she will reverse the recent 1.25 per cent hike in National Insurance rates, scrap a planned rise to corporation tax and suspend green levies on energy bills.

At a Tory leadership hustings in Eastbourne, Mr Sunak warned that Conservatives could “kiss goodbye” to the next general election if they failed to get inflation under control.

“The first thing we need to do in order to make sure we can win that election is have got through this inflation problem by then,” he told an audience of Tory members. “And that’s why I’m particularly worried about policies that risk making it worse and last longer.”

Mr Sunak, who is trailing Ms Truss in polls of the 160,000 Tory members who will choose the new PM, said that inflation was “the most important question that confronts our country at the moment”.

There was “no hope” of the Conservatives winning an election expected in 2024 if rising prices remain “embedded” at that point, as the Bank of England fears, he said.

“If we don’t get a grip of this thing and get a grip of it fast, then we can kiss goodbye to winning that next election,” said Mr Sunak.

“The first thing we need to do, if we’re going to grip this, is not make the situation worse and put fuel on the fire and repeat the mistakes of the past.

“I believe that pumping £40 or £50bn of borrowed money into an economy that’s already seeing an inflation spiral is enormously risky. It is taking a big gamble with your savings, your pensions and your mortgage rates and that is not a gamble that I’m prepared to take.”

But Ms Truss suggested her plans for immediate tax cuts could avert a recession.

On a campaign visit to the West Midlands, she 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.”

Ms Truss pointed the finger of blame at Mr Sunak’s 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.”