Liz Truss’ plan to focus on tax cuts to tackle the cost of living – rather than targeted support for low income households – could see people end up on the streets, according to one of her rival’s backers.
Tory MP Kevin Hollinrake, who is supporting Rishi Sunak in the race to become the next prime minister, claimed the foreign secretary needed to stop offering “the magic money tree” to her supporters and instead look at how to help those most in need.
He told Sky News’ Kay Burley: “Talking about tax cuts that would help a low income household to the tune of about £1 a week and still… help a household like mine to the tune of about £30 a week is simply not right.
“These people are going to be on the streets. Things are going to be that bad for some households. You’ve got to provide that target package of support.”
His comments come as Ms Truss is accused of trying to “avoid independent scrutiny” as she prepares to hold a budget next month without an official economic forecast from the Office for Budget Responsibility (OBR), despite one being ready should she ask.
Having an emergency budget in September – in which she will make long-term funding pledges – has been a key part of the frontrunner’s campaign to get into Number 10.
The move has been branded “worrying” by an economist and expert in government finance, while the team behind Conservative leadership rival Rishi Sunak accused Ms Truss of wanting “to avoid independent scrutiny”.
Labour shadow minister Alex Norris told Kay Burley it was “really frightening [that] at a time when families are really struggling, where people up and down the country are so concerned and that is the conversation being had, the leadership contest doesn’t seem to reflect those concerns”.
Ms Truss has come under criticism for a perceived lack of clarity over her money promises, with veteran former cabinet minister Michael Gove accusing her of taking a “holiday from reality”.
She wants to spend £30m on cutting taxes – like reversing the National Insurance rise and cancelling the uplift in corporation tax – using money that economists no longer think exists due to inflation.
Ms Truss has also hinted she may spend more money by providing further help to people this winter, despite previously saying she would not.
Mr Sunak said she would plunge the economy into an “inflation spiral” if she does not choose between tax cuts and providing cost of living support, as it would mean “dangerous” levels of borrowing.
“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,” his team said.
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The OBR provides forecasts for all budgets as part of the founding law of the body, enacted in 2010, and despite being funded by the Treasury, it is fully independent.
While the OBR is ready to provide an analysis for Ms Truss if she asks for it, the former Treasury minister – who counts the chancellor and chief secretary to the Treasury among her supporters – wants to go ahead without it.
A spokesperson for her team said: “The cost of living crisis means immediate action is required. A Truss government would seek to act as soon as possible to help people across the UK, by cutting taxes and introducing a temporary moratorium on energy levies.”
And a source in the Truss campaign told Sky News that a forecast wasn’t necessary for a “targeted fiscal event”.
But more criticism came from the former head of policy for Margaret Thatcher, the Tory PM who Ms Truss has been accused of styling herself on during the campaign.
Lord Griffiths, who is now a Conservative peer, 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.”
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Not consulting the OBR for short-term financial measures, like giving help to people over the winter, is not unreasonable, according to Thomas Pope, the deputy chief economist at the Institute for Government.
However, enacting tax cuts without a forecast – especially when one is ready – is a “worrying decision”, he said.
“It would be reasonable to make some short-term announcements to alleviate the energy bills crisis without an OBR report because the immediate support package is not so dependent on the long-term outlook,” he said.
“But there should be no rush to announce any permanent tax cuts, and any such decisions should be accompanied by the best possible information, which the OBR would provide.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, has estimated that if Ms Truss wins, Britain’s budget deficit is likely to hit about £170bn in the current financial year, about three times its size before the pandemic.
