Liz Truss promises to cut taxes 'immediately' as Rishi Sunak criticises ‘handouts’ comments

Liz Truss has pledged to cut taxes “immediately” if she becomes Prime Minister as Rishi Sunak criticises her comments over “handouts”.

The Foreign Secretary promised to use a September emergency budget to reverse the national insurance rate rise brought in by Mr Sunak when he was chancellor, which she at the time supported.

It is understood this change would happen within days, rather than wait until April under the usual Treasury rules.

Writing in the Sunday Telegraph, Ms Truss said: “I would hit the ground running by bringing in an emergency budget, charting a firm course to get our economy growing in order to help fund our public services and NHS.

Rishi Sunak at an event in Edinburgh, as part of the campaign to be leader of the Conservative Party and the next prime minister. Picture date: Saturday August 6, 2022.

“I would use this to immediately tackle the cost-of-living crisis by cutting taxes, reversing the rise on national insurance and suspending the green levy on energy bills.”

She is pressing ahead with the plans despite claims they would fuel inflation, and argues her £30bn plan for tax cuts will make the economy more competitive.

Speaking on Sunday, she said: "Having the highest taxes for 70 years is not going to deliver that economic growth, and it's leading our country to a recession."

The Foreign Secretary earlier sparked fury after claiming tax cuts, not “handouts”, would help families with rocketing fuel bills this winter.

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

Responding, 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.”

Trade minister Penny Mordaunt denied that Ms Truss had ruled out expanding direct payments to people.

Ms Mordaunt, a former Tory leadership candidate who has thrown her weight behind the Foreign Secretary, told Sky News: “It’s not that she’s ruling out all future help, that’s a misinterpretation of what she said.

“What she is looking at though is enabling people to keep more of the money that they earn.

“It makes no sense to take money off of people and then to give it back in very, very complicated ways.

“We need to simplify this and we need to ensure that households are as resilient as possible and stopping taking large sums of tax off people is one way of doing that.”

Ms Mordaunt said tax cuts “don’t have to be inflationary”, in response to Mr Sunak’s argument that they would further drive up prices.

Backers of Mr Sunak seized on Ms Mordaunt's comments, with Tory MP Mark Harper tweeting: "Stop blaming journalists (again) - reporting what you actually say isn't 'misinterpreted'.

"This kind of thing happened under the current PM & hugely damaged trust in us all. So just what does 'not giving out handouts' mean then? Seems pretty clear…"

Simon Hoare, the Conservative MP for North Dorset, said: "So, 2 'misinterpretations' in a few days!! The country needs a serious PM who doesn't make it up as it goes along."

Elsewhere, Mr Sunak warned more borrowing could make things worse.

He 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 OK 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.”

The former chancellor claimed the public deserved “clear-eyed realism and not starry-eyed boosterism”.

Allies of both camps criticised the other side’s plans, with former Tory party co-chairman Oliver Dowden labelling Ms Truss’s proposed tax cuts “insufficient”.

The Sunak supporter told BBC News: “You’re going to see energy bills going up to almost £4,000 and if you look at the idea of the tax cuts, this idea of reversing the national insurance contributions, that’s only going to benefit someone working full time on the national living wage by less than £60.

“Contrast that with whoever the prime minister is, they’re going to get a benefit of about £1,800.

“So this isn’t the way to help people through this very difficult period.”

Senior Conservative MP Mel Stride tweeted: “Pensioners typically won’t benefit. Workers on Living Wage gain under £60 a year. Millions of poorest will get nothing. Rishi’s right we need clear targeted support. Get this wrong and we lose next election.”

But former cabinet minister John Redwood, a backer of Ms Truss, tweeted: “Rishi now wants the state to spend and borrow more to help with the cost of living. Mr Flip Flop will discover the more you change your message the fewer people will believe anything you say. He told us if the state borrowed more we would get more inflation so he wouldn’t do that.”

Tory MP Damian Hinds conceded the package of support Mr Sunak drew up as chancellor was not enough in these “extraordinarily difficult times”, and suggested more would come if he became prime minister.

He told Sky News: “Things have been getting worse even since that was put into place in terms of projections for energy bills… and he’s been clear that more may well be needed and and he is ready to do that as required.”