Rishi Sunak has launched a fresh attack on Liz Truss’s “premature” tax cuts that he says would “stoke inflation” ahead of the expected hiking of interest rates.
The former chancellor said his Foreign Secretary rival in the Tory leadership race would further drive up rates, raising mortgage payments, with her swift plan of action.
His warning came as the Bank of England was forecast to raise interest rates to the highest level in nearly three decades on Thursday, from 1.25% to 1.75%.
An announcement is scheduled after experts warned that inflation could peak at 15%, adding to the already painful cost-of-living crisis with spiralling prices.
Mr Sunak has faced attacks from Ms Truss for overseeing rising taxes while in No 11 during the pandemic, as she pledges a more radical plan to slash them.
He has insisted he does want to see taxes come down, but argues it is necessary to bring inflation under control before making major changes.
The former chancellor stressed there are “crucial differences” between their plans “because timing is everything”.
“If we rush through premature tax cuts before we have gripped inflation all we are doing is giving with one hand and then taking away with the other,” he said in a statement.
“That would stoke inflation and drive up interest rates, adding to people’s mortgage payments. And it would mean every pound people get back in their pockets is nothing more than a down payment on rising prices.
“A policy prospectus devoid of hard choices might create a warm feeling in the short term, but it will be cold comfort when it lets Labour into Number 10 and consigns the Conservative Party to the wilderness of opposition.”
Ms Truss countered by saying “we cannot tax our way to growth” and insisting her plans would not drive up prices further.
“My economic plan will get our economy moving by reforming the supply side, getting EU regulation off our statute books, and cutting taxes,” she said.
“Delivering bold reforms to the supply side is the way we’ll tackle inflation in the long run and deliver sustainable growth. Modest tax cuts – including scrapping a potentially ruinous corporation tax rise that hasn’t even come into force – are not inflationary.”