Rishi Sunak says tax cuts would fuel inflation, while Liz Truss argues a recession can be averted.
Image source, PA MediaTory leadership rivals Rishi Sunak and Liz Truss have set out competing plans to deal with the economic recession forecast by the Bank of England in their latest TV clash.
Mr Sunak said Ms Truss’s “unfunded” tax cuts would pour “fuel on the fire” of inflation.
But Ms Truss said a recession was “not inevitable” if “bold” action was taken.
The Bank’s gloomy forecast of a recession this year loomed large in the TV special, hosted by Sky News.
It earlier raised interest rates to the highest level in almost three decades, from 1.25% to 1.75%, in an attempt to push back skyrocketing prices.
The inflation rate is forecast to hit a 42-year high of 13% this year, while the UK economy is expected to shrink for more than a year.
The Bank said main reason for high inflation and low growth is rising energy bills, driven by Russia’s invasion of Ukraine.
The worsening state of the UK economy has dominated the Tory leadership campaign, with both candidates putting forward rival visions to deal with the fallout.
Mr Sunak, who has trailed Ms Truss in recent polls, has repeatedly said he would prioritise bringing inflation down before cutting taxes, if he became prime minister.
Meanwhile, Ms Truss has pledged a package of tax cuts worth £30bn soon after she enters office, which Mr Sunak has argued would increase inflation and the cost of borrowing.
Mr Sunak told the Sky News programme: “We in the Conservative Party need to get real and fast – because the lights on the economy are flashing red and the root cause is inflation.
“I’m worried that Liz Truss’s plans will make the situation worse.”
Ms Truss reiterated her pledge to immediately reverse the increase in National Insurance and cut other taxes to prevent the job losses of a recession.
“What the Bank of England have said today is of course extremely worrying, but it is not inevitable,” she said.
“We can change the outcome and we can make it more likely that the economy grows.”
The pair are vying to win over Conservative Party members, whose votes will determine which of them will become the next Tory leader and British prime minister.
The party’s roughly 160,000 members started receiving ballot papers on Monday, with the result due on 5 September, when Prime Minister Boris Johnson will leave office.