Liz Truss, the Tory leadership favourite, is under pressure to promise more help for poor households facing a crushing cost of living crisis this autumn, after expressing her preference for tax cuts over “handouts”.
Both Truss, foreign secretary, and her rival Rishi Sunak, the former chancellor, have been urged to explain how they would help households through the worst income squeeze in over 60 years and a “financial time-bomb” that is primed to detonate in the autumn.
But Truss, the frontrunner to be Britain’s next prime minister, is under most pressure after telling the Financial Times last week that she would “look at what more can be done” but adding: “The way I would do things is in a Conservative way of lowering the tax burden, not giving out handouts.”
Her ally Penny Mordaunt told Sky News on Sunday that Truss’s comments had been “misinterpreted” and that Truss would look at a range of measures to help poor households, alongside plans to reverse a £13bn national insurance increase. “She’s not ruled out all future help,” she said.
Truss said she would scrap the 1.25 percentage point NI rate rise — introduced by Sunak — in an emergency Budget expected in September. She wrote in the Sunday Telegraph: “We would be able to put more money back in the pockets of hard-working people without delay.”
But Sunak’s allies claimed it would take several months to implement the technical measures needed to make the change, leaving many households facing a cash crunch when a new energy price cap — possibly topping £4,000 — is applied in October.
The former chancellor’s team also say that the cut in NI rates would not help the poorest and most of the benefits would accrue to higher earners. “Her tax cut won’t touch the sides for most families who will need the most help,” said one Sunak ally.
Sunak’s team said a person working full time on the national minimum wage would save £59 a year, while a person on median earnings of £26,000 would save £170. A person earning £100,000 would save over £1,000.
Oliver Dowden, former cabinet minister and a Sunak supporter, said Truss’s tax cuts were “not fit to deal with the scale of the challenge that we are facing”. Mordaunt insisted that Truss had never excluded coming up with a much wider package of support.
Meanwhile Sunak said he would “go further” than the £1,200 he had already earmarked for vulnerable households as chancellor once it was clear how high domestic fuel bills would rise; but he was criticised for failing to give more detail.
The former chancellor has promised to cut an average of £160 off bills by temporarily scrapping VAT. But that is far smaller than the £2,000 by which the price cap of £1,971 set in April by the energy regulator could rise in October.
Gordon Brown, former Labour prime minister, said Boris Johnson should convene a meeting with Truss and Sunak to deliver an emergency Budget now. “The reality is grim and undeniable: a financial time-bomb will explode for families in October,” he wrote in the Observer.
He added: “There is nothing moral about indifferent leaders condemning millions of vulnerable and blameless children and pensioners to a winter of dire poverty.”
Torsten Bell, director of the Resolution Foundation think-tank, said: “Cuts to income taxes will make little or no difference to lower-income households, so whoever becomes prime minister will have to [offer] direct help through the benefits system or directly through lower bills.”