Supporters of Liz Truss have denied she is ruling out more financial help for households struggling with the cost of living, after furore greeted the Tory leadership frontrunner’s declaration she would not offer “handouts”.
Leadership rival Rishi Sunak signalled that he plans another multi-billion package of help if he becomes prime minister in September, and said it was “simply wrong” for Ms Truss to rule out further direct support at a time of soaring energy prices.
Anti-poverty campaigners and experts have told The Independent that the new PM will have to immediately double the £15bn support package announced by Mr Sunak in May in order to avert searing hardship for millions of Britons this winter.
And former prime minister Gordon Brown has called for Sunak, Truss and prime minister Boris Johnson to agree an emergency budget or risk “condemning millions of vulnerable and blameless children and pensioners to a winter of dire poverty”.
Fears of a devastating cash crisis for families were fuelled by Thursday’s Bank of England forecast of inflation topping 13 per cent and a five-quarter recession, coupled with predictions that the energy price cap will rise from £1,971 to more than £3,700.
And the cost of living was forced to the top of the agenda in the Tory leadership contest by Ms Truss’s comment that she would offer help by “lowering the tax burden, not giving out handouts”.
Mr Sunak hit back at her comments, saying: “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.”
Penny Mordaunt has backed Liz Truss in the Tory leadership race after being eliminated herself (Victoria Jones/PA)
But trade minister Penny Mordaunt today denied that Ms Truss had ruled out expanding direct payments.
The former 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 on people is one way of doing that.”
Ms Truss has promised an emergency budget in September if she is elected Tory leader by 160,000 Conservative party members.
It isn’t the first of Liz Truss’ statements to be ‘misinterpreted’
But she has given no indication that this will include direct help with fuel bills, instead focusing on the “immediate” delivery of tax cuts totalling around £30bn.
It is understood that she will aim to implement the reversal of Mr Sunak’s 1.25 per cent hike to National Insurance within days, rather than waiting until April as would normally be the practice.
She also plans to scrap a corporation tax rise from 19 to 25 per cent planned by the former chancellor for 2023, and suspend green levies on energy bills.
“Despite the Bank of England’s stark assessment this week, I do not believe in resigning our great country to managed decline or accepting the inevitability of a recession,” Ms Truss wrote in the Sunday Telegraph.
“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.”
Anti-poverty thinktank the Joseph Rowntree Foundation warned that tax cuts were “a really ineffective way of getting money to those who need the help most”, as many of the poorest do not pay tax.
Rishi Sunak has pledged more cost of living support despite previously facing criticism for not doing enough as chancellor
“Six pounds out of every seven that you would spend on scrapping the National Insurance rise would go to the top half of the income distribution,” the Foundation’s Katie Schmuecker told The Independent.
And Mr Sunak warned that premature tax cuts risked driving inflation yet higher.
“Putting £40 billion-plus of borrowed money into an economy that’s seeing an inflation spiral does risk making it worse,” he told the Sunday Times.
“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.”
The former chancellor said the public deserved “clear-eyed realism and not starry-eyed boosterism” on the issue.
The scale of the impending crisis was laid bare in a report commissioned by Mr Brown which found that 13m households – almost half of the country – are at risk of fuel poverty after October’s price rises.
“A financial timebomb will explode for families in October as a second round of fuel price rises in six months sends shockwaves through every household and pushes millions over the edge,” the former Labour prime minister wrote in The Observer.
“A few months ago, Jonathan Bradshaw and Antonia Keung at York University estimated that April’s 54% increase in fuel prices would trap 27 million people in 10m households in fuel poverty.
“Now, 35 million people in 13m households – an unprecedented 49.6% of the population of the United Kingdom – are under threat of fuel poverty in October.”
Mr Brown said that if Mr Johnson, Mr Sunak and Ms Truss could not agree an emergency budget, “parliament should be recalled to force them to do so”.
The new report, carried out by Professor Donald Hirsch at Loughborough University, found existing Government support for low-income households has fallen short of offsetting the losses they face, with some families up to £1,600 worse off a year.
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 becomes prime minister.
The Sunak supporter told Sky News: “Things have been getting worse even since that was put into place in terms of projections for energy bills are going to be in future and he’s been clear that more may well be needed and he is ready to do that as required.”
