The frontrunner in the race to replace Boris Johnson as Prime Minister Foreign Secretary Liz Truss’ plan to cut taxes would be “electoral suicide”, a chief ally of her opponent Rishi Sunak has warned.
Deputy Prime Minister Dominic Raab, has claimed that the central ethos of the Conservative party, cutting taxes, should be abandoned during the economic crisis if the party hopes to retain its majority in the Parliament for a record fifth term.
“All the evidence tells us that, with inflation running high and energy bills the highest for decades, the winter will be extremely difficult. High prices and high bills will put pressure on the household budgets of hardworking people. Those pressures are well beyond the living memory of millions of voters, and will directly affect millions more,” Mr Raab wrote in The Times.
“If we go to the country in September with an emergency budget that fails to measure up to the task, voters will not forgive us,” he wrote. “Such a failure will read unmistakenly to the public like an electoral suicide note and see our great party cast into the impotent oblivion of opposition.”
The debate over taxation has been a central issue in the race between Sunak and Truss, with the foreign secretary and her allies claiming that it is necessary for taxes — which rose to a seven decade-high during Sunak’s tenure as the top man of the Treasury — should be cut in order to foster economic growth in the hopes of mitigating or preventing the looming recession.
On the other hand Mr Sunak, the former Chancellor of the Exchequer who oversaw massive increases to government debt as a result of his furlough scheme during the Chinese coronavirus crisis, has argued that repaying the debt should not be put off to other generations and that cutting taxes would only serve to further fuel inflation.
Though Truss currently holds a commanding lead over Sunak in the Conservative leadership contest, polling has suggested that the public as a whole (64 per cent to 17) is in favour of tackling inflation before cutting taxes. There is more support among the Tory membership (33 per cent) for focusing on tax cuts first.
Defending the idea of cutting taxes, Truss backer and former leader of the Conservative party, Sir Iain Duncan Smith told GB News on Tuesday that while the current economic crisis is largely caused by global factors, such as the war in Ukraine’s impacts on energy prices and the holdover supply chain impacts of “two deep and too long lockdown” policies, the UK government can still mitigate the impacts by pursuing a strategy of economic growth.
“If we don’t get those tax reductions, then you can kiss goodbye to any debate about whether or not we can supply people with money for the cost of living because the economy will be
crashing,” he said.
“That is very much what Conservatives believe in, you can’t tax your way to growth,” Sir Iain added.
The former Tory leader went on to criticise both the Bank of England and the Treasury under Sunak for pursuing a policy of quantitive easing during the lockdowns, which he said effectively raised asset prices and made it more difficult “for the people on lower income to actually gain any assets because the costs went spiraling and that has fueled domestic inflation.”
The Bank of England has warned that the UK is facing the prospect of a 15-month recession starting at the end of this year, when it expects inflation to surpass 13 per cent.
In order to combat inflation, which has already hit 9.4 per cent, the central bank rose interest rates to its highest level since the 2008 financial crisis, raising rates from 1.25 per cent to 1.75 per cent last week.
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