Liz Truss has been forced to back down on her scrapping of cost-of-living “benefits” amid growing calls for an emergency budget to help families facing a “financial time bomb” this winter.
For the second time in a week – following her earlier reversal on regional pay – supporters claimed the Tory front-runner’s comments had been “misconstrued”.
But leadership rival Rishi Sunak said the foreign secretary was “simply wrong” to rely on tax cuts rather than direct payments to help the millions of people struggling to pay their energy bills.
He has signaled that he is planning another multibillion-dollar aid package if he becomes prime minister in September.
But both candidates’ proposals were dismissed as “grossly inadequate” by Margaret Thatcher’s former energy secretary Lord Howell of Guildford.
With immediate action needed to avert “horrendous” inflation that will “paralyze the lives of vast numbers of families in this country”, the challengers’ promises of future relief were like Marie Antoinette saying “let them eat cake” , said a Tory peer.
Campaigners and anti-poverty experts told The Independent that the new prime minister must immediately double the £15bn support package announced by Mr Sunak in May to avoid severe hardship for millions of Britons this winter.
And Gordon Brown called on Sunak, Truss and Prime Minister Boris Johnson to agree an immediate emergency budget or risk “condemning millions of vulnerable and blameless children and pensioners to a winter of abject poverty”.
A report commissioned by the former Labor prime minister found families would be up to £1,600 worse off this year, even after existing government support of up to £1,200 per household is paid out.
The new report, by Professor Donald Hirsch of Loughborough University, found that 13 million households – a fraction of half the country – are at risk of fuel poverty after the next energy price cap rises to £3,700 or more in October .
Penny Mordaunt backs Liz Truss in Tory leadership race after she herself was eliminated
(PA cable)
“A financial time bomb will explode for families in October as the second rise in fuel prices in six months sends shock waves through every household and pushes millions over the edge,” Mr Brown said.
If the prime minister and the contenders to replace him refuse to offer an emergency package, he said, “Parliament must be recalled to force them to do so.”
Fears of a devastating cash crunch for families were fueled by the Bank of England’s forecast on Thursday of inflation topping 13 percent and a five-quarter recession.
And the cost of living has been forced to the top of the agenda in the Tory leadership contest due to Ms Truss’s comment that she would offer help through “tax cuts, not handouts”.
Mr Sunak hit back at her comments, saying: “It is simply wrong to rule out further direct support at this time, as Liz Truss has done. What’s more, her tax proposals won’t significantly help people like retirees or those on low incomes, who are the very families who will need help.
But Trade Secretary Penny Mordaunt denied Mrs Truss had ruled out expanding direct payments.
This isn’t the first Liz Truss statement to have been ‘misconstrued’
(Reuters)
The former Tory leader candidate, who has thrown her weight behind the foreign secretary, said: “It’s not that she’s ruling out any future help; this is a misinterpretation of what she said.
“What she’s looking for, though, is to enable people to keep more of the money they earn.”
“It doesn’t make sense to take money from people and then give it back in very, very complicated ways.
“We need to simplify this and we need to make sure that households are as resilient as possible, and stopping large amounts of tax being taken from people is one way of doing that.”
Mrs Truss promised an emergency budget in September if elected Tory leader by the 160,000 Conservative Party members.
But she has given no indication that this will include direct help with fuel bills, instead focusing on the “immediate” delivery of tax relief totaling around £30bn.
It is understood she will seek to implement the reversal of Mr Sunak’s 1.25 per cent increase in national insurance within days, rather than waiting until April as would normally be the practice. She also plans to reverse the former chancellor’s 2023 corporate tax increase from 19 to 25 per cent and end 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 recession,” Ms Truss said.
“I would start by introducing an emergency budget, charting a firm course for growth for our economy to help fund our public services and the NHS.”
Rishi Sunak has promised more support for living costs, despite previously facing criticism that he was not doing enough as chancellor
(PA cable)
The anti-poverty think tank, the Joseph Rowntree Foundation, has warned that the tax cuts are “a really ineffective way of getting money to those who need it most”, as many of the poorest pay no tax.
“Six pounds out of seven that you would spend on scrapping the increase in National Insurance would go to the top half of the income distribution,” the foundation’s Katie Schmucker told The Independent.
And Mr. Sunak warned that premature tax cuts risked driving inflation even higher.
“Putting more than £40 billion of borrowed money into an economy that is seeing spiraling inflation risks making it worse,” he said.
“That might be good, but I think it means gambling with people’s savings, their pensions, their mortgage rates. That’s not a gamble I’m willing to take.
The former chancellor said society deserved “astute realism, not astute boosterism” on the issue. Tory MP Damien Hinds admitted the package of support drawn up by Mr Sunack as chancellor was not enough in these “extremely difficult times” and suggested more would come if he became prime minister.
Mr Hinds, a Sunak supporter, said: “Things have been getting worse even since this was introduced in terms of predictions of what energy bills are going to be in the future.
“He has made it clear that more may be needed and he is prepared to do so as required.”
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