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The final two vying to be the next prime minister have come to blows over their fiscal proposals, with Rishi Sunak warning against a “huge borrowing spree” as Liz Truss defended tax-cutting plans worth at least £30 billion a year.
The former chancellor did not pull any punches in an interview on Thursday evening, claiming the current evidence suggests the Conservatives would suffer a defeat at the next general election under his rival’s leadership.
Mr Sunak said he thought borrowing £30 billion for unfunded tax cuts would be “inflationary”, adding that going on a “huge borrowing spree” would only “make the situation worse”.
He told Tonight With Andrew Marr on LBC: “If you look at all the polling evidence that we have, and you see what that says, it’s pretty clear that I am the person that is best placed to defeat Keir Starmer in the next election.”
Asked if that meant the Conservative Party would likely be defeated in the next election if Ms Truss became leader, he replied: “That’s what all the evidence that we have today would show, and that’s what our members will need to consider.”
Earlier, Ms Truss defended her tax cut plans as “affordable”, as the economic policies of the two candidates came under scrutiny.
“What is not affordable is putting up taxes, choking off growth, and ending up in a much worse position,” she told broadcasters during a visit to Peterborough.
Mr Sunak was understood not to be envisaging cutting personal taxes until at least autumn next year to avoid fuelling inflation.
But Ms Truss, the Foreign Secretary, promised an emergency budget to reverse the national insurance hike immediately under her proposals to drive growth.
The financial plans of the final candidates for prime minister were growing more divided as they battled for the votes of the Tory membership required to win the race for No 10.
Robert Joyce, the deputy director of the Institute for Fiscal Studies (IFS) think tank, put Ms Truss’s tax cuts at “more than £30 billion per year – and possibly considerably more”.
The plans “mean higher borrowing or less public spending, or some combination”, he said, though their impact remains unclear because Ms Truss’s proposals are “yet to be fleshed out”.
“Without spending reductions, the tax promises would likely lead to the current fiscal rules being broken, and Ms Truss has hinted that the fiscal rules may change,” Mr Joyce added.
Ms Truss insisted she was not planning “public spending reductions” despite pledging vast tax cuts.
She told reporters in Peterborough: “What I am planning is public service reforms to get more money to the front line, to cut out a lot of the bureaucracy that people face…
“I’m certainly not talking about public spending cuts. What I’m talking about is raising growth.”
Asked on LBC “what would be the effect on inflation of borrowing £30 billion for unfunded tax cuts”, Mr Sunak said: “I think it would be inflationary.”
He added: “I’m worried about the inflation that we’ve got at the moment becoming embedded and lasting far longer.
“That’s going to be so damaging for everyone listening because it’s going to erode all the savings that they’ve worked really hard to build up.
“It’s going to push up their mortgage rates if interest rates have to go up very high to deal with (it).”
In his pitch to Conservative members after MPs selected the final two candidates, Mr Sunak argued that only he is capable of beating Labour in a general election.
But Ms Truss hit back by saying the Tories would struggle to win under the current economic policy written by Mr Sunak when he was in No 11.
Mr Sunak told LBC he wants to “restore trust in Government” as prime minister.
He said his life would be easier if he vowed to do “this lovely sounding thing and this lovely sounding thing”, but argued that would not be leadership.
“I think it would damage trust, because part of rebuilding trust is for the Government and politicians to deliver the things that they say, and sitting here promising you a bunch of things that I don’t think are right or deliverable would be wrong,” he said.
Mr Sunak was the parliamentary party’s favourite, winning 137 votes to Ms Truss’s 113 among Tory MPs.
But bookmakers placed the Foreign Secretary as the frontrunner, with early indications suggesting she is more popular with Tory members ahead of a summer of campaigning.
Writing in The Daily Telegraph, former Brexit Minister Lord Frost again offered his support to Ms Truss, arguing that Britain cannot “tax our way out of deficit and debt”.
He added: “We need to grow the size of the cake and end the poisonous politics of interest groups and identity politics, which sets one group against another.
“The only way out of this trap is to focus ruthlessly on increasing the productive capacity of our own economy. That will need the kind of measures that Liz Truss is setting out.”
A small, unrepresentative poll of 730 members on Wednesday and Thursday again saw Ms Truss in the lead.
Some 49% of respondents said they would back the Foreign Secretary while 31% chose Mr Sunak.
The rest were undecided or said they would not vote.
The pair battled to win the support of local politicians on Thursday when they took part in a private hustings for the Conservative Councillors’ Association.
They will tour the UK to take part in 12 hustings for the Tory members who will vote for their next leader, with the result being announced on September 5.