What Rishi Sunak predicted about Liz Truss’s ‘fairytale’ economic plans

Rishi Sunak is reported to be avoiding Conservative party conference this year, so that Liz Truss can "own" the unfolding economic chaos.

The former chancellor and leadership candidate can certainly claim some reasons to be sanguine.

He warned repeatedly that her strategy was not a good idea, well before the IMF and Bank of England were forced to intervene.

As Ms Truss pledged tax cut after tax cut to win over Tory members, Mr Sunak suggested they could do real economic damage.

During a leadership debate on 15 July Mr Sunak accused his rival of "fairytale economics" by promising unfunded tax cuts.

“Liz, we have to be honest. Borrowing your way out of inflation isn’t a plan, it’s a fairytale," he said.

But Ms Truss was unconvinced, and responded with a conservative slogan: “You cannot tax your way to growth.”

Mr Sunak elaborated on his criticism later in the campaign.

On 21 August Mr Sunak's campaign team put out a statement warning that Truss's economic policy could cause an "inflationary spiral".

“The reality is that Truss cannot deliver a support package as well as come good on £50bn worth of unfunded, permanent tax cuts in one go," Mr Sunak's spokesperson said.

"To do so would mean increasing borrowing to historic and dangerous levels, putting the public finances in serious jeopardy and plunging the economy into an inflation spiral.

“It’s no wonder they want to avoid independent scrutiny of the OBR in their emergency budget - they know you can’t do both and it’s time they came clean about that now.”

As planned, Ms Truss's chancellor Kwasi Kwarteng avoided any scrutiny from the Office for Budget Responsibility for his mini-budget.

UK news in pictures

27 September 2022: David White, Garter King of Arms, poses with an envelope franked with the new cypher of King Charles III 'CIIIR', after it was printed in the Court Post Office at Buckingham Palace in central London (AFP/Getty)
27 September 2022: David White, Garter King of Arms, poses with an envelope franked with the new cypher of King Charles III 'CIIIR', after it was printed in the Court Post Office at Buckingham Palace in central London (AFP/Getty)
26 September 2022: A gallery staff member poses next to a painting by Lucian Freud - Self-portrait (Fragment), 1956 - on show at a photocall for the Credit Suisse exhibition - Lucian Freud: New Perspectives at the National Gallery in London (PA)
26 September 2022: A gallery staff member poses next to a painting by Lucian Freud - Self-portrait (Fragment), 1956 - on show at a photocall for the Credit Suisse exhibition - Lucian Freud: New Perspectives at the National Gallery in London (PA)
25 September 2022: Labour leader, Sir Keir Starmer is interviewed by Laura Kuenssberg in Liverpool  before the start of the Labour Party annual Conference which he opened with a tribute to Queen Elizabeth II and sang the national anthem (PA)
25 September 2022: Labour leader, Sir Keir Starmer is interviewed by Laura Kuenssberg in Liverpool before the start of the Labour Party annual Conference which he opened with a tribute to Queen Elizabeth II and sang the national anthem (PA)
24 September 2022: Handout photo issued by Buckingham Palace of the ledger stone at the King George VI Memorial Chapel, St George's Chapel, Windsor Castle (PA)
24 September 2022: Handout photo issued by Buckingham Palace of the ledger stone at the King George VI Memorial Chapel, St George's Chapel, Windsor Castle (PA)
23 September 2022: A climate change activist protests against UK private jets while lighting his right arm on fire during the Laver Cup tennis tournament at the O2 Arena in London (EPA)
23 September 2022: A climate change activist protests against UK private jets while lighting his right arm on fire during the Laver Cup tennis tournament at the O2 Arena in London (EPA)
22 September 2022: Woody Woodmansey, Lee Bennett, Kevin Armstrong, Nick Moran and Clifford Slapper attend the unveiling of a stone for David Bowie on the Music Walk of Fame at Camden, north London (PA)
22 September 2022: Woody Woodmansey, Lee Bennett, Kevin Armstrong, Nick Moran and Clifford Slapper attend the unveiling of a stone for David Bowie on the Music Walk of Fame at Camden, north London (PA)
21 September 2022: A flock of birds in the sky as the sun rises over Dungeness in Kent (PA)
21 September 2022: A flock of birds in the sky as the sun rises over Dungeness in Kent (PA)
20 September 2022: Flowers which were laid by members of the public in tribute to Queen Elizabeth II at Hillsborough Castle in Northern Ireland are collected by the Hillsborough Gardening Team and volunteers to be replanted for those that can be saved or composted (PA)
20 September 2022: Flowers which were laid by members of the public in tribute to Queen Elizabeth II at Hillsborough Castle in Northern Ireland are collected by the Hillsborough Gardening Team and volunteers to be replanted for those that can be saved or composted (PA)
19 September 2022: The ceremonial procession of the coffin of Queen Elizabeth II travels down the long walk as it arrives at Windsor Castle for the committal service at St George’s Chapel (AFP/Getty)
19 September 2022: The ceremonial procession of the coffin of Queen Elizabeth II travels down the long walk as it arrives at Windsor Castle for the committal service at St George’s Chapel (AFP/Getty)
18 September 2022: A man stands among campers on The Mall ahead of the Queen’s funeral (Reuters)
18 September 2022: A man stands among campers on The Mall ahead of the Queen’s funeral (Reuters)
17 September 2022: Wolverhampton Wanderers’ Nathan Collins fouls Manchester City’s Jack Grealish leading to a red card. City went on to win the match at Molineux Stadium three goals to nil. (Action Images/Reuters)
17 September 2022: Wolverhampton Wanderers’ Nathan Collins fouls Manchester City’s Jack Grealish leading to a red card. City went on to win the match at Molineux Stadium three goals to nil. (Action Images/Reuters)

The unfunded tax cuts were not well received by the markets.

The impact was immediate: Sterling crashed to record lows against the dollar and government borrowing costs surged.

Increasing import costs are likely to add to inflation across the board, worsening the cost of living crisis.

The Bank of England is now expected to increase interest rates to 6 per cent by the end of the year, pumping up costs for mortgage holders and making business investment more difficult.

Mr Sunak is far from the only person to have warned in advance against Ms Truss's strategy, but he certainly rejected her approach during the Tory leadership campaign.