key member of Liz Truss’s leadership campaign team warned on Thursday that a recession on top of the cost-of-living crisis would be a “human disaster”.
Amid predictions of a “financial timebomb” this autumn as energy bills rocket, both Ms Truss and her rival for Downing Street Rishi Sunak are under growing pressure to announce plans to offer more support for millions of struggling families.
Ms Truss, who is promising to slash taxes to ease the pressure on household budgets, on Wednesday appeared to soften her position on also offering more targeted direct financial support, saying she will do “all I can” to help people through the looming crisis.
But Sir Iain Duncan Smith, the former Tory leader who is helping to run Ms Truss’s bid for No 10, reiterated the need to lower taxes, which are rising to their highest levels in 70 years. He told Sky News: “What she wants to do on day one … is to make sure that we reduce the burden of taxation because why? Right now we face the potential of a recession. If you have a recession on top of this cost-of-living crisis it would be an utter human disaster.”
The Bank of England last week forecast that the UK could slump into a 15-month recession starting later this year with unemployment rising at the same time as inflation soars to more than 13 per cent.
On Friday, the Office for National Statistics will publish the latest GDP figures, with economists expecting the data to show the UK slipped back into negative growth in June after a surprise jump of 0.5 per cent in output in May.
Ms Truss has said reversing April’s National Insurance rise and temporarily scrapping the green levy on energy bills will help put more money in people’s pockets. She has also said she will scrap planned rises in Corporation Tax from next year in a bid to kick-start economic growth. But critics say it will take too long for the tax cuts to filter through to the economy as inflation dampens demand and accuse her of failing to understand the scale of the crisis, with energy bills set to rise to more than £3,500 a year from October.
Former prime minister Gordon Brown has warned of the financial timebomb unless action is taken now.
Speaking to the BBC yesterday, Mr Sunak said: “I do feel a moral responsibility … to go further and get extra help to people over the autumn and the winter to help them cope with what is going to be a really difficult time.”
While Sir Iain said Ms Truss is “certainly prepared” to look at targeted support to help people, he added: “Right now on a campaign it’s not feasible for two candidates to literally make up amounts of money on the back of an envelope.”
