Rishi Sunak warned Liz Truss’s economic strategy will damage the nation, saying that pouring “fuel on the fire” will cause “misery for millions”, after she insisted her tax cuts could avert the recession forecast by the Bank of England.
Ms Truss, the Foreign Secretary, used a televised debate on Thursday to warn of “very, very difficult times” without “bold” action rather than her Tory leadership rival’s caution.
But Mr Sunak, a former chancellor, struck back with fears her vision “will make the situation worse”, on the day the Bank warned inflation could peak at 13.3% in October.
Interest rates were raised to the highest level in nearly three decades, from 1.25% to 1.75%, worsening the pain for mortgage holders, before the Bank predicted the economy will plunge into the longest recession since the financial crisis in 2008.
Mr Sunak told the Sky News debate: “We in the Conservative Party need to get real and fast – because the lights on the economy are flashing red and the root cause is inflation.
“I’m worried that Liz Truss’s plans will make the situation worse.”
He stressed a need to get a grip on runaway inflation before cutting taxes, adding: “But it all starts with not making the situation worse.
“Because if we just put fuel on the fire of this inflation spiral, all of us, all of you, are just going to end up with higher mortgage rates, savings and pensions that are eaten away, and misery for millions.”
Mr Sunak said there is “of course” measures that can be taken to counteract a recession.
“It’s not the tax burden that is causing the recession. That’s simply wrong. What’s causing the recession is inflation,” he added.
“So what I’m not going to do is embark on a borrowing spree worth tens of billions of pounds, put that on the country’s credit card, ask our kids and our grandkids to pick up the tab because that’s not right. That’s not responsible.”
The financial focus of the battle to succeed Boris Johnson as prime minister only intensified with the Bank’s warnings, with the contenders differing strategies already prominent as they try to win the Tory members who will select the winner.
Ms Truss reiterated her pledge to immediately reverse the national insurance increase, introduced by Mr Sunak when he was in No 11, as well as cut other taxes to prevent the job losses of a recession.
“What the Bank of England have said today is of course extremely worrying, but it is not inevitable,” she said.
“We can change the outcome and we can make it more likely that the economy grows.
“Now is the time to be bold, because if we don’t act now, we are headed for very, very difficult times.”
Mr Sunak is fighting to make up ground on Ms Truss, after polls put her around 32 percentage points ahead among Tory members.
Asked if would concede the fight at any point, Mr Sunak responded: “The quick answer is no, and that’s because I’m fighting for something I really believe in and I’m taking my ideas around the country.
“I’m going to fight incredibly hard ’til the last day of this campaign for each and every one of your votes.
“The stakes are really high.”
Mr Sunak received some comfort by receiving the overwhelming support in a show of hands of the audience in Sky’s West London studios, which was mostly comprised of undecided Tory members.
The audience was divided over Mr Johnson’s legacy, with Ms Truss’s defence of his conduct receiving a mixed response and Mr Sunak being accused of having “knifed Boris for your own interests”.
Ms Truss refused to say whether she would strip the Tory whip from the outgoing Prime Minister if a Commons inquiry finds he deliberately lied to MPs over partygate.
She said she was “not making any prejudgments” about the investigation, before adding: “But by the way I’m very clear he didn’t mislead Parliament.”
Labour shadow minister Conor McGinn used the debate as evidence that the Tories, with their “their low-growth, low-wage plans”, will not be able to fix the economic crisis.
“The two continuity candidates have no answers to sky-high inflation, rocketing energy bills and the lengthy recession the Bank of England has warned is on the horizon,” he said.