London Daily

Focus on the big picture.
Sunday, Oct 26, 2025

Liz Truss’s tax and spending plans sow consternation among economists

Liz Truss’s tax and spending plans sow consternation among economists

Analysis: experts are lining up to warn that her policies will increase inflation and leave the UK with higher debt

Liz Truss claims her economic agenda of tax cuts and public spending will revitalise the UK economy, but it is not just her rival prime ministerial candidate Rishi Sunak arguing that the measures will be self-defeating.

Economists have lined up to warn that her £30bn package – including the reversal of this year’s national insurance rise, the suspension of green levies on power bills, and the cancellation of a sharp rise in corporation tax in 2023 – will increase inflation and leave the government with higher debt bills.

The foreign secretary and frontrunner in the race for the Tory leadership has criticised the Treasury’s economic record during her opponent’s time as chancellor, saying it has been timid and “contractionary” when it should have been promoting growth.




Citing other European countries that have spent more money supporting households hit by the cost of living crisis, Truss has said she would allow people to keep more of their own money by taxing less. She has also touted a carer’s allowance and pushing defence spending up to 3% of GDP – amounting to an extra £86bn over the next five years – as ways to help the UK avoid a recession.

Meanwhile, the Bank of England has come under attack from Truss and her allies because she claims looser government spending should have a counterweight in tighter policy on controlling the money supply.

Harking back to Margaret Thatcher’s stance in 1979, Truss believes inflation is partly the result of cheap borrowing fostered by the central bank, so tighter monetary policy would limit rising prices. Last weekend she said the government should “look again” at the Bank’s mandate “to make sure it is tough enough on inflation”.

At the moment the BoE is independent and arrives at its own policies to bring down inflation to a 2% target. Truss is likely to cause consternation in financial markets if she seeks to meddle in the central bank’s decision-making.

Nick Macpherson, the former Treasury permanent secretary, described the tax-cutting proposals of Sunak’s rival Tory candidates, including Truss, as “less the heirs to Margaret Thatcher; more the disciples of Recep [Tayyip] Erdoğan”.

Turkey’s president has sacked more than five central bank bosses because they failed to pursue his chosen interest rate policy. It has left the country with a near-80% inflation rate and a currency worth 90% less than when Erdoğan began running the country almost 20 years ago.

Ben Nabarro, UK economist at Citi, said: “Liz Truss’ policy platform poses the greatest risk from an economic perspective with an unseemly combination of pro-cyclical tax cuts and institutional disruption.”

Robert Joyce of the Institute for Fiscal Studies thinktank warned that her £30bn worth of pledges would have implications beyond the tax system that remain unclear.

But one thing is for sure: “they will mean higher borrowing or less public spending, or some combination”, so vast swathes of Whitehall and welfare spending will need to come under the hammer. “In the end, lower taxes do mean lower spending.”

Truss’s strategy does have some backing, however. The economist Gerard Lyons emerged as a potential supporter after he told the BBC Radio 4’s World at One: “We need tighter monetary policy to tackle inflation and looser fiscal policy to promote growth.”

He dismissed claims that targeted tax cuts would be inflationary and self-defeating, saying a sharp reduction in fuel duty by cutting the green levy would push down transport costs.

Truss also cited Patrick Minford as an economist who approved her approach. The Cardiff University academic came to prominence ahead of the Brexit referendum, which he claimed could generate £135bn in extra income for the UK. Last year the government’s independent forecasters at the Office for Budget Responsibility assessed it would cost around £80bn in lost income.

The OBR also warned this month that tax cuts rarely pay for themselves. Worse for Truss and her proposals, it said, Britain’s public finances were on an “unsustainable” long-term path, with a debt burden that could more than treble without further tax rises to cover the mounting cost of an ageing population and falling fuel duties.

Newsletter

Related Articles

0:00
0:00
Close
United States and China Begin Constructive Trade Negotiations Ahead of Trump–Xi Summit
U.S. Treasury Sanctions Colombia’s President Gustavo Petro over Drug-Trafficking Allegations
Miss USA Crowns Nebraska’s Audrey Eckert Amid Leadership Overhaul
‘I Am Not Done’: Kamala Harris Signals Possible 2028 White House Run
NBA Faces Integrity Crisis After Mass Arrests in Gambling Scandal
Swift Heist at the Louvre Sees Eight French Crown Jewels Stolen in Under Seven Minutes
U.S. Halts Trade Talks with Canada After Ontario Ad Using Reagan Voice Triggers Diplomatic Fallout
Microsoft AI CEO: ‘We’re making an AI that you can trust your kids to use’ — but can Microsoft rebuild its own trust before fixing the industry’s?
China and Russia Deploy Seductive Espionage Networks to Infiltrate U.S. Tech Sector
Apple’s ‘iPhone Air’ Collapses After One Month — Another Major Misstep for the Tech Giant
Graham Potter Begins New Chapter as Sweden Head Coach on Short-Term Deal
Ecuadorian President Daniel Noboa Alleges Poison Plot via Chocolate and Jam
Lakestar to Halt External Fundraising as Investor in Revolut and Spotify
U.S. Innovation Ranking Under Scrutiny as China Leads Output Outputs but Ranks 10th
Three Men Arrested in London on Suspicion of Spying for Russia
Porsche Reverses EV Strategy as New CEO Bets on Petrol and Hybrids
Singapore’s Prime Minister Warns of ‘Messy’ Transition to Post-American Global Order
Andreessen Horowitz Sets Sights on Ten-Billion-Dollar Fund for Tech Surge
US Administration Under President Donald Trump Reportedly Lifts Ban on Ukraine’s Use of Storm Shadow Missiles Against Russia
‘Frightening’ First Night in Prison for Sarkozy: Inmates Riot and Shout ‘Little Nicolas’
White House Announces No Imminent Summit Between Trump and Putin
US and Qatar Warn EU of Trade and Energy Risks from Tough Climate Regulation
Apple Challenges EU Digital Markets Act Crackdown in Landmark Court Battle
Nicolas Sarkozy begins five-year prison term at La Santé in Paris
Japan stocks surge to record as Sanae Takaichi becomes Prime Minister
This Is How the 'Heist of the Century' Was Carried Out at the Louvre in Seven Minutes: France Humiliated as Crown with 2,000 Diamonds Vanishes
China Warns UK of ‘Consequences’ After Delay to London Embassy Approval
France’s Wealthy Shift Billions to Luxembourg and Switzerland Amid Tax and Political Turmoil
"Sniper Position": Observation Post Targeting 'Air Force One' Found Before Trump’s Arrival in Florida
Shouting Match at the White House: 'Trump Cursed, Threw Maps, and Told Zelensky – "Putin Will Destroy You"'
Windows’ Own ‘Siri’ Has Arrived: You Can Now Talk to Your Computer
Thailand and Singapore Investigate Cambodian-Based Prince Group as U.S. and U.K. Sanctions Unfold
‘No Kings’ Protests Inflate Numbers — But History Shows Nations Collapse Without Strong Executive Power
Chinese Tech Giants Halt Stablecoin Launches After Beijing’s Regulatory Intervention
Manhattan Jury Holds BNP Paribas Liable for Enabling Sudanese Government Abuses
Trump Orders Immediate Release of Former Congressman George Santos After Commuting Prison Sentence
S&P Downgrades France’s Credit Rating, Citing Soaring Debt and Political Instability
Ofcom Rules BBC’s Gaza Documentary ‘Materially Misleading’ Over Narrator’s Hamas Ties
Diane Keaton’s Cause of Death Revealed as Pneumonia, Family Confirms
Former Lostprophets Frontman Ian Watkins Stabbed to Death in British Prison
"The Tsunami Is Coming, and It’s Massive": The World’s Richest Man Unveils a New AI Vision
Outsider, Heroine, Trailblazer: Diane Keaton Was Always a Little Strange — and Forever One of a Kind
Dramatic Development in the Death of 'Mango' Founder: Billionaire's Son Suspected of Murder
Two Years of Darkness: The Harrowing Testimonies of Israeli Hostages Emerging From Gaza Captivity
EU Moves to Use Frozen Russian Assets to Buy U.S. Weapons for Ukraine
Europe Emerges as the Biggest Casualty in U.S.-China Rare Earth Rivalry
HSBC Confronts Strategic Crossroads as NAB Seeks Only Retail Arm in Australia Exit
U.S. Chamber Sues Trump Over $100,000 H-1B Visa Fee
Shenzhen Expo Spotlights China’s Quantum Step in Semiconductor Self-Reliance
China Accelerates to the Forefront in Global Nuclear Fusion Race
×