London Daily

Focus on the big picture.
Friday, Sep 25, 2026

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
Vistry Cuts Profit Outlook as Losses Deepen and Private Home Sales Weaken
Reported Assaults on Great Britain’s Railways Rise Sharply
Far-Right Activist Daniel Thomas Arrested After Channel Dinghy Slashing
Ukrainians in Britain Face Greater Homelessness Risk as Host Payments Are Cut
Scottish Drug Deaths Rise as Synthetic Opioids Spread
UK Diesel Prices Approach Record High as Energy Costs Intensify
UK Food and Drink Trade Deficit Widens to Record £21 Billion
Britain’s Largest Planned AI Supercomputer Delayed by Power Grid Constraints
NHS Boards Impose Minimum Waits of Up to Two Years for ADHD and Autism Assessments
Police Arrest Far-Right Activist After Migrant Dinghy Slashed in English Channel
Synthetic Opioids Drive Renewed Rise in Scotland’s Drug Deaths
Reported Assaults on Britain’s Railways Rise 20% in a Year
Vistry Cuts Profit Forecast as Losses Weigh on UK Housebuilder
TikTok Drops Appeal and Accepts £12.7 Million UK Data Protection Fine
Russell Group Urges UK Government to Drop Proposed International Student Levy
Legal & General Plans to Cut 1,000 Jobs by Mid-2027
UK Health Bill Would Remove Independent Governors From NHS Foundation Trusts
BMA Raises Patient Safety Concerns Over Advanced Practitioners Filling Doctor Rotas
UK’s Largest AI Supercomputer Delayed by Power Supply Constraints
NHS Orders Security Cameras in Neonatal Units Following Thirlwall Inquiry
Post-Brexit Trade Barriers Cost UK Economy Up to £6.5 Billion a Year, Analysis Says
UK Parliament Launches Inquiry Into Bank of England Monetary Policy Independence
Global Bond Selloff and Higher Oil Prices Narrow UK Budget Options
UK Prime Minister Andy Burnham Addresses UN and Holds First Meeting With Donald Trump
Royal Navy Commandos Complete Maritime Operations Training With US Navy SEALs
Vistry Profit Warning Adds to Concerns Over UK Housebuilding Conditions
UK Commits £343 Million to Major Expansion of Community Mental Health Services
Five Eyes Partners Back UK-Led Campaign Against Global Fraud Networks
UK Businesses Gain Full Access to £13 Trillion CPTPP Trading Bloc
UK Allocates Nearly £10 Billion for Council, Social and Affordable Housing
Chancellor John Healey Unveils Deregulation Drive to Accelerate UK Investment and Growth
Prime Minister Andy Burnham Sets Out Post-Brexit Foreign Policy Vision at United Nations
UK Reassesses Chagos Arrangements as Burnham Seeks New Path on Diego Garcia
Key Trends to Watch
Government’s “Buy British” Procurement Push Targets More Domestic Jobs and Industrial Capacity
Scotland Launches Four-Year Flood Resilience Programme With New Community Funding
Low-Income Renters Face Record Gap Between Housing Support and Private Rents
UK and US Test Torpedo Launch From British Undersea Drone in Defence Technology Milestone
Britain Pushes Artificial Intelligence Security Onto United Nations Security Council Agenda
Treasury Committee Defends Office for Budget Responsibility Independence Amid Fiscal Pressure
Scotland Records Eleven Per Cent Rise in Drug-Use Deaths as Cocaine and Nitazenes Drive Concern
Welsh Government Sets Four-Year Programme Around Health, Living Costs, Jobs and Housing
Study Finds Most People With High Blood Pressure in England Remain Undiagnosed
Britain Plans First National Workplace Health System to Tackle Economic Inactivity
England to Introduce Vocational GCSEs in Major Secondary Education Reform
UK Elevates Climate and Nature Risks to National Security Priority
Andy Burnham and Donald Trump Put Trade at Centre of First Major Bilateral Meeting
Andy Burnham and Ursula von der Leyen Push Ahead With Closer UK-European Union Economic Ties
UK Government Borrowing Jumps to Eighteen Point Three Billion Pounds Ahead of October Budget
Piddington Residents Back Symbolic Independence Vote Over Asylum Accommodation Plan
×