London Daily

Focus on the big picture.
Friday, Aug 15, 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
Man Who Threw Sandwich at Federal Agents in Washington Charged with Assault – Identified as Justice Department Employee
A Computer That Listens, Sees, and Acts: What to Expect from Windows 12
Iranian Protection Offers Chinese Vehicle Shipments a Cost Advantage over Japanese and Korean Makers
UK has added India to a list of countries whose nationals, convicted of crimes, will face immediate deportation without the option to appeal from within the UK
Southwest Airlines Apologizes After 'Accidentally Forgetting' Two Blind Passengers at New Orleans Airport and Faces Criticism Over Poor Service for Passengers with Disabilities
Russian Forces Advance on Donetsk Front, Cutting Key Supply Routes Near Pokrovsk
It’s Not the Algorithm: New Study Claims Social Networks Are Fundamentally Broken
Sixty-Year-Old Claims: “My Biological Age Is Twenty-One.” Want the Same? Remember the Name Spermidine
Saudi Arabia accelerates renewables to curb domestic oil use
U.S. Investigation Reports No Russian Interference in Romanian Election First Round
Oasis Reunion Tour Linked to Temporary Rise in UK Inflation
Musk Alleges Apple Favors OpenAI in App Store Rankings
Denmark Revives EU ‘Chat Control’ Proposal for Encrypted Message Scanning
US Teen Pilot Reaches Deal to Leave Chile After Unauthorized Antarctic Landing
Trump considers lawsuit against Powell over Fed renovation costs
Trump Criticizes Goldman Sachs Over Tariff Cost Forecasts
Perplexity makes unsolicited $34.5 billion all-cash offer for Google’s Chrome browser
Kodak warns of liquidity crisis as debt obligations loom
Cristiano Ronaldo and Georgina Rodríguez announce engagement
Taylor Swift announces 12th studio album on Travis Kelce’s podcast after high-profile year together
South Korean court orders arrest of former First Lady Kim Keon Hee on bribery and corruption allegations
Asia-Pacific dominates world’s busiest flight routes, with South Korea’s Jeju–Seoul corridor leading global rankings
Private Welsh island with 19th-century fort listed for sale at over £3 million
JD Vance to meet Tory MP Robert Jenrick and Reform’s Nigel Farage on UK visit
Trump and Putin Meeting: Focus on Listening and Communication
Instagram Released a New Feature – and Sent Users Into a Panic
China Accuses: Nvidia Chips Are U.S. Espionage Tools
Mercedes’ CEO Is Killing Germany’s Auto Legacy
Trump Proposes Land Concessions to End Ukraine War
New Road Safety Measures Proposed in the UK: Focus on Eye Tests and Stricter Drink-Driving Limits
Viktor Orbán Criticizes EU's Financial Support for Ukraine Amid Economic Concerns
South Korea's Military Shrinks by 20% Amid Declining Birthrate
US Postal Service Targets Unregulated Vape Distributors in Crackdown
Duluth International Airport Running on Tech Older Than Your Grandmother's Vinyl Player
RFK Jr. Announces HHS Investigation into Big Pharma Incentives to Doctors
Australia to Recognize the State of Palestine at UN Assembly
The Collapse of the Programmer Dream: AI Experts Now the Real High-Earners
Security flaws in a carmaker’s web portal let one hacker remotely unlock cars from anywhere
Street justice isn’t pretty but how else do you deal with this kind of insanity? Sometimes someone needs to standup and say something
Armenia and Azerbaijan sign U.S.-brokered accord at White House outlining transit link via southern Armenia
Barcelona Resolves Captaincy Issue with Marc-André ter Stegen
US Justice Department Seeks Release of Epstein and Maxwell Grand Jury Exhibits Amid Legal and Victim Challenges
Trump Urges Intel CEO Lip-Bu Tan to Resign Over Alleged Chinese Business Ties
Scotland’s First Minister Meets Trump Amid Visit Highlighting Whisky Tariffs, Gaza Crisis and Heritage Links
Trump Administration Increases Reward for Arrest of Venezuelan President Maduro to Fifty Million Dollars
Armenia and Azerbaijan to Sign US-Brokered Framework Agreement for Nakhchivan Corridor
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
OpenAI Launches GPT‑5, Its Most Advanced AI Model Yet
Embarrassment in Britain: Homelessness Minister Evicted Tenants and Forced to Resign
President Trump nominated Stephen Miran, his top economic adviser and a critic of the Federal Reserve, to temporarily fill an open Fed seat
×