London Daily

Focus on the big picture.
Wednesday, Aug 19, 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
A Sleepless Night on Wall Street: Nasdaq to Begin Nearly Round-the-Clock Trading
"The First in the World": 69-Year-Old Protested Artificial Intelligence—and Went to Jail
Ukraine's Ousted Defence Minister Calls for Wartime Presidential Election
UK Marks Ten Years of Night Tube as London Weekend Usage Exceeds Eighty-One Thousand Journeys a Night
Met Office Issues Thunderstorm Warnings Across Northern Ireland Over Flash-Flood Risk
Frasers Group Raises Stake in Hugo Boss to Nearly Forty-Eight Percent
Scottish Clyde Marine Pilots Prepare for Strike That Could Disrupt Glasgow and Greenock Shipping
Twenty Passengers Injured After Southern Train Derails Near Lewes in East Sussex
Government Rules Out High-Speed Rail Revival Between West Midlands and Northern England
West Midlands Bus Network Returns to Public Ownership in Twenty-Four Million Pound Deal
UK Competition Watchdog Targets Trainline, Virgin Atlantic and RED Driving School Over Drip Pricing
Northern Ireland Health Minister Mike Nesbitt Resigns After Dispute Over Causeway Hospital Surgery Closure
UK Long-Term Government Bond Yields Rise to Five Point Eight Five Percent as Borrowing Costs Surge
UK Government Overhauls Planning Rules to Push Housing Development Near Major Transport Hubs
UK Health and Economic Pressures Highlight Wider Strain on Households and Public Finances
UK Prime Minister Andy Burnham Reaffirms Full Support for Ukraine Amid Russian Warnings
Sainsbury’s Suspends Live Facial Recognition at London Store After Customer Misidentified
Artists Urge UK Prime Minister Andy Burnham to Reject New North Sea Oil and Gas Licensing
UK Government Awards Four Hundred and Fifty-Six Million Pound Civil Service Training Contract to EY and KPMG
Global Government Bond Yields Rise as Middle East Conflict Fuels Inflation Concerns
British Housing Market Records Weakest August Since Two Thousand and Eighteen as Asking Prices Fall
UK Announces New Sanctions on Russian Shadow Fleet and Financial Institutions
UK Approves Virgin Rail Group Services Through Channel Tunnel, Challenging Eurostar
UK Government Backs Three Hundred Million Pound AI Investment Zone in North Lanarkshire
UK Declares National Salmonella Outbreak Linked to Imported Eggs
China’s Lifelike AI Humans Move From Livestreams Into Real-World Service Roles
UK Government Rolls Out £5.8 Billion Regional Investment Programme to Revive High Streets
AstraZeneca Ends Late-Stage Lung Cancer Trial After Data Shows No Survival Benefit
London Stocks Fall for Sixth Day as Bond Yields and Middle East Tensions Weigh on Markets
UK Government Rewrites Planning Rules to Accelerate Housing Near Transport Hubs
UK Wildfires Spread Across Southern England as Met Office Issues Severe Heat Warnings
British Doctors Warn Cancer Care Is at Risk as Hospitals Reject More Than a Quarter of Urgent Referrals
UK Hospitals Suspend Critical Care as Extreme Heat Exposes Infrastructure Failures
Sarah Ferguson Reportedly Retreats to Late Ex-Boyfriend's Swiss Chalet
Cristiano Ronaldo and Georgina Rodríguez Sign Prenup Protecting Their Separate Fortunes
Thieves Steal Antonello da Messina Renaissance Masterpieces From Sicilian Museum
Better.com Founder Who Fired 900 Employees on Zoom Is Ousted as CEO
Italian Speed Camera Issues Nearly 32,000 Fines in 10 Weeks, Worth More Than €3 Million
AI Manager at San Francisco Store Recommends Firing Human Employee
Google Launches Pixel 11 With Gemini AI at the Center of Its Hardware Strategy
Campaigners Press Government to Strengthen Rights for Four Million Gig Workers
Government Considers Higher Private Rents to Spread Asylum Accommodation Across UK
UK Moves to Protect Historic Pubs From Conversion Into Housing and Offices
Nigel Farage Wins Clacton By-Election to Return to House of Commons
British Manufacturers Report Rising Cybersecurity Threats Across Industrial Supply Chains
Royal Navy Increases Monitoring of Russian Ships in UK Waters by 25 Percent
England Adds More Than 350 Medical Training Posts to Strengthen NHS Capacity
NHS Waiting Lists Over 52 Weeks Rise by More Than 11,000 Patients
Brent Crude Near $88 Raises Fresh UK Energy Cost Concerns
UK Treasury Warns Prolonged Strait of Hormuz Disruption Could Cut 2027 Growth to 0.3 Percent
×