London Daily

Focus on the big picture.
Monday, Aug 18, 2025

Rishi Sunak attacks Truss tax cut plan after big interest rate rise

Rishi Sunak attacks Truss tax cut plan after big interest rate rise

Chancellor Nadhim Zahawi said to be on holiday as Bank of England adds to dire economic outlook
Rishi Sunak has seized on the Bank of England’s historic half-point rate rise to claim that Liz Truss’s plan for unfunded tax cuts would “make everyone poorer”.

The Bank’s gloomy forecasts, published alongside the rate decision, underline the scale of the challenge facing the next prime minister, with the economy projected to plunge into a prolonged recession by the end of the year.

Despite the dire economic outlook, the Guardian has learned the chancellor, Nadhim Zahawi, is away from Westminster, as the caretaker government takes a back seat while the leadership contest rages.

Zahawi was said to be working remotely from a family holiday.

In a statement, the chancellor said: “There is no such thing as a holiday and not working. I never had that in the private sector, nor in government. Ask any entrepreneur and they can tell you that.”

He added: “Millions of us dream about getting away with our families, but the privilege and responsibility of public service means that you never get to switch off, that’s why I have had calls and briefings every day and continue to do so.” The prime minister is currently on holiday.

Zahawi put out a written statement on the Bank’s announcement and is holding meetings with its governor, Andrew Bailey, later on Thursday and the Treasury’s chief economist.

Sunak, the underdog in the leadership race, has repeatedly said throughout the contest that he would wait until inflation was under control, before embarking on a tax-cutting spree.

By contrast, Truss has promised £30bn worth of tax cuts, which Sunak has claimed would push up borrowing and boost inflation.

“The Bank has acted today and it is imperative that any future government grips inflation, not exacerbates it,” he said.

“Increasing borrowing will put upward pressure on interest rates, which will mean increased payments on people’s mortgages. It will also make high inflation and high prices last for longer, making everyone poorer.”

Truss has cited the rightwing economist Patrick Minford to support her argument. As he stepped up his attack on her approach, Sunak tweeted a link to a ready reckoner showing the cost to mortgage borrowers, if interest rates rose to 7%, as Minford has said they might have to.

Truss said the rate rise “underlines the need for the bold economic plan that I am advocating”.

She promised an emergency budget to “kickstart my plan to get our economy growing and offer immediate help to people struggling with their bills” though she has so far proposed few measures to deal with the cost of living, aside from suspending the green levies on energy bills, and reversing recent tax rises.

Earlier, Truss supporter Suella Braverman said that if the foreign secretary became prime minister, she would review whether the Bank’s mandate was “fit for purpose” and examine its “exclusionary independence on interest rates”.

Braverman, the attorney general, told Sky News the Tory leadership frontrunner would look again at the Bank’s powers. “Interest rates should have been raised a long time ago and the Bank of England has been too slow in this regard,” she said.

She added: “Liz Truss has made clear that she wants to review the mandate that the Bank of England has, so that’s going to be looking in detail at exactly what the Bank of England does and see whether it’s actually fit for purpose in terms of its entire exclusionary independence over interest rates.”

Truss told a Conservative hustings on Wednesday night she would alter the Bank’s mandate because of the changing economic picture. “The best way of dealing with inflation is monetary policy, and what I have said is I want to change the Bank of England’s mandate to make sure in the future it matches some of the most effective central banks in the world at controlling inflation.

“The last time the mandate was looked at was in 1997 under Gordon Brown. Things are very, very different now.”

Mel Stride, the chair of the Treasury select committee and a Sunak supporter, said it would be dangerous to cut taxes this autumn. “What we must do now is avoid stoking the inflation and making the problem even worse,” he said. “One of the ways you can make the problem very significantly worse is by coming forward with large-scale, tens of billions of pounds’ worth, of unfunded tax cuts.”

He added: “The big decision, fiscally, here is around tax. You have to do it in a measured way and at the right time but not start coming forward with tens of billions of unfunded tax cuts right now. I think that would be really quite dangerous.”
Newsletter

Related Articles

0:00
0:00
Close
Emails Worth Billions: How Airlines Generate Huge Profits
The CEO Who Replaced 80% of Employees for the AI Revolution: "I Would Do It Again"
Character.ai Bets on Future of AI Companionship
China Ramps Up Tax Crackdown on Overseas Investments
Japanese Office Furniture Maker Expands into Bomb Shelter Market
Intel Shares Surge on Possible U.S. Government Investment
Hurricane Erin Threatens U.S. East Coast with Dangerous Surf
EU Blocks Trade Statement Over Digital Rule Dispute
EU Sends Record Aid as Spain Battles Wildfires
JPMorgan Plans New Canary Wharf Tower
Zelenskyy and his allies say they will press Trump on security guarantees
Beijing is moving into gold and other assets, diversifying away from the dollar
Escalating Clashes in Serbia as Anti-Government Protests Spread Nationwide
The Drought in Britain and the Strange Request from the Government to Delete Old Emails
Category 5 Hurricane in the Caribbean: 'Catastrophic Storm' with Winds of 255 km/h
"No, Thanks": The Mathematical Genius Who Turned Down 1.5 Billion Dollars from Zuckerberg
The surprising hero, the ugly incident, and the criticism despite victory: "Liverpool’s defense exposed in full"
Digital Humans Move Beyond Sci-Fi: From Virtual DJs to AI Customer Agents
YouTube will start using AI to guess your age. If it’s wrong, you’ll have to prove it
Jellyfish Swarm Triggers Shutdown at Gravelines Nuclear Power Station in Northern France
OpenAI’s ‘PhD-Level’ ChatGPT 5 Stumbles, Struggles to Even Label a Map
Zelenskyy to Visit Washington after Trump–Putin Summit Yields No Agreement
High-Stakes Trump-Putin Summit on Ukraine Underway in Alaska
The World Economic Forum has cleared Klaus Schwab of “material wrongdoing” after a law firm conducted a review into potential misconduct of the institution’s founder
The Mystery Captivating the Internet: Where Has the Social Media Star Gone?
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
×