Tories Warned of 'Big Trouble’ Ahead Unless Liz Truss 'Rethinks Tax Cuts' as Labour Surges in Polls

In the race to become the new Tory leader, the campaign of Liz Truss, the UK's Foreign Secretary who is facing former Chancellor Rishi Sunak, has been defined by a radical plan to slash taxes. With the arrival of double-digit inflation in the country, her £30Bln package of tax cuts and other pledges has been dubbed Trussonomics.

The tax-cut-based economic agenda touted by No 10 hopeful Liz Truss has sparked mounting panic among high-ranking Conservatives, reported Sunday newspaper, The Observer.

Senior Tories allegedly fear that their party might suffer devastating electoral losses under a Truss premiership. Their concerns have been further fueled by a recent poll showing that UK Labour party leader Sir Keir Starmer’s initiative to freeze energy bills had boosted his popularly.

The latest Opinium poll for The Observer interviewed 2,001 UK adults on the 17 and 18 August, revealing that Labour had gained an eight-point lead - its biggest over the Conservatives in months.

According to the survey, Starmer’s proposal to freeze the energy price cap as a means of tackling the cost of living crisis has hit home with 62 percent of those surveyed - nearly two-thirds. Opinium also found that about 40 percent of respondents feared they would not be able to afford the rise in the energy price cap - due to be announced by regulator Ofgem - without cutting back on other essentials.

Furthermore, both Tory leadership candidates - frontrunner Liz Truss and Rishi Sunak - were shown trailing Starmer as the preferred prime minister.

The new poll findings corroborate the YouGov survey figures published in The Times on Friday, which gave Labour a lead of 13 - its largest since 2013.

‘In Big Trouble’

The result of the summer-long contest will be announced on 5 September with either Truss or Sunak replacing outgoing Prime Minister Boris Johnson.

Truss has a 32-point lead over her rival, according to a Sky News poll on 18 August. But looking further ahead, several former cabinet ministers have reportedly warned that unless Truss rethinks her economic policies, Starmer could be on course for No 10.

Truss’s campaign has centered around a £30Bln package of tax cuts, which she claims will boost investment while lowering inflation. Abandoning next April’s rise in corporation tax from 19 percent to 25 percent, and reversing the planned rise in National Insurance - introduced in April this year by Sunak while he was Chancellor - would boost the “supply side” of the economy, Truss insisted.

However, a former Cabinet minister was cited by the outlet as saying:

“If Liz does not change tack and back a real economic package that does more to help those in need, I think we will be in big trouble. But to do so she will need to go back on what she has said in the leadership campaign, which will not be without consequences either.”

The Tory critic added that under a Truss premiership the party could just as well “write off those ‘blue wall’ seats”. “Cutting taxes won’t help us win support in the ‘red wall’ either. You can’t cut taxes and level up,” the former minister added.

Similar fears were voiced by former Tory chancellor Kenneth, Lord Clarke. In an interview in the Observer’s New Review, he slammed the tactics adopted by Truss as “simplistic”.

“This is not a time for tax cuts because we have enormous public debts. Tax cuts will stimulate growth in demand, but the problems are with the difficulties in supply, so they will push inflation up further,” Clarke said.

Earlier, former cabinet minister Michael Gove branded Truss’ plan to focus on cutting taxes a “holiday from reality”, announcing he was throwing his weight behind Sunak.

In a Times article, Gove said that he believed Sunak “makes the right arguments”.

“And here I am deeply concerned that the framing of the leadership debate by many has been a holiday from reality… The answer to the cost of living crisis cannot be simply to reject further ‘handouts’ and cut tax,” he wrote.

Truss has repeatedly claimed she would resist more “handouts” to households feeling the squeeze on their budgets.

Gove, however, said the tax-cutting approach would fail to benefit those most in need.

“Proposed cuts to national insurance would favor the wealthy, and changes to corporation tax apply to big businesses, not small entrepreneurs. I cannot see how safeguarding the stock options of FTSE100 executives should ever take precedence over supporting the poorest in our society, but at a time of want it cannot be the right priority,” Gove wrote.

This comes as UK inflation rose to another 40-year high in July, rising above 10 percent for the first time since 1982, according to data published by the Office for National Statistics. Rising food prices made the largest contribution to annual inflation rates between June and July, the ONS said.

Inflation is predicted to soar even further later this year, driven by rises in regulated energy bills in October. Electricity prices have risen by 54 percent and gas prices by 95.7 percent in the 12 months to July 2022.