Liz Truss and Rishi Sunak have torn into each other's economic plans following today's alarming interest rate rise - as a Tory grandee warned universal credit must be looked at to prevent Brits becoming "destitute".
This morning the Bank of England announced its biggest rise in 27 years and forecast that inflation will hit a huge 13 per cent.
The rise in energy prices will push the economy into a five-quarter recession, experts warned - with gross domestic product (GDP) shrinking each quarter in 2023.
Labour said the bleak situation is "further proof that the Conservatives have lost control of the economy", while both candidates hoping to become Prime Minister aimed digs at each other.
Former Tory Chancellor Ken Clarke said today there were already "too many people in abject poverty" and urged the government to look at Universal Credit to cushion the impact.
Today the Bank of England increased its base rate from 1.25% to 1.75% - a rise of 0.5 percentage points.
Mr Sunak hit out again at Ms Truss's plans, saying borrowing would just drive up inflation. He said in a statement: "One of the most urgent challenges we face as a country is getting inflation under control as quickly as possible.
"The Bank has acted today and it is imperative that any future government grips inflation, not exacerbates it.
"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.
"As prime minister I would prioritise gripping inflation, growing the economy and then cutting taxes."
But Ms Truss hit back, saying she would use an emergency budget to "get our economy growing".
She said: “Today’s news underlines the need for the bold economic plan that I am advocating."
Ms Truss continued: "As Prime Minister, I’d use an emergency budget to kickstart my plan to get our economy growing and offer immediate help to people struggling with their bills.
"Through supply side reforms, dealing with burdensome business regulation and cutting taxes, I will get our economy back on track. My tax cuts are necessary, affordable and not inflationary.
“You cannot tax your way to growth. Business as usual will not do. Instead, we need a new approach on the economy, we need to challenge the failing economic orthodoxy and we need to deliver the necessary reform to tackle inflation and achieve sustainable growth.“
Labour delivered a scathing verdict on the Tory management of the UK economy.
Shadow Chancellor Rachel Reeves said: “This is further proof that the Conservatives have lost control of the economy, with skyrocketing inflation set to continue, while mortgage and borrowing rates continue to rise.
“As families and pensioners worry about how they’re going to pay their bills, the Tory leadership candidates are touring the country announcing unworkable policies that will do nothing to help people get through this crisis."
Meanwhile former chancellor Lord Clarke warned against Ms Truss's approach, saying her plan for immediate tax cuts runs "the risk of contributing to the problem".
He told BBC Radio 4's World at One: "It may be the Government has to do something to help the people who will be badly hit, and some households are being badly hit already, but it should be very narrowly, strictly targeted to the people who can't cope - who are the poor.
"I very much hope we don't see an increase in the number of people destitute in this country. We already have too many people in abject poverty and the number is likely to rise, and I think the Government should be looking at things that help the very poorest and the very low-paid, and things like Universal Credit.
"What we don't want is immediate tax cuts which cheer up the better off and are particularly valuable to the very wealthy."
