Liz Truss could introduce a price freeze for some energy bills, it has emerged, as the MP widely tipped to be her chancellor if she is announced as the new Conservative leader promised her government would be “bold”.
Truss has consistently refused to explicitly set out what she would do to combat soaring energy costs if she becomes prime minister, which will formally happen on Tuesday should she, as expected, defeat Rishi Sunak for the party leadership.
Speaking on Sunday, Truss promised an announcement on how to help people with bills within her first week in No 10 if elected, but declined again to give any details.
But she failed to rule out a government-imposed freeze on bills, as proposed by Labour. Overnight, the Times and Daily Telegraph reported that her team has been in talks about potentially doing this, although such help could be more targeted than Labour’s universal proposal.
Writing an article in Monday’s Financial Times, Kwasi Kwarteng, the business secretary, who is understood to be Truss’s choice for chancellor if she wins, said a new government would need to take “decisive action” on the economy and bills.
Kwarteng, who closely shares Truss’s beliefs about the need for a lower-tax, low-regulation economy, conceded in the article that helping people as well as her promises of immediate tax reductions would lead to government borrowing increasing for a time, but promised a “fiscally responsible” approach.
Some observers, including senior Tory MPs, have warned that Truss’s economic plan risks fuelling inflation, and could push up interest rates.
The former minister David Davis, who comes from the same low-tax wing of the Conservative party, said on Sunday that Truss should “think quite hard about” her plans.
“The worst outcome is, as it were, to give low taxes a bad name,” Davis said.
Paul Johnson, the head of the Institute for Fiscal Studies thinktank, said Truss’s plans could bring “not just extremely high borrowing in the short run, but also additional inflationary pressure”.
“She’s clearly absolutely right that we’ve had dreadful growth over the last 15 years,” he told BBC Radio 4’s Today programme. “The ‘but’ is that simply cutting taxes, cutting national insurance contributions, for example, is not a strategy for growth.”
Writing in the FT, Kwarteng said the UK economy was suffering the impact of the invasion of Ukraine and of Covid. He said: “Families and businesses are feeling the impact across the United Kingdom and the world. In response, we have to be bold. That is what Liz Truss will be if elected as leader of the Conservative party and prime minister of the UK.”
He added: “We know households are worried, and decisive action is needed to get families and businesses through this winter and the next. They need certainty.”
Promising policies to increase growth, Kwarteng said the scale of the crisis meant “there will need to be some fiscal loosening to help people through the winter”.
He added: “That is absolutely the right thing to do in these exceptionally difficult times. The UK’s ratio of debt to gross domestic product is lower than any other G7 country except Germany, so we do not need excessive fiscal tightening.
“But I want to provide reassurance that this will be done in a fiscally responsible way. Liz is committed to a lean state and, as the immediate shock subsides, we will work to reduce the debt-to-GDP ratio over time.”
In a BBC interview on Sunday, Truss indicated a notable economic break with her immediate predecessors as Tory leaders by saying she was not focused on policies to help reduce income inequality, preferring instead to try to grow the economy overall.
Asked about her plan to cut national insurance, Truss said it was fair that this would benefit the highest earners 250 times more than the poorest, arguing it was wrong to view all economic policy through the “lens of redistribution”.
