Margaret Thatcher would be “appalled” by Rishi Sunak and Liz Truss' plans to cut taxes, a former Cabinet Minister.
Lord Kenneth Baker, who served in Mrs Thatcher's Cabinet as Education Secretary and Home Secretary, tore into the Tory leadership hopefuls’ pledges to slash tax.
The economy has been a key battleground in the race for the Tory crown - with pressure ratcheted up by the Bank of England's decision to interest rates to 1.75% from 1.25%, the biggest single rise since 1995.
It also issued bleak warnings about an economy heading into recession and inflation hitting an eye-watering 13% at the end of the year, causing a squeeze on household incomes.
Lord Baker told Times Radio: "I think Margaret Thatcher would be simply appalled at the concept of giving tax cuts not matched by government expenditure.
“In a critical Budget of 1981 in the depths of a very deep recession - a very, very deep recession - she didn't cut taxes, she cut government expenditure. That was a very brave thing to do.
"But it established the basis of sound finances, which allowed Nigel Lawson, six years later, to cut income tax by 65%. And she would simply be appalled, she wouldn't sign off on that at all.
"She wouldn't sign off on either of their policies on tax, Margaret Thatcher - absolutely no way."
Tory former chancellor Lord Lawson said Mr Sunak was "guided by the principles of Thatcherism" in his bid to ensure the current generation "pays its own way" rather than "saddling" the next with greater debt.
Writing in the Telegraph, Lord Lawson added: "While Liz Truss has many qualities, her plans now reportedly comprise approximately £60 billion of unfunded spending/tax cuts - and her message of reassurance about the associated inflationary risk is, to me, uncomfortably reminiscent of the missteps of the Tory government of 50 years ago."
Both candidates have tried to claim the mantle of the polarising Prime Minister, 32 years after she was ousted from Downing Street.
Iron Lady wannabe Ms Truss has long presented herself as the heir to Mrs Thatcher, while Mr Sunak has repeatedly name-checked her in his campaign for the top job.
Ahead of a TV leadership debate tonight on Sky News, the Tory contenders clashed over their tax plans after the Bank of England threw a political grenade into the race by hiking interest rates to a 27-year high.
Mr Sunak was first out of the traps with a swipe at his rival , saying it is "imperative that any future government grips inflation, not exacerbates it".
He then tweeted: "Liz Truss’s economic guru Professor Patrick Minford, said their plans mean 'yes, interest rates have to go up and it’s a good thing.'
"Really?"
He posted a link to a website created by his campaign, allowing people to work out how much interest rate rises would impact on their mortgage.
Ms Truss insisted the news "underlines the need for the bold economic plan that I am advocating".
She added: "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."
It comes ahead of a TV clash between the two rivals tonight on Sky News, where they will face a grilling on their economic strategy.
