An emergency economic package drawn up by Conservative leadership frontrunner Liz Truss risks the financial markets losing confidence in the British economy if she becomes prime minister, rival Rishi Sunak has said.
Former chancellor Mr Sunak raised concerns about her economic competence, saying that he “struggled to see” how Ms Truss’ tax and spending commitments added up.
Speaking as the bitter Conservative leadership contest comes to an end with its final political husting in London on Wednesday night, Mr Sunak also told the Financial Times that it would be “complacent and irresponsible” for the next prime minister “not to be thinking about the risks to the public finances”.
If, as polls suggest, Ms Truss beats Mr Sunak in the race to become prime minister, then she will be forced make decisions during an economic crunch.
Inflation in the UK is running at about 10 per cent, with some analysts predicting it could rise as high as 22 per cent in the coming months.
The Russian invasion of Ukraine has led to spiralling energy costs, and British households face annual bills of about £4,000.
Owners of small businesses including restaurants, pubs and hotels said that they risk going bust with a 400 per cent increase in their fuel and heating costs.
Hospitals and schools said they might have to cut staffing levels to be able to afford energy.
Energy companies could reportedly make profits in excess of £170 billion in the next two years, but Ms Truss and Kwasi Kwarteng, the man who is likely to become her chancellor if she wins the leadership, oppose any further windfall taxes.
This could become a major political battlefield, especially if Britain has a cold and difficult winter.
While Mr Sunak has a proven economic track record and was praised for his handling of the coronavirus pandemic, Ms Truss’ monetary experience comes from her two years as Chief Secretary to the Treasury.
Her answer to tackling the cost of living crisis has been to cut taxes and provide financial support for households in an emergency budget next month.
But Mr Sunak and leading economists fear that her plan for unfunded spending commitments would create uncontrollable state debt that would further fuel inflation.
“I have been consistent, clear and honest throughout this contest that we must fix inflation first,” he said in statement before Wednesday’s husting.
“Only by supporting people through this winter and gripping inflation can we lay the foundations for growth and prosperity.”
Mr Sunak, who is unlikely to take a post in a Truss government, urged her to stick to fiscal rules to allow debt to fall and to tackle inflation as a priority.
Should Ms Truss take up residence in Downing Street, it is possible that she will ditch her free market economics and seek to bail out households and companies, perhaps a scheme similar to pandemic financial assistance.
Some Conservatives MPs believe that the government may have to partially renationalise Britain's energy industry.
The two leadership rivals will meet in north London on Wednesday evening after a bruising contest that has done little for Conservative Party unity.
The ballot for the estimated 160,000 party members will close at 5pm on Friday, with the winner announced shortly after noon on Monday.
If Ms Truss wins the leadership, she will become Britain’s third female prime minister following a formal meeting with Queen Elizabeth II on Tuesday at Balmoral, the monarch's Scottish residence.