Cost of living crisis: what Liz Truss and Rishi Sunak have said - amid calls for emergency budget

Liz Truss and Rishi Sunak are facing mounting pressure to explain how they will help households with the skyrocketing cost of living.

Their economic response to the crisis has emerged as the main battleground in the race to replace Boris Johnson, with the two Tory leadership candidates clashing over their conflicting fiscal plans for the country.

Many of their fellow politicians have voiced concerns about the next prime minister’s approach to this crisis, with former Labour Prime Minister Gordon Brown demanding an emergency budget before the UK hits a “financial timebomb” in the Autumn.

The Foreign Secretary in particular has come under recent fire following her claim she would not give out “handouts” to solve the country’s economic crisis.

So what have Ms Truss and Mr Sunak said about the cost of living crisis, who has criticised them, and what has Mr Brown called for?

What did Liz Truss say?

The South West Norfolk MP told the Financial Times she would “look at what more can be done” in the light of warnings from the Bank of England that the UK could see its longest recession since the 2008 financial crisis.

But the Foreign Secretary then added: “The way I would do things is in a Conservative way of lowering the tax burden, not giving out handouts.”

Penny Mordaunt was quick to defend the Tory leadership favourite, telling Sky News the comments had been misinterpreted.

The trade minister, who was kicked out of the leadership contest in the last stage of MPs’ votes, said: “It’s not that she’s ruling out all future help.

“What she is looking at, though, is enabling people to keep more of the money that they earn.”

She continued: “It makes no sense to take money off of people and then give it back in very, very complicated ways.

“We need to simplify this and we need to ensure that households are as resilient as possible and stopping taking large sums of tax from people is one way of doing that.”

What was Rishi Sunak’s response?

Mr Sunak quickly condemned Ms Truss’ recent comments, arguing it would be “simply wrong to rule out further direct support” for struggling families this winter.

The former chancellor’s allies meanwhile criticised his rival for making another U-turn.

Former chief whip Mark Harper wrote on Twitter: “Stop blaming journalists (again) - reporting what you actually say isn’t ‘misinterpreted’.”

He continued his criticism by saying this was the second time in five days that Ms Truss had backtracked on comments she had made, writing that “this kind of thing happened under the current [Prime Minister] and hugely damaged trust in us all.”

The Tory MP concluded: “So just what does ‘not giving out handouts’ mean then?”

It comes after Ms Truss previously pledged to end national salary deals and cut public sector pay for workers outside of southeast England - and then scrapped the plan just 12 hours later.

What else has been said tax cuts?

Supporters of Mr Sunak have also slammed Ms Truss’ plans to reverse the national insurance rate rise brought in by the Richmond MP when he was chancellor.

Ms Truss wrote in the Sunday Telegraph: “I would use (an emergency budget) to immediately tackle the cost-of-living crisis by cutting taxes, reversing the rise on national insurance and suspending the green levy on energy bills.”

Former Culture Secretary Oliver Dowden, who is backing Mr Sunak, said the Foreign Secretary’s proposed tax cuts were “insufficient” to help low-income workers and would disproportionately benefit the better-off.

He told BBC News: “You’re going to see energy bills going up to almost £4,000 and if you look at the idea of the tax cuts, this idea of reversing the national insurance contributions, that’s only going to benefit someone working full time on the national living wage by less than £60.

“Contrast that with whoever the prime minister is, they’re going to get a benefit of about £1,800,” he continued. “So this isn’t the way to help people through this very difficult period.”

Tory MP Damian Hinds, who is a supporter of Mr Sunak, said the former chancellor would go further than the additional £1,200 he initially offered to the poorest in society.

He conceded that the existing package was not enough in these “extraordinarily difficult times,” telling Sky News: “Things have been getting worse even since that was put into place in terms of projections for energy bills… and [Mr Sunak has] been clear that more may well be needed and he is ready to do that as required.”

Sunak criticised over local funding and tax ‘U-turn’

Mr Sunak came under recent fire after a video was published on 29 July by the New Statesman magazine, which showed the former chancellor addressing Conservative Party members in Tunbridge Wells.

Mr Sunak told the audience: “I managed to start changing the funding formulas to make sure that areas like this are getting the funding that they deserve, because we inherited a bunch of formulas from the Labour Party that shoved all the funding into deprived urban areas.”

The town is considered a relatively affluent area in southeast England.

The Tory leadership candidate continued: “I started the work of undoing that.”

Mr Sunak was also recently accused by critics of “flip-flopping on tax”, after he pledged to scrap VAT on all domestic energy bills for the next year if he becomes Prime Minister, in a move which would save the average household £160.

The former chancellor had previously positioned himself as the fiscally conservative leadership candidate, condemning Ms Truss’ promises of unfunded tax cuts as “comforting fairy tales.”

Business Secretary Kwasi Kwarteng, an ally of Ms Truss, claimed that Mr Sunak’s U-turn came only because he was under pressure in the race to become Prime Minister, as polls were showing the Foreign Secretary was the party memberhip’s favourite.

He told Times Radio: “There comes a time in campaigns when people are under a lot of pressure - he clearly felt under a lot of pressure in the debate and he wanted to get out on the front foot and interrupt Liz.”

What has Gordon Brown said?

The former Labour Prime Minister has called for both candidates to agree an emergency budget with Boris Johnson, urging whoever becomes the UK’s next prime minister to increase the support available to vulnerable households.

Mr Brown commissioned a report which found that Government support for low-income households has fallen short of offsetting the losses they face, with some families up to £1,600 worse off a year.

He said if more support was not provided, the Government risked “condemning millions of vulnerable and blameless children and pensioners to a winter of dire poverty.”

He continued in Sunday’s Observer: “The reality is grim and undeniable: a financial timebomb will explode for families in October as a second round of fuel price rises in six months sends shock waves through every household and pushes millions over the edge.”

The former prime minister lamented the “vacuum” at the heart of Government, which he said has been created by the Prime Minister and Chancellor being on holiday and the Tory leadership candidates being on the campaign trail.

He told BBC Radio 4’s The World This Weekend that not enough was being done to address “a moment when a lot of the gains of the last 30 or 40 years have been lost”.

Mr Brown’s report also found that the additional £1,200 offered to the poorest in society this year will fail to compensate for three major blows to their income from October 2021 to October 2022.

What happens next?

Ms Truss and Mr Sunak will continue to participate in nationwide hustings events over the coming weeks as they attempt to gain support of Tory members before the vote ends in September.

The result - and the UK’s new Prime Minister - is due to be announced on 5 September.