Lowering taxes best way to avoid recession, says Liz Truss

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Watch: Liz Truss quizzed on 'no handouts' cost of living policy

Tory leadership contender Liz Truss has defended her plans to lower taxes, describing them as the best way to avoid a recession.

She was speaking after she had told a paper she favoured lowering taxes over "giving out handouts" to help households hit by higher fuel bills.

On a visit to Solihull, she said lowering taxes would help ease the cost of living crisis.

Her rival Rishi Sunak wants to tackle inflation before cutting taxes.

Foreign Secretary Ms Truss has pledged to scrap April's National Insurance rise, cancel a planned corporation tax rise and temporarily suspend green levies on energy bills.

Asked by the Financial Times about how she would help households faced with fuel bills due to rise again in October, she said: "Of course I will look at what more can be done.

"But the way I would do things is in a Conservative way of lowering the tax burden, not giving out handouts."

Questioned later about these comments, she said: "What I will do from day one is reduce taxes, reverse the National Insurance rise and also have a temporary moratorium on the green energy levy so people are spending less of their money on fuel bills.

"But what I'm about as a Conservative is people keeping more of their own money, growing the economy so we avoid a recession and the best way to do that is lower taxes, but also unleashing investment into our economy."

Ms Truss also took aim at Mr Sunak's economic legacy as chancellor after the Bank of England warned this week that the UK would fall into recession as it raised interest rates by the highest amount in 27 years.

She added: "Under the plans at present, what we know is Britain is headed for a recession.

"That is not inevitable, but we need to avoid that by making sure our economy is competitive, that we're encouraging businesses to grow and that we are keeping taxes low."

Her rival Mr Sunak has said he would focus on getting a grip on inflation.

Responding to Ms Truss's comments, the former chancellor said it is "simply wrong to rule out further direct support at this time".

"Her tax proposals are not going to help very significantly, people like pensioners or those on low incomes who are exactly the kind of families that are going to need help", said Mr Sunak.

He said he wants to ensure "that the people who really need our help do get the support that they need to get through the winter".

Speaking at a leadership hustings in Eastbourne on Friday, he said the Tories can "kiss goodbye" to winning the next election if inflation is not brought under control quickly.

He highlighted a warning by the Bank of England that inflation could become embedded.

The Bank of England has warned inflation - currently 9.4% - could peak at more than 13% and stay at "very elevated levels" throughout much of next year, before eventually returning to its 2% target in 2024.

He said there would be "no hope that we're going to win that next election" amid continuing rising prices.