Liz Truss will have to slash public services to cut taxes, warns top economist

·Political Correspondent, Yahoo News UK
·3 min read
Liz Truss speaking during a hustings event at the NEC in Birmingham as part of her campaign to be leader of the Conservative Party and the next prime minister. Picture date: Tuesday August 23, 2022. (Photo by Jacob King/PA Images via Getty Images)
Liz Truss beat Rishi Sunak in the race for Number 10 on Monday. (Getty Images)

A senior economist has warned Liz Truss's plans to slash taxes will mean "radical" cuts to public services.

Truss beat former chancellor Rishi Sunak in the race for Number 10 on Monday afternoon after an eight-week leadership contest.

Truss made tax cuts the central pledge of her campaign, claiming this would help tackle the rising cost of living.

Ofgem confirmed the increase to the energy price cap (Yahoo News UK/Flourish)
Ofgem confirmed the increase to the energy price cap (Yahoo News UK/Flourish)

Taxes in her sights include national insurance contributions, planned corporation tax increases, and green levies on energy bills.

Paul Johnson, director at the Institute for Fiscal Studies (IFS), warned her tax pledges will mean serious public spending cuts.

"There’s going to have to be significant additional funding for public services, because they’re also facing this inflation," said Johnson.

Read more: Liz Truss: Who is her husband Hugh O'Leary and do they have children?

"And yet she’s also talking about 10, 20, 30 plus billion pounds worth of tax cuts."

He added: “Even if you do cut taxes now, it’s very hard to know how you keep them down unless you’ve got some very new, novel, radical plans for cutting back on other public services.”

In her victory speech, Truss said she had a "bold plan" to cut taxes while also tackling soaring energy bills.

Read more: Will you be better or worse off under Liz Truss?

“I know that our beliefs resonate with the British people: our beliefs in freedom, in the ability to control your own life, in low taxes, in personal responsibility," she said.

The IFS warned also warned in August that Truss' tax plans would also "breach fiscal targets".

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UK inflation is at its highest level for decades. (ONS CPI)

It comes after the Resolution Foundation in July said tax cuts are not "a serious answer" to the cost-of-living crisis, warning they will benefit the wealthiest the most.

"Whatever the merits of these proposals – and debate about the right level of taxation is a perfectly normal part of politics – they are not a serious answer for the current crisis," the think tank said.

"While their price tags are high, they do little to target those hardest hit by the rise in the cost of living, due to the focus on rates of personal income taxes."

On Sunday, Truss staunchly defended her tax cutting plans – claiming it was fair that they would benefit the wealthiest the most, and that she was focused on economic growth.

Read more: Exasperated Martin Lewis left with head in his hands at ex-Tory MP's energy saving tip

It came as BBC analysis revealed the bottom 10% of earners would benefit by £7.66 a year from her planned NICs cuts – in contrast, the top 10% of earners would benefit by £1,801.89.

“What I’m about is about growing the economy and growing the economy benefits everybody,” she told the BBC.

Truss is set to deliver a victory speech from Downing Street on Tuesday afternoon after visiting the Queen in the morning where she will officially be appointed as prime minister.

Watch: Liz Truss promises to set out plan for energy crisis within one week - but refuses to go into detail