Liz Truss’s plan to cut taxes to boost economic growth will further fuel inflation, Paul Johnson, director of the Institute for Fiscal Studies think tank, has warned.
“She’s clearly absolutely right that we’ve had dreadful growth over the last 15 years,” the senior economist told the BBC Radio 4 Today programme.
“The ‘but’ is that simply cutting taxes, cutting National Insurance contributions, for example, is not a strategy for growth.
“And it is clearly pumping a large amount of money into the economy on top of the £30 billion we’ve already had to support energy bills, on top of the presumably many, many 10s of billions additional that are going to come from that, and on top of what’s going to have to be more money for public services.
“Now put all of that together and that will lead to not just extremely high borrowing in the short run, but also additional inflationary pressure.”