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(Bloomberg) -- Clear dividing lines over the economy emerged as the UK’s leadership race turned personal in the second of three debates to determine who will succeed Boris Johnson as prime minister.
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Front-runner and former Chancellor Rishi Sunak accused Foreign Secretary Liz Truss and former Defence Secretary Penny Mordaunt, his two closest rivals, of “socialism” as he attacked their plans to cut taxes and borrow more.
In a series of hostile exchanges broadcast live on ITV, Sunak was in turn accused of “choking off growth” by raising the UK tax burden to its highest level in 70 years and turning a blind eye to £17 billion of fraud in his Covid loan program.
In the most abrasive debate yet, the five remaining candidates, tussling for control of the ruling Conservative Party, repeatedly clashed over policy, with the Bank of England dragged into the debate over its poor recent record on inflation.
Conservative MPs vote to eliminate one candidate on Monday afternoon before a final televised leadership debate on Tuesday. The final two candidates will be decided by a vote of MPs on July 21.
They will then have six weeks to argue their case before grassroot Tory members, who vote for a new leader in early September. The race was triggered by Johnson’s resignation after more than 50 ministers quit over questions about his honesty.
When asked, none of the five candidates said they would have Johnson in their cabinet should they win.
Truss, who is in third place currently but would beat all other candidates in the final run-off according to a Conservative Home poll of 845 Tory party members conducted over the weekend, came out fighting with a strong defense of plans for roughly £34 billion of tax cuts, paid for with higher borrowing.
In a swipe at Sunak’s record, she said: “We cannot get growth going while we are raising taxes... If he has a great plan for growth why haven’t we seen it in the two and half years at the Treasury?”
Sunak responded by arguing that promising “something for nothing isn’t Conserative, it’s socialism.” The solution to high debt was not more borrowing, he added.
The former chancellor accused Mordaunt, who has the second-most votes among Tory MPs, of acting like Jeremy Corbyn, the socialist former Labour Party leader who was defeated by Johnson’s Conservative Party in 2019.
Mordaunt plans £15 billion of tax cuts and would scrap the fiscal rules that prevent the government borrowing for everyday spending. Borrowing to invest is one thing, Sunak said, but scrapping the rule “to not borrow for day-to-day spending is not just wrong, it’s dangerous -- even Jeremy Corbyn didn’t go that far.”
“If we aren’t for sound money, what is the point of the Conservative Party?” he asked.
His former junior Treasury minister Kemi Badenoch then attacked Sunak for turning a blind eye to £17 billion of fraud in the Covid business loan program he oversaw, an accusation he rejected.
Tom Tugendhat, the clean break candidate who is chairman of the foreign affairs select committee, also laid into Sunak’s record on economic growth, accusing him of promising “jam tomorrow when they want bread today.”
Setting out her stall as an economic radical, Truss suggested the BOE’s mandate should be changed to more closely replicate the Bank of Japan, which has a better record of keeping inflation down. The BOJ has, however, been grappling with deflation, often seen as a worse threat.
On the BOE, Truss said: “I completely support BOE independence but I think we need to look at best practice around the world and look at mandates they have - for example the Bank of Japan. The business as usual economic strategy is not working for the people of Britain and is not bold enough for the crisis we’re in.”
Badenoch also hit out at the BOE. Monetary policy makers are just “human beings” and were not meeting their 2% target even before the crisis, she claimed. “We have not been marking their homework. We need to be bolder about challenging [them],” she said.
Sunak defended the BOE’s record, which has been closer to 2% than almost every other major advanced central bank, and said he was “worried by some of the things I’m hearing.”
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