(Bloomberg) -- Liz Truss ruled out introducing any new taxes or rationing energy this winter if she becomes the UK’s next prime minister, making two eye-catching pledges in her final pitch to win the post.
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Truss, who is the bookmakers’ favorite to succeed Boris Johnson, made the commitments at the last Conservative Party leadership hustings in London on Wednesday, ahead of the victor being announced Sept 5.
Truss was asked if she’d make a “read my lips” promise not to raise taxes in government, a reference to a famous pledge made -- and then broken -- by former US President George H. W. Bush. She replied: “Yes. No new taxes.” She specifically ruled out introducing any new windfall taxes on the energy sector.
Should she win the race for 10 Downing Street, Truss will have to confront a looming economic crisis in Britain, with households facing a record squeeze on the cost of living amid a surge in energy prices. Truss is planning an emergency mini-budget within her first month in office but is yet to detail an extensive plan for how she’d ease the pain.
Britons are set for the biggest squeeze on their living standards in a century unless the next prime minister delivers tens of billions of pounds of extra support, according to new analysis published by the Resolution Foundation think tank on Thursday.
“If the government does want to substantially cut the price of energy faced by households, then it should look to offset some of the cost with increases in taxes, particularly on better-off households,” Resolution Foundation Chief Economist Mike Brewer told Bloomberg Radio on Thursday.
Truss’s opposition to a further windfall tax on extraordinary profits linked to high gas prices caused by Russia’s war in Ukraine may come under pressure in the coming months. The UK Treasury forecasts as much as £170 billion of profit for gas producers and electricity generators over the next two years, according to a person familiar with the matter. Johnson’s Tories introduced an initial 25% levy on the profits of oil and gas firms in May after months of pressure from the opposition Labour Party.
Labour is arguing for a freeze on energy bills in the UK this winter, funded by an expanded windfall tax. Without new taxes, Truss will need to lean on extra government borrowing or cuts to spending elsewhere to finance further household support. Former Bank of England Deputy Governor Charlie Bean said Wednesday that investors are starting to see UK assets as more risky because of signals coming from Truss about her plans to cut taxes and raise spending.
The UK government is also planning to offer fixed-price contracts to more renewable-energy producers as a way to cap profits without imposing a windfall tax, people familiar with the plans told Bloomberg.
Read more: Truss, Sunak Under Pressure to Clarify UK Energy Bills Support
And even as the British government works on contingency planning to secure energy supplies for the winter -- under a worst-case scenario officials predict blackouts -- Truss ruled out the prospect of needing to ration energy, without giving further details. Her leadership rival, Rishi Sunak, said nothing could be ruled out.
“Many European countries are looking at how we can all optimize our energy usage,” Sunak said at the hustings at Wembley Arena in London. “That is a sensible thing for us to be doing as a country.”
Read more: Liz Truss Is On Course for a Collision With UK Economic Reality
Truss also signaled that she would look at reforming business rates, a form of property tax on commercial premises. Bloomberg reported Wednesday afternoon that she was weighing a cut to rates.
The winner of the Conservative Party leadership race will be announced on Monday and they will formally become prime minister after seeing the Queen on Tuesday.
(Updates with comment from Resolution Foundation in sixth paragraph)
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