Friday 5 August 2022 11:28 AM Liz Truss plans September budget if she wins power to unleash the "full ... trends now

Liz Truss could bring in a sweeping round of tax cuts before the end of September as she insists a full-blown recession is not 'inevitable'.

The favourite to become the new Tory leader and prime minister is believed to have earmarked September 21 - two weeks after taking power - for her chancellor to hold an emergency budget.

It came amid dire warnings for the future of the UK economy as the Bank of England predicted a five-quarter recession starting late this year and inflation hitting 13 per cent.

Last night in a live TV debate on Sky News both she and rival Rishi Sunak insisted that their economic plans were the right way forward. They face another interrogation at a hustings in Eastbourne this evening.

She has pledged to cut National Insurance and scrap a planned Corporation Tax rise. But Mr Sunak has said his own cuts would have to wait until inflation was back under control because that is the most important issue.

Speaking in London today she acknowledged there will be a 'tough winter' ahead but said there is a need to move away from the 'business-as-usual' policies to help 'reform the economy'.

On a visit to meet key investors in the City of London, she told reporters: 'The reality is we're facing a recession if we carry on with our business-as-usual policies.

'People are struggling - whether it's to pay food bills or fuel bills - that's why it's very important we reverse the national insurance increase, we have a temporary moratorium on the green energy levy to help people with their fuel bills.

'The most important thing is getting the economy going so we avoid a recession and the business-as-usual policies aren't working, we need to do more, and that's why I am determined to reform the economy and keep taxes low.'

However both Tory leadership contenders tax cut plans were criticised by experts today, amid forecasts of economic doom.

Paul Johnson, director of the Institute for Fiscal Studies think tank, told BBC Radio 4's Today programme that the 'fiscal headroom' they have quoted in order to make it work may no longer exist.

'What they're talking about is that the Office for Budget Responsibility at the time said that we'd be borrowing about £30 billion less than we absolutely could to meet the fiscal target of a balanced current budget in a few years' time,' he said.

'Now that was itself highly uncertain and still gave us a fairly high probability of not meeting the Conservatives' own fiscal rules, but more importantly now with the economy changing and completely going into recession, inflation much higher than expected, those numbers are massively out of date.

Speaking in London today Ms Truss acknowledged there will be a 'tough winter' ahead but said there is a need to move away from the 'business-as-usual' policies to help 'reform the economy'.

Ms Truss has been accused by rival Rishi Sunak of unveiling economic plans that will drive up inflation and borrowing.

The Bank of England has predicted that inflation will reach 13% in the coming months

The Bank of England has increased interest rates from 1.25 per cent to 1.75 per cent

A new poll shows that of the two, Truss is the only one seen as a better prospective prime minister than Keir Starmer - though she is just two percentage point ahead

Don't blame me for recession! Bank of England governor hits back at claims he was 'asleep at the wheel'

Bank of England Governor Andrew Bailey today denied claims he had failed in his job and had been 'asleep at the wheel' as Britain careers towards a year-plus recession as he faced a ferocious backlash after admitting inflation will pass 13 per cent - 11 per cent above his own target.

Critics said Bank officials including its £575,000-a-year boss should 'rue the day' they decided not to raise interest rates last year and last night Attorney General Suella Braverman said interest rates 'should have been raised a long time ago and the Bank of England has been too slow in this regard'.

Experts have said the rises should have started much earlier - and as a result predictions that it will hit 3 per cent to 4 per cent by the end of this year 'may not be sufficient', one former BofE executive said today.

But amid some calls for him to resign, Mr Bailey told BBC Radio 4's Today programme: 'If you go back two years, which is, given the monetary transmission mechanisms, where we'd have to go back to, given the situation we were facing at that point in the context of Covid, in the context of the labour market, the idea that at that point we would have tightened monetary policy, you know I don't remember there were many people saying that.'

But commentator and senior member of the Institute of Economic Affairs, Christopher Snowdon, said last night: 'If my only job was keeping inflation at 2% but inflation was 9 per cent and I expected it to rise to 13%, I'd like to think I would have the decency to resign, even if I was earning £575,000 a year'.

Food, fuel, gas and numerous other items are rocketing in price following the pandemic and the war in Ukraine - hitting record levels - but some economists have claimed that the BofE has been too slow to act as Britain careers towards recession.

As the BofE was dubbed the 'Bank of doom and gloom', Tory leadership favourite Liz Truss insisted last night that a recession is 'not inevitable'. She said: 'We can change the outcome and we can make it more likely that the economy grows.' Rishi Sunak claimed interest rates would reach as high as 7 per cent under his rival Liz Truss's proposals.

Business Secretary Kwasi Kwarteng has said there is a 'strong argument' that interest rates should have been raised 'slightly sooner'.

Asked on Sky News how the Bank of England has handled the current situation, Mr Kwarteng said: 'There is an argument - and I think it's a strong one - to say that inflation was an issue that was identified at the beginning of last year.'

He said: 'The job of the Bank was to deal with the inflation. They have got a 2% inflation target. That's actually their mandate. And now inflation is hitting double digits. So, clearly something has gone wrong and I think there is an argument to suggest that rates should have probably gone up slightly sooner.'

'What they need to be talking about is how they think they're going to be tackling inflation, how they think they're going to be responding to the increased needs of households and how they're going to be responding to what this means for public services, and it

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