Mortgage misery for millions if Liz Truss pushes tax cut plans
Appearing on the BBC last night as part of a Conservative party leadership debate, the question of whether it was the right time to cut taxes was asked by presenter Sophie Raworth.
Truss said she would reverse the increase in National Insurance as this was promised in the Conservative’s 2019 manifesto. She also said she would impose a temporary moratorium on the green energy levy which would “help cut money on fuel bills”.
This would be part of an immediate economic growth plan, she added.
“The way we are going to solve our issues as a country, the way we’re going to pay back our debt is by growing the economy,” Truss said.
However, last week, Truss’ own economic adviser said her plans would push interest rates up to 7%.
Based on a £150,000 mortgage over 25 years at a current 2% rate, homeowners pay £635.78 a month. If rates were to jump to 7%, this would push up monthly capital and interest mortgage payments to £1,060.17, according to calculations by data site Moneyfacts. On a £300,000 mortgage, this would see payments jump from £1,271.56 a month to £2,120.34.
Prime Ministerial hopeful Rishi Sunak said: “Your own economic adviser said this could lead to mortgage rates, interest rates, going up to 7%. Can you imagine what that’s going to do for everyone here, everyone watching? That’s thousands of pounds on their mortgage bill.
“It’s going to tip millions of people into misery and it’s going to mean that we absolutely have no chance of winning the next election either.”
In response, Truss said: “I don’t accept those points. Any economist knows that taxes are completely different from interest rates. Interest rates are set by the independent Bank of England. We know that inflation is forecast to fall next year. What I’m talking about with my plans is not raising taxes. There is no evidence at all that not raising taxes is inflationary.
“What we know though, is that raising taxes prevents growth.”
Speaking of his plans to raise taxes, Sunak said it was not right to pass on the costs of the pandemic to future generations by cutting taxes now and paying for it later.
Truss said her plans would see people pay for these measures within three years.
Sunak and Truss are the last two candidates standing to become the next leader of the Conservative party and as a result, Prime Minister following Boris Johnson’s resignation this month. The chosen candidate is set to be announced in September.