As part of her campaign to derail the “business as usual economic strategy,” Truss has promised to cut personal and corporate taxes if elected. Recently, she has also stepped up criticism of the Bank of England, even making suggestions that Andrew Bailey and his colleagues’ mandates should be changed.
The chief UK executive of Citi stated that “Truss’s policy platform still poses the greatest risk from an economic standpoint with an unsightly combination of pro-cyclical tax cuts and institutional instability.”
Truss’s pledges total £34 billion pounds ($41 billion), according to Bloomberg analysis cut taxes only when inflation currently at a four-decade high is under control. In an ITV debate on Sunday, Sunak rounded on Truss’s approach, accusing her of “socialism.”
Truss has signaled that she would give the BOE a money supply target to ensure it’s “tough on inflation” if she wins the Tory leadership race. In recent TV debates, she has blamed the central bank for high inflation and said the next government should look at other economies that had been successful in controlling inflation, citing the Bank of Japan as one positive example.
The BOJ comparison has already drawn scorn from some economists, but Nabarro also expressed concerns over the wider tone of the criticism of the BOE from Truss and her supporters.
“Scapegoating the bank for the cost of living squeeze is neither correct nor constructive,” Nabarro wrote. “More worrying here though are efforts to muddy operational independence, which poses fundamental questions surrounding institutional credibility.”
After a record fall in the value of the pound against the dollar earlier this week, the government announced it would set out a plan to cut debt in the “medium term” on 23 November.
In a bid to reassure markets, the Treasury has also asked government departments to find savings.