Truss to look at changing Bank of England mandate on inflation

Foreign secretary Liz Truss, frontrunner in the race to become the next British prime minister, said she would look to change the Bank of England’s mandate to ensure it controlled inflation.

Speaking at a hustings of Conservative party members in Cardiff on Wednesday, she argued that inflation had been caused by “huge” supply side shocks after the pandemic and the Ukraine war and said she wanted to review the mandate of the central bank, which has a target of maintaining 2 per cent inflation.

The central bank is widely expected to raise interest rates on Thursday, possibly by a half percentage point, amid surging prices. In June, consumer price inflation in the UK stood at a 40-year high of 9.4 per cent.

She told the event: “The best way of dealing with inflation is monetary policy and what I have said is I want to change the Bank of England’s mandate to make sure in the future it matches some of the most effective central banks in the world at controlling inflation.”

Truss added: “The last time the mandate was looked at was in 1997 under Gordon Brown. Things are very, very different now.”

The foreign secretary, who has pitched herself as the low-tax, high-growth candidate, has pledged to reduce the planned national insurance rise and introduce low-tax investment zones to reinvigorate the economy and support families through the cost of living crisis.

“What is simply wrong at this time is to be putting taxes up on ordinary people when they’re struggling to pay their fuel bills, they’re struggling to pay their food bills,” she said.

Rishi Sunak at the Tory hustings in Cardiff. He said he was open to the idea of examining the rules on inheritance tax © REUTERS

Her campaign received a boost on Wednesday when former health secretary Sajid Javid offered his support. In a comment piece in the Times newspaper, Javid praised the foreign secretary’s “sharp focus and willingness to challenge the status quo”.

“Having worked closely with him for years in cabinet, Liz is delighted to have Sajid on her team,” the Truss campaign said. “His support signals that Liz is bringing the party together and they’re uniting behind her bold plan to cut taxes, grow the economy and deliver for the country.”

Recent YouGov polling has placed Truss firmly ahead in the leadership race, with 69 per cent of members favouring the foreign secretary, compared with 31 per cent backing former chancellor Rishi Sunak.

Speaking on the eve of the BoE’s rate-setting meeting, Sunak warned that rushing through “premature tax cuts” before the country had reduced inflation would worsen the problem and drive up interest rates.

“I will make gripping inflation my number one economic priority. And I will deliver a sustainable, long-term tax plan that means people can bank the money it saves them,” he said before meeting party members.

Former Tory leader Lord Michael Howard gave his backing to the former chancellor at the hustings, drawing parallels between Sunak and the late Margaret Thatcher.

“She hated inflation. So does Rishi Sunak. She hated the thought of increased borrowing. So does Rishi Sunak. She would never have countenanced unfunded, irresponsible tax cuts. Nor will Rishi Sunak,” he told the audience in Cardiff.

Speaking to Tory party members, Sunak also said that while examining the rules on inheritance tax was “not what he set out a plan to do”, he was open to it.

He argued that supporting aspiration was a “Conservative value” and inheritance tax formed part of that, but he stressed the importance of rewarding those in paid work.

“So, over time, is that something that we should look at? Of course we should, because people who are working hard should be rewarded for that,” he said.

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