In a setback for Rishi Sunak's campaign, former Chancellor of the Exchequer Sajid Javid has endorsed Liz Truss, stating that Sunak's economic plan would entail "sleepwalking into a high-tax, low-growth" economy.

Sunak had a terrible day as the leadership contender increased his inflation warnings and renewed his criticism of Truss's proposed quick tax cuts, claiming that any prime minister who encouraged inflation would be handing Labour the next election.

A day following identical results from YouGov, Truss' campaign received a lift from a conservative poll that put her 32 points in front of party members.

On the eve of the Bank of England's interest rate announcement, the support for Javid once more highlighted the stark differences between the two camps' positions on economic growth.

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Javid, who collaborated with Sunak in the Treasury and quit on the same day that Johnson was ousted, said Truss was most suited to "reunite the party" and that Sunak needed to take a different approach to the economy.

“I fought for strong fiscal rules in our last manifesto,” Javid wrote in an article for the Times. “But the circumstances we are in require a new approach. Over the long term, we are more likely to be fiscally sustainable by improving trend growth.

“Only by getting growth back to pre-financial crisis levels can we hope to support the high-quality public services people rightly expect.”

Formerly thought of as close allies, Sunak and Javid fell out over health spending when Javid rejoined the cabinet.

Sunak: inflation would eat tax cuts

In remarks made public on Wednesday night, Sunak cautioned that immediate tax cuts will be offset by rising inflation.

He said he would “make gripping inflation my number one economic priority” rather than tax cuts. “If we rush through premature tax cuts before we have gripped inflation, all we are doing is giving with one hand and then taking away with the other,” Sunak said.

“That would stoke inflation and drive up interest rates, adding to people’s mortgage payments. And it would mean every pound people get back in their pockets is nothing more than a down payment on rising prices."

“A policy prospectus devoid of hard choices might create a warm feeling in the short term, but it will be cold comfort when it lets Labour into No 10 and consigns the Conservative party to the wilderness of opposition.”

Truss: tax cuts would deliver “immediate help” 

Truss insisted that her plan for tax cuts would offer people "immediate help" during the coming season. 

“We cannot tax our way to growth. My economic plan will get our economy moving by reforming the supply side, getting EU regulation off our statute books, and cutting taxes.

“Modest tax cuts - including scrapping a potentially ruinous corporation tax rise that hasn’t even come into force – are not inflationary.”

By the beginning of 2023, experts have warned, the cost of living in the UK might increase by as much as 15% annually due to substantial increases in energy prices. The Resolution Foundation think tank predicted that earlier predictions were likely off and that price pressures would endure longer and be stronger.

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Javid’s article directly challenged Sunak’s claim that tax cuts would be inflationary. “Some claim that tax cuts can only come once we have growth. I believe the exact opposite – tax cuts are a prerequisite for growth,” he said.

“Tax cuts now are essential. There are no risk-free options in government. However, in my view, not cutting taxes carries an even greater risk.”

He said the government was “sleepwalking into a big-state, high-tax, low-growth, social democratic style model which risks us becoming a middle-income economy by the 2030s with the loss of global influence and power”.