Liz Truss floats big tax break for families despite criticism of ‘fairytale’ economic plans

Liz Truss has floated another expensive tax cut if she wins the Tory leadership race, despite criticism that her economic plans are “a fairytale”.

The foreign secretary says she would explore giving people a tax break of up to £2,500 to help them take time out of work to look after children or other family members.

Rishi Sunak scored a major hit on the right-wing candidate in Friday’s live TV debate when he called for “honesty” over tax reductions until soaring inflation has been tamed.

Ms Truss, whose campaign is floundering behind that of the former chancellor and surprise favourite Penny Mordaunt, has unveiled a flurry of uncosted tax cut promises topping £30bn.

She would scrap a planned rise in corporation tax and suspend green energy levies, on top of an earlier pledge to reverse the rise in National Insurance to fund the NHS.

Now Ms Truss has said couples with young children or caring responsibilities should receive extra help by being allowed to share their personal tax allowances.

The Treasury would be asked to explore an “opt-in” system for members of the same household, a change to be introduced as soon as the budget next year.

“Families are a vital part of our lives and the crucial building block for a stable society,” the foreign secretary told the Daily Mail.

“They don’t just look after themselves but also build communities, charities and even businesses. We will review the taxation of families to ensure people aren’t penalised for taking time out to care for their children or elderly relatives.”

The move would expand the existing tax break for married couples, allowing one member of a couple who earns under £12,570 to transfer £1,270 of their allowance to their spouse, reducing their tax bill by up to £252 a year.

Eligibility could be extended to all cohabiting couples, while possibly increasing the tax break to allow the transfer of the full allowance – which would be worth up to £2,514 a year per couple.

Laura Suter, head of personal finance at AJ Bell, said the proposal would help families but “add complexity to an already very complex tax system”.

In Friday evening’s debate, Mr Sunak – the only candidate ruling out early tax cuts – condemned the impact on prices of immediate reductions, saying: “Inflation is the enemy that makes everyone poorer.

“It erodes your savings, it erodes your living standards, it means that those of you who have mortgages will see your interest rates go up higher and higher.”

He told Ms Truss: “Borrowing your way out of inflation isn’t a plan, it’s a fairytale.” But she hit back, with an attack likely to appeal to Tory members, saying: “I think it is wrong to put taxes up.”