Liz Truss economic policy ‘more Ted Heath than Margaret Thatcher’, IFS chief says

Liz Truss's economic policy resembles that of Ted Heath rather than Margaret Thatcher, the director of a leading think-tank has said.

The Tory frontrunner plans to cut taxes and grow the budget deficit in the face of high inflation – amid warnings it could drive prices even higher

Paul Johnson, head of the Institute for Fiscal Studies, said the approach resembled the approach taken by Sir Ted in 1973 – noting that Baroness Thatcher had actually raised taxes in the early 1980s to manage inflation.

The comparison is likely to irk the Truss camp – as the foreign secretary is widely regarded as having deliberately aped Britain's first woman prime minister in style if not substance.

It comes after former chancellor and leadership rival Rishi Sunak's campaign warned that Ms Truss's economic approach could cause an "inflationary spiral" unless she reconsidered her approach.

Mr Sunak has since indicated that he may pass on a job with Ms Truss's Cabinet unless her policy changes, adding: "I think her plan risks making everything worse.”

Over the weekend Tory heavyweight Michael Gove also characterised Ms Truss's plans as a "holiday from reality".

They were joined on Monday night by Mr Johnson, who said: "Cutting taxes and growing deficit in face of high inflation has clear echoes of Ted Heath in 1973.

"Could not be further from Thatcher who famously took very unpopular decision to raise taxes in 1981 to manage deficit and inflation."

Polls suggest Ms Truss holds and is consolidating a commanding lead in the Tory leadership contest, with the latest YouGov survey last week suggesting a 32-point gap between her and Mr Sunak.

But the prospect of her becoming prime minister is yet to resonate outside the membership of the Conservative party, with Labour opening up a significant and consistent poll lead across pollsters.

A leaked internal Labour member reported by the Guardian however suggests the opposition's own pollsters believe Ms Truss's appointment could give the government a new wave of support and revive its fortunes.

Ms Truss however faces a battle to reverse the slide in Tory support, having already faced criticism for not addressing the cost of living crisis.

While the foreign secretary has promised unspecified help for families, she has also said she will focus on tax cuts and avoid what she described as "handouts".

The result of the Tory leadership election will be announced on Monday 5 September.