Liz Truss' tax cuts could push interest rates up to 7%, admits own economic adviser

Liz Truss' promise to immediately reverse tax hikes implemented by Boris Johnson's government could result in interest rates of up to 7%, according to her own economic adviser.

The Tory leadership contender's plans to reverse National Insurance (NI) and corporation tax hikes would raise interest rates, says Prof Patrick Minford - who insisted on that it would be "a good thing".

Foreign Secretary Ms Truss will face former Chancellor Rishi Sunak in the race to become the next Prime Minister after Mr Johnson was forced to resign following a mass exodus from his government.

When his rival Mr Sunak was Chancellor he brought in increases to NI which came into force in April this year and an increase in corporation tax - from 19% to 25% - is due to take effect th n 2023.

This week, during Ms Truss's push to stand as the best of two candidates to succeed Mr Johnson, she insisted that her £30billion proposal A budget plan - which would see tax hikes canceled - would be affordable and essential to avoid a recession.

RecommendedBoris Johnson quit the Tories in 'deep s***', former donor warns of two very different UK futures" height="56" width="82" layout="responsive" class="i-amphtml-layout-responsive i-amphtml-layout-size-de fined" i-amphtml-layout="responsive" />Truss vs Sunak - and the choice of two very different UK futures

In contrast, Mr Sunak is representing ortedly does not plan to cut taxes until at least fall 2023 - which will take effect around April 2024 - to avoid fueling runaway inflation, which has reached a 40-year high of 9.4%.

Rishi Sunak raised national insurance and corporation tax when he was chancellor

(Victoria Jones/PA)

Ms Truss said it would be "wrong" to raise personal taxes amid a cost of living crisis partly exacerbated by sky-high fuel prices caused by the Russian invasion of Ukraine.

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In an interview with The TimesProfessor Minford of Cardiff University said higher interest rates following Ms Truss' plans will would be welcome.

The pro-Brexit economist said they would protect savings and purge the economy of 'zombies'. companies” that have “survived because it costs them nothing to borrow”.

He added: “It is right that a healthy economy should have a decent interest rate. That's definitely something I want to see."

Interest rates currently stand at 1.25%. While the...