Conservative leadership debate LIVE: Liz Truss says there is no need to balance books ‘prematurely’ despite interest rate rise

Liz Truss has claimed there is no need to “balance the books prematurely” after the Bank of England hiked interest rates from 1.25 per cent to 1.75 per cent, the biggest increase for 27 years.

Speaking during the Tory leadership debate on Sky News, Ms Truss said her tax cuts would stimulate growth and help to repay public debt back in the long-term.

It comes after Governor Andrew Bailey forecast that the country would enter the longest recession since the financial crisis.

The Tory leadership hopefuls traded barbs in the run-up to Thursday’s debate, with Mr Sunak warning that his opponent’s plans to increase borrowing would “make high inflation and high prices last for longer, making everyone poorer”.

Ms Truss countered by saying the bleak forecast “underlines the need for the bold economic plan”, with Mr Sunak instead pledging to get inflation under control before enacting major tax cuts.

The Foreign Secretary, the bookmakers’ favourite to become the next prime minister, has also pledged to re-examine the Bank’s mandate to make sure it has a “tight enough focus on the money supply and on inflation”. One of her allies said she would consider whether the current arrangements are “fit for purpose”.

Debate round-up: Truss insists recession is not inevitable

21:46 , Josh Salisbury

Thank you for joining us for our live coverage of the Tory leadership debate on Sky News.

Read our round-up of all the developments in the debate here.

Audience backs Sunak over Truss in show of hands

21:36 , Josh Salisbury

In a show of hands at the end of the debate from the audience of who they preferred as prime minister, a majority chose Mr Sunak - despite polls suggesting Liz Truss has a commanding lead.

Anchor Kay Burley said: “I wasn;t that expecting that I have to be honest ... It looks to me as if Mr Sunak convinced you fa rmore than Liz Truss”.

Sunak insists we can tackle recession

21:34 , Josh Salisbury

On whether there is nothing he can do about a recession, Rishi Sunak told the Sky News debate: “Of course, there is, of course.”

He added: “What is causing the recession, right, as you heard from the Bank of England today and I think Liz (Truss) said something before, which I’m just going to correct.

“It’s not the tax burden that is causing the recession. That’s simply wrong. What’s causing the recession is inflation. That’s the root of the problems, not just here, but in America and elsewhere.

“So the way we’re gonna get through this first and foremost is gripping inflation.”

Sunak claims Liz Truss plan will make inflation worse

21:14 , Josh Salisbury

Rishi Sunak warned that Liz Truss’ plans will make the dire economic situation worse, warning of “misery for millions” by pouring “fuel on the fire”.

The former chancellor told the Sky News debate: “We in the Conservative party need to get real and fast because the lights on the economy are flashing red and the root cause is inflation.

“I’m worried that Liz Truss’s plans will make the situation worse.”

He said he has a plan to grow the economy, adding: “But it all starts with not making the situation worse, because if we just put fuel on the fire of this inflation spiral, all of us, all of you, are just going to end up with higher mortgage rates, savings and pensions that are eaten away, and misery for millions.”

Sunak: I’d increase defence budget

21:11 , Josh Salisbury

Mr Sunak was asked if he would commit to increasing the size and budget of the armed forces.

He replied “yes, that simple answer is absolutely”, before adding: “Now, remember, I was the chancellor who oversaw the largest increase in the defence budget since the end of the Cold War. That’s my track record.

“And actually, I singled out the Ministry of Defence in the middle of the pandemic for a special treatment because they were going through a period where they were looking at future threats, they needed the certainty of knowing that they had the funding to make all those investments in the new technologies that will keep us safe.”

Sky News’ presenter Kay Burley told Mr Sunak that is not what the Defence Secretary claimed, as he accused the former chancellor of attempting to block extra money for defence before being overruled by the Prime Minister.

Mr Sunak said: “No, that’s not right. I’m not going to talk ill of any of my colleagues. But ultimately, I’m the chancellor that is responsible for the decisions on how we spend our money. And that’s what I did.”

Rishi Sunak insists he will not step aside despite Truss’s poll lead

20:53 , Josh Salisbury

Rishi Sunak has insisted that he will not withdraw from the contest at any point, despite Liz Truss having a commanding poll lead.

Taking to the floor for questions from the audience after Ms Truss, and asked if he would consider withdrawing, he said: “The quick answer is no. And that’s because I’m fighting for something I really believe in.”

He added: “I passionately believe what I’m saying is right, I want to convince as many people as possible and hopefully I can do that tonight”.

Truss insists she has no skeletons in her closet

20:50 , Josh Salisbury

In a round of quick-fire questions, Liz Truss has insisted that she has no skeletons in her closet, because her record is so public.

She told Sky News: “There are no skeletons in my closet.

“I think everything I’ve ever said and done is known about very publicly.”

Truss: My pay policy was misrepresented

20:47 , Josh Salisbury

Liz Truss has insisted that her plans over regional pay, which was criticised as cutting pay for teachers, was “misrepresented by various people” as she resisted admitting that announcing it was a mistake.

Under questioning from Sky’s Kay Burley, the Foreign Secretary said: “I absolutely accept that it wasn’t the right policy to deal with the situation and therefore I withdrew the policy immediately.”

Truss: Scrapped regional pay policy was ‘misrepresented'

20:37 , Daniel Keane

Liz Truss maintained that her regional pay boards policy was "misrepresented by various people" as she resisted admitting that announcing it was a mistake.

Under questioning from Sky's Kay Burley, the Foreign Secretary said: "I absolutely accept that it wasn't the right policy to deal with the situation and therefore I withdrew the policy immediately."

Truss ‘doesn’t have details’ of £8bn savings plan

20:26 , Daniel Keane

Ms Truss is asked whether she was correct to state that the media “misrepresented” the regional pay policy.

“I am not going ahead with this policy because of the concerns that have been expressed. When something is wrong I don’t go through with it.”

Asked how she reached the figure, she said she “doesn’t have the details”.

Truss: Balancing the books prematurely

20:21 , Daniel Keane

Ms Truss is asked how important it is to ”balance the books”.

“It is important to ensure the private sector is growing faster than the public sector. But it isn’t right to try and balance the books straight away when we’ve had a major crisis like Covid.

“We have lower levels of debt than most G7 countries, balancing the books prematurely stops new investment and economic growth. It means you are less likely to pay that debt off.”

Russia could attack Ukraine again, Truss warns

20:14 , Daniel Keane

Pressed on her plan for the war in Ukraine, Ms Truss says it would be wrong for the UK to persuade the country to give up territory in exchange for peace.

She says it is “ultimately about what the Ukrainians are willing to negotiate”.

“What I don’t want to see is Ukraine come under pressure for expediency’s sake. All we will see is Russia retreat and come back for more later.”

Truss: I will remove ‘layers of management’ in NHS and help doctors

20:10 , Daniel Keane

Ms Truss is asked how she will solve understaffing in hospitals.

She says she will help doctors and nurses by removing “diktats” and “layers of management”, which she claims can be “demotivating”.

“More of the decisions need to be made on the frontline,” she adds.

She says there should be “less distance” between decision making and the frontline, claiming that too many targets are being set by the Department of Health.

Truss: Tories need to keep our promises

20:06 , Daniel Keane

Liz Truss is asked how she will repair the party’s reputation.

She says that the best way to improve the Tories’ credibility is to “keep our promises” and deliver on Brexit freedoms.

“I will always make sure I appoint people into my Cabinet on the basis of merit. What people want us to do is deliver and we need to get started straight away.”

Truss: BoE forecast ‘worrying but not inevitable'

20:04 , Daniel Keane

Beginning the debate, Liz Truss says that the Bank of England’s dire economic forecast is “worrying, but not inevitable”.

“We can change the outcome and we can make it more likely that the economy grows,” she says.

She mentions that she will immediately reduce the National Insurance rise and keep corporation tax low.

“Now is the time to be bold,” she says, adding that working people must not be “burdened” by regulation and taxes.

Pictured: Sunak and Truss begin debate with Kay Burley

20:01 , Daniel Keane

Good evening

19:50 , Daniel Keane

Good evening and welcome to the Evening Standard’s live coverage of tonight’s Tory leadership debate.

Rishi Sunak and Liz Truss will be going head-to-head in just under ten minutes - we’ll have all the latest here.