PLEDGES to cut taxes made by Tory leadership candidates Liz Truss and Rishi Sunak are looking increasingly implausible, experts at the Institute for Fiscal Studies (IFS) warned today.

The IFS, a research organisation specialising in taxation, has suggested short-term government borrowing to support struggling households might be a necessary measure for the next prime minister, but warned “permanent tax cuts” could increase pressures on the public purse.

New research by the organisation predicts high interest rates and inflation will increase public spending including in areas like benefits and pensions. 

Combined with weak economic growth this is likely to offset the effect of an expected increased tax intake, the IFS said.

This is before accounting for tax cuts or new support measures put forward by the two Conservative Party candidates which if enacted could disrupt the government’s plans to manage the economy, the IFS said.

Carl Emmerson, IFS deputy director and author of its latest report, said: “The reality is that the UK has got poorer over the last year. 

“That makes tax and spending decisions all the more difficult.

“It is hard to square the promises that both Ms Truss and Mr Sunak are making to cut taxes over the medium term with the absence of any specific measures to cut public spending and a presumed desire to manage the nation’s finances responsibly.”

The warnings arrive amid an ongoing cost-of-living crisis. Basic goods have increased in price with inflation at 10.1 per cent in July while energy costs are expected to continue to climb this autumn.

Both Ms Truss and Mr Sunak have pledged to cut taxes during their bids to win the Conservative Party leadership contest and become the next PM.

Mr Sunak, who is believed to be trailing Ms Truss in the contest, has used the report to attack her. 

A Sunak campaign spokesman said that the analysis “drives a coach and horses through Liz’s economic plan.”

The IFS said in its report: “The two candidates for prime minister need to recognise this even greater than usual uncertainty in the public finances. 

“Additional borrowing in the short term is not necessarily problematic — and indeed may be appropriate to fund targeted support.

“Only last month the Office for Budget Responsibility warned that the public finances are already on an unsustainable long-term path: large, unfunded, permanent tax cuts would only act to make this problem worse.”