Liz Truss and Rishi Sunak face mounting pressure to explain how they will help households with the spiralling cost of living and the “financial timebomb” due to explode in the autumn.
Their economic response to the crisis has emerged as the main battleground in the bid to be the next prime minister, with Ms Truss under fire from Mr Sunak’s allies for suggesting there would be no “handouts” and subsequently playing down the comment.
The row followed the Tory leadership favourite telling the Financial Times she would “look at what more can be done” in the light of warnings from the Bank of England about the longest recession since the financial crisis and inflation soaring to over 13%.
But she added: “The way I would do things is in a Conservative way of lowering the tax burden, not giving out handouts”.
Mr Sunak quickly condemned it as “simply wrong to rule out further direct support” for struggling families this winter.
Penny Mordaunt, a former Tory leadership contender who has thrown her weight behind Ms Truss, insisted she had been misinterpreted.
She told Sky News: “It’s not that she’s ruling out all future help, that’s a misinterpretation of what she said.
“What she is looking at though is enabling people to keep more of the money that they earn”.
But supporters of Mr Sunak accused his rival of another U-turn after she last week rowed back on proposals to cut public sector pay outside London.
Former chief whip Mark Harper tweeted: “Stop blaming journalists (again) – reporting what you actually say isn’t ‘misinterpreted’.
“2nd time in just 5 days. This kind of thing happened under the current PM & hugely damaged trust in us all.
“So just what does ‘not giving out handouts’ mean then?”
The former chancellor’s camp also rounded on Ms Truss’s plans to use a September emergency budget to immediately reverse the national insurance rate rise brought in by Mr Sunak when he was chancellor.
Ms Truss wrote in the Sunday Telegraph: “I would use (an emergency budget) to immediately tackle the cost-of-living crisis by cutting taxes, reversing the rise on national insurance and suspending the green levy on energy bills.”
Former Tory party co-chairman Oliver Dowden said the Foreign Secretary’s proposed tax cuts were “insufficient” to help low-income workers and would disproportionately benefit the better-off.
The Sunak supporter told BBC News: “You’re going to see energy bills going up to almost £4,000 and if you look at the idea of the tax cuts, this idea of reversing the national insurance contributions, that’s only going to benefit someone working full time on the national living wage by less than £60.
“Contrast that with whoever the prime minister is, they’re going to get a benefit of about £1,800.
“So this isn’t the way to help people through this very difficult period.”
Mr Sunak would go further than the additional £1,200 he offered to the poorest in society as chancellor, his allies suggested. He has also pledged to axe VAT on fuel bills.
Tory MP Damian Hinds conceded the existing package was not enough in these “extraordinarily difficult times”.
He told Sky News: “Things have been getting worse even since that was put into place in terms of projections for energy bills… and he’s been clear that more may well be needed and and he is ready to do that as required.”
There are growing calls for the new PM to urgently increase the amount of support available to vulnerable households, with a report commissioned by former prime minister Gordon Brown suggesting Government help has failed to address their needs.
Mr Brown pressed both candidates to agree an emergency budget with Boris Johnson this week or risk “condemning millions of vulnerable and blameless children and pensioners to a winter of dire poverty”.
“The reality is grim and undeniable: a financial timebomb will explode for families in October as a second round of fuel price rises in six months sends shock waves through every household and pushes millions over the edge,” the Labour former prime minister wrote in Sunday’s Observer.
His report found existing Government support for low-income households has fallen short of offsetting the losses they face, with some families up to £1,600 worse off a year.
The additional £1,200 offered to the poorest in society this year will fail to compensate for three major blows to their income from October 2021 to October 2022, the analysis suggests.
Mr Brown lamented the “vacuum” at the heart of Government created by the Prime Minister and Chancellor being on holiday and the Tory leadership candidates being on the campaign trail, telling BBC Radio 4’s The World This Weekend that not enough was being done to address “a moment when a lot of the gains of the last 30 or 40 years have been lost”.
Ms Truss and Mr Sunak continue to criss-cross the country seeking support from Tory members to be elected the next party leader and prime minister. Voting has begun, with the result to be announced on September 5.