Tory minister criticises ‘weird and dumb’ Sunak boast about diverting funds from deprived areas – UK politics live

Sunak comment one of the dumbest things I’ve ever heard from a politician, says Tory minister

Conservative politicians have been responding to Rishi Sunak’s remarks that he had been working to divert funding from “deprived urban areas” towards more prosperous towns.

Foreign Office minister Zac Goldsmith said the leaked video was “one of the weirdest – and dumbest – things I’ve ever heard from a politician”.

Jake Berry, the chairman of the Northern Research Group of Tory MPs, said that in public Sunak “claims he wants to level up the North, but here, he boasts about trying to funnel vital investment away from deprived areas”.

But supporters of Sunak rallied around him, with Conservative Tees Valley mayor Ben Houchen arguing Boris Johnson led the party to electoral victory on a pledge to invest in areas “that have been ignored at the expense of urban cities”.

Updated at 07.31 EDT

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No emergency cost of living help for at least a month, says minister

The UK business secretary, Kwasi Kwarteng, has admitted it will be more than a month before ministers can introduce any measures to tackle the rising cost of living.

Kwarteng, who is backing the foreign secretary, Liz Truss, to become the next leader of the Conservative party, said he was expecting a new prime minister to introduce a “support package” in an emergency budget but it could not happen until after they start work next month.

Both Boris Johnson and the chancellor, Nadhim Zahawi, are on holiday as the Bank of England warns the economy will enter the longest recession since the 2008 financial crisis. The UK is forecast to suffer an economic downturn lasting more than a year.

Kwarteng said: “I don’t know where Boris is,” but claimed the public would not begrudge the outgoing prime minister taking a honeymoon. He went on to say he was in “regular contact” with Johnson.

Read the full article here.

Updated at 09.46 EDT

CBI warns economic crisis ‘cannot wait’ until the Tory leadership contest’s conclusion for action

Tony Danker, the CBI director general, has said he fears a power vacuum amid the Tory leadership contest, warning that the economic crisis “cannot wait until 5 September for action”.

His comments came as both Boris Johnson and Nadhim Zahawi are both on holiday as the country braces for a looming economic crisis.

He told BBC Radio 4’s World at One:

I have no problem with people having short holidays. My fear is much more profound, which is that there will be a vacuum from now until 5 September. We need the current prime minister and the current chancellor to fill that vacuum. We need them to make decisions. We need them to make plans. We need them to reassure firms, markets and households that we are gripping this.

We cannot wait until 5 September for action. We cannot wait until 5 September for plans and we cannot wait until 5 September for reassurance.

He added:

I think they need to be developing these interventions that are going to help people with the cost of living in the autumn. They need to be signalling on 26 August when Ofgem signal what the price rise is going to be.

They need to be signalling that the government has a response and an answer. And they need to be setting out growth plans and growth intentions now.

Industry bosses have accused Liz Truss and Rishi Sunak of “cherrypicking” between inflation and growth.

Tony Danker, director general of the Confederation of British Industry, said the Tory leadership candidates must tackle both.

He told BBC Radio 4’s World at One:

I think the candidates are having a debate about stagflation actually. Each candidate is sort of picking their worse evil to focus on first. But the trouble with stagflation is you don’t get to choose between tackling inflation or tackling recession, you have to tackle both.

So, that’s challenge number one to the candidates, to not pick which one of inflation or recession they care about more, but to come up with a plan that tackles both.

He added:

We need a genuine plan about growth, that when it comes to tax we need to talk about the whole tax regime, not cherry-picking the ones that are most totemic.

We also need to think way beyond tax, we need to think about regulation that’s pro-growth, we need to think about boosting growth markets, and above all, given where most people are in business today, is we need to think about a plan to tackle labour and skills shortages.

Lisa Nandy writes to Tunbridge Wells MP over Sunak’s ‘scandalous’ funding claims

Lisa Nandy, the shadow secretary of state for levelling up, has written to Greg Clark, the levelling up secretary and Tunbridge Wells MP, about Rishi Sunak’s “scandalous” admission that he “funnelled public money away from deprived areas and gave it to affluent Tory shires”.

The Labour MP for Wigan called on Clark to “urgently investigate” what changes were made to funding and what justified them.

Updated at 08.54 EDT

Richard Holden, the Conservative MP for North West Durham, has defended Rishi Sunak over the Tunbridge Wells video in which he said that as chancellor he tried to divert funding from deprived urban areas (see also 10:59).

He told Sky News:

This is exactly the sort of policy that he’d be speaking about whether he’s in Tunbridge Wells or is in places like Consett and County Durham where I represent.

He added:

We can’t just see money constantly funnelled as it has been over the last few years into those same urban areas. thats why he tore up those green book plans … that’s why Ben Houchen [the Tees Valley mayor] has come out today and welcomed exactly what Rishi Sunak said.

He claimed that the “formulas that have been there to date” have “left behind” constituencies across the country.

Updated at 08.37 EDT

My colleagues Jessica Elgot and Heather Stewart have written a profile on Kwasi Kwarteng: the low-tax Tory frontrunner to be the next chancellor.

There are few ministers who clashed more with Rishi Sunak during his time in office than Kwasi Kwarteng, from windfall taxes to net zero. Now the business secretary is among those touted to have a turn in Number 11.

Kwarteng has been a longtime loyal supporter of Liz Truss, making discreet inquiries with MPs about support for her potential leadership bid for many months. That dedication and his relative seniority has placed him as a frontrunner alongside Thérèse Coffey, the work and pensions secretary, and Sajid Javid – who briefly held the job before.

But it is quickly becoming a poisoned chalice. The next chancellor has an in-tray which contains the worst outlook for the economy since the 2008 banking crash, a lengthy recession, eye-watering inflation and rising interest rates, potential mass defaults on energy bills and an NHS going into a winter crisis.

Sunak began his own political career with an entrenched small state ideology, which was steamrollered in his first weeks in the job by the pandemic and the need to introduce the unprecedented furlough scheme.

Kwarteng would enter the Treasury if appointed as a free marketeer and is likely to find his beliefs will face extraordinary challenges from the economic headwinds.

Read the full article here.

Updated at 08.37 EDT

The Tory former cabinet minister Liam Fox was speaking earlier to Sky News where he said it was “a bit surprising that we’re not hearing more from the chancellor” following the Bank of England’s forecast.

Fox, who is supporting Rishi Sunak in the leadership race, said he believes a recession is “inevitable” despite Liz Truss suggesting that is not the case.

He added:

What Liz seems to be saying is, at a time when we are already spending 85 billion on debt interest, twice as much as we’re spending on defence during a conflict in Europe, we should be borrowing even more money.

That’s been tried before. If there was an easy way to get out of the inflationary problem and growth, don’t you think it would have been done here or the United States or in Europe?

He went on to say:

There is a global inflation element to deal with here. The question is how do we do that? My view is you deal with inflation first. Get control of borrowing. Then you take the measures to help grow the economy. And then you start to think about reducing taxes.

Updated at 07.31 EDT

Sunak comment one of the dumbest things I’ve ever heard from a politician, says Tory minister

Conservative politicians have been responding to Rishi Sunak’s remarks that he had been working to divert funding from “deprived urban areas” towards more prosperous towns.

Foreign Office minister Zac Goldsmith said the leaked video was “one of the weirdest – and dumbest – things I’ve ever heard from a politician”.

Jake Berry, the chairman of the Northern Research Group of Tory MPs, said that in public Sunak “claims he wants to level up the North, but here, he boasts about trying to funnel vital investment away from deprived areas”.

But supporters of Sunak rallied around him, with Conservative Tees Valley mayor Ben Houchen arguing Boris Johnson led the party to electoral victory on a pledge to invest in areas “that have been ignored at the expense of urban cities”.

Updated at 07.31 EDT

The former housing secretary Robert Jenrick has said the government’s “overwhelming priority” should be inflation.

Jenrick, who is backing Rishi Sunak in the leadership race, told BBC Radio 4’s Today programme:

The dashboard is flashing red on the British economy and we shouldn’t fool ourselves into believing that all is going to be fine.

I think it’s very clear this morning that our overwhelming priority must be inflation. That’s what many people have been saying for a long time. It’s what Rishi Sunak has been saying throughout this leadership contest and tax cuts, unfunded tax cuts, in the immediate – always attractive though that might be to those of us who want to reduce the burden of taxation – seem less relevant in these circumstances.

Updated at 07.32 EDT

Liz Truss has acknowledged there will be a “tough winter” ahead but argued there is a need to move away from the “business-as-usual” policies to help “reform the economy”.

The foreign secretary has spent the morning meeting with key investors in the City of London. She told reporters:

The reality is we’re facing a recession if we carry on with our business-as-usual policies. People are struggling – whether it’s to pay food bills or fuel bills – that’s why it’s very important we reverse the national insurance increase, we have a temporary moratorium on the green energy levy to help people with their fuel bills.

The most important thing is getting the economy going so we avoid a recession and the business-as-usual policies aren’t working, we need to do more, and that’s why I am determined to reform the economy and keep taxes low.

She added:

I know it’s going to be a tough winter, I want to do all I can to make sure we’re releasing the reserves in the North Sea of gas, I want to get on with things like fracking in areas that support it, and I also want to make sure that we’re moving ahead with nuclear power and more renewables.

Of course, it will take time but the best time to start is today in moving that forward, as well as giving people all the help we can by keeping their taxes low and getting the economy going.

Updated at 06.44 EDT

Rishi Sunak’s campaign has defended the former chancellor’s remarks that he had been working to divert funding from “deprived urban areas” towards prosperous towns.

In the video, Sunak is seen bragging that he had started changing public funding formulas to ensure more prosperous towns receive “the funding they deserve”.

Sunak’s campaign did not dispute the video, instead arguing the Treasury’s green book setting the rules for government spending to help towns and rural areas also in need of investment.

A source said:

Levelling up isn’t just about city centres, it’s also about towns and rural areas all over the country that need help too. That’s what he changed in the green book and he will follow though as prime minister.

They added:

Travelling around the country, he’s seen non-metropolitan areas that need better bus services, faster broadband or high quality schools. That’s what he’ll deliver as prime minister.

Updated at 06.45 EDT

The Home Office has been accused of wasting taxpayers’ money after paying out £70m in compensation and associated legal costs, official figures show.

Departmental accounts for 2021-22 show that a total of £41.1m was handed out in compensation, which includes £25.1m to 768 victims of the Windrush scandal and £12.7m to 572 people who were wrongfully detained in immigration centres.

The payouts, highlighted by the Liberal Democrats, are believed to be the highest amount for compensation and legal costs in a single year for at least a decade.

They also show that the Home Office was required to pay £28.8m last year in adverse legal costs for 2,106 cases it lost.

Compensation payments have trebled since Priti Patel became home secretary, from £13.6m in 2019-20 to £25.4m in 2020-21 and £41.1m last year.

The disclosure comes as the government prepares to spend an undisclosed amount on sending asylum seekers to Rwanda, after a £120m upfront payment for the deal. The Home Office’s most senior civil servant, Matthew Rycroft, said the department was “uncertain” whether the scheme offered “value for money”.

Read the full article.

Rishi Sunak boasts of taking money from ‘deprived urban areas’ in video

A leaked video shows Rishi Sunak boasting to Conservative party members that he was prepared to take public money out of “deprived urban areas” to help wealthy towns, the New Statesman reports.

The former chancellor was recorded on 29 July telling party members in Tunbridge Wells, Kent:

I managed to start changing the funding formulas, to make sure areas like this are getting the funding they deserve because we inherited a bunch of formulas from Labour that shoved all the funding into deprived urban areas and that needed to be undone. I started the work of undoing that.

Labour expressed anger at the video, telling the magazine that it was “scandalous that Rishi Sunak is openly boasting that he fixed the rules to funnel taxpayers’ money to prosperous Tory shires”.

The shadow levelling up secretary, Lisa Nandy, added:

This is our money. It should be distributed fairly and spent where it’s most needed – not used as a bribe to Tory members.

Updated at 06.30 EDT

Here’s more from the business secretary, Kwasi Kwarteng, who said carrying on with the current economic policy “is not going to cut it” and that raising taxes is “adding insult to injury”.

Kwarteng, who is backing Liz Truss to be leader, told Sky News:

I think the problem we have is very simple. I think we’ve got inflation which is, as you say, squeezing people’s incomes, but we’ve also got a rising tax burden.

I’ve never understood why if we’re going to help people, how are we going to help people by putting up their taxes? Especially when their daily shop, their costs, are going up.

Asked if the Bank of England is fit for purpose, he said:

I think it’s a good institution. I think it’s worked well. But we need to look again at what the mandate is and how best they can actually fulfil that mandate. I think it’s a good institution. I think it’s worked well. But we need to look again at what the mandate is and how best they can actually fulfil that mandate.

He claimed there is a “strong argument” that interest rates should have been raised “slightly sooner”, adding:

The job of the Bank was to deal with the inflation. They have got a 2% inflation target. That’s actually their mandate. And now inflation is hitting double digits. So, clearly something has gone wrong and I think there is an argument to suggest that rates should have probably gone up slightly sooner. ‘Stop in momentum’ for Truss after debate, Tory pollster says

Robert Hayward, a Conservative peer and elections analyst, said Rishi Sunak’s performance in last night’s debate caused “a stop in terms of the momentum in one direction” of the leadership campaign.

Last night marked the first time Sunak had “clearly led” in a debate, Lord Hayward told Sky News this morning, adding that Truss had struggled when asked about her policy U-turn on public sector pay.

He said:

There’s no question in my mind and the vote of the audience, it was the first time that he had clearly led in a debate.

He added:

Liz has had the best of the last few days, no question about it, with the series of endorsements from different major personalities. I think what happened last night was there was a stop in terms of the momentum in one direction.

It won’t necessarily have reversed it, but there will be this morning a different sense of messaging that is around.

Updated at 06.19 EDT

Emily Dugan

The business secretary, Kwasi Kwarteng, has criticised the the Bank of England’s control of inflation, saying “something had clearly gone wrong” at the institution as prices are predicted to rise by 13% and the UK is forecast to suffer an economic downturn lasting more than a year.

As a key supporter of the foreign secretary, Liz Truss, the frontrunner to be the next Tory leader and prime minister, Kwarteng’s comments suggest the Bank’s independent mandate to keep inflation at 2% may be re-examined if she takes over at No 10.

Kwarteng told Sky News:

The job of the Bank was to deal with inflation. They’ve got a 2% inflation target, that’s actually their mandate. And now inflation is getting double digits. So clearly, something’s gone wrong.

He added:

I think there is an issue about how the Bank is operating because clearly if I say to you 2% is your target, and you say to me, ‘Well, actually it’s going to hit 13%,’ I would quite rightly say something’s gone wrong. We’ve got to look at how you’re performing.

Kwarteng also said the Bank should have acted quicker to increase interest rates in an effort to control inflation. He said:

I think there is an argument to suggest the rate should have probably gone up slightly sooner.

Read the full article here.

Liz Truss and Rishi Sunak “need to stop” talking about tax in the Tory leadership contest and focus on tackling inflation, the head of the Institute for Fiscal Studies has warned.

During a set of televised leadership interviews with both contenders last night, Truss claimed her tax cut plans could avert the looming recession, claiming that it was “we can change the outcome, and we can make it more likely that the economy grows.”

Sunak claimed £30bn plan would lead to “misery for millions” and that he was “worried” her proposals would lead to “misery for millions”.

Paul Johnson, director of the Institute for Fiscal Studies, said the reason why Truss and Sunak are so focused on tax “remains a mystery”.

He told BBC Radio 4’s Today programme this morning:

I think candidates need to stop talking about the fiscal headroom that was announced, that was sort of supposed to be there back in March.

What they’re talking about is that the Office for Budget Responsibility at the time said that we’d be borrowing about 30 billion less than we absolutely could to meet the fiscal target of a balanced current budget in a few years’ time.

Those numbers are now “massively out of date” now that the economy has changed and inflation is much higher than expected, Johnson said.

He added:

What they need to be talking about is how they think they’re going to be tackling inflation, how they think they’re going to be responding to the increased needs of households and how they’re going to be responding to what this means for public services, and it remains a mystery to me why they’re so focused on tax.

Updated at 04.53 EDT

PM and chancellor ‘completely on top’ of economy despite being on holiday

Good morning

The business secretary, Kwasi Kwarteng, who is backing Liz Truss in the Conservative leadership contest, has admitted that “I don’t know where Boris is” but insisted the prime minister is in “constant contact” with him.

Johnson and his chancellor, Nadhim Zahawi, have been criticised for being on holiday on the day the Bank of England announced the biggest interest rate rise in 27 years and forecast an economic downturn lasting more than a year.

The PM has been on holiday since Wednesday and Zahawi is away with his family and was not available for interviews in the wake of the BoE’s grim predictions.

When asked if the PM is on holiday, Kwarteng told Times Radio:

I don’t know where Boris is, but I’m in constant contact with him. He’s just had a wedding, I think he’s on a honeymoon and … I don’t think many people will begrudge him that.

Speaking to LBC radio, Kwarteng said he believed the chancellor was “completely on top of the situation”. He added:

He’s completely aware of what’s going on and his officials and he are working very hard to see how best we can generally be we can deal with this.

I think I think he’s on top of the situation. I think his arrangements are up to him.

He said it is “completely false” to say the government is doing nothing over the summer, adding on Times Radio:

I said we’re going to have to wait four weeks for an emergency budget because that’s how we help people – it’ll be through the new chancellor, new prime minister, whoever they are, to come up with the measures. But the idea we’re doing nothing in the meantime is false.

Meanwhile, Liz Truss and Rishi Sunak each took part in a televised leadership interview where the foreign secretary was challenged about the Bank’s projections as it increased interest rates by 0.5 percentage points.

Truss claimed her tax cut plans could avert the looming recession, while Sunak stepped up his criticisms of her £30bn plan for unfunded tax cuts, claiming it would lead to “misery for millions”.

Kwarteng, who is backing Truss to be leader, argued that carrying on with the current economic policy “is not going to cut it” and that raising taxes is “adding insult to injury”.

He defended the foreign secretary’s tax cuts plan, arguing that taking more of people’s money through tax when their real income is being squeezed by inflation “doesn’t make any sense”.

He told BBC Radio 4’s Today programme:

There is pressure on public finances but the immediate problem, as Liz always said, is one of growth.

She talked about recession very early on, a few weeks ago, at the beginning of the leadership contest, and the risk of recession means that you can’t have rising interest rates, which we saw yesterday, and also have tighter fiscal policy. No economist in the world is going to say that the way to deal with a looming recession is to tighten monetary policy and to tighten fiscal policy at the same time.

Here’s the agenda of the day.

9.30am: The Office for National Statistics publishes the results of its latest survey of the social impacts of the cost of living, goods shortages and Covid-19.

7pm: Truss and Sunak will meet in Eastbourne tonight for hustings with party members in the southeast.

I’ll be covering for Andrew Sparrow today. Do drop me a line if you have any questions or think I’ve missed anything. My email is leonie.chao-fong@theguardian.com or you can reach me on Twitter.

Updated at 05.57 EDT