Prime Minister hopefuls feud over tax and spending plans

The final two candidates in the race to succeed British Prime Minister Boris Johnson clashed on Monday in a televised debate, during which they tore into each other's tax and spending plans.

Foreign Secretary Liz Truss, the bookmakers' favourite to win the Conservative Party leadership election, told former finance minister Rishi Sunak his emphasis on balancing the government's books would tip the economy into recession.

"Crashing the economy in order to pay a debt back quicker would be a massive mistake," Truss said.

Sunak, whose resignation from government earlier this month set in motion Johnson's downfall, said Truss's plan to cut taxes was nothing more than a "sugar rush" for the economy that would be followed by a crash.

The final stretch of a weeks-long contest has pit Sunak, a former Goldman Sachs banker who has raised the tax burden towards the highest level since the 1950s, against Truss, a convert to Brexit who has pledged to cut taxes and regulation.

Whoever triumphs when the result is announced on Sept. 5 will inherit some of the most difficult conditions in Britain in decades. Inflation is on course to hit 11% annually, growth is stalling, industrial action is on the rise and the pound is near historic lows against the dollar.

Their quarrel on Monday underlined divisions in Britain's ruling party about the best way to manage the economy, with Truss pitching a continuation of Johnson's big-spending ethos, and Sunak portraying the classic Conservative fiscal hawk.

"Does anyone think that the sensible thing to do is go on a massive borrowing spree worth tens of billions of pounds and fuel inflation even further?" asked Sunak, who repeatedly interrupted Truss.

Truss said she would challenge the economic orthodoxy of Britain's powerful finance ministry and dismissed Sunak's warnings about her plans as "project fear" - a line used by Brexit supporters during the 2016 referendum.

A snap opinion poll of 1,032 voters from Survation showed 39% of the British public thought Sunak performed best during the debate, compared with 38% who said Truss did.

Among Conservative voters, 47% thought Truss did best, with 38% for Sunak.

A YouGov survey of Conservative Party members published last week showed Truss held a 24-point lead over Sunak in the race to become leader.

The opposition Labour Party said both candidates had trashed the Conservatives' record in government during the debate, and that neither had offered a plan to tackle a worsening cost-of-living crunch.

(Writing by Andy Bruce, editing by Deepa Babington)