Policy watch: Where Liz Truss and Rishi Sunak stand on the key issues

Liz Truss and Rishi Sunak are going head-to-head in the final battle to replace Boris Johnson.

The former chancellor is pitching himself to the party and members as the serious candidate on the economy, who can guide the country through a potential recession by resisting calls for tax cuts.

Meanwhile, the Foreign Secretary is marketing herself as a Thatcherite who promises tax cuts, foreign policy experience, and a track record of delivery.

The pair traded more barbs on tax and had the most substantive discussion of the NHS to date in a heated TV debate on Tuesday night, before it was cut short when TalkTV presenter Kate McCann fainted on air.

The pair also clashed over taxes, Brexit and China in their first head-to-head debate on Monday night.

Here is where the final two candidates stand on the key questions:

Rishi Sunak

Taxes: The former chancellor has been accused of making a "screeching U-turn" on tax cuts as he vowed to scrap VAT on energy bills for a year if he becomes prime minister. He vowed to introduce the measure to save £160 on the average household bill as energy prices soar this winter.

Mr Sunak had previously been resisting calls for immediate tax cuts amid the cost of living crisis, instead saying the nation needs "honesty and responsibility, not fairytales". He had pledged to focus on getting inflation under control and only cut taxes once that happens, presenting his position as "common-sense Thatcherism".

Borrowing: Mr Sunak has repeatedly said that the nation must balance its books. He has warned that "borrowing your way out of inflation isn’t a plan" and in Monday's TV debate challenged Ms Truss on her promise to borrow more to fund her tax cuts. He said: “That is the country’s credit card and it’s our children and grandchildren, everyone here’s kids will pick up the tab for that. There’s nothing conservative about it.”

Net Zero: He has committed to keeping the target of making Britain carbon neutral by 2050. To achieve that he would oversee a massive expansion in offshore wind farms, but he would maintain the ban on putting up any new turbines on land. He wants to make the UK energy self-sufficient by 2045.

Trans: The former chancellor has made it clear where he stands on trans rights. He said: “The fact that we have to have a conversation about what a woman is is quite frankly extraordinary. As a parent of two young girls and married to one, I know exactly what a woman is. We don’t need to have a debate about it. I am going to stand up for women’s rights, whether it is the language that people are now trying to erase from public life, access to changing rooms, sports – we need to stand up for women’s rights. It is not bigoted or somehow narrow-minded to say that.” Mr Sunak launched his campaign by pledging a new "manifesto of women’s rights".

Brexit: Mr Sunak voted Leave and has said taking back control of lawmaking will give Britain a competitive economic edge. He has pledged to scrap or reform all remaining EU rules on the UK’s statute books by the next election and wants to overhaul Brussels red tape clogging up the City. In Monday's TV debate, he attacked Ms Truss for voting Remain.

Defence: He has vowed to stick to the Nato target of spending two per cent of GDP on defence and has suggested he would exceed that, saying it is a floor not a ceiling. But he has refused to commit to the "arbitrary" 2.5 per cent rise promised by Boris Johnson.

Housing: Mr Sunak has pledged to speed up building in cities and on brownfield sites as well as cracking down on "landbanking" by big developers. He has suggested he wants to see government funding for affordable housing scaled back, with more incentives put in place for developers to build homes poorer people can afford to buy. He has also pledged to prevent encroachment on the green belt.

Immigration: The ex-chancellor would keep the Rwanda policy, saying it is "absolutely critical that we have control of our borders". He has said a tough approach is needed to foil "an illegal set of criminal gangs who were causing people to die in pursuit of coming here".

Liz Truss

Taxes: The Foreign Secretary has announced £30 billion worth of tax cuts and would start to implement them "from day one". She would cancel the planned six per cent rise in corporation tax and reverse the National Insurance hike which came into force in April. She would also lift green levies on energy bills for two years. On Monday night she said Mr Sunak’s plans to put business taxes up further would push Britain into a recession.

Borrowing: She has said that she plans to pay for tax cuts by putting the Covid debt on a "longer-term footing", akin to the nation's war debt from the 1940s. That would potentially involve refinancing the £311 billion borrowed during the pandemic so that it was paid back over a much more drawn out period.

Net Zero: Ms Truss backs the target overall but has said "we need to reach net zero in a way that doesn’t harm businesses or consumers". She is "very supportive of using gas as a transition fuel" and has suggested she would end the ban on fracking so it could go ahead in areas where there’s local consent.

Trans: The Foreign Secretary has hit out at "ludicrous debates about pronouns" and as equalities minister scrapped plans to reform the law so people could change gender without a medical diagnosis. She has backed feminist campaigners, including Labour MP Rosie Duffield over her statement that "only women have a cervix".

Brexit: She vociferously supported Remain during the 2016 referendum but has since transformed herself into one of the most steadfast Brexiteers in the Government. She has driven forward plans to override the Northern Ireland Protocol and has said she now regrets voting to stay in the EU. When challenged by Mr Sunak during Monday's TV debate over why she voted Remain in 2016, she said: “Maybe I’ve learnt from that.”

Defence: Ms Truss would increase spending on the military to three per cent of GDP by the end of this decade and "review" the plan to cut the size of the army to 72,500. She has said Russia’s invasion of Ukraine shows the West has not dedicated enough funding to defence. Ms Truss has also unveiled plans to boost trade between Commonwealth nations and stop China from buying up influence in some of the world’s fastest developing countries.

Housing: The Foreign Secretary has pledged to rip up "Stalinist" housing targets and would make it quicker and easier for developers to build on brownfield land in "opportunity areas". She has said the UK needs to "build up more" in cities and "it’s very important that we have policies that have local consent".

Immigration: She "completely agrees" with the Rwanda policy and says "we need to have further reforms in the UK to make sure we can really stop illegal immigration". She has said she wants to see reform to the way ECHR rulings are applied in Britain but "would be prepared" to withdraw from it if necessary.