Politics

Sunak in major tax U-turn as he announces plan to scrap VAT on energy bills

Rishi Sunak has announced a plan to scrap VAT on energy bills – a significant U-turn on his previous pledge not to make any immediate tax cuts.

The former chancellor said that if he becomes prime minister he would implement the temporary measure to save the average household £160.

It marks a significant change of direction after he repeatedly said he wants to hold off on tax cuts until inflation is under control.

TV debate abandoned after presenter faints – live updates

Liz Truss also ramped up her bid to win the keys to No 10 with a new policy announcement on Tuesday night – as she pledged to publish police league tables while asking forces to slash serious crime by 20%.

Rishi Sunak announces ‘desperate’ tax cut

Although he has never ruled them out entirely – saying tax cuts are a question of “when not if” – Mr Sunak has trashed Ms Truss’ plans to immediately reverse the National Insurance hike and slash corporation tax as “unconservative”.

More on Cost Of Living

Mr Sunak also argued against a VAT cut on energy when he was chancellor, telling the House of Commons in February: “That policy would disproportionately benefit wealthier households”.

Announcing a new ‘winter plan’ on Tuesday night, Mr Sunak said that as the energy price cap is now expected to rise above £3,000 in October, more help was needed to reduce the cost of living crisis.

He said the tax cut would be “temporary and targeted”.

It is understood the VAT cut is subject to energy regulator Ofgem confirming the price cap will rise to £3,000. It will take effect from 1 October and last for 12 months, with the policy estimated to cost £4.3bn.

Mr Sunak’s campaign team insists this stands in contrast to Ms Truss’ £30bn worth of fiscal commitments, which they argue will stoke inflation, and increase interest rates and government borrowing.

But supporters of the Truss campaign accused him of being “desperate” with his backtrack.

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Five things you need to know about Rishi Sunak

His U-turn has also been attacked by Labour, with shadow chief secretary Pat McFadden saying it is “just another example of the Tory party trying to cling on” when they “are out of time and out of ideas”.

Tax has become the clear dividing line between the two Tory leadership contenders, with the pair engaging in fiery clashes over their economic plans in live TV debates.

The leadership hopefuls both called each other’s plans immoral during a showdown on TalkTV on Tuesday, before the programme was dramatically taken off air after the presenter collapsed.

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Tory leadership debate halted as presenter faints

Mr Sunak has advocated prudence with the nation’s finances to recover from the pandemic, while Ms Truss is pledging large tax cuts of more than £30bn to spark economic growth.

But both face the conundrum of needing to deliver some sort of extra support this coming winter in the face of a crippling cost of living crisis amid a slowing economic backdrop.

Ms Truss has said she will cut the green energy levy to help people cope with spiralling bills.

In her own bid to win over Tory members before they start voting for their party’s leader next week, the foreign secretary pledged on Tuesday to give police and crime commissioners more powers to “veto training that focuses on identity politics”.

She said she wants police to “spend their time investigating real crimes, not Twitter rows and hurt feelings” and said that, if she becomes prime minister, she would tell police to cut homicide, serious violence and neighbourhood crime by a fifth by the end of this parliament.

Ms Truss also wants every domestic burglary to be attended by a police officer in person.

Ms Truss said: “People across our country want criminals locked up, and crime prevented, so they feel safe on their streets.

“It’s time for the police to get back to basics and spend their time investigating real crimes, not Twitter rows and hurt feelings. People can trust me to deliver and these league tables will help hold the police to account – making our streets safer and our country more prosperous.”

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