Rishi Sunak Promises VAT Cut To Help Soaring Energy Bills In Big Campaign Shift

Ex-chancellor looks to claw back ground on frontrunner Liz Truss, who has promised crowd-pleasing cuts.
Rishi Sunak taking part in the BBC leadership debate earlier this week.
Rishi Sunak taking part in the BBC leadership debate earlier this week.
WPA Pool via Getty Images

Rishi Sunak has dropped his opposition to immediate tax cuts if he becomes prime minister by pledging to scrap VAT on all domestic energy bills for the next year.

The ex-chancellor has stood apart from his Tory rivals in the race to succeed Boris Johnson by resisting the urge to promise crowd-pleasing early cuts, mainly as it undermines his record in charge of the Treasury.

But with Liz Truss polling comfortably ahead of her former cabinet colleague among the party members who will decide who wins their run-off, chiefly thanks to her tax platform, Sunak has changed tack.

As part of his “winter plan” as energy bills are expected to spiral, Sunak will say a move to scrap VAT on energy bills will save the average household £160.

On top that, the Tory leadership hopeful said he would introduce welfare reforms and bring in new proposals to reduce the dependence on French ports.

His campaign team says the plan stands in contrast to the inflationary £55 billion of fiscal commitments Truss has made.

Sunak said: “Tackling inflation and getting people the support they need to help with the cost of living is critical.

“That’s why, with the price cap expected to rise above £3,000 in October, I will move immediately to scrap VAT on everyone’s domestic energy bills for the next year, saving the average household £160.

“This temporary and targeted tax cut will get people the support they need whilst also – critically – bearing down on price pressures.

“As chancellor I knocked £400 off everyone’s energy bill and provided support of £1,200 for the most vulnerable households. This additional VAT cut will help deal with the current emergency.

“I will also begin undertaking major supply side reforms targeted at the rising cost pressures families are facing. That means urgently getting more people off welfare and into work and tackling the supply chain crunch.”

In response, the Truss campaign argued Sunak opposed a VAT cut in February, when he stated it would disproportionately benefit wealthier households and that there was no guarantee that suppliers would pass on the discounts to all customers.

Quoting a source on her campaign, the Telegraph headlined the move as a “screeching U-turn”.

Keeping taxation low and economic competence are totemic Conservative issues. While Truss has opted to pursue eye-catching traditional cuts, Sunak has contended overall fiscal responsibility trumps everything else.

Under his new plan, Sunak would expand the labour force by tightening up the rules on out-of-work benefits, doubling the number of hours someone on welfare has to work a week in order to avoid having to look for a full time job.

He would also look at new incentives to support inactive older workers to return to the labour market, and would reduce the UK’s dependence on French ports.

Work and pensions secretary Therese Coffey, who supports Truss in the leadership race, suggested the former chancellor U-turned on his welfare proposals.

She said: “Helping people progress in work by getting better jobs and more hours is a key role of job centres.

“DWP (Department of Work and Pensions) will shortly change the rules to ensure people keep looking for extra work until they have at least 12 hours a week, with an ambition to increase that in the future.

“DWP had hoped to get this under way earlier this year, but unfortunately was blocked by the former Chancellor.

“I share the ambition to go further but these new proposals require extra £210m funding.

“In the meantime, we need to get on so we can help people be more prosperous and help grow the economy.”


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