Rishi Sunak vows to scrap VAT in ‘screeching U-turn’

Rishi Sunak has promised to scrap VAT on household fuel bills for a year, saving the average household £160, as he battles to remain in the race to become the next prime minister. The move is being called a “screeching U-turn” by his rival Liz Truss’ campaign.

The proposed scrapping of VAT is part of the former chancellor’s “winter plan” to tackle inflation and the cost-of-living emergency, which, his campaign team says, stands in contrast to the inflationary £55 billion of fiscal commitments Liz Truss has made.

On top of scrapping VAT on all domestic energy bills, the Tory leadership hopeful said he would also undertake major supply side reforms aimed at bringing down costs.

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

“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,” he added.

Institute for Fiscal Studies has published a short briefing on Rishi Sunak’s proposal for a temporary cut in VAT on fuel bills, stating that the move will cost about £4.3 billion.

Business Secretary Kwasi Kwarteng, a senior ally of Truss, said that Sunak’s U-turn is a sign that he is under a lot of pressure in the race of No. 10. 

“He was the person who said the VAT cut would disproportionately benefit rich families and now he’s saying that a VAT cut on energy bills is the right thing,” Kwarteng told Times Radio. 

“He was saying that tax cuts were a fairytale, now he is proposing an unfunded tax cut.