Will a blast of TRUSSONOMICS put cash in YOUR pocket?

As our new PM plots a major energy price freeze and tax cuts to tackle the cost of living . . .

AS LIZ TRUSS enjoys her first days in office, the issue of rocketing energy bills is right at the top of her in-tray. Wholesale gas prices shot up another 30 pc this week — and the incoming Prime Minister’s first job is to shield families from the worst of the fallout. So far, the promises have been bold. ‘I will take action this week to deal with energy bills and to secure our future energy supply,’ Miss Truss declared in her first speech as Prime Minister on Tuesday.

Similarly confident was new Chancellor Kwasi Kwarteng, who wrote in the Financial Times that the Government would take ‘ decisive action’ on rising bills.

As one Conservative source told the Mail yesterday: ‘We either sort out bills, or we don’t have a Government by Christmas.’

But what exactly does Miss Truss have in mind? Reports suggest a freeze on energy bills — that could last for two years — is to come within days. The radical measure is expected to cost up to £ 100 billion, putting it on the same scale as the £ 70 billion Covid furlough scheme.

experts say there is no alternative as families need immediate help in the face of rampant inflation, which Goldman Sachs predicts will hit 22 pc by January.

What’s more, Miss Truss is positioning herself as a low-tax leader, intent on slashing business rates and reversing leadership rival Rishi Sunak’s controversial National Insurance hike.

It spells good news for overstretched households, with an announcement due on Thursday.

However, will it be good enough to get us all through what is set to be a very bleak winter?

Here is everything we know so far about the new Government’s economic promises and how they might help your budget . . .

ENERGY BILLS

THe Prime Minister has pledged ‘immediate support’ for household energy bills, which could surpass £4,000 early next year without any action.

The Government is considering freezing the price cap at around £2,500 — up from the current rate of £1,971 but £1,000 below next month’s expected cap of £3,549 — for at least 18 months.

The cost could be added to the national debt and paid for out of the tax pot to which we all contribute. Or energy companies could take out Government-backed loans to foot the bill.

These subsidised customer payments would then be repaid through additions to bills over the next decade or two.

Miss Truss is believed to favour funding the scheme through future taxation.

She has also ruled out a windfall tax on the profits of energy giants, a solution favoured by Labour and the Lib Dems.

Most experts agree it will be a welcome relief to struggling households and will prevent them from relying on handouts. However Tom Selby, head of personal finance at wealth management firm AJ Bell, says: ‘ The policy is riddled with uncertainty. And at some point this will all need to be paid for. It is hard to see how a gargantuan support package like this can be funded without tax rises.’

Under current plans, households are still set to receive £400 off their energy bills this winter, with around eight million low-income and vulnerable families receiving an additional £650. These payments should mean the typical annual energy bill ends up closer to the current £1,971 price cap.

More than eight million pensioners will also receive £300 alongside their winter fuel payment in November, and around six million people on an eligible disability benefit will receive an additional £150. The PM has made clear any further support payments will be targeted at the most vulnerable. And she has pledged extra help to businesses, many of whom have been hit hardest by rising costs as they are not protected by a price cap.

Yesterday reports suggested she is finalising plans for a £40 billion support package to lower energy bills for UK businesses.

Finally, Miss Truss has hinted at removing all green energy levies, which would benefit both households and businesses. ‘We do need to remove the green energy levy and find a better way of delivering our net zero targets,’ she said in July.

NATIONAL INSURANCE

TOP of the new leader’s wider agenda is scrapping tax hikes imposed by former Chancellor Mr Sunak — including April’s 1.25 percentage point National Insurance (NI) rise.

Named a ‘social care levy’, the tax was supposed to fund reforms to the nation’s health and social care services.

The policy was thought to disproportionately affect lower earners, as NI contributions fall dramatically on earnings above £50,000.

However, the Government raised the NI threshold from £9,880 a year to £12,570 in July, meaning low earners pay less.

Reversing the NI rise would save someone on a £30,000 annual salary around £235 per year, while someone on a £100,000 salary would save £1,093, according to analysis by Interactive Investor.

This would be a victory for the Daily Mail which has campaigned to ‘spike the hike’ since it was first announced.

But again, some experts point out it would be of minimal benefit to the most vulnerable households.

The Institute for Fiscal Studies (IFS) says those on the lowest incomes would gain just £7.66 a year — 235 times less than the top 10 pc of earners.

And some of the most vulnerable households — including retirees, those earning less than £242 a week and self-employed workers earning less than £6,275 a year — will not see any benefit.

INCOME TAX

THe Prime Minister is also looking at ending the four-year freeze on income tax thresholds, brought in by Mr Sunak to help pay for Covid debts.

Increasing the thresholds would effectively act as a wage increase for workers.

And it means those who receive a pay rise — to help with soaring inflation — are less likely to be pushed into a higher tax bracket.

Miss Truss is reportedly planning to raise the tax-free personal allowance, which currently sits at £12,570, and the higher rate threshold, which kicks in at £50,271.

Mr Kwarteng is also considering bringing forward a planned 1p cut in the basic rate of income tax, which is not due to come in until 2024.

Laith Khalaf, head of investment analysis at AJ Bell, says the measure has ‘ the potential to provide an adrenaline shot directly to the heart of the UK

consumer economy’. But, as with NI, those hit hardest by the cost-of-living crisis are unlikely to benefit.

Miss Truss has additionally proposed allowing couples to pool their personal tax allowance. This would mean one spouse could earn up to £25,140 tax- free if the other is not earning, for example due to caring responsibilities.

Rachael Griffin, tax and financial planning expert at Quilter, says: ‘Although not a bad idea, this won’t help families who have two working parents.’

Positively, the Prime Minister has also ruled out introducing further levies. She told the final leadership hustings in London in August: ‘No new taxes.’

TRIPLE LOCK

IN Good news for pensioners, the new Government is committed to reintroducing the triple lock, which guarantees the state pension increases each year by whichever is the highest of Consumer Price Index (CPI) inflation, average earnings growth or 2.5 pc.

The triple lock was suspended for the 2022/2023 tax year, with the state pension instead rising 3.1 pc — in line with CPI inflation for the year to September 2021.

Jon Greer, head of retirement policy at Quilter, says: ‘There will be a huge sigh of relief from millions who have seen the real terms value of their income from the state pension drop due to inflation this year.’

VAT CUTS

VAT may also be slashed by up to five percentage points across the board in a move which could save families up to £1,300 per year. Miss Truss is said to be mulling over a reduction to 15 pc.

VAT — currently set at a standard rate of 20 pc — is charged on a range of goods and services, but is generally not charged on items considered ‘essentials’, such as most food sold in supermarkets. It is charged on meals eaten in restaurants and alcohol.

Cutting it by 5 percentage points would be the largest reduction in history and would cost around £38 billion for one year, according to analysis by the IFS.

Mr Sunak’s team had previously ruled out cuts to VAT.

CORPORATION TAX

MISS Truss said she would not implement the planned corporation tax hike on larger businesses from 19 pc to 25 pc. The move is designed to ensure the UK remains attractive for investors.

For a business with £500,000 of taxable profits, this would save them around £30,000 a year, according to analysis by Interactive Investor, while a larger business with taxable profits of £2 million would save £120,000.

However, small businesses with taxable profits under £50,000 would save nothing, as their Corporation Tax was not due to increase under the planned changes and would have remained at 19 pc.

AND WHAT ELSE?

MISS Truss has hinted at a number of other policies while on her campaign trail, including a full review of UK taxes.

This could include inheritance tax — the nation’s most loathed financial levy. Ms Griffin says: ‘As a tax that the general public love to hate, inheritance tax seems an area ripe for reform.’