Solutions Liz could turn to as Prime Minister
CUTTING VAT
Proposal: The Treasury has drawn up options for a temporary cut in VAT of 2.5 or 5 per cent.
Pros: The move would cut inflation in the short term and deliver an immediate boost to both household incomes and the economy, helping to stave off a recession.
Cons: Expensive, at a cost of up to £30billion. Critics point out that energy and food bills attract little or no VAT bill.
RAISING INCOME TAX THRESHOLDS
Proposal: Plans to raise both the tax-free personal allowance and the threshold at which people start paying 40 per cent tax.
Pros: Would bring an early end to Rishi Sunak’s four-year freeze on thresholds, would prevent millions of people being forced to pay a high proportion of their income in tax. With inflation at more than 10 per cent it is hard to justify continuing the freeze.
Cons: Would deprive the Treasury of a huge windfall which could be used to fund other support measures.
CUTTING THE BASIC RATE OF INCOME TAX
Proposal: Bring forward a 1p cut in the basic rate, which is not due until 2024.
Pros: Would put immediate cash in the pockets of 27 million people who pay income tax and is in line with her approach of allowing people to keep more of their cash.
Cons: Mr Sunak has argued cutting income tax now would fuel inflation, leaving everyone worse off in the long-run.
DIRECT HELP WITH BILLS THIS WINTER
Proposal: The Treasury has put forward a range of proposals for helping the worst off this winter.
Pros: Measures such as raising the pensioners’ winter fuel allowance and increasing universal credit would directly target those people on ‘fixed incomes’ who need the most help.
Cons: Does nothing for those on middle incomes. Chancellor Nadhim Zahawi warned this weekend people on £45,000 salaries may need help – well above the level for claiming universal credit.
ENDING VAT ON ENERGY BILLS
Proposal: Allies of Miss Truss are urging her to borrow Mr Sunak’s plan to scrap the 5 per cent VAT on energy bills.
Pros: Would use Britain’s post-Brexit freedoms to offer everyone savings of around £170 a year.
Cons: Cutting VAT would be difficult in Northern Ireland, where EU rules still apply. The £170 cut is relatively modest when the energy price cap has soared to £3,549.