South Wales Evening Post

Sunak blasts VAT cut as ‘regressive’

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RISHI Sunak’s team has warned that cutting VAT by 5% across the board would be “regressive” and cost tens of billions of pounds amid reports that Liz Truss is considerin­g the move as a “nuclear” option.

It is one of a series of possible strategies to ease the cost-of-living crisis being drawn up by the Treasury for the new prime minister to look at when they take office, according to The Sunday Telegraph.

The newspaper said the 20% headline rate of VAT could be cut by up to 5%, saving the average household more than £1,300 per year.

But a source from Mr Sunak’s campaign said this would be “incredibly regressive” and cost north of £30bn.

The Sunday Times also reported that Ms Truss is considerin­g slashing VAT as part of an emergency package to help households cope with rising prices.

Another option being weighed up by the Foreign Secretary is a cut to income tax, the paper said, with proposals from allies including increasing the level above which people start paying the levy.

Others in the Truss camp have suggested raising the tipping point for the higher rate of 40% and cutting the basic rate below 20%, it added.

A Treasury spokesman said the department is making the “necessary preparatio­ns” to ensure the next government has options to deliver extra help “as quickly as possible”.

It comes after Boris Johnson said that whoever succeeds him in No 10 would announce “another huge package of financial support” as Britain faces sky-high costs this winter.

The outgoing PM hinted at the scale of the options to ease the burden being teed up for either Ms Truss or Mr Sunak to consider, as he insisted “we must and we will help people through the crisis”.

The Sunday Telegraph cited a source close to the discussion­s about the next steps as saying cutting VAT is “the nuclear option”.

In an article for Mail+, Mr Johnson acknowledg­ed that the next few months will be difficult – “perhaps very tough” – as “eye-watering” energy bills take their toll, but he forecast the UK will emerge “stronger and more prosperous [on] the other side”.

He said “colossal sums of taxpayers’ money” have already been committed to assisting people with their bills.

But he added: “Next month – whoever takes over from me – the Government will announce another huge package of financial support.”

Chancellor Nadhim Zahawi has suggested people earning around £45,000 per year could be among those struggling to cope with soaring living costs as the energy price cap is increased again.

Regulator Ofgem warned the UK Government on Friday that it must act urgently to “match the scale of the crisis we have before us” as Britain faced the news that the average household’s yearly bill will rise from £1,971 to £3,549.

 ?? JOE GIDDENS/PA WIRE ?? Conservati­ve Party leadership candidate Rishi Sunak
JOE GIDDENS/PA WIRE Conservati­ve Party leadership candidate Rishi Sunak

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