About-turn on energy tax cut ‘is inflationary’

THE former chancellor’s promise to scrap VAT on energy bills for a year is “inflationary”, the Institute for Fiscal Studies warned yesterday, as his aboutturn on tax cuts appeared to backfire.

Rishi Sunak is now promising to introduce the “temporary and targeted measure” for a year and said it would save households £160 on average, while costing the Treasury an estimated initial £4.3billion.

The IFS said: “While the policy would reduce energy prices directly, leaving more money in people’s pockets would encourage more spending on other items, slightly adding to inflationary pressures elsewhere.”

It came as supporters of Liz Truss invoked Margaret Thatcher to criticise Mr Sunak’s change of heart – he rejected the measure in February while he was chancellor.

Simon Clarke, the Chief Secretary to the Treasury, said on Twitter: “U-turn if you want to. The lady’s not for turning.”