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Rishi Sunak has announced he would scrap VAT on all domestic energy bills for the next year, saving the average household £160, if he becomes prime minister.
The move 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.
Mr Sunak said: “Tackling inflation and getting people the support they need to help with the cost of living is critical.
“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.”
He added: “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.
“I will also begin undertaking major supply side reforms targeted at the rising cost pressures families are facing.
“That means urgently getting more people off welfare and into work and tackling the supply chain crunch.”
This temporary and targeted tax cut will get people the support they need whilst also – critically – bearing down on price pressures
Under his new plan, Mr Sunak would expand the labour force by tightening up the rules on out-of-work benefits, doubling the number of hours someone on welfare has to work a week in order to avoid having to look for a full time job.
He would also look at new incentives to support inactive older workers to return to the labour market, and would reduce the UK’s dependence on French ports.
Mr Sunak said that he would work with Britain’s biggest importers to build up trade with Dutch and Danish ports, ending the disruption that is causing the shortages and the price increases.
Work and Pensions Secretary Therese Coffey, who supports Ms Truss in the leadership race, suggested the former chancellor U-turned on his welfare proposals.
She said: “Helping people progress in work by getting better jobs and more hours is a key role of job centres.
“DWP (Department of Work and Pensions) will shortly change the rules to ensure people keep looking for extra work until they have at least 12 hours a week, with an ambition to increase that in the future.
“DWP had hoped to get this under way earlier this year, but unfortunately was blocked by the former Chancellor.
“I share the ambition to go further but these new proposals require extra £210m funding.
“In the meantime, we need to get on so we can help people be more prosperous and help grow the economy.”
Responding to Mr Sunak’s “winter plan”, shadow Treasury minister Pat McFadden said: “Will the real Rishi Sunak please stand up?
“Once again he’s acting as his own personal rebuttal unit – attacking a policy for months then adopting it.
“Not content with playing hokey cokey with our taxes as Chancellor, he’s devised a poor imitation of the windfall tax Labour called for, and now he wants to cut VAT on energy bills.
“It’s like he’s forcing himself to do dodgy cover versions of a band he insists he always hated.
“This is just another example of the Tory party trying to cling on despite 12 years of continuous failure, when the truth is they are out of time and out of ideas.”
Meanwhile, Liberal Democrat Treasury spokesperson Sarah Olney said that “this sounds like another Sunak Swindle”.
She added: “His tax hikes alone have cost families four times as much as this measly plan would ever save them.
“It is proof that both Sunak and Truss are out of touch and out of ideas. All they can offer is half-baked policies which won’t save people from the frankly frightening rise in energy bills this winter.
“Both candidates are tax-hikers who are guilty of breaking promises made to the British public. We can’t trust them to govern this country through an economic crisis.
“If Conservative MPs refuse to listen to our calls for an emergency tax cut, they face a reckoning from Blue Wall voters at the next election.”