British leadership frontrunner Liz Truss is considering cutting value-added tax by 5 per cent across the board to help tackle the cost-of-living crisis if she succeeds Boris Johnson as prime minister, the Sunday Telegraph reports.
The British government has faced growing calls for immediate financial support to households struggling with squeezed budgets as energy bills jump 80 per cent to an average of £3549 ($6051) a year from October.
Ms Truss’ leadership campaign is considering the plan as a “nuclear” option, the Telegraph quoted an unnamed source as saying. Other options include a 2.5 per cent cut in the VAT sales tax, from the current standard rate of 20 per cent.
A 5 per cent cut in VAT would save the average household more than £1300 a year, and would cost British taxpayers £3.2 billion a month, according to analysis by the Institute for Fiscal Studies think tank, the Telegraph said.
Separately, the Times newspaper reported Ms Truss was also considering an emergency cut to income taxes.
Some of her allies believe that the personal allowance, the rate above which people start to pay income tax, should be lifted, the paper said.
In May, the government set out a £15 billion support package, including a £400 energy bill credit for every household.
The BBC, citing her campaign team, reported Ms Truss had ruled out further direct support for everyone, the approach favoured by her rival for leadership of the governing Conservative Party, former finance minister Rishi Sunak.
Ms Truss has previously said she favoured tax cuts rather than handouts.
Sunak supporter and former minister Simon Hart told Times Radio on Sunday the cost-of-living pressures people faced would not be resolved by “just an eye-catching tax cut”.
Soaring energy bills, exacerbated by Russia’s invasion of Ukraine, have driven inflation in Britain to 40-year-highs. But the government’s response has been hampered by the race to replace Mr Johnson, which runs until September 5.
The government has said it is preparing options on a support package for the next prime minister to consider.
Ms Truss was also considering extending a 5-pence cut in fuel duty, the Telegraph said.
“Liz will consider options to help people but it would not be right for her to announce her plans before she has even been elected prime minister or seen all the facts,” a Truss campaign source said.
Writing in the Mail on Sunday, Mr Johnson acknowledged energy bills were going to be “eye-watering”.
“Next month – whoever takes over from me – the government will announce another huge package of financial support,” he said.
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