Truss 5% VAT cut plan ‘incredibly regressive’

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 £30 billion.

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”.

Yesterday, Sunak supporter and former Cabinet minister Simon Hart acknowledged the current situation is “frustrating” for people.

But he told Sky News: “To speculate now about what the extent of the challenge would be and then come up with a solution is, I think, slightly unreasonable.

“Is there going to be a specific number? Are we going to say ‘We are going to give you this amount of money on September 7’? No, I think that would be irresponsible to do that.

“What we can say is – like the prime minister has – there is a package on its way.”

He later said he would not commit to backing Ms Truss’s planned fiscal event if she wins the keys to No 10.

In a swipe at the foreign secretary’s financial proposals, he told Times Radio the crisis is “not going to be resolved by just a sort of eye-catching tax cut announced on day one”.

“This is much more complex than that,” he said.

He added: “I’m not going to sit here ... and say I hereby pledge that I’m going to vote for or against (proposals) we haven’t even seen yet.”

Ms Truss has promised “decisive action” to deliver “immediate support” if she wins the contest.