Truss’s plans to slash VAT are ‘regressive and flawed’, says Sunak’s team

theguardian.com:

Liz Truss’s plans to tackle the cost of living crisis by slashing VAT across the board will do little to help those struggling to pay food bills and benefit richer households substantially more, Rishi Sunak’s team has claimed.

The frontrunner in the Conservative leadership race was accused of considering a “regressive” and “flawed” move that could cost the exchequer up to £38bn a year, while the government faces calls to offer more support with rising energy costs.

With the Tory leadership contest entering its final week, a fresh row erupted over Truss’s “nuclear” option of cutting VAT to help those who will see their gas and electric payments soar. It follows confirmation that the energy price cap will rise by 80% from October in England, Scotland and Wales.

Alongside several pledged tax cuts, Truss was reported by the Sunday Telegraph to be considering reducing the headline levy of 20% on goods and services by 5% – the largest ever reduction.

It was said to have been examined by the Treasury as part of modelling on Gordon Brown’s response to the 2008 financial crash, when VAT was cut from 17.5% to 15% for a year.

But a source in Sunak’s team said given VAT was not paid on basic items such as staple foods, the move would do “nothing to help families pay their supermarket bills”.

They called the plan “flawed on many levels” and “regressive”, claiming it would benefit richer households with “very little to no benefit for lower income households who will need the most help this winter”.

The source added it was “yet another addition to Liz’s spending black hole” – adding to the “existing £60bn of other unfunded permanent tax cuts … all paid for through borrowing money we don’t have, and risking stoking inflation further”.

Truss’s