Rishi Sunak announced he would eliminate VAT on all domestic electricity bills next year, saving the average household £160 if he becomes prime minister.
The move is part of the former chancellor’s “winter plan” to combat inflation and the rising cost of living emergency, which his campaign team says contrasts with the £55bn inflationary budgetary commitment Liz Truss has taken on.
In addition to eliminating VAT on all domestic electricity bills, the Conservative leadership has said it hopes to introduce major supply-side reforms aimed at reducing costs.
Mr Sunak said: “Fighting inflation and giving people the support they need to help with the rising cost of living is critical.
“That’s why, when the price cap is expected to exceed £3,000 in October, I will immediately move to eliminate VAT on all domestic electricity bills next year, saving the average household £160.
“This temporary and targeted tax cut will give people the support they need and also – very importantly – reduce price pressures.”
He added: “As chancellor, I have kicked £400 off all electricity bills and provided £1,200 of support for the most vulnerable households. This additional VAT reduction will help deal with the current emergency.
“I will also begin to implement major supply-side reforms to address the growing financial pressure families face.
“It means getting more people out of social benefits urgently and getting them employed, as well as solving the supply chain problem.”
This temporary and targeted tax cut will give people the support they need and, crucially, reduce price pressures.Rishi Sunak
Under his new plan, Mr. Sunak will expand the workforce by tightening the rules on unemployment benefits, doubling the number of hours a person receiving benefits must work per week to avoid looking for a full-time job. .
It will also consider new incentives to support the return of inactive older workers to the labor market and reduce the UK’s dependence on French ports.
Mr Sunak said he would work with Britain’s biggest importers to improve trade with Dutch and Danish ports, ending disruptions that are causing shortages and rising prices.
Labor and Pensions Minister Teresa Coffey, who backs Ms Truss in the race for leadership, suggested the former chancellor drop his welfare proposals.
She said: “Helping people advance at work by getting better jobs and more hours is a key role for job centers.
“The DWP (Department of Work and Pensions) will soon change the rules so that people continue to look for additional work until they have at least 12 hours a week, with the intention of increasing this number in the future.
“The DWP had hoped to start this earlier this year but was unfortunately blocked by the former Chancellor.
“I share the desire to go further, but these new proposals require additional funding of £210m.
“In the meantime, we need to move on so we can help people become more prosperous and help the economy grow.”
Responding to Mr. Sunak’s ‘winter plan’, Shadow Treasury Secretary Pat McFadden said: “Please stand up, the real Rishi Sunak?
“Once again, he acts as his own personal rebuttal unit—criticizing a policy for months and then accepting it.
“Not content with playing cocaine with our taxes as Chancellor, he has developed a pathetic imitation of the windfall tax that Labor called for, and now he wants to lower VAT on electricity bills.
“It’s like he’s forcing himself to do tricky cover versions of a band he claims he’s always hated.
“This is just another example of the Tory party trying to hold on despite 12 years of continuous setbacks when the truth is they don’t have the time or ideas.”
Meanwhile, Liberal Democrat Treasury Department spokeswoman Sarah Olney said “this sounds like another Sunak scam.”
She added: “His tax hikes alone cost families four times more than this pathetic plan could ever have saved them.
“This is proof that both Sunak and Truss have lost touch and ideas. All they have to offer is ill-conceived policies that will not save people from frankly frightening electricity bill increases this winter.
“Both candidates are tax collectors, guilty of breaking promises made to the British public. We cannot trust them to run this country during an economic crisis.
“If Conservative MPs refuse to heed our calls for emergency tax cuts, they will have to pay the price of Blue Wall voters in the next election.”