Tweaks suggested by Sunak and Truss will create longer-term problems. The need for a third support package is inescapable
In the contest to mouth the words “tax cuts” as often as possible to attract the gaze of Tory party members, Rishi Sunak now says he would remove VAT on energy bills for a year. However much his camp protests otherwise, this is a U-turn of the screeching sort. As chancellor, Sunak had two goes at constructing an energy support package for households and he kept the 5% VAT rate in place both times.
More importantly, it’s a U-turn that does not come close to recognising the size of the hit coming to the pockets of poorer households. The sums here are not difficult. At £3,400 – a reasonable estimate for October’s price cap for an average household – axing VAT would produce an annual saving for consumers of £170. At £3,850 – the more speculative estimate of where the cap could be set in January if Russia continues to reduce gas flows through Nord Stream 1 to a trickle – we’re talking £192.50.
