'Screeching U-turn': Team Truss says Sunak tax cut is 'gambit for leadership'

On Wednesday, Rishi Sunak promised a temporary VAT cut on energy bills during the debate, as Deputy Political Editor Anushka Asthana reports

Prime ministerial hopeful Rishi Sunak is being accused of making a "screeching U-turn" by his rival's campaign, with team Liz Truss saying the former chancellor has now pledged tax cuts in a "gambit for leadership" as he trails in the polls.

The ex-Cabinet minister, who for the entirety of his campaign to be PM has attacked tax cuts promised by his opponents, announced following a TV debate with Ms Truss that he would scrap VAT on all domestic energy bills for the next year.

He said his plan to help with the cost of living would save the average household £160 and cost the state £4.3 billion, compared with the £55 billion in tax cuts promised by Ms Truss.

A source close to the Truss campaign said Mr Sunak's move was welcome, releasing an ironic statement which said: "It's good that Rishi has finally woken up and decided to offer something to people struggling with the rising cost of living."

"However," the source added, "this feels like a screeching U-turn from someone who has spent the last few weeks of the leadership campaign branding everyone else’s tax cuts immoral and fairytales.”

The Foreign Secretary was asked about her rival’s pledge during a visit to Romford on Wednesday, but refused to launch any personal attacks against Mr Sunak and instead challenged him to cut more taxes.

She insisted everyone needs to recognise that tax - at its highest level for 70 years - has to come down.

Ms Truss pointed out that the Tory manifesto pledged not to increase National Insurance - something her opponent introduced to help tackle the NHS and social care's backlog.

“I welcome the fact that he is now saying that we should cut taxes because that’s what we need to do," she said. “I’d like to see more.

“I’d like to see him commit to going and reversing the national insurance rise because that national insurance rise has hit families in the pocket."

Ms Truss said she would use general taxation to fill the gap in NHS funding left by her plan to reverse Mr Sunak’s national insurance increase and believes she can start bringing debt down after three years while simultaneously growing the economy.

“I want a country where people who work hard and do the right thing, set up their own businesses, go into work are rewarded, and that’s why I want to lower tax," she added.

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Key Sunak backer Grant Shapps, the transport secretary, has denied a U-turn, saying the pledge was "consistent" with what support he's offered in the past and the former chancellor says it's in response to a predicted rise in energy costs.

But Business Secretary Kwasi Kwarteng insisted it was a U-turn, as he pointed to Mr Sunak's previous stance on VAT cuts while chancellor.

"What isn't consistent is arguing against VAT cuts because they help richer people and they're not targeted enough, and then three weeks after you've left the office of chancellor saying that actually it's a good idea to help people with energy bills by removing VAT.

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"That's a U-turn, if that isn't a U-turn, I don't know what is," he said.

Mr Sunak, delivering an economic update to the Commons while chancellor in February, warned against a VAT cut on energy.

He said: "I know that some in this House have argued for a cut in VAT on energy. However, that policy would disproportionately benefit wealthier households.

"There would be no guarantee that suppliers would pass on the discounts to all customers, and we should be honest with ourselves: this would become a permanent government subsidy on everyone’s bills, a permanent subsidy worth £2.5 billion every year, at a time when we are trying to rebuild the public finances."

Rishi Sunak attacks VAT cuts on energy bills while chancellor:

However, when announcing his VAT cut on energy bills last night, he said he would "immediately" scrap VAT on energy bills if elected prime minister.

“Tackling inflation and getting people the support they need to help with the cost of living is critical.

“That’s why, with the price cap expected to rise above £3,000 in October, I will move immediately to scrap VAT on everyone’s domestic energy bills for the next year, saving the average household £160.

“This temporary and targeted tax cut will get people the support they need whilst also – critically – bearing down on price pressures.”

Many have suggested this pledge was made in a bid to win over voters, with Foreign Secretary Truss still the favourite to win the race.

The Cabinet minister has also promised to cut murders by 20% if she's elected PM.

At the suggestion her tough stance on crime was a gambit for leadership, Mr Kwarteng hit back, saying it was an "ambitious target" and "if we want to talk about gambits for leadership, we can talk about U-turns on tax, that seems to me more fertile".

Ballot papers will be posted through Tory member letter boxes next week and the winner of the leadership contest will be announced on September 5, meaning the former chancellor is running out of time to gain support.

Ms Truss's promises of vast tax cuts have helped her come out ahead in opinion polls and member surveys.

During Tuesday night's TalkTV/Sun debate, which was halted after host Kate McCann fainted live on air, Ms Truss said it was "morally wrong" to raise taxes during a cost-of-living crisis, but the former chancellor hit back by saying it was "morally wrong" to heap more debt on future generations.

The two also clashed over the rise in national insurance, brought in to help pay for the NHS and social care, with the former chancellor describing himself as "brave" for introducing the £12 billion tax increase.