Rishi Sunak’s plan to cut VAT on energy bills a screeching U-turn, says Kwarteng

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Rishi Sunak’s last-minute proposal to cut VAT on energy bills has been described as “a screeching handbrake U-turn” by the business secretary, Kwasi Kwarteng.

Kwarteng, who is supporting Liz Truss in the race to become prime minister, said on Wednesday: “If this isn’t a U-turn, I don’t know what is.”

But Grant Shapps, an ally of Sunak, defended the former chancellor’s stance, saying a VAT cut on energy bills was worthwhile and would not be inflationary.

Sunak had previously been the only candidate in the Conservative leadership contest who did not pledge to cut tax. But on Tuesday evening as his chances of leading the country appeared to be ebbing away in the polls, he announced he would scrap VAT on energy bills, saving the average household £160.

In a series of broadcast interviews on Wednesday morning, Kwarteng was damning about Sunak’s change of position.

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He told Sky News he was “delighted to see that Rishi Sunak has now come late to the party and decided that tax cuts are a good idea and they’re not a fairytale. And that being a grownup … does mean that you can have tax cuts.”

Sunak had argued against the tax cut in question in February when he was chancellor, telling the Commons the policy “would disproportionately benefit wealthier households”. Sunak said the cut was “targeted and temporary” and called it a winter plan to tackle rising energy bills.

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Kwarteng said: “Let’s not beat about the bush: this is a U-turn. A few months ago, he said that VAT on energy bills would disproportionately help richer people; it wasn’t targeted enough at people who are vulnerable and that’s why he decided not to go with it. People were suggesting it. He rejected that.

“Only last week he said that tax cuts were part of a fairytale, that he was the only grownup in the contest because he was lifting taxes where all the other candidates were suggesting tax cuts. So I’m delighted that today, he’s announcing that he wants to remove VAT on energy bills. It is a U-turn. I mean, if this isn’t a U-turn, I don’t know what is.

Shapps hit back, telling ITV’s Good Morning Britain: “The thing is, with this particular cut, what it does not do is add to inflation. In fact in the short term it would be deflationary because people’s costs would reduce, in the medium term it would not have an impact on the consumer prices index.

“[Sunak] is saying: ‘Here’s something that won’t add to inflation that would save every person watching your programme £160 off their energy bills.’ I think that’s worthwhile.”

Before a TalkTV debate between the two candidates on Tuesday night was cut short after the host, Kate McCann, fainted, Truss had attacked Sunak for raising national insurance to fund the NHS and social care in the wake of Covid-19.

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Truss said: “I do think it is morally wrong at this moment when families are struggling to pay for food that we have put up taxes on ordinary people when we said we wouldn’t in our manifesto and when we didn’t need to do so.”

Throughout the contest, Sunak has defined himself as the candidate prepared to make unpopular decisions on tax to keep the economy stable and curb borrowing.

In Tuesday’s debate, he appeared to stick to his guns by criticising Truss for proposing to delay the repayment of debts accrued during Covid. “What’s morally wrong is asking our children and grandchildren to pick up the tab for the bills that we are not prepared to meet,” he said.