Rishi Sunak was on Wednesday accused by a former Cabinet colleague of “flip flopping” over tax cuts, after he announced a pledge to slash VAT on domestic energy bills.
With polls showing the former Chancellor is behind Liz Truss in the race to succeed Boris Johnson as prime minister, Mr Sunak has watered down his previous opposition to cutting taxes by announcing a new “winter” plan to help ease the cost of living crisis.
This includes a commitment to removing VAT on energy bills if the Ofgem energy price cap exceeds £3000 this October. Analysts have already predicted the cap could hit £3200, up from the £1971 in April.
But Business Secretary Kwasi Kwarteng, who is supporting Foreign Secretary Liz Truss, said Mr Sunak had “flip-flopped and U-turned” on the question of tax cuts, adding on LBC that he was “pleased” to see he had changed his mind.
He added: “He said tax cuts were a fairy-tale, I think that was the word he used, he also implied he was the grown up because he was going to simply continue the status quo of increasing taxes...belatedly I am very happy to see he has changed his mind and the VAT cut he is proposing today is the very cut he opposed when he was Chancellor until about three weeks ago.
“We have got to remember that he was Chancellor until three weeks ago and he was two and half years in that job where he didn’t think it was right to cut VAT on energy bills. In fact earlier this year he was in the House of Commons, I was with him sitting on the front bench when he said this was the wrong tax cut because it would disproportionately favour richer households.
“I am pleased to say he wants to cut taxes now, pleased to see he has changed his mind, but I am backing a candidate that was much more consistent on this big question on whether we can incentivise the economy by reducing people’s tax burden.”
But Transport Secretary Grant Shapps, who is backing Mr Sunak, dismissed claims of a U-turn, saying the move was a “sensible and rational way to operate”.
Mr Shapps added on Sky News it was “consistent” with Mr Sunak’s previous commitment to keep support for struggling households under review.
He said: “He has done a huge amount on energy and actually on the cost of living, some £37bn. He has said he can do something further on energy bills - this would be a one off - it would be removing VAT on fuel for one year, which would be about £160. It’s consistent with what he has said all along which is he would always keep these things under review and that’s what he has done.
“And it isn’t inflationary, it reduces people’s bills in the shorter term and in the medium term it does nothing either way in terms of the Consumer Prices Index ...all in all it’s policy that stacks up and helps people pretty quick as well.”
The divide between Mr Sunak and Ms Truss on tax and the economy has been the defining issue of the leadership campaign so far, with the former Chancellor consistently arguing the Foreign Secretary’s pledge of £30bn of tax cuts would drive up inflation, risking higher interest rates.
Ms Truss meanwhile has said Mr Sunak’s plan to hold off until inflation - already at 9.4 per cent - is back under control next year risks tipping the UK economy into recession.
But with a YouGov poll on Tuesday showing the 50 per cent of Tory members thought Ms Truss won Monday’s night’s crucial BBC debate, compared to 39 per cent for Mr Sunak, the former Chancellor is under pressure to act fast to try and turn his leadership bid around.
Chris Curtis, head of political polling at YouGov said his move on VAT had “created a rod for his own back”, adding “it’s certainly not I would have done if I was in his shoes”.
“Rishi Sunak is ultimately running out of time, running out of opportunities to start closing that gap among Conservative Party members. Monday night was a really big opportunity to do so and it doesn’t look like he managed to do it.”
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 Foreign Secretary said: “What has happened is that the tax has been raised on families through national insurance so that they are having to pay more money to the Treasury.
“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.”
Interjecting, Mr Sunak said: “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.”
The two also clashed over the rise in national insurance, brought in to help pay for the NHS and social care.
The former chancellor described himself as “brave” for introducing the £12 billion tax increase to pay for health social care, telling the debate: “I made sure we got the NHS the funding it needed to help work through the backlogs, get everyone the care they needed and do that as quickly as possible.
“It wasn’t an easy thing for me to do, I got a lot of criticism for it, but I believe it was the right thing to do as I don’t think we can have an NHS which is ultimately the country’s number one public service priority that is underfunded and not able to deliver the care it needs.
TalkTV apologised to viewers for not resuming the programme, which was taken off-air just over halfway through, saying in a statement: “Kate McCann fainted on air tonight, and although she is fine, the medical advice was that we shouldn’t continue with the debate.”
Ms McCann, TalkTV’s political editor, was meant to co-host The Sun’s Showdown: The Fight for No.10 alongside The Sun’s political editor Harry Cole, but he tested positive for Covid-19 hours before the programme was due to air.
