Economists have cast doubt over plans put forward by Rishi Sunak to cut VAT on energy bills - warning they could move the UK in the "wrong direction".
Last night the former Chancellor announced plans to scrap the 5% charge from October if the energy price cap tops £3,000 - sparking a fresh wave of blue-on-blue squabbling.
Mr Sunak was accused of flip-flopping after previously speaking out against the move.
Last night he claimed it would provide "targeted" support for those who most need it, but today the Institute for Fiscal Studies (IFS) said the biggest benefactors would be high users rather than those struggling to pay.
The IFS said once introduced it would be tricky politically to bring VAT back - but said if it became permanent it would move the UK in "exactly the wrong direction".
It is estimated that scrapping VAT on energy bills would save households around £156 a year, with the cost to the exchequer estimated at around £4.3 billion.
While this would be "bearable" in the short term, it could encourage more energy use if brought in over a longer period, an expert said.
Stuart Adam, a Senior Economist at the IFS, said: “By providing more support to those who use more energy, it would be well targeted at those who face the biggest rise in their energy bills, but not at those – the poorest – who are least able to cope with the rise in costs.
"If it were genuinely temporary, the fiscal and environmental costs of the policy would be bearable.
"The biggest risk with the policy is that it would prove politically difficult to restore VAT on energy bills at the end of the 12 months.
"As a permanent policy, removing VAT on energy bills would be a move in exactly the wrong direction: distorting households’ choices towards more energy use, making it harder to meet the UK’s ‘net zero’ targets and meaning that any reduction in emissions happened in a way that was more costly overall to households than it need be."
Labour have been pushing for a cut to VAT on energy bills for months - but Mr Sunak told the Commons earlier this year that the "policy would disproportionately benefit wealthier households."
He also said he plans to double the number of hours those on welfare have to work each week in order to avoid having to look for a full time job.
In January a Labour motion to force a cut in VAT on energy bills was voted down by Tories, with Boris Johnson previously branding the move a "blunt instrument".
After having a change of heart, Mr Sunak said last night: "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."
And he continued: "As Chancellor I knocked £400 off everyone’s energy bill and provided support of £1,200 for the most vulnerable households. This additional VAT cut will help deal with the current emergency."
Tory MPs are worried that the griping the issue provoked is harming the party's re-election hopes.
Responding to a tweet from Truss supporter Simon Clarke accusing Mr Sunak of u-turning, South West Devon MP Gary Streeter replied: "Wow guys be careful.
"You are not leaving much earth not scorched. We have got to unite ourselves and the country and win an election when all this is over."
Earlier Shadow Treasury Minister Pat McFadden accused Mr Sunak of "acting as his own personal rebuttal unit", while Liberal Democrat Treasury spokesperson Sarah Olney said "this sounds like another Sunak Swindle".
Truss backer Kwasi Kwarteng said Mr Sunak had pivoted as he was under pressure in the contest.
Asked whether Mr Sunak could win a general election, Mr Kwarteng told LBC radio: "He has flip-flopped and U-turned on this tax issue, which I find somewhat concerning, but he is a capable politician and a very likeable chap."
Work and Pensions Secretary Therese Coffey, another Truss ally, said: "Helping people progress in work by getting better jobs and more hours is a key role of jobcentres.
"DWP will shortly change the rules to ensure people keep looking for extra work until they have at least 12 hours a week with an ambition to increase that in the future.
"DWP had hoped to get this underway earlier this year but unfortunately was blocked by the former Chancellor.
"I share the ambition to go further but these new proposals require extra £210m funding. In the meantime, we need to get on so we can help people be more prosperous and help grow the economy.”
Sources within Ms Truss's camp claim that by delaying extra career support, Mr Sunak denied it to potentially hundreds of thousands of people.
But Transport Secretary Grant Shapps, a Sunak ally, defended the shift by the former Chancellor.
"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," he told ITV's Good Morning Britain.
Told it was a "flip-flop", Mr Shapps said: "If he hadn't produced £37 billion of support, about £1,200 to the hardest-up households already - if he hadn't done any of that and then suddenly did it then you would have a point.
"But he has, he has been providing all this support, now he 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."
