Truss urged to cut fuel duty and cap energy bills

The votes are in and it’s Liz Truss as Prime Minister. So what now? RIFT Tax Refunds has laid out what we can expect from our new PM when it comes to our taxes, as well as urging her to remove fuel duty for 12 months and cap energy bills at £1,1750 for the next year, if she wants to help the average household.

After a somewhat odd battle or more a squabble between Truss and Sunak as the rather limited choice of leader provided to the Conservative Party rank and file, Liz Truss crushed Rishi Sunak with 57% of the membership vote. This is a far lower share of the vote than Boris Johnson, Theresa May, David Cameron or even Ian Duncan Smith before her.

Well, after weeks of uncertainty at least we now have a fresh face and undoubtedly some fresh policies about to emanate from Downing Street.

The candidates, when not tearing lumps out of each other, have made a number of promises and not least around taxation. Rishi Sunak on the one hand didn’t seem to want to do much at HMRC level at all as yet, however Liz Truss has been pretty bold with her promise to slash the following:

Reducing VAT from 20% to 15%
National Insurance - a return to pre-Sunak levels, reversing his hike in April
Corporation Tax - ditto
Doing away with Green Levies within consumer and business energy bills
Capping electricity and gas bill increases
Increase Married Tax Allowance

Cost to the Treasury?

Vat - £38 billion
National Insurance - £13 billion
Corporation tax - £19 billion
Green Levies - £11 billion
Energy bills - Unknown (depends upon how and how much)
Married Tax Allowance - £7bn

(Source: The Resolution Foundation)

So that’s a package of measures that tots up to £88 billion each year plus whatever the energy bill cap methodology works out to. Add another £49 billion if this is proposed as halving the current energy cap level for each of the UK’s 27.8 million households.

£137 billion. That’s greater than the Government budgets for education, defence and justice combined. Every year. Therefore within three years Prime Minister Truss will have presided over an increase in the deficit of £400 billion - about the same as the pandemic cost us.

The problem, apart from the enormity of the borrowing that this will entail and at higher money costs than in years, is that much of this will not even target those that need the support most.

Tax cuts to business and NI reductions to ordinary tax-payers in fact, will miss most of the vulnerable within our population that do not even pay tax. 3.5 million couples now cohabit rather than as married (up 137% since the 1990’s). And VAT cuts would also benefit bigger spenders more than those with meagre budgets.

RIFT has the solution and it’s simple.

Remove petrol and diesel duty for 12 months - cost £26 billion
Cap household electricity and gas bills at £1750 for 12 months - cost £50 billion

£76 billion is almost half the cost of Liz Truss’s proposals but in their view much better targeted to ALL households and ALL car users. Proportionately, this move would benefit the less well off more.

Importantly, the cost of food and consumer goods has escalated largely because transport costs have risen so starkly. Reducing fuel duty reduces transport costs and consumer goods costs too therefore applying respite across the high street and in turn lowering inflation. A win win.

In RIFT’s opinion, their proposal represents much more bang for the new Prime Minister’s buck. And very possibly a political win as the parties venture toward a general election too?