Liz Truss’s tax cut plans to tackle crisis are ‘fundamentally unserious’ and risk ‘mass poverty’

Plans put forward by Conservative leadership frontrunner Liz Truss have been condemned as “fundamentally unserious,” amid questions over the likely impact of tax cuts and a suspension of green energy tariffs.

Responding to Ofgem’s announcement of the increase in the energy price cap today, Truss’ team said that if elected she will “immediately take action” to support households during the energy crisis.

The Foreign Secretary has so far resisted calls for additional direct support on top of the payments announced already by the Government.

What are Liz Truss’s tax cut plans?

In a statement released in response to the energy cap price increase announcement, a spokesperson for Truss acknowledged that the rise “will cause grave concerns” to many households.

They said: “As Prime Minister, Liz would ensure people get the support needed to get through these tough times. She will immediately take action to put more money back in people’s pockets by cutting taxes and suspending green energy tariffs.

“This is on top of ongoing work such as the Energy Bills Support Scheme, which will see a £400 discount paid to consumers from October, and the £1,200 package of support for the most vulnerable.

“Liz will work flat out to deliver long term energy affordability and security, unleashing more energy by maximising our North Sea oil and gas production - helping keep down bills in the future.”

What experts say Truss should do

However, the plans have been criticised as being insufficient, with economists from across the political spectrum questioning whether either tax cuts or a suspension of green energy tariffs would make a meaningful difference to those most in need.

Many critics have pointed out that the poorest households, including many pensioners and those in receipt of benefits, do not pay tax so would be unaffected by changes to tax-free allowances.

James Meadway, director of the Progressive Economy Forum think tank, said Truss’ plans will “do nothing”.

He said: “Millions of people are at risk of fuel poverty whilst corporations like BP and Shell profit directly from their hardship. It’s the profiteering that has seen energy bills skyrocket - yet it is the biggest corporations Truss wants to cut the most tax from.”

Meadway says Truss should do three things if she becomes PM, starting with the cancellation of the energy bill hike, funded through “furlough-style government borrowing”.

He said: “The second is to bring failing energy companies back into public ownership. The third is to announce a massive investment programme for safe, secure, cheap renewable energy and home insulation.

"Anything less than this is failing to grasp the scale of the social and economic crisis we face.

“Truss’s current plans are fundamentally unserious."

Research by the Resolution Foundation estimated that her plans will increase the richest households’ disposable income by £936, while the poorest incomes will only get £92 more.

Some experts have speculated that Truss may be waiting until the leadership election is over to announce a raft of support measures which could potentially be unpopular with Conservative members, such as direct cash support.

Alex Chapman, Senior Researcher at the New Economics Foundation, described the measures set out by Truss so far as “wholly inadequate for the scale of the crisis”.

He said: “We can only hope that this is little more than political tactics for winning the Conservative leadership election which Truss plans to cast aside upon taking the reins.

“If they are not replaced with a meaningful strategy, mass poverty and destitution will result, while the ultra-wealthy line their pockets."

Pause on green energy levy could amount to £11 benefit to households

Analysis of Truss’planned tax cuts and green energy tariff ‘moratorium’ carried out by the Institute for Fiscal Studies (IFS) found that the policy could reduce energy costs for households by as little as £11 over three months.

The IFS points out that there is no single Green Energy Levy, but a number of different policies which increase energy costs to consumers.

However, due to high electricity prices, renewable generators actually have the effect of providing a net-benefit to suppliers.

As a result, the IFS claims that, “in three months from October, the net effect of green and social levies on bills is likely to be just £11 for a typical household”.

Writing on Twitter, Ben Zaranko, an economist at the IFS, said: “It’s possible that Liz Truss intends only  a ‘moratorium’ on a subset of levies - those that increase, rather than reduce, household energy bills.

“But even that would only save the typical household £50 this winter. Other forms of support will be needed.”