DOWNING Street is considering slashing VAT in a bid to help struggling families battle the cost of living crisis, it is reported.
The proposals to cut VAT from the headline figure of 20 per cent could reduce the tax bill for millions of Brits.
The move would help ease the pressures faced by households as the cost of living crisis continues.
The Prime Minister’s chief of staff Steve Barclay has suggested reducing the rate on a temporary basis, The Times reports.
However, there are fears the Treasury has warned the move could end up fuelling inflation by overstimulating the economy.
Inflation, which reached 9.1 per cent last month, is at its highest in four decades.
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It has contributed to strikes or threats of industrial action by workers across transport services, schools, postal services and hospitals.
And making matters worse, official figures show the number of people expected to be subjected to a higher tax bracket will reach 6.1million this year.
It comes after Boris Johnson hinted at cutting VAT on energy bills to save Brits hundreds of pounds.
The PM said he would not “rule out” cutting tax as families continue to feel the squeeze from the cost-of-living crisis.
Speaking to BBC Radio 4’s Today programme on June 18, Mr Johnson said the Government is doing “a huge amount” to support people “with the fiscal firepower we have”.
Asked why he had not yet cut VAT on energy bills, he said: “I don’t rule out that we will do it.”
He said the Government had “already cut fuel duty by record amounts”, but he acknowledged this would be “swallowed up” and added: “There may be more that we have to do.”
Pressed on whether the tax will be slashed further he said: “We want to make sure that those cuts are properly passed on to the consumer.”
Speaking on June 25, Mr Johnson dangled tax cuts to frustrated voters and businesses after his double by-election drubbing.
The PM promised only the Tories would cut levies to “turbo charge” the UK and get the cost of living crisis under control.
Fighting to get back on the front foot after losing two by-elections and the shock resignation of his party chairman, he told reporters: “I’m not going to pretend these are brilliant results”.
But he vowed: “We are the government that believes in cutting taxes, and we want to get into a situation where sensibly and responsibly we can turbo charge the attractions of the UK as a place to come and invest by having the best possible tax framework as well for businesses and for families.”
Millions of Brits will get the first chunk of their cost of living payments in just over two weeks after a law was passed.
New rules were given the rubber stamp to pay people direct to their bank accounts for the first time.
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The first £326 for eight million people is expected from July 14 onwards.
The second part will come in the autumn.