As inflation is forecast to rise by £40 billion, the Lib Dems are calling for a tax cut.
It is estimated that the Treasury will receive about £40 billion in additional VAT revenues as a result of surging inflation.
Office for Budget Responsibility data suggests that Chancellor Rishi Sunak would enjoy a VAT windfall of £38.6 billion over the next four years, with working households expecting a £428 VAT tax bill increase in 2022-23 alone because of growing retail prices.
Leader Sir Ed Davey intends to focus his local election campaign on the cost of living crisis, insiders said.
Families are struggling to make ends meet because of rising energy costs, according to Sir Ed Davey.
The Lib Dems propose a one-year, £600-per-family VAT decrease from 20% to 17.5 percent, which they believe would save households hundreds of pounds.
To aid struggling high street businesses and keep inflation in check, they argue the ideas will encourage spending and lower costs in the shops.
Using figures from the Resolution Foundation’s research tank, the party said the increased VAT cost comes on top of the Chancellor’s Conservative manifesto-busting tax increases, which include freezing the income tax threshold and raising national insurance by 1.25 percent points on Wednesday.
According to the Lib Dems, even before the additional VAT pinch is felt, the economic measures will leave a typical family £535 worse off each year.
Sir Ed claimed that “families are suffering from increasing energy bills and sorely need a tax cut to help them make ends meet” ahead of commencing the party’s local election campaign in south London on Wednesday.
Although the Conservatives have broken their commitments by repeatedly hiking taxes, they are still unable to help.”
Tax revenue from VAT will rise by over £40 billion over the next four years because of inflation. Chancellor Rishi Sunak
There will be over £40 billion extra in the Treasury over four years because of inflation, the Lib Dems say (Kirsty O’Connor/PA) “These elections are an opportunity to send a message to this Conservative Government that they can’t afford… to take people for granted.”
“We will push for a fair settlement that puts money into the pockets of struggling families through an emergency tax cut,” he continued.
The Lib Dems will propose a sewage levy on water corporations as part of their local election campaign to raise money for river clean-ups.
There is also a proposal to create a national community ambulance fund that would allow trusts to reopen and cancel scheduled closures of ambulance stations.