Chancellor drawing up tax cut package for businesses facing bankruptcy

According to The Times Zahawi, who is working on an emergency energy strategy for the new prime minister, said the government could learn the “lessons from Covid” and introduce targeted reductions in VAT and business rates to help the retail and hospitality sectors. These tax breaks could also be given to energy-intensive industries. 

While he’s not expected to remain chancellor when the Tory leadership contest ends on Monday, the outlet understands he has discussed his plans with the leadership frontrunner Liz Truss. 

Zahawi warned that failing to act could force many companies into bankruptcy and lead to economic “scarring”, but insisted Truss would “deliver help” to families and businesses. 

According to the outlet, the chancellor has said: “If we don’t support businesses I worry about the longer-term of the economy. 

“I had an example given to me the other day from EDF. One of their clients, their bills have gone from £25m a year to £75m. This is a perfectly viable business. 

"We have to make sure we support businesses as well as households.” 

He also said he was in favour of a targeted approach that helped those worse hit, explaining “the lesson from Covid is that actually there are some levers like VAT, like business rates”. He added: “Targeting particular sectors of the economy, whether it’s hospitality or high energy use sectors, can be done very effectively.” 

According to The Times, Zahawi would - however - not say how much money the government would make available to businesses but highlighted underspending in the government’s budget for infrastructure projects could be used to fund the help.