Liz Truss considers ‘nuclear’ option of five per cent VAT cut

In France, ministers pledged on Saturday to maintain caps on power prices that prevent energy firms from increasing by no more than four per cent into next year in an attempt to protect households from spiralling rates.

Ms Truss’s campaign has begun drawing up plans for her “emergency Budget”, but a source close to her said on Saturday night that it “would not be right for her to announce her plans before she has even been elected prime minister or seen all the facts”.

She is understood to have changed her mind after initially declaring there would be “no handouts” under her leadership, and is planning to appoint an economics adviser in Number 10 to help deal with the cost of living crisis.

“Three weeks ago they were saying that we need everything to be much more targeted, and it needs to be more precise – it can’t be a whole economy approach,” said a source with knowledge of her team’s discussions.

“But they just don’t have time to do that. People are going to start going out of business from the minute she takes office.”

Writing for The Telegraph, Robert Jenrick, the former housing secretary, said he had been the “first Cabinet minister to raise the threat of inflation back in 2020” and called for the new prime minister to “recognise the relationship between energy, power and geopolitics as great Western leaders once did”.

Despite backing Mr Sunak in the Tory leadership race, Mr Jenrick has been tipped as a potential Cabinet minister in Ms Truss’s government if she wins.

A Treasury spokesman said the Government was making the “necessary preparations to ensure a new government has options to deliver additional support as quickly as possible, adding: “No major fiscal decisions will be taken until the new prime minister is in post.”