ECONOMIC experts have warned Liz Truss’s tax proposals are “inappropriate” and risk exacerbating inflation.

The Institute for Fiscal Studies (IFS) has criticised the Foreign Secretary’s plans which would reportedly cut VAT by 5% across the board as a “nuclear” option – a move described as “regressive” by her rival Rishi Sunak’s team.

Ms Truss, the frontrunner to replace Boris Johnson as prime minister, is also reportedly considering cutting income tax.

Pointing to reports Ms Truss is ready to slash VAT, Paul Johnson, director of the IFS, said the proposal was “inappropriate” and risked exacerbating inflation, as he also warned against slashing income tax on top of other tax cuts.

Speaking to The Times, he said: “You clearly can’t do all of this without completely crashing the public finances.

“This simplistic mantra that you cut taxes and the economy grows more, that you cut taxes when you have a big deficit and high inflation, and you don’t do it with any other part of the plan, is quite worrying”.

The BBC on Sunday reported that Ms Truss had “ruled out” direct support for every household to assist with soaring bills.

But a source from the Foreign Secretary’s team later said that, while she is more attracted to targeted assistance, she has not yet ruled anything out.

“Liz has been clear we need to lower the burden of taxation and focus on boosting energy supplies and this will be her priority as prime minister,” they said.

“She’s also been clear further support may be required to help.

“Her preference is to target this to those most in need, but isn’t ruling anything out.”

The Truss campaign has said the Tory leadership frontrunner is leaning towards targeted support over help for all to ease the cost-of-living crisis, but maintained she is not “ruling anything out” at this stage.

Former chancellor Alistair Darling condemned the UK Government for “fiddling around with small measures” as he called for bold action to avoid a “lethal cocktail” of skyrocketing energy prices, recession and high inflation.

He told BBC Radio 4’s Today programme: “You need something significant and substantial and you need it now, because people’s bills are going to start coming in in a few weeks time.

“If you don’t do that then you have the risks that I’ve been describing, that the economy will slip into recession with all that entails.

“And when you’ve got that on top of the fact you’ve got inflation already at very, very high levels we haven’t seen since the 1970s, this is a lethal cocktail, which is why it needs bold action taken by the Government now, not fiddling around with small measures that frankly won’t make any difference at all.”

The Labour ex-chancellor added that the lesson he learned in the 2008 financial crisis was that Government had to do “more than people expect”.

The SNP’s Alison Thewliss has condemned both Ms Truss and Mr Sunak for a failure to “put forward a real plan to support people through the cost-of-living crisis”, adding that “the current PM is missing in action”.

She said: “The best either PM hopeful has come up with is to scrap the 5% VAT on domestic energy and axe the green energy levy.

“Truss and Sunak are living in fantasy land with their tax promises, or they are knowingly misleading the public on how effective they will be. Either way, their actions - or lack of - are dangerous for the millions who are struggling to make ends meet in this cost-of-living crisis.”

Ms Thewliss added: “Households and businesses need the Westminster government to get a grip and use its reserved powers to take immediate and radical action to support them with record high energy bills.

“That means reversing the energy price cap rise, and recalling parliament immediately to deliver an emergency budget that provides the support people need - including scrapping VAT on fuel, doubling support for households, and introducing an energy price cap and grants for businesses.”

Conservative minister Victoria Prentis insisted the UK Government is drawing up options for the next prime minister and argued that targeted support is needed.

“I would like to reassure that there are many, many different plans being worked on by civil servants and ministers at the moment, and whoever comes in as the next Conservative leader and our next prime minister will have the background work ready and will be able to make those difficult choices very quickly and before it’s needed,” she told Times Radio.

“We need to make sure that while we will be providing some general support, … most of our support goes to those really vulnerable households”.