Sunak reportedly mulls cutting VAT on household energy bills to ease cost of living
Rishi Sunak is reportedly considering cutting the 5 per cent rate of VAT on energy bills in a bid to cut living expenses for families this winter.
Potential cuts in VAT to energy bills were touted by Vote Leave campaigners as a “Brexit dividend”, as EU rules stop countries from changing the rate, with some Tory MPs pushing the chancellor to now deliver on the policy as Brits face a cost of living crisis.
Energy bills rose across the board earlier this month as the government increased its energy price cap to £1,277 a month, with this cap likely to rise significantly again in April.
It comes alongside above expected rises in inflation and a recent cut £1,000-a-year cut to Universal Credit.
The Financial Times reports that Sunak is looking at cutting the 5 per cent rate of VAT on energy bills in his 27 October Budget to ease the squeeze on families.
“It would tick two boxes — it reminds people of the benefits of Brexit and shows you’re listening to people,” one Treasury official said.
The move to cut VAT would mean the Exchequer would miss out on an extra £1.5bn in taxation revenue.
It would come as Sunak is trying to tighten the nation’s purse strings, after wracking up post-war record levels of public spending during the Covid-19 pandemic.
Sunak is reportedly concerned that slashing VAT on energy bills could lead to calls for further cuts on VAT rates for other goods.
It would also come just days before the start of the United Nations Cop26 climate summit in Glasgow, which is being billed by the UK government as a final chance to keep global warming to 1.5 degrees.
More to follow