UK Chancellor Rishi Sunak will not announce a cut to value added tax (VAT) on household energy bills in his Budget and Spending Review scheduled for Wednesday, the Daily Mail has cited unnamed Treasury sources as saying.
The sources argued that the Chancellor had ruled out slashing the duty on home fuel bills because he believes it would be “poorly targeted” and result in “subsidising thousands of well-off households and not providing enough help to those who most need it”.
The current 5% VAT rate on these bills sets households back by around £60 ($82) a year, and lifting it mays cost the Treasury about £1.6 ($2.2) billion, according to the Mail.
The insiders’ claims follow Labour's Shadow Chancellor Rachel Reeves urging Prime Minister Boris Johnson and Secretary of State for Levelling Up, Housing and Communities Michael Gove to deliver on a promise they made during the 2016 Brexit referendum campaign.
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At the time, then-Foreign Secretary Johnson and then-Secretary of State for Justice Gove pledged to scrap VAT on energy bills if the UK left the European Union.
In an interview with the Mail, Reeves said that she wonders why Johnson and Gove have failed to live up to their promise, adding, “what more evidence do you need to cut VAT domestic energy bills?“
“This is the time to do it when they are soaring so much. The good thing about cutting VAT is it can be done immediately and automatically on bills. So people don't have to apply for it, there's no bureaucracy to go through and everybody is affected by rising gas electricity bills”, she pointed out.
Reeves also accused government ministers of wasting billions of pounds of public money over the past two years, arguing that the government is “not showing the respect for taxpayers' money that I think it deserves”.
“It is a lack of understanding about how families, pensioners and businesses are struggling right now with rising costs. I'm not sure if ministers fully comprehend the difficult decisions that families and businesses are having to make at the moment”, the Labour shadow chancellor underlined.
15 Mln UK Households Hit by Soaring Energy Bills
Reeves spoke after at least 15 million households in England, Wales, and Scotland faced higher domestic energy bills in early October under the UK Office of Gas and Electricity Markets' (Ofgem) latest price cap.
The bills increased by £139 ($193) from £1,138 ($1,583) to a record high of £1,277 ($1,777) a year, according to the British energy watchdog.
Referring to the price cap, Adam Scorer, chief executive at the UK fuel poverty charity National Energy Action, asserted that “the massive devastating increases in energy prices will drive over 500,000 more households into fuel poverty, leaving them unable to heat or power their homes".
"[…] Without a wider package of support – keeping Universal Credit uplifts and more rebates to protect those on the lowest incomes from spiralling energy prices – vulnerable people are still at dire risk of premature death this winter", Scorer claimed.
The remarks came as a significant increase in wholesale gas prices in the UK resulted in the collapse of nine suppliers around the country in September. The closure was reportedly caused by the suppliers' failure to deliver on price promises to their customers, and the suppliers being uninsured against the rising costs.