PMQs: Labour piles pressure on PM to slash VAT on energy bills

Published by Scott Challinor on January 6th 2022, 12:01am

Labour deputy leader Angela Rayner pressed prime minister Boris Johnson to scrap the five per cent VAT rate on energy bills during Wednesday’s Prime Minister’s Questions in the House of Commons.

Rayner was leading the frontbench in lieu of Labour leader Sir Keir Starmer, who was isolating after testing positive for Covid for a second time.

Rayner and her party's calls for “serious solutions” to the cost-of-living crisis stemming from rising energy prices have been backed by 20 Tory MPs and peers, who recently wrote to the Sunday Telegraph pressing the PM on the issue.

The Conservative signatories of the letter supported Labour’s suggestions for a VAT cut on energy bills and went further by calling for environmental levies to be suspended also.

Yet, a defiant Johnson remained insistent that the government had already implemented a number of measures to help British households and continued to resist calls to cut VAT.

Energy bills have been on the rise after wholesale gas prices soared last year, with 27 energy companies now having gone out of business as a result.

The energy price cap is due to rise in April, the same month that the new National Insurance increase comes in, sparking fears that households across the UK could face higher energy bills and be left significantly worse off financially.

Rayner said that working people across the UK were left with “rising bills and ballooning prices” because of inflation, energy price hikes and the National Insurance hike, and that the government was to blame for such a perfect storm being allowed to go unchecked.

She said: “The prime minister pretends it is not his fault. He blames the global forces, he blames the market, but the prime minister has made political choices that have led us into this place,” adding that the government had “failed to invest in long-term energy security” and allowed the market to “run out of control.”

Labour says that a temporary abolishing of the five per cent VAT rate on energy bills could help those on lower incomes weather higher costs over the winter months, when such bills are typically higher.

Supporters of the VAT cut argued that because of rising energy prices, VAT receipts from energy bills had raised an additional £3 billion than what was forecast, meaning that the government had funds available to cover the cost of a reduction.

In response, the PM highlighted that the government had already introduced a warm homes discount, winter fuel payments and cold weather payments schemes to help support low-income households.

Johnson also took a swipe at the Opposition frontbench for calling for the VAT cut after it had campaigned to remain in the EU ahead of the 2016 referendum, given that the bloc mandates member countries to levy energy bills at a minimum five per cent rate.

He said: “Everybody knows full well it would be absolutely impossible [to cut VAT on energy bills] if they were to do what Labour would do and go back into the EU and remain aligned with the EU single market.”

Craig Mackinlay, the Tory MP who co-ordinated the letter to the Sunday Telegraph, had suggested prior to the session that energy bill VAT should be permanently scrapped as a Brexit dividend, after the PM had suggested in May 2016 that having the ability to abolish the tax was a positive aspect of leaving the EU.

Mackinlay said: “VAT should be cut permanently as a Brexit dividend. Heating your home is as much of a right as buying children’s clothes. We don’t do it for fun. It’s a basic right and need.”

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Scott Challinor
Business Editor
January 6th 2022, 12:01am

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