Martin Lewis explains inflation and energy bills
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Mike Foster, CEO of Energy and Utilities Alliance, has stressed that Britain should knock off the five percent levy on energy bills to alleviate the pressures of the cost-living crisis. The EU VAT was first introduced by the bloc back in the 1990s and Prime Minister Boris Johnson promised he would scrap it during the Brexit referendum campaign in 2016.
But as energy bills soar, the levy remains.
Instead, Mr Sunak is reportedly considering boosting the warm homes discount (WHD) in July by up to £600, four times the current amount.
Under current plans, the WHD will let three million of the poorest households in England and Wales knock £150 off their bills.
But treasury officials have floated several one-off increases of £300, £500 up to £600 to help households.
He will also reportedly slash taxes ahead of schedule, which could come in the form of a VAT cut or a reduction of income tax.
There is a cut bringing the basic rate of income tax from 20p to 19p scheduled for April 2024, but Mr Sunak could announce it this autumn.
While Mr Foster welcomes the warm homes discount, he claims he has a better solution to the tax cuts.
He told Express.co.uk: “Increasing the value of the WHD is a practical and welcome response to the energy price hikes faced by consumers.
“Extending the eligibility, beyond the current range, would also mean more households would get support.
“Cutting income tax puts money into peoples’ pockets, but it would be fairer to scrap the recent increase in National Insurance to reward workers.
“Scrapping VAT on energy bills would give every household a cut of £100 now, and that cut would increase in value if, as predicted, bills rise again in the autumn.”
The Chancellor did announce in the Spring Statement that he would cut the five percent EU VAT charge for installing heat pumps, insulation and solar panels.
But this was not good enough for Mr Foster, who argues that scrapping the VAT on energy bills is more important.
He told Express.co.uk in March: “His VAT cut on solar panels and heat pumps will be welcomed by those who make them and by those who can afford to fit them, but a VAT cut on energy bills would have helped everyone.”
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According to the Institute for Fiscal Studies, energy prices soared by 70 percent in the year to April, a rate of increase not seen for over 30 years.
It added that “Ofgem figures imply that for an average household this means an increase in gas and electricity bills of nearly £60 per month”.
Mr Foster says a long-term plan is needed to put an end to these skyrocketing bills.
He told Express.co.uk: “Longer term, we need to switch our gas from fossil gas to hydrogen, made in the UK from renewable sources, freeing us from the grip of Putin and other unsavoury regimes.”
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