Minister rejects call to cut VAT on energy bills
Published 17 November 2021
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Energy minister Greg Hands has rejected calls by Labour to cut VAT on energy bills because any help it provided would be “very untargeted”.
Speaking during departmental question time in the House of Commons on Tuesday (16 November), Labour MP Shabana Mahmood pressed ministers from the Department for Business, Energy and Industrial Strategy on the opposition’s pre-budget call for a VAT cut on household energy bills.
“I have had constituents tell me that they are sitting in the cold to try to save money,” she recounted. “Such a cut would have provided immediate relief to people in my constituency.”
Pointing out that VAT rates are a matter for the Treasury, Hands said: “A VAT cut would be very untargeted towards vulnerable people.”
He said, with other schemes such as the Warm Home Discount already in place to help vulnerable and elderly people: “The government have got the policy right.”
Kwasi Kwarteng, secretary of state for business and energy, was later accused by Alan Whitehead of presiding over a “train wreck” in the energy supply market.
The shadow energy minister said “nothing has happened” since Kwarteng’s claim that he was in talks with the Treasury a month ago about providing assistance for energy-intensive industries.
Hands responded that Whitehead’s allegation was “rather unfair” and that BEIS is “engaging continuously with the Treasury on these matters”.
Responding to criticisms from MPs that the government is not providing sufficient backing for tidal power, Hands pointed to remarks by prime minister Boris Johnson, expressing support for the technology.
But the energy minister said the government must work with the marine energy sector on cost reductions.
While the prices of tidal stream and wave power are respectively around £220 and £280/MWh, Hands said offshore wind can be generated for only about £40/MWh, adding: “With scaling up and investment in the technology, we would expect those costs to come down, but I stress the current disparity between those sectors.”
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