Thu. Jan 20th, 2022


Labor on Tuesday will put pressure on Boris Johnson to scrap value-added taxes on household energy bills by enforcing a parliamentary vote on the issue that will expose Tory sections on how to address the cost-of-living crisis.

The British Prime Minister and Rishi Sunak, Chancellor of the Exchequer, held talks on Sunday with discuss measures to ease pressure on household budgets, after Johnson last week described the VAT move as a “blunt instrument”.

Sunak officials are considering a one-off windfall tax on North Sea oil and gas production companies, which are booming due to rising gas prices, to raise around £ 1bn to help offset rising household energy bills.

The treasury is skeptical about such a tax, for fear that it could freeze investments, cut supply and cause oil and gas prices to rise. But one Sunak ally said, “We are not ruling anything out at this stage.”

Johnson and Sunak come under pressure to help families through the cost-of-living crisis of conservative MPs and usually supportive newspapers, including the Daily Mail, Daily Express and The Sun.

Labor will exploit this tension on Tuesday by enforcing a vote in the House of Commons that will allow the opposition party to propose legislation to reduce VAT on household energy bills from 5 percent to zero for one year.

Boris Johnson advocated the policy during the Brexit referendum in 2016, and in recent days a number of Conservative MPs have endorsed a move to zero VAT on household energy.

Ed Miliband, secretary of shadow climate change, said: “The government – and all the Tory MPs who have previously supported a VAT cut on household energy bills – must follow through on their promises and agree with Labor to cut taxes for a. to delete years. “

The Labor procedural motion, if approved, would allow the party to submit a bill to reduce VAT on household energy bills on Feb. 1, a possibility Johnson could want to close.

Johnson and Sunak agreed that the cost of living crisis is so widespread that the government should not be in a hurry to announce measures to mitigate it. “We have to get it right,” one government insider said.

The crisis could peak in April when millions of families face an increase in the annual energy price limit – currently £ 1,277, but are expected to rise to around £ 2,000 – which will coincide with tax changes giving the typical household £ 600 per years can cost.

But in the meantime, Number 10 will suffer from demands from MPs and the media to set out a plan.

Sunak has not ruled out a VAT cut on household energy bills, at a cost of around £ 2bn, but he and Johnson are worried it will benefit all households and not just those who need it most.

Extending the hot house discount scheme, currently worth £ 140 each winter to 2.7 million poorer households, would be a more targeted approach. A taxpayer-funded payment of £ 300 to 8.5 million households will cost up to £ 2.5 billion.

Labor and the Liberal Democrats want a one-time windfall tax on North Sea oil and gas production companies to help cover the extra household costs. Bernard Looney, BP’s CEO, said in November that high energy prices had turned his company into a “cash machine”.

Kwasi Kwarteng, business secretary, indicated in September that he was considering “all options” after the Spanish government introduced its own windfall tax on the energy sector.

But the Spanish experience, according to officials, made British ministers think. Madrid has drained its energy tax after power companies said they were hitting their investment in low-carbon energy schemes.

The idea of ​​a British windfall tax on North Sea producers is not new. Experts have pointed out that in the past, successive governments have regularly adjusted the tax regime covering North Sea production to achieve higher incomes during periods of strong oil or gas prices.

Meanwhile, Downing Street has demanded “self-restraint” from MPs amid expectations that an independent review body would recommend a salary increase of around £ 2,000 to their £ 81,932 annual compensation in April, as the cost of living crisis hits. Labor leader Keir Starmer said MPs should not accept the increase, which is expected to be around 2.7 percent.



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