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Lowering VAT on fuel bills won’t work for the poorest

Lowering VAT charges on fuel may be politically attractive but is not good news for those who will struggle the most writes Corporate Tax Partner, Heather Self.

Politically attractive, but still bad news

Pressure is building on the Government to make domestic fuel costs zero-rated for VAT as customers face increased charges in the spring. While this would be possible now the UK has left the EU and may be politically attractive, it would still not be good news for the poorest in society.

People need more than a token gesture

Customers are facing real problems in paying their heating bills. The Government needs to do more than make an expensive token gesture.

If the Chancellor really wants to help those most in need, he should think again about reinstating the £20 uplift to Universal Credit, which would give the poorest families £500 cash over the next 6 months.

Customers are facing price rises of up to £700 in the spring. A VAT cut would only give them about £100 saving, which is not enough to make a real difference to those in greatest need. Those who would gain most are those with the largest houses and highest heating bills – who are not the people most in need.

The VAT reduction is estimated to cost of £1.7 billion and is an expensive way to give people a saving of £100 each. There is also no guarantee that gas and electricity companies would pass on all the saving to customers, unless the cut is specifically priced into the Ofgem price cap.

Would you like to know more?

If you would like to discuss the above or how it may affect you and your business, please get in touch with Heather Self or your usual Blick Rothenberg contact using the details on this page.

For press enquiries, please contact David Barzilay.

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